To a New Yorker, this seems impossible, but in some states, a child may be personally liable for a deceased parent’s medical bills. Over half the states have legislation variously referred to as Filial Support or Filial Responsibility Laws. These statutes oblige children to satisfy their parents’ medical debts even if the child made no promise to do so, signed no guarantee to do so, or received no assets from his or her parents. New York does not have such a statute. But New Jersey and Pennsylvania do have such laws! Should this still be source for concern to New Yorkers?  Under the U.S. Constitution’s Full Faith and Credit Clause could a judgment creditor in New Jersey or Pennsylvania under these laws be able to enforce that judgment in New York? While Medicare and Medicaid have reduced the impact of these laws, there have been cases where they have been enforced.

Filial Responsibility laws stem from England’s 16th century Poor Laws, a set of social measures meant to support impoverished citizens that resulted in debtors’ prisons, poor houses, government custody of children (imagine a Dickens novel, or his own youth). At one point, 45 states had statutes that left adult children responsible for the expenses of their indigent parents. Many states repealed these laws with the advent of Medicaid in 1965 and the reduced need for family support (generally, Medicaid prevents nursing  homes from requiring family members to act as “guarantors” when admitting a new patient.)

Consider the following facts. A Pennsylvania resident incurred a $93,000 nursing home bill for rehabilitation care.  When she was released from the facility she left the country, leaving behind the debt and her son. (Mom had applied for Medicaid, but the application was still pending at the time of this case.)   The nursing home sued her son. The courts ruled that the son was financially able and therefore responsible for paying the bill under the Pennsylvania.

For more on this topic (and a body of law that, frankly, was unknown to this writer when he was searching for a subject to write about), see this article from a website called AgingCare (https://www.agingcare.com/Articles/filial-responsibility-and-medicaid-197746.htm ). It begins:

As a caregiver, keeping your finances separate from those of your loved one is difficult, if not impossible, especially if they have few assets and limited income. Even if an aging parent lives in a long-term care facility paid for by Medicaid, adult children often shell out money to help cover personal needs and the occasional treat. Many think that because the cost of care is covered by the government, they have been absolved of all financial responsibility, but this is not quite true in some states.

Now for the good news. New Yorkers do not have to worry about this happening here. In a 1967 case, the Second Department had to decide whether the Full faith and Credit Clause of the federal Constitution preempted local law. A Connecticut welfare investigator filed suit against a New York resident in a Connecticut court to recover monies expended for the New York resident’s mother in a Connecticut hospital. The case was “transmitted” to a New York Family Court where the son objected to such obligation in light of the repeal of New York filial support law. The Family Court held that the son was obligated to contribute to his mother’s care in Connecticut. The appellate court reversed the Family Court, ruling that while the 1966 filial support law amendment did not directly address the issue, the failure to do so was an “oversight” and that of all filial support obligations, “both intrastate or interstate,” were repealed by the statute. See, In The Matter of Welfare Commissioner v. Mintz, 28 A.D.2d 14, 17 (2d Dep’t 1967).

 

 

Will Rogers, a folksy humorist for those too young to know, once said that “a  Republican moves slowly. They are what we call conservatives. A conservative is a man who has plenty of money and doesn’t see any reason why he shouldn’t always have plenty of money. A Democrat is a fellow who never had any, but doesn’t see any reason why he shouldn’t have some.” Perhaps the quote is a bit dated today, perhaps it is a bit unfair, but it is satire after all. It calls to mind the latest tax proposal from Washington that would impose a wealth tax on unrealized gains for the very wealthy. Would it also include a yearly credit  for unrealized losses? Who knows? Is this an unconstitutional taking? Who knows? How would such a tax be administered? Who knows? Is it a cruel joke to drive planners, accountants, attorneys crazy? Who knows? One thing we do know is that there is a great inequality in the distribution of wealth in this country, but is this the way to address it? Let’s see what some experts are writing.

Tyler Cowen is a respected libertarian economist with a very popular blog called Marginal Revolution.[1] He makes one observation on the latest tax proposal and then cites to another respected economist, Aswath Damodaran, from NYU, and his analysis. First, Tyler:

“Put simply, this proposal is biased towards people with inherited wealth, invested in non-traded assets and mature businesses, and against people invested in publicly traded equities in growth companies, many of which they have started and built up. If that is the message that the tax law writers want to send, they should at least have the decency to be up front about that message, and to defend it.” marginalrevolution.com

Prof. Damodaran holds the Kerschner Family Chair in Finance Education and is Professor of Finance at New York University Stern School of Business. He is also a respected commentator on such topics and his analysis of the latest news from Washington is worthy of note. His website, Musings on Markets,  is also very much respected, at least according to family members in the field  (I wouldn’t know). See: aswathdamodaran.blogspot.com

A selection from Prof. Damodaran’s analysis:

If you have been tracking the torturous workings of the infrastructure bills working their way through Congress, consideration is now being given to a “billionaire” tax, focused on a extraordinarily small subset of Americans, and intended to raise tens, perhaps even hundreds, of billions of dollars in revenues, to cover the costs of the bill. I am constantly amazed by the capacity of legislatures to write bad tax law, but this one takes the cake as perhaps the worst thought-through and most ineffective attempt ever, at rewriting tax code. That is a little unfair, I know, because the details are still being hashed out, and it is conceivable that the final version will be redeemable, but given that the clock is ticking, I am not hopeful!

[1]  Disclaimer: I am not now nor have I ever been nor will I ever be a libertarian. However, the website is always interesting and worthy of following.

Recently, I read a newspaper article reporting that Bing Crosby’s estate is selling an equal stake in the rights to Bing Crosby’s catalog to Primary Wave Music for an estimated $50 million dollars, making Primary Wave Music and the estate partners.  Of late, contemporary musicians, such as Bob Dylan and Neil Young, have made lucrative deals to sell their catalog rights for many millions of dollars.  Those artists wrote their own songs.  Bing Crosby did not.  He interpreted songs written by others.   Messrs. Dylan and Young are alive.  Mr. Crosby died in October 1977, forty-four years ago.

Although recorded by many artists, Bing Crosby’s rendition of “White Christmas,” written by Irving Berlin in or around 1940, is perhaps the most famous version of the song.  Mr. Crosby recorded it in 1941.  A quick glance at Wikipedia shows that he publicly debuted it on Christmas Day of that year on the NBC radio show, The Kraft Music Hall.  That must have been a moving performance given that it came just two weeks after the bombing of Pearl Harbor.  Apparently, Mr. Crosby had ownership rights in that performance of the song.  Those rights are now an asset of his estate, along with a vast catalog of musical performances.

Primary Wave Music must be pretty confident of its ability to popularize the music of the long-deceased Mr. Crosby with younger generations to pay such a whopping sum of money.  The beneficiaries of Mr. Crosby’s estate must be very happy to have a $50 million infusion into the estate’s coffers.

The lesson to be learned is to write or sing a classic song and your children and their children will have happy holidays for many years to come.  Now, all I need is some musical talent.

 

I. Tax changes, the latest developments.

The Trusts and Estates community is awash with rumors of the tax changes being proposed in Washington. Every day, the inbox is filled with rumors, invitations to webinars on planning opportunities, and the “dire” consequences of some of the proposals.  The lobbyists are more numerous in Washington than people with opinions on the internet. Some examples:

  1. Democrats’ tax plan upends estate planning using trusts with life insurance:

Financial Planning News – Life Insurance, Trusts and Tax Benefits

“The tax plan taking shape in Congress would strangle a strategy widely used by the wealthy to shield their estates from taxes and pass on major wealth to heirs. Specifically, it would erase the long-standing benefit of keeping life insurance in certain trusts, by making its value subject to the 40% estate tax when the policy owner dies. That’s a huge change: Currently, the trusts and their assets aren’t subject to the levy.

What does this mean? Some life insurance policies, when ”owned” by certain types of trusts have the ability to pass the proceeds of the policy to the designated beneficiaries entirely free of estate or gift taxation. This proposal would change that result. Will it become law? Wait and see.

  1. One More Scary Estate Tax Change And New Action Items For Many Affluent Taxpayers

Forbes.com Estate Tax Changes

“Many taxpayers and their advisors have been rushing to establish or fully fund special irrevocable trusts that can both avoid federal estate tax and purchase from or exchange assets with the Grantor at no income tax cost.

“These “Defective Grantor Trusts” can pay for appreciating assets by giving long-term low interest promissory notes, while the Grantor/contributor pays the income tax attributable to the trust income.”

What does this mean? Well, let’s let Forbes describe the concept via an example: “I may have established a trust that has $2,000,000 worth of appreciated stock that I would like to buy back from the trust before my death, so that the stock can get a new fair market value income tax basis when I die. I therefore give the trust $2,000,000 cash or other high basis assets, and the trust transfers the stock to me. . .Under present law, this can be accomplished income tax free; however if the new law is amended to provide for the above then after the date of enactment of the new law, this will be treated as if I sold the stock for $2,000,000 at the time of the sale.”

  1. Estate Tax Law Changes – What To Do Now

Forbes.com Estate Tax Changes

“Under the new rules, the funding of a GRAT after the date that this law would be enacted could cause income tax on the excess of the fair market value of the assets placed into the GRAT over the tax basis of such assets, and the excess value remaining after the GRAT term may be considered a gift when distributed, notwithstanding that Internal Revenue Code Section 2702 provides under present law that no gift results when the actuarial value of the annual payments made to the Grantor equals the value of assets placed into the Trust.”

What does this mean? The GRAT, or Grantor Retained Annuity Trust, is a primary vehicle for high net worth individuals to achieve vast income, estate, and gift tax savings. The article describes the reasons and the changes that might remove those advantages.

  1. Lobbyists shielded carried interest from Biden’s tax hikes, top White House economist says

CNBC.com

“Fierce lobbying by the private equity industry is the reason the carried interest tax rate is not included in President Joe Biden’s planned tax hikes, top White House economist Jared Bernstein told CNBC on Thursday.

“Biden and congressional Democrats are hoping to pass a sprawling budget, much of which is paid for with revenue from a laundry list of tax changes, including higher rates for the wealthiest Americans and corporations.

“But closing the so-called “carried interest loophole” by taxing private equity profits at personal income rates, instead of at lower capital gains rates, is not on that list.”

What does this mean? It means the lobbyists have already won one. The concept is an easy one to express (or perhaps that merely displays this writer’s ignorance): should the profits of private equity funds be taxed as capital gains (lower) or as regular income (higher)? The CNBC article describes Andrew Sorkin’s shock at this development, “For private equity firms, keeping their tax rate at the lower capital gains level is their top priority in Washington and has been for years. . .The private equity industry has spent millions of dollars on lobbyists to fight any effort to change how it is taxed. And so far, the plan appears to be working. . .The industry has contributed hundreds of millions of dollars to congressional campaigns, $600 million total over the past decade, according to a New York Times analysis earlier this year.”

  1. For a useful review of all the proposed changes to the tax law, see this recent article from The National Law Review: National Law Review

II. More news on the personal impact of inherited wealth

It’s not all about taxes. Too many estate planners give little attention to the costly litigation that can result from planning focused exclusively on tax efficiency instead of family dynamics nor do they discuss with their high net worth clients the personal impact of inherited wealth may have on their families. A recent article from Yahoo Finance describes the efforts made by some very wealthy individuals to provide for their families, but not too much. “You can never be too rich or too thin,” said the late Wallis Simpson (she of Duchess of Windsor and abdicating kings fame). Evidently, Warren Buffett and Kevin O’Leary (two very high net worth individuals) disagree and describe their efforts to make sure their children are secure but not spoiled. Mr. Buffet has a pithy way of putting it:

“After much observation of super-wealthy families, here’s my recommendation: Leave the children enough so that they can do anything but not enough that they can do nothing.”

The article, “Warren Buffet, Kevin O’Leary and Other Millionaires are Concerned About Inheritances” The link:  Finance.com News

Estate planners and corporate trust officers (not to mention trusts and estates litigators) have many horror stories about the harmful impact of inherited wealth or the result of careless planning that fails to avoid litigation. This is not a problem reserved for the high net worth individual. Every parent with a house owned for decades must plan for what happens when he or she dies and the children squabble over the house (one is living there, the others do not want their share of the house frozen in place to support the residential sibling). They also have horror stories of relatively modest estates being consumed by litigation when a sibling is favored over another sibling and the estate plan does not include techniques to minimize the chances of such litigation.

Somewhat along these lines, Open Culture is a fine website that lists free cultural resources on the internet. Here is an entry that discusses the passing of wealth across the generations. Openculture.com Mahatma Gandhis List 7 social sins. It describes the Mahatma Gandhi formulation of the seven “social sins.” Before it does, however, it travels back in time to the first formulation of the seven deadly sins: “[i]n 590 CE, Pope Gregory I unveiled a list of the Seven Deadly Sins – lust, gluttony, greed, sloth, wrath, envy and pride – as a way to keep the flock from straying into the thorny fields of ungodliness. These days though, for all but the most devout, Pope Gregory’s list seems less like a means to moral behavior than a description of cable TV programming.” This list of the seven social sins was published by Mohandas K. Gandhi in his weekly newspaper Young India on October 22, 1925:

Wealth without work.

Pleasure without conscience.

Knowledge without character.

Commerce without morality.

Science without humanity.

Religion without sacrifice.

Politics without principle.

There used to be a saying in the Surrogate’s Court, “blood may be thicker than water, but money is thicker than blood.” We prove that maxim every day as practitioners in Surrogate’s Court.  The estate of the late great Jimi Hendrix continues to be embroiled in a family dispute, this time over the use of his name. The superb guitarist and composer died without a Will, making his father the sole beneficiary of his estate. That did not stop his brother and other family members from attempting to take advantage of the estate that is now valued at $175 million. The article from the Guardian describes the latest skirmish in a trademark dispute: The Guardian.com Jimi Hendrix Family Dispute. If you are interested, here is the recent decision from the Southern District of New York: Casetext.com Hendrix llc v Hendrix

And speaking of Jimi Hendrix, it is gratifying to learn of a famous musician who does not recognize artificial boundaries in music. Violinist Nigel Kennedy canceled a concert at the Royal Albert Hall in London after Classic FM stopped him from including a Hendrix tribute. Again, from The Guardian:

“Violinist Nigel Kennedy has pulled out of a concert at the Royal Albert Hall with only days to go after accusing the radio station Classic FM of preventing him from performing a Jimi Hendrix tribute.

“Kennedy said the “culturally prejudiced” decision amounted to “musical segregation”, with the station he now calls “Jurassic FM” preferring him to play Vivaldi’s Four Seasons in Wednesday’s show.

“He intended to play some Hendrix with Chineke!, an orchestra of young black and ethnically diverse musicians, until he was told the rock star was “not suitable” for the station’s desired audience. Classic FM, which was hosting the event, preferred for him to play Vivaldi’s Four Seasons.” The Guardian.com Music Violinist Nigel Kennedy Cancels Concert

Finally, the late Nat Hentoff, human rights activist, writer, and historian of American Classical music (i.e., Jazz) was passing the Fillmore East one evening when he was shocked to see none other than Duke Ellington leaving the Jimi Hendrix concert. Nat asked Duke, “What are you doing here?” The maestro replied, “man, if it sounds good it is good.” The lesson here, one that Nigel Kennedy would and has approved with regard to musical snobbery, is that if you can’t swing with Oscar Peterson, then you don’t deserve to swing with Johann Sebastian Bach. And vice versa.

 

 

 

 

 

Many people have been following the developments in the conservatorship of Britney Spears.  It is hard not to since the matter has been in the headlines so often of late.  Ms. Spears alleged gross financial and personal abuse by her father, who, until he was suspended earlier this week by Los Angeles Superior Court, had been the conservator in charge of Ms. Spears’s finances since 2008.  He was replaced by a temporary conservator of Ms. Spears’s choosing.

There is little doubt the Ms. Spears needed a conservator years ago when she had a very public breakdown.  Ms. Spear’s objective is to have the conservatorship discontinued. Whether she needs a conservator now will be for the court to decide.  I am sure we will be reading about this for some time to come.

California utilizes conservatorships for people in need of financial oversight.  New York did until 1993, when Article 81 of the New York Mental Hygiene Law was enacted.  Conservators were replaced by property guardians.  Committees, which oversaw a person who could not handle his or her personal needs, were replaced with personal needs guardians.  The beauty of Article 81 guardianships, unlike conservatorships and committees, which were all-encompassing, is that guardianships can be tailored in each case with the standard being the least restrictive means needed to protect the individual determined after a hearing to be incapacitated.

With that said, the guardianship of famous artist Peter Max made the news earlier this week.  Mr. Max was adjudicated as incapacitated under Article 81 in late 2016, and a guardian was appointed for him.  He is said to have dementia.  Underlying the need for a guardian was the alleged abuse of him by his then-wife.  However, she committed suicide last year just prior to when Mr. Max’s second guardian was replaced by his current one, an attorney.

Mr. Max’s daughter alleges that her father is being held hostage by the guardian in the sense that access to her father is restricted and also that the current guardian is abusing her authority as Mr. Max’s property guardian.  Mr. Max’s son and a close friend of the artist both assert that the guardian has placed onerous restrictions on visiting Mr. Max.  Mr. Max’s daughter wants the guardianship to end.  His son, who is estranged from his sister, does not.   It is important to note that the veracity of the allegations against Mr. Max’s current guardian has not been determined by the court.

Britney Spears and Peter Max are high-profile individuals.  But, what about the many, many average people for whom a conservator or a guardian has been appointed?  What prevents abuse in their cases and, if there is abuse, how is it remedied?

In New York, court-appointed guardians are granted specific powers and cannot act beyond those powers.  Lay guardians must take guardian training, as must guardians who are attorneys, as in Peter Max’s case.  The court usually will require a guardian to be bonded for the amount of money that he or she is overseeing for the incapacitated person.  A property guardian, whether a family member or friend of the incapacitated person, or an independent guardian, must account each year for all of the money received and expended by the guardian.   A personal needs guardian must visit the incapacitated person a certain number of times each year, must make sure the incapacitated person receives proper care, and must keep the court apprised of the incapacitated person’s health and well-being.  Often, the court appoints one person to be both the property guardian and personal needs guardian.  A court examiner is appointed for each guardianship.  The court examiner is an individual, usually an attorney, whose function it is to review the initial and annual reports that each guardian is required to file.  The court examiner must alert the court if the reports are not filed or if there are discrepancies in the reports.

Even these safeguards do not ensure that there is no abuse.  If the incapacitated person has family or friends other than the guardian, they should keep close tabs on what is going on and should alert the court to anything that appears untoward.  If the incapacitated person is able, he or she should do the same.  Although there are abuses, most of the time an Article 81 guardianship is a humane solution to an often-sad situation.

 

 

Pity the poor estate planners. They are like zookeepers managing an ever increasing menagerie of exotic beasts, creatures of the tax code and regulations designed to take maximum, albeit legitimate, advantage of the complexities increasingly built into the system.  For example: CRATs, CRUTs, FLPs, Zeroed-Out CLATs, Stretch IRAs, RMDs, GRUTs, DAPTs, Grantor Trusts, SLATs, etc. This week’s entry on the firm’s Trusts and Estates blog continues earlier references to retirement accounts and adds a “new” member to the zoo, a STAT. It all calls to mind a quote from the writer Barbara Ehrenreich:

“It seems to me that there must be an ecological limit to the number of paper pushers the earth can sustain, and that human civilization will collapse when the number of, say, tax lawyers exceeds the world’s total population of farmers, weavers, fisherpersons, and pediatric nurses.”

The Trusts and Estates community is awash in articles on the proposed changes to the tax laws, the latest scare articles concern the increases  in the capital gains tax that may not only effect the very wealthy but may also capture many middle class taxpayers who have owned homes for lengthy periods of time. If those income taxes are made law and made retroactive, then the law may have a major impact on people that are not very wealthy.

Another source of worry, one that may be relevant to a large number of all taxpayers, is the concern over retirement accounts in light of the recently enacted SECURE Act. “SECURE” stands for “Setting Every Community Up for Retirement Enhancement Act.” (I kid you not, think of the hours a young and highly-credentialed Congressional staffer spent on concocting that acronym.)

In an article called “The ABCs of Estate Planning for IRAs Under the Secure Act,” one of the countries leading experts on estate planning, Natalie Choate,  writes on issues worthy of our consideration. Read it if only to learn what a STAT is. The link for the article is:  Morningstar Articles.

Ms. Choate writes,

“The ‘ABC’ (and sometimes ‘D’) system described here is designed to cut through that confusion and get you quickly to the estate planning options for each type of beneficiary and their minimum distribution consequences. The client has only four options for how he can leave his IRA to any beneficiary. The ABCD approach gets you instantly to the RMD effect of each approach. Here goes:

In the client’s beneficiary designation form for the client’s IRA:

A: The client names the beneficiary directly.

B: The client names a “conduit trust” for the beneficiary.

C: The client names a see-through accumulation trust for the beneficiary.”

Finally, on a personal note, Phil Schaap has passed away. You may ask, “Who?” If you do, then you are not a fan of American music. He was the great historian, producer, promoter, and raconteur of America’s one great contribution to world culture, Jazz. Every morning, for almost 50 years, Phil would hold forth on WKCR on the music of Charlie Parker. The show was called Bird Flight. I hope his alma mater, Columbia, that sponsored his radio show has an archive of his broadcasts. He was a recipient of the 2021 NEA Jazz Masters honor. He should have been honored much earlier. This link to a short video from Jazz at Lincoln Center, with which he was long associated, is worth your time. RIP, Phil, and thanks, Jazz at Lincoln Center.

 

While the producers of the television show Jeopardy are trying to find a replacement to the late Alex Trebek (your writer is old enough to remember the original host Art Fleming), a popular category of the game show provides the title for this week’s collection of trusts and estates related news, Potpourri.

  1. What is an RMD and How Do I make a mistake with it? Happily for your writer, there is little need for a deep knowledge of the intricacies of qualified retirement plans, IRA accounts, income tax deferrals, and required minimum distributions when among my colleagues is an acknowledged master of the relevant arcana, Victor Finmann. Nonetheless, this headline caught my attention as someone in constant need of fresh content for this blog, “84% of Retirees Are Making This RMD Mistake.”

This recent article from Yahoo Finance discusses the RMD mistake most people are evidently making: Yahoofinance.com

From the article:

“An RMD [as in ‘required minimum distribution’ – there are severe income tax consequences for not taking them] is the minimum amount the government requires most retirees withdraw from their tax-advantaged retirement accounts at a certain age. In 2020, the RMD age was raised from 70.5 to 72. . .

“Retirees’ prudence surrounding withdrawals may be misguided, though.”

“The RMD approach has some clear shortcomings,” JPMorgan Chase’s Katherine Roy and Kelly Hahn wrote. “It does not generate income that supports retirees’ declining spending in today’s dollars, a behavior that we see occurs with age. In fact, the RMD approach tends to generate more income later in retirement and can even leave a sizable account balance at age 100.”

The article may be useful for retirees in planning their financial needs as they get even older. As always, consult a professional before making any decision.

  1. What happens to my digital data, music, and pictures when I die?

This recent article from AP News asks the increasingly important estate planning question: “Who gets the keys to your digital estate?” APnews.com

“In the past, your executor — the person entrusted with settling your estate after your death — probably could have figured out what you owned and owed by rummaging through the papers in your filing cabinet and the bills in your mail, notes Sharon Hartung, the author of two books for financial advisors, “Your Digital Undertaker” and “Digital Executor.” That’s no longer the case.

“Because our digital assets tend to be virtual in nature, an executor is not going to find them in a search of our home office,” Hartung says. “We’re going to have to leave some additional instructions on what we’ve created and how the executor is supposed to get access.”

Digital assets have become a major element in a comprehensive estate plan. New York has enacted a new set of laws to deal with these matters. The law is found in Article 13-A of the Estates Powers and Trusts Law. To give an example of the kinds of issues that may arise, see the link below to the Serrano case from New York County. It is a very clear analysis of the new law and its limitations. Most of us are not Bitcoin billionaires, but most of us probably have a substantial number of family pictures on our electronic devices, not to mention our iTunes music library (which presents a whole set of different issues about what constitutes ownership).

In sum, it is well worth your time making known in an effective way (either in your Will or in conjunction with your internet platforms and their individual requirements) how these assets are to be handled when you depart for that great hard drive in the sky.

Matter of Serrano:

Casetext.com

 

Dorothy Parker is known for having been a prolific writer and poet.  She was born in 1893 and died in 1967.  She is famous for her satirical style and biting wit.  She was a member of the legendary Algonquin Round Table, a group that included Robert Benchley, an American humorist, and Robert E. Sherwood, an American playwright and screenwriter, both renowned in their own right.

Ms. Parker was known for her sardonic wit.  One merely has to search her name on the Internet to find numerous quotes that fall into that category.  For instance, she is quoted as saying, “That would be a good thing to cut on my tombstone:  Wherever she went, including here, it was against her better judgment.”  That quote seems appropriate for this Blog entry.

Ms. Parker bequeathed her estate to Martin Luther King, Jr., and upon his untimely death, to the NAACP.  Ms. Parker was cremated.  But, alas, she left no instructions about what she wanted done with her ashes.  At first, they were unclaimed.  In 1973, they were sent to her attorney’s office.  Her ashes remained in a file cabinet belonging to her attorney’s colleague until 1988 when the NAACP claimed them.  The NAACP buried them in a garden outside of its Baltimore headquarters and dedicated a lovely plaque.  One line of the plaque states, “For her epitaph, she suggested, ‘Excuse my dust.’”  Fitting.

A couple of years ago, when the NAACP moved its headquarters into the City of Baltimore, and was planning another move, to Washington, D.C., the subject of Ms. Parker’s ashes arose.  What was to become of them?

Well, by now, Ms. Parker’s relatives opined that the ashes should be moved to the family plot in Woodlawn Cemetery in the Bronx.  After all, although she was born in New Jersey, she considered herself a New Yorker.  In August 2020, the urn containing her ashes was exhumed and re-buried in Woodlawn Cemetery, presumably Ms. Parker’s final resting place.  The memorial was grand, befitting a woman of such renown.  A headstone was erected.  Her fifty-three-year journey was over.

What is the moral of this story?  Is there a moral?  Not really, but a lesson to be learned to avoid this type of situation is to execute as part of your estate planning a simple document called an “Appointment of Agent to Control Disposition of Remains.”  In that document, you can designate an agent to control the disposition of your remains and specify any special instructions about them, such as whether you want to be cremated or buried and, if so, where.  Of course, the document becomes operative only upon your death and can be revoked at any time prior to then, assuming you have the mental capacity to do so.

With all Dorothy Parker’s writings, just one more would have avoided having to “[e]xcuse [her] dust” as it traveled about for more than fifty years.

 

Daniel Craig is a prominent actor, one of the most recent incarnations of  the James Bond franchise. Mr. Craig made headlines recently with his announcement that he finds that “inheritance is distasteful.” He plans to give little if anything to his children and the rest to charity. Shocking. Positively shocking? No, a charitable disposition is to be lauded and it is hard to imagine that the actor’s children will be left impoverished

Why did Daniel Craig feel the need to make this statement? Most people prefer to tend to their financial and family affairs privately.  Perhaps it is an example of “virtue signaling” that is prevalent among the celebrities of the world who may be embarrassed by their wealth. It calls to mind a witticism of the late playwright George Bernard Shaw, “Money is not the root of all evil. The lack of money is the root of all evil.” Pulling Shaw out of thin air serves an ulterior motive, it gives your writer the chance to recommend two great movies made from Shaw plays that star the incandescent and underappreciated Wendy Hiller – Major Barbara and Pygmalion. The latter was made into the classic musical My Fair Lady. A musical comedy based on the class struggle? Who would have thunk it? Ironically, both Pygmalion and My Fair Lady ended as Shaw never intended. In the play, Eliza walks out on Henry Higgins, “If I can’t have kindness, I’ll have independence,” she declares. Then, according to Shaw’s final stage direction, Eliza “sweeps out.” So, perhaps there is a link between my digression to Mr. Shaw, the movies, and Mr. Craig’s pompous pronouncement. “That’s Entertainment.”

Good luck, Mr. Craig. If you are serious about your plans then be sure to make the arrangements now. There are a large number of planning techniques available that will accomplish your goals now and still provide for your children. If you leave it to your Last Will and Testament to accomplish, then take care that it is safely stored in a place where your children will not find it. And if you are adamant about disinheriting them, take the proper steps to assure your charitable beneficiaries have little to fear from the litigation your children will probably commence. Just saying.

The Telegraph: Daniel Craig Shuns Quite Distasteful Inheritance Children

Newsweek: Daniel Craig Won’t Be Leaving Inheritance

Page Six: Daniel Craig Won’t Leave Inheritance To Kids

 

 

Last week we introduced the story of a battle over a portion of the Walt Disney fortune. His grandson is challenging the sale of a ranch in Wyoming by the trustees of a family trust. The article reporting the story contained a number of questionable statements that might be worth reviewing if only to illustrate some points of trust law and empathize with the difficult job of a trust officer. (See the link below to the original article.)

 “Trustees for Bradford Lund, the grandson of legendary animator and producer Walt Disney, have reportedly negotiated the sale of a family ranch outside Jackson against Lund’s wishes.”

The trustees are bound by a fiduciary duty to all the trust’s beneficiaries, a group that may include many others aside from Brad. Hence, his wishes to keep the ranch is not dispositive and may violate the trustees’ duty to other beneficiaries.

“For months, Lund has been locked in a legal battle with his own trustees over Eagle South Fork, the 110-acre ranch in Teton County left to Lund and his twin sister, Michelle, by their father.”

The sentence is contradictory. It displays a common misunderstanding of trusts. Assuming the governing law is similar to New York’s, then a trust may be the legal owner of the ranch while the beneficiaries are the beneficial owners. While the trust may be the legal owner of the ranch, the trustees hold it in a fiduciary capacity for the benefit of the beneficiaries. In fact, if this were the only asset of the trust and the beneficiaries relied on the trust for income, then Brad would be complaining of the trustees violating their duties under the Prudent Investor Act (or its local equivalent) in failing to make the trust assets diversified and productive for his living expenses. Can Brad challenge the sale? Sure, perhaps the trust instrument stipulated that barring extenuating circumstances the ranch was to remain in the trust and enjoyed by family members for years to come. After all, who among us would not like to live on ranch in Wyoming on a trout stream?

“In January, trustees told Lund he could pay just over $34 million (which they referred to as a “discounted price”, despite the residential appraisal of his portion of the land coming in at under $10 million) to retain ownership of his half of the ranch. Michelle Lund was reportedly not interested in keeping her share.”

Wait a minute, something does not add up here. The property was set to sell for $35 million by the trustees to a third party. Assuming (a big assumption) Mr. Lund and his sister Michelle are equal beneficiaries of the trust, on both the income and principal side, and therefore equal ultimate owners of the trust’s assets, then the trustees would be free to sell the ranch to Brad for its net fair market value (whatever that may mean under the circumstances) and credit him for his share of the equity. Valuation disputes are always difficult to litigate, even at these high values, because they involve expert testimony and, as all litigators know, one can get an “expert” to testify that up is down or that down is up.

“Lund’s legal team argues he shouldn’t have to pay out of pocket for property already owned by his own trust — a trust that, by law, is supposed to act according to his interests.”

Maybe yes, maybe no. They may be other family members whose interests in the trust do not coincide with Brad’s. The trustees must steer a course of undivided loyalty to all beneficiaries of the trust, both present beneficiaries and future ones as well. If Brad’s conduct is found to be unreasonable and contrary to the wishes of the other beneficiaries, then he could (in New York) be made to pay not only his own legal fees but to have the trustees’ legal fees come from his share of the trust estate.

“The letter says the trustees don’t expect the sale to be final until this fall, and an affidavit ordered by Lund’s team has them under oath that the sale won’t close until September. If the sale goes through before then, the trustees could be guilty of perjury.”

Bwa hah hah hah . . . That’ll be the day.

“According to court filings, the trustees are set on having the case heard in a Los Angeles court out of convenience for them. But Lund’s legal team argues it should be heard in Wyoming, where the ranch is. A motion to bring the case to Wyoming was denied by a judge this week.”

The issue of jurisdiction and the issue of venue are different concepts in the law and it is impossible to say in this instance who is right and who is wrong. While the instrument that created the trust may choose to have a particular state’s law govern the relationship, that does not mean that the choice of law in one state is the preferred or even the proper venue to bring the proceedings. Perhaps the real issue here is a tactical one. The trustees want to litigate where they have home field advantage (of convenience only, of course) and Brad vice versa.

“If the sale does go through, the trustees have indicated they’ll receive a 2% “marketing fee” for facilitating the deal. According to Chris Hawks, a Jackson lawyer representing Lund, that’s highly unusual.”

No, no they won’t, at least under New York law. The trustees are already compensated by a commission (in New York, it is statutory and for a corporate trustee it is according to a schedule set by the trustee) and an added sales commission on the sale of a trust asset would be, in New York,  “self-dealing,” an egregious breach of a fiduciary’s  duty.

“Aside from the litigation over the ranch, Lund has also petitioned the Los Angeles County Probate Court to remove his team of trustees from their positions, citing a pattern of breaches in their duties to him as the trust’s beneficiary.”

Removal of trustees – easy or difficult? The courts in New York usually give great deference to the choice of fiduciaries made by a testator (for an executor) or a grantor (for a trustee). Nonetheless, the court has the power to remove a fiduciary for a variety of causes ranging from misconduct to (in rare cases) extreme hostility between the beneficiary and the trustee.

“He has struggled to access inheritance payments that have been withheld for more than 15 years, as trustees claim he’s mentally incompetent to receive the money. Lund, now 50, was meant to receive payments of approximately $20 million every five years between his 35th and 45th birthdays — meaning he’s out around $60 million dollars in total.”

Wait! What? If the trust requires said payments, they cannot be withheld. If the trustees believe their beneficiary is incompetent, they have a remedy that corresponds to their duty, one similar to a guardianship in New York but they cannot do what they are said to have done. That being said, why is there even a dispute over the ranch that must be generating huge legal fees? (One of Brad’s attorneys is Washington political figure Lanny Davis.) The trust could have made a distribution in kind to Brad of the net value of the ranch in lieu of one or more of those large distributions. I hope there is more to the story than being reported.

The article:

Casper Star-Tribune Disney Trustee