$25 million probate battle pits Florida's slayer statute against its pretermitted-spouse statute

A NY Times article entitled A Lurid Aftermath to a Hedge Fund Manager’s Life reports on a brewing dispute over a Jupiter, FL estate reportedly "worth at least $25 million."  The following excerpts from the linked-to article give us a sense of what kind of case this will be (ugly!) and where the battle lines are being drawn:

JUPITER, Fla. — A life of private jets and black-tie balls ended with Seth Tobias, a wealthy investment manager and a familiar presence on CNBC, floating face down in the swimming pool of his mansion here.

*     *     *     *     *

Mr. Tobias, who was 44 years old, had apparently suffered a heart attack, his brother Spence said at the time. The police did not consider his death suspicious.

But now an unfolding drama over Mr. Tobias’s estate is providing a lurid account of fast money and faster living in the volatile world of hedge funds. Mr. Tobias’s four brothers and Mrs. Tobias are locked in a legal battle over the estate, which is worth at least $25 million. And, in a civil complaint, they have gone so far as to accuse her of murder.

The brothers, Samuel, Spence, Scott and Joshua, claim Mrs. Tobias drugged her husband and lured him into the pool. Bill Ash, a former assistant to Mr. Tobias, said he had told the police that Mrs. Tobias confessed to him that she had cajoled her husband into the water while he was on a cocaine binge with a promise of sex with a male go-go dancer known as Tiger.

*     *     *     *     *
At the center of the dispute is Mr. Tobias’s will, which designates his brothers as beneficiaries but does not name Mrs. Tobias. She contends that she is entitled to the estate because the will was signed before the couple married. In court filings, the Tobias brothers invoke Florida’s “slayer statute,” which prohibits inheritance by a person who murders someone from whom they stand to inherit. They claim she “intentionally killed” her husband “by asphyxiation and drowning.”

Florida's "pretermitted spouse" statute:

Mrs. Tobias' argument is based on Florida's version of the pretermitted spouse rule.  Here's how that argument is played out:

Mr. Tobias married Mrs. Tobias after making his will.  As such, pursuant to F.S. §732.301, regardless of what the will says, Mrs. Tobias is entitled receive a share of his $25+ million estate equal in value to that which she would have received if Mr. Tobias had died intestate, unless 1) provision has been made for, or waived by, Mrs. Tobias by a nuptial agreement; 2) Mrs. Tobias is otherwise provided for in the will (she apparently is not); or 3) the will discloses an intention not to make provision for Mrs. Tobias.


Pursuant to F.S. §732.102, the intestate share to which Mrs. Tobias would be entitled is as follows: a) If there are no living lineal descendants of Mr. Tobias, she gets the entire intestate estate; b) if there are surviving lineal descendants of Mr. Tobias, all of whom are also Mrs. Tobias' lineal descendants, she gets  the first $60,000 of the intestate estate, plus one-half of the balance of the intestate estate; and c) if there are surviving lineal descendants of Mr. Tobias, one or more of whom are not lineal descendants of Mrs. Tobias, she gets one-half of the intestate estate.

Florida's "slayer" statute:

Mr. Tobias' surviving brothers argue that Mrs. Tobias murdered her husband, and thus she shouldn't get a penny of the estate under Florida's version of the "slayer" rule, a doctrine I've written about before [see here, here, here]. 

Florida’s slayer statutes are found at F.S. § 732.802 (probate estates) and F.S. § 736.1104 (trust estates).

Although a murder conviction would make things easier for the Tobias brothers, it's not a pre-condition to their lawsuit. If Mrs. Tobias were convicted of the murder, that would conclusively divest her of all of her interest in Mr. Tobias' estate; but if Mrs. Tobias were acquitted of the murder (or never charged), the probate court could still weigh the evidence and determine "by the greater weight of the evidence" whether or not she should be divested. Here is the key language from F.S. § 732.802:

(1) A surviving person who unlawfully and intentionally kills or participates in procuring the death of the decedent is not entitled to any benefits under the will or under the Florida Probate Code, and the estate of the decedent passes as if the killer had predeceased the decedent.

*     *     *     *     *

(5) A final judgment of conviction of murder in any degree is conclusive for purposes of this section. In the absence of a conviction of murder in any degree, the court may determine by the greater weight of the evidence whether the killing was unlawful and intentional for purposes of this section.

The wife of missing adventurer Steve Fossett has asked a court to declare him dead

In Florida a death certificate is prima facie proof of the “fact, place, date, and time of death as well as the identity of the decedent.” § 731.103(2), Fla. Stat. (2007). It is not conclusive proof of any fact related to the death.  If insurance proceeds are at stake, you'll need a lot more than a death certificate to prove the insured is dead [click here and here for real-life examples of this point].

In a CNN article entitled Wife of missing adventurer wants him declared dead, we get a glimpse of the quantity and quality of the circumstantial evidence Steve Fossett's wife will be submitting in Illinois to legally establish the fact of his death.  I am assuming insurance proceeds are at stake in this case.  Excerpts from the linked-to CNN article demonstrate that Mrs. Fossett is going far beyond simply filing a copy of his death certificate:

"As difficult as it is for me to reach this conclusion, I no longer hold out any hope that Steve has survived," wrote Peggy V. Fossett in court documents filed Monday with the Cook County [Illinois] Circuit Court.

She asked that the will of her husband of 38 years be admitted to probate.

*     *     *     *      *

"No one involved in the search holds out any hope that Fossett is still alive," the petition said.

Rick Rains, a sheriff's supervisor of the San Diego County Sheriff's Department, said Fossett's plane was last spotted at 11 a.m. less than 20 miles from the ranch's airport. "Given the timeline and the sighting of Fossett's plane, I believe he was within 20 to 25 miles of the ranch when he crashed," Rains said.

But, he noted, "the terrain is very difficult to search, with many areas where the crevices, deep ravines and closely grown trees make it impossible to see from the air what is on the ground."

"If Fossett was physically able to find water to survive on in the Nevada desert, he would have been physically capable of signaling searchers, by doing something as simple as crafting a large X of sticks or rocks, or by starting a signal fire," Rains said.

In affidavits supporting his wife's petition, Fossett's doctor described the 63-year-old man as physically and mentally fit.

Robert Keilholtz, a captain in the California Civil Air Patrol who was involved in the search, noted that the difficulty in finding wreckage was underscored by the fact that World War II-era plane wreckage was discovered last spring in the mountain range.

In the search for Fossett, wreckage from eight other crashes was discovered, one of them from the 1960s, the lawyers said.

Indictments issued in Brooke Astor estate feud

In the latest twist to the Brooke Astor estate litigation [click here for a chronology of the case], Ms. Astor's son, Anthony D. Marshall, has been indicted on charges of plundering his mother's $198 million estate.  Here’s an excerpt from an AP article headlined Brooke Astor's son accused of plundering estate:

An indictment charges Marshall, 83, with grand larceny, criminal possession of stolen property, forgery, scheme to defraud, falsifying business records, offering a false instrument for filing and conspiracy.

The top count, grand larceny, is punishable by up to 25 years in prison.

Marshall's former attorney, Francis X. Morrissey Jr., also has been indicted on those charges.

"The indictment charges that Marshall and Morrissey took advantage of Mrs. Astor's diminished mental capacity in a scheme to defraud her and others out of millions of dollars," said District Attorney Robert Morgenthau.

Marshall's son, Philip, prompted the criminal investigation last year after he accused his father of neglecting Astor's care and stealing her money.

While a criminal indictment may seem like a win for the parties suing Mr. Marshall in the NY probate proceedings, in the long run it will likely cause more harm than good in the civil litigation.  For example, as previously reported by the NY Times in Talks on Astor Estate Halted to Clear Way for a Criminal Inquiry, settlement discussions that were apparently making good progress have now been halted at the behest of the prosecutor's office:

The district attorney’s office wants the settlement talks, being held under the auspices of the Westchester County Surrogate’s Court, held at bay to prevent prosecutors from losing a strategic edge, should indictments and a criminal trial result, according to the people who have been briefed.

This could happen, for example, if their key witnesses were deposed in the Westchester case by Mr. Marshall’s lawyers, who could then learn details of the district attorney’s line of inquiry, the people said.

*     *     *     *     *

During a half-hour hearing .  .  . Judge Anthony A. Scarpino asked a representative for the attorney general if the office’s position regarding settlement talks remained the same. He was told that it did.

“Negotiations are on hold status, as far as we’re concerned,” the judge then said, without mentioning the specific reason behind the stalled talks.

He reiterated that protracted litigation as a result of an inability to settle the case was “going to cost the charities a lot of money” by eroding their bequests. The settlement discussions spanned two weeks or so last month. The talks, spurred by the question of which of Mrs. Astor’s wills should be the valid one, focused on how much money the main charities would receive from her estate, which is valued at about $132 million, in addition to a trust estimated to be worth more than $60 million.

Not only do the civil litigants lose control of the case once a criminal indictment is issued, discovery becomes much more challenging because the other side can now "plead the 5th" and simply refuse to answer your questions in a deposition.  I've written before about this tactic [click here].  Ask yourself: who really benefits when the other side is indicted?

Lesson learned:

Criminal indictment = more expensive and time consuming civil litigation = unhappy client.

Blatant self promotion: NBI Seminar - "The Probate Process from Start to Finish"

I will be speaking on December 11 and 12 on probate litigation at an NBI seminar entitled The Probate Process from Start to Finish."  Click here for a PDF copy of the brochure.  The dates and locations for the seminar are:

  • Miami, Florida - December 10, 2007
  • Dania, Florida - December 11, 2007
  • West Palm Beach, Florida - December 12, 2007

If you're an attorney looking to expand your practice into probate-administration matters, this introductory-level seminar is probably a good idea for you.  Here's how to register:

  • WEB: register online at www.nbi-sems.com
  • PHONE: (800) 930-6182 - weekdays 7:00 AM - 5:30 PM CST
  • FAX: (715) 835-1405
  • MAIL: NBI, Inc. P.O. Box 3067, Eau Claire, WI 54702

'Vexatious' Attorney Conduct Results in Removal of Executor

The statute governing removal of personal representatives ("PR") in Florida is 733.504Acrimony - no matter how heated - is usually NOT sufficient to warrant removal of a PR [click here for recent example].  However, the outcome may be different if you can establish a detailed factual record proving that the acrimony is such that a significant portion of the estate will be eaten up in litigation expenses if the designated PR is not removed.  Note the shift in emphasis from "I don't like him" so please remove him as PR, to "the estate assets will be wasted" so please remove him as PR.

Mark Fass of the New York Law Journal recently published an article entitled 'Vexatious' Attorney Conduct Results in Removal of Executor.  In that NY case, the PR (referred to as "executor") was removed based upon a detailed factual record proving that a PR's representation by a particular law firm was so likely to result in litigation and waste of estate assets, that the PR should be removed.  The court agreed, and removed the PR.  Here's an excerpt from the linked-to article:

The "vexatious conduct" of the attorneys in the distribution of a woman's estate has led to the disqualification of their client as executrix of the estate.

The complex familial dispute began with the intestate death of 83-year-old Roseanna DeLaune, in 1997. Pursuant to statute, her sister, Paula M. Venezia, was appointed administrator; her heirs included her disabled nephew, William Pennington III.

Venezia hired her childhood friend from Manhattan's Little Italy, attorney Alfred Sica, to serve as counsel. He in turn hired the firm now known as Vaneria & Spanos.

In 2003, Venezia, 85, died, leaving the entirety of her own million-dollar estate to the same nephew, Pennington. She nominated her goddaughter, Joanne Zaccaria, to serve as executrix. Zaccaria, who had no role in the disbursement of the first estate, hired the same counsel -- Sica and Vaneria & Spanos.

Meanwhile, over the intervening six years, the administration of DeLaune's estate had devolved into what Sica later termed "combat" between himself and Pennington.

Loath to let history repeat itself, Pennington objected to Zaccaria's appointment, based in part on her selection of the attorneys he crossed swords with following the death of his first aunt.

Brooklyn Surrogate Margarita Lopez Torres has granted the petition, disqualifying Zaccaria from overseeing Venezia's estate. The surrogate cited the "vexatious conduct" of Zaccaria's chosen attorneys during the administration of the previous estate.

"To permit Zaccaria to serve as executor, along with her chosen counsel of Vaneria & Spanos and Alfred Sica, Esq., would be detrimental to this estate," Surrogate Lopez Torres held in Estate of Venezia, 2100/2003.

"Because of the excessively hostile and bitter relationship between the nominated fiduciary, her counsel and Pennington, the appointment of Zaccaria as fiduciary ... would have the practical effect of rendering the bequests of decedent to her nephew a nullity, as this estate would surely be taken down the inevitable road to further combative litigation," she said.

Lesson learned:

The concept of "issue framing" is nothing new in politics [click here].  Same idea applies in litigation. How an issue is "framed" in estate proceedings is everything.  If a litigant frames the issue in terms of his or her personal interests, a probate court is not likely to respond favorably.  By contrast, as the linked-to article shows, if the litigant frames the issue in terms of preserving estate assets - the likelihood of success goes way up.

Jurisdictional Competition for Trust Funds: Florida's Competitive Strengths

I recently had the pleasure of speaking at a luncheon hosted by the Miami Branch of the "Society of Trusts and Estates Practitioners" (STEP).  Originating in the U.K., this organization has grown exponentially in the last few years by attracting international planners from around the world.

I was asked to explain Florida's new trust code - in 30 minutes or less.  Feeling a bit overwhelmed by the scope of the topic, I did what any good litigator would do: I redefined the question to my liking, speaking instead on how Florida's new trust code fits into competition for trusts-and-estates business at the "macro" state level.  Entitled Jurisdictional Competition for Trust Funds: Florida's Competitive Strengths, the discussion outline should be of interest to anyone who's ever been asked to explain why Florida is better/just as good as jurisdiction "X" [you fill in the blank] for trust "situs" purposes.

Salvation Army Accused of Draining Dead Man's Funds

Pay on death or "POD" accountants are familiar territory to Florida probate counsel. As my partner Michele "Mickey" Maracini commented in Salvation Army Accused of Draining Dead Man's Funds by Jordana Mishory of the Daily Business Review, POD accounts are often used as probate-avoidance devices:

Attorney Michele Maracini at Stokes McMillan Maracini & Antunez of Miami, who is not involved with the case, said people frequently use this type of account. She said by leaving an account in trust for a specific person, the recipient is able to bypass the probate process.

POD Account Litigation: Florida Charities Beware!

POD accounts, like any other form of jointly-titled bank account, are not immune from disputes . . . many of which end up getting litigated in court.  I recently wrote about one such case [click here]. The two Florida statutes principally at play in these cases are 655.82 and 655.825.

Due to a quirk in the statute charities may be legally disqualified from being designated as beneficiaries of POD accounts.  That's the focus of the litigation reported on in Salvation Army Accused of Draining Dead Man's Funds:

A lawsuit in U.S. District Court alleges the Salvation Army improperly took more than $120,000 from a dead man's bank accounts -- even though the man had left $106,000 of that amount in the charity's name.


Filed by the estate of Richard Jose Belanger of West Palm Beach, Fla., the Oct. 5 lawsuit claims the Salvation Army improperly took the money left for it in Belanger's payable-on-death bank account. The suit, filed on behalf of Richard Jason Belanger, a son who is serving as personal representative, claims only a person may be left money in these types of accounts. The suit alleges the account his father left for the charity is invalid.

Family attorney John Cooney said the Florida Legislature did not intend for the 1995 statute that allows for the establishment of pay-on-death accounts to apply to entities or organizations. He drew his analysis from a portion of the statute that requires proof that the beneficiary is alive on the date of the account holder's death.

"When you have a statute that changes the way the law used to be, you need to interpret it narrowly and strictly," said Cooney, a partner at Arnstein & Lehr in Fort Lauderdale. "It doesn't matter what the decedent intended. If the decedent wanted to leave money for charity, that's why we have wills."

The lawsuit is the first legal challenge to the statute in Florida, according to the complaint. An Ohio appellate court found that a similar statute in that state allowed for only people to receive money from these types of accounts.

If Belanger's estate is successful in its case against the Salvation Army, the case could affect money left for charities across the state.

Lateral Thinking?

By the way, I think this case is yet another example of creative, lateral thinking in the probate litigation context.  Rather then challenge the Salvation Army gift on undue influence or lack-of-capacity grounds, which as litigation goes is always expensive and always full of uncertainty, plaintiff's counsel took a left turn, read the POD statute and "viola," he developed a low-cost, high probability-of-success litigation strategy where, as plaintiff's counsel states, "It doesn't matter what the decedent intended."  The case now becomes an exercise in statutory construction, which is a relatively inexpensive and quick case to litigate. Win or lose, plaintiff's counsel gets an "A" for lateral thinking.

Why Did Trust Law Become Statute Law in the United States?

Question:

Why did trust law become statute law in the United States?

Answer:

Because in today's world the most common trust asset is a diversified portfolio of marketable securities.  Uniform legislation involving trusts, which culminated in the Uniform Trust Code ("UTC"), which was adopted by Florida effective July 1, 2007 [click here], was needed to "clear away" centuries of common law that worked when trusts usually only held real property, but clearly did NOT work when it came to managing investment portfolios.

In his recently published article entitled Why Did Trust Law Become Statute Law in the United States?  Prof. John H. Langbein of Yale Law School explains how codification of trust law facilities trustee management of the modern investment portfolio, and overrides common law governing trusts to the extent its inconsistent with modern portfolio management.

Trustees: what can the the new Florida Trust Code do for you?

In order to take full advantage of the new Florida Trust Code's default rules, Florida trustees need to understand how they simplify trust administration in Florida.  Prof. Langbein's linked-to article provides the following road map for figuring out how the Florida UTC makes life easier for Florida trustees.  (I've cross-referenced Prof. Langbein's UTC citations to the new Florida Trust Code.)

  • Transaction Empowerment
  • Allocating Expenses and Receipts
  • Facilitating Pooled Investments
  • Fiduciary Investing
1.   Transaction Empowerment

Historically, third parties doing business with trustees had a duty to independently verify that the trustee was authorized to enter into the subject transaction.  Florida UTC section 736.1016 eliminates this duty.  Historically, trustees were very limited in their authority to engage in business transactions.  A primary goal of new uniform trust legislation was to equip trustees as a matter of default law with essentially unlimited transaction authority.  Florida UTC sections 736.0815 and 736.0816 codify this regime.

2.   Allocating Expenses and Receipts

A trust containing financial assets requires the trustee to pay a great deal of attention to apportioning the receipts and expenses of a trust between or among different classes of beneficiaries (typically life and remainder interests).  Codifying fiduciary law on this point allowed for the development of sound default rules for allocating such such receipts and expenses.  A prefatory note to the UTC recognizes that the Uniform Principal and Income Act ("UPI") accomplished this goal, and that "a jurisdiction enacting the revised Uniform Principal and Income Act may wish to include it either as part of this Code or as part of its probate laws."  Florida incorporated its version of the UPI into stand alone Chapter 738 of the Florida Statutes.

3.   Facilitating Pooled Investments

Historically, trustees were barred from pooling funds from different trusts for investment purposes.  In today's world, pooling trust-fund investments via mutual funds and other similar financial products needed to build an adequately diversified investment portfolio is a must.  Florida UTC section 736.0802(g) facilitates mutual-fund investing by expressly overriding existing common law and authorizing bank trust departments to invest in affiliated mutual funds.

4.   Fiduciary Investing

Historically, trustees were very limited in the types of assets they could invest in.  Again, this approach makes perfect sense if most trusts only own real property, it simply does not work in a world where most trusts are invested in marketable securities and managed in accordance with the "modern portfolio theory."  Florida UTC section 736.0901 recognizes that the Florida Uniform Prudent Investor Act previously overrode the common law on this point by simply cross referencing to Florida Statutes Chapter 518.

'Orphan' Trusts Benefit Lawyers Who Control Them

Private foundations are a growing phenomenon.  A piece by Petra Pasternak in The Recorder entitled Small Firms Find Profit in Nonprofits reported on the trend as follows:

[T]he nonprofit sector is exploding. In California, the number of private foundations more than doubled in the past decade, while the number of public charities swelled by nearly 60 percent, according to the National Center for Charitable Statistics.

And their wealth is growing. California private foundations owned about $34.9 billion in total assets in October 1997. That has since ballooned to $78.2 billion in September of this year.

Private foundations are not a big part of my practice, but they do come up with some frequency.  A basic question that sometimes gets lost in the tax arcana surrounding private foundations is "how long will this thing last?"  In the absence of an express termination date, the presumption is that the private foundation will go on in perpetuity after the client's death.  The longer the private foundation remains in existence after the client's death, the more likely it is that it will veer -- perhaps dramatically -- away from the client's original philanthropic intent.

For example, a recent NY Times article by Stephanie Strom provides dramatic anecdotal evidence of what can go wrong when private foundations become "orphaned" because the original donor has died and there are no remaining family members to oversee distributions.  Entitled Donors Gone, Trusts Veer From Their Wishes, the investigation uncovered several examples of abuse.  Here's an excerpt:

When Mamie Dues died in 1974, she left the fortune her husband, Cesle, had made in movie theaters in El Paso to a foundation controlled by a local bank there. The couple had no heirs and no other family.

*     *     *     *     *

Three decades later, however, the foundation’s legal address is in Delaware, and a global bank, JPMorgan, manages it from an office in Dallas. While its assets have grown to almost $6 million, from $5.1 million in 2000, its giving has fallen sharply, and the local group that once decided who would receive its money no longer has a say in its operations.

Such is the fate of many “orphan” trusts and foundations around the country that have been left in the hands of lawyers or local banks that have then been swallowed up by multinational financial institutions.

With no family members to encourage gifts to the original donor’s favorite causes, the banks and lawyers have wide latitude to change the way the trusts operate and to decide which charities will receive grants.

Banks can reduce gifts and increase the foundation’s assets, thus increasing their fees. At the same time, banks and lawyers stand to gain personal influence and prestige by selecting new charities.

*     *     *     *     *

An examination of several orphan trusts found these cases:

¶When large global banks take over, the number of grants often drops sharply, reducing the bank’s administrative costs. But bank fees, which are based on the amount in the trust, increase..

¶Small local grant recipients that have historically received money are either dropped in favor of larger charities or receive money far more sporadically.

¶New grant recipients sometimes include the alma maters of trustees or organizations with which they and their families have personal relationships.

¶Regulators have limited ability to identify such trusts and foundations and monitor them.

Lesson learned?

The simplest way to address the "orphan" trust problem is to define a termination date for the private foundation keyed off of the original donor's date of death.  If the private foundation terminates within 10, 20 or even 50 years after the original donor's date of death, it is much more likely that a family member or someone else with a personal link to the donor who shares his or her vision/values will still be around -- and in charge -- when the private foundation's last charitable dollar is given away.

Malpractice insurance carrier: wills and estates-related legal malpractice claims on the rise

I've received a number of inquiries regarding the $1 million estate-planning/probate malpractice verdict recently upheld on appeal, which I previously wrote about [click here].  I think many practitioners are trying to figure out what went wrong in that case and what they can do to avoid making the same mistakes.

Against this backdrop, a recently published article by LawPRO, a Canadian professional liability (malpractice) insurance provider, should be of interest.  Wills & estates law claims on the rise by Deborah Petch and Dan Pinnington provides claims statistics and risk management advice specifically focused on the probate/estate planning practice area.  Although written for a Canadian audience, the advice seems equally applicable in Florida.

I was especially interested to see that "lawyer/client communication failures" was far and away the single most common cause of malpractice claims.  This finding is in line with the med-mal statistics and "don't-be-a-jerk" risk management advice given to doctors I previously wrote about [click here].  Another way of stating the don't-be-a-jerk rule is: respectfully listen to and communicate with your clients.

Here are a few excerpts from the linked-to article:

In both count and cost, wills and estates-related legal malpractice claims have slowly increased over the last several years. By area of law, wills and estates is the fifth most common area of claims: Only litigation, real estate, corporate and family claims are higher. 

Over the last five years, wills and estates-related claims averaged 6.0 per cent of LAWPRO’s claims count (112 claims per year), and 5.4 per cent of our claims costs ($3.9 million per year). On average, resolving a wills and estates claim costs LAWPRO $34,404.

This article examines the reality behind the numbers: It highlights the most common errors, and the steps you can take to reduce the likelihood of a claim.

The most common errors

In the wills and estates area, the most common causes of claims
are the following:

  1. lawyer/client communication failures;
  2. inadequate discovery of facts or inadequate investigation;
  3. failure to know or properly apply the law;
  4. time and deadline-related errors;
  5. conflicts of interest; and
  6. clerical/delegation.
What is striking to most lawyers is that law-related errors rank third.  Lawyer/client communication-related errors are actually the most common, representing almost 40 percent of the errors in the wills and estates area.

*     *     *     *     *

Avoiding communications errors

When it comes to avoiding or reducing the likelihood of a communications-related claim, the importance of putting things in writing cannot be over-emphasized. While the failure to have written confirmation of instructions and advice is not negligence in and of itself, such written communication can be extremely helpful in defending you in the unhappy event that a claim is made against you. Why? Because more often than not, this type of claim involves the lawyer recalling that one thing was said or done, or not said or not done, and a disappointed beneficiary that alleges something different. This type of claim is very hard for LAWPRO to defend successfully. At the end of the day it essentially comes down to a question of credibility. Unfortunately, we frequently find inadequate documentation in the lawyer’s file to back up the lawyer’s version of what occurred. All too frequently, we see files with no correspondence or reporting letters whatsoever.

Fortunately this error is one of the easiest to prevent. You can significantly reduce your claims exposure by documenting your work. Confirm the information that your client provided to you, your advice to the client, the client’s instructions to you, and what steps were taken on those instructions. Document the time spent reviewing the provisions of the will, including what issues were discussed. This can be done in your notes, and in interim or final reporting letters, or even in an e-mail message.

Even taking a few seconds to make more detailed dockets can be a lifesaver. "Conference with client re review of draft will, including provisions re cottage” is much better than just "Conference with client re draft will."

A special caution is warranted for matters involving family members and close friends: We do see claims on these matters, and quite often find almost no documentation in the file. This probably happens because the lawyer is familiar with the personal circumstances of the client, and fails to make and document all appropriate inquiries. It would be best not to act for them; but, if you feel that you must, treat them as though you had never met them before. Remember, often it is not your client who is the potential claimant, rather it is a beneficiary or disappointed beneficiary, with whom you have no personal relationship.

Bank's Opening of Safe-Deposit Box Leads to Trial on Missing Cash Claim

Opening safe-deposit boxes is a part of most probate administrations.  Banks are usually sticklers for protocol, which is understandable given their liability exposure if anything goes wrong.  Fortunately, Florida has a detailed statutory scheme governing access by fiduciaries to safety deposit boxes (see F.S. 655.93 - F.S. 655.94 and F.S. 733.6065).

Wachovia is learning the hard way that people will sue if things go wrong, as reported by Daniel Wise in Bank's Opening of Box Leads to Trial on Missing Cash Claim.  Here's an excerpt:

An elderly woman's claim that Wachovia Bank was liable for $75,000 allegedly lost when it authorized unsupervised locksmiths to break into her safety deposit box should proceed to trial, an acting Supreme Court justice in Manhattan has ruled.

The bank's failure to check one of its computer databases to see if the box had been rented raises a triable issue of fact as to whether the bank committed "gross negligence," Justice Michael Stallman ruled last week in Glassman v. Wachovia Bank, 115380/06.

In early 2005, Roberta Glassman, who has residences in Manhattan and Florida, rented a self-service safe deposit box at the Wachovia branch in West Palm Beach, Fla. Under the agreement, she was to be given the only keys.

The agreement also provided that any missing contents were Glassman's responsibility and that "the Bank has no liability whatsoever unless the loss is caused by the Bank's gross negligence, fraud or bad faith."

Glassman, 74, claimed that when she left in May 2005 for a trip to Europe, she removed $3,000 in cash from the safety deposit box, leaving $87,000 in $100 bills and a $100,000 Suffolk County bond.

However, an envelope bearing the box number and containing keys was mistakenly included in the bank's inventory of unrented boxes. The keys did not open her box.

On May 27, 2005, a short time after Glassman left on her trip, the bank called in locksmiths from Diebold Incorporated.

The bank's lawyer, Jocelyn Keynes, said it was the bank's policy not to supervise the work of locksmiths on unrented boxes. In this case, the locksmiths soon realized the box had been rented because it did not have a piece of white Styrofoam normally found between the door of unused boxes and the actual container for valuables.

The locksmiths, according to the lawyer's affidavit, then summoned two bank employees, who inventoried the contents of the box as $12,000 in $100 bills and the $100,000 bond.

Both sides sought summary judgment upon Glassman's claim. Wachovia claimed it had acted reasonably, and had certainly not been grossly negligent.

Stallman found that the agreement's gross-negligence provision was sustainable under both New York and Florida law.

Although the case referred to in the quoted piece [Glassman v. Wachovia Bank, 115380/06] is out of New York, fortunately for us in sunny Florida the court skirted the choice of law issues by simply applying both New York and Florida law.  Florida practitioners should find the following useful:

  • Exculpatory clauses in safe-deposit box agreements are enforceable.

[I]n Florida . . . an appellate court has held that the limitation of liability provided in a safe deposit box agreement which limited the bank's obligations for loss to instances of gross negligence, fraud or bad faith was . . . [enforceable]. F.D.I.C. v. Carre, 436 So.2d 227, 229-230 (Fla App 2d Dist 1993)(court noted that whether or not “a customer is wise to enter into an agreement such as the one in this case, we cannot find that the agreement was against public policy.”). Thus, under the laws of New York and Florida, an exculpatory clause, such as the provision contained in the subject Agreement that limits a party's liability to grossly negligent conduct, is enforceable.

  • If a gross-negligence exculpatory clause is enforceable, then what is "gross negligence"?

The Florida courts have acknowledged that their jurisprudence “reflects a history of difficulty in dividing negligence into degrees” and that “it is doubtful that gross negligence has precisely the same meaning in each context.” See Fleetwood Homes of Florida, Inc. v. Reeves, 833 So.2d 857, 865-66 (Fla App 2d Dist 2002); see also LeMay v. Kondrk, 860 So.2d 1022, 1025 (Fla App 5th Dist 2003) (“Courts have encountered great difficulty in attempting to draw clear and distinct lines between the various grades of negligence). In Fleetwood Homes, the court observed that, in the context of addressing workers' compensation and in awarding punitive damages based on gross negligence, the relevant statute defines gross negligence to include “conduct [that] was so reckless or wanting in care that it constituted a conscious disregard or indifference to the . . . rights of person exposed to such conduct.” Id. at 867.[FN3]

[FN3]. The same definition for gross negligence was noted in In re Standard Jury Instructions-Civil Cases, (797 So.2d 1199 [2001] ), where the Florida Supreme Court authorized the publication of guidelines for jury instructions and model verdict forms with respect to the award of punitive damages in instances that involve intentional misconduct or grossly negligent conduct.

Are "directed trusts" coming to Florida?

I previously posted here the text of new legislation proposed by the Florida Bankers' Association to allow "directed trusts" in Florida.  This type of legislation would allow Florida banks and trust companies to assume no fiduciary liability for those trusts where they assume very limited administrative trust duties and focus solely on managing the trust's portfolio.

The inter-state "trust legislation" market is headed in the direction of directed trusts, lead as usual by Delaware, so it's only a matter of time before Florida adopts its version of the statute.  Here's a link to an excellent white paper explaining Delaware's directed trust statute.

A recent LawyersUSA article entitled Family trusts branch out addressed the growing prevalence of directed-trust legislation and, most importantly, contained a few nice Florida references and quotes on the subject.  Here's an excerpt from the linked-to story:

Experts estimate that by the middle of this century, the largest intergenerational wealth transfer in the United States - more than $41 trillion - will have taken place.

Competing to capture the lucrative family trust business, states are revamping their trust statutes to offer tax breaks and encourage the use of multiple trust advisers. So far, 20 states have adopted the Uniform Trust Code, which allows trustees to delegate duties to co-trustees and agents, and generally provides that trustees are exempt from liability for others' actions, except in cases of a "serious breach of trust."

About 10 states have adopted "directed trusts" statutes that specifically authorize the appointment of co-trustees and advisers for investment, management and distribution duties.

South Dakota and Delaware, which are considered to have the strongest directed trust statutes, eliminate liability for a trustee who follows instructions from an adviser appointed in the trust agreement to make investment or distribution decisions. 

*     *     *     *     *

Bruce Stone, a trusts and estates lawyer and shareholder at Goldman, Felcoski & Stone in Coral Gables, Fla., said directed trusts can .  .  .  be used for running closely held family businesses.

"A corporate trustee doesn't want to get involved in running a closely held business, and families don't want corporate trustees interfering in a lot of their decisions," he commented. "The solution is that with a directed trust, the corporate trustee only has to do certain things."

Crain, of BNY Mellon Wealth Management, agreed: "The family wants a corporate trustee to do all the important things - like tax returns, compliance - so the directed trust is the answer, because by statute, you can relieve the trustee of liability and responsibility for holding those assets."

Crain is the chair of a Florida Bankers' Association Trust legislative committee, which expects to introduce a bill next year proposing a directed trustee statute in Florida.

"It's a competitive issue," she said. "I personally have lost trust business because Florida doesn't have a directed trustee statute."

Florida's existing trust laws "don't go far enough in insulating a trustee," Crain said.

"You still have the duty to oversee, to monitor, to intervene," she noted. "The directed trustee statutes in the few states that have strong ones are explicit as to the lack of responsibility on the part of the trustee for reviewing the actions of the investment manager."

Rich v. Super Rich: You know things are bad when even millionaires feel left behind

In a blog post entitled Rich vs. Super-Rich, WSJ blogger Robert Frank highlighted this very funny video produced by the folks at The Onion lampooning the pseudo class war brewing between millionaires and today's super-rich class of billionaires.  The video is hilarious, and well worth watching.  On a more serious note, Frank notes that the joke plays off of the very real, and growing, wealth gap in the U.S.  Here's an excerpt from Frank's blog post:

The main reason for all this class envy at the top is that inequality among the rich is now at its highest level in recent history. The economic distance between mere millionaires and the richest billionaires has more than doubled over the past decade. While the average income for the top 1% of income earners grew about 57% between 1990 and 2004, it grew by more than 80% for the richest one-tenth of one percent.

.  .  .

The rich (or even affluent) may be feeling more and more class envy because of all the people around them who are even richer. But mere millionaires are still among the luckiest people in the world. Instead of always looking up and counting their fortunes, they should also look down and count their blessings. Because, as the Onion video points out, “not everyone can vacation in Italy. Some of you have to vacation on Martha’s Vineyard.”

Bancroft Trusts' Lawyers Hold Key to Dow Jones

I can't imagine a more extreme example of trustee decision making under pressure-cooker conditions than the on-again-off-again negotiations for the sale Dow Jones & Co., which owns the Wall Street Journal.  As reported by the WSJ in Bancroft Trusts' Lawyers Hold Key to Dow Jones, at the center of that deal was a small group of lawyer-trustees:

The Bancroft family may own a controlling stake in Dow Jones & Co., but the final decision on whether to sell the publisher of The Wall Street Journal to Rupert Murdoch could well be made by a small circle of longtime family lawyers in downtown Boston.

Lawyers from Hemenway & Barnes sit at the center of dozens of overlapping trusts that hold power over most of the Bancrofts' 64% voting stake in the company .  .  .  . Those lawyers occupy two of the three trustee seats on a number of key trusts, with the third held by a family member. On one of the biggest trusts, lawyers from the firm are the only trustees. And the fact that the large Bancroft clan is divided over whether to sell further deepens the firm's influence.

"The vote really resides with them," says one family member who is leaning in favor of selling the company.

Risk management:

The best way to reduce the risk of getting sued as a trustee is to make sure the trust beneficiaries consent to your actions.  That seems to be what the trustees did in this case:

"There are 35 adult family members who have 35 points of view," Mr. Elefante said. "We've tried to be fair to all the family members by giving each of them all the information they need to make a good decision."

As the family's legal representative, Mr. Elefante likely would be reluctant to go against the family's wishes if a large portion of them oppose the deal. While trustees don't legally have to consult the beneficiaries of a trust before acting, ignoring their wishes might expose them to litigation. What's more, the Hemenway & Barnes trustees do not have to vote in concert. Mr. Elefante is expected to poll the family before deciding how the trusts would vote on a sale, a person close to him said.

Lesson learned -- plan ahead:

The earliest Bancroft trusts date back to the mid-1930s.  Back then no one could have possibly anticipated a sale of the WSJ in the year 2007 to a controversial media magnet from Australia.  Just like no one creating a trust today to hold a client's family business could possibly anticipate every contingency that trust will have to face in the decades (perhaps centuries - see here) that trust may be around for.

What you can do today is put in place a mechanism for trustee decision making that decreases the likelihood of future litigation while also making sure qualified trustees are at the helm when needed.  One way of achieving this balance is to design the trust so that an independent trustee, preferably a bank or trust company (see here for why), has ultimate decision making authority.  However, if trust beneficiaries feel their trustee isn't doing a good job or doesn't have their best interest at heart, sooner or later the parties will end up in court.  A way to avoid this type of showdown is to give the trust beneficiaries the power to hire and fire their corporate trustee at regular intervals.  Here's one way to do it:

  • Require a corporate trustee:

After my death or if my personal rights under this Trust Agreement are suspended, there must be at least one Corporate Trustee serving at all times.

  • Give trust beneficiaries periodic power to hire/fire corporate trustee:

Upon the third anniversary date of my death, and every three years thereafter, a majority in interest of the permissible current income beneficiaries most closely related to me who are then legally competent may remove any Corporate Trustee for any reason by giving 30 days’ written notice to that Trustee and to the permissible current income beneficiaries, including the natural or legal guardians of any beneficiaries who are then disabled.

  • Give senior generation greater voting power:

If there is ever a vacancy in the office of Trustee of any trust created in this Trust Agreement and no successor is appointed as provided in this instrument, a majority in interest of the permissible current income beneficiaries most closely related to me who are then legally competent (the “beneficiaries”) will nominate as a successor Trustee a Corporate Trustee as defined in this Trust Agreement. If the beneficiaries do not appoint a successor Trustee within a reasonable time, the terminating Trustee shall, or any beneficiary may, petition a court of competent jurisdiction to appoint a successor Corporate Trustee.

Truth is stranger than fiction

The saying "truth is stranger than fiction" didn't originate in a trusts-and-estates case (see here) . . . but it should have. 

For example, say you went to a movie and the plot line revolved around a brilliant but eccentric MIT professor who allegedly staged his own "hit" by two masked men with Russian accents then blamed his son in order to gain the upper hand in litigation involving a family trust.  You'd say "no way, that could never happen."  And you'd be wrong.  As reported in Former MIT professor headed to trial in allegedly staged shooting that's exactly the real life drama currently playing itself out in a Boston courtroom:

CAMBRIDGE, Massachusetts (AP) -- What the former MIT professor and wealthy businessman told police sounded like a scene from a bad spy novel: He was shot by two masked men with Russian accents, and saved only because two of the bullets bounced off his belt buckle.


Five months later came the indictment -- against him.

Prosecutors say John J. Donovan Sr. staged his own shooting to gain an advantage in a legal battle with his own children for control of trusts that he claims are worth at least $180 million. He's accused of trying to get back at his oldest son by falsely accusing him of hiring his would-be killers.

*     *     *     *     *
Donovan is charged with filing a false police report, a misdemeanor that carries a maximum one-year sentence. His trial is scheduled to begin Friday in Middlesex Superior Court.

"John Donovan repeatedly provided false information to police about a crime that did not occur in order to 'frame' his son for a crime his son did not commit and had no part in," prosecutors claim in court documents.

*     *     *     *     *

During the 911 call Donovan made from his cell phone after the shooting, he told a state police dispatcher that his son James, now 40, "laundered $180 million" and had threatened to kill him.

Prosecutors say Donovan made up the story to exact revenge, but his lawyer Barry Klickstein calls Donovan "the innocent victim of a violent crime."

Big firm trusts & estates practice groups

Big firms have been shedding their trusts and estates practice groups for decades (see here).  But those that still have them apparently populate them with the most interesting lawyers at the firm.  At least that's what I gather from reading Undue Influence: The Epic Battle for the Johnson & Johnson Fortune, by David Margolick.  Here are two gems from his book:

:"[A]t Shearman & Sterling as at most large firms, the individual-clients group was a loss leader, a service the firm extended to plutocratic executives, but a gilded graveyard for those lawyers -- eccentrics, aristocrats, gays, fops, women -- who traditionally congregated in them."


"[Sullivan & Cromwell's] probate department was small and idiosyncratic, inhabited by the usual collection of oddballs, geniuses, and women.  It was the only place at the firm where one could be an associate in perpetuity and eccentric with impunity."

Well, one of S&C's eccentric, oddball geniuses has decided to go elsewhere.  As reported here in the WSJ Law Blog:

Trusts and estates lawyer Henry “Terry” Christensen III, who formerly represented New York society doyenne Brooke Astor, is leaving Sullivan & Cromwell after more than 37 years to join McDermott Will & Emery. Christensen is the senior partner in Sullivan’s T&E practice and former head of the group.


It is almost unheard of for a partner to leave Sullivan, one of the country’s most prestigious and profitable law firms. Its average profits per partner in 2006 were about $2.8 million, double that of McDermott’s, according to the American Lawyer.

Christensen, as well as a person at the firm, said he was departing because of recent potential conflicts between work for his individual clients and corporate clients of the firm. Here’s the press release from McDermott trumpeting Christensen’s pending arrival.

Among Christensen’s clients are the Tate Gallery and the Starr Foundation. S&C represented Astor, now 105 years old, for more than 40 years, and Christensen handled the Astor relationship for the firm when it ended in 2004. For prior Law Blog coverage of the flap surrounding Astor’s fortune, click here, here and here.

THE COMPLETELY INSANE LAW OF PARTIAL INSANITY

Last year I wrote here about a case out of the 3d DCA that had me puzzled.  The 2006 case was a will contest involving allegations of "insane delusion".  I couldn't reconcile the 3d DCA's apparent retreat from the extremely tough "lucid interval" standard generally applicable to testamentary capacity cases.

What the 3d DCA failed to explicitly state was that lack of testamentary capacity can be established in two ways: (1) general incapacity (governed by the insane-delusion standard) or (2) by establishing some specific and narrower form of insane delusion that is the direct cause of the invalid will.  This second testamentary-capacity line of attack is worth remembering.


As if on cue, professor Bradley E.S. Fogel of St. Louis University School of Law just published an article in the Spring 2007 edition of the ABA's Real Property, Probate and Trust Journal providing an excellent summary of the law governing insane-delusion will contests.  The article is entitled THE COMPLETELY INSANE LAW OF PARTIAL INSANITY: THE IMPACT OF MONOMANIA ON TESTAMENTARY CAPACITY.  Here's the editor's synopsis of his article:

In this Article, the author discusses the doctrine of monomania, which permits a court to invalidate a will based on the testator’s insane delusion if that insane delusion caused the testator to dispose of his property in a way that he otherwise would not have. The author argues that the monomania doctrine is fatally flawed and that the doctrine should be abandoned in favor of using the general test for capacity to make all testamentary capacity decisions.

Estate Attorney With Tourettes Learning to Adjust

A blog dedicated to probate litigation usually doesn't go for laughs, but I couldn't pass this one up from San Francisco blog Crooked Street Press:

Estate Attorney With Tourettes Learning to Adjust

San Francisco- Estate Planner George Henry came down with a severe case of tourette syndrome about 9 months ago strangely enough while he was in front of a judge in a court room. Henry says that the last nine months has been hard on himself and loved ones around him “especially the people that make me mad F&#@ SH** B*^%#!” Where it has been especially tough is on the job as an estate planner to families that have lost members of their family and Henry starts to blurt out rants of swear words. Many times the swearing goes on for several minutes especially around the time the fees for his service are debated by the grieving family.

“When he swore in my court room after I over ruled against him on an objection, I about threw the book at him.” Judge Thurgood Thompson said. “Then he told me that he had tourettes. But I had never heard him swear before. From that point forward until the end of the case he would put on a swearing clinic. In my gut…I think most of it was directed at me.”

“Don’t get me started on F&#@ SH** B*^%# Judge Thurgood Thompson.” Henry said.

Henry and his family have been living with his condition for about 9 months now and his family has adjusted to this sudden problem. “I think the kids like it because it gives them new ideas.” Margaret Henry said. “Usually the episodes happen when I ask George to wash the dishes. He’ll rant for about twenty minutes or so but then he eventually does them.”

“I hope someday my F&#@ SH** B*^%# condition will subside.” Henry said. “But until then people had better leave me the F&#@ SH** B*^%# alone.”

2nd Circuit Re-Examines Standard for "Probate Exception" to Federal Court Jurisdiction

Many predicted that Anna Nicole Smith's 2006 Supreme Court victory involving her late husband's estate would lead to increased numbers of trust-and-estate cases being litigated in federal court (see here and here).

A recent example of the "federalizing" of trust-and-estates litigation is reported on in 2nd Circuit Re-Examines Standard for Probate Exception.  As the following excerpts make clear, it will now be much easier for litigants in the North East (i.e., litigants within the 2nd Circuit's jurisdictional boundaries) to adjudicate trusts-and-estates disputes in federal court:

 A retired attorney's long-running fight with the Bank of New York and a White Plains, N.Y., law firm over her parents' estate gave a federal appeals court the chance to explore the new standard on the probate exception to federal diversity jurisdiction.

The 2nd U.S. Circuit Court of Appeals said a 2006 U.S. Supreme Court decision changed the scope of the exception and the circuit's own case law, with the result that some of the claims brought by Adrienne Marsh Lefkowitz against the bank and McCarthy, Fingar, Donovan, Drazen & Smith can stay in federal court.

Second Circuit Judges John Walker and Peter Hall, with Southern District of New York Judge Denise Cote, sitting by designation, decided Lefkowitz v. The Bank of New York, 04-0435-cv. Hall wrote for the panel.

.     .     .     .     .

[I]n 2006, the U.S. Supreme Court decided Marshall v. Marshall, 126 S.Ct. 1735. In that case, former Playboy playmate and TV reality show star Anna Nicole Smith won a procedural victory in her attempt to collect a bequest from her late 90-year-old husband, Texas oil magnate J. Howard Marshall.

Hall, in writing the 2nd Circuit's opinion, said Marshall "reigned in the boundaries of the probate exception."

"The court explained that in Marshall the probate exception did not apply because plaintiff sought neither to (1) 'administ[er] an estate, ... probate ... a will, or [do] any other purely probate matter,' nor (2) 'to reach a res in the custody of a state court,'" Hall said. "From these statements, we discern that under the clarified probate exception a federal court should decline subject-matter jurisdiction only if a plaintiff seeks to achieve either of these in federal court."

Hall said that, therefore, "insofar as our Court's decision in Moser purported to direct courts to exercise subject-matter jurisdiction over in personam and other claims that might 'interfere' with probate proceedings only ... that holding was overly broad and has now been superseded by Marshall's limitation of the exception."

Case Law Update: Makeup Post

Tampa probate litigator Steven L. Hearn provided an excellent case-law update for the 26th Annual Attorney/Trust Officer Liaison Conference.  As always happens when I review someone else's case-law list, I found cases on his list that I had missed.  Below is a list of cases covered by Mr. Hearn which I had not blogged on.  I intend on posting individual discussions for these cases over the next several weeks.  Stay tuned!

Abandonment at Issue in Family's Feud Over Distribution of 9/11-Related Funds

Law.com reported on an interesting issue in Abandonment at Issue in Family's Feud Over Distribution of 9/11-Related Funds regarding the rights of a surviving parent that abandoned a pre-deceased child.  I'd be interested if anyone has seen similar Florida law on this point.  Here is an excerpt from the linked-to story:

 A judge in Brooklyn on Wednesday heard testimony in a case that pits the mother of a man who died in the 2001 terrorist attacks on the World Trade Center against her former husband, who wants half of their son's $2.9 million award from the federal September 11th Victim Compensation Fund.

Brooklyn Surrogate Margarita Lopez Torres held a daylong hearing that included testimony from the mother, Elsie Goss-Caldwell; the father, Leon Caldwell; their eldest son, Leon Jr.; and family friends.

The case might turn on Lopez Torres' interpretation of Estates, Powers and Trusts Law §4-1.4(a), which precludes the distribution of a deceased child's estate to a partner who has refused to provide for, or abandoned, a child before the child reached age 21.

Judge in Anna Nicole Smith case says he'll retire

As reported here by CNN, Judge Larry Seidlin has decided to retire in part "to pursue the many opportunities that have been offered to me outside the judicial system."  (See here for law.com's more lengthy report.)  The speculation has been that Judge Seidlin will now "pursue" some sort of TV deal.  As I reported here, Judge Seidlin's performance during the Anna Nicole Smith proceeding in Florida was the subject of much criticism.  Perhaps any press (good or bad) is enough to land a daytime TV deal?  Anyway, the following is the entire CNN report (it's short):

(CNN) -- The Florida judge noted for his unorthodox oversight of the Anna Nicole Smith case says he is retiring at the end of July.

"As a judge, I have been deeply touched by the thousands of children and families in crisis who have come before me to share their struggles," Broward County Circuit Judge Larry Seidlin wrote June 13 to Florida Gov. Charlie Crist.

"I hope that by working together, we have made a positive difference in their lives," Seidlin added. "I consider myself among the most fortunate people on earth."

The letter was made public Tuesday.

"Nevertheless," he continued, "it is now time for me to devote more of my daily life to my own young family and to pursue the many opportunities that have been offered to me outside the judicial system, and I have disregarded until now."

The 57-year-old Bronx native wept on the bench during his oversight of the disposition of Smith's remains.

CNN legal analyst Jeffrey Toobin referred to him as "Judge Judy's wacky little brother."

Some observers speculated he was using his platform as a dais from which to try out for a job on television.

The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford

One of the basic building blocks of Florida probate law is the "life estate" in homestead property all surviving spouses are entitled to.  The statutory basis for this rule is found in F.S. 732.401, which provides as follows:

(1) If not devised as permitted by law and the Florida Constitution, the homestead shall descend in the same manner as other intestate property; but if the decedent is survived by a spouse and lineal descendants, the surviving spouse shall take a life estate in the homestead, with a vested remainder to the lineal descendants in being at the time of the decedent's death per stirpes.

(2) Subsection (1) shall not apply to property that the decedent and the surviving spouse owned as tenants by the entirety.

Pretty basic stuff for any Florida probate practitioner.  What may not be so simple is explaining the real life practicalities of a life estate to a surviving widow.  Which is why you may want to keep a copy of The New Homestead Trap: Surviving Spouses Are Trapped by Life Estates They No Longer Want or Can Afford handy.  In this just published article Ft. Lauderdale attorney Jeffrey A. Baskies does a good job of explaining the costs assumed by surviving spouses/life tenants, a point often overlooked by families and their advisers.

Costs Borne by Life Tenants

F.S. §738.801 provides in part that “the provisions of F.S. §738.701-738.705 … shall govern the apportionment of expenses between tenants and remaindermen when no trust has been created….” In the absence of some agreement, those provisions apply to all life estate/remainder situations created by the Florida homestead laws (created by the constitutional restrictions on devise in art. X, §4 of the state’s constitution and F.S. §732.401).

Taken together, these statutes require the life tenant to pay:

  • All of the ordinary expenses incurred in connection with the administration, management, or preservation of property, including ordinary repairs (including condo or homeowners’ association maintenance charges) and regularly recurring taxes (ad valorem property taxes).
  • The interest portion of mortgage payments, if any, on the property.
  • Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
  • The costs of, or special taxes or assessments for, an improvement representing an addition of value to property shall be paid by the tenant when the improvement is not reasonably expected to outlast the estate of the tenant. In all other cases, a part only shall be paid by the tenant, ascertainable based on the present value of the tenant’s estate (actuarially).

Thus, surviving spouses — who are ostensibly “protected” by the Florida Constitution and statutes (given the “right” to live “rent-free in a homestead”) — are required to bear 100 percent of the burden of the state’s two largest fiscal crises: the escalation in property taxes and homeowners’ insurance. In addition, costs of ordinary upkeep, interest payments on mortgages and, in many cases, virtually all of the special assessments are also the burden of the surviving spouse. Further exacerbating the situation, many widows live in communities which have charged (and are still charging) assessments to repair common areas damaged by the hurricanes the state faced these past few years — with the promise of active hurricane seasons for the foreseeable future.

While the surviving spouses have borne all of these huge increases in their costs of living, the remainder beneficiaries have seen property values double in most of the state (and increase three to five times in some areas) over the past five to 10 years. One hundred percent of that appreciation inures to the benefit of the remainder beneficiaries, while they are not forced to pay for any of these increased expenses.

Contrast the “rent free” use of the property by the widow with the “free ride” the remainder beneficiaries have had on property values, and ask who is being helped and who is being harmed by our homestead “protections”? The costs of property taxes and homeowners’ insurance have skyrocketed at the same time property values have appreciated at a meteoric pace. This situation has exposed in stark relief the discrepancy in treatment and benefits of surviving spouse life tenants and remainder beneficiaries.

Jury: Milbank's Blattmachr Breached His Fiduciary Duty

As reported here by the New York Probate Litigation Blog, a New York jury found last month, in a mixed verdict, that Jonathan Blattmachr, one of the country’s leading trusts and estates lawyers, breached his fiduciary duty to a client in connection with a planning strategy called a “split-dollar insurance arrangement,” involving the purchase of life insurance to avoid estate taxes.

The following is an excerpt from Jury: Milbank’s Blattmachr Breached His Fiduciary Duty, as reported in the WSJ Law Blog:

Among the T&E bar, wrote New York Times tax reporter David Cay Johnston in his book “Perfectly Legal,” Blattmachr “enjoys the status of some Hollywood stars — his first name alone prompts recognition.” (We know Blattmachr’s a big macher, but can the name “Jonathan” alone really prompt recognition?)


But one of Blattmachr’s wealthy clients, Marvin Schein, was none too happy with Blattmachr’s services. Schein, whose father founded medical-supplies company Henry Schein Inc., sued Blattmachr and Milbank in 2003. Click here for the amended complaint, in which Schein alleged, among other things, that Blattmachr persuaded Schein to pursue a tax-avoidance strategy even though Blattmachr sensed IRS hostility toward it.

The strategy, called a “split-dollar insurance arrangement,” involved the purchase of life insurance to avoid estate taxes. In December 2000, Schein paid roughly $12 million in premiums for about $340 million in life-insurance policies. The IRS effectively halted the strategy in August 2002, a move Schein said rendered his policies useless.

Estate Claims "Insane" Killer Can't be Victim's Heir

The Wills, Trusts & Estates Prof Blog reported here on an interesting West Virginia case revolving around whether a mentally ill man who killed his mother and plead not guilty by reason of insanity is excluded from her estate under Virginia's slayer statute.

The case is discussed in detail in Estate Claims "Insane" Killer Can't be Victim's Heir:

The estate of a woman who was killed by her mentally ill son may create new law in West Virginia by seeking to bar him from inheriting any of her assets even though he was not technically convicted of a crime.

Richard O'Neal pleaded not guilty by reason of insanity to the murder of his mother, whom he suffocated to death in her Charleston home in March 2005. A judge accepted the plea and ordered him committed to a state mental health facility for up to 40 years or until a further order of the court.

Under West Virginia's “slayer's statute,” “No person who has been convicted of feloniously killing another ... shall take or acquire any money or property, real or personal, or interest therein, from the one killed.”

As one of Bonnie O'Neal's three sons, Richard is entitled to a one-third share of her estate. But in a declaratory relief claim, her executor says that given his responsibility for her death, it would be "inequitable” and a violation of the “slayer's statute” for him to receive that share.

“While the slayer's statute applies ostensibly when there is an actual felony conviction in connection with the wrongful act, the public policy of West Virginia prohibits Richard G. O'Neal from profiting from his wrongful act,” the complaint, filed in Kanawha County Circuit Court, states.

Florida's Slayer Statute:

Florida’s slayer statutes are found at F.S. § 732.802 (probate estates) and F.S. § 737.625 (trust estates).  Unlike the West Virginia statute, the Florida statute is drafted broadly enough to give the trial judge the discretion necessary to disinherit a killer even if he or she isn't actually convicted of murder.  Here is the key language from F.S. § 732.802:

(1) A surviving person who unlawfully and intentionally kills or participates in procuring the death of the decedent is not entitled to any benefits under the will or under the Florida Probate Code, and the estate of the decedent passes as if the killer had predeceased the decedent.

.  .  .  .  .

(5) A final judgment of conviction of murder in any degree is conclusive for purposes of this section. In the absence of a conviction of murder in any degree, the court may determine by the greater weight of the evidence whether the killing was unlawful and intentional for purposes of this section.

 

Choose The Right Executor/Personal Representative

Picking the right person to serve as personal representative or trustee can make all the difference in the world.  The wrong person can convert what should be an uncontested estate into a quagmire of never-ending litigation (see here).  The right person (or entity) can take a difficult situation and smoothly work through the issues with minimum fuss and expense to the benefit of all concerned.

Forbes on-line recently published Choose The Right Executor, which does a solid job of underscoring the importance of picking the right personal representative ("executor" if you live in the North East). Here's an excerpt from the linked to piece:

Most people tend to choose a family member or a close friend to act as an executor and to administrate their wills upon their death. But because of the intricacies that go with the job, people must realize that the most competent person (not the closest in relation) should be chosen. As mentioned before, this does not mean that the chosen individual must do everything themselves. Executors are allowed to hire others to help with various aspects of the process (such as an accountant to help with the taxation portion).

With that in mind, if you don't have a friend or a relative who you think can complete these duties in a satisfactory manner, don't worry--attorneys, accountants and other professionals can act as an executor for a fee, usually derived from the deceased person's estate. And while that fee may be in the hundreds or even thousands of dollars (depending on the size of the estate and difficulties involved) it may be worthwhile, especially if it means that your family will receive their inheritance intact and on a timely basis.

The bottom line is that most people assume that being an executor is an easy task that can accomplished by anyone, but because the probate process is so involved and may entail interaction with tax and legal professionals, only an intelligent, dependable person should be named as executor.

Source: Death & Taxes Blog

Estate Wins Battle Over Images of Marilyn Monroe

Intellectual property rights may be the single most valuable asset owned by a decedent's estate, and in the case of celebrities, the dollar amounts can easily be in the millions (see here).  This recent news item is but the latest example of pseudo probate litigation addressing the issue (see here for others).  The following is an excerpt from Lensman's Estate Wins Battle Over Images of Marilyn Monroe:

A federal judge in Manhattan has sided with the family of late photographer Sam Shaw in a dispute over the rights to images of Marilyn Monroe.

Southern District of New York Judge Colleen McMahon rejected a claim that the estate of Shaw had violated Monroe's right of publicity by selling photos without the consent of Marilyn Monroe LLC, a company founded by the Hollywood icon's heirs.

The judge, writing in Shaw Family Archives Ltd. v. CMG Worldwide, Inc., 05-CV-3939, said the laws of New York, California and Indiana, which were at the heart of the dispute, did not grant a retroactive right of publicity to Monroe after her death.

"Ms. Monroe could not devise by will a property right she did not own at the time of her death in 1962," the judge wrote.

The ruling is the first of its kind involving the image of the legendary sex symbol. The attorneys who represent the Shaw estate, David M. Marcus and Christopher Serbagi, said "tens of millions" of dollars are at stake because of the ruling. They will pursue counterclaims against Monroe's heirs for interfering with licensing relationships.

Florida attorney Roy Black represents Dr. Atkins' widow in lawsuit against trustees of her $400 million marital trust

As reported in When the Rich Die, Lawsuits Sometimes Fly by WSJ columnist Robert Frank, the widow of famed nutritionist Dr. Robert Atkins is suing the trustees of her $400 million marital trust.  Ms. Atkins' lawsuit is also summarized in greater detail in a press release (interesting litigation tactic?).  And there's a Florida connection: as reported here, Ms. Atkins' attorney is celebrity Florida attorney Roy Black.

Here is an excerpt from the linked-to WSJ column:

Ms. Atkins’ tale, recounted in my print column today, is a lesson in choosing advisors. When Dr. Robert Atkins, of Atkins diet fame, died suddenly in 2003 after slipping and falling on an icy New York City sidewalk, he had a relatively small investible fortune, since most of his wealth was tied up in his business. When the business was sold after his death, his wife was left with $400 million. Dr. Atkins had appointed two of his business partners as trustees for the marital trust. But shortly after his death, Veronica Atkins got a call from a family acquaintance to offer to help manager her money. She got rid of the two advisors appointed by her late husband and hired a new team, led by a Miami businessman.

Over time, however, Ms. Atkins felt that the advisors were taking her for a ride. So in 2006, she stopped paying part of their hefty salaries — $1.2 million a year each — and asked that they be terminated. The advisors sued, claiming breach of contract. They also say Ms. Atkins has fallen prey to a financial predator, Alexis Mersentes, now Ms. Atkins’ husband. They say Mr. Mersentes had the advisors fired so he could get his hands on the Atkins fortune.

Lesson learned?  When the stakes are high, hire corporate fiduciaries to avoid disputes.

Mr. Frank ends his quick summary of the Atkins litigation with this bit of sage advice:

The case offers an important lesson: hire a bank or trust firm. Sure, they can be irresponsible too. But if Dr. Atkins had hired a private bank or trust company to give advice to Veronica - who had little financial experience - she might not have been vulnerable to all manner of advisors and “friends.”

I agree with Mr. Frank and have previously said the same myself (see here).

Original source: Death & Taxes Blog

Majority of American Adults Remain Without Wills, New lawyers.comSM Survey Finds

According to this recently published survey, probate litigators can be assured of much gainful employment for years to come.  Here are a few excerpts from the linked-to press release:

You can’t take it with you, according to the adage, but many Americans seem to be planning to do just that.

That’s because over half (55 percent) of all adult Americans do not have a will, a new survey shows, a percent that has remained virtually unchanged over the past three years.

*     *     *     *     *

Among non-white adults, the lack of wills is even more pronounced. Only one in three African American adults (32 percent) and one in four Hispanic American adults (26 percent) have wills, compared to more than half (52 percent) of white American adults.

The Jolly Testator Who Makes His Own Will

While these statistics may drive estate planners bananas, those of us who make a living litigating estate disputes should be more philosophical, taking comfort in the following words of wisdom penned over 150 years ago by Lord Neaves:

The Jolly Testator Who Makes His Own Will

-Lord Neaves, Judge and Solicitor General – Edinburgh, Scotland

circa 1852

Ye lawyers who live upon litigants' fees,
And who need a good many to live at your ease,
Grave or gay, wise or witty, whate'er your degree,
Plain stuff or Queen's Counsel, take counsel of me.
When a festive occasion your spirit unbends,
You should never forget the Profession's best friends;
So we'll send round the wine and bright bumper fill,
To the jolly testator who makes his own will.

He premises his wish and his purpose to save
All dispute among friends when he's laid in the grave;
Then he straightaway proceeds more disputes to create
Than a long summer's day would give time to relate.
He writes and erases, he blunders and blots,
He produces such puzzles and Gordian knots,
That a lawyer, intending to frame the thing ill,
Couldn't match the testator who makes his own will.

Testators are good, but a feeling more tender
Springs up when I think of the feminine gender!
The testatrix for me, who, like Telemaque's mother,
Unweaves at one time what she wove at another;
She bequeaths, she repeats, she recalls a donation,
And ends by revoking her own revocation;
Still scribbling or scratching some new codicil,
Oh! success to the woman who makes her own will.

'Tisn't easy to say, 'mid her varying vapors,
What scraps should be deemed testamentary papers.
'Tisn't easy from these her intention to find,
When perhaps she herself never knew her own mind.
Every step that we take, there arises fresh trouble:
Is the legacy lapsed? Is it single or double?
No customer brings so much grist to the mill
As the wealthy old woman who makes her own will.

Source: see herehere and here.

North Carolina tax attorney cleared of all tax-fraud charges related to off shore trust scheme

In a blog post entitled Offshore trust scheme leads to former U.S. Attorney pleading guilty to tax fraud, I wrote about two North Carolina attorneys who had been charged with conspiring to commit tax fraud in connection with a tax evasion scheme revolving around the use of off-shore trusts.

One attorney, Samuel T. Currin, a former North Carolina U.S. Attorney, state judge and state Republican chairman, agreed to plead guilty to conspiring to launder $1.45 million through his law firm's client trust account and to lying on his taxes by failing to report an offshore debit card account.  The second attorney caught up in the prosecution was North Carolina tax attorney Rick Graves.

In fairness to Mr. Graves, I feel compelled to follow up on my original blog posting by reporting that he was recently cleared of all charges by a unanimous jury verdict of NOT GUILTY.  The following are excerpts from this post on the North Carolina Estate Planning Blog:

Mr. Graves is a lawyer in Wilmington, North Carolina, who was charged a year ago with two federal crimes: 1) Conspiring to Defraud the IRS and 2) Obstructing the IRS. Both charges arose from Mr. Graves’ association with other individuals who engaged in “off-shore” criminal activities – without Mr. Graves’ knowledge -- relating to tax planning and asset protection. Mr. Graves has always asserted his complete innocence, and based upon all the evidence, including a 7-hour cross-examination of Mr. Graves, the jury agreed.

*     *     *     *     *

Co-counsel, Will Terpening added that, “over the last two weeks, during the trial, Rick Graves was finally given an opportunity to defend himself and to clear his name. With the jury’s verdict ---- He has done both.” Reflecting on the investigation, the trial, and the jury’s verdict, Rick Graves wondered how he gets his good reputation back. More specifically, he stated that “the case against me was based on false assumptions and guilt by association.” He added that, “the prosecutors indicted first, and investigated later.”

Lawyer Anderson also added that:
The investigation of Rick Graves raises important issues about the increasing use of criminal punishment in highly regulated areas, like tax planning. In this arena, the line between mistakes” and “crimes” is often too blurry for fair prosecutions. Criminal charges should only
be used for truly “bad actors.”

Lawyer Terpening added that:
Mr. Graves was a lawyer with an impeccable reputation, who was a deacon in his church, and who had a 20-year military career. At a minimum, he should have been given the chance to address the government’s concerns before being indicted. In the end, Rick Graves was thrilled with the outcome and with the hard work of his legal team. He concluded by stating that: “Justice has finally been served. This nightmare is over. My name is finally cleared.”

Lesson learned: Make sure you get paid for taking on the risks associated with an estate tax practice.

My personal belief is that estate planning attorneys often take on risks they are not paid for.  In other words, the fees they charge for the tax services they provide do not adequately compensate them for the risks they assume.  This case is a prime example.  I have no idea what Mr. Graves was paid for the tax work he did in this case.  But I am absolutely certain that it in no way adequately compensated him for the risk of possibly being the subject of a two-year nightmare/criminal prosecution.  In the corporate context, CPAs and tax attorneys charge very large sums of money to compensate them for the risks they assume when they give their corporate clients tax advice.  Much of those fees are generated in the "due diligence" phase of the corporate engagement.  My sense is that this rarely happens in the estate-planning context.

Senate Eyes Estate Tax in Budget Debate

Writing here back in November of 2006 I predicted that permanent reform of the estate tax was a very real possibility, and that such reform would likely mean a freeze on the estate tax at 2009 levels: $3.5 million exemption at a top rate of 45 percent.

As recently reported here by the North Carolina Estate Planning Blog, the U.S. Senate just approved an amendment to the Budget Resolution that would extend the 2009 estate tax rate (45%) and exemption ($3.5 million) through 2012.  Under current law the estate tax would be "repealed" in 2010, but would return in 2011 with an exemption of only $1 million.

This latest Senate vote may not be a permanent fix, but if passed into law, it will get us passed 2010.   In the same blog post cited above the North Carolina Estate Planning Blog also published an excellent analysis of the current state of affairs on the estate-tax front prepared by Marshall Jones of West Palm Beach, Florida.  Well worth reading.

Woman's Search for Her Birth Mother Leads to Share of Jell-O Fortune

When reading the linked-to story keep two Florida-law points in mind.

  • As I wrote about here, in Florida, adults can be adopted, and for the purpose of intestate succession by or from an adopted person, the adopted person is considered a lineal descendant of the adopting parent and is one of the natural kindred of all members of the adopting parent's family. 63.042, 732.108.
  • I wrote here about a 2005 decision where the 4th DCA held that under Florida law the presumption is that a testator intendedd the term “heirs at law” to be construed under the statutes in existence at the time the Will was executed.

With these points in mind, now consider the following excerpts from Woman's Search for Her Birth Mother Leads to Share of Jell-O Fortune:

'ADOPTED OUT' DAUGHTER

After the trustee told McNabb that she would not be entitled to a share, McNabb hired an attorney to represent her at the Surrogate Court's settlement of the trusts.

She chose a lawyer randomly from the Genesee County Web site and called his office, hoping to find someone familiar with the Woodward family. Coincidentally, the first attorney she called, Paul S. Boylan, knew the family well.

"Not only do I know about the Woodwards," Boylan told McNabb, "but my father was your grandfather's attorney."

In December 2005, Monroe County Surrogate Judge Edmund A. Cavalruso ruled that as an "adopted-out" daughter McNabb did not constitute a "descendant" or "child" of Piel and therefore was not a member of the trusts' class of intended remaindermen or beneficiaries.

On Friday, the 4th Department reversed, effectively awarding McNabb a one-third share of the multimillion-dollar trusts.

The case turned on the dates the trusts were established.

The underlying Surrogate Court decision had relied on a 1985 decision, Matter of Best, 66 NY2d 151, which in turn rested on amendments to the Domestic Relations Law that became effective in 1964 and 1966. Under the amended law, adopted children could no longer inherit "from and through" both their biological and adoptive parents.

But the 4th Department disagreed, holding that Best did not apply as it and the amendments were not in effect when the trusts were established.

By the narrowest of margins -- the second trust was executed in 1963, the year the first amendment was passed by the Legislature, but one year before its effective date -- the original Domestic Relations Law controlled, the panel determined.

And under the original DRL §117 (as well as Decedent Estate Law §89), McNabb is her mother's daughter, the panel concluded.

DEL §89 "recognized the status of a nonmarital child as the descendant of his or her mother, albeit through the provision that such child shall inherit only in the event that no 'lawful issue' existed," the panel ruled. "In addition, Domestic Relations Law former §117 specifically provided that adopted-out children may inherit from and through their biological as well as their adoptive parents."

Judge Involved in Anna Nicole Smith Case Cited for Marijuana

Unfortunately, the Florida trial judges involved in the Anna Nicole Smith proceedings in this state have not fared well under the glare of national media attention.  First Judge Seidlin was the focus of considerable criticism (see here), now it's Judge Lawrence Korda's turn under the microscope.

But for the Anna Nicole Smith case, Judge Korda's recent run in with the law would never have hit the papers.  But, here we are.  In Judge Involved in Anna Nicole Smith Case Cited for Marijuana the Associated Press reported on the following sad news:

A judge who had a secondary role in recent Anna Nicole Smith proceedings was cited for smoking marijuana in a Hollywood, Fla., city park, police said Monday.

Lawrence Korda was smoking marijuana while sitting under a tree at Stanley Goldman Park on Sunday, police said. Three officers who were doing training there caught Korda and field-tested the joint, said Capt. Tony Rode, a police spokesman.

The judge was not arrested. He was given a misdemeanor citation to appear in court.

"Judge Korda was not given special treatment because of his status as a circuit court judge," Rode said. "He was provided with a notice to appear. That's exactly what 99 percent of other offenders would have been given for this type of offense."

The former lesbian partner of the granddaughter of the founder of I.B.M. is seeking a share of an inherited fortune

Estate planning is challenging because planners are asked to anticipate issues that may or may not present themselves for decades to come.  The "adult adoptee" issue is a perfect example of the type of low-probability scenario that can come back to bite a family if not appropriately anticipated.

The New York Times reported on a high profile trust case involving an adult adoptee in Partner Adopted by an Heiress Stakes Her Claim.  The following are excerpts from the linked-to piece: 

In 1991, Ms. Watson, then 43, adopted Ms. Spado, then 44, under a Maine law that allows one adult to adopt another. The reason, Ms. Spado has contended in court documents, was to allow Ms. Spado to qualify as an heir to Ms. Watson’s estate.

But less than a year after the adoption, Ms. Watson and Ms. Spado broke up. Then in 2004, Ms. Watson’s mother died, leaving multimillion-dollar trusts established by her husband to be divided among their 18 grandchildren.

Re-enter Ms. Spado with a claim: Because she was adopted by Olive F. Watson, she said, she is technically Thomas J. Watson Jr.’s 19th grandchild and is therefore eligible for a share of the trusts.

*     *     *     *     *

Many states allow adult adoption, but the laws were primarily intended for situations like a stepparent adopting a stepchild later in life, said D. Marianne Blair, an adoption expert at the University of Tulsa College of Law.

However, some same-sex couples began using the adoption process to establish financial security or inheritance for their partners, said Arthur S. Leonard, a professor at New York Law School.

“Before we had domestic partnership ordinances, before same-sex marriage or civil unions, back then there wasn’t much you could do,” Professor Leonard said.

In Florida, adults can be adopted, and for the purpose of intestate succession by or from an adopted person, the adopted person is considered a lineal descendant of the adopting parent and is one of the natural kindred of all members of the adopting parent's family.  63.042, 732.108.

The adult-adoptee issue can be addressed with fairly simple boilerplate language inserted into the client's will or trust.  The following is an example:

Effect of Adoption. A legally adopted child (and any descendants of that child) will be regarded as a descendant of the adopting parent only if the petition for adoption was filed with the court before the child’s thirteenth birthday. If the legal relationship between a parent and child is terminated by a court while the parent is alive, that child and that child’s descendants will not be regarded as descendants of that parent. If a parent dies and the legal relationship with that deceased parent’s child had not been terminated before that parent’s death, the deceased parent’s child and that child’s descendants will continue to be regarded as descendants of the deceased parent even if the child is later adopted by another person.

Special thanks to Miami commercial litigator Javier A. Reyes of Boies, Chiller & Flexner LLP for bringing the New York Times article to my attention.

Keeping Peace in the Family While You are Resting in Peace: Making Sense of and Preventing Will Contests

Professor Judith G. McMullen, Marquette University - Law School, just published a new article that should be of interest to probate litigators trying to make sense of the underlying dynamics driving most will contests: Keeping Peace in the Family While You are Resting in Peace: Making Sense of and Preventing Will Contests.

Here's the SSRN abstract of this article:

Abstract:

This Article focuses on post-mortem challenges to wills. All such will challenges involve a clash between the testator's stated intentions and the disappointed heirs' expectations and desires. While the legal issues may differ somewhat in individual cases, the claims are almost invariably the result of a disappointed heir feeling that she has been treated unfairly or has not received what she expected to receive. Rather than focusing on the technical issues of will drafting or execution, this Article reflects on the emotional causes of fighting over an estate and suggests some ways to reduce the family fighting and hard feelings that result in will contests.

The first section of the Article describes some of the common legal challenges used to prevent the enforcement of specific will provisions or to contest the will's admission to probate. The Article then discusses the overarching issue of why surviving family members fight about property after the death of a love one. Here, the Article describes the legal concept of freedom of testation and contrasts a testator's view towards property ownership and disposal with the views of potential family recipients. This section also discusses the implicit preference that the law gives to presumptive heirs – a preference that probably bolsters the resolve of disappointed heirs to engage in will challenges. In the final section, this Article describes specific steps that typically are recommended for use by testators to reduce the likelihood of will challenges, and it concludes by asking clients and their lawyers to mull over the long-term emotional and social repercussions of proposed estate plans.

Florida Judge in Anna Nicole Smith Case Is Vilified as 'Weepy Wacko'

In stark contrast to the glowing reviews enjoyed by Attorney Richard C. Milstein (see here), most observers have been less than impressed with Judge Larry Seidlin.  The following excerpts from Florida Judge in Anna Nicole Smith Case Is Vilified as 'Weepy Wacko' sum up the national consensus:

From the state that brought you the hanging chad, now comes the crying judge.


Some members of the bar and other court-watchers are cringing over the way Judge Larry Seidlin wept -- no, sobbed -- on live, national TV as he announced a ruling Thursday in the dispute over where Anna Nicole Smith should be buried.

Some are accusing the brash former New York cab driver of showboating for the cameras, or worse, auditioning for his own courtroom TV show, with his one-liners, his personal asides and his smart-alecky Bronx delivery during the six-day hearing.

They say that he let the hearing drag on way too long, that he made inappropriate jokes for a dispute over a body, that he acted as if it were all about him.

"He's like Judge Judy's wacky little brother," legal analyst Jefrey Toobin quipped on CNN.

The New York Post called him a "Weepy Wacko," while the The New York Daily News asked, "How Low Can This Judge Go?" and referred to him as "Blubbering Seidlin." One of Miami's most celebrated defense attorneys, Roy Black, said of the circus-like scene in Seidlin's courtroom: "I sort of think it gives circuses a bad name."

Miami trusts and estates attorney Richard C. Milstein: Is "the Calm" in Media Storm Over Anna Nicole Smith Case

It couldn't happen to a better guy.  In the midst of all the antics surrounding the proceedings to determine custody of Anna Nicole Smith's body one calm professional stood out: Akerman Senterfitt’s Richard C. Milstein.

I know Richard only casually from bar functions.  However, he's known as a true gentlemen and professional in every sense of the word.  Richard makes us all look good.  So perhaps it shouldn't be surprising that he's getting some great national press in Akerman Attorney Is 'the Calm' in Media Storm Over Anna Nicole Smith Case.  Here are a few excerpts from the linked-to story:

Seidlin granted the power to decide where Smith will be buried to Richard C. Milstein, an Akerman Senterfitt attorney who was appointed last week as guardian ad litem for Smith's 5-month-old daughter, Dannielynn Hope Marshall Stern.

*     *      *     *     *

Milstein, who has avoided the spotlight, left the courthouse through a side exit and went straight to his car without making any statements.

Throughout the hearings the dapper and mild-mannered Milstein seemed above the fray as the proceedings quickly degenerated into a circus-like atmosphere.

*     *      *     *     *

Those who know Milstein said he was the perfect lawyer for the job.

"He is always the calm in the middle of many storms," said Milstein's friend Jorge Mursuli, the executive director of People for the American Way in Florida. "What a perfect choice amongst the circus to have someone so deeply committed to child-advocacy issues and not interested in self-serving press."

Miami attorney Valdespino said Milstein "wouldn't be influenced by the glitz."

Miami attorney Richard Milstein granted custody of Anna Nicole Smith's body then moves quickly to resolve dispute

Broward Circuit Court Judge Larry Seidlin surprised everyone by ruling from the bench today.  Here's the latest from the Boston Globe:

FORT LAUDERDALE, Fla. --Anna Nicole Smith will be buried in the Bahamas, alongside her dead son, it was announced Thursday after a tearful judge left the decision up to the attorney for the model's baby daughter.

Richard Milstein, the court-appointed lawyer for 5-month-old Dannielynn, announced the plans not long after a judge gave him control of Smith's final resting place. He gave no timeframe for the burial.

*     *     *     *     *
The judge, who choked up frequently and sometimes blubbered as he explained his decision, compromised and gave custody to Milstein. And the judge made it abundantly clear what he felt should be done.

"I want her buried with her son in the Bahamas," he said through tears. "I want them to be together."

By the way, choking up, "blubbering," speaking through tears, is not exactly the court-room demeanor one would expect from a veteran trial judge.  But then again, Judge Seidlin's performance in this case has become a topic of discussion all on its own.  Here's what this Miami Herald report had to say:

He's become something of a national spectacle for his role as Anna Nicole Smith's probate judge, with his colleagues snickering about his courtroom demeanor and with national legal analysts deriding his professional judgment.

But Broward Circuit Court Judge Larry Seidlin has been taking it all in stride, keeping in daily contact with the county's chief judge and refusing to let the criticism stop him from long soliloquies and other courtroom antics.

Thanks to Alachua, FL attorney Jane E. Hendricks for alerting me to this latest breaking news.

NY Times Op-Ed: Historical discussion of the status of a child born out-of-wedlock triggered by Dannielynn, Anna Nicole Smith's surviving non-marital child

The NY Times published an interesting Op-Ed piece by Stephanie Coontz entitled Illegitimate Complaints that does a good job of highlighting how “traditional” family values were historically very harsh on out-of-wedlock or “bastard” children. Generally accepted notions of the rights of lineal descendants – irrespective of whether or not the parents were married – have changed dramatically over the last hundred years or so.

The harsher aspects of the common law dealing with an illegitimate child have been eliminated in all states, primarily through the application of the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution (see here for discussion).  Florida codified its approach to persons born out of wedlock in F.S. 732.108.

Here are a few excerpts from the linked-to NY Times piece:

PITY poor little Dannielynn, just 5 months old and already the potentially multimillion-dollar prize in a paternity battle waged by three of the unsavory men who partied with her mother, Anna Nicole Smith, in the last years of her troubled and tawdry life. There’s an even creepier fourth potential candidate: Ms. Smith’s half-sister claims that Ms. Smith’s late husband, the nonagenarian billionaire J. Howard Marshall, left behind frozen sperm. And now Ms. Smith’s estranged mother has also rushed forward to claim custody of the baby. Could anything be worse for this little girl than to be at the center of such a media circus or to end up with one of these characters?

Actually, yes. For thousands of years, the future of a child born out of wedlock was of absolutely no interest to anyone, especially if she was an orphan. The only people likely to take her in were people who needed free labor on their farms or required a child “helper” small enough to run under dangerous factory machines piecing together broken threads or picking up dropped objects.

For 500 years, British law, on which American law was modeled, held that a child born to an unwed mother was a “filius nullius” — literally, a child of no one, entitled to support from no one. Little Dannielynn would not have had a right to her mother’s inheritance, much less a legal claim to receive support from the family of either her deceased mother or her father.

South Florida trusts and estates litigators drawn into battle over who will bury Anna Nicole Smith

As the Anna Nicole Smith saga takes its latest bizarre twist inside a South Florida courtroom, prominent South Florida trusts and estates litigators - Richard Milstein & Shane Kelley - were tapped by Broward County Judge Larry Seidlin to help him sort through the conflicting claims for custody of Anna Nicole Smith's body.  CNN reported in In court: Who will bury Anna Nicole Smith? on these latest developments.  For those of us practicing in South Florida, it's fun to spot our colleagues in the news.  Here's an excerpt from the linked-to story:

FORT LAUDERDALE, Florida (CNN) -- Anna Nicole Smith wanted to be buried in the Bahamas, next to her son, and bought a burial plot there, according to attorneys for her longtime companion, Howard K. Stern.

Smith's estranged mother, Vergie Arthur, wants to take the body home to Texas to be buried with family members.

The two sides faced off in Broward County Circuit Court on Thursday at a probate hearing that bounced from custody of the body to DNA sampling to whether a baby can be considered next of kin under Florida law.

With several attorneys arguing loudly around a conference table, Judge Larry Seidlin tried to sort through a tangle of legal arguments and competing interests.

. . . . .

Some progress was made: The judge appointed a guardian, Miami attorney Richard Milstein, to protect the interests of Smith's infant daughter, Dannielynn. He also appointed an administrator, Shane Kelley, a Fort Lauderdale lawyer, to sort through the competing interests and recommend who will bury Smith, and where.

An evidentiary hearing is scheduled for Tuesday.

Smith's body is being kept under refrigeration at the medical examiner's office in Dania Beach. She is likely to be embalmed there as early as Friday. But any decision about releasing her body for burial isn't likely until next week at the earliest.

So who gets the body under Florida law?

What law applies will likely turn on what jurisdiction Anna Nicole Smith is deemed to have been a resident of when she died.  I don't think Florida is in the running, but assuming somehow Florida law ends up governing the substantive rights at play here, then the 4th DCA's 2005 opinion in Cohen v. Guardianship of Cohen, 30 Fla. L. Weekly D664 (Fla. 4 DCA March 9, 2005) will likely determine the outcome.  I wrote about this opinion here.

Anna Nicloe Smith apparently executed a will prior to her death (see here).  However, even if her will speaks to her wishes regarding her burial, the inquiry does not necessarily end there.  In Cohen the 4th DCA held that a testator's will does not control where he or she is buried if there's clear and convincing evidence reflecting that the testator's true intent was to be buried elsewhere.  In other words, the parties need to present "clear and convincing" evidence to substantiate their claims to Anna Nicole Smith's body.  Here's how the Cohen court stated the rule:

[A] testamentary disposition is not conclusive of the decedent’s intent if it can be shown by clear and convincing evidence that he intended another disposition of his body.

I assume whatever ruling is entered by Judge Seidlin it will get appealed.  If it is, the appeal will be heard by none other than the 4th DCA, the same appellate court that decided CohenYes, Anna Nicole Smith's on-going contributions to U.S. probate-litigation jurisprudence continue unabated (I wrote here about her May 2006 U.S. Supreme Court win).

P.S.  For additional commentary, see Anna Nicole Smith - Guidance for Burial Disputes (published in Steve Leimberg's Estate Planning Newsletter).  As an extra bonus, this linked-to item also contains a link to Anna Nicole Smith's just-released will.

The Florida 'boom': lawyers see huge increase in wealthy claiming residency in the Sunshine State.

Lawyers USA published this article discussing many of the reasons Florida is becoming an increasingly popular destination for the wealthy seeking lower taxes and greater asset protection.  For an alternate race-to-the-bottom angle on Florida's increasing popularity see Marching Off a Cliff.

There's nothing particularly new in the linked-to Lawyers USA article for practicing Florida trusts and estates attorneys.  However, I thought the introductory paragraphs were fine examples of Florida boosterism, and gladly reprint them below:

People are flocking to the Sunshine State in greater numbers than ever, seeking asset protection and a decrease in taxes, estate planners tell Lawyers USA.


"It's a tidal wave," said Bruce M. Stone, a 32-year estate planning veteran at Goldman Felcoski & Stone in Coral Gables, Fla. "We've noticed a huge increase in the numbers of wealthy clients claiming Florida as a domicile."

"We're seeing a significant uptick in the number of people relocating, or establishing themselves as Florida residents," agreed Donald R. Tescher, an estate planning and tax specialist at Tescher Gutter Chaves Josepher Rubin Ruffin & Forman in Boca Raton, Fla. "We've been really busy."

Clients with a second home in Florida are establishing it as their primary residence, and others are simply moving all of their assets into the state, he said.

Jonathan B. Alper, a solo in Heathrow, Fla. who specializes in asset protection, said that lawyers and clients are increasingly taking advantage of Florida's favorable legal climate because "technology gives them the ability to communicate out of state so easily. Now it's possible to live in Florida but run a business up north or stay in contact with family in California."

Marshall v. Marshall -- Rashomon Revisited

Anna Nicole Smith’s tragic death (see here) put a spotlight once again on the record-shattering trust-and-estates litigation she and her former step-son, E. Pierce Marshall (he died in 2006), waged over the vast estate of her former husband, J. Howard Marshall. As I've previously written about on this blog, this case resulted in a U.S. Supreme Court decision, Marshall v. Marshall, viewed by many (including me) as opening the federal court room doors to trust-and-estates litigation to an extent we've never seen before (see here).

So the timing of an article appearing in the January/February edition of the ABA’s Probate and Property magazine written by California trust-and-estates litigator Dominic J. Campisi was almost eerily prescient. This article deserves notice by trust-and-estates litigators everywhere. In Marshall v. Marshall -- Rashomon Revisited Campisi does a good job of articulating why this case should be viewed as part of a general trend towards greater federal court involvement in trust-and-estates disputes. Here’s the conclusion to Campisi’s article, summing up his views nicely:

J. Howard Marshall, who had taught wills and trusts at Yale Law School, certainly has provided a most intriguing case study for future generations of law students and practitioners. The price of a unanimous decision such as Marshall is that many contentious issues are left unresolved in order to reach a common decision. The lower courts continue to wrangle over attempts to use federal diversity jurisdiction for probate and trust disputes based on the general conclusions in Marshall.

In Hoffman v. Sumner, No. 05-C7114, 2006 WL 1444677 (N.D. Ill. May 18, 2006), the court followed Marshall in denying remand of a diversity case involving a dispute over a joint tenancy asset, holding that the dispute did not violate the probate exception, and rejected the suggestion that it should abstain in favor of the local probate court. The bankruptcy court in In re Enron Corp. v. Whalen, 351 B.R. 305 (Bankr. S.D.N.Y. 2006), held that an action to recover an allegedly improper transfer from the estate of a decedent was not covered by the probate exception because there was no interference with the res in the possession of the state court. The court explained that any federal judgment could subsequently be enforced in the probate action.

Judge Richard Posner in Jones v. Brennan, 465 F.3d 304 (7th Cir. 2006), distinguished between a claim brought concerning the conduct of the Cook County Probate Court in a pending dispute, holding:

That clearly would violate the probate exception. Marshall v. Marshall, supra, 126 S. Ct. at 1748. But she is also accusing the guardians of having mismanaged the estate, and as an heir she may have a claim for breach of fiduciary duty by them. . . . Such a claim does not ask the court in which it is filed to administer the estate, but rather to impose tort liability on the guardians for breach of fiduciary duty.

465 F. 3d at 307–08 (citations omitted).

In Burt v. Rhode Island Hospital Trust National Bank, No. C.A. PC/022243, 2006 WL 2089254 (R.I. Super. July 26, 2006), the court followed Marshall in holding that a breach of fiduciary duty claim against an executor was not within the limited jurisdiction of the probate court and could be heard in the Rhode Island general jurisdiction court instead.

In Bedree v. Lebamoff, No. 05-2258, 2006 WL 2860575 (7th Cir. Sept. 27, 2006), the Seventh Circuit held in a federal question case that

[t]he claim against the probate commissioner confronts another jurisdictional bar: the probate exception to federal jurisdiction. . . . And Bedree’s request for the district court to remedy what he perceives as errors in the state court’s administration of the estate, like the plaintiff’s request in Jones is the equivalent to asking the district court to take over administration of the estate. . . . This violates the probate exception even under the Supreme Court’s narrowed construction of the exception in Marshall. See, Marshall, 126 S.Ct. at 1748 (limited probate exception to proscribe only “disturb[ing] or affect[ing] the possession of property in the custody of a state court”). . . . The breach of fiduciary duty claim, on the other hand, is not barred by the probate exception because it need not necessarily affect the administration of the estate. See Marshall, 126 S. Ct. at 1748; Jones, 2006 WL 2337610, at *3.

2006 WL 2860575 at *2.

The Salvation Army has gone to court in Seattle to challenge a trust dividing more than $260 million among eight charities, including Greenpeace

I've written in the past regarding the unique public-relations issues faced by charities involved in trust/probate litigation (see here) and the different expectations the public and media have with respect to such litigants (see here).  The same dynamics are currently playing themselves out in a case involving a $260 million gift to eight charities.

As reported by the New York Times in Salvation Army Unit Seeks to Gain More of a Huge Gift, the charities find themselves balancing a legitimate desire to maximize the funds going to their respective charities -- all of which do good works and could use the money -- against appearing less than saintly in public.  Here are a few excerpts from the linked-to story:

The Salvation Army has gone to court in Seattle to challenge a trust dividing more than $260 million among eight charities, including Greenpeace.


The Salvation Army argues that the specific Greenpeace organization to which the donor, H. Guy Di Stefano, assigned the money was dissolved in 2005 and that its affiliate is not eligible to receive the gift. It wants the court to divide the money among the seven other charities.

“I’m mystified why anyone, let alone the Salvation Army, would oppose Greenpeace receiving this generous donation,” said John Passacantando, the group’s executive director. “It’s obvious that the donor’s intent was for Greenpeace to benefit from this.”

The dispute involves a trust created by Mr. Di Stefano, whose late wife, Doris, inherited United Parcel Service stock from her father, a former U.P.S. executive, and never sold it.

Mr. Di Stefano died in July and left his estate to eight charities: Direct Relief International, the Salvation Army, the Santa Barbara Hospice Foundation, the Santa Barbara Visiting Nurse Association, the American Humane Society, the Disabled American Veterans Charitable Service Trust, Greenpeace International Inc. and the World Wildlife Fund. Each stands to receive roughly $33 million.

Greenpeace International is defunct, however, and a charity called the Greenpeace Fund, with which it shared offices, phones and some employees, is claiming its share.

In October, Bank of America, the trustee, filed a petition in court in Washington State, where Mr. Di Stefano lived at the time of his death, asking what it should do. Shirley Norton, a bank spokeswoman, said it was only seeking to clarify its duties, not to deprive Greenpeace of money.

“Because of the disparity in the names and the fact that Greenpeace International no longer exists, we need guidance from the court,” Ms. Norton said.

The bank’s petition prompted the Salvation Army to contest disbursement of the money to the Greenpeace Fund.

.     .     .     .     .

The other beneficiaries of the trust have avoided the dispute.

In my 10 years as a legal counsel here, we have never gotten involved in a dispute over donor intent, and we certainly have had the opportunity,” said Christopher J. Clay, general counsel and planned giving director at the disabled veterans group.

“For a national charity to get out there in this kind of a case would take a compelling reason,” Mr. Clay said, “and I don’t think there’s a compelling reason here.”

The tone of the article clearly telegraphs the writer's disapproval of the Salvation Army's actions and the lengths the other charities are going to distance themselves from the Salvation Army.  Not surprisingly the blogosphere has been less than "charitable" to the Salvation Army on this case (see here).  The Salvation Army thought it was resolving a legal dispute when in fact it was stepping into a big PR mess.  I don't fault them for seeking to maximize their share of the $260 million charitable gift, but I do fault them for being clumsy about it.

Big Firms and Estate Planning

The departure of a number of prominent trust-and-estates partners from Sonnenschein Nath & Rosenthal has highlighted - again - the precarious nature of big firm trusts and estates departments.

As a partner in a small "boutique" trusts-and-estates firm (4 partners, 1 associate) I've seen first hand why this practice is a tough sell for big firm bean counters: leverage.  It's very, very difficult to leverage yourself as a T&E lawyer, which is OK in a small firm -- but not-so-OK in a big firm.  Here's an excerpt of what the Wall St. J. Law Blog had to say on the the subject:

With profitability a top priority at Sonnenschein Nath & Rosenthal, one practice group is under the microscope: trusts and estates. Four T&E partners at Sonnenschein in recent weeks have either left or announced plans to leave the 660-lawyer firm.


Roy Adams, the senior chairman of the practice group, left on Jan. 1 for Constantine Cannon; Eileen Trost jumped to Chicago’s Bell Boyd & Lloyd in December; Richard Brown recently departed for Harrison & Held; and Susan Slater-Jansen has announced she’s moving to Kurzman Eisenberg Corbin Lever & Goodman in White Plains, N.Y.

The departures come at a time when Elliott Portnoy .  .  .  , the firm’s 41-year-old chairman-elect, has said he is bent on taking a hard look at the economics of Sonnenschein’s various departments. T&E may be vulnerable because it is a low “leverage” practice — fewer junior lawyers generally are needed, say, to draft a will than to complete a merger agreement.

I say good riddance -- a sentiment apparently shared by Chicago T&E lawyer Joel Schoenmeyer, as expressed in the following excerpt from his blog, Death & Taxes:

It may be that big firms don't need estate planning groups (or don't think they do -- big firms, like Kirkland & Ellis, are famous for changing their minds on this point). But I think that goes both ways -- good estate planners don't need big firms, either. We're probably going to see more T&E boutique firms (like this one) spring up in the near future, which is a good thing.

Rosa Parks' Estate Scheduled For Jury Trial

Although civil-rights icon Rosa Parks passed away leaving behind a modest estate, there are millions at stake in her estate's upcoming will-contest jury trial.  When Ms. Parks passed away, her most valuable asset was not her bank account -- it was the future marketing rights to her name and likeness.  An excerpt from Forbe's list of Top-Earning Dead Celebrities for 2006 gives a sense of how high the economic stakes in the Parks litigation could be:

The 13 icons on our sixth annual Top-Earning Dead Celebrities list collectively earned $247 million in the last 12 months. Their estates continue to make money by inking deals involving both their work and the rights to use their name and likenesses on merchandise and marketing campaigns. To land on this year’s list, a star needed to make at least $7 million between October 2005 and October 2006.

As reported here in Philip Bernstein's New York Probate Litigation Blog Parks died in October 2005, leaving virtually all of her assets under a 1998 will to the nonprofit Rosa and Raymond Parks Institute for Self Development, which she founded in 1987 with her longtime friend and caregiver, Elaine Steele. Steele, who has served as an officer of the institute, was granted power of attorney over Parks in 1998, the same year Parks' will was signed.  The will-contest goes to trial on February 19, 2007, before a six-member jury in Wayne County Probate Court, although rumors of a pre-trial settlement have surfaced in the past (see here).

For the latest developments in this case, here's an excerpt from Millions at stake in name of Parks:

The ongoing battle over Rosa Parks' estate set to play out in a Wayne County courtroom next month will have more to do with the marketing rights to her likeness and image than any money the civil rights icon left when she died.


Even if Parks' estate isn't worth the millions some have claimed, experts say, her name and image could be worth millions for decades to come.

"Maybe tens of millions," said Charles L. Sharp, a marketing professor at the University of Louisville, noting that former boxing great Muhammad Ali last year sold most of the rights to his name and likeness for $50 million to be used on such products as snack food.

. . . . .

Since her death, Parks' likeness has appeared in national Chevrolet and Apple Computer ads. Not to mention the souvenirs and other memorabilia being sold around metro Detroit and over the Internet.

Parks' only family, 13 nieces and nephews, contested their aunt's will in November 2005, claiming that Steele bamboozled Parks, who suffered from dementia, into signing a will that cut them out of any decision-making about how Parks' likeness would be used and any profit from the licensing of her name and image.

. . . . .

Civil rights activists and others will closely watch the outcome because it could determine how the country ultimately remembers one of its greatest heroes of the struggle for racial equality.

"If this can happen to someone of her stature, then it can happen to anyone," said nephew William McCauley, 48, of Detroit, who serves as the family spokesman. "We just believe that our aunt was taken advantage of. ... The way her will read, she didn't care about her family, and that couldn't be farther from the truth."

Celebrity Probate Litigation

An AP article entitled Family Feuds Follow Famous People After Death has fun rounding up all the latest celebrity probate cases in one nice package.  I've written about some of the cases mentioned in the linked-to article (James Brown, Billy Graham), noted two celebrity cases not mentioned in the article (Jimmy Hendrix, Celia Cruz), and was amused to find bits of probate gossip I'd missed (Ted Williams, Peter Lawford, Marlon Brando, Ray Charles).  Here's an excerpt from the linked-to AP piece:

James Brown has yet to rest in peace.


His embalmed body lies in a sealed casket at his South Carolina home while his family and attorneys argue over his estate and final resting place. Security guards maintain constant watch over the Godfather of Soul -- whose coffin sits in a temperature-controlled room -- while issues surrounding his estate are hashed out. Brown died Dec. 25.

Such posthumous problems are not new. While burial battles like Brown's are rare, family dramas have haunted famous folks well into the afterlife.

The list includes athletes, musicians, movie stars and others.

"It's just the nature of families," said Joelle Drucker, an attorney with Greenberg Traurig in Los Angeles. "If you don't get along, if there's a prior marriage with children and conflicting interests, there's always going to be fighting. It tends to be the norm rather than the exception."

Philosophical arguments for and against estate taxes

Last year's estate tax debate was compelling on many levels.  One interesting aspect of the debate was that it forced those on both sides of the issue to consider -- and articulate -- their fundamental philosophical beliefs with respect to property rights, inheritance rights, and the role of taxation in our society.

Which is why I found an excellent research paper published by the IRS entitled "Federal Taxation of Inheritance and Wealth Transfers" especially thought provoking.  It contains the best summary I've read to date of the historical bases for the divergent philosophical world-views playing themselves out in the current estate-tax repeal debate.  The following is an extended excerpt that is well-worth reading for anyone remotely interested in the issue:

Continue Reading...

The ABA Promotes Land Trusts

I recently wrote here about a land-trust case roiling Florida's real property and trust law landscape for the last several years.  It was against this backdrop that I found the "Young Lawyers Network" column in the January/February 2007 edition of the ABA's Probate & Property Journal especially interesting.

The column, entitled "The Land Trust", should be of special interest to Florida lawyers because it does a good job of explaining the unique characteristics of the typical "Illinois Land Trust" and how this form of property ownership is so far removed from classic trust law that calling it a trust can be misleading.  Here's an excerpt:

The land trust, often referred to as an "Illinois land trust" because of its origins, is truly a unique legal entity.  And, as described by Henry W. Kenoe, the Illinois land trust scholar, it is, perhaps, unfortunate that it bears the the trust moniker  because  the designation is almost too confusing.  The land trust is very versatile and differs from a conventional trust in many ways.

The land trust is a legal arrangement in which a trustee holds legal and equitable title to property, but all managerial powers over the trust assets remain with the beneficiaries of the trust.  The trustee takes action when called upon and directed by the beneficiaries.  A classic definition of the land trust appeared in Robinson v. Chicago Nat'l Bank, 176 N.E.2d 659 (Ill. App. Ct. 1961).

A key benefit of the land trust over the most common type of alternative form of joint ownership, the tenancy-in-common, is that the land trust is not subject to partition actions.  Especially in those cases where a family wants to keep a farm or other large parcel of real property intact when passed to the next generation, the land trust can be ideal (this case is an example of how partition actions can otherwise disrupt the best laid plans).  The column in this month's Probate & Property Journal goes on to provide the following list of the benefits of holding real property in land trusts:

  • the interest of the beneficiaries will not be disclosed without order of court;
  • the interests are not subject to partition;
  • the beneficial interest is personal property and, therefore, avoids ancillary probate requirements;
  • transferability of beneficial interest is simple;
  • the beneficial interest can be used as collateral; and
  • testamentary dispositions can be set out within the trust agreement, thereby avoiding probate.
By the way, the ABA also has solid Florida-law specific forms available for professionals considering land trusts for their clients.
For more on land trusts (including additional sample forms), Albany Bank and Trust has a comprehensive web-page here dedicated to promoting the virtues of land trusts.

Soul legend James Brown instructed lawyers before he died to carry out DNA tests to show if he was the father of his wife's son

I previously wrote here about virtual adoptions, and how under this doctrine persons potentially deemed to be "heirs" of an intestate estate may include non-biological descendants if the child was raised by the decedent, even if never legally adopted.  James Brown's estate may soon have to grapple with this issue based on the brewing paternity dispute reported in Soul legend James Brown instructed lawyers before he died to carry out DNA tests to show if he was the father of his wife's son, which provides as follows:

Brown's family lawyer Debra Opri told CNN's Larry King the singer never wanted five-year-old James Joseph Brown II tested when he was alive, but wanted it done for the rest of his family's sake once he was gone.

The boy is the son of Tomi Rae Hynie, 36, who after the star's death on Christmas Day said she was locked out of his South Carolina home after another lawyer alleged they had not been legally married.

Hynie insists they were and she has documentation to prove it, and Brown was her son's father.

Hynie told King the little boy was "absolutely without a doubt" Brown's son and she would welcome a test.

"There is no doubt about it," she said. "No doubt to my husband, no doubt to me and I'd be willing to take any test that they'd like to take."

Sperm donor says he wants to be a father to two children

In Florida, a sperm donor's parental rights are governed by Florida statute section 742.14, which provides as follows:

The donor of any egg, sperm, or preembryo, other than the commissioning couple or a father who has executed a preplanned adoption agreement under s. 63.212, shall relinquish all maternal or paternal rights and obligations with respect to the donation or the resulting children. Only reasonable compensation directly related to the donation of eggs, sperm, and preembryos shall be permitted.

As reported here, the Kansas Supreme Court is considering the constitutionality of a similar statute.  The case is generating national attention, and will probably have national ripple effects if the statute is overturned on constitutional grounds.  The Kansas Supreme Court is expected to rule by February.  Here is an excerpt from the linked-to story:

A case before the Kansas Supreme Court has become a key test of the rights of sperm donors who want to be involved with their offspring over the objection of the children's mothers.

The dispute, which has drawn national attention, involves a single woman, identified in court papers only as S.H., who gave birth to twins in May 2005 after being inseminated with the sperm of a friend, identified as D.H.

After the mother made it clear that she did not intend to share parenting, D.H. sued to establish paternity. He lost in a trial court because of a Kansas law that says the donor of sperm provided for artificial insemination is not the legal father of the child unless the donor and mother agree to it in writing.

The major question in the case is whether requiring such written agreements in cases involving sperm donors known to the mother, not anonymous donors from sperm banks, violates the donor's constitutional rights as a parent. Like Kansas, many states have legal hurdles for donors seeking parental status.

The case arises at a time of increasing advances in reproductive technology. According to the Centers for Disease Control and Prevention, the numbers of women being impregnated with eggs fertilized outside the womb is significantly on the rise. There are no reliable statistics on methods of conception with donated sperm.

"It's clearly a broadening phenomenon," New York University sociology professor Judith Stacey says of artificial insemination with donor sperm. "All of this is tied to changes in the family, including women choosing to marry later and the gay and lesbian movement. What hasn't changed is women's desire to have children."

Most sperm donors are anonymous and waive parental rights. The move typically shields donors from demands for child support and protects mothers' privacy.

However, when the donor and the mother know each other, different expectations and legal complications can arise, as is the Kansas case and others in recent years from California to Pennsylvania. The cases reflect the lack of uniformity in laws regarding sperm donors, says American University law professor Nancy Polikoff, one of 20 family law professors who filed a brief in support of the Kansas mother. They say states traditionally have had broad latitude to define parentage on factors other than biology, such as marriage.

Source:  Wills, Trusts & Estates Prof Blog

Judge to consider removing Celia Cruz executor

If an estate is especially large or complex, probably the single best insurance against probate litigation is designating a bank or trust company to act as personal representative of the estate (or "executor" if you're in the North East).  A corporate PR will have the resources and expertise to get the job done while avoiding the possible land mines (see: Trust in your bank?).  This service doesn't come for free, but it's usually exponentially cheaper than litigation.

As reported here, the Celia Cruz estate is beginning to learn why picking the right PR can make all the difference in the world.  The following is an excerpt from the linked-to case:

 NEWARK, N.J. - A New Jersey judge next month will consider whether to remove one of the executors handling the affairs of the late Celia Cruz, a singer beloved as the "Queen of Salsa."
The hearing is to be held in response to charges by the executor that co-executor Luis Falcon has been spending money intended for Cruz's husband, ailing trumpeter Pedro Knight.

In addition to scheduling the Feb. 9 hearing, Superior Court Judge Peter E. Doyne this week appointed a New York lawyer to represent Knight's interests as guardian.

Falcon has drained funds from accounts for Knight, made "extravagant expenditures" and failed to account for transfers of more than $1 million from Cruz's estate, according to a lawsuit filed by co-executor Omer Pardillo, of Cliffside Park.

In addition, Falcon is exercising improper influence over Knight, who is 85 and suffering from dementia, the lawsuit claimed. After Cruz died in 2003, Knight moved to California with Falcon, the lawsuit said.

Source: Wills, Trusts & Estates Prof Blog

Florida doctor pleads guilty in $1 billion life insurance viatical settlement fraud

Life insurance is such an integral part of the estate planning process, that related litigation should be considered as falling within the ambit of trusts-and-estates litigation.  Which is why this Reuters report covering the latest developments in a mega fraud case involving fraudulent viatical settlement contracts caught my eye.  Here's an excerpt from the linked-to story:

MIAMI (Reuters) - A Florida doctor pleaded guilty on Wednesday to securities fraud in connection with a life insurance scam that cost 28,000 investors nearly $1 billion, prosecutors said.

Clark Mitchell, the former director of a prominent AIDS clinic who was arrested more than five years ago on insurance fraud charges, agreed to be responsible for restitution of $367 million to investors in Mutual Benefits Corp., a Fort Lauderdale company that sought investors in life insurance policies held by elderly or ill people.

U.S. District Judge Paul Huck accepted a plea agreement and set sentencing for March 7, 2007, prosecutors said. It is one of several civil and criminal cases stemming from the company.

Prosecutors said Mutual Benefits directed an international network of agents who conned people into investing in viatical settlements, which are agreements to buy the life insurance death benefit of a terminally ill or elderly person in return for a lump-sum payment.

For a not-very-favorable summary of how this case has been handled from beginning to end, social worker/financial planner/author Gloria Grening Wolk provides comprehensive commentary and source-document links at Reports on Mutual Benefits Corp.  For the DOJ's spin on the case, see here.

So what's the latest on estate tax reform?

As I wrote here, Democrats are expected to dust off some form of their past proposals for estate tax reform and try to get something passed prior to the 2008 presidential elections.  So what's the latest news on this front?   Well, the North Carolina Estate Planning Blog had this post on recent public comments by Russ Sullivan, Democratic Staff Director of the Senate Finance Committee, at the joint meeting of the Estate & Gift Tax Committee and Trusts, Estates & Surrogate's Courts Committee of the NYC Bar Association.

Congress expects to address the estate tax in the second half of 2007. The bottom line is that for any bill to pass both houses, it cannot reduce the revenues raised by estate/gift tax by more than 50% (apparently the reason last year's proposal didn't pass is that it cost just a little too much (it reduced revenues by 60%) for some key Democratic senators to support it). Any new estate tax law is highly likely to contain the following provisions:

Step-up in basis (the feedback regarding carryover basis has been loudly and uniformly negative)

Estate tax exemption between $3.5 million and $5 million

Estate tax rate will correspond to the capital gains rate--possibly 15% rate for the first $5-10 million and a higher rate, which "will start with a 3", for the balance over that

Exemptions will be transferable between spouses

No state tax deduction (Apparently the state governors have been terrible lobbiers--not a single one has complained about the loss of state estate tax revenues.)

There will be "offsets" in exchange for the reduction in tax rates. These are likely to include restrictions on discounts available for family limited partnerships, especially those funded with mostly marketable securities. He told us, "Take a good look at some of the proposals from during the Clinton administration."

Unclear whether the estate and gift tax will be reunified--there has been disagreement within the Senate Finance Committee staffs

If we get to 2010 and no estate tax bill has been passed, they will extend the 2009 provisions for a while--even the more progressive Democrats agree that we can't go back to the pre-2001 law.

Sons squabbling over Billy Graham's burial site

Facing your own mortality is never easy.  Imagine what world-famous Evangelist Billy Graham and his wife Ruth must be feeling as two of their sons squabble (now in public) over where they're to be buried.  The following is an excerpt from this AP report on the now-public family dispute:

CHARLOTTE, N.C. – The uncomfortable topic of where aging evangelist Billy Graham and his wife Ruth will be buried has moved into a public setting after a newspaper reported the family is split over the issue.

Mark DeMoss, a spokesman for the Billy Graham Evangelistic Association, said Wednesday there has been no final decision on where the 88-year-old Graham will be buried after he dies – whether near his home in the mountains of western North Carolina or at a museum and library being built at the association's headquarters in Charlotte, near where Graham grew up.

"Obviously, there has to be a decision at some point," DeMoss said. "Whether that would be in the coming weeks or just upon death, I don't know. ... It's unfortunate that it was worked out in The Washington Post."

So what's the probate-litigation angle?

As I reported here, at least one Florida appellate court (the 4th DCA) has held that a testator’s body is not considered “property.” As such, the general rule of construction found in Probate Code Section 732.6005(2) requiring Wills in Florida to be deemed to pass all property that the testator owns at death does not apply to bodily dispositions. Instead, the 4th DCA formulated the following rule regarding the disposition of a Florida testator’s body:

[A] testamentary disposition is not conclusive of the decedent’s intent if it can be shown by clear and convincing evidence that he intended another disposition of his body.

In other words, if the Grahams want to make sure they get the final word on where they're going to be buried, they need to make sure they leave behind clear and convincing evidence stating exactly what they want to happen.  Mrs. Graham has apparently already received advice to that effect, as indicated by the following excerpt from the linked-to story:

The Post reported that Ruth Graham recently wrote a notarized memo, witnessed by six people, that states her desire to be buried in the mountains.

Brooke Astor Guardianship Litigation Part 2: Fees

I previously wrote here about the very public litigation involving guardianship proceedings for legendary New York socialite Brooke AstorWell, it's almost inevitable that part 2 of any guardianship case will be a fight over fees (see generally), and this case is no exception.  The following is an excerpt from In Aftermath of the Astor Case, How the Final Fees Piled Up, a New York Times piece reporting on the case:

The legal drama over the health care and finances of Brooke Astor, New York’s legendary socialite and philanthropist, played out for nearly three months amid allegations and recriminations of financial duplicity, greed and outright forgery.

The case against her son, Anthony D. Marshall, came to a halt on Oct. 13 when the parties in the feud reached a settlement, averting what could have been an expensive and sensational trial scheduled to begin less than a week later.

But everything comes with a price. In the seven weeks since the agreement, those involved in the case have filed bills with Justice John E. H. Stackhouse of State Supreme Court in Manhattan for fees totaling about $3 million for the services of 56 lawyers, 65 legal assistants, 6 accountants, 5 bankers, 6 doctors, 2 public relations firms and a law school professor. Under state law, such payments would come out of Mrs. Astor’s assets, valued at over $120 million.

But yesterday, Justice Stackhouse issued an order that approved a smaller amount, $2.22 million, calling the original figure “staggering” and saying that some charges were for work that was not in the best interest of Mrs. Astor, who is 104. The justice denied payments for the public relations firms, the time lawyers spent talking with reporters and the hours logged preparing the fee applications themselves.

Yikes!!  According to my math the court refused payment of close to $800,000 in fees.  Unless these professionals have fee agreements in place requiring the litigants/their clients to pay their fees, they just did a whole lot of free work for a $120 million+ guardianship estate.

Lesson learned:

In a guardianship case, either you need to be ready to work on a pro bono basis or you need to have an engagement agreement in place requiring whomever hires you to personally pay your fees if the court wont authorize payment of your fees from the guardianship estate.  The risk of the court refusing payment of fees will be borne by someone, just make sure that if it's going to be you the decision is a conscious one.

Source: Death and Taxes - The Blog

Former California Pastor Accused of Killing Man for His Multimillion-Dollar Trust Fund

Other than as an excuse to note Florida's Slayer Statute (see here), which automatically disinherits a killer, this latest report from the bizzaro world usually inhabited by FOX News isn't particularly interesting.  For all the details go to Former California Pastor Accused of Killing Man for His Multimillion-Dollar Trust Fund, although the following excerpt pretty much sums up the story:

A preacher was arrested at the Mexican border and accused of deliberately crashing his pickup truck and killing an 85-year-old passenger in a scheme to get his hands on the farmer's multimillion-dollar trust fund.

Source: Wills, Trusts & Estates Prof Blog

Charities as litigants: a tough balancing act

I previously wrote here about the very public battle going on between the family of a very wealthy donor and Princeton University.  The same public relations issues at play in that case were also at play (albeit on a much smaller scale) in a probate case involving the University of Wisconsin, as reported in Woman wins probate fight with UW:

The case highlights a dilemma for nonprofit groups: how hard to pursue money they believe is theirs. Fight too hard and they risk antagonizing potential donors, but too soft might mean they lose money for their cause.

The "dilemma" faced by charities is a product of the different expectations the public has when it comes to non-profits: they aren't supposed to be driven solely by economic concerns.  Unlike private litigants, we seem to expect more from charities.  Note how the opposing side in the UW case expressed indignation at the university's "inexplicable" decision to "needlessly" litigate the contested inheritance:

The foundation's tactics drew harsh criticism from North Central Trust Co., the administrator of Mennes' estate. In July, company lawyers told the high court in a brief the foundation was "inexplicably" fighting the case even after losing several rounds. They said the litigation was draining the estate of money meant for the university and his daughter.

"If the foundation develops a reputation for needlessly engaging family members in litigation, it is less likely that people will provide for the University of Wisconsin (as opposed to other worthy causes) in their estate plans," the lawyers wrote.

Lesson learned:

There's no getting around the different expectations the public . . . and judges . . .  have when charities are involved in probate litigation.  Whether the charity is your client or the opposing side, simply being aware of this dynamic may make or break your case.

Thanks to Chicago-area attorney Joel A. Schoenmeyer, author of Death and Taxes - The Blog, for bringing this article to my attention in his blog post entitled Charitable Beneficiaries Play Hardball.

Every Divorcing Client Needs Estate Planning

Divorce and its unintended probate-litigation aftermaths are a recurring topic on this blog (see here, here & here).  The subtext to these prior posts should be fairly obvious: every divorcing client needs estate planning!  However, just in case the message wasn't getting across Florida attorney Jeffrey Baskies was  kind enough to write a Florida Bar Journal article entitled Every Divorcing Client Needs Estate Planning that does a good job of underscoring the interconnections between divorce and estate planning.  Here's the concluding paragraph to Mr. Baskies' article:

[T]here are many compelling reasons every divorcing client needs estate planning. Clients involved in a divorce need to consider and address their changed circumstances and their changed estate planning objectives. Any lawyer representing a client in a divorce should advise the client to see a qualified estate planning attorney. Indeed, no divorcing client should ignore the complicated legal issues relating to estate planning that are made acute by the initiation of the divorce proceedings. For all of these reasons, estate planning should be a top concern for divorce lawyers and should be addressed immediately with their clients.

Hendrix Estate: a cautionary estate planning tale for musicians

As reported here in Forbes a musician's highest earnings years may come long after he or she has passed away.  Here's an excerpt from the linked-to Forbes piece:

A nail in the casket is hardly the end for some stars. Instead, their work, as well as their iconic images, continues to appeal to fans who remember them, and to those born long after they died.

The 13 icons on our sixth annual Top-Earning Dead Celebrities list collectively earned $247 million in the last 12 months. Their estates continue to make money by inking deals involving both their work and the rights to use their name and likenesses on merchandise and marketing campaigns. To land on this year’s list, a star needed to make at least $7 million between October 2005 and October 2006.

Which is why the on-going legal battles involving the Hendrix estate shouldn't be viewed as an isolated event.  If you're luck enough to find some success as an artist, what happened to Hendrix's estate could happen to you.  As reported in Hendrix Estate Wins Effort to Halt Sale of Star's Songs after soaring to success and then overdosing and dying all by the age of 27, Hendrix also left behind a "world of controversy":

The dispute dates back to 1965. The then-unknown electric guitarist, whose music ushered in a new era in blues rock, signed a one-page recording agreement with PPX Enterprises, an entity controlled by Edward Chalpin and based in New York.

According to Judge Kaplan's decision, Hendrix agreed to "produce and play and/or sing exclusively for Enterprises" for a three-year period. He gave Enterprise exclusive rights to the masters produced, in exchange for a royalty of 1 percent of the retail selling price of the records so produced.

Hendrix shot to international fame two years later. In June 1967, he performed at the Monterey International Pop Festival and wowed the audience with his rendition of "Wild Thing." His whirlwind success was short lived: He died of a drug overdose in 1970 at the age of 27.

"A WORLD OF CONTROVERSY"

Judge Kaplan noted that after Hendrix's untimely death the musician "left a body of musical works and world of controversy." Hendrix's estate and Chalpin and PPX Enterprises, an entity based in New York, have been engaged in a series of lengthy legal battles in Great Britain and the United States over the rights to Hendrix's songs.

I have no doubt a minimal amount of estate planning would have avoided much of the controversy swirling around the Hendrix estate.  By the way, ASCAP has a good estate-planning primer for musicians at Estate & Trust Planning Issues For Music Copyright Owners. 

I of course recognize that the odds of a twenty-something rock super star sitting down to plan his or her estate are basically zero.  So perhaps the most these die-young super stars can teach us from a planning perspective is to highlight all the things that can go wrong.

Public relations as litigation tool in cases involing charities: Robertson v. Princeton University

The Wills, Trusts & Estates Prof Blog had this interesting post on the Robertson v. Princeton website, a classic example of litigation public relations.  It seems to me that trust/probate litigation involving charities is especially ripe for this tactic.  By the way, it should also be noted that in a sharp break from prior law, under Florida's new trust code settlors of charitable trusts will now have standing to sue the charitable beneficiaries of their trusts under F.S. 736.0405(3).

Back to the main point of this blog post.  Here's a sampling of what the Robertson family website has to say in their war-of-words against Princeton:

In a subsequent amended complaint, filed in New Jersey Superior Court on November 12, 2004, the plaintiffs expanded their charges, alleging that Princeton has:

    • Wrongfully spent more than $100 million of the Robertson Foundation’s money on programs, projects, salaries, bonuses, buildings, equipment and “overhead” costs that have little or nothing to do with the Robertson Foundation mission.
    • Engaged in an fraudulent cover-up scheme, involving several Princeton administrations, to hide the improper spending.
    • Similarly misused other donors’ gifts in what appears to be a systemic university-wide “pattern and practice of diverting [donations] from their intended purpose.”

In January 2006, the estimate of more than $100 million in improper spending was more than doubled, to more than $207 million (nearly $500 million in 2006 dollars).

Not to be out gunned on the PR front, this is a sampling of Princeton's rebuttal:

Today’s briefs show that the University paid many costs that it could have charged to the Robertson Foundation under the Foundation’s Certificate of Incorporation. As a result, the Foundation was charged some $235 million less than it might have been—an amount greater than all of the “overcharges” alleged by plaintiffs combined.

Clearly the PR battle going on here is an integral aspect of the case . . . and both sides seem to believe success in the courtroom/settlement conference room will turn in large part on who wins the PR battle.   I also think that the first side to realize PR would play a large role in this case probably had the first-mover advantage (based on the clippings excerpted in the Robertson family website, I would guess they were probably the first to go on the PR offensive).

Note to self:  when it comes to litigation PR, be the first mover.

"Wills are uncanny and electric documents."

Every once in a while we need to be reminded that estate planning documents aren't simply technical instruments effectuating the tax efficient transfer of assets from one generation to another.  Which brings me to this wonderful description of a will in Strangers in Paradise: How Gertrude Stein and Alice B. Toklas got to Heaven, The New Yorker, Nov. 13, 2006, at 57:

Wills are uncanny and electric documents. They lie dormant for years and then spring to life when their author dies, as if death were rain. Their effect on those they enrich is never negligible, and sometimes unexpectedly charged. They thrust living and dead into a final fierce clasp of love or hatred. But they are not written in stone—for all their granite legal language—and they can be bent to subvert the wishes of the writer.

Source: Wills, Trusts & Estates Prof Blog

Estate Tax Repeal is Dead; Estate Tax Reform is Alive and Well

Now that both the House and Senate are in Democratic hands I think it's safe to say that estate tax repeal is a dead issue, a view shared by USA Today among others (see also here).  What does have a fighting chance is estate tax reform that excludes most taxpayers while retaining most of the revenue currently generated by the tax, as reported in the USA Today piece:

While Democrats have opposed full repeal of the estate tax, many support increasing the exemption amount, says Clint Stretch, managing principal of tax policy at Deloitte Tax in Washington. Rep. Charles Rangel, the New York Democrat who's expected to chair the House Ways and Means Committee, favored estate tax reform as far back as 2001, Stretch notes. "Clearly, he would be supportive of a significant increase in the exemption amount."

Here's how a leading Democratic reform proposal was described in June 2006 in Estate tax reform not dead, despite vote:

Many Democrats may be amenable to raising the exemption level, but far fewer seem to be in favor reducing the tax rates, due to concern over how much revenue would be lost. The tax rate, not the exemption level, is what would cause the sharpest reductions in revenue, according to the liberal Center for Budget and Policy Priorities.

The latest proposed compromise comes from Sen. Tom Carper (D-Delaware). He offered an amendment to the repeal bill that would freeze the estate tax at 2009 levels: specifically, a $3.5 million exemption at a top rate of 45 percent.

The Urban-Brookings Tax Policy Center estimates that if the 2009 estate tax provisions were made permanent ($3.5 million exemption with a top rate of 45 percent) that would protect the smaller estates that otherwise would be subject to estate tax under pre-2001 law, and it would cost 60 percent less than permanent repeal.

If the estate tax were frozen at 2009 levels, only 0.3 percent of all estates would have any tax liability, according to CBPP.

My prediction:

Estate tax will be frozen at 2009 levels: $3.5 million exemption at a top rate of 45 percent.  By the way, this is reportedly the estate-tax reform approach favored by none other than Rep. Rangel himself:

Mr. Rangel has also supported estate-tax relief that would raise the exemption level to $3.5 million ($7 million for couples), thus exempting an estimated 99.7 percent of Americans from paying the so-called death tax.

See What Charlie Rangel hasn't said

New Form 706 Requires Disclosure of Lifetime Sales to Trusts

A sale to an intentionally defective grantor trust is a very effective and flexible estate-tax planning device.  Moreover, if the sale is reported on one of the more than 99% of gift tax returns that are NOT audited by the IRS and the transferor dies more than three years after the gift tax return is filed, the IRS will generally be precluded from raising valuation or other issues related to the sale on an audit of the transferor’s estate tax return.  (In 2005, approximately 0.8% of gift tax returns filed with the IRS were audited. Approximately 8% of estate tax returns were audited. See Treasury Inspector General for Tax Administration, Trends in Compliance Activities Through Fiscal Year 2005, Figures 45 and 46.)

In the Wills, Trusts & Estates Prof Blog Prof. Beyer posted on a report in the October 2006 RPPT eReport by Amy E. Heller (Weil, Gotshal & Manges LLP) on the new Form 706.  Bottom line, all the arguments in favor of reporting grantor-trust sales on a gift tax return are even more compelling in light of new line 12(e) of part 4 of the new Form 706.  Although Ms. Heller's report was published before the new 706 was adopted (see here for the new Form 706 as adopted), her comments remain relevant because new Line 12(e) of part 4 was in fact incorporated into the final form:

[L]ine 12(e) of part 4 of the draft form asks an executor whether a decedent at any time during his or her lifetime transferred or sold an interest in a partnership, a limited liability company or a closely-held corporation to a trust that was in existence at the decedent’s death and that was (1) created by the decedent during his or her lifetime or (2) created by someone other than the decedent under which the decedent possessed any power, beneficial interest or trusteeship. If the answer to this question is yes, the executor is required to provide the EIN of the entity in which the interest was transferred.

As a result of new line 12(e), certain gratuitous transfers to trusts that are reportable on a gift tax return will need to be reported for a second time on the transferor’s estate tax return. More significantly, certain sales to trusts for which no gift tax return was filed will need to be disclosed on the seller’s estate tax return. For example, an individual’s sale of a partnership interest to his or her grantor trust for fair market value will need to be reported on the individual’s estate tax return, regardless of whether the sale was required to be reported on a gift tax return. ***

[Because new line 12(e) was in fact incorporated into the new Form 706], practitioners who do not currently advise clients to report sales of interests in partnerships, LLCs or closely-held corporations to grantor trusts on gift tax returns may wish to consider doing so. Reporting these sales will help to close the statute of limitations on IRS challenges more quickly and may even reduce the risk of such challenges. If a sale is reported on one of the more than 99 percent of gift tax returns that are not audited and the transferor dies more than three years after the gift tax return is filed, the IRS will generally be precluded from raising valuation or other issues related to the sale on an audit of the transferor’s estate tax return. Furthermore, in the event that the IRS does successfully challenge a sale disclosed on a gift tax return, it may be possible to make adjustments to a client’s estate plan that would not be possible if the challenge arose after his or her death.

Senate Report On Abusive Offshore Trusts

I previously wrote here about a well respected North Carolina attorney facing serious jail time for allowing himself to get enmeshed in a fraudulent offshore trust scheme.  Continuing with the "let's bash" offshore trusts theme, Jonathan Alper's blog, the Florida Asset Protection Blog, had the following to say about a recently published Senate Committee Report (401 pages!) examining abusive offshore trust schemes:

I occasionally get email questions about offshore trusts for people interested in sheltering income taxes. My reply always is that asset protection planning is income tax neutral, and that an asset protection plan is not designed to reduce taxes. Nevertheless, there are promoters and attorneys who market various plans to reduce income tax involving one or more offshore legal entity. There is a well know website called Quatloos.com which reports on tax evasion scams and the prosecution of their promoters. In a November 1, 2006, post Quatloos includes a report on offshore tax havens written by the U.S. Senate committee investigating income tax scams.

The Senate report is lengthy but very interesting. Anyone who is thinking of involvement in an offshore legal structure promising to reduce income tax should read portions of the Senate report. The report is very detailed in its description of abusive offshore tax schemes, and it names the promoters and attorneys responsible.

Policing Charitable Trusts: The J. Paul Getty Trust Case

Florida’s new trust code continues the common law rule in this state that charitable trusts are policed primarily by the Florida Attorney General (F.S. §736.0110(3)). The same rule applies to Florida not-for-profit corporations (F.S. §617.2003). However, in a significant break from the common law rule, the new trust code also gives settlors standing to personally enforce the charitable trusts they create (F.S. §736.0405(3)).

The ongoing saga over the J. Paul Getty Trust in California (see here for prior post) is a dramatic example of how charitable trusts can go awry and how a state’s attorney general’s office can play a role in policing these organizations. In the latest twist, the New York Times reported in California Attorney General Appoints Overseer of Reforms at J. Paul Getty Trust that the California attorney general has appointed an independent monitor to oversee mandated reforms. The following is an excerpt from the linked-to story:

LOS ANGELES, Oct. 2 — Ending a 14-month investigation, the California attorney general appointed an independent monitor on Monday to oversee reforms at the J. Paul Getty Trust, one of the world’s richest cultural organizations. The inquiry determined that the trust’s former president, with the approval of the Getty board, misspent trust money on his wife’s travel, used employees for personal errands and made improper payments to a graduate student.

Although the attorney general, Bill Lockyer, found that the former president and the board violated their legal duties, he declined to take civil or criminal action against them. The report stated that the misuse of funds did not result from fraud and that the value of a settlement between the former president, Barry Munitz, and the trust exceeded the value of the losses from any improper payments.

The Getty, which has adopted several reforms since Mr. Munitz resigned under pressure in February, expressed satisfaction with the results of the inquiry.

Professor David F. Powell: The New Florida Trust Code, Part 2

I previously wrote here about Part 1 of Professor Powell's series of Florida Bar Journal articles explaining Florida's new trust code.  This month's Florida Bar Journal contains Part 2 of Prof. Powell's series entitled aptly enough "The New Florida Trust Code, Part 2".  The new trust code provisions covered in this latest article are the following:

  • Duties of a trustee
  • Trustee Powers
  • Liability of Trustees for Breach of Trust
  • Exculpatory Clauses
  • Remedies and Damages for Breach of Trust
  • Costs and Fees
  • Liability of Trustees to Third Parties
  • Limitations on Actions Against Trustees
  • Protection of Persons Other Than Beneficiaries Dealing with the Trustee
  • Rules of Construction
  • Charitable Trusts

Prof. Powell concludes his article with the following observations:

Even before the enactment of new Ch. 736, Florida already had an extensive body of statutory trust law, virtually all of which is found in F.S. Ch. 737. Nevertheless, enactment of the Code should prove beneficial because the Code is more structured, comprehensive, understandable, modern, accessible, and uniform than existing Ch. 737. Indeed, a major benefit of the Code is that it provides answers to a host of questions for which Florida’s law was previously not definitively settled. The added certainty the Code offers should promote efficiency and fairness to beneficiaries and trustees alike. At the same time, it should minimize the need for costly litigation.

I think Prof. Powell's last point is especially important.  Knowledge is power, especially so in the trust litigation arena where the substantive law can be very complicated and the dollars at stake in most cases simply makes it economically unfeasible to learn all the trust-law nuances once you're involved in the case.  In order to be truly effective, you need to know this stuff ahead of time.  And if you do know your stuff, you'll probably know how to cut to a final result that works best for all concerned without going through two years of costly litigation to get there!

Forbes: Reduce Estate Tax By Making Gifts

Warren Buffett's record shattering gift has raised the level of awareness people have with respect to gifting as part of a person's estate plan.  Apparently in response to this waive of interest Forbes just published an article entitled Reduce Estate Tax By Making Gifts, which did a pretty good job of summarizing how gifting can fit into a person's estate plan.  The following are excerpts from the linked-to article:

While the estate tax is still in effect--or if Congress resurrects it after it goes away as scheduled in 2010--you may want to take steps to reduce possible estate tax liability at your death. One way to avoid estate taxes is to give away property during your life. This provides you with more than just tax savings; you also get to see the recipients enjoy your gifts. 

Currently, you can make an unlimited number of $12,000 gifts of cash or other property each year, completely tax-free. To ensure these tax savings, you need remember only that no individual recipient can receive more than $12,000 in a calendar year. If you left the same gifts at your death and they were subject to estate taxes, the recipients would see their gifts shrink by at least 39%.

How the Annual Exclusion Works

The $12,000 annual tax exemption rule (called the "annual exclusion") is pretty straightforward. For instance, if you give $25,000 to someone, $12,000 of it is exempt from the gift tax. The remaining $13,000 is not. A few more examples:

--You give $8,000 to a cousin in one year. There are no federal gift-tax consequences.

--You give $16,000 to your grandson in one year. $4,000 is subject to the gift tax.

--You give $8,000 each to your two children in one year: None of that $16,000 is subject to the gift tax.

The exclusion amount is indexed for inflation; it rises, in $1,000 increments, as the cost of living does.

Couples: Double Your Exclusion

Married couples can combine their annual exclusions, meaning that they can give away $24,000 worth of property tax-free, per year, per recipient. In fact, even if only one spouse makes a gift, it's considered to have been made by both spouses if they both consent. (Internal Revenue Code § 2513.) If you and your spouse give to another couple, you can transfer up to $48,000 tax-free each year.

Gifts To Your Spouse

All gifts you make to your spouse are tax-free, as long as he or she is a U.S. citizen. If your spouse isn't a citizen, the limit on tax-free gifts is currently $120,000 per year. (IRC § 2523[a].) However, there's seldom a reason to make large gifts to your spouse. If you each own about the same amount of property, you could worsen your tax situation by saddling your spouse with an estate that's so large it will be taxed at his or her death.

Should you consider a bank trust department for your estate planning?

My personal theory is that most probate litigation is NOT the result of intentional malfeasance, but rather the product of well-intentioned fiduciaries who are simply in over their heads (see here).  If the estate is complex or the beneficiaries are likely to be demanding (often legitimately so), then a professional trustee is almost always a bargain . . . especially compared to the cost of contested proceedings.

A recent article entitled Trust in your bank? reports on a study just published by the Spectrem Group, Chicago, that makes two principal points:

  • All probate or trust estates valued at over $5 million should be managed by a professional trustee.
  • More and more families are opting for non-bank professional trustees.

I wrote here about a previously published study by Tiburon Strategic Advisors that also reported on the trend away from banks to other providers for professional trustee services.

Here are a few excerpts from the linked-to story:

A recent report, published by the Spectrem Group, Chicago, shows that, ironically, just as the baby boomers need trust services more trust money is leaving banks. Personal trust assets held by U.S. banks fell 10% to $986.2 billion in 2005 from a peak of $1.1 trillion in 1999, it says.

Banks are losing ground due to the continued growth of nonbank trust services and the selection of family members as trustees, the report says. Plus, banks have been slow to change their services and the way they provide services.

The Spectrem Group report says that every ultra-high-net-worth household -- those with at least $5 million -- should have a trust. Yet only 52% of the 930,000 households nationwide that fall in that category do.

Intimate Betrayal: When the Elderly Are Robbed by Their Family Members

I recently wrote here about some of the tools available to Florida probate attorneys involved in cases where the decedent is alleged to have been the victim of financial elder abuse/exploitation.  The Wall Street Journal recently published an article entitled Intimate Betrayal: When the Elderly Are Robbed by Their Family Members, that underscores the comments I made regarding how prevalent this problem is.  Here is an excerpt from the linked-to story:

Note to retirees: Beware the family.

Financial swindles are one of the fastest-growing forms of elder abuse. By some estimates, as many as five million senior citizens are victimized each year, says Sara Aravanis, director of the nonprofit National Center on Elder Abuse, which provides information to federal and state policy makers. Because of the problem's spread, "many states have laws authorizing financial institutions to report suspicions of elderly abuse," says Bruce Jay Baker, general counsel for the Illinois Bankers Association. Earlier this summer, the Securities and Exchange Commission hosted a Seniors Summit to highlight the issue, with SEC Chairman Christopher Cox noting that protecting seniors' pocketbooks "is one of the most important issues of our time."

Yet it's not dodgy financial experts or crooked caregivers who are the biggest threat. It's family. Children, siblings, grandchildren, nieces and nephews, and even spouses are the people most likely to rob the elderly, according to elder-law advocates and attorneys. The data that exist -- albeit in a spotty manner -- suggest that financial crimes rank as the third-most prevalent abuse of the elderly.

Valuing Corporations for Estate Tax Purposes: A Blount Reappraisal

I previously wrote about Estate of Blount v. Commissioner, 428 F.3d 1338, 1339 (11th Cir. 2005) – an 11th Circuit estate tax valuation case  – in which the court held that in the context of a buy-out agreement funded by insurance proceeds, the insurance funds should not be counted when estimating the company's fair market value.  In a recently published article, Prof. Adam Chodorow (Associate Professor – Arizona State College of Law) argues that the 11th Circuit got this one wrong.  The SSRN abstract of his article, entitled Valuing Corporations for Estate Tax Purposes: A Blount Reappraisal, is as follows:

Abstract:
Valuation issues have long been the bane of the estate tax. In addition to the basic problem of valuing property in the absence of a market transaction, taxpayers routinely engage in tactics specifically designed to suppress the value of their property for estate tax purposes, without actually diminishing the value of the property itself.

This article explores a recurring issue of asset valuation, which the Eleventh Circuit purported to resolve in Estate of Blount v. Commissioner, 428 F.3d 1338, 1339 (11th Cir. 2005), namely how to value a corporation where the corporation is set to receive insurance proceeds on account of a decedent's death, but where those proceeds are offset by a corresponding obligation to redeem the decedent's shares. Both the Eleventh and the Ninth Circuit (the only other court to consider this issue) concluded that insurance proceeds and redemption obligations offset, and therefore insurance proceeds should be excluded from corporate value. I argue here that, despite the superficial appeal of their holdings, both courts are, in no uncertain terms, wrong. Rather, insurance proceeds must be included in corporate value, and any redemption agreement must be ignored. 

Trustees: How Not to Get Sued

Lawsuits against trustees are on the rise.  That is the conclusion to be drawn from the following statistic, as reported in the on-line article entitled How Not to Get Sued:

[L]awsuits and arbitration cases concerning breach of fiduciary duties are increasing at a compound annual rate of 22 percent, according to an analysis of NASD figures by the Center for Fiduciary Studies, of Sewickley, Pa.

The linked-to article goes on to address key strategies for avoiding trustee lawsuits, which are encapsulated in the following 4 bullet points:

  • Know the client's risk tolerance
  • Serve the client's needs
  • Keep careful records
  • Be particularly careful to document anything unusual

The Society of Fiduciary Advisors has also published its BEST PRACTICES FOR INDIVIDUAL INVESTORS, which provides excellent risk-management guidance for trustee/investment advisors.

For boomers, not-so-great expectations of a windfall

I previously reported here on the often-quoted statistics suggesting that baby boomers will reap a mega-windfall of trillions of dollars - one of the largest intergenerational transfers of wealth in history - as their parents, the WWII generation, passes away.  Well, it's not that simple.  Demographic trends and increased wealth disparities in the U.S. are deflating the inheritance expectations some baby boomers may have been banking on.   The following are excerpts from an article entitled For boomers, not-so-great expectations of a windfall, making the following sobering points:

Longevity, with resulting long-term care and health costs, is at the root of diminishing inheritances, but there are numerous other factors:

Fewer traditional pensions to fund longer lives.

Reverse mortgages that allow the house asset to be "spent" before death.

An inheritance pie that must be split among an average of 3.3 boomer children and the grandchildren - not to mention charities and alma maters.

Active older adults choosing to use their money to enjoy retirement.

*     *     *     *     *
Even Paul Schervish, who co-authored the oft-quoted research predicting the huge wealth transfer, says most Americans shouldn't count on a mega-inheritance to bail them out in retirement.

About 40 percent will go to estate taxes, fees and charity, said Schervish, director of Boston College's Center on Wealth and Philanthropy.

After that, mostly the children of the rich will benefit, with the wealthiest 7 percent of estates spinning off half the money to heirs.

The remaining 93 percent of heirs will divvy up the rest. "They're not going to fund their retirement on that," Schervish said.

Higher Standards for Professional Trustees?

In trust litigation the identity of the trustee (i.e., individual vs. corporate, inexperienced vs. professional) has a large impact on how the case is handled.  Prof. Melanie B. Leslie (Professor of Law, Cardozo Law School) has recently published an interesting article addressing the different standards of care that are (or should be) applied to professional trustees in light of the fact that many jurisdictions, including Florida, have adopted the Uniform Trust Code, which some view as overly protective of corporate trustees.  The article is entitled Common Law, Common Sense: Fiduciary Standards and Trustee Identity, 27 Cardozo L. Rev. 2713 (2006).   The following is the article's SSRN abstract:

Abstract:
The past twenty years have seen significant changes in the law governing trustees' fiduciary duties. Though fiduciary duty law is a common law creation, recent changes are not a result of common-law evolution, but legislative action. The push to codify trust law, including fiduciary duties, has come from a few sources, including academics, who have argued that trust law should be more uniform, and banking institutions, who have pushed for legislation to ease the burdens of trust management.

In some significant respects, legislative changes to fiduciary duties have not improved upon the common law. In fact, a few important statutes have replaced theoretically sound common law standards with rules that undermine the historical objectives of trust law. In some instances, scholars have justified changes by claiming that they are necessary to protect the non-professional, poorly counseled trustee. But, by and large, it is the large, institutional trustees who have benefited - significantly - from the statutory changes in the rules.

This article argues that recent statutes would be much improved if they differentiated between professional and non-professional trustees. There are critical distinctions between professional and non-professionals: differences in settlor's expectations and objectives, negotiation settings, monitoring costs and the trustee's response to liability rules. These distinctions justify having different fiduciary standards for different types of trustees.

Courts, with their case specific approach to rules, intuitively understand that the identity of the trustee should make a difference in assessing liability for breach of fiduciary duty. Either expressly or implicitly, courts gradually have developed two sets of rules. Thus, changing fiduciary standards to protect the non-professional was never really necessary.

Estate lawyer's activities queried

In Florida, trustees and personal representatives have an affirmative statutory duty to keep trust and estate beneficiaries informed (see new Ch. 736 for trustees; 733.602 and 733.604 for PRs).  Additionally, being pro-active, let alone responsive, with respect to keeping everyone informed is probably the cheapest way to avoid getting sued by the beneficiaries, a point underscored in this newspaper article.  The following is an excerpt from the linked-to article:

Friday, August 18, 2006
By FRED CONTRADA
fcontrada@repub.com

AMHERST - When William J. Bernotas shot his estranged wife Jean Hosmer to death in front of the Northampton police station in 1999 and then turned the gun on himself, he left their two children orphans.

One of Hosmer's sisters came forward to take care of Sandra and Kevin Bernotas, but their estate was entrusted to Amherst lawyer Nancy J. Sardeson.

Now the family has questions about how the estate has been managed and Sardeson has been suspended from practicing law for failing to provide the answers.

Brooke Astor: Legal filing seeks removal of $2.3 million-a-year guardian

In this article CNN.COM first reported on the guardianship litigation involving Brooke Astor, one of America's most storied and prominent socialites, her only son and guardian, Anthony Marshall, and her grandson Philip Marshall, who is suing his 81 year old father for neglecting his 104 year old grandmother.  In a subsequent article reported here on CNN.COM, Anthony Marshall denies any wrongdoing.  Here is an excerpt from the first CNN.COM articles:

NEW YORK (AP) -- She wears torn nightgowns and sleeps on a couch that smells of urine. Her bland diet includes pureed peas and oatmeal. Her dogs, once a source of comfort, are kept locked in a pantry.

A court filing alleges that this is the life of 104-year-old Brooke Astor, the multimillionaire Manhattan socialite who dedicated much of her vast fortune to promoting culture and alleviating human misery.

In addition to be very sad, this story is instructive: guardianship disputes can erupt in any case, no matter how wealthy the ward may be.  This point was underscored in  this New York Times editorial reporting on proposed federal legislation intended to address this issue.  Here is an excerpt from the NY Times piece:

The scandal over Brooke Astor’s care has had the healthy side effect of getting people talking about the needs of the elderly. The 104-year-old former socialite and philanthropist now appears to be getting the attention she needs. But it has inspired people to ask what is being done for old and “older old” people who have no Rockefellers or Kissingers to come to their defense.

Last week the Senate Finance Committee unanimously approved a bill that would expand the federal system for protecting the elderly from physical, psychological and financial abuse. A second crucial measure, the reauthorization of the Older Americans Act, is also being considered by Congress. Important aspects of both bills — like the people they seek to protect — are in danger of sinking beneath the radar as other matters move ahead on the priority list. We’re hoping all the publicity over the alleged mistreatment of Mrs. Astor by her son will change that.

Estate Tax Repeal Vote Fails in Senate

As reported by the New York Times in Wage Bill Dies; Senate Backs Pension Shift, efforts to repeal the estate tax were blocked in the Senate for the third time this year.  Here is an excerpt from the linked-to story:

WASHINGTON, Aug. 3 — Senate Democrats on Thursday blocked legislation tying the first minimum wage increase in almost a decade to a decrease in the federal estate tax, denying Republicans a legislative victory as lawmakers head into a crucial month of campaigning before the November elections.

Republican backers of the measure, dubbed the trifecta for its three chief elements, fell 4 votes short of the 60 needed to cut off debate. Democrats had argued that it was a bad bargain to exchange a $2.10 wage increase for struggling workers for a costly tax cut for the country’s wealthiest families.

“This trifecta is a high-stakes gamble with America’s future,” said Senator Richard J. Durbin of Illinois, the Senate’s No. 2 Democrat. “This is the worst special-interest bill I have seen in my time in Congress.”

Scrambling to complete its business and join the House in an August recess, the Senate also approved and sent to the president a major overhaul of pension law as Republicans sought to record some last-minute accomplishments.

But the failure of the bill linking the wage increase and the tax cut was a significant defeat for Senator Bill Frist, the majority leader entering his last months in the post. Mr. Frist had hoped to steer the measure through the Senate, partly with the help of an accompanying series of tax incentives and federal aid to woo lawmakers.

Mr. Frist and his allies in business viewed the wage increase, stretched over three years, as an acceptable trade-off for a permanent reduction in the estate tax and $38 billion in tax breaks and federal aid that constituted the third part of the measure. But they could not overcome intense opposition from Democrats and organized labor.

The You and Yours Blawg has also posted on this latest vote (see Estate Tax Repeal Vote Down Again (3rd time the charm?)).

Undeterred by failing to get its way via the democratic process, the Bush administration has simply fired almost half of all of the IRS's estate tax auditors in what has been dubbed the "back door" approach to estate tax repeal (see IRS Cans Elite Auditors, Undermining Estate Tax).

Man who fought Playmate for inheritance dies

The man who spent more than a decade battling former Playboy playmate Anna Nicole Smith over his father's oil fortune (see here) has died unexpectedly.  Here is an excerpt from this on-line report:

E Pierce Marshall, 67, died of an "extremely aggressive infection", family spokesman David Margulies wrote in a statement, the Houston Chronicle reported today.

Marshall's death comes before his long-running battle with Smith reached a conclusion.

The fight went all the way to the US Supreme Court, which last month sided with the ex-stripper, saying the matter was not the exclusive jurisdiction of a Texas court that had ruled in favor of the younger Marshall.

Smith met J Howard Marshall II at the club where she worked as a topless dancer when she was 26 and he was 89.

He died 14 months after they wed. Smith claimed Marshall verbally promised her half of his estate, worth millions, but E Pierce Marshall claimed to be the only beneficiary.

The Supreme Court ruling gave Smith another chance to collect some of her dead husband's riches.

CNN also reported on Marshall's death here.

Discouraging Family Estate Litigation Through Proper Planning and Administration

Many of the topics touched on in this blog will be the subject of the following upcoming seminar:

Discouraging Family Estate Litigation Through Proper Planning and Administration
August 28, 2006
West Palm Beach, FL

In addition to yours truly, the speakers lined up for this seminar are all solid trust-and-estates litigation practitioners.  One of my co-presenters is Amy B. Beller, whose recently published article "New York vs. Florida: A Forum Selection Guide for Will Contests" I previously wrote about here.  Another is a personal friend, Liz Consuegra, who recently joined one of the top trust-and-estates litigation shops in Miami (other than my firm, of course!).  Another presenter to take note of is John C. Moran, who is lucky enough to work with one of the top trust-and-estates litigation shops in Palm Beach County (and the first law firm I ever worked for), Gunster Yoakley.

Equitable Paternity a/k/a Virtual Adoption

An interesting article entitled N.Y. High Court Says Mistaken Avowal of Fatherhood Imposes an 'Equitable Paternity' addressed a recent New York appellate decision ratifying the "equitable paternity" doctrine.  This doctrine can come up in the Florida probate litigation context in that the class of persons potentially deemed to be "heirs" of an intestate estate may include a child that was raised by the decedent but never legally adopted.  Here are a few excerpts from the linked-to article:

He who acts like a father, is a father -- if not biologically than at least legally -- the Court of Appeals said Thursday in imposing "equitable paternity" on a man who wrongly assumed he had fathered a girl and acted accordingly.

The court in Matter of Shondel J. v. Mark D., 40, upheld the trial court and the Appellate Division, 2nd Department, in ordering a man to pay child support on behalf of a child he did not father. In doing so, it recognized the legislatively endorsed concept of "equity paternity," or paternity by estoppel (see Family Court Act §§ 18 [a] and 532 [a]).

The "virtual adoption" doctrine in Florida was articulated in Williams v. Dorrell, 714 So.2d 574, 23 Fla. L. Weekly D1580 (Fla. 3d DCA 1998), as follows:

Virtual adoption is an equitable doctrine created to “protect the interests of a person who was supposed to have been adopted as a child but whose adoptive parents failed to undertake the legal steps necessary to formally accomplish the adoption.” Miller v. Paczier, 591 So.2d 321, 322 (Fla. 3d DCA 1991); see also Sheffield v. Barry, 153 Fla. 144, 14 So.2d 417 (1943). Virtual adoption does not create a parent-child relationship. It is invoked when the adoptive parents die intestate “in order to allow the supposed-to-have-been adopted child to take an intestate share” and to prevent unfair results created by intestacy statutes. Miller, 591 So.2d at 322; see also Tarver v. Evergreen Sod Farms, Inc., 533 So.2d 765, 766 (Fla.1988); Laney v. Roberts, 409 So.2d 201, 203 (Fla. 3d DCA 1982).

A New Twist: Divorce After Death

In a recent National Law Journal article entitled "A New Twist: Divorce After Death" there was an interesting discussion regarding posthumous divorces in light of recent probate law changes and a handful of unusual lawsuits that deal with spouses who died during divorce proceedings. I have written before about the often close connection between probate litigation and divorce proceedings (see here and here).  The linked-to article simply underscores how high the stakes can be in the probate context when estate planning issues are not immediately addressed after a divorce (better yet, during the divorce proceeding).  Here is an excerpt from the linked-to story:

In Pennsylvania, an attorney is seeking a first-of-its kind posthumous divorce settlement following the death of her client -- a dentist who was killed in his home in April, the night before he was to sign divorce papers. Yelenic v. Yelenic, No. 10944 (Indiana Co., Pa., Ct. C.P. 2003).

 In Connecticut, divorce proceedings are still alive in the case of Andrew Kissel, a millionaire developer who was found murdered in his Greenwich home in April, nearly a year after his wife filed for divorce. Millions of dollars are at stake. Kissel v. Kissel, No. FST-FA-05-4003907-S (Stanford, Conn., Super. Ct.).

Posthumous divorce litigation and revised probate laws has prompted family law expert Jonathan W. Wolfe to issue a word of warning to his clients.

"If you have a will, it has to be changed immediately. And if you don't have a will, you need to have one ... because you are now in a position in your life where you don't want your separate assets to go to the person you're trying to divorce," said Wolfe, who chairs the family law committee for the American Bar Association's General Practice, Solo and Small Firm Division.  

Professor Powell on Florida's New Trust Code: Part I

FSU Law Professor David F. Powell was the scrivener for the Ad Hoc Trust Law Committee of the Florida Bar that drafted Florida's new trust code.  In this month's Florida Bar Journal he published an article entitled "The New Florida Trust Code, Part 1," that provides a detailed discussion of the new trust code.  Here's the introduction to his article:

An important event occurred this past legislative session. Ch. 736 was added to the Florida Statutes. For estate, family law, elder law, and tax practitioners; for clients, their beneficiaries, accountants, and trustees; for regulated trust companies and for Florida courts, this promises to be a big deal!

A long time in the making, new Ch. 736 and some conforming amendments made to the Probate Code and other Florida statutes are the product of a five-year effort by the Ad Hoc Trust Code Revision Committee1 to codify Florida trust law. When it takes effect, the new Florida Trust Code (FTC or the Code) will replace Florida’s existing statutory trust law, most of which is found in Ch. 737.

As will soon be apparent, the new Code contains numerous changes and additions. As a consequence, it has a delayed effective date of July 1, 2007. Between now and then, practitioners and other interested persons have a window of time in which to familiarize themselves with the new Code. This two-part article is intended to facilitate that process. Part 2 will be published in the October issue of The Florida Bar Journal.

Buffett gives billions, hits bid to repeal the estate tax

I thought this Boston Globe article was interesting in that it tied Warren Buffett's history-making charitable gift (see here) to the current debate on estate tax repeal.  Here are a few excerpts from the Boston Globe article:

Asked about recent efforts to repeal the estate tax, Buffett said he would ``hate to see the estate tax gutted." Thursday, the House voted 269-156 to abolish the tax for all but the wealthiest Americans; the Senate is to take up the issue this week.

``I can't think of anything that's more counter to a democracy that dynastic wealth," he said. ``The idea that you win the lottery the moment you're born: It just strikes me as outrageous." Buffett, along with Bill Gates's father, William H. Gates, a Seattle-based lawyer, have been among some of the most outspoken -- and well-heeled -- critics of repealing the estate tax.

Warren Buffett gives away his fortune

The world's second richest man - who's now worth $44 billion - will start giving away 85% of his wealth in July - most of it to the Bill & Melinda Gates Foundation.

FORTUNE Magazine reported here on what is advertised as the largest charitable gift EVER -- out giving Carnegie and the Rockefeller clan by a long shot.  Here are a few excerpts from the Fortune story.

"Brace yourself," Buffett warned with a grin. He then described a momentous change in his thinking. Within months, he said, he would begin to give away his Berkshire Hathaway fortune, then and now worth well over $40 billion. 

This news was indeed stunning. Buffett, 75, has for decades said his wealth would go to philanthropy but has just as steadily indicated the handoff would be made at his death. Now he was revising the timetable.

"I know what I want to do," he said, "and it makes sense to get going." On that spring day his plan was uncertain in some of its details; today it is essentially complete. And it is typical Buffett: rational, original, breaking the mold of how extremely rich people donate money.

Also interesting: Letters from Buffett and Should You Leave It All to the Children?

A visit from 'death tax' widows

Most of what passes for "debate" regarding estate tax repeal isn't very funny. Well, there's an exception to every rule. For great satire check out The Swift Report's post entitled "'Death Tax' More Deadly than Gout, Polo Injuries Combined". Here's an excerpt from the post:

A visit from 'death tax' widows


Later this week Senators will hear from a handful of individuals whose families have been literally taxed to death in recent years. Among those scheduled to testify on Capitol Hill: members of the Mars candy family, the Gallo wine family, the Wegman supermarket family, the Dorrance family, which controls Campbell soup, and the Waltons, who control Wal-Mart.

Members of the hard-hit families will temporarily lift the black veil that the 'death tax' has lowered onto their lives, allowing Senators and ordinary citizens a glimpse into this other America. "These are not easy stories to tell," says a source close to one of the families. "People are suffering. They're having to scratch and claw just to get the things they need to survive: yachts, granite counter tops, single malt whiskey. We're talking about very basic goods here."

Senate Rejects Effort to Cut Estate Tax

The following are excerpts from this New York Times article on today's Senate vote defeating efforts to repeal the estate tax:

WASHINGTON, June 8 -- The Senate rejected a major Republican effort on Thursday to eliminate the estate tax on inherited wealth. The vote was a big defeat both for President Bush and for Senate Republican leaders, who had framed their opposition to what they called the "death tax" as a popular and even populist crusade.


Sixty votes were required to end debate on the bill and prevent a filibuster, but the measure got only 57, with 41 Senators voting against and 2 not voting. Only a few lawmakers crossed party lines.

Though a handful of lawmakers continued to search for a compromise that could pass, negotiators appeared unable to reach a deal before the end of this week -- if ever.

"We were foreseeing ourselves putting this over the line," said Dick Patten, executive director of the American Family Business Institute, a group that has led much of the political campaign against the estate tax. Though insisting that he was still trying to line up another two votes, Mr. Patten had already begun to talk about making the issue a central one in the 2008 elections.

You can find more on the estate-tax repeal vote here.

The U.S. May be a Good Trust Jurisdiction for Foreign Persons

Florida is a hub for international business and investment. Given that Florida has just adopted a new Trust Code (see here), this is probably a good time to reconsider Florida as an ideal trust jurisdiction for non-U.S. persons. Warren Whitaker (Partner, Day, Berry & Howard LLP) has recently posted an excellent article addressing this question from a general U.S. perspective (i.e., he did not focus on Florida) entitled The U.S. May be a Good Trust Jurisdiction for Foreign Persons. The following is the SSRN abstract of his article:

Abstract:


At one time non-U.S. persons would rarely consider creating a trust that was subject to the jurisdiction and governed by the substantive law of one of the fifty United States. The definition of what constituted a U.S. trust for income tax purposes was vague and amorphous, and US trusts are subject to U.S. income tax on their worldwide income, while non-U.S. trusts are taxed only on their U.S. source income. However, recent changes in U.S. tax law have made it possible to create a trust with a U.S. trustee that is subject to U.S. court supervision and governed by the laws of a U.S. state, and still achieve all the tax advantages of a foreign trust. In addition, certain states have enacted substantive trust laws that are attractive for anyone who wants to create a trust, including non-U.S. persons.


Among the recent changes in the tax law that permit foreigners to use U.S. trusts are:

1. The revised definition of "United States Trust" enacted by Congress in 1996 creates a two-pronged bright line test, and only trusts that meet both tests are considered to be U.S. trusts. The tests make it possible to create a trust under US law that nonetheless qualifies as a foreign trust.

2. Several U.S. states now permit a Settlor to contribute assets to an irrevocable trust and remain a permissible beneficiary of the trust in the discretion of an independent trustee, and the trust assets will be protected from creditors whose claims arise after the trust is created, and thus also potentially excluded from U.S. estate tax at the Settlor's death.

3. The rules regarding grantor trusts with non-U.S. grantors were also significantly amended in 1996.

4. Certain countries have lists of jurisdictions that are considered to be tax havens. The U.S. is not on any of these lists.

5. Income tax treaties between the United States and certain other countries provide benefits to non-U.S. persons residing in these treaty countries who create and fund U.S. domestic trusts.

6. The income taxes of the United States on passive income have been dramatically reduced in recent years in order to avoid taxation in their home country.

The substantive advantages that make U.S. trusts attractive to foreigners include:

1. No Rule Against Perpetuities in some states.
2. Investment Advisor with sole responsibility for investment management.
3. Distribution Advisor
4. Protection From Forced Heirship
5. Private Trust Companies

New Report Reveals Estate Tax Repeal Would Give Over $200 Million Windfall to Oil Company Executives

Deirdre R. Wheatley-Liss, Esq., author of the You and Yours Blawg, wrote here about a report just published by Representative Henry A. Waxman, Ranking Member, Committee on Government Reform, and the Committee on Government Reform Minority Office. The study, entitled "New Report Reveals Estate Tax Repeal Would Give Over $200 Million Windfall to Oil Company Executives," is a numerical look at who (naming names) might benefit the most from a total repeal of the estate tax. The following is the introduction to the report's findings:

Tuesday, May 30, 2006 -- Next week the Senate is scheduled to consider legislation (H.R. 8) to repeal the estate tax. Repealing the tax, which has been law since 1916, is estimated to cost $1 trillion from 2011-2021. Although the tax affects few Americans, repeal will give some families extraordinary windfalls. The CEO's of major oil companies, for instance, would get enormous benefits if H.R. 8 were enacted. The family of one oil executive, Lee Raymond (the former ExxonMobil CEO), alone could receive a tax break worth over $160 million.


This report analyzes the impact that repeal would have on the families of the senior executives for the major oil companies. In 2005, the minority staff of the Government Reform Committee released a similar analysis showing that repealing the estate tax repeal would save the President, Vice President, and 11 cabinet members as much as $344 million.

Estimated Estate Tax Savings of Oil Company CEOs
2005 Analysis: Estimated Tax Savings of Bush Cabinet

The "Satisfactions" Of Litigation

California attorney/mediator Charles Parselle just published an interesting article entitled "The Satisfactions Of Litigation," available here on Mediate.com. Parselle reflects on why some parties are drawn, at least initially, to litigation over mediation. Especially for "first time" litigants (i.e., the vast majority of probate litigants), the lure of a trial can be very compelling, no matter how rational the arguments in favor of a mediated settlement agreement may be. Parselle summarizes the "satisfactions" offered by these contrasting methods of dispute resolution, all of which are especially applicable in the probate-litigation context:

In summary, litigation offers satisfactions that other forms of conflict resolution usually cannot match. These are: (1) vindication (2) empowerment (3) public hearing (4) legitimacy (5) justice. [B. Mayer, 2004]


Mediation does not offer, or is thought not to offer, these satisfactions. Successful mediators need to understand realize that the needs driving litigation are strongly felt, and seek to find some way to accommodate them. It is because the existing trial court system is so broken in many ways that disputants seek alternative means to satisfy their needs.

Yet mediation offers satisfactions that the litigation system cannot hope to offer. These are: (1) speed (2) choice of mediator (3) flexibility as to time and place (4) low cost (5) privacy and confidentiality (6) mutually acceptable results (7) control of outcome.

The reality may not turn out the way the process was imagined, but that imagining remains a powerful lure. For many litigants are first-time entrants who have never done it before; most of their education may have been in the illusory processes of movie or television courtroom drama. If they go through with a trial, they often find that the real thing is slow, technical, cumbersome, tedious, and turns out be emotionally disappointing.

Cautionary Tale: What Can Go Wrong (Big Time!) When You Agree to Be Someone's Personal Representative or Trustee

My personal belief is that most probate disputes involve how an estate is administered, versus who gets what at the end of the day. I also believe that administration disputes are less a product of intra-family greed or any of the other "seven deadly sins," but rather mostly the result of a family friend or trusted son or daughter being asked to do a job he or she is simply ill-equipped to do. If this often well-meaning person has the misfortune of hiring a lawyer who also isn't up to the job: the fireworks are soon to follow.

That's how I read this cautionary tale, where Monsignor Norman Bolduc, a Roman Catholic priest, is reported to have died owning a stock portfolio worth over $6.5 million. In his will, Bolduc left all his property to his parents. He named his best friend, another priest, the Rev. George Soberick, executor of his will. For complex reasons that remain unclear to me six months after Bolduc's death the stock portfolio was worth only $500,000 (oops!). That's when things got ugly. The following are excerpts from the linked-to story:

All of the accounts were finally liquidated about six months after Bolduc died. In the end, the value of the stock accounts had fallen to just under $500,000 from $6.5 million on the date of his death.


The greatest devaluation took place between early November 2000 and mid-December 2000, the period during which Soberick was petitioning for authority to act as executor.

Bolduc's parents went to probate court arguing that Soberick did not act in time to prevent losses, given the state of the stock market. The probate court agreed with the parents and "surcharged" Soberick in the amount of $1,256,000, with interest of 5 percent calculated from Nov. 27, 2000, through April 15, 2005, the date of the court's order.
A surcharge is the penalty for failure to exercise common prudence, common skill and common caution in the performance of the fiduciary's duty and is imposed to compensate beneficiaries for loss caused by the fiduciary's lack of care.

While this case is on appeal, it illustrates what can go wrong. Think twice about accepting an executor's role; if you do, be sure to understand your responsibilities.

Lesson Learned:

Accepting the job of personal representative of an estate is an honor that carries very serious ethical and legal obligations along with it. If you make mistakes that result in significant financial losses - don't expect the surviving family to simply shrug its shoulders and buy the "but I never meant any harm" defense.

New Poll Shows 57% Prefer Keeping or Reforming the Estate Tax

As the Senate prepares for a May vote on estate tax repeal, increased budget deficits and a more educated public are spurring greater numbers to join a movement begun by some of America's millionaires in 2001 to keep the federal estate tax. A new national poll shows that 57% prefer keeping the tax as is or reforming it. Only 23% favor repealing the tax. The number favoring preservation or reform rises to 68% when respondents learn more information about the estate tax, with 23% again favoring repeal.

For more facts and figures related to estate tax repeal, see here.

Departing Shot: How to Disinherit Neatly

The Wall Street Journal recently publishded Departing Shot: How to Disinherit Neatly, Wall St. J., May 6, 2006, at B4, by Kaja Whitehouse. The following are excerpts from this article:

Will contests are becoming more common because people have more to leave behind, says Philip Bouklas, an estate planning attorney in New York.


At least $41 trillion will be passed on before the middle of this century, according to a study by two Boston College economists. Last year, in fact, saw a record number of millionaire households: 8.9 million, compared with 4.9 in 1996, according to research group TNS Financial Services.

Consider using the following safeguards to protect your heirs from a long, costly court battle. Even if the jilted heir doesn't win, a will contest or lawsuit can place an estate in limbo and deplete money from the rightful beneficiaries for legal fees.

Trust Funds in Common Law and Civil Law Systems: A Comparative Analysis

Florida attorney Carly Howard recently published in article in the University of Miami's International Law Journal that should be of interest to Florida practitioners working with foreign clients and their advisors. The following is an excerpt from the introduction to Trust Funds in Common Law and Civil Law Systems: A Comparative Analysis, 13 U. Miami Int'l & Comp. L. Rev. 343 (2006).

Due to globalization and the impact of international investing upon legal and financial systems, the trust and similar instruments have become enormously popular. Although the realm of trusts was fairly clear-cut only 30 years ago, there has been a "massification" of the trust throughout the world. Countries without traditional trust devices have been forced to adapt their laws to accommodate the growing use of trusts across the globe. Even original trust law jurisdictions have made frequent and drastic changes to trust law in response to its growing popularity.


This paper focuses on theories which validate and invalidate private trusts, as opposed to public or charitable trusts, and emphasizes the world's attempts to harmonize differences in attitudes toward trusts. Topics include: 1) definitions and formalities of trusts; 2) purposes and elements of a trust; 3) histories of the common law trust and its civil law counterparts; 4) general principles of enforcement and recognition of trusts, particularly in light of the Hague Convention on the Law Applicable to Trusts and on their Recognition 1985. Although an understanding of the global state of trusts can be found by comparing the laws of particular countries, this paper surveys the general theories behind trust mechanisms and their application.

More Probate Suits Seen in Smith Ruling: Former Playmate's Case May Open Door to Federal Courts

The moment I read the U.S. Supreme Court's Ruling in the Anna Nicole Smith case I thought: "I guess I'll be in federal court more often from now on." Apparently I wasn't the only one who thought this case would lead to more federal-court litigation involving trust and estates matters. Martha Neil in her article More Probate Suits Seen in Smith Ruling, ABA J. e-Report, May 5, 2006, reports that the case is expected "to open federal courtroom doors to a deluge of new estate-related litigation." Here is an excerpt from her article:

Meanwhile, even those on the other side expect the Supreme Court decision in Smith's case to open federal courtroom doors to a deluge of new estate-related litigation.


"I think it's going to be read primarily by litigators and it's going to create another new litigation opportunity," says James R. Wade, a Denver lawyer and former probate judge who filed an amicus brief on behalf of the National College of Probate Judges. "I think that the litigators are going to see opportunities which they hadn't even thought of before of bringing probate cases in federal court."

Anna Nicole Smith Victorious at United States Supreme Court

Earlier today (Monday, May 1, 2006) the AP reported here that Anna Nicole Smith scored a big win before the U.S. Supreme Court, which by a unanimous vote reversed the Ninth Circuit Court of Appeals in Ms. Smith's favor (for more background on this case, see my prior blog post here). Here is an excerpt from today's AP story:

WASHINGTON - The Supreme Court ruled Monday that one-time stripper and Playboy Playmate Anna Nicole Smith could pursue part of her late husband's oil fortune.


Justices gave new legal life to Smith's bid to collect millions of dollars from the estate of J. Howard Marshall II. Her late husband's estate has been estimated at as much as $1.6 billion.

Smith has been embroiled in a long running cross-country court fight with Marshall's youngest son, E. Pierce Marshall. The court's decision, which was unanimous, means that it will not end anytime soon.

The legal issues at play in this case, Marshall v. Marshall, are summed up nicely in the following excerpts from the Supreme Court's opinion:

In Cohens v. Virginia, Chief Justice Marshall famously cautioned: "It is most true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction, if it should . . . . We have no more right to decline the exercise of jurisdiction which is given,than to usurp that which is not given." 6 Wheat. 264, 404 (1821). Among longstanding limitations on federal jurisdiction otherwise properly exercised are the so-called "domestic relations" and "probate" exceptions. Neither is compelled by the text of the Constitution or federal statute. Both are judicially created doctrines stemming in large measure from misty understandings of English legal history. * * * In the years following Marshall's 1821 pronouncement, courts have sometimes lost sight of his admonition and have rendered decisions expansively interpreting the two exceptions. In Ankenbrandt v. Richards, 504 U. S. 689 (1992), this Court reined in the "domestic relations exception." Earlier, in Markham v. Allen, 326 U. S. 490 (1946), the Court endeavored similarly to curtail the "probate exception."


Nevertheless, the Ninth Circuit in the instant case read the probate exception broadly to exclude from the federal courts' adjudicatory authority "not only direct challenges to a will or trust, but also questions which would ordinarily be decided by a probate court in determining the validity of the decedent's estate planning instrument." * * * The Court of Appeals further held that a State's vesting of exclusive jurisdiction over probate matters in a special court strips federal courts of jurisdiction to entertain any "probate related matter,"including claims respecting "tax liability, debt, gift, [or] tort." Id., at 1136. We hold that the Ninth Circuit had no warrant from Congress, or from decisions of this Court, for its sweeping extension of the probate exception.

(Emphasis added.)

Source: Wills, Trusts & Estates Prof Blog

Truths about the Estate Tax - Debunking the Popular Myths

New Jersey estate planning attorney Deirdre R. Wheatley-Liss is the author of the You and Yours Blawg. In this posting, she recently provided an excellent summary of a few recently published studies "debunking" many of the myths/arguments usually put forth in favor of estate tax repeal. This is highly recommended reading for those following this debate.

The following is an excerpt from Deirdre's blog posting:

In yesterday's post, Who Wants Estate Tax Repeal - The Uber-Rich Lobby (98%+ chance you aren't one of them) I highlighted a new report from Public Citizen and United for a Fair Economy that demonstrated how "18 families worth a total of $185.5 billion have financed and coordinated a 10-year effort to repeal the estate tax, a move that would collectively net them a windfall of $71.6 billion."


In the report entitled "Spending Millions to Save Billions - The Campaign of the Super Wealthy to Kill the Estate Tax" Public Citizen's Congress Watch and United for a Fair Economy explore and refute some common myths about the estate tax. These myths are just plain wrong "facts" that many believe to be gospel truth about the estate tax, but are, in real fact, just plain wrong. I thought the report did such an excellent job of educating readers about the true role of the estate tax, that wanted to highlight some of the information here. This is a long post, but it gets to the heart of the matter of the estate tax. The education it provides is worth scrolling down for.

New Florida Trust Code Passed by House and Senate

It looks like Florida's about to adopt a whole new trust code. Below is a copy of an email posted on the list service for the Dade County Bar Association's Probate and Trust Law Committee. The email contains a link to the final version of the bill. I previously provided a link to an annotated version of the new trust code comparing it to current Florida law here. Enjoy!

-----Original Message-----

From: Spivey, Barry
[mailto:Barry.Spivey@ruden.com]
Sent: 21 April 2006 14:05
To: tlc@lists.flabarrpptl.org
Cc: mmadorsky@carltonfields.com
Subject: [RPPTL-tlc] Florida Trust Code


For anyone who hasn't heard, the Florida Trust Code was passed unanimously by the House of Representatives this morning, having passed the Senate on April 5, 2006. There hasn't been a single "nay" vote on the bill through six House and Senate committees or on the floor of either. We're hoping Gov. Bush signs the bill, and there seems to be no reason this won't happen given the lack of any opposition.

Prof. David Powell, who most know is the scrivener of the bill for the Ad Hoc Trust Code Committee, is compiling a list of "questions," "issues," or "glitches" to be given consideration for possible inclusion in the inevitable "glitch bill" that must be introduced by this fall in order to make any changes or corrections in the FTC before its effective date in July 2007.

Therefore, unless you want to wait until Gov. Bush actually signs the bill, it is time to begin taking a serious look at the Fla. Trust Code. The final version of the bill is online [here]. As you know, the Trust Code project originated in the Trust Law Committee, and the Ad Hoc Trust Code Revision Committee will be relying to a large extent on the members of the Trust Law Committee to critically review the Code in the light of their own experience with various factual situations, and to raise questions about perceived inconsistencies, ambiguities, problems not addressed, etc.

With that in mind, we will be discussing such issues that have been brought to the attention of Brian Felcoski or me as of the Trust Law Committee meeting in Orlando at the Section Convention in late May. So please begin your serious study of the Fla. Trust Code and submit to me [barry.spivey@ruden.com] or Brian [bfelcoski@gfsestatelaw.com] within the next few weeks any issues that you would like to see discussed at that meeting and added to Prof. Powell's list.

Barry F. Spivey
Attorney
Ruden McClosky
1515 Ringling Boulevard
Suite 700
Sarasota, FL 34236
Direct 941-316-7600 | Fax 941-316-7908
Barry.Spivey@ruden.com | www.ruden.com
Board Certified Wills,
Trusts & Estates Attorney

Academia's Take on Incentive Trusts

I previously wrote about "incentive trusts" here. Professor Joshua C. Tate (Associate Professor, SMU Dedman School of Law) has recently released an article addressing these types of trusts entitled "Conditional Love: Incentive Trusts and the Inflexibility Problem," 41 REAL PROP., PROB. & TR. J. (forthcoming 2006). Here is the SSRN abstract of Prof. Tate's article:

Abstract: This Article examines the contemporary phenomenon of incentive trusts: trusts that use money to encourage or discourage certain behaviors. Using evidence from Internet websites, practitioner articles, and newspaper articles, the Article considers the likely provisions that a typical incentive trust might have, and explains how such trusts might lead to a problem of inflexibility when they are not drafted so as to take into account the possibility of changed circumstances. The Article also examines current law regarding trust modification and termination as well as recent reform proposals, and suggests some alternatives that might better take into account the particular characteristics of incentive trusts.

Thanks to Wills, Trusts & Estates Prof Blog for pointing out this article.

Letterman's: Top Ten Dumb Accountant Tax Tips

This was too good to pass up during tax season. You know the apocalypse will soon be upon us when someone actually figured out how to make taxes . . . funny?! Stop everything and go to Taxalicious this moment to judge for yourself. This post, which I've reprinted below, gives you a sense of the blog's take on taxes.

Letterman's: Top Ten Dumb Accountant Tax Tips


10. Don't file a W-2 form unless your name begins with "W"

9. Answer every question "Wouldn't you like to know?"

8. Hide all money in mattress, on return write "No money hidden in mattress"

7. If you've just eaten, don't do taxes for at least half an hour

6. Hire yourself as an employee, fire yourself, sue yourself for discrimination, deduct court costs

5. Report $1 billion income so IRS will think you're some sort of big shot

4. For "charitable contributions," list $9 you spent on last Kevin Costner movie

3. Request bonus deduction because "easy" misspelled on 1040-EZ form

2. To distract the auditor, enclose a photo of yourself naked

1. Remember, you can't spell "taxes" without "CPA"

Law Firms See Rise in Inheritance Feuds

The on-line version of the Minneapolis/St. Paul Business Journal reported on this phenomenon here, providing national statistics that should be of interest to Florida probate attorneys. The following are portions of the article I found most interesting:

The perfect storm


The reasons for the flurry of trust-and estate-related legal battles are many.

According to an article in the Dispute Resolution Journal, an estimated $41 trillion of wealth will be transferred in the United States from the "Greatest Generation" to their kids, the baby boomers, between 1998 and 2052.

The massive transfer in wealth alone is enough to spur more family feuds, Godfrey said.

Increasingly complex family compositions makes disagreement even more likely. Disputes often arise between children and second spouses as well as between children of different marriages, said Jim Clay, a partner in the Trusts and Estates Department at Rider Bennett in Minneapolis.

That's what's happening in the Anna Nicole Smith case being heard by the U.S. Supreme Court. In that case, Smith is trying to claim part of the inheritance of her late husband, Howard Marshall, a Texas oil tycoon. Smith alleges that Marshall's son, Pierce, destroyed documents, thus interfering with her expected inheritance. Pierce denied the allegations and said Marshall left Smith nothing in his will.

Some lawyers say baby boomers seem much more willing to air their family problems in court than their parents were.

Well-publicized trials also contribute to the rise in demand for estate litigation.

In the Binger case, the family disputed the former Honeywell chairman's decision to amend his will two months before he died in November 2004 to give about $40 million to $50 million of his $200 million estate to Jane K. Mauer after his death. Mauer was his family's wealth manager with whom he also had a close personal relationship. The family objected to that gift, arguing that Mauer manipulated Binger into giving it to her. Mauer says that's not true. Dorsey & Whitney attorney Greg Weyandt, a member of the firm's trust-and-estate litigation practice, represented the Binger family.

"I've gotten calls from people who said they read about some other case in the newspaper and it made them think they may have a claim," said Alan Silver, a litigator with Minneapolis-based Bassford Remele.

Lack of trust in the trustee

Disputes among family members -- or families vs. other beneficiaries -- aren't the only conflicts spilling over into the courtroom.

Battles between beneficiaries and trustees are becoming increasingly common.

The economic downturn of 2001 seems to have had something to do with the popularity of this kind of case.

"We had a significant decrease in the market and if trustees didn't have a diversified portfolio or weren't doing everything they should have been doing as trustees, there's always the potential of being sued by beneficiaries," Clay said.

A classic example of this kind of dispute is the clash between the heirs to the Minneapolis Creamette fortune and Lowry Hill, the trustee to the 48-year-old family trust. In that case, the family of Creamette founder James T. Williams, represented by Silver, alleged that Lowry Hill failed to properly manage the trust's stock portfolio and caused a $13.3 million decline in the value of the trust. Lowry Hill officials maintained they handled the trust prudently. The trial court awarded the Williams family $5.4 million plus attorneys fees and return of trustees fees. The Minnesota Court of Appeals set aside the award and sent the case back to the trial court for further proceedings. The parties ultimately resolved the case out of court on a confidential basis.

Beneficiaries also may sue a trustee for failing to properly execute the orders of a trust.

Silver litigated one such case that was decided by the Minnesota Court of Appeals in 2004. In that case, Ruben Divine left his assets to his son, Perry, and to his wife and left strict instructions as to how that money was to be distributed. Perry Divine argued that the trustees abused their discretion in allowing the distribution and took them to court, but a Ramsey County District Court judge disagreed with Divine. Divine tried to get that decision reversed by the Court of Appeals, but failed.

You're Disinherited!

British Aristocrat Turns to "Apprentice"-style Reality TV Program in Hunt for American Heir

Proving once again that tacky U.S. pop culture ideas never die, they just morph into new versions of themselves around the globe, Sir Benjamin Slade, British aristocrat and heir to a $13 million estate, doesn't just want to give his estate away to any old Yank, he wants a group of hardy souls to trek to his 13th-century manor house in North Newton, England, and allow themselves to be "ejected," apparently while being filmed for TV, from contention with his own variation on "The Donald's" now-famous you're fired line: "You're disinherited!"

Sir Slade's line doesn't seem to have quite the same "humph" to it that Donald's catchphrase does, but it certainly is off the charts on the "eccentricity" scale (maybe that's the problem?). This story was reported here in the New York Times. The following are excerpts from the linked-to story (note the litigation angle):

NORTH NEWTON, England, March 2 -- WANTED: Heir for $13 million estate, including 13th-century manor house, in bucolic Somerset. Must be able to pay $140,000 annual upkeep and meet incidental costs of, for example, repairing the driveway ($70,000) and fixing the stables ($1 million).


Also, "He can't be a drug addict," said Sir Benjamin Slade, the current owner of the estate and its manor, Maunsel House, which has been in the family since 1772. "He can't be a Communist. It's politically incorrect to say so, but he can't be gay, because he may not produce any children."

The problem, said Sir Benjamin, who is 59 and childless himself, is that none of his army of relatives is willing to take on the property when he dies. So he is searching for an heir in America, where some Slades settled in the 18th century.

"Americans have more energy and a better work ethic," he said, sipping tea in his sumptuous library. ("There are no bookcases, because my family was illiterate," he said.) Paintings of ancestors plastered the walls; a fire roared in the hearth; a leak dripped steadily from the ceiling.

Sir Benjamin has a ready store of scandalous stories about his ancestors, to whom he refers in the first-person plural. Many of his tales have to do with the Slade habit of losing money in inheritance-related disputes. The hardest fought of these, perhaps, was between a set of male Slade twins in the 19th century, only one of whom could be the heir.

"The problem was that no one knew who popped out first," Sir Benjamin said. The ensuing suit -- Slade v. Slade -- cost a fortune in legal fees, adding to the family's financial woes. "We were absolutely stuffed," Sir Benjamin said.

He got the idea for the heir hunt when an American television company, researching a program about Britons' American relatives, got in touch.

The television company -- which Sir Benjamin said has asked him not to discuss too many details -- is now hoping to turn the search into an "Apprentice"-style reality program, in which potential heirs would live at Maunsel House and undergo a series of challenges, with Sir Benjamin eliminating them one by one.

Sir Benjamin is looking forward to ejecting the losers with his own aristocratic catchphrase: "You're disinherited."

New York vs. Florida: A Forum Selection Guide for Will Contests

Special thanks to Florida/New York attorney Amy B. Beller of the West Palm Beach, Florida office of Kaye Scholer LLP, for giving me the heads up on an article she recently published entitled "New York vs. Florida: A Forum Selection Guide for Will Contests," NYSBA Trusts and Estates Law Section Newsletter, Winter 2005, Vol. 38, No. 4. Ms. Beller does a great job of outlining the distinctions between New York and Florida in the will-contest arena. From a Florida perspective, I found the following observations the most interesting:

  • New York law recognizes IN TERROREM clauses as enforceable and they are commonly used. In Florida, these clauses are NOT enforceable.
  • New York law provides a right to JURY TRIALS in will contests. No such right exists in Florida.
  • New York law does not have an equivalent to Florida's HOMESTEAD LAWS. In New York, subject to a spouse's right of election, a decedent can devise his or her home to whomever he or she pleases.

Incentive Trusts: Making Heirs Work for the Money

According to this study sponsored by Allianz Life Insurance, non-financial items that parents leave behind--like ethics, morals, faith, and religion--are 10 times more important to both boomers and their parents than the financial aspects of inheritance. Little wonder then that estate planners have responded to this "values driven" estate planning perspective with trust vehicles that provide positive financial incentives for behavior parents and grandparents want to encourage, as well as financial disincentives for behavior parents and grandparents want to discourage. These trusts are referred to as "incentive trusts," and they are gaining in popularity.

The New York Times recently reported here on the growing acceptance and use of incentive trusts as estate planning tools. Although the article was well written, what I find most interesting is the fact that it was written at all. What was once as little-known planning device has now apparently gained such widespread acceptance that it warrants national attention in a general circulation newspaper.

Below are a few excerpts from the linked-to New York Times story:

"In traditional trusts, beneficiaries receive money at a certain age, but in incentive trusts, heirs must reach milestones or take actions. For example, children might receive a $25,000 bonus when they graduate from college or marry. Or they might receive funds matching money they earn."


"Mr. Holzapfel, who has many wealthy clients in the technology and real estate fields, says he has seen a growing interest in performance-based trusts.

"Quite a few people worked their tails off in high tech, working 24/7 for years, and made a lot of money," he said. "They have a very strong work ethic, and they want their kids to as well." Among his clients with young children and assets of $10 million or more, about 60 percent have incentive trusts.

Critics, however, call incentive trusts too inflexible and say that some parents can be too controlling. A trust that offers a dollar for every dollar earned can be unfair, the critics say, because it gives big rewards to already-successful business people and much smaller amounts to heirs who may work just as hard but have chosen careers as, say, artists or teachers. (And unless other provisions are made in the trust, homemakers and volunteers may get nothing.) Critics also say that some incentives may go so far as to pay children to provide their parents with grandchildren."

"The Bessemer Trust Company, a wealth management firm, serves as trustee for about half its 1,800 client families, who have a variety of estate plans. William H. Forsyth Jr., the firm's chief fiduciary counsel, says the biggest fans of performance-based wills are typically "C.E.O. types who tend to be quite controlling" and those with first-generation wealth because "they are the most scared by it." Because incentive trusts are relatively new, he predicts many legal challenges from heirs." (Emphasis added.)

Trustees Targets of Multimillion Dollar Lawsuits

Recent newspaper stories reporting on multimillion dollar lawsuits involving two of the wealthiest families in the United States, the Pritzkers (reported here by the New York Times) and the duPonts (reported here by the Daily News), are interesting for many reasons.

The angle I find most interesting is to ask myself what could have been done to avoid litigation in the first place. Both cases seem to revolve around disputes over the administration of family trust funds (versus a zero-sum dispute over a set pot of money by conflicting parties). Without knowing more about these cases, I'd guess the manner in which the subject trust agreements were drafted is in all likelihood at least partly to blame for the current litigation.

Trust documents that may (either initially or over time) govern huge sums of money and span several family generations must be drafted with (1) enough specificity to accomplish the original founder's goals while (2) also allowing for enough flexibility to work through unforseen future contingencies - without having to go to court.

A poorly drafted trust agreement gives the parties only two choices: do nothing or sue. A properly drafted trust agreement provides multiple options for conflict resolution/avoidance between those two extremes.

As I previously wrote here, the amount of wealth flowing into multi-generational trusts or "dynasty trusts" is skyrocketing (current estimates are in the $100 billion range). In the absence of carefully drafted trust agreements, more trust litigation of the type reported above seems inevitable.

  • The following are excerpts from the New York Times article on the Pritzker trust litigation:
The Pritzker clan, [Chicago's] first family of fortune and philanthropy, has been riven by accusations of betrayal, self-dealing and conflicts of interests, according to court records unsealed here Tuesday.


The revelations come halfway through a secretive decade-long process in which the Pritzkers must untangle and liquidate huge holdings, including their signature Hyatt hotel chain and the 60 companies in the $6 billion Marmon Group, in order to divide the assets by 2011. The family fought fiercely to keep the records sealed - and the schism secret - but The Chicago Tribune successfully sued to bring them to public light.

The current fight began in July 2000, months after Jay Pritzker's funeral, when six of the cousins - Dan, James, J. B., John, Linda and Tony - wrote the others questioning "whether the structure of our family enterprise needs to be updated." Quoting "Great Grampa Nicholas," the cousins worried that as the growing clan developed divergent interests, members would "feel unfairly treated, and that strains and tensions may develop among people who should be a loving family."

Their letter said information about the family's fortune was too tightly held and asked for more independence in making charitable gifts. "We do not want a divisive process that leaves hurt feelings," it said.

But when the requests were refused, the cousins hired lawyers, and soon conference rooms were filled with documents. They settled about 18 months later, devising a 10-year plan, and went to court only for a limited proceeding to make the agreement binding on future generations.

(Emphasis added.)

  • The following are excerpts from the Daily News article on the duPont trust litigation:
He's a direct descendant of one of America's wealthiest families, but Alexis du Pont de Bie Sr. says he's now "literally destitute and homeless" - at least by du Pont standards.


He grew up in a house with 20 bedrooms and 13 bathrooms, set on a 260-acre estate in Delaware, but now he sleeps on the sofas of kindhearted friends.

He once had a trust fund worth $7 million, but now it's worth only $2.7 million - trimming his monthly allowance to $3,000.

De Bie is suing two management companies, Tredegar Trust Co. and Middleburg Financial Corp., both of Virginia, for mismanaging the trust fund, forcing him to live on a working-class salary.

Neither Tredegar nor Middleburg returned calls for comment. The suit seeks $60 million - $10 million based on what the trust would be worth had it been properly invested and $50 million in punitive damages. It also seeks to have a new trustee appointed.

(Emphasis added.)

Florida Bar Probate & Trust Litigation Committee Meeting: Friday, January 13, 2005

If you're like most attorneys whose practice includes probate litigation, you rarely have a chance to attend the Probate & Trust Litigation Committee meetings. Even if you can't go to the meeting, you may want to take a look at the committee-meeting materials (which I've posted here and here). The committee is involved in several initiatives (all of which are discussed in the posted materials) that could have a big impact on your practice, including:

  • Contestability of Revocable Trusts.
  • Fiduciary Lawyer-Client Privilege.
  • Use of trust assets to pay attorneys' fees of the trustee in litigation against a beneficiary.
  • Enforcing arbitration clauses in Wills and Trusts.


  • Appealing Orders entered in a Probate Proceeding.
  • Collateral Attack on the Validity of Marriage after Death Based Upon Undue Influence.
  • Enforceability of Exculpatory Clauses in Wills.

Family Feud Over $25 Million Fortune Sheds Light on Differences in Probate Practices From State to State

When I wrote here about the brewing probate dispute involving Rosa Park's estate, I mentioned that contested guardianship proceedings are often simply precursors to the real battle: probate litigation. An on-going guardianship dispute that is now receiving national attention, as described in this New York Times article, also highlights a second issue driving many guardianship disputes: forum shopping. In this case, the family is split over whether a court in Texas or one in New Jersey should have jurisdiction over the dispute. The following are a few excerpts from the New York Times article:

Lillian Glasser, by all accounts, never intended to spend her twilight years in Texas. Or her $25 million fortune.


Beyond the personal drama, the case highlights the checkerboard practices of local probate courts, which govern the transfer of property from people who die or are declared incompetent. The courts are not federally regulated, but in response to a growing number of interstate disputes, the National Conference of Commissioners on Uniform State Laws is drafting nationwide probate standards similar to those in the field of child custody.

"These cases are popping up all over the country," said Terry Hammond, executive director of the National Guardianship Association, a nonprofit group of lawyers, social workers and other professionals seeking uniform standards. "The combination of the mobile character of society plus the demographics of an aging population combine to create a potentially volatile situation," said Mr. Hammond, a lawyer in El Paso who briefly represented Mrs. Glasser's son in the Texas dispute.

To Russell Verney, an investigator with Judicial Watch, which has been studying probate courts, the issue boils down to "forum shopping."

"In my opinion," Mr. Verney said, "this is a case about a resident of New Jersey who amassed her fortune in New Jersey and never indicated any interest in subjecting herself or her estate to the probate laws of Texas. If anyone has jurisdiction, it should be the State of New Jersey."

Sharon B. Gardner, a Texas lawyer representing Ms. Glasser's daughter and former guardian, Suzanne Matthews, has responded publicly to the charges being made against her client (and the jurisdiction of the Texas courts) in an e-mail message published here on the Wills, Trusts and Estates Prof Blog.

As reported here, in the latest turn of events the case has wound up in Federal Court, where a judge ruled yesterday. Here are a few excerpt from the linked-to story describing the judge's ruling:

In a sharply worded order that spanks the squabbling children of Lillian Glasser, the 85-year-old New Jersey woman mired in a nasty Texas probate struggle, U.S. District Judge Fred Biery took over a chunk of the complex case Wednesday.


Calling the dispute a "legal fratricide" between sibling rivals that has consumed millions of dollars in attorneys' fees, Biery's order said "the end result ... is the creation of a Glasser chess game in which Mrs. Glasser has become a pawn."

His ruling sends parts of the case back to Bexar County Probate Court where a trial will be held over who should become the guardian of Glasser and her $25 million estate. But because the principal parties come from three states, Biery kept control over other issues.

Widowed Prostitute Battles Stepdaughter over Inheritance

File this particular probate litigation story under the "only in LA" category. As reported here, this gem of a case is on its way to California's Supreme Court. The following are a few excerpts from the linked-to story:

A nasty fight over $1.1 million between a dead man's daughter from a former marriage and his second wife -- allegedly a prostitute whom he was planning to divorce -- has landed in the [California] Supreme Court.


Soon after crane operator Raymond Corder died in a construction accident in May 2001, Shaoping "Sherry" Corder -- his wife of eight months -- and Lisa Corder -- his adult daughter from a first marriage -- filed wrongful death actions that were consolidated.

The two got a $1.1 million settlement, but couldn't agree how to apportion it. At a subsequent trial, Lisa Corder presented evidence that she and her father were very close and that he had been preparing to divorce his new wife because she allegedly was working as a prostitute against his wishes.

Giving the seemingly imminent divorce great weight, Orange County Superior Court Judge Randell Wilkinson allocated 90 percent of the settlement money to Corder's daughter and 10 percent to his second wife.

Probate litigation may be many things, but boring isn't one of them.

Yours, Mine and Heirs'

Philip Bernstein's blog, The New York Probate Litigation Blog (catchy title!), reported here on this interesting New York Times article discussing one family's thoughtful approach to planning for the ultimate distribution of family heirlooms from one generation to the next. Here's what Phil had to say about the article:

The significance that family members may attach to relatively insignificant possessions can easily lead to huge disputes in the settling of an estate. An article by Margaret McCaffrey in the December 8th New York Times deals with this subject in humanistic rather than legalistic terms. Nevertheless, Ms McCaffrey's suggestions on how to anticipate and defuse the conflicts that can arise when adult children battle over the same item of jewelry or furniture can have a positive effect not only on the way in which family members treat each other after losing a parent or grandparent but also can reduce the chances that arguments over possessions may lead to more serious and more expensive legal conflicts.

In Florida, under F.S. § 732.515, parents can create "separate written statements" to dispose of family heirlooms. These statements must be referred to in your will, but they can be revised as often as you'd like without the signing formalities required for a will. All in all, a convenient tool that helps families avoid disputes over who gets the family china.

Gannett Newspaper Fortune: Probate Administration Malpractice Update #2

As I previously reported here, two heirs to the Gannett newspaper sued West Palm Beach, Fla.-based Gunster Yoakley & Stewart alleging that the firm colluded with its client JPMorgan Trust Co., a subsidiary of New York City-based JPMorgan Chase & Co., in running up fees for planning and administering the estate of their father, Charles McAdam Jr., a Wellington resident who was worth more than $57 million when he died in 2003.

Well, as reported in this Palm Beach Post article, the suit has not gone well for Gunster Yoakley. In a move that sent Circuit Judge Jonathan Gerber back to the books to do legal research, the jury awarded the brothers $1.2 million -- $331,496 more than the heirs requested as damages for this portion of the case. The jury found that the firm breached its fiduciary responsibility and committed legal malpractice in its handling of the estate.

And there may be more bad news to come. In a related upcoming trial the Gannett heirs will be claiming another $7 million that they had to pay in taxes and fees because of other oversights made by Gunster Yoakley. "I'm confident that we will be successful," said attorney Steven Katzman, who represented the heirs. Calling the verdict "an aberration," Donald Beuttenmuller, the managing shareholder of Gunster Yoakley, said it will be appealed.

Lesson Learned:

Estate planning and probate administrations can be complex, high-stakes affairs that even the largest and most well respected law firms get burned by on occasion. This is no place for amateurs.

Four New Cases: Stay Tuned for New Blog Postings

I've been consumed by work on an appellate brief, which kept me away from the blog. During my absence Florida's appellate courts have been busy publishing probate-related opinions. I've listed the four newly published opinions below and intend to have write ups for all four of them soon. Stay tuned!

Rosa Parks's Death Stirs Up Bitter Feud Over Her Estate

A long-simmering feud between the family of civil-rights icon Rosa Parks and the people who cared for her at the end of her life has erupted into a court fight over her estate. The Wall Street Journal first ran a story on this unfortunate turn of events here, although a later story reported by the Detroit News here seems to indicate an amicable settlement may be within sight.

Most probate litigators also handle contested guardianship proceedings. This is not by coincidence. Unresolved guardianship disputes have a way of spilling over after a person's death. Ms. Park's story is all too common. The best way to manage these disputes is to work through them at the first available opportunity. Ignoring unresolved grievances while a person is under the care of a guardian wont make them go away. They simply come back around again as probate litigation.

Judge: Scott Peterson not entitled to wife's insurance

As reported here, because Scott Peterson was convicted of killing his pregnant wife, a California judge ruled last Friday that he is not entitled to collect the benefits of her life insurance policy. The judge said the money should go to the executor of Laci Peterson's estate, her mother, Sharon Rocha.

Although the news report does not mention California's "Slayer Statute" as the basis for the judge's ruling, I assume that must have been the basis for the ruling. Florida's Slayer Statutes are found at F.S. § 732.802 (probate estates) and F.S. § 737.625 (trust estates), and would have resulted in the same outcome.

Don't Die In Connecticut: Move to Florida

John H. Langbein, the Sterling Professor of Law and Legal History at Yale Law School, has just published a commentary that is highly critical of the Connecticut probate system entitled Don't Die In Connecticut: A will can't protect you from the state's predatory probate system, considered a national disgrace, Hartford Courant, Oct. 23, 2005.

According to Prof. Langbein's Testimony to Connecticut Legislature Committee on Program Review and Investigations, Hartford, CT. October 7, 2005 [click here], Florida has a "responsible probate system" that compares very favorably to Connecticut's system. In fact, the good professor had the following sage words of advice for the citizens of his fair state:

When citizens of our state ask me about Connecticut probate, I give this simple advice: Try not to die in Connecticut. If you are a person of means, you should--late in life--establish your domicile in some place such as Florida or Maine or Arizona that has a responsible probate system. You can still own a Connecticut home and spend plenty of time here. Indeed, if you place title to your Connecticut home in a Florida trust, your trustee can even transfer the house after your death without going through Connecticut probate.

Source: Wills, Trusts & Estates Prof Blog

"Win-Win" Trust Administration: How to please BOTH current income beneficiaries and remaindermen

Conflicts between current beneficiaries of a trust that want to maximize current income distributions and remainder beneficiaries of a trust that want to maximize their remainder interest are at the core of almost all disputes involving a trust's administration. In the past the best trustees could do to manage this inevitable conflict was to invest trust assets in income producing securities (e.g., bonds) while also trying to ensure an acceptable level of capital appreciation for the remainder beneficiaries. This type of investing inevitably leads to lower overall growth of the trust's portfolio.

Savvy use of Florida's Principal and Income Act can deliver a win-win solution to this age old conundrum. Here's how:

  • First, increase the anticipated remainder interest of the trust by investing the trust's portfolio in accordance with the Modern Portfolio Theory. This investment approach is in stark contrast to traditional trust investment approaches that artificially skewed portfolios in favor of high income producing assets (e.g., bonds).
  • Second, increase current distributions to the income beneficiaries by relying on the authority granted under F.S. § 738.104 to make adjustments between principal and income or the authority granted under F.S. § 738.1041 to convert the trust into a "unitrust."

This solution works because investing in accordance with the Modern Portfolio Theory increases the size of the trust "pie," thereby creating win-win options for all concerned.

Using a case-study approach the authors of The Appropriate Withdrawal Rate: Comparing a Total Return Trust to a Principal and Income Trust, 31 ACTEC J. 118 (2005), do a great job of explaining in plain English how a trustee can both increase current distributions and deliver a higher expected return to the remaindermen using the solution outlined above.

Source: Wills, Trusts & Estates Prof Blog

Physician assisted suicide: Supreme Court to rule on who gets to decide - the fed's or states?

The NY Times reported here on oral arguments made in Gonzalez v. Oregon, the United States Supreme Court case testing the limits of federal authority over decisions made at the state level regarding medical care. In 2001, United States Attorney General John Ashcroft determined that Oregon's assisted-suicide legislation was not a legitimate medical practice and thus doctors who prescribe the deadly drugs would be in violation of the Controlled Substances Act ("CSA").

In Oregon v. Ashcroft, 368 F.3d 1118 (9th Cir. 2004), the Ninth Circuit ruled against the federal authorities, holding that attempting to criminally prosecute physicians if they help terminally ill patients commit suicide in accordance with Oregon's Death With Dignity Act exceeded federal authority, stating as follows:

"To be perfectly clear, we take no position on the merits or morality of physician assisted suicide. We express no opinion on whether the practice is inconsistent with the public interest or constitutes illegitimate medical care. This case is simply about who gets to decide. All parties agree that the question before us is whether Congress authorized the Attorney General to determine that physician assisted suicide violates the CSA. We hold that the Attorney General lacked Congress' requisite authorization. The Ashcroft Directive violates the "clear statement" rule, contradicts the plain language of the CSA, and contravenes the express intent of Congress." (Emphasis added.)

This case goes to the heart of the "states' rights or New Federalism" debate often separating Republicans and Democrats. What's ironic is that in this instance it's a Republican administration advocating for more federal authority - an argument usually reserved for Democrats - and directly contrary to the "New Federalism" philosophy usually advocated by Republicans. Stay tuned for more.

Source: Wills, Trusts & Estates Prof Blog

Dynasty Trusts estimated to hold roughly $100 billion in trust funds

A "dynasty trust" is a trust that is not limited by the rule against perpetuities (the "RAP") and can therefore last for centuries or, in some states, forever. Florida’s statutory rule against perpetuities is found in F.S. § 689.225. This statute was amended in 2000 to allow dynasty trusts in Florida to remain in effect for up to 360 years, which effectively abolishes the RAP.

Estate planning Nirvana:

Dynasty trusts have received a lot of attention in recent years from trusts-and-estates practitioners.  In a NY Times article entitled Shifting Rules Add Luster to Trusts, the planning benefits of these types of trusts was described as follows:

''Dynasty trusts are tremendously attractive, because wealth builds up quickly when it can be passed on without paying estate taxes at each successive generation,'' said Gideon Rothschild, a partner at Moses & Singer, a law firm in New York.

If a dynasty trust of roughly $1 million was established today, Mr. Rothschild figured, it would be worth $867.7 million after four generations, assuming that it grew 7 percent a year and nothing was spent. By contrast, it would be worth $35.6 million if the property was given outright to future generations and was subject each time to an estate tax of up to 55 percent.

Dynasty trusts have also been written about in the WSJ [click here].

Big business for bankers:

Dynasty trusts may be good estate planning, but are they big business for bankers?  You better believe they are!  Prof. Robert H. Sitkoff of Harvard Law School and Prof. Max M. Schanzenbach of the Northwestern University School of Law analyzed federal banking data and concluded that as of the end of 2003 roughly $100 billion in trust funds had shifted to U.S. states - like Florida - that abolished the RAP and are thus amenable to the creation of dynasty trusts.  According to the authors, these new trust funds may translate into as much as $1 billion in yearly trustees' fees.

The Sitkoff-Schanzenbach study was published in a 2005 Yale Law Journal article entitled Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes.  Here's an abstract of the article:

Abstract:
This Article presents the first empirical study of the domestic jurisdictional competition for trust funds. To allow donors to exploit a loophole in the federal estate tax, since 1986 a host of states have abolished the Rule Against Perpetuities as applied to interests in trust. To allow individuals to shield assets from creditors, since 1997 a handful of states have validated self-settled asset protection trusts. Based on reports to federal banking authorities, we find that, on average, through 2003 a state's abolition of the Rule increased its reported trust assets by $6 billion (a 20% increase) and increased its average trust account size by $200,000. By contrast, our assessment of validating self-settled asset protection trusts yielded indeterminate results. Our perpetuities findings imply that roughly $100 billion in trust funds have moved to take advantage of the abolition of the Rule. Interestingly, states that levied an income tax on trust funds attracted from out of state experienced no observable increase in trust business after abolishing the Rule. Because this finding implies that abolishing the Rule does not directly increase a state's tax revenue, it bears on the study of jurisdictional competition. In spite of the lack of direct tax revenue from attracting trust business, the jurisdictional competition for trust funds is patently real and intense. Our findings also speak to unresolved issues of policy concerning state property law and federal tax law.

How and when to involve children in estate planning

Although many parents hesitate when it comes to discussing their estate plans with their children, doing so can be very helpful in terms of avoiding future acrimony. On this point, the California Estate and Business Law Blog recently posted the following:

Deborah L. Jacobs has written an informative article in the October 2005 issue of Bloomberg Wealth Manager (pdf format - slow loading but worth the wait). The article discusses the family dynamics of estate planning with adult children. Key graphs:


Many parents are afraid to inform children about an inheritance for fear it will "demotivate" them - destroy their incentive to work or to be productive members of society. But Thayer Willis, a therapist in Portland, Oregon, and author of Navigating the Dark Side of Wealth, says she's had several clients in their 50s or 60s who didn't know they were getting a huge inheritance and would have made very different life choices if they had - about careers and leisure activities, for instance. They wound of resenting their parents for being so secretive, Willis says.

Lee Hausner, a Los Angeles psychologist specializing in money and families and the author of Children of Paradise: Successful Parenting for Prosperous Families, explains that it's perfectly appropriate for children to discuss their inheritance with their parents. And Las Vegas attorney Steve Oshins recommends children ask that their inheritance be distributed through a trust rather than outright - and the trust should be drafted to provide protection from law suits and claims of divorcing spouses.

Source: California Estate and Business Law Blog

"Maxcy rule" strikes again: Fort Lauderdale attorney ordered to return $1.6 million in fees in probate case

On September 23, 2005 the Daily Business Review reported that Broward County probate judge Mel Grossman ordered Fort Lauderdale attorney Stephen Rakusin to return $1.6 million in fees and costs that were challenged by Holy Trinity Orthodox Seminary, a Russian Orthodox monastery. The Monastery was represented by Robert Judd, a partner at Gunster Yoakley in Fort Lauderdale, in connection with the fee dispute.

According to the Daily Business Review, judge Grossman ruled that under the "Maxcy rule" (see Maxcy v. Citizens National Bank of Orlando, 240 So.2d 93 (Fla. 2d DCA 1970)), after four years of work on the case attorneys Stephen Rakusin and Craig Donoff (both of whom were engaged by the personal representative of the estate) would have to contend themselves with a $151,500 flat-fee originally negotiated by Donoff. Judge Grossman ruled that Rakusin's billing was a violation of the Maxcy rule because he was contracted to perform the same legal services on an hourly basis that Donoff had agreed to do for a flat fee.

Lesson learned: In probate, winning is only half the battle. Getting paid for your work is often just as difficult and hotly contested as the underlying litigation.

ABC News anchor Peter Jennings left a fortune worth more than $50 million to his wife and two children

The Daily News reported here that famed ABC News anchor Peter Jennings left a fortune worth more than $50 million to his wife and two children. According to Jenning's will, which was recently filed in Manhattan Surrogate's Court, Jennings, 67, left the bulk of his estate in trust for his two children, Elizabeth, 25, and Christopher, 23, from his marriage to writer Kati Marton.

Source: Legacy Matters Blog

A Trustee's Duties and Responsibilities Under Discretionary Invasion Provisions

Disputes revolving around whether the trustee of a "discretionary" trust acted appropriately or not often get bogged down because one side or the other fails to grasp the following basic concept: in Florida, discretionary authority does not translate into "I-can-do-whatever-I-want" authority. This Florida Bar Journal article by attorney Peter B. Tiernan does an excellent job of summarizing the current state of the law in Florida on this point.

Former Playboy model takes her probate-litigation case all the way to the U.S. Supreme Court

Former Playboy model Anna Nicole Smith is taking her claims against the estate of J. Howard Marshall II, an oil tycoon who married her in 1994 when he was 89 and she was 26, all the way to the U.S. Supreme Court! The Associated Press reported here that the U.S. Supreme Court has granted cert in Marshall v. Marshall, 04-1544, to answer the following question: when may federal courts hear claims that are also involved in state probate proceedings? When the Ninth Circuit earlier ruled here on the so-called "probate exception" to federal jurisdiction, it held as follows:

We hold that all federal courts, including bankruptcy courts, are bound by the probate exception to federal court jurisdiction and that we are required to refrain from deciding state law probate matters, no matter how the issue is framed by the parties. We vacate the district court's final judgment and remand with instructions.

As I previously posted here, the stripper-turned-reality-TV-star stands to win as much as $474 million that a bankruptcy judge initially said she was owed. The self-described "blonde bombshell" claims that her husband promised her millions but that his scheming son cut her out of the estate.

As the Chicago Sun-Times reported here, this case promises to liven things up at the Supreme Court:

The case promises to be the sexiest of the nine-month [Supreme Court] term which begins next week.


"She's very excited. She will be attending arguments, there's no question about that," Smith's lawyer, Howard K. Stern, said from Vermont where the television reality star is filming a movie.

Another example of why planning focused on addressing potentially contentious beneficiaries (or their guardians) is so important

The LA Times recently reported here on the bitter and lengthy on-going litigation involving a $400 million testamentary trust between the decedent's third ex-wife (who also happens to be the guardian of the 13 year old boy who is the principal beneficiary of the trust) and the trustees. Battles over how an estate is administered, be it a probate estate being administered by a personal representative or a trust estate being administered by one or more trustees, are far and away the leading causes of probate litigation. These disputes are foreseeable, and can be mitigated (although not eliminated) with proper planning.

Source: Wills, Trusts and Estate Prof Blog

Divided Families: Civil Disengagement Instead of War

Mediated settlement agreements are the norm in Florida when in comes to probate litigation. An excellent resource for thoughtful articles on why probate mediation has "taken off" over the last decade can be found here on the Mediate.com website. But just when you thought mediation was the answer to all of your problems, this interesting post on the Wills, Trusts & Estates Prof Blog (which is reproduced below) discusses yet another option for the creative probate attorney: civil disengagement.

In a recent newsletter, Gerald Le Van, a strong proponent of family wealth mediation, introduces the concept of "civil disengagement" as an alternative to financially and emotionally costly litigation when family members cannot reach an amiable solution.


Mr. Le Van explains that civil disengagement:

  • acknowledges current irreconcilable differences,
  • but avoids family litigation;
  • manages each divided camp separately,
  • but leaves the door open to family reunification in later generations.

See Gerald Le Van, Divided Families: Civil Disengagement Instead of War (Aug. 2005).

Florida Moves Towards Adoption of the Uniform Trust Code

If all goes according to plan, Florida will soon be adopting its version of the Uniform Trust Code ("UTC"). The following e-mail announcements were circulated to Miami-Dade County probate attorneys on the "proguard" list service. Attached to the announcements was this draft version of the Florida UTC.

August 30, 2005

Judge Korvick,

Thanks for getting the word out about the new proposed trust code. I am attaching the latest version. This product will have further revisions before it is filed with the legislature for the 2006 session.

Brian Felcoski


August 29, 2005

Dear friends,

Attached, for your information, is the proposed revision to the Florida Trust Code. Many of you had asked me to please send you this document via e-mail. On August 20, 2005, at the last meeting of The Executive Council of the Real Property, Probate and Trust Law Section of the Florida Bar, The Executive Council unanimously agreed to bring this complete re-draft of the Trust Statutes before the Legislature. This bill already has legislative sponsors. The section also unanimously decided to obtain the assistance of the section's lobbyist, Pete Dunbar, to assist in the passing of this bill.

Brian Felcoski, heading the Trust Committee has done a beautiful job. The proposed bill is drafted, for the most part, adopting the New Uniform Trust Code. The Uniform Trust Code was analyzed and compared to Florida Law by attorneys from around the State. The Uniform Trust Code was annotated by the group so that everyone could see whether there were any major changes to Florida Law.

The new, proposed Florida Trust Code is patterned, in its format, after the Uniform Trust Code. The new Florida Trust Code retains parts of Florida law, not included in the Uniform Trust Code.

Sincerely,

Maria Korvick

New survey shows seniors and boomers rank money last in estate planning priorities

If much of your practice involves probate litigation, you will inevitably (and almost daily) find yourself in the following conflict: you, as lawyer, want to focus on the dollars and cents of the case, your client, on the other hand, wants to relive family grievances that may have been simmering for decades - issues that unfortunately are almost impossible to resolve in the context of civil litigation. According to these findings in the recently published Allianz American Legacies Study, this type of cross-communication is probably inevitable. The California Estates and Business Law Blog provided the following comments on the study:

The Allianz American Legacies Study, sponsored by the Allianz Life Insurance Co., . . . found that seniors and baby boomers ranked money last in their list of important estate issues. Ahead of it were sharing values and life lessons, understanding final instructions and wishes to be fulfilled, and distributing personal possessions that have emotional value.


Still, just one-third of the more than 2,500 people surveyed said they had discussed such a wide range of issues.

Ken Dychtwald, president and chief executive of Age Wave, a San Francisco-based consulting group that helped design the survey, said families may be approaching estate planning incorrectly.

"We found that when you ask people to talk about inheritance, everyone clams up," Dychtwald said. "Inheritance is about money, and it's seen as greedy. But ask them to talk about legacy ... it's as if we hit some kind of magic button, and people open up about leaving behind family values and traditions - and money was just a piece of that."

This I Believe: Always Go to the Funeral

When I first started out as a trusts and estates lawyer one of the senior partners at my firm gave me some very good advice. He told me that if you're ever unsure about visiting someone at the hospital or going to a funeral . . . always opt for showing up. This report on NPR's "This I Believe" series reminded me of that wise advice. The following are a few highlights from that piece:

I believe in always going to the funeral. My father taught me that.


The first time he said it directly to me, I was 16 and trying to get out of going to calling hours for Miss Emerson, my old fifth grade math teacher. I did not want to go. My father was unequivocal. "Dee," he said, "you're going. Always go to the funeral. Do it for the family."

Sounds simple -- when someone dies, get in your car and go to calling hours or the funeral. That, I can do. But I think a personal philosophy of going to funerals means more than that.

"Always go to the funeral" means that I have to do the right thing when I really, really don't feel like it. I have to remind myself of it when I could make some small gesture, but I don't really have to and I definitely don't want to. I'm talking about those things that represent only inconvenience to me, but the world to the other guy. You know, the painfully under-attended birthday party. The hospital visit during happy hour. The Shiva call for one of my ex's uncles. In my humdrum life, the daily battle hasn't been good versus evil. It's hardly so epic. Most days, my real battle is doing good versus doing nothing.

In going to funerals, I've come to believe that while I wait to make a grand heroic gesture, I should just stick to the small inconveniences that let me share in life's inevitable, occasional calamity.

On a cold April night three years ago, my father died a quiet death from cancer. His funeral was on a Wednesday, middle of the workweek. I had been numb for days when, for some reason, during the funeral, I turned and looked back at the folks in the church. The memory of it still takes my breath away. The most human, powerful and humbling thing I've ever seen was a church at 3:00 on a Wednesday full of inconvenienced people who believe in going to the funeral.

Source: Legacy Matters Blog

Getty Trust Under Investigation

Prof. Beyer's Wills, Trusts & Estates Prof Blog reported here on what may eventually evolve into an interesting peak into the inner workings of the J. Paul Getty Trust, which runs the J. Paul Getty Museum, the Getty Research Institute, the Getty Conservation Institute, and the Getty Foundation. Bill Lockyer, the attorney general of California, has recently begun a detailed investigation into the finances of the trust.

Prof. Beyer summarized the current allegations of wrong doing as follows:

It seems that one or more of the trustees may have made inappropriate expenditures in breach of their duties such as first-class airline tickets, staying in lavish hotels, and renting high-end cars such as a Porsche Cayenne. There is also an allegation that the Trust sold a parcel of real property to a close friend of one of the trustees for $700,000 less than its appraised value.

Wills, Trusts & Estates Prof Blog Recognizes Florida Probate Litigation Blog

The leading (and I think only) estate planning blog authored by a law professor is Professor Gerry W. Beyer's Wills, Trusts & Estates Prof Blog. One of a series of blogs authored by U.S. law professors as part of the Law Professor Blogs Network, Prof. Beyer's blog is an excellent resource for any professional working in the estate planning field. As such, it was flattering to note that the Florida Probate Litigation Blog was recently recognized here by Prof. Beyer. Thanks!

Leading Accounting Website Recognizes the Florida Probate Litigation Blog

In this recent article on the SmartPros Website by Eva Lang, co-author of "The Best Websites for Financial Professionals," estate planning was identified as one of the niche practice areas covered by bloggers that should be of most interest to accountants. The Florida Probate Litigation Blog was one of only three estate planning blogs mentioned. Thanks!

Bank Trust Departments under Intense Competitive Pressure

Economic pressures loom large in all civil litigation. Those pressures are both the likely source of the underlying dispute and the driving force behind the course of the litigation and the manner in which the parties choose to negotiate settlement terms . . . or not. As I previously expressed here, two often opposing values shape the corporate trust market: traditional fiduciary responsibilities to trust beneficiaries and market-driven demands for increased profits.

Changing market conditions will only heighten that tension in the future. This July 8, 2005 study by Tiburon Strategic Advisors reported that Bank of America has $126 billion in personal trust assets under management, Wells Fargo $62 billion, PNC Bank $38 billion, JP Morgan Chase $26 billion, and Wachovia $25 billion. While those sums are huge, they don't tell the whole story. According to the study, banks are having trouble keeping up with changing market conditions.

  • In 1991, brokerage firms accounted for only 5% of the personal and institutional market share. Today they account for 32% of that market.

  • In 1998 there were only 117 non-bank companies offering trust services to consumers. In only five years that number grew nearly five fold to 564 companies.

How these dramatically changing market conditions will play themselves out in future litigation is anyone's guess, but they will undoubtedly have an impact.

Source: Estate Legacy Vaults

Probate practice is complex and demanding . . . and the stakes can be very high if someone thinks you got it wrong

This June 22, 2005 law.com article is a good example of how even the best Florida firms are not immune to malpractice claims challenging a firm's handling of a large estate. Two heirs to the Gannett newspaper fortune allege that West Palm Beach, Fla.-based Gunster Yoakley & Stewart colluded with its client JPMorgan Trust Co., a subsidiary of New York City-based JPMorgan Chase & Co., in running up fees for planning and administering the estate of their father, Charles McAdam Jr. of Wellington, who died in early 2003. That suit seeks no specific damage figure. But the plaintiffs maintain that Gunster's actions cost the estate almost $8 million in legally avoidable taxes alone.

Avoid Litigation - Don't Surprise or Confuse Your Heirs

The California based Estate Business and Tax Law Blog reported here that this litigation-related excerpt from the new book by Nancy Keates, The Wall Street Journal Guide to the Business of Life was in today's Wall Street Journal:


Don't surprise or confuse your heirs:

A contested will can make legal fees skyrocket. Making clear decisions, telling your heirs exactly what to expect, and being explicit in your will, will help reduce the risk of a legal fight. One common problem is a poorly drafted will that can lead to ambiguities about the deceased's wishes and, ultimately, increase the risk of legal fights. Another thing to watch out for are conflicting directives between the will and, say, a life insurance policy or a retirement account.

I couldn't have said it better myself.

What Divorce Attorneys Need to Know about Trust & Estates Litigation

As I previously posted here, "Dynasty Trusts" are estimated to hold up to $100 billion in assets. Dynasty trusts are only one subset of the trust options available to families. And as more and more of those families formalize their estate planning with the use of trusts for their children, more and more of those trusts will be targeted in divorce proceedings. Whether you represent a trust beneficiary considering a prenuptial agreement or a divorcing spouse attempting to shield his or her trust assets from Florida's equitable distribution regime (i.e., F.S. § 61.075), you need to know what the key issues are.

Step one, read the 1985 landmark Florida Supreme Court opinion Bacardi v. White, 463 So.2d 218 (Fla. Jan 31, 1985). Step two, read Colorado trust & estates attorney Marc A. Chorney's recent Real Property, Probate and Trust Journal article entitled "Interests in Trusts as Property in Dissolution of Marriage: Identification and Valuation."

Continue Reading...

Australian widow can't use husband's sperm

Just in case you're even thinking about it, forget it if you're in Australia! This story reports on an Australian widow who has been refused the right to impregnate herself with her dead husband's sperm because she did not have his written consent to do so. The 36-year-old woman had been married to her husband for more than eight years when he was killed in a car accident in July 1998. Within 24 hours of his death the woman received court authority - and the consent of the dead man's parents - to have his sperm taken and stored at a Melbourne hospital. Victorian Supreme Court judge Kim Hargrave subsequently ruled that Australian law did not allow the taking of sperm or ova from the dead for the purpose of reproduction if the person had not consented in writing to the procedure before their death.

My guess is that it wont be long before some probate judge somewhere in Florida has to grapple with the same issue. Also, is this one more item to consider when we're working on a couples' estate plan?

Source: Legacy Matters

Questioning the Trust Law Duty of Loyalty: Sole Interest or Best Interest?

The March 2005 edition of the Yale Law Journal contains this interesting (perhaps even provocative) article by the noted Yale Law School Professor John H. Langbien. The logic underlying his thesis is somewhat circular in nature, although it is sure to warm the hearts of corporate fiduciaries (or more specifically, the "business development" folks at large banks). In a world dominated by an ever smaller group of financial-services conglomerates that maximize shareholder returns by cross selling an ever growing array of financial products and services to a single set of clients (the fancy word for this is "synergy"), it is no surprise that corporate fiduciaries seek to cross sell to their trust clients as well. The only problem is that they are hampered by these old fuddy duddy fiduciary self-dealing prohibitions that were developed within the context of a supposedly more genteel 18th century English business culture. The gist of Prof. Langbien's article is that if today's corporate environment conflicts with two-century's worth of Anglo-American fiduciary common law, then there must be something wrong with the law (see what I mean by the circular nature of this argument). Prof. Langbien proposes a technical fix that could be easily incorporated into state statutory regimes governing trustees and other fiduciaries (e.g., personal representatives of estates).

Continue Reading...

Adam Hirsch Named the William and Catherine Vandercreek Professor of Law at The Florida State University College of Law

The more intellectual firepower is applied to examining and improving Florida's probate-related laws, the better off we all are. So it is good news indeed for Florida practitioners that according to this press release Adam Hirsch, a leading authority on wills and trusts, has been named the William and Catherine VanDercreek Professor of Law at The Florida State University College of Law.

Over the past two years, Professor Hirsch worked as a consultant to the subcommittee of the Real Property Probate and Trust Section of The Florida Bar that drafted a comprehensive revision to Florida's statute covering disclaimers of inheritances. The Florida Legislature recently enacted the statute, and it awaits the governor's signature.

Source: The Wills, Trusts & Estates Prof Blog

NPR on "When the Elderly Become Financial Targets"

Because elder abuse claims often end up as part of the victim's probate estate, I thought this NPR story might be interesting to readers of this blog.

Source: The Elder Law Prof Blog

Custody of soldier's body is civil-court decision, probate-court judge rules

This article reports on a conflict between divorced parents over the remains of their son, who was killed in Iraq. Because of the growing number of such cases, Shelley Berkley, D-Nev., introduced this legislation earlier this month that would require soldiers to designate someone to handle their funeral arrangements. According to this article, the Department of Defense currently has the following policy in place:

Spouses of slain service members have first claim to the remains. If the victim is unmarried, the body goes to children over 18 in order of age. If the victim has no children over 18, remains go to parents in order of seniority, unless one parent was granted sole legal custody.

Source: Death & Taxes - The Blog

The Florida Probate Litigation Blog gets noticed!

The granddaddy of all Florida legal blogs is Matt Conigliaro's Abstract Appeal. Matt was generous enough to post a link here to the Florida Probate Litigation Blog while also commenting that this blog was "among the notable additions" to Florida's ever growing blogosphere. Thanks Matt.

"The Case of Theresa Schiavo" by Joan Didion in the New York Review of Books

Thanks to the Legacy Matters blog for posting this link to an excellent article in the New York Review of Books by Joan Didion tracing the history of the Terry Shiavo case through all its twists and turns. Highly recommended.

Hospital attorneys brace themselves for new legislation in the aftermath of the Terri Schiavo case

Thanks to Florida blog Abstract Appeal for identifying this Corporate Counsel article discussing how in-house hospital attorneys are bracing themselves for new legislation in the aftermath of the Terri Schiavo case that could make it tougher to remove someone from life support. For example, Louisiana and Alabama are considering laws that would prohibit doctors from removing feeding tubes or other means of nutrition and hydration, even with the consent of a guardian. Kansas is considering a change that would compel guardians to seek court permission before withholding food or water. Michigan is weighing a law that would bar anyone having an extramarital affair from making life support decisions for his or her spouse.

Gary Becker and Richard Posner on repeal of the federal estate tax

Thanks to the Wills, Trusts and Estates Prof Blog for drawing attention to the May 15, 2005 entry on the blog maintained jointly by Gary Becker and Richard Posner seting forth their ideas about the continued vitality of the federal estate tax. They respond, in part, to the New York Times article I previously posted on addressing repeal of the federal estate tax here. Enjoy!

The Estate Tax: Efficient, Fair and Misunderstood

As I previously posted here, even though the estate tax is not a litigation issue, it looms in the background of almost any litigation involving an estate large enough to be subject to the tax. Which means I'm giving myself license to continue posting on the issue of estate-tax repeal. On that note, SmartBlog recently posted an interesting New York Times article here addressing repeal of the estate tax. Enjoy!

Probate judge orders the former executor of violinist Isaac Stern's estate to pay hundreds of thousands of dollars to Stern's three grown children

A probate judge has ordered the former executor of famed violinist Isaac Stern's estate to pay hundreds of thousands of dollars to Stern's three grown children. Stern, who died in 2001 at age 81, was one of the foremost violinists of the 20th century. He was among the most recorded classical musicians in history, and played a major role in cultivating the careers of such musicians as Itzhak Perlman, Pinchas Zukerman and Yo-Yo Ma. The full story is available here.

Release of dead soldier's e-mail account to his parents in Michigan has sparked debate over personal data: Who owns your e-mail when you die?

In the recent Michigan case, a probate judge ordered Yahoo Inc. to give the family of a soldier killed in Iraq full access to their son's e-mail account. Attorney Brian Dailey, who represented the Ellsworth family, said there was no court battle with Yahoo and there was no controversy over privacy issues. "It took no convincing because Yahoo agreed," he said. He added that "[t]here's really no privacy debate over who owns e-mail. It's the same thing as a safe deposit box." The full story is available here.

House Approves Bill Repealing Federal Estate Tax

Granted, this isn't exactly a probate-litigation story, but the estate tax looms so large over every aspect of trust and estates law in the U.S., I can't just ignore it.

So here's the latest. In what is becoming an annual ritual (usually timed for maximum political advantage), the House voted yet again on April 13, 2005 (272-162) to repeal the federal estate tax in 2010 and beyond. The legislation would prevent the estate tax from re-emerging after its scheduled elimination, for one year, in 2010. Previous bills passed by the House have languished in the Senate. Talks between Republicans and Democrats have just begun in the Senate, where some lawmakers have worried about increasing federal deficits. In fact, with a $1.3 trillion deficit already forcast for the next decade, walking away from an additional $290 billion in lost estate-tax revenues (source: Joint Committee on Taxation Report) has some fiscally conservative Republicans re-evaluating their positions. Estate tax repeal's top proponent, Sen. Jon Kyl, R-Ariz., refused to predict an outcome. The full Associated Press story is available here.

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The Lighter Side of "Living Wills"

Leave it to the Onion to add a little levity to a subject very much in the news lately. Check out this posting for a few lighthearted tips to keep in mind when preparing your Living Will.

Baker Botts and Wells Fargo Bank Texas Hit With $71 Million in Damages for Estate Planning Malpractice

A state district judge in Kerrville, Texas, signed a judgment ordering Baker Botts and Wells Fargo Bank Texas to pay $71 million in damages to former estate-planning client Kathleen C. Cailloux, a wealthy widow in Kerrville. The full article is available here. A previous article covering the same case is available here.

Court won't reconsider Anna Nicole ruling

A federal appeals court has declined to reconsider a ruling that former Playboy model Anna Nicole Smith is not entitled to $88.5 million from the estate of her late husband, oilman J. Howard Marshall II. Last December, a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled a Texas probate court's decision should stand: the oilman's son was the sole heir -- and doesn't owe Smith anything. The panel said the federal judge in California who ruled in Smith's favor in 2002 should never have even heard the case. Read more here.