Death and Taxes - The Blog

Estate Planning After Divorce

Last week I was at a meeting of estate planners, and the guest speaker was a divorce attorney.  The meeting really gave me a lot more insight into how that process works, and into how divorce attorneys and estate planners need to work together to assist their mutual clients. 

When someone gets divorced, usually there are two goals:

1. Executing estate planning and other documents to make sure the ex-spouse isn't still named as a beneficiary.  However, as Christopher Yugo indicates in this article for nwitimes.com, you also need to think about assets that won't pass pursuant to a Will or trust (such as retirement benefits, life insurance, and payable on death -- POD or TOD -- accounts).

2. Making sure that any estate planning requirement set forth in the divorce decree is satisfied.  For instance, the decree might require that one party keep in force life insurance with the other party (or the children of the parties) as beneficiary.  If you die without taking steps to satisfy the terms of the divorce decree, your ex-spouse and/or children will have a claim against your estate at your death.

Anna Nicole Smith and the Probate Exception

On Tuesday the U.S. Supreme Court hears oral arguments in the case of Vickie Lynn Marshall v. E. Pierce Marshall.  This is the so-called Anna Nicole Smith case (Vicki Lynn Marshall is Ms. Smith's real name) which I have mentioned before:

Anna Nicole Smith and the Best.Correction.Ever (8/4/05)

Anna Nicole Smith Goes to the Supreme Court (9/27/05)

More on Anna Nicole Smith's Probate Cast (10/7/05)

As I noted in my October '05 post, once you set aside the joking about the case, there are some very important legal issues involved.  These two recent articles do a good job of explaining the controversy:

"As Date With Playmate Approaches, High Court to Ponder Jurisdiction Issue," by Brenda Sapino Jeffreys, published at law.com

"Mrs. Smith Goes to Washington," published at the website for Foley & Lardner LLP

Estate Planning For Collectors

This weekend's Wall Street Journal has an interesting article about people who collect things (stamps, pencils, jigsaw puzzes) -- more specifically, the article discusses the problem of what will happen to a prized collection when the owner dies?  The article, by Jeffrey Zaslow, is entitled "Who's Going to Want Grandma's Hoard of Antique Gnomes?" -- it's online here, although you need to be a subscriber.

Evidently kids today aren't all that interested in these types of collections; as a result, upon the collector's death, the collections may be (a) discarded or (b) sold for a pittance.  This is the opposite of the typical problem that arises with tangible personal property upon the owner's death (where everybody wants it) -- here, nobody wants the antique gnomes (or the  matchbooks or the miniature guns).  It's still a problem, though, at least if we think in terms of carrying out the deceased collector's wishes. 

So what do you do to preserve that unique collection after your passing?  Two ideas:

1. Appoint a special executor or trustee for the collection, who can handle the disposition of the collection (either by selling it for full value, or by donating it to an appropriate institution); or

2. Leave the collection to an appropriate institution yourself, in your Will or trust.

McCartney-Eastman Probate Litigation

The "Art & Money" column in this morning's Wall Street Journal (which I can't find online) has an interesting story about the estates of Lee Eastman and his wife, Monique de T. Eastman.  The family tree is a bit confusing, but the players are as follows:

Lee Eastman: Described as an "entertainment lawyer" and "art collector," Mr. Eastman was also the father of Linda Eastman McCartney (photographer and wife of the Beatle), which of course also makes him the grandfather of the fashion designer Stella McCartney.  Mr. Eastman died in 1991, at which point a Marital Trust was established for the benefit of...

Monique de T. Eastman: Mr. Eastman's wife, who died in May of 2005, naming as her executors...

Peter, Paul, and Philip Sprayregen: Mrs. Eastman's children from a prior marriage.

The Brothers Sprayregen (known as The Three P's?) have filed suit alleging that some of the paintings held in the Marital Trust were in fact owned by their mother (either alone or together with Mr. Eastman).  Following Mrs. Eastman's death, the paintings in the Marital Trust were sold at auction, with the proceeds of sale exceeding $48 million.  These proceeds were distributed to Mr. Eastman's descendants.  (It appears from the article that such distribution was what's known as "per stirpes," with the descendants of a deceased child -- in this case, the children of the deceased Linda Eastman McCartney -- receiving that child's share.)

Suit has been filed in New York.  I don't know anything about New York law on this point, but if this case took place in Illinois, the Brothers Sprayregen would be initiating a citation action.  This type of action is used when you (as executor or administrator) believe that property belonging to the estate you are handling is instead in the possession of a third party.  In the McCartney-Eastman case, the argument is that the proceeds from the sale of the paintings purportedly owned by Mrs. Eastman are a part of her estate, and should have been distributed to the executors of the estate.

The article concludes that the Brothers Sprayregen face an uphill battle in proving that their mother had ownership of the paintings at issue.

Mediation in Estate Planning and Probate: A Survey (Part 2 - Court Links)

I'm compiling a survey of estate planning and probate-related mediation resources (mostly of the on-line variety), and will be posting the results here in the near future.  Here's my plan for this survey:

Part 1 (yesterday): Articles about estate planning and probate-related mediation (if an article is available on-line, you can click on the word "link" following the article citation to access it)

Part 2 (today): Links to court probate mediation programs

Part 3: Links to websites that relate to probate mediation

I view all of these parts as works in progress -- I'll be supplementing the lists as new items come to my attention.  If you think I'm missing a link, please let me know!

ARIZONA

-Maricopa County

HAWAII (pdf)

ILLINOIS

-Cook County

MICHIGAN

-Genesee County

-Oakland County (pdf)

NEW HAMPSHIRE

UTAH

WASHINGTON DC

Mediation in Estate Planning and Probate: A Survey (Part 1 - Articles)

I'm compiling a survey of estate planning and probate-related mediation resources (mostly of the on-line variety), and will be posting the results here in the near future.  Other postings will probably be fairly sparse for the next two weeks, as I'm on jury duty in the United States District Court for the Northern District of Illinois (!) from today through March 7 (!!).   Here's my plan for this survey:

Part 1 (today): Articles about estate planning and probate-related mediation (if an article is available on-line, you can click on the word "link" following the article citation to access it)

Part 2: Links to court probate mediation programs

Part 3: Links to websites that relate to probate mediation

I view all of these parts as works in progress -- I'll be supplementing the lists as new items come to my attention.  If you think I'm missing a link, please let me know!

Laura Bachle, "Estate Planning and Family Business Mediation." link

J. Behrens, "The History of Mediation of Probate Disputes," 68 Arbitration: the Journal of the Chartered Institute of Arbitrators 138 (May 2002). link

Roselyn L. Friedman and Erica E. Lord, "Using Facilitative Mediation in a Changing Estate Planning Practice," Estate Planning, Dec. 2005. link

Roselyn L. Friedman and Erica E. Lord, “Using Mediation to Stem the Tide of Litigation in the Ocean of Family Wealth Transfers,” 59 Disp. Res. J. 36 (Nov. 2004/Jan. 2005). link

Roselyn L. Friedman and Sally Larson Sargent, “Applying Mediation Strategies to Trusts and Estates,” 139 Tr. & Est. 56 (Feb. 2000).

David Gage et al., “Holistic Estate Planning and Integrating Mediation into the Estate Planning Process,” 39 Real Prop. Prob. & Tr. J. 509 (2004). link

David Gage and John A. Gromala, "Mediation in Estate Planning: A Strategy for Everyone's Benefit." link

Susan N. Gary, "Mediating Probate Disputes," Probate & Property, July/Aug. 1999, at 10. link

Susan N. Gary, “Mediation and the Elderly:  Using Mediation to Resolve Probate Disputes over Guardianship and Inheritance,” 32 Wake Forest L. Rev. 397 (1997).

Samuel R. Graham and Paula Pierce, "Mediating Probate and Estate Matters." link

John A. Gromala and David F. Gage, "Trustee - Beneficiary Mediation." link

John A. Gromala, "The Use of Mediation in Estate Planning: A Preemptive Strike Against Potential Litigation." link

Rikk Larsen, "Mediating a Key Estate Settlement Issue - Dividing Personal Property." link

Rikk Larsen, "Mediation in Today's Estate Settlement World." link

Rikk Larsen, "Tipping Points - Reasons Why Mediation Works in Complex Family Disputes." link

Bridget A. Logstrom, “Arbitration in Estate and Trust Disputes:  Friend or Foe?,” 30 ACTEC J. 266 (2005).

Ray D. Madoff, “Mediating Probate Disputes:  A Study of Court Sponsored Programs,” 38 Real Prop. Prob. & Tr. J. 697 (2004). link

Mary F. Radford, “An Introduction to the Uses of Mediation and Other Forms of Dispute Resolution in Probate, Trust and Guardianship Matters,” 34 Real Prop. Prob. & Tr. J. 601 (2000). link

Mary F. Radford, “Tax Considerations and Other Issues Unique to the Mediation of Estate and Trust Cases,” 39 U. Miami Heckerling Inst. on Est. Plan.  IV-A-5 (2005).

Gifts to Charity: The Slate 60

Slate annually compiles a list of the 60 largest American charitable contributions.  This article explains the idea behind the list -- the list itself can be found here.  You'll note that the top contribution came from the estate of Cordelia Scaife May, who died in January of 2005.  I blogged about Ms. May's Will last March.

Wills vs. Living Trusts: Now or Later

This article by Texas attorney Ronald Lipman is a really nice summary of the advantages and disadvantages of living trusts (especially compared to Wills).  I've started explaining the costs associated with the two documents in terms of timing:

A living trust has immediate costs -- you pay a little extra now, both in terms of attorney's fees and in terms of work you have to do (transferring assets by changing title and beneficiary designations). 

A Will has future costs, which must be paid when you die -- basically, the attorney's fees and court costs associated with probate (including the cost of having your executor transfer assets to the estate and to your beneficiaries).

Which is better for you, a living trust plan or a plain old Will?  That's going to depend on your assessment of the above costs.  The actual fees are pretty easy to break down, but the intangible costs are more difficult to consider -- when we talk about transfers of assets during lifetime, we're really talking about questions like:

Do you have time to transfer your assets to your living trust?

Do you have the ability to make these transfers yourself (or can someone else, like your financial planner, help with the transfers)?

Can you devote your attention to these transfers, to make sure that nothing is forgotten, and that all assets get placed into the trust?

Do you mind the "hassle" of making these transfers, and the added complexity that a living trust gives to your life?

Answers to these questions will vary among different individuals, which is why a living trust may be a bad idea for one client (an 85-year-old who hates complexity and doesn't want the hassle of asset transfers) and a very good idea for another (a 55-year-old with time and interest to spare on the transfers).

Florida: Enabling Bad Estate Planning

I've written quite a bit about why it's a bad idea to give someone the gift of making them a joint tenant on your property -- here is my main post on the subject, which references an article from my website as well as an article from the You and Yours Blawg.

I'm sure Florida's politicians have the best of intentions, but the legislation discussed here is nonsensical.  The legislation "would keep a cap on property tax increases when a co-owner is added to a homestead property deed," an issue that "comes up most often when a parent puts a child's name on a deed to try to avoid probate court when the parent dies."  Adding a child or other individual as a joint tenant on your home is almost always a bad idea, and isn't something that the state should be encouraging or enabling.  The article mentions that  the legislation would cost the state $8.6 million per year in lost revenue.  The problem is that it's going to cost the people of the state of Florida much more than that when you consider the disputes that inevitably arise from these types of situations. 

More on Will and Trust Construction: Ambiguities

Yesterday I talked a little about Will and trust construction, and about ambiguities.  As I mentioned, most ambiguities relate to either the property that is to be given away, or the identity of the beneficiary (or beneficiaries) to receive the property. 

Another way to think about ambiguities (one used by Illinois courts) is to distinguish between patent ambiguities (which are obvious from reading the document) and latent ambiguities (which only appear in light of outside evidence).  Some examples:

Patent ambiguity: A person's Will leaves her entire estate to nine people, in equal 1/18th shares.  What happens to the other half of the estate?

Latent ambiguity: Here is an example I blogged about last year.   In an article entitled "Construction, Reformation, Revocation, and Modification of Wills and Trusts," and featured in the 2002 edition of IICLE's Estate, Trust, and Guardianship Litigation Practice Handbook, authors David A. Baker and Kathleen O'Hagan Scallan give some others:

... a testator or grantor bequeathing property that he or she does not own, incorrectly describing the property subject to disposition or the identity of the legatee, and providing a description that, on its face, fits more than one object of property or person.

I think two other examples of possible latent ambiguities can be found in the Howard Hughes Mormon Will, which I posted here. 

ninth: one-sixteenth to be devided [sic] amoung [sic] my personal aids [sic] at the time of my death -

The remainder of my estate is to be devided [sic] among the key men of the company's [sic] I own at the time of my death.

How do we define "personal aids" (sic) and "key men"?