Category Archives: Trusts & Estates
Nov 13, 2024 Kent D. SchenkelTrusts & Estates
Brian Galle, David Gamage & Darien Shanske,
Money Moves: Taxing the Wealthy at the State Level, 112
Cal. L. Rev. __ (forthcoming, 2025), available at
SSRN (January 14, 2024).
Polls show that a majority of Americans believe that inequality is increasing, and that taxes should be raised on the very wealthy. But income tax rates on high earners remain historically low, and estate planning techniques that minimize the reach of federal transfer taxes proliferate. What about state-level taxation? Conventional wisdom holds that progressive state tax regimes backfire by triggering wealth flight to low-tax jurisdictions, leading many states to stick with regressive sales and property taxes. But the consequences of progressive state tax policy are misunderstood, and states have many options, write Brian Galle, David Gamage and Darien Shanske, in their comprehensive, informative and practical article, Money Moves: Taxing the Wealthy at the State Level.
The tax theory of “fiscal federalism” holds that only the federal government should impose progressive taxes to fund government benefits. Fiscal federalists argue that if individual states undertook to create progressive tax regimes, the wealthy would just relocate to other states, creating “horizontal externalities.” Therefore, the federal government has put in place its more progressive income tax, which enables it to return tax revenues to the states in the form of grants or other types of revenue sharing. Continue reading "Practical Considerations for State Taxation of Wealth"
Oct 25, 2024 Sarah WaldeckTrusts & Estates
In Confusing Cy Près, Christopher J. Ryan, Jr. examines judicial decision-making in cases involving proposed modifications to charitable trusts. Two doctrines permit modification: equitable deviation and cy près. Ryan uses a comprehensive data set—over 1,300 cases between the years of 1820 and 2019—to explore when courts are likely to apply the doctrines and, critically, when courts confuse them. His research reveals that courts routinely use equitable deviation when they should use cy près and, tantalizingly, suggests that the Uniform Trust Code is at least partially responsible. Ryan’s empirical work also sheds light on when courts are most likely to modify charitable trusts.
Doctrinally, equitable deviation and cy près are straightforward. Equitable deviation allows a court to modify the administrative terms of a trust—what Ryan describes as “the little details of how [the trust] is run and controlled.” (P. 30.) Cy près allows a court to modify “the dispositive and material terms of the trust (i.e., the purpose of the trust, the charitable cause the trust addresses, and the delivery of the trust assets to the intended beneficiaries).” (P. 30.) Both doctrines require a change in circumstances that negatively affects the trust. For equitable deviation, the change in circumstances must impair the functioning of the trust in a way that threatens the trust’s very purpose. For cy près, the change in circumstances must make the trust’s specific purpose impracticable, impossible, or illegal, and the settlor must have manifested a charitable intent that is more general than the specific purpose that has become unsustainable. Continue reading "Unexpected Twists in the Modification of Charitable Trusts"
Oct 10, 2024 Phyllis C. TaiteTrusts & Estates
Miranda Perry Fleischer,
A New Look at Old Money, 98
S. Cal. L. Rev. __ (forthcoming, 2024) available at
SSRN (March 4, 2024).
Professor Miranda Fleischer contributes to the wealth tax discourse by analyzing a taxation theory proposed a century ago by philosopher Eugenio Rignano: an inheritance tax imposed on old, unearned wealth. This inheritance tax would facilitate the goals of a wealth tax, including combating wealth concentration and providing greater tax preferences for earned wealth. Following a brief historical overview of transfer taxes and proposed alternatives, Fleischer analyzes the pros and cons of a wealth tax, suggests key design structures for implementation, and concludes with policy justifications in support of such a tax. This article stands out because Professor Fleischer proposes a comprehensive structural design for the tax and addresses key policy questions that would make a Rignano tax politically feasible and administratively workable.
In the overview, Professor Fleischer describes key features of the current transfer tax system, including the imposition of the tax on the donor, higher lifetime exemptions, and reduced rates. The effect of increasing exemptions is that fewer estates are required to pay the tax and more wealth is transferred tax-free. Further, the current tax design creates other avenues for the transfer of tax-free wealth such as the annual exclusion, even while recipients pay no income tax on gift and estate transfers, irrespective of their size. Fleischer discusses alternative proposals for taxing wealth such as imposing an income tax on gifts and bequests (subjecting them to similar tax rules applicable to lottery winnings), imposing a carryover basis in place of a stepped-up basis for purposes of the capital gains tax, and various other models such as inheritance and accession taxes. Continue reading "New Money: No Problem, No Tax"
Sep 11, 2024 Gerry W. BeyerTrusts & Estates
How does one define death, and to what extent can we confidently say someone is dead enough? The answer to this question varies among our jurisdictions. Before initiating the administration of a deceased person’s estate, the primary question is whether the individual is deceased. Despite the existence of the Uniform Determination of Death Act, there are notable differences among states regarding the indicia of death, leading to the possibility of someone being declared legally dead in one state but considered alive in another state. The challenge of determining death is further complicated when considering how conflicting simultaneous death statutes may apply to potential beneficiaries. In this thought-provoking piece, Prof. Alyssa DiRusso delves into the intricacies of determining legal death by highlighting the challenges posed by advancements in medical technology and the inconsistencies in state laws. Prof. DiRusso proposes two possible solutions to create a clear and consistent standard for determining death: the domicile rule and the decedent situs rule.
Historically, the determination of death was straightforward, with doctors relying on physical signs like pulse, breath, and fixed pupils. However, history showed enough misjudgments to create a market for air tubes in coffins…just in case. Before the twelfth century, death was considered to be the “cessation of all vital functions and signs.” Medical advances challenged this, as respirators allowed cardiorespiratory activity even after irreversible brain damage. Further, organ transplantation complicated the definition as organ donors needed to be dead but not too dead to preserve organ function. Continue reading "“He’s Dead, Jim” or Not?"
Aug 2, 2024 Allison Anna TaitTrusts & Estates
Climate change and environmental justice are topics that thread through and are pushing the boundaries of legal inquiry in multiple doctrinal areas. From reproductive justice to corporate investing, environmental concerns have emerged as both salient and pressing. One subject area still awaiting robust exploration of the relationship between environmental concerns and legal rules is inheritance law. This lack of energetic conversation about the environment and estate planning might be, on the one hand, surprising. Estate planning is all about the future and provisioning future generations. On the other hand, it is perhaps not a complete surprise since estate planning tends to focus on the preservation of private family wealth rather than the creation of extended public benefit.
Given the need for increased scholarly attention to this area, it is encouraging to see two short pieces about environmental justice and estate planning in the Fall 2023 volume of the ACTEC Law Journal dedicated to a critical analysis of inequality in the field. The first of the two articles is Trace Brooks’ article, Incorporating Social Justice and Environmental Sustainability into Estate Planning Through Conservation Easements. In the article, Brooks explores “the intersection of estate planning, private land conservation, social justice, and environmental sustainability,” and discusses ways in which conservation easements have been used both to entrench and erode inequality. Conservation easements, in which a landowner donates an easement to a conservation organization (think a land trust or even the government) in exchange for a tax deduction, have historically been a tool for wealth preservation and obtaining tax advantages. So, while these kinds of easements provide environmental benefit by restricting development and preserving the land, they have also comprised a mechanism for consolidating and increasing family wealth, particularly for white families and communities, and particularly for those who can afford homes and land in desirable geographies. The existence and effects of this trend in high-wealth locales have been compellingly documented and explored by sociologists like Justin Farrell in Billionaire Wilderness and Lisa Sun-Hee Park and David Pellow in The Slums of Aspen. Continue reading "The Wealth Planning Climate"
Aug 2, 2024 Victoria J. HanemanTrusts & Estates
A billionaire invests in human cryopreservation so that his head may be preserved in hopes of his entire person being revived later. His head, and his favorite dog, will be preserved at minus 320 degrees Fahrenheit in a cylindrical tank filled with liquid nitrogen in the hopes that the advanced medical technology of the future will allow for their reanimation. And no, the technology does not currently exist to reanimate a cryogenically preserved human or dog, but cryogenics companies are optimistic that it will be possible in the future.
As part of his revival plan, the billionaire consults with an estate planning attorney. He would like a perpetual trust to be established in the state of South Dakota, so that he and his dog need not be poor in the future. The perpetual trust can shelter a large chunk of money (often transfer tax-free) for centuries, in relative secrecy. Because of the climate crisis, our unfrozen billionaire may awaken to find himself in a world without Greenland or Antarctica. Important megacities will be gone, including New York City, London, Shanghai, Mumbai, and Bangkok, and so he needs to buy a new house. Or two.
Planning for immortality in a bleak apocalyptic future has become big business for an unknown number of billionaires who also appreciate the importance of maintaining status as a “have” (instead of a “have not”). This billionaire hypothetical (which may not actually be hypothetical—I will leave it to you to figure out) raises a myriad of rarely discussed ethical issues for both estate planners and legislators. Estate Planning Ethics for the Apocalypse, by Carla Spivack, published in 2023 in the ACTEC Journal, seeks to open this important conversation. Continue reading "Climate Conscious Advocacy and Perpetual Burdens"
Jul 4, 2024 Goldburn MaynardTrusts & Estates
Culture plays a major role in estate planning, whether we like it or not. Whereas the law of wills and trusts allows for vast testamentary freedom, millions of Americans, either because they want to avoid talking about death or because they do not have the resources to hire an estate planner, fail to avail themselves of these instruments. Some of the gaps have been filled by other nonprobate transfers like joint bank accounts and life insurance. A simple signature allows one to pass on assets at death using those forms of transfer. But outside of trusts, these nonprobate transfers do not cover all property and do not provide the flexibility of a will. The gap between what the testator wants and what society provides is particularly important if cultural norms prevent the individual from engaging in planning. In a recent article, Shui Sum Lau, a litigation attorney, considers how Asian cultural values can shape end-of-life and estate planning decisions.
According to Lau, Asian cultural values make Asian Americans the ethnic group most likely to support elderly relatives. For example, many Asian-Americans feel compelled to ensure the physical and mental wellbeing of their parents. Because elder care requires time and resources, we can assume that end-of-life planning would at least lower some of the decisionmaking burdens in these delicate circumstances. After all, deciding on life-saving care close to the end of a relative’s life can be extremely stressful for family members. Unfortunately, as Lau underscores, in many Asian cultures, discussions of death are taboo and often avoided, thus leaving children to make uncomfortable decisions on their incapacitated parents’ behalf because they refused to plan in advance. Continue reading "Cultural Lessons for Estate Planners"
Jun 10, 2024 Adam HirschTrusts & Estates
As Justice Holmes observed, lawmaking consists in drawing lines. But how many lines do we need? Regarding charitable transfers, more than we have—so contends Professor Eric Kades, in a recent article.
Kades begins by observing a fundamental point that we often take for granted: as a legal category, charitability is monolithic. A transfer either is or is not charitable. Hence, an income tax deduction is either available or unavailable, depending on whether the tax commissioner acknowledges an entity or purpose as charitable. Although the exact range of purposes accepted as charitable varies among American states, and is defined independently under federal law for tax purposes, the binary nature of the classification is universal.
Kades argues that this attribute, resulting in either a 100% tax deduction or no deduction, is oversimplified. The deduction should instead fall along a continuum, depending on whether the transfer is “more or less charitable.” (P. 288.) Yet, under current law, “someone donating, say, $10,000 to a local food bank receives no greater deduction than someone donating the same amount to the National Mustard Museum.” (P. 302.) Continue reading "Revisiting the Law of Charitable Transfers"
May 22, 2024 Michael YuTrusts & Estates
Goldburn Maynard & David Gamage,
Wage Enslavement: How the Tax System Holds Back Historically Disadvantaged Groups of Americans, 110
KY. L.J. 665 (2021-2022), available at
SSRN (Mar. 28, 2024).
In their article, Professors Goldburn Maynard and David Gamage call for reform of the U.S. tax system, specifically identifying the phenomenon of “wage enslavement” and then arguing that it is a “central injustice of our tax system.” (P. 691.) Professors Maynard and Gamage argue that the problem of wage enslavement should be recognized as central to the pursuit of tax justice and to the “deeply connected” pursuit of racial justice, and they further contend that only by addressing wage enslavement “can we effectively promote a more just future of shared prosperity for all Americans.” (P. 692.)
What is “wage enslavement”? The term, as Professors Maynard and Gamage use it, refers to the means whereby the existing tax system (“‘by heavily taxing wage and salary incomes, and only lightly taxing the returns to owning wealth’”) inhibits historically disadvantaged groups from building wealth or from catching up with historically more privileged groups. Such inhibiting effects then trap many members of historically disadvantaged groups into a cycle of dependence on tax-disfavored wage and salary incomes because of the difficulty they encounter in earning enough wages to cover all living expenses and, further, in starting to build wealth. (Pp. 666-67.) The Professors clarify, “Of course, by calling this phenomenon “wage enslavement,” we do not mean to imply that this is an injustice at anywhere near the level of true, literal slavery.” (P. 667.) Continue reading "Towards Tax and Racial and Equal Justice"
May 8, 2024 Katheleen GuzmanTrusts & Estates
Richard Storrow, Reviving Revival in the Law of Wills, 55 Tex. Tech L. Rev. 501 (2023).
I am embarrassed to admit the time it took for me to realize that words beginning with the Latin prefix “re” generally denote something done over again: move and remove; solve and resolve; cognize and recognize. Relatedly, I’ve sometimes struggled with the concepts of two negatives equaling a positive, or whether “the enemy of my enemy” was (really) my friend.
In Reviving Revival in the Law of Wills, Professor Richard Storrow suffers no such problems. In addressing one of the more confounding doctrines of wills law–determining how to interpret the estate plan of a testator who executes a first will, follows it with a second valid instrument that fully or partially revokes the first, and later yet revokes the second will or codicil by physical act–he couples double-done and double-negative concepts to make and defend the straightforward proposition that revoking a revocation should equal revival. Indeed, by reminding readers of the ambulatory nature of wills – “the anchor grounding testators’ understanding that they can later change the testamentary plans they make today” – he makes and defends a more subtle point: that “the problem with revival doctrine is not so much one of testamentary intent but of testamentary expectation.” The act of revoking the second will, or the codicil, ought to restore the first will because a testator would expect that it does. This should surprise no one who holds to the notion that no will speaks until the death of its maker. But, Prof. Storrow intimates, it might surprise many readers to know that under modern doctrine, wills indeed speak immediately upon execution, perhaps most loudly to revoke any that had been written before. As such, Prof. Storrow’s article simultaneously revisits old doctrines with an eye toward clarifying them while also contemplating new and original theories of will . Continue reading "Double Negatives/Coming Around Again"
