Saving Us From Ourselves: Reforming the Fiduciary Duty of Loyalty

Mar 30, 2010 Julia BelianTrusts & Estates

Julia Belian

In the wake of disaster, we as a species invariably reach out with untold generosity, donating vast amounts of cash and supplies to assist the victims.  And, just as invariably, at least some of the charitable organizations through which most of us funnel our compassion will drop the ball through some form of mismanagement.  In the past twenty years, the relief efforts following almost every major disaster – spring flooding in the Midwest, mudslides and wildfires on the West Coast, hurricanes throughout the Gulf of Mexico, tsunamis in the South Pacific, and, most famously, Katrina – have been plagued by reports of mismanagement ranging from lack of meaningful oversight to outright embezzlement.

Which should mean that right now, as the world struggles to come to the aid of a ravaged and overwhelmed Haiti, would be a prime time to consider meaningful reform of the standards by which such charities conduct their critical business.  For several years, Prof. Melanie B. Leslie of Cardozo School of Law has offered a clarion call for reform of the rules governing fiduciary conflicts of interest, especially within the nonprofit sector.  In the wake of the catastrophic earthquake January 12, the arguments and suggestions in her article The Wisdom of Crowds? Groupthink and Nonprofit Governance deserve serious attention. Continue reading "Saving Us From Ourselves: Reforming the Fiduciary Duty of Loyalty"

The 101 Biggest Estate Planning Mistakes

Mar 25, 2010 Gerry BeyerTrusts & Estates

Gerry Beyer

What fun!  That was my first reaction to this new book by Herbert Nass, the famous New York attorney who has worked on the estate plans of countless celebrities.  By using the wills of the rich, famous, and infamous as examples, Nass guides readers though the most common and significant mistakes individuals and their attorneys make during the estate planning process.

In the span of eleven chapters, Nass sets out his top 101 missteps which individuals and their attorneys are prone to take when planning an estate.  A good way to get a flavor of the scope of his coverage is to peruse the titles of his chapters: Continue reading "The 101 Biggest Estate Planning Mistakes"

Intrafamily Loans and Tangible Property

Mar 25, 2010 Wendy GerzogTrusts & Estates

Wendy Gerzog

The article Revisiting Dickman: Are Loans of Tangible Property Gifts? by Joseph M. Dodge, recently posted on SSRN, exhaustively covers this central question left unanswered by the Supreme Court in its 1984 Dickman decision. Dodge describes a common scenario in wealthy families: informally, parents allow their adult child to use their vacation home rent-free for an unspecified time. The piece then delves into the query about whether or not that familiar occurrence is a taxable gift. To answer that question, the article takes the reader into a wide-ranging discussion that includes property interests, imputed income, psychic benefits, Internal Revenue Code section 7872 (dealing with gift tax and income tax consequences of below-market interest loans of money), revocable transfers, and the estate tax consequences of the retained enjoyment of property.

Dodge argues against subjecting tangible personal use property to the gift tax. After all, he suggests, when you swim in a neighbor’s pool, that neighbor has not transferred a property interest to you. The permission to use property does not create a property interest in the user because it implicitly includes the power to revoke that permission.  Dodge analyzes Dickman, criticizing the court’s minimizing the real problem of cost-free loans of personal-use tangible property when it stated that the IRS was not interested in taxing such neighborly or familial gifts. The court too easily dismisses the issue by saying that, in any event, the annual exclusion and credit exemptions would shelter those transactions from any transfer tax. He critiques the court’s overgeneralizations and explains that the gift tax is not a tax on foregone economic opportunities but a tax on wealth transfers. Moreover, he states that the annual exclusion would not be available if a transaction was characterized as forming a tenancy at will plus a reversion, because there would be no ascertainable present value of the child’s interest.   After examining the case under different transfer tax principles, Dodge concludes that Dickman was doctrinally confused and wrongly decided. Continue reading "Intrafamily Loans and Tangible Property"

Whose Trust is It?

Mar 13, 2010 Tom GallanisTrusts & Estates

Tom Gallanis

There is a central tension in the law of trusts between the rights of the settlor and of the beneficiaries.  On the one hand, the organizing principle of the law of donative transfers, as stated in Section 10.1 of the Restatement 3d of Property (Wills and Other Donative Transfers), is that the “donor’s intention is given effect to the maximum extent allowed by law.”  On the other hand, the Restatement 3d of Trusts emphasizes in Section 27(2) that “a private trust, its terms, and its administration must be for the benefit of its beneficiaries.”  A similar benefit-the-beneficiaries rule is codified in Section 404 of the Uniform Trust Code (UTC) and made mandatory in UTC Section 105.

This essay, Burn the Rembrandt?  Trust Law’s Limits on the Settlor’s Power to Direct Investments, by one of America’s leading scholars of trust law, Professor John Langbein of the Yale Law School, explores the limits that trust law places on the power of the settlor, as the author of the trust’s terms, to direct the trustee’s investment decisions.  The essay is a response to an earlier article in the Boston University Law Review by Professor Jeffrey Cooper, in which Professor Cooper criticized the benefit-the-beneficiaries rule, instead proposing greater deference to the intentions of the settlor, for example where the settlor “intentionally and thoughtfully impaired beneficiaries’ economic rights.” See Jeffrey A. Cooper, Empty Promises: Settlor’s Intent, the Uniform Trust Code, and the Future of Trust Investment Law, 88 B.U. L. Rev. 1165, 1166 (2008). Continue reading "Whose Trust is It?"

A Good Time to Die: Family-Based Objections to Inheritance Taxation

Feb 8, 2010 Bridget CrawfordTrusts & Estates

Bridget Crawford

Now is a good time to die.  Congress’s failure to take action on the extension of the estate tax caused it to “expire” on December 31, 2009.   This repeal is scheduled to last for only one year, and Congress likely will enact some form of estate tax before then.  So only those who die soon will be able to transmit wealth entirely tax-free.  In the meantime, questions about the economics, fairness, morality of inheritance taxation–broadly defined–will figure prominently in political and social debates.  Anne Alstott’s essay, Family Values, Inheritance Law, and Inheritance Taxation, forthcoming in the Tax Law Review, will help ground these discussions.

Alstott’s argument is that taxing inheritance can be consistent with valuing families; it all depends on what view of the “family” one takes.  Alstott begins by locating her work in the academic debate about inheritance tax (the umbrella term she uses to refer to wealth transfer taxation generally, acknowledging that there is no federal inheritance tax per se).  She launches her analysis on the springboard of Tom Nagel’s argument that “the right to use one’s resources to benefit one’s family” [1] is at odds with inheritance taxation.  Alstott evaluates this claim using three perspectives on the family – she calls them the liberal, conventional, and functional views.   She synthesizes these from a careful reading of Jens Beckert’s historical study, Inherited Wealth (2008).  Roughly characterized, the liberal view approaches the family as a private sphere within which individuals should have freedom to choose their beneficiaries.  The conventional view construes the family as a privileged unit of economic and social organization that transmits identity and values from generation to generation.  A functional view emphasizes the family’s socio-economic welfare role–i.e., providing needed financial and other assistance to its members. Continue reading "A Good Time to Die: Family-Based Objections to Inheritance Taxation"

Meet the Editors

Jan 5, 2010 Michael FroomkinTrusts & Estates

Section Editors

The Section Editors choose the Contributing Editors and exercise editorial control over their section. In addition, each Section Editor will write at least one contribution (“jot”) per year. Questions about contributing to a section ought usually to be addressed to the section editors.

Professor Bridget J. Crawford
Pace Law School Continue reading "Meet the Editors"

Call for Papers

Jan 5, 2010 Michael FroomkinTrusts & Estates

Jotwell: The Journal of Things We Like (Lots) seeks short reviews of (very) recent scholarship related to the law that the reviewer likes and thinks deserves a wide audience. The ideal Jotwell review will not merely celebrate scholarly achievement, but situate it in the context of other scholarship in a manner that explains to both specialists and non-specialists why the work is important.

Although critique is welcome, reviewers should choose the subjects they write about with an eye toward identifying and celebrating work that makes an original contribution, and that will be of interest to others. Please see the Jotwell Mission Statement for more details. Continue reading "Call for Papers"