Category Archives: Trusts & Estates
Sep 18, 2018 Kent D. SchenkelTrusts & Estates
James J. White,
Fraudulent Conveyances Masquerading as Asset Protection Trusts, 47
UCC L.J. 367 (2017), available at
SSRN.
Property rights are contingent. While property owners enjoy exclusive access to property owned, laws governing creditors’ rights moderate owners’ rights under certain conditions. Failure to satisfy a debt can trigger legal processes that may even lead to a complete stripping of ownership rights in favor of the creditor. Viewed this way, the sorting of rights to property is a zero-sum game where a creditor’s gain offsets an owner’s loss.
Trusts can reduce the vulnerability of an owner’s property rights by adding additional complexity to the ownership arrangement. The spendthrift trust is the obvious example. In such an arrangement an owner transfers the ownership bundle in manner that is said to “split” new ownership rights between a trustee and one or more beneficiaries. Afterwards, the beneficiaries enjoy the benefits of ownership, but neither a beneficiary nor most third parties are capable of diminishing beneficial ownership rights in the spendthrift trust arrangement. Continue reading "A Creditors’ Rights Perspective on Domestic Asset Protection Trusts"
Aug 3, 2018 Alexander Boni-SaenzTrusts & Estates
Susan N. Gary,
Best Interests in the Long Term: Fiduciary Duties and ESG Integration, 90
U. of Colo. L. Rev. __ (forthcoming 2018), available at
SSRN.
What is the time frame of fiduciary duties? In other words, what time horizon should fiduciaries have in mind as they execute their responsibilities? This is an underexamined aspect of fiduciary law, and Professor Susan Gary’s piece, Best Interests in the Long-Term: Fiduciary Duties and ESG Integration, provides a thought-provoking entry point using the lens of socially responsible investing (SRI). Gary argues that if prudent investing evolves to encompass a longer-term understanding of value creation, then consideration of environmental, social, and governance (ESG) factors may become not only possible, but legally required. If this occurs, we may witness a tectonic shift in investor behavior similar to that produced by enshrining modern portfolio theory (MPT) in fiduciary law.
Gary starts by reviewing the different terminologies and strategies of SRI. The goal is to differentiate ESG integration—Gary’s primary object of analysis—from other types of SRI. ESG integration is a holistic investment strategy that considers traditional financial factors alongside material ESG factors, with materiality defined as the likelihood that the ESG factor has some relationship with financial outcomes. Environmental factors might include a company’s energy efficiency policies, while social factors can run the gamut from human rights to labor conditions to community relations. Governance factors, in turn, involve such issues as board diversity, executive compensation, and transparency policies. Gary contrasts ESG integration with early forms of SRI that employed negative screening mechanisms to exclude certain socially undesirable companies or classes of assets from an investment portfolio. She also distinguishes it from a more modern form of SRI called impact investing, which typically involves a sacrifice of economic return in exchange for a measurable social impact. Continue reading "The Temporal Dimension of Fiduciary Duty"
Jul 4, 2018 Phyllis C. TaiteTrusts & Estates
Discussions about wealth accumulation and economic equality invariably lead to discussions about income and wealth inequalities. Professor Erez Aloni‘s article, The Marital Wealth Gap, takes the discourse to a new level by adding the connection between marriage and wealth inequality. Specifically, Professor Aloni indicates how the family structure impacts wealth by comparing the accumulation of wealth among married households in the top ten percent to all households in the bottom ninety percent. He coins this differential “the marital wealth gap.” Further, the article exposes various policies that reinforce wealth inequalities that serve as the foundation for the marital wealth gap. Finally he discusses the cause and harms caused by the gap and possible solutions for narrowing the gap.
In his analysis, Professor Aloni explores whether the success of married couples is the cause of the wealth advantage and he analyzes the various legal mechanisms that reinforce the wealth privilege that married households enjoy. In other words, he posits that law and policy facilitate measures to maximize wealth holdings for married households. Professor Aloni proposes the state should decouple wealth benefits from marriage by dismantling the architecture that supports preferences based on marriage. Continue reading "Is Marriage a Proxy for Wealth?"
Jun 8, 2018 Paula MonopoliTrusts & Estates
Parentage is central to our status-based system of inheritance. Over the past twenty years, we’ve seen tremendous changes in how courts and legislatures approach the question of just who is a parent. We generally use the same legal definition of parentage for both family law and inheritance law, a definition derived in many states from the Uniform Parentage Act (UPA). Thus, Professor Courtney Joslin’s new article, Nurturing Parenthood Through the UPA (2017), is particularly salient for trusts and estates scholars.
In Obergefell v. Hodges, the United States Supreme Court held that states must allow same-sex couples to marry. But that decision didn’t address the myriad corollary questions that arose from marriage equality. These included questions like whether the marital presumption of parentage granted to “husbands” also applied to female spouses who were not the genetic parent of a child. Or whether such a nongenetic female spouse had the right to have her name automatically listed on a birth certificate. Those issues were largely put to rest in a relatively unheralded case, Pavan v. Smith, which was decided after Obergefell. Professor Joslin notes that, “In June 2017, the Supreme Court held in Pavan that Arkansas’s refusal to list a woman on the birth certificate of a child born to her same-sex spouse was inconsistent with its prior declaration in Obergefell.” And in McLaughlin v. Jones ex rel. Cty. of Pima, “the Arizona Supreme Court explained, under Arizona’s marital presumption, husbands were recognized as parents even if they were not biological parents. After Obergefell and Pavan, the court continued, that rule could not ‘be restricted only to opposite-sex couples.’” Continue reading "The New Uniform Parentage Act (2017) and Inheritance Law"
May 10, 2018 Solangel MaldonadoTrusts & Estates
Imagine that you are engaged to be married but die shortly before the wedding. You do not have a will. Should your fiancé be entitled to a share of your estate?
Imagine instead that shortly after your engagement, you execute a will giving your fiancé half of your estate. You end the relationship before walking down the aisle but never change your will. You are later killed in an accident. Should your ex-fiancé take under the will? Continue reading "On the Way To and From Marriage"
Apr 13, 2018 Gerry W. BeyerTrusts & Estates
Mark Glover,
Freedom of Inheritance, 2017
Utah L. Rev. 283 (2017), available at
SSRN.
Policymakers have long focused on the freedom of disposition, the ability of donors to decide how their property should be distributed. These decisions are almost at the complete discretion of the donor. The donee, on the other hand, has a much smaller role in the process. The donee’s only real decision is deciding whether to accept or reject the donor’s gift. This choice is termed the freedom of inheritance. While the freedom of disposition is well understood, the freedom of inheritance has not been explored to the same extent.
Prof. Mark Glover’s article, Freedom of Inheritance, justifies the need to recognize the freedom of inheritance and how policymakers need to facilitate the freedom of inheritance for donees. Prof. Glover explains the importance, mechanics, and rationales behind the freedom of disposition. He then conducts parallel explanations for the freedom of inheritance. The article also analyzes how the freedom of inheritance aids the utility for both the donee and the donor. Prof. Glover delineates how the donee may be better prepared to handle the disposition of the donor’s property post-mortem with specific examples. Finally, the article emphasizes how to best facilitate the freedom of inheritance in contrast with the freedom of disposition. Continue reading "Uncaging the Donee’s Freedom"
Mar 15, 2018 Sergio ParejaTrusts & Estates
Danaya C. Wright & Beth Sterner, Honoring Probable Intent in Intestacy: An Empirical Assessment of the Default Rules and the Modern Family, 43 ACTEC L.J. 341 (2017).
The principal goal of any intestacy statute is to determine the probable intent of individuals who die without a will. Presumably, that means determining what most people who die without a will would want their wills to say if they were to have executed a will before dying. This is a particularly challenging endeavor, given that intent changes over time and may not be consistently the same throughout a large, multicultural country.
In their excellent article, Professor Wright and Ms. Sterner analyze 493 wills that were probated in Escambia and Alachua Counties, Florida, in 2013. They do this, the authors say, “[i]n light of the fact that marriage is a waning institution and a majority of children are currently being raised in nontraditional families—defined as blended, single-parent, or same-sex.” Continue reading "Using Empirical Studies as a Basis for Updating Intestacy Laws"
Feb 16, 2018 Browne LewisTrusts & Estates
The Strange Case of Dr. Jekyll and Mr. Hyde is a popular novella that was published by Robert Louis Stevenson in 1886. In the novella, Gabriel Utterson, a lawyer, investigates strange events involving Dr. Henry Jekyll and Edward Hyde. Dr. Jekyll is a respected man and Mr. Hyde is suspected of killing several people. Mr. Utterson becomes upset when Dr. Jekyll produces a holographic will that leaves the bulk of his estate to Mr. Hyde. He believes that Dr. Jekyll’s actions are a result of blackmail on the part of Mr. Hyde. After Dr. Jekyll commits suicide, Mr. Utterson finds a letter in which Dr. Jekyll confesses that he used a potion to transform himself into Mr. Hyde. Because he is unable to prevent himself from turning into Mr. Hyde Dr. Jekyll kills himself. In his entertaining and well-written article, Professor Alton presents an imagined conversation that he has with Mr. Utterson.
Their imagined conversation focuses on Dr. Jekyll’s testamentary capacity at the time he wrote the will leaving his property to Mr. Hyde. The article starts with a discussion of Dr. Jekyll’s general mental capacity. Professor Alton asserts that, on several occasions, Mr. Utterson indicated that he thought that Dr. Jekyll was of unsound mind. Professor Alton explains the standard courts apply to determine testamentary capacity. Because he teaches in Texas Professor Alton relies on Texas law. Under Texas law, the soundness of mind requirement is satisfied if the testator can understand (1) the activity in which he or she is engaging; (2) the nature and extent of his or her property; (3) the intended beneficiaries; (4) his or her dependents; and (5) the manner of distribution that he or she is making. The testator must also be able to form a reasonable judgment with regards to the four enumerated factors. Both Professor Alton and Mr. Utterson agree that the first four elements of the test were satisfied. Nonetheless, Mr. Utterson states that he believes that Dr. Jekyll “was so deranged in his mind that he could not form a reasonable judgment as to the other elements.” Therefore, Mr. Utterson thinks that Dr. Jekyll lacked the testamentary capacity to make a valid will. However, Professor Alton is not willing to concede that point because the capacity necessary for a person to make a will is so low compared to what is required for a person to execute a contract. Continue reading "Using an Interesting Conversation to Teach Testamentary Capacity"
Jan 19, 2018 Sarah WaldeckTrusts & Estates
In Posthumous Privacy, Decedent Intent, and Post-Mortem Access to Digital Assets, Alberto B. Lopez discusses a distinctly modern problem: how much access should a personal representative have to decedent online accounts? Surprisingly few states have addressed this important question, although there is a recent flurry of proposals. Lopez argues that the legislative debate has failed to account for the decedent’s privacy interest and has mostly ignored decedent intent, the lodestar of estates and trusts law. He concludes that when decedent privacy and intent are properly “included in the legislative balance,” policies will lean “toward non-disclosure for individuals who die intestate and toward disclosure if the testator has instructed [by will] that account contents be available.” (P. 242.) While I would ultimately permit more access than Lopez recommends, his article is a must-read because it highlights an important estate planning problem and makes the reader ponder the appropriate scope of post-mortem privacy.
Digital accounts contain a plethora of information: photographs and other individual memories, email correspondence, entertainment files, individual work product, career information, financial data, and on and on and on. Some of this information makes the job of administrating an estate easier; some of it has subjective value to the decedent’s survivors; and some of it may even have actual market value. Continue reading "The Dead’s Online Accounts"
Dec 7, 2017 Camille DavidsonTrusts & Estates
In the law of Wills, the testator’s intent is of upmost importance. If there is clear and convincing evidence of a testator’s intent, then a document intended to be his or her will should be probated, right? Not so fast—according to Professor John Langbein, in a jurisdiction that has adopted the strict compliance approach to Wills Act formalities a document will not constitute a validly executed will if all of the statutory requirements are not met, even when evidence shows that the testator intended the document to be his or her will. Langbein penned substantial compliance and harmless error proposals as alternatives to strict compliance. In Wills Act Compliance and the Harmless Error Approach: Flawed Narrative Equals Flawed Analysis?, Professor Peter T. Wendel asserts that Professor Langbein has not framed the narrative correctly and therefore the analysis of the issue is flawed. He rephrases the narrative so that the debate can continue in a less simplistic manner.
Wendel asserts that Langbein incorrectly painted a picture of strict compliance as a rigid villain that invalidates wills when there is not 100 percent compliance with Wills Act formalities. In his articles, Langbein uses conclusory language and assumes that the reader already agrees with him. Then, in each article, Langbein’s proposal is pitched as the solution to the injustice of the strict compliance approach. Professor Langbein first proposed a substantial compliance doctrine, and a decade later proposed a more lenient harmless error doctrine outlining when courts should probate documents that do not meet the requirements of the Wills Act. Although Langbein’s harmless error proposal has been adopted as part of the Uniform Probate Code and Restatement (third) of Property, most states have not adopted such proposal. Continue reading "Strict Compliance and Wills Act Formalities"
