Monday, March 8, 2021
Nebraska Supreme Court: Nonjudicial Settlement Agreement Violated Material Purpose Of Trust By Ignoring Spendthrift Provision
In In re Trust Created By McGregor, "the Nebraska Supreme Court held that spendthrift provisions of a trust established a material purpose of the trust, and held a nonjudicial settlement agreement invalid for violating the trust’s purpose."
Clifford McGregor died in 2009 with a surviving spouse, Evelyn McGregor. Before Clifford died, he and Evelyn created separate trusts and equally divided their real estate in their respective trusts.
After Clifford's death, Evelyn became the trustee of Clifford's trust. After expenses were paid, the trust created an irrevocable trust that consisted of the remaining assets of the trust estate.
The irrevocable trust, The Family Trust, created two separate trusts for the McGregor's children, Allen and Debra. Clifford's intent was to treat the two children as equal as possible.
Evelyn, Allen, and Debra entered into a trust settlement agreement, which stated that upon Evelyn's death, the assets of the Family Trust would pass directly to Allen and Debra. Six years later, Evelyn attempted to revoke this agreement via an email to Allen.
Allen brought action seeking to enforce the settlement agreement.
The lower court rejected the agreement because (1) not all necessary parties were present and (2) the settlement agreement violated a material purpose of the Family Trust because it altered specific terms of the irrevocable trust in a number of ways.
Under the Nebraska Uniform Trust Code, "a nonjudicial settlement is valid only to the extent it does not violate a material purpose of the trust."
The Nebraska Supreme Court affirmed the provision and held that the spendthrift provisions of the Family Trust established a material purpose of the trust and that Allen offered no evidence to rebut this presumption.
See Nebraska Supreme Court: Nonjudicial Settlement Agreement Violated Material Purpose Of Trust By Ignoring Spendthrift Provision, Probate Stars, February 25, 2021.
Surutchada Reekie and Adam Reekie recently published an article entitled, The Surviving Legacy of English Trust Law and Trusts in Thailand, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article.
In Thailand, the establishment of trusts outside a statutory regime is effectively prohibited by section 1686 of the Civil and Commercial Code. The provision stipulates that trusts created expressly or impliedly, by wills or other means, to take effect during the lifetime of the creator or after his death, shall have no legal effect. The only exception to this is trusts created by a specific statute, which to date only applies to investment trusts under the Trusts for Transactions in the Capital Market Act of 2007.
However, virtually unexplored in depth in academic literature is the existence of “common law” trusts in Thailand. These trusts were initially set up by foreign, and then by local, settlors in accordance with English trust law, by virtue of consular jurisdiction during the time of extraterritoriality in Siam in the late 19th century. This chapter has identified and analysed 47 Supreme Court cases dated from 1920 to 2012 which involve issues relating to common law trusts. The discussion demonstrates that these trusts survived the coming into force of section 1686 and many are still valid and enforced by Thai courts. Moreover, in adjudicating these disputes, the Supreme Court has applied a combination of English trust law principles and Thai legal principles in a way that does not simply reflect a direct legal transplant of English legal principles. Instead, they constitute a unique body of judicially developed trust jurisprudence that is similar to, yet distinct from, English trust law.
Thailand’s common law trusts provide a fascinating case study of a transfer of legal ideas which was arguably incidental in its inception, yet which transformed into a unique body of legal rules that operates beyond the realm of the country’s major legal code and statutes.
Sunday, March 7, 2021
Article: The New Section 100A Trustee Act 1925 (NSW): When a Beneficiary is Personally Liable to Indemnify a Trustee
Joseph Campbell recently published an article entitled, The New Section 100A Trustee Act 1925 (NSW): When a Beneficiary is Personally Liable to Indemnify a Trustee, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article.
Over the years since 1901 there has been a recognised principle in the law of trusts, derived from the Privy Council decision in Hardoon v Belilios , under which a beneficiary of a trust who was sui juris and absolutely entitled had, prima facie, a personal obligation to indemnify the trustee for liabilities that the trustee had incurred. In November 2019 a new section 100A of the Trustee Act 1925 (NSW) came into effect in New South Wales, which in terms abolished the “rule in Hardoon v Belilios”, with some minor exceptions, and made other alterations to the law concerning the liability of a trust beneficiary to indemnify a trustee. This paper considers how section 100A has affected the law in New South Wales, and the extent to which it will have effect outside New South Wales. It considers some of the circumstances in which, notwithstanding the enactment of section 100A, a beneficiary of a trust might still have an obligation to indemnify a trustee.
Friday, March 5, 2021
Ying Khai Liew recently published an article entitled, Constructive Trusts and Limitation Periods in Malaysia, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article.
Malaysia, as a former British colony, has inherited much of its trusts law from the English. One notoriously difficult area of law is constructive trusts. Precisely when and why constructive trusts arise are fundamental but imperfectly understood matters. This is unfortunate, because the lack of understanding might, in practice, be critically relevant for the determination of liability. To illustrate, consider the ongoing infamous ‘1MDB’ saga. 1MDB was a government-run strategic development company (allegedly) utilized by the former Prime Minister of Malaysia, Najib Razak, and many others (including his aide, Jho Low) to siphon money to their personal and company accounts. The key events of the highly complex fraudulent scheme took place over a six-year period, leaving behind a long money trail which crossed multiple jurisdictional borders and involved numerous shell companies, international banks, investment companies, and even Hollywood celebrities. While the Malaysian government has focused its efforts on the criminal liability of those allegedly involved, little attention has thus far been paid to the potential private law liabilities, either of those directly breaching trusts or fiduciary duties, or those receiving proceeds of those breaches. These claims would likely be pursued as a matter of course, for example by the liquidators or new directors of 1MDB. At that stage the law of constructive trusts would be crucial for the determination of liability.
One of the first practical hurdles would be the question of limitation: are the constructive trust claims time-barred? As with the law of constructive trusts, the law of limitation in Malaysia is closely modelled on English law. Here, again, the interactions between Malaysian and English law throw up interest but difficult issues of law. This article considers those interactions in the particular context of the applicable limitation periods to constructive trusts claims in Malaysia, to evaluate and assess how English jurisprudence and local developments have shaped the law.
Thursday, March 4, 2021
Gerry W. Beyer, recently published an article entitled, Texas Estate Planning Judicial Update: End of 2020 Edition, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article.
This article discusses recent judicial developments (last half of 2020) relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters. The discussion of each case concludes with a moral, i.e., the important lesson to be learned from the case. By recognizing situations that have led to time consuming and costly litigation in the past, estate planners can reduce the likelihood of the same situations arising with their clients.
Monday, March 1, 2021
In order to avoid conflict, many parents and/or grandparents decide to leave their children the same inheritance, although equal may not always be equitable. With the pandemic bringing the drafting and execution of more wills, this issue is coming up more frequently.
One example of this situation occurred with clients of Elizabeth Candido Petite, an estate planning lawyer in N.J. Her clients wanted to give one of their children more than the other two because she "needed it more."
This child in particular had been laid off due to the pandemic and her parents had a feeling she would continue to need extra help. Meanwhile, the other two children still had their jobs and those jobs were in "higher-paying careers."
Luckily, in this instance the other two children agreed and everyone was on the same page.
According to a survey by Merrill Lynch Wealth Management and the consultant Age Wave, "two-thirds of Americans 55 and older said a child who provided them care should get a bigger inheritance than children who did not."
Different families might approach these issues based on what their personal definition is of "fair" and "equity." Equal is not always fair and fair is not always equitable.
See Susan B. Garland, The Unequal Inheritance: It Can Work, or It Can ‘Destroy Relationships’, N.Y. Times, February 19, 2021.
Special thanks to Matthew Bogin, (Esq., Bogin Law) for bringing this article to my attention.
Wednesday, February 17, 2021
Tennessee businessman Bill Dorris died last year at the age 84 and left $5 million to his 8-year-old collie, LuLu. Bill's friend, Martha Burton, had already been well acquainted with LuLu as she would watch after her when Bill travel; an arrangement that had occurred for several years before Bill's passing.
"I don’t really know what to think about it, to tell you the truth," Burton told WTVF. "He just really loved the dog."
According to the will, $5 million is to be placed in a trust for LuLu's care. The will also specifies that LuLu stay with Burton, for which Burton will be reimbursed for normal monthly expenses.
Yes, LuLu the dog is a millionaire. The most interesting thing is that she is not the only animal that has come into a large sum of money, as it is far more common than you think for pet owners to leave a portion (and sometimes the entirety) of their estate to their animals.
See James Leggate, Tennessee man leaves $5 million to dog in his will: 'She’s a good girl', Fox News, February 12, 2021.
Sunday, February 14, 2021
Albert Feuer has recently posted on SSRN his article entitled Ethics, Earnings, ERISA and the Biden Administration which is forthcoming in 62 Tax Mgmt. Memo No. 3, 23. Here is the abstract of his article:
Ethical-factor investing shall be defined as using ethics, such as an enterprise’s policies regarding social/economic/health/environmental justice, sustainability, climate change, or corporate governance, as a factor to determine whether to acquire, dispose of, or how to exercise ownership rights in an equity or debt interest in a business enterprise.
Ethical-factor investing includes, but is not limited to the ESG, sustainable, socially responsible, impact, and faith-based investing. Ethical-factor investing may. but need not, be intended to enhance the investor’s financial performance. Ethical-factor investing also may, but need not, be intended to enhance an enterprise’s ethical behavior, i.e., to be socially beneficial.
The Trump administration discouraged ethical-factor investing. Nevertheless, such investing is becoming increasingly popular among Americans, American mutual funds, and American retirement plans.
The article introduces the current types of ethical investing, their history, their financial and ethical performance, and their pre-Biblical progenitors. All those issues are discussed more extensively in a longer referenced article.
This article suggests how the Biden Administration may encourage ethical-factor investing by ERISA retirement plan fiduciaries. This may be done with revised ERISA regulations and other interpretative documents. No ERISA amendments would be needed. ERISA permits such investing if it does not adversely affect the expected financial performance of such plans’ investment portfolios or investment choices. Finally, such plans investors, including plan participants and beneficiaries, may thereby generate their preferred benefits for society. Such benefits are, like desired financial benefits, most likely to be achieved if such investors are explicit about their preferred benefits and they regularly monitor the performance of their investments.
Saturday, February 13, 2021
Hanich Dagan and Irit Samet recently published an article entitled, Express Trust as the Missing Piece in the Liberal Property Regime Jigsaw, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article.
Trust sceptics are correct to revolt against the increasing abuses of the trust. But they are wrong to deem it beyond redemption. In this chapter, written for the “Philosophical Foundations of the Law of Trusts”, we develop a charitable interpretation of trust doctrine and of the legacy of the trust that offers a happy raison d’être around which it can, and should, be reconstructed. The trust, we argue, plays an indispensable role in a system of liberal (that is: autonomy-enhancing) property law. Pushing it to live up to this (implicit) promise offers an exciting reformist agenda in which many of its weeds are properly cleared.
Saturday, January 30, 2021
Max M. Schanzenbach and Robert H. Sitkoff recently published an article entitled, Risk Management and the Prudent Investor Rule, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article.
The prudent investor rule, now enacted in every state, is the centerpiece of trust investment law. In accordance with modern portfolio theory, the rule directs a trustee to implement an overall investment strategy having risk and return objectives reasonably suited to the trust. This article, recently published in Trusts & Estates magazine, summarizes the results of an earlier empirical study of the effect of the rule on asset allocation and management of market risk by bank trustees. We had two main findings. First, enactment of the rule was associated with increased stockholdings by bank trustees, but not among banks with average trust account sizes below the 25th percentile, a result that is consistent with sensitivity in asset allocation to trust risk tolerance. Second, enactment of the rule was associated with increased portfolio rebalancing by bank trustees, a result that is consistent with increased management of market risk. Given these findings, we concluded that reallocation toward additional stockholdings after enactment of the rule was correlated with trust risk tolerance and that the increased market risk exposure from those additional stockholdings was more actively managed.