Category Archives: Trusts & Estates
Nov 8, 2010 Alyssa DiRussoTrusts & Estates
Kristine S. Knaplund,
Charity for the Death Tax? The Impact of Legislation on Charitable Bequests, 45
Gonz. L. Rev. 713 (2010), available at
SSRN.How sturdy is the charitable impulse in the face of federal and state regulation, and would the removal of an estate tax benefit for charitable bequests smother it? Professor Kristine S. Knaplund of Pepperdine explores this conundrum from a creative and unique perspective in her new article.
The article is a story of American legal history and the persistent charitable drive. Professor Knaplund points out that charitable bequests have taken their legal knocks before, and still emerged strong. Her article guides us through a variety of legislative acts, both state and federal, that altered restrictions or incentives to make charitable gifts. Throughout the article, Professor Knaplund skillfully juxtaposes the federal regimes (largely tax acts) with contemporaneous state law developments. Continue reading "The Effect of State and Federal Regulation on Charitable Giving: A Historical Analysis"
Oct 25, 2010 Randall RothTrusts & Estates
The People’s Republic of China officially adopted the Western notion of a trust on April 28, 2001, and scholars are now pondering the likely long-term impact on individuals, institutions, and cultural norms in that ancestor-venerating, socialist, civil-law system. Most of the scholarship is coming from inside China, of course, and the common theme is the need to “nativize” the transplanted trust in order for it to thrive, or at least do no harm, in its new environment. One Chinese scholar has described the process as “absorbing what is useful and discarding what is not.”
In American Trust Law in a Chinese Mirror, Professor Frances Foster combines impressive trust-law credentials with fluency in Chinese language to unveil and explain a robust and intelligent critique of the so-called American trust. What makes this article particularly fascinating is Professor Foster’s focus on the implications of this critique to the evolution of trust law in the United States. As she explains, “legal transplants can provide a mirror for donor countries to see flaws in their own systems and new directions for reform.” Continue reading "Mirror, Mirror on the Wall, Is China’s Trust the Fairest of All?"
Oct 11, 2010 Michael YuTrusts & Estates
F. Philip Manns, Jr.,
New Reasons to Remember the Estate Taxation of Reversions, 44
Real Prop. Tr. & Est. L.J. 323 (2009), available at
BePress.
Professor F. Philip Manns, Jr.’s article, “New Reasons to Remember the Estate Tax of Reversions,” might have been cheekily (but not inappropriately) titled, “Everything You Really Need to Know about the Estate Tax of Reversions.” A reversion, per Professor Manns, “exists whenever a transferor transfers less than all she owns.” (footnote 12 at P. 327.) In its first main part, the article focuses on how a reversion can arise not only from the transferor’s intent but also from inartful drafting and even by statute or common law decision; in its second main part, the article addresses the gift and estate tax treatment of reversions (however they are created).
Among the many strengths of the article, perhaps its most significant contribution to the existing literature is Professor Manns’ detailed explanation of how to calculate, for purposes of Internal Revenue Code sections 2033 and 2037, the value of a transferor’s reversion. Professor Manns indicates that “no case law, administrative pronouncement, or commentary instructs people how to make such calculations.” (P. 354.) Many sources address the calculations by referring the reader to Revenue Ruling 76-178, 1976-1 CB 273. But that Revenue Ruling merely gives answers without any explanation. In his article, Professor Manns explains the required “probability theory and life contingency actuarial mathematics” (P. 354.) and then impressively provides sample calculations showing all of his work. Continue reading "Estate Taxation of Reversions"
Sep 13, 2010 Mitchell GansTrusts & Estates
John H. Langbein,
Mandatory Rules in the Law of Trusts, 98
Nw. U. L. Rev. 1105 (2004), available on
LexisNexis.
As state legislatures contemplate adopting the Uniform Trust Code (UTC), they should consider how it will interface with the Uniform Prudent Investor Act (UPIA). Consistent with the principles of modern portfolio theory, the UPIA imposes a duty on trustees to diversify investments in the absence of “special circumstances.” However, the UPIA is a default statute and therefore appears to contemplate that the settlor may negate this duty. While the UTC is also, as a general rule, a default statute, it does contain fourteen mandatory rules that cannot be altered by the settlor. Among these rules is the requirement that the trust be maintained for the benefit of the beneficiaries. Depending on how one reads these uniform statutes, there is a potential conflict: Should a settlor’s direction against diversification be respected on the rationale that the UPIA is a default statute, or should it instead only be respected where it does not result in a violation of the UTC’s benefit-the-beneficiaries rule?
In a 2004 article, Professor John Langbein examined the UTC’s mandatory rules. He argued that the duty to diversify investments cannot be entirely waived by the settlor. Rather, just as a settlor cannot create a trust for capricious purposes, so, too, a settlor should not be permitted to waive the duty if it would violate the benefit-of-the-beneficiaries rule. In other words, the settlor’s investment-related restrictions should not be respected if it would impair the value of the portfolio and thereby inure to the detriment of the beneficiaries. In his example involving IBM stock, Professor Langbein posited a case where the trust instrument directed the trustee not to diversify. He explained that modern portfolio theory has shown that such non-diversification creates a risk for which the investor is not compensated and that the settlor should not be permitted to impose foolishly this harm on the beneficiaries. He also posited a case involving a direction to invest solely in the stock of the bankrupt ENRON corporation, where the trust fund was modest in size and the beneficiaries were the otherwise destitute widow and orphans of the settlor. He concluded that no court would uphold such a restriction given the risk and reward profiles of the beneficiaries. Professor Langbein maintained that the benefit-the-beneficiaries rule is designed to articulate the policies underlying the capricious-purpose cases and should serve as an outer limit on the scope of investment-related restrictions that the settlor may impose. Continue reading "Duty to Diversify: Default v. Mandatory Law"
Aug 5, 2010 María Pabón LópezTrusts & Estates
Kevin Noble Maillard,
The Color of Testamentary Freedom, 62
SMU L. Rev. 1783 (2009), available at
SSRN.
This work of recent scholarship in the field of wills law and legal history is an excellent and thought provoking piece and anyone interested in a critical analysis of race in its historical context should read it. This article is quite special and well worth reading for its detailed archival research and its innovative analytical approach. It is a welcome addition to the legal scholarship that studies the influence of race in the United States legal system, particularly in the area of Trusts and Estates.
In this beautifully written and thoroughly researched article, Kevin Noble Maillard, an Assistant Professor at Syracuse University College of Law and the Director, Angela Cooney Colloquium for Law and Humanities brings to bear his knowledge of Critical Race Theory, and Critical Legal Studies into the realm of the law of wills.
Professor Maillard initially observes how wills in which the main devisees are nontraditional close family members of the testator pose tremendous challenges to courts that have to decide the posthumous wishes of the testator. This is even more the case when these wills have excluded collateral heirs. He then points out that the collateral heirs who object to will provisions where the bequests to the nontraditional family members seem to expand the definition of the testator’s family stand to benefit from the tension between testamentary freedom and the social deviance of the family. In such instances, courts may privilege the interests of collateral heirs to the detriment of the nontraditional close family member. These nontraditional close family members are usually the unmarried cohabitant and nonmarital children of the testator, often of a different race than the testator. In Professor Maillard’s view, wills with nontraditional family devisees act as evidence of moral or social transgressions, such as interracial sex and extramarital reproduction. This may be a reason why such wills are often subject to will contests by collateral heirs, who aim to use their white privilege and legitimacy status to overcome the clear intent of the testator. Continue reading "A Critical Race Theory Analysis of the Influence of Race in 19th Century will contests"
Jul 19, 2010 Joanna GrossmanTrusts & Estates
Melanie B. Jacobs,
More Parents, More Money: Reflections on the Financial Implications of Multiple Parentage, 16 Cardozo Journal of Law and Gender 217 (2010), available on
SSRN.
The increasing complexity of family formation poses many challenges for law. When as many as five adults could be involved in the production of a single child – egg donor, sperm donor, gestational mother, intended mother and intended father, to take just the example of a complex surrogacy – we have to at least consider the possibility that some of our traditional rules are outdated. Melanie Jacobs has written several pieces in which she considers whether the “two parent” rule is one of those outdated rules. In this piece, she considers the financial implications of “multiple parentage,” including the implications for inheritance. Why limit a child to two parents when additional ones may bring important financial as well as emotional resources to the table?
Courts and legislatures have, when given the opportunity, virtually all reaffirmed the rule that a child can have no more than two legal parents. Thus, the Supreme Court ruled in Michael H. v. Gerald D. against granting legal parent status to the biological father of a child conceived in adultery. The mother’s husband was conclusively presumed to be the child’s father under California law, and due process did not require that the biological father be given a formal role in his daughter’s life, even though he had acted as a parent for a significant period of time. In a telling sentence, which Jacobs quotes, Justice Scalia writes that “law, like nature itself, makes no provision for dual fatherhood.” And in numerous other cases, a third party with significant ties to a child – and, often, a significant role in planning for the child’s conception and birth – is ruled the odd man out. Sometimes the excluded party is a lesbian partner who co-parented a child who has a legal father (and thus a second parent); sometimes it is a biological father, as in Michael H., whose rank in the parental hierarchy is trumped by another man’s claim to legal or presumed fatherhood; sometimes it is a former stepparent who engaged in substantial childrearing while married to the child’s mother or father; and sometimes it is one or more parties to a surrogacy, which, like the one described above, may entail the participation of as many as five different adults. Continue reading "Dual Parenthood and Inheritance Problems"
Jul 1, 2010 Joshua C. TateTrusts & Estates
T.P. Gallanis,
Death by Disaster: Anglo-American Presumptions, 1766-2006, in
The Law of Presumptions: Essays in Comparative Legal History (R.H. Helmholz & W. David H. Sellar eds., 2009), available at
SSRN.
The problem of simultaneous death has troubled inheritance law for many centuries. If a common accident kills both Mother and Son, and Mother’s will names Son as her primary devisee, does Mother’s property pass through Son’s estate to his heirs? Or does it pass instead to the person next in line under Mother’s will?
American teachers of trusts and estates know where to look for the answer to this question: a statute. Since the mid-twentieth century, widely adopted uniform acts have attempted to solve the puzzle of simultaneous death by establishing a presumption of survivorship. Yet this was not always the case. In his new article, “Death by Disaster: Anglo-American Presumptions, 1766-2006,” Thomas Gallanis explores the history of the Anglo-American law of simultaneous death from the eighteenth century to the present day. A modern lawyer may be surprised to learn that, for much of its history, the common law made no effort to establish legal presumptions to deal with the problem of simultaneous death. In addition, the statutory presumptions that were eventually adopted in England are quite different from their contemporary American counterparts. Continue reading "Inheritance and Presumptions"
Jun 4, 2010 Paula MonopoliTrusts & Estates
Daphna Hacker,
The Gendered Dimensions of Inheritance: Empirical Food for Legal Thought, 7
J. of Empirical Studies (forthcoming 2010), available at
SSRN.
There is a distinct lack of empirical research in the area of inheritance law. Domestically, inheritance law is the province of fifty different states. Thus, conducting an empirical study of testamentary patterns is a painstaking process that requires fieldwork in multiple probate courts, often consisting of a tedious review of individual probate court case files or records. And among the studies that have been done over the years, few have focused on the role of gender in our field. That gap is the focus on Daphna Hacker’s new article, The Gendered Dimensions of Inheritance: Empirical Food for Legal Thought, in the Journal of Empirical Legal Studies, a peer-edited, peer-refereed, interdisciplinary journal. Hacker is an Assistant Professor at the Buchman Faculty of Law, Tel Aviv University where she is also a faculty member in the NCJW Women and Gender Studies Program.
In her article, Hacker identifies four historical trends which have created the conditions under which women may exercise broader freedom to bequeath property at death. These include laws which allowed women to own property in their own right, the abolition of rules that prevented women from inheriting property, the enactment of laws allowing women to be full participants in the labor force and the trend toward recognition of marital property rights in both spouses. After identifying these trends, Hacker poses the following questions which empirical research could help us answer if it were more widely conducted: Do women take full advantage of this power to bequeath property? Do they use this power to bequeath wealth as they wish? Are there gendered dimensions to intestate succession? And are there differences between the structure and content of men and women’s wills? Continue reading "Testation, Empiricism and Gender Equality"
May 12, 2010 Stewart SterkTrusts & Estates
In the nearly 50 years since Norman Dacey’s How to Avoid Probate first hit the best seller list, law reformers have responded by making probate easier, faster, and less expensive – especially for families with modest means and modest needs. These legal reforms, however, have barely made a dent in the use, and growth of probate avoidance devices. In a recent article, Reconfiguring Estate Settlement, 94 Minn. L. Rev. 42 (2009), John Martin suggests replacing the probate system with a non-judicial registration system. Although his proposal builds on the UPC and other reform statutes, Professor Martin contributes some new insights – not the least of which is that any reform effort may be doomed if it retains the “probate” label.
Professor Martin describes the UPC’s flexible system for administration of estates, which allows interested parties to calibrate their contact with the judicial system to match their need for judicial protection, and also catalogs the small estate procedures enacted in states that have not adopted the UPC. Despite the availability of these modern probate systems, lawyers and their clients continue to seek out non-probate alternatives. Why is this a problem? Because, as Professor Martin points out, probate avoidance generates unnecessary expenditures on bypass devices and encourages unscrupulous peddling by “trust mills” that prey on fear of the probate process. In addition, the proliferation of probate avoidance devices requires co-ordination, and creates unexpected difficulties when the co-ordination is less than perfect. Continue reading "The End of Probate"
Apr 20, 2010 Jeffrey CooperTrusts & Estates
Stewart E. Sterk,
Rethinking Trust Law Reform: How Prudent is Modern Prudent Investor Doctrine?,
95 Cornell L. Rev. (forthcoming 2010),
available at SSRN.
Jeffrey Cooper
With the stock market of recent years dashing so many hopes and dreams, investors are all asking the same questions: How could we have let this happen? How can we be sure it won’t happen again? Included among those asking these questions are the beneficiaries of countless trusts who have witnessed significant declines in the value of their trust portfolios. In his article “Rethinking Trust Law Reform: How Prudent is Modern Prudent Investor Doctrine?,” Professor Stewart E. Sterk joins this search for answers, ultimately concluding that modern prudent investor laws fail to adequately protect trust beneficiaries in troubled economic times.
Professor Sterk’s article consists of three major Parts. In Part I, Professor Sterk lays the historical framework for his analysis by summarizing the evolution of laws governing trust investment management. In particular, he explores how two widely-accepted economic theories regarding the behavior of financial markets, modern portfolio theory (“MPT”) and the efficient capital market hypothesis (“ECMH”), came to influence trust investment law. Sterk chronicles how both the Restatement (Third) of Trusts and the Uniform Prudent Investor Act wholeheartedly embraced MPT and ECMH in a quest to encourage the investment of trust funds in the manner these theories suggested would maximize the economic interests of trust beneficairies. Continue reading "Time to Rethink Prudent Investor Laws?"
