Category Archives: Trusts & Estates

The Big Questions of Philanthropy Law in a Delightful Snack-Size Portion

Oct 26, 2011 Alyssa DiRussoTrusts & Estates

Alyssa DiRusso

Should charitable trusts be perpetual and should such philanthropy benefit from generous tax subsidies? Professor Ray D. Madoff of Boston College Law School addresses what are perhaps the most fundamental questions of charitable trust law in a surprisingly accessible and engaging article. The article reads less like legal scholarship and more like a good story, perhaps owing to the fact that it relies upon her book, Immortality and the Law (Yale Univ. Press 2010).

Professor Madoff opens with a character sketch of Leona Helmsly, the “queen of mean,” who harnessed the tax benefits supporting philanthropy to fund an eight-billion-dollar trust for the benefit of dogs (in addition to funding a comfortable twelve-million-dollar fund for her own aggressive terrier). She explains the role of tax expenditures in supporting such donations and invites her reader to question whether the benefits from such a system are worth its costs. Continue reading "The Big Questions of Philanthropy Law in a Delightful Snack-Size Portion"

Father of the Iowa Trust Code

Sep 28, 2011 Jeffrey CooperTrusts & Estates

Jeffrey Cooper

Back in 2001, Professor Martin Begleiter published an article analyzing the drafting and revision of Iowa’s comprehensive new Trust Code, of which he was a primary author.¹  A decade later, Professor Begleiter has released a follow-up work, Son of the Trust Code—The Iowa Trust Code after Ten Years. This new article chronicles the evolution of the Iowa Trust Code during its first decade of operation, discussing both legislative amendments and judicial pronouncements. Professor Begleiter’s new work, like his former one, not only offers a fascinating look into the legislative and judicial processes but provides invaluable lessons for other states which have recently adopted, or are considering adoption, of the Uniform Trust Code or other comprehensive legislation regulating trusts.

Three factors combine to give Begleiter’s article national relevance and enduring significance.  First, his subject matter is vitally important. The promulgation of the Uniform Trust Code (“UTC”) gets my vote as being the most significant trust law development of the 21^st Century.  Enacted in approximately half of the states, and under consideration in numerous others, the UTC has reinforced timeless principles of trust law while revolutionizing others — generating robust scholarly debate among its many supporters and detractors. The Iowa Code, however, is not an enactment of the UTC. Rather, while it often parallels the UTC, the Iowa Trust Code was developed through an independent drafting process.  Accordingly, studying the Iowa Trust Code offers an opportunity to compare and contrast Iowa’s approaches to crucial issues with the UTC’s approaches to those same issues. Continue reading "Father of the Iowa Trust Code"

Disclaimers and Family Settlement Agreements as Possible Solutions to Election Out and Document Construction Problems

Aug 18, 2011 Michael YuTrusts & Estates

Michael Yu

In this comprehensive article, the authors address the effects of Congress’ reinstatement, on December 17, 2010, of the estate tax and the generation skipping transfer tax. The authors first analyze how the reinstatement presents certain election out and document construction problems, and then they propose disclaimers and family settlement agreements as possible solutions.

The authors have two election out problems: First, tax-sensitive language in documents may be difficult to interpret because estate or GST taxes may not have been applicable on the date of the decedent’s death in 2010–possibly even without regard to any retroactivity. (P. 592.) Second, the personal representative of the estate of a decedent who died in 2010 must decide whether to elect out of the estate tax regime (and therefore into the carryover basis regime for income tax purposes) or to allow the default estate tax regime to apply. (P. 592.) The tax results under both scenarios must be compared, including reviewing the “calculation of the net appreciation in each asset, the character of the gain on the sale of each asset, the tax rate applicable to the gain on the sale of each asset, when each asset is likely to be sold and whether tax benefits exist that might reduce the tax on such sales, and how the modified carryover basis rules will apply to these assets” as well as related factors such as passive losses and partnership interests. (P. 595.) Continue reading "Disclaimers and Family Settlement Agreements as Possible Solutions to Election Out and Document Construction Problems"

The Family as an Economic Unit

Jun 16, 2011 Joanna GrossmanTrusts & Estates

Joanna Grossman

No small amount of ink has been spilled on the problems created by the clash between law’s dated vision of the traditional family and the social realities of the diverse and complicated modern family.  This piece, written for a University of Minnesota symposium, Family Values: Law and the Modern American Family, is a refreshingly concise essay that makes normative claims about how law should respond to most significant change in the family form: the dramatic rise in nonmarital cohabitation among not only heterosexual couples, but also couples of the same-sex and adults who share a care, but not a romantic, bond.  Gallanis answers the question “to what extent should there be room in our law for a family outside marriage” with three claims: (1) non-marital cohabitation merits recognition and support in law; (2) given American mobility, relationship statuses should be universally portable across state lines; and (3) the law should do more to protect family units–however constituted–against third parties, as opposed to worrying only about their obligations to one another.  It is this last point that gives rise to the third dimension alluded to in the title.

Gallanis begins by traversing some familiar ground on the treatment of non-marital cohabitants and same-sex couples. Although courts began in the 1970s to recognize contractual economic claims by one cohabitant against the other, those “Marvin rights” have turned out to provide very anemic protection to the weaker or more dependent party.  Slightly later, some states moved to create quasi-marital, status-based rights for cohabitants, a shift endorsed by the American Law Institute’s Principles of the Law of Family Dissolution.  And later still, same-sex couples got in on the action, earning status-based rights in various American and foreign jurisdictions, with great variation by jurisdiction in the particular status available and the rights and obligations accompanying it. Continue reading "The Family as an Economic Unit"

Fiduciary Obligations: Why and When?

May 23, 2011 Tom GallanisTrusts & Estates

Tom Gallanis

Observers with a transatlantic lens will readily notice that law professors in England take legal doctrine seriously.  At the elite law faculties in Cambridge, Oxford, and London, the sophisticated study of doctrine thrives and is highly respected.  The contrast with the modern legal academy in the United States is striking.  For example, how many U.S. law professors write or teach in the field of restitution?  The American Law Institute has just completed a remarkable Restatement (Third) of the Law of Restitution and Unjust Enrichment, yet the subject is largely, though not entirely, absent from our classrooms and student-edited law reviews.  And restitution is not the only example.  Consider the trenchant observations of Professor John Langbein:

Legal doctrinal writing [in the United States has]… declined precipitously.  A good way to see what has happened is simply to compare the law reviews for then and now.  I recently had occasion to check something in the 1967-1968 Yale Law Journal, where I noticed a three-part article on federal tax liens.  I think you’d probably have to establish your own law review today in order to publish a three-part article on tax liens.  The current diet in the leading journals is mostly high falutin’ constitutional law and theory, gender and racial issues, and law-and-economics.  Doctrinal analysis is disfavored, and a good rule of thumb is that the ‘better’ the journal the less doctrinal scholarship it will publish.¹

A fascinating English study of doctrine recently crossed my desk: James Edelman’s article on “When Do Fiduciary Duties Arise?”  It appeared in the prestigious and peer-edited Law Quarterly Review.  The author teaches at Oxford, where he is Professor of the Law of Obligations.  (If only donors to U.S. law schools would endow such chairs!) Continue reading "Fiduciary Obligations: Why and When?"

The Impact of Race and Inherited Wealth on Social Mobility

Apr 22, 2011 Paula MonopoliTrusts & Estates

Paula Monopoli

In her recent article, Inheriting Inequality: Wealth, Race and the Laws of Succession, Palma Joy Strand unpacks the connection between social mobility and inherited wealth.  She situates this discussion within the broader picture of the increasing gap between rich and poor in the United States.  Strand isolates the role of race in that trend and she argues that the transmission of inherited wealth, as much if not more than income levels, is a dominant predictor of whether a family will move between classes in American society.  Her goal is to develop a theory of the relationship between inheritance and the reproduction of our economic structure.  It is an ambitious goal and Strand makes substantial steps toward it in this article.

Strand first presents the data on the increasing inequality of overall wealth accumulation in this country, noting the distinction between “income” and “wealth.” She defines the former as the inflow of resources over time offset by outflows to cover expenses and the latter as accumulated assets most often accrued within the family.  Strand cites sociologist Seymour Spilerman for the proposition that “even modest levels of wealth have the ability to “cushion” families, particularly low-income families from economic shocks such as illness or job loss” and that wealth levels are correlated with educational achievement and well-being.  With this data, Strand lays the foundation for her argument that we must reform inheritance laws because they have a disparately negative impact on the accumulation of wealth in certain kinds of families. Continue reading "The Impact of Race and Inherited Wealth on Social Mobility"

Deep Irony — The Law of the Gift

Mar 14, 2011 Iris GoodwinTrusts & Estates

Iris Goodwin

A cursory perusal of Richard Hyland’s Gifts: A Study in Comparative Law (2009)¹ reveals a massive work of such erudition that the twenty years Hyland admits he devoted to it seems neither surprising nor, indeed, unreasonable. Gifts not only manages to do yeoman’s work for the practicing attorney—providing six chapters that survey the essential aspects of the substantive law of gifts in three common law and five civil law jurisdictions—but this work is likely to change the terms of future discussion about the gift among comparativists and other scholars in the humanities and social sciences.  Demanding though this work is, however, the material remains thoroughly ac­cessible.  Written in prose that is a model of concise lucidity, the work will engage someone who picks it up and reads a section or two.  But the book is ultimately a page-turner and anyone who absorbs one section is likely to succumb to its richness and turn to the beginning, reading the book as it ultimately de­mands to be read—from cover to cover.

The bulk of the work consists of six chapters that survey the law in the common law jurisdictions of England, the United States, and India, as well as the civil law jurisdictions of Germany, Italy, Spain, France, and Belgium. In addition, Hyland frequently gilds the lily with Roman, medieval, and early modern antecedents, especially where the law encompasses exception layered upon exception, only explicable—Hyland argues—as the excrescence of centuries of legislative tweaking. Continue reading "Deep Irony — The Law of the Gift"

Wills, Slavery, and Wealth

Jan 10, 2011 Solangel MaldonadoTrusts & Estates

Solangel Maldonado

In her 1996 article, The Myth of Testamentary Freedom, Melanie Leslie argues that “many courts do not exalt testamentary freedom above all other principles” and “are as committed to ensuring that testators devise their estates in accordance with prevailing normative views as they are to effectuating testamentary intent.”   I have always agreed with this statement, but Bernie D. Jones’s new book, Fathers of Conscience:  Mixed Race Inheritance in the Antebellum South (Univ. of Georgia Press 2009), challenges this assertion.  In her analysis of appellate cases from the antebellum era, Jones tells the story of white male slaveholders who used trusts and estates law to grant freedom and/or property to their enslaved mixed-race children and their mothers, thereby circumventing the law of slavery.  These testators were counting on judges to exalt testamentary freedom above the law, especially in states where slaveholders’ ability to manumit during their lifetime was quite limited.

Although miscegenation was prohibited in the antebellum South, many white men had sexual relations (sometimes consensual, sometimes not) with female slaves and lived openly with Black women and the children they bore.  Despite strong disapproval, there was little that society could do to punish privileged white men who breached social norms.  However, these men did more than breach social norms when they sought to grant freedom, property, and the legal rights that follow, to mixed-race children and their mothers; their behavior threatened the institution of slavery itself. Continue reading "Wills, Slavery, and Wealth"

Charity Begins With The Gift Agreement: Keeping Intent Fluid

Dec 6, 2010 Browne LewisTrusts & Estates

Browne Lewis

Charities have a legal duty to comply with the restrictions donors place on gifts. Most charities act in good faith and honor the conditions the donors place on the donations. Problems usually occur when internal or external events make it necessary for the charity to change the manner in which it is carrying out the donor’s intent. Persons objecting to those changes may go to court to prevent the charity from taking certain actions. The litigation does not benefit the charities or the donors. Professor Gary addresses this problem with a comprehensive and thought-provoking article. She starts with an explanation of charitable trust law and identifies the legal issues that can arise because donor intent is difficult to determine and to enforce.

Professor Gary starts the article discussing recent high profile cases involving disputes over donor restrictions on charitable gifts. The five cases Professor Gary highlights contain facts that are interesting enough to get the reader’s attention. By starting with illustrations of recent cases Professor Gary shows that the issues she examines in her article are timely and in need of resolution. Continue reading "Charity Begins With The Gift Agreement: Keeping Intent Fluid"

Top-Down versus Bottom-Up Law Reform in Trusts and Estates: Future Interests and Perpetuities

Nov 22, 2010 Robert SitkoffTrusts & Estates

Robert Sitkoff

Trusts and estates law reform generally follows one of two patterns. In the first, which we can characterize as top-down, the American Law Institute or the Uniform Law Commission sponsors a reform through a new Restatement or Uniform Law, often but not always prepared in concert. Top-down reforms are typically designed to update the law in accord with emerging academic and elite practitioner policy consensus on necessary revision to the canon. The prudent investor rule is perhaps the quintessential example of a successful top-down reform. In the other law reform pattern, which we can characterize as bottom-up, local bankers and lawyers lobby state lawmakers for a specific reform. Bottom-up reforms are usually meant to attract trust business (think perpetual or asset protection trusts), but not always. Some are meant to fill a gap in the top-down reforms (think unitrust, an alternative to the power of adjustment under the Uniform Principal and Income Act). Either way, owing to the commercial necessity of appealing to apparent donor preferences, the bottom-up reforms tend to enhance the reach of the dead hand (even the unitrust, a gap-filling bottom-up reform, is more solicitous of the dead hand than its top-down alternative, the power of adjustment).

In a quartet of short essays, Professor Lawrence W. Waggoner (Michigan) examines a pair of top-down reforms, just approved by the ALI, which will appear in the final volume of the Restatement (Third) of Property: Wills and Other Donative Transfers, for which Waggoner is the reporter. The reforms are: (1) a simplification of the law of estates and future interests, and (2) a reworking of the Rule Against Perpetuities. The reforms prompt two questions: (1) why these reforms, and (2) will they take hold? Waggoner’s essays focus primarily on the former question, though he gives some treatment to the latter, particularly as regards the new Rule Against Perpetuities. Continue reading "Top-Down versus Bottom-Up Law Reform in Trusts and Estates: Future Interests and Perpetuities"