Category Archives: Trusts & Estates

A Proposal to Limit the Deduction of Funeral Expenses

Jul 6, 2023 Sergio ParejaTrusts & Estates

Sergio Pareja

Law professors have the luxury of devoting time to thinking about ways to improve the law. Often this means looking at niche issues that may not arise with much frequency but that remain important. Professor William Drennan has done this quite well in his interesting article, Restricting Funeral Expense Deductions. The article focuses on the narrow issue of the deductibility of extravagant amounts spent at death by decedents who want to build monuments to themselves. While he does not argue that the law should prevent people from using their money for these expenses, his primary point is that society should not offer them a tax subsidy to do so because it promotes socially undesirable expenditures.

Part I of the article discusses average burials in the United States, extravagant burials in general, and the costs of extravagant burials to society. These costs include the tying up of land, the consumption of natural resources, and environmental damage due to the release of embalming fluids as well as other chemicals and metals into the ground, not to mention the environmental impact of using metals and cutting down trees to build ornate coffins. Continue reading "A Proposal to Limit the Deduction of Funeral Expenses"

Economies of Death

Jun 22, 2023 Allison Anna TaitTrusts & Estates

Allison Anna Tait

Victoria Haneman’s recent article, Prepaid Death, is a call for change in the way that people shop for and ultimately purchase burial and funeral services as well as a plea for policy reforms that would encourage consumers to make these important decisions pre-need rather than at the time of death. At death, the time of need, family members and others involved in the funeral services selection are grieving, vulnerable, and willing to pay exorbitant amounts for things that the decedent might not even have wanted. As Haneman points out: “The pre-need consumer is cost-sensitive and far less likely to make decisions that are time-pressured or driven by guilt. Although decisions may be unfamiliar, there is time to research and familiarize oneself with options and providers — including new and innovative death care technologies that may not be on the menu of choices offered at one’s local funeral home.” She also points out that when consumers have more time to explore their options, low- and middle-income consumers benefit because of increased opportunities to access financing options.

The solution that Haneman suggests is leveraging Internal Revenue Code section 125 and flexible spending account principles. The current Flexible Spending Accounts (FSAs) program allows eligible employees to make voluntary pre-tax contributions for certain qualified benefits that do not currently include death care. One option would be to allow consumers to create a dedicated Death Care Flexible Spending Account funded with pre-tax earnings contributed to this earmarked account. A second option would be to continue using FSAs in their current form but add death care expenses to the list of reimbursable “qualified expenses.” Continue reading "Economies of Death"

Constructive Trusts and Cremated Remains

May 23, 2023 Victoria J. HanemanTrusts & Estates

Victoria J. Haneman

The “law of the dead” or the law of human remains is regarded as an emerging field of study that considers rights to physical possession of the deceased and control over their disposition. In the United States, it is an idiosyncratic area of the law that dresses the concept of remembering in positive legal protections. In memory of the living, we afford a now-empty vessel with quasi-property status to protect against disrespect or defilement. The law of the dead in the United States has developed in an inconsistent and formalistic way, arguably with the funeral industry having an oversized role in the process of rulemaking. In guiding the law of the dead toward more cohesive and forward-thinking rules, it is important to consider the way in which other countries address disputes involving human remains. Trusts Over Cremated Ashes, by Kate Falconer, published in 2021 in the Journal of Equity, considers the use of “cremated ashes trusts” by the Australian courts.

Cremation is a popular method of disposition in Australia, accounting for an estimated 65% of deaths. Comparatively, the U.S. cremation rate was 57.5% in 2021. Roughly 20% to 40% of cremated remains (“cremains”) are interred in a cemetery (either stored in a columbarium or buried) and the remainder are either maintained somewhere other than a cemetery, dispersed, or repurposed. It is not uncommon for disputes to arise over who is entitled to possess and manage the cremains, and the law is not necessarily efficient or consistent in dictating a result. Contemporary U.S. law consists of a patchwork of state statutes that overlay the common law nullius in bonus (“no property in a dead body”) rule, which provides no legal right for a decedent to dictate a preferred method of final disposition. Although some states would like to grant the decedent this right, current statutes frequently lack enforcement mechanisms. Continue reading "Constructive Trusts and Cremated Remains"

When The Dog Bites

Apr 24, 2023 Katheleen GuzmanTrusts & Estates

Katheleen Guzman

Scholarship brings variety. Complex constructions that drag readers through thickets; subtle and sublime ones suggesting some knowing inner ring; irony with head feints that leave the reader thunderstruck when the rug is pulled – each form can delight, with the best scholarship inviting others into the mind (if not heart) of its author. Reading this sort of piece can feel a bit like a temporary possession, every bit as exhausting as its writing may have been.

Richard Ausness pulls no such punches. In These Are a Few of My Least Favorite Things, he squares up unafraid to take down assorted aspects of the 1990 Revised Uniform Probate Code with an approach that is rapid but measured and always direct. There is much to be said for writing that inspires readers to see brand new things.  But there is also something thrilling about seeing the same old things anew. Continue reading "When The Dog Bites"

To Learn What People Want, Ask

Mar 21, 2023 Sarah WaldeckTrusts & Estates

Sarah Waldeck

The reason I liked Adam J. Hirsch’s article is in its title: When Beneficiaries Predecease: An Empirical Analysis. Empirical analysis is particularly useful for the default rules governing wills. Most of these rules are intent-furthering, meaning that they ordain the result that legislatures and the Uniform Law Commission think most testators prefer.

Provisions about lapse and antilapse are part of the default rule lexicon for wills. Tempora mutantur may be a universal truth, but some testators nonetheless fail to provide any instructions about what do if a beneficiary predeceases them. The rules of lapse and antilapse fill this gap in the testator’s will. Setting aside some jurisdictional niceties, the rules of lapse are simple enough: (1) property left to the deceased beneficiary goes to the takers of the residuary estate; and (2) if the deceased beneficiary was to receive part or all of the residue, the property goes to either the other takers of the residue or to the testator’s heirs at law. Continue reading "To Learn What People Want, Ask"

It’s Time to Talk about Will Revocation Rules

Feb 9, 2023 Michael YuTrusts & Estates

Michael Yu

In the field of inheritance law, will execution and revocation formalities loom large because, traditionally, courts have demanded strict compliance with statutory procedures for creating and revoking a testamentary instrument. As to the law of revoking wills in their entirety, Professor David Horton, in Revoking Wills, argues that the high formalism of will revocation doctrine is problematic and should be loosened by:  (1) courts increasing their nascent use of the constructive trust in certain failed will revocations, (2) extending the harmless error rule into will revocation law, and (3) as “a novel path forward:  importing the will revocation formalities from trust law.” (P. 563.)¹

To help frame his critique of will revocation law, Professor Horton first summarizes will execution law, which “has long been synonymous with ‘harsh and relentless formalism.’”  (P. 573, quoting Professor John Langbein.) The oft-cited benefits of will execution formalities include:  (1) the “evidentiary” function of ensuring that the decedent’s wishes are in a “reliable and permanent form”, (2) the “ritual” or “cautionary” function that protects against “inconsiderate action”, (3) the “protective” function of “shielding testators from fraud and undue influence”, and (4) the “channeling function” of “standardizing the appearance of testamentary instruments”. (Pp. 575-76, citations omitted.)  Professor Horton argues, however, that the formalities in will execution law are becoming more flexible, as seen in the rise of the harmless error rule and statutes governing electronic wills. (Pp. 579-80.) Continue reading "It’s Time to Talk about Will Revocation Rules"

Trust Alteration in the Twenty-First Century

Jan 6, 2023 David HortonTrusts & Estates

David Horton

I don’t know about you, but, in all of my courses, there’s at least one topic I dread teaching. In Trusts, Wills, and Estates, that dishonor goes to the rules that govern the modification and termination of trusts. For starters, judge-made law, the Restatement of Trusts, the Uniform Trust Code, and the law of California (where I teach) march to their own subtly different drumbeat. In addition, the black letter law is filled with word balloons like “material purpose” and “general charitable intent.” Every semester, I see the subject approaching on my syllabus like an angry bull.

But when that time comes next year, I’ll be armed with Jeffrey N. Pennell and Reid Kress Weisbord’s new article, Trust Alteration and the Dead Hand Paradox. This engaging and exhaustively researched piece will sharpen the reader’s understanding of trust modification and termination. In addition, it makes three contributions to the literature. Continue reading "Trust Alteration in the Twenty-First Century"

Sometimes the Road Is Less Traveled Because It’s the Wrong Direction

Nov 29, 2022 Phyllis C. TaiteTrusts & Estates

Phyllis C. Taite

Attorney Matthew Van Leer-Greenberg evaluates the continued relevance of family limited partnerships (“FLPs”) in estate planning. FLPs have been excellent tools for asset protection, continuity of control, succession planning, and attainment of substantial tax benefits. With other options such as limited liablity companies and corporations offering some of the benefits of FLPs, Leer-Greenberg explores whether recent cases have diluted key benefits of FLPs—namely, valuation discounts and exclusion from the gross estate for estate tax purposes.

In Family Limited Parnerships: Are They Still a Viable Weapon in the Estate Planner’s Arsenal?, Leer-Greenberg begins by discussing Internal Revenue Code (“IRC”) § 2036, a key provision for tax planning benefits of FLPs that generally requires inclusion of transfers with a retained life estate in the decedent’s gross estate. FLPs can be structured in ways that remove the transfer from the transferor’s gross estate at death while discounting the value of the lifetime transfer for purposes of the gift tax during life. To achieve the intended outcome from a transfer to a FLP, the transferor must give up control and make a bona fide gift or sale of the interest. Continue reading "Sometimes the Road Is Less Traveled Because It’s the Wrong Direction"

Posthumous Reproduction and Inheritance Law

Nov 7, 2022 Alexander Boni-SaenzTrusts & Estates

Alexander Boni-Saenz

One of the ramifications of the recent Supreme Court decision in Dobbs v. Jackson Women’s Health Organization is the significant uncertainty it has created about the legal status of various reproductive technologies, given that many states will regulate abortion in ways that impact those technologies as well. In Reimagining Postmortem Conception, Professor Kristine Knaplund provides a comprehensive snapshot of the pre-Dobbs legal landscape regarding postmortem conception using reproductive technology and its effect on inheritance law. This 50-state survey provides an interesting example of the variety of regulatory strategies that can evolve in a contested legal area as well as the difficulties that such a patchwork might entail. For those interested in trusts and estates, family law, and health law, it will be an invaluable read.

Knaplund starts by surveying the current social and legal landscape. Opinion surveys indicate that a majority of Americans support postmortem conception, and that number rises if the decedent consented. On the ground, a small but growing number of people are cryopreserving sperm, ova, and embryos for the purpose of having children in the future, possibly including after death.  Further, there have been increasing requests for gamete retrieval from spouses who are recently deceased or exist in a vegetative state. While public sentiment regarding postmortem conception has been trending toward higher levels of approval, states have lacked uniformity in their regulatory response and, in particular, have failed to agree on the impact of postmortem conception on inheritance rights. Twenty-four states have addressed the inheritance question directly, with all but one establishing that postmortem children can inherit from a predeceased parent if certain conditions are met. The other twenty-six states take wildly varying approaches, with courts looking to parentage law or other statutes for clues to solve this legal question.

Posthumous children present two challenges for inheritance law. First, how can lawmakers ensure the orderly administration of estates, given that reproductive material can be stored for years or decades before being used? Second, how can courts determine whether the deceased prospective parent consented to the use of that reproductive material? Continue reading "Posthumous Reproduction and Inheritance Law"

A Life Insurance Tax Dodge Under Layers of Math

Oct 28, 2022 Kent D. SchenkelTrusts & Estates

Kent D. Schenkel

Section 101(a)(1) of the Internal Revenue Code (IRC) is pretty straightforward. It excludes life insurance death benefits from the federal income tax. But what is life insurance? The IRC defines “life insurance contract” in § 7702. However, in A Matter of High Interest: How a Quiet Change to an Actuarial Assumption Turbocharges the Life Insurance Tax Shelter, Andrew Granato characterizes that provision as “obscured by layers of mathematics.” Under recent amendments, writes Granato, this “highly technical approach” to the definition of life insurance abuses the § 101 exemption by expanding the definition of life insurance in a manner that effectively subsidizes the wealthy through tax expenditures on their behalf.

Life insurance comes in two basic types. First, there is “term” or pure life insurance. The cost of a term policy is based on the risk taken on by the insurance company that the insured will die within a certain time, triggering the company’s obligation to pay the death benefit to the beneficiary. This type of policy has no cash value because the owner paid only for the death benefit—the insurance company’s promise to take on the risk. At any given time, the policy’s value is the unexpired portion of the premium paid. Continue reading "A Life Insurance Tax Dodge Under Layers of Math"