Archive for the ‘Wills, Trusts, and Estates’ Category
posted by Frank Pasquale
I was recently reading a Money Laundering Threat Assessment (from 2005), and the following lines came up on p. 49:
[T]he trust laws of some jurisdictions have aided money launderers in their use of trusts to conceal identity and to perpetrate fraud. In certain jurisdictions, such as the Cook Islands, Nevis, and Niue, the trust laws no longer require the names of the settlor and the beneficiaries to be placed in the trust deed, permit settlors to retain control over the trust, and allow trusts to be revocable and of unlimited duration.
My question is: why is this even called a trust? Shouldn’t it bear some other name? At least Liechtenstein has the decency to call its creepy money-hiding methods “Anstalts.”
The larger consequences here are terrifying. The wealth defense industry has created an environment where all manner of swindlers, thieves, and terrorists can hide ill-gotten gains. As a forthcoming University of Pennsylvania piece by Shima Baradaran, Michael Findley, Daniel Nelson, and J.C. Sharman puts it:
On the whole, forming an anonymous shell company is as easy as ever, despite increased regulations following 9/11. The results are disconcerting and demonstrate that we are much too far from a world that is safe from terror.
I nevertheless expect that most of the centomillionaire and billionaire class will continue to fight efforts to crack down on shell companies and trusts, and will find ample “help” to argue their case. Perhaps someone will even pen an ode to financial privacy. Meanwhile, we have no idea what taxes may be due from trillions of dollars in offshore wealth, or to what purposes it is directed.
Expect to hear many more stories on this issue. The stakes could not be higher. As Liu Xiaobo has stated, corruption is the “officialization of the criminal and the criminalization of the official.” Persisting even in a world of brutal want and austerity-induced suffering, tax havenry epitomizes that sinister merger.
posted by Meredith Render
I am grateful to have been invited by Danielle to join the esteemed group of guest bloggers this month at Concurring Opinions. This opportunity arrives at an interesting moment in my scholarly life. For the last few years I’ve been thinking a great deal about what “ownership” means – both when we use the term colloquially and when we mean it to connote a term of art. It is, I think, a deceptively simple idea at the core (at least on the surface of the thing). At the core, “ownership” seems to convey the idea that an “owner” may exercise a unique degree of dominion or control over a valuable entity, and that control is backed by the force of law. By some lights, the concept of “ownership” primarily articulates a relationship between the “owner” and those that are obliged to respect her ownership prerogatives (i.e. everyone else) rather than a relationship between the owner and the valuable entity itself. Others adopt a different view. But what has fascinated me the past few years is the constitutive relationship between our concept of “ownership” and the status designation of “owner.” Is “ownership” a capacity? Is it a uniquely human capacity – i.e. does it require sentience, or perhaps some degree of agency? Who (or what) is a capable of being an “owner”?
I first became interested in this question in the context of contemplating our capacity to own our own whole and living bodies, a contemplation that is detailed in my piece The Law of the Body, which is forthcoming in the Emory Law Review. In that piece, I passed upon the question of whether a person has the capacity to own her own living body – whether it falls within the extension of our concept of “ownership.” This question ostensibly raised subject/object problems (i.e. can one both be the subject (owner) and object (owned)) as well as a number of other interesting (at least to me) issues.
In particular, the idea of owning oneself raises deeper questions about ownership as a capacity. In this vein, I have read with great interest Taunya Bank’s recent posts (also here) about how “human beings can lose control over what happens to their bodies (and body parts) during life as well as after death.” Professor Banks touched upon two of the more salient (and to some degree, vexing) points about ownership (including body ownership): control and death. In almost any plausible understanding of the concept of “ownership,” it connotes some degree of control. There are two ways to think about this control. It may be that ownership refers only to legally sanctioned control. On the other hand, it may refer to “control” in the sense of the capacity to make decisions about the use or disposition of an entity. While these two senses of “control” largely overlap, they are not coterminous.
posted by Naomi Cahn
Hendrik Hartog, Someday All This Will be Yours: A History of Inheritance and Old Age (Harvard University Press 2012)
Dirk Hartog’s Someday All This Will Be Yours: A History of Inheritance and Old Age is a book about story telling in the law, as well as a rich description of work within families, of the complex relationship between labor, money, and love. It is also a new and critical (in several senses of that word) text for the developing field of elder law. Elder law as a discipline that is just now coming into its own, an event that, not coincidentally, is occurring as the baby boomers begin to hit retirement age and as the sandwich generation has become increasingly vocal. More than half of all law schools now include, in their listed curriculum, a course on elder law.
Hartog, who is the Class of 1921 Bicentennial Professor in the History of American Law and Liberty at Princeton University, is also the author of Man and Wife in America (2000), which served as a legal history of marriage in America from the late 18th century through the middle of the 20th century, and was based on studying how ordinary men and women attempted to use the law either to escape their dissatisfying marriages or to seek shelter through the status of marriage. Someday All This Will Be Yours does something similar, also arguably within the context of family law, by studying how, from the mid-nineteenth to mid-twentieth century, ordinary men and women arranged for their own care as they aged, and then how their alleged caretakers attempted to use the law to make good on these arrangements. Aging individuals used the promise (in these cases, the illusion) of inheritance to induce the needed caretaking at a time when there was no default of Social Security and Medicaid and before the widespread development of pensions. The book analyzes the resulting conflicts about property inheritance, using an extensive database of more than 200 cases from 19th- and 20th-century New Jersey courts as well as more extensive trial transcripts in 60 of those suits. Hartog closely, carefully, and painstakingly examines these cases for what they show about changing patterns in care for the elderly, parent-child relations, the tensions between family and commodification, and the development of the common law outside of precedent-setting and frequently cited cases. As he points out, the cases involve two different “shadowy figures within family la as it has ordinarily been conceived: the adult child and the elderly person.” (p. 21)
posted by Sarah Waldeck
In the last week I’ve come across two teaching resources that are worth sharing. As the headline suggests, the first is about the Barnes Foundation, which closed the doors to its original home in Merion, Pennsylvania at the end of June. For years I’ve been urging my Estates and Trusts students to visit the Barnes before it is “too late,” by which I meant “before it moves to downtown Philadelphia.” I did this partly because I thought one needed to see the Barnes to fully understand the ongoing battle over its future, and partly because the Barnes was really, really cool. Now that it is officially “too late,” I will point them to this 360 degree interactive tour of the Barnes that was put together by the New York Times. Their effort really gives a flavor of the place, although many of us undoubtedly mourn that we’re left with only a computer program.
Next up is something for Property professors: an episode of This American Life entitled “Game Changer.” You can access the episode, which is about drilling for natural gas in Pennsylvania, here. Fast forward to minute 33:30 and soon a reporter will say, “The standoff between [the gas company] and [the town] started with one of the least gripping topics in all of government: zoning.” While the reporter’s explanation of the difference between conditional and permitted uses isn’t any more interesting than what I say in class, the story she tells is much more engaging than anything I’ve previously used to teach zoning. Moreover, the story of the small town that tried to write a zoning ordinance after Big Gas arrived does a better job of driving home the economic consequences of zoning than anything I’ve encountered to date.
posted by Sarah Waldeck
A while back, I asked readers who were involved with family cottages (or summer homes or cabins or whatever you want to call them) to tell me their stories. I was curious about how many generations the property had been in your family; how you handled carrying costs, improvements, scheduling and use; whether your property was governed by a tenancy in common or other legal arrangement; and whether that arrangement was rocky or smooth. Some first-rate sociology had already been done in this area, but I was curious enough to want to supplement with some casual empiricism.
I recently posted the article that grew out of these inquiries on SSRN. Forthcoming in the Notre Dame Law Review, the article discusses how “identity property” is passed along from one generation to the next. Identity property is that which is valued for what it represents about self and family—a sort of ratcheted-down version of Margaret Radin’s “personhood property.” In the absence of more sophisticated estate planning, identity property is often inherited by the decedent’s children, who take as tenants in common. Standard doctrine relies on familial bonds and the unilateral right of partition to mitigate bilateral monopoly problems and to foster cooperation in the management of the children’s common resource. I argue that with identity property, this standard account is often wrong. Because courts favor partition by sale, the exit of one tenant often means that the remaining co-tenants will be forced to sell the identity property. Because the remaining tenants perceive the property as non-fungible, the threat of exit can be powerful enough to exacerbate bilateral monopoly problems and decrease the likelihood of cooperation.
The article makes use of some of the stories that readers of Concurring Opinions told about their family cottages to elucidate how devisees modify the default rules of a tenancy in common, particularly the right of partition. What I found most interesting about these stories was how willing some individuals were to radically restrict their right of exit from the co-tenancy and the corresponding belief that a strong right of exit would ultimately work against their collective interest. The Article ultimately argues that when it comes to identity property, the right of exit through partition should not be as absolute as current law allows.
For those who are interested in learning more, the abstract and article are available here.
p.s. And for those of you who are gearing up for another season in property that is jointly owned with other relatives, rest assured that not one single person who responded to my request reported an entirely smooth arrangement!
posted by Frank Pasquale
Her name is Conchita, a thin, spa-loving, diamond-draped heiress, and she’s at the center of one of America’s nastiest estate battles. She is also a dog—a chihuahua who was the favorite of the late Miami heiress Gail Posner, a daughter of the corporate takeover artist Victor Posner. When Ms. Posner died in March at age 67, Conchita and two other dogs inherited the right to live in her seven-bedroom, $8.3 million Miami Beach mansion, their comfort ensured by a $3 million trust fund.
The story reminded me of the following passage from Korzeniewicz & Moran’s 2009 book, Unveiling Inequality:
The magnitude of global disparities can be illustrated by considering the life of dogs in the United States. According to a recent estimate . . . in 2007-2008 the average yearly expenses associated with owning a dog were $1425 . . . For sake of argument, let us pretend that these dogs in the US constitute their own nation, Dogland, with their average maintenance costs representing the average income of this nation of dogs.
By such a standard, their income would place Dogland squarely as a middle-income nation, above countries such as Paraguay and Egypt. In fact, the income of Dogland would place its canine inhabitants above more than 40 percent of the world population. . . . And if we were to focus exclusively on health care expenditures, the gap becomes monumental: the average yearly expenditures in Dogland would be higher than health care expenditures in countries that account for over 80% of the world population. (xv)
posted by Sarah Waldeck
Lawrence M. Friedman, Dead Hands: A Social History of Wills, Trusts, and Inheritance Law (Stanford University Press, 2009) 230 pp.
I opened Lawrence Friedman’s Dead Hands: A Social History of Wills, Trusts and Inheritance Law already sold on his central premise: “[b]ig changes in the law of succession necessarily reflect big changes in society” and “smaller, more technical changes” can be just as interesting to those who care about “social meaning and the impact of the law.” My predisposition to agree with Friedman may explain why I was both admiring and disappointed as I read the book.
Let’s begin with the admiration. Friedman deftly weaves explanation of technical legal doctrines, case summaries, and description of the historical and sociological changes that have prompted reform of estates and trusts law. His chapter on the rule against perpetuities illustrates the point. Readers get a two-page comprehensible summary of the rule’s operation and idiosyncrasies, a brief explanation of various reforms, and the observation that reforms accept the rule’s underlying premise that dead hand control must eventually end. Then Friedman discusses the move to outright abolition of the rule, notes how banks anxious to attract trust monies lobbied for abolition, and seizes the opportunity to mention asset protection trusts. Friedman next writes that abolition and asset protection trusts would not be possible “without a bigger, broader change in the culture,” namely (quoting Joel Dobris) “we like rich folks these days.” Friedman then discusses how culture has changed in ways that make ordinary people feel as though they can relate to the rich. (One might wonder whether this affection for the wealthy will survive the Great Recession.) Last, Friedman speculates about whether abolition of the rule or asset protection trusts pose any real danger to the polity and concludes that neither should keep us up at night. I’m breathless just thinking about all that Friedman manages to cover in this 14-page chapter. Indeed, the same can be said about the entire book. Friedman traverses a tremendous amount of ground in 230 pages: intestacy, wills, will contests, will substitutes, dynastic and caretaker trusts, charitable giving, taxes, and of course the rule against perpetuities. Friedman touches on everything that is likely to be covered in an introductory Estates and Trusts course, plus more.
So there is the primary source of the admiration. What about the disappointment? Friedman focuses on the adoption of various reforms and shows how the reform is reflective of broader change. For example, we would not have seen the decline of dower and the fall of the doctrine of coverture without profound changes in societal conceptions of what it means to be a “wife” or “husband.” Similarly, Friedman sees “a trend, or at least the beginning of a trend” as states “respond to changing times” by extending intestacy rights to domestic partners. But the law of estates and trusts does not always follow a linear path forward; sometimes it sputters and stalls. This kind of gear grinding can be just as revealing about the connection between law and society as when reform is achieved. For instance, there was once widespread anticipation that many states would adopt a community property system. Today just nine states have done so. The 1990 Uniform Probate Code (UPC) has an elective share mechanism designed to reflect the principle that all property earned during the marriage belongs equally to both spouses. But some states that otherwise embraced all or part of the UPC have declined to adopt its elective share provisions. The lukewarm reception for community property principles says quite a lot about definitions of “earn” and “own” and societal conceptions of marriage. Friedman spends very little time on the stalls and sputters, even though they too reflect broader societal trends.
The second reason for my disappointment is probably unfair, as I suspect that I am not Friedman’s target audience. Dead Hands is almost entirely descriptive, albeit sometimes brilliantly so. It provides a lens through which to view the law of succession, but is largely agnostic with respect to the content of the law or its future direction. Those who are well-versed in the law of succession will likely already be familiar with much of what Friedman writes, even if they have not yet seen it so nicely explicated. In other words, estates and trusts experts are unlikely to find much in Dead Hands that is truly new to them.
Dead Hands, however, will be useful to at least two audiences. The first is the contingent of property and family law professors who are “drafted” each year to teach Estates and Trusts and who have not yet had a chance to discover why it is one of the most interesting courses in the curriculum. Dead Hands provides a framework for organizing an introductory course and for helping the students conceptualize the material. The second audience who will benefit from this book is law students, both those who want a clearer sense of the big picture in estates and trusts law and those who are interested more generally in law and society. I may add the book as recommended reading in my introductory Estates course; my Fall students can stay tuned.
posted by Sarah Waldeck
Yesterday’s New York Times had a disturbing article about how successful collection agents “trained in the five stages of grief” are in collecting the debts of the deceased. These agencies aren’t operating through the probate process. Instead, they are collecting from the deceased’s relatives, who have absolutely no legal obligation to pay the debt. It’s true that for some of these relatives, the amount of their inheritance would be reduced by whatever was owed to the creditor. It’s also true that some individuals may believe that they are honoring the memory of the deceased by settling all outstanding obligations. But,
[S]ome of those who pay a dead relative’s debts are unaware they may have no legal obligation.
Scott Weltman of Weltman, Weinberg & Reis, a Cleveland law firm that performs deceased collections, says that if family members ask, “we definitely tell them” they have no legal obligation to pay. “But is it disclosed upfront — ‘Mr. Smith, you definitely don’t owe the money’? It’s not that blunt.”
Well, it should be. And apparently I’m not the only one who thinks so. The Times article is currently number 1 on the “most-emailed “ list and many of the more than 200 reader comments are calling for regulation. You only have to read a couple of accounts of an unemployed son-in-law agreeing to assume credit card debt that is not his own or of a widow struggling to pay $5 a month before deciding that such regulation is already past due.
posted by Kaimipono D. Wenger
Rajo Devi became the oldest woman in recorded history to ever give birth on November 28, when the 70-year-old delivered a baby girl in India. . . . The baby was conceived through the use of a donor egg that was injected with Ms. Devi’s 72-year-old husband’s sperm. . . . The record age for giving birth has inched up over the years (well, it’s the record if you don’t count Sarah and Abraham in the Bible) passing through the sixth decade — from 62 to 66 to 67 — an occasional woman at a time.
How old was Elizabeth Jee? She was seventy. Modern medical technology has finally brought us the day that Jee makes some sense. If we want to make sure that there’s no vesting outside of lives-in-being-plus-21, then maybe we do need to strike down poor Elizabeth’s gift.
(Of course, common-law RAP has been abolished, or partially superseded by USRAP, in a large number of U.S. jurisdictions. But that does not mean that RAP is dead. USRAP incorporates the common law formulation in one of its prongs, which really only makes the issue more complicated — because now you may have to check both the common law prong and the wait-and-see prong.)
posted by Sarah Waldeck
Jeffrey Toobin has written a must-read article about a $12 million trust that Leona Helmsley established for the benefit of her dog, Trouble. I usually cover the topic of honorary trusts quite quickly, but this semester I’m going to slow down a bit. If nothing else, Trouble’s trust should force students to contemplate the extent to which they are committed to dead-hand control. Beyond the obvious concerns about spending millions on a single dog, as Toobin points out, Trouble herself probably would have been happiest if she had simply been adopted by a dog-loving family.
As an aside, we all know how prickly adult children can get when a step-parent receives the bulk of the decedent’s property. But imagine if the children are disinherited because of a dog . . . .
posted by Dave Hoffman
In today’s episode of Law Talk, we hear from George R. R. Martin, the prolific author of the “high fantasy” series The Song of Ice and Fire. George has also been a screenwriter and Hollywood producer, an editor, a chess tournament director, a union leader, and a volunteer media director for the Cook County Legal Assistance Foundation. As I’ve previously written, George is a leader in the movement to bring a degree of realism to fantasy, and he has been dubbed (by Time Magazine) “The American Tolkien.”
George and I talked for almost an hour, on topics ranging from the role of law in fantasy books (starting 3.5 minutes in); the limits of magic as a plot device (20 minutes in); law professor Robert Cover (22 minutes in, brought up by me, to my shame); why most fantasy novels seem to be set in merry olde england (28 minutes in); fan fiction and copyright infringement (31minutes in); how writing sci-fi is like selling music, and whether he likes Radiohead’s distribution model (35 minutes in); how to keep control over your work when it is transformed into another medium (39 minutes in); and inheritance law (toward the end).
George is a fantastically interesting, well-read, thoughtful guy, and I think you will enjoy this interview quite a bit. (If you aren’t a fan of the books, ignore my constant, irritating, references to characters you have never heard of.) Finally, if you want to learn more about George, visit his blog (which he says isn’t one) and join the hordes of folks waiting for the next installment of the series, A Dance With Dragons, to ship.
Missed the link? Here’s the interview again. Warning: it’s a big file!
For other posts in the “Law and Hard Fantasy” Interview Series, see:
December 18, 2007 at 12:26 pm Posted in: Book Reviews, Contract Law & Beyond, Culture, History of Law, Intellectual Property, Law and Humanities, Law Talk, Media Law, Sociology of Law, Wills, Trusts, and Estates Print This Post 30 Comments
posted by Deven Desai
Adam Liptak has a nice piece in today’s New York Times about the growth of left-over money from class action suits. Judges are finding that after a case is complete there is often a large pool of money that is unclaimed, and the judge must then decide what to do with the money. In one case involving models the judge designated an eating disorder and a drug abuse charity as recipients of the money. The problem is that the Second Circuit and some academics think the plan to use cy pres as a way to dispose of the money has flaws. Judges are being lobbied for money which raises corruption concerns according to Professor Issacharoff of NYU. As Dean Levi of Duke notes, this role “is not a true judicial function and can lead to abuses,” and requests to give an instiution money as a cy pres award put judges in “uncomfortable” positions. The awards can be large. For example, according to the article, George Washington University Law School and The Illinois Institute of Technology have each received $5 million from law suit settlements. Whether judges are best-placed to dole out the money might merit some research and writing. In addition, some argue that the money must go to plaintiffs. Yet, if only a handful of plaintiffs end up filing the paperwork and receive a windfall the system is apparently flawed again. Nonetheless perhaps allowing such windfalls will provide incentives to others to claim their otherwise small payments. It seems that the system fails to provide a good way to get the money to the plaintiffs which alone suggests that judge should not be in this position in the first place. That alone might be worth some writing and thought.
posted by Dave Hoffman
Divorce is catastrophic: it increases the rates of suicide and heart disease; can decrease overall well-being for both parents and children; and it significantly hurts the financial position of the parties, especially women.
But unlike almost all other catastrophic risks that we face, the costs of divorce can not be fully insured. Because of statutory requirements that limit insurance coverage to “fortuitous events”, and the perception that divorce is elected (at least by one of the parties to the marriage), you can’t buy a policy that will pay you for breach of the marriage contract. Such is the law.
There has been significant enthusiasm for the concept. As some noted, you could imagine such insurance having a collateral-benefit: “risk matching” your perspective spouse (or even a first date) based on their premiums. But when you think about the concept a little bit, obvious objections present themselves:
posted by Frank Pasquale
As tax day approaches, Sheryl Sandberg of the Google Foundation has some sobering insights on the “charity gap”–how small a percentage of donations actually help the disadvantaged. “[O]nly 8% of donations provide food, shelter or other basic necessities. At most, an additional 23% is directed to the poor.” International deprivation is not a major concern of most donors; “The most generous estimate shows that only 8% of U.S. individual donations supports international causes of any kind.”
Another article, on the prevalence of organ markets, shows how this persistent inequality affects the global supply of and demand for body parts. It pleads for another type of giving:
Fewer than 40 percent of Americans have signed organ-donor cards, and only about half of their families consent to the donation of a loved one’s organs. . . . Many assume that if they don’t supply the organs, somebody else will. But [even if that is the case,] that somebody won’t be a corpse. It’ll be a fisherman or an out-of-work laborer who needs cash and can’t find another way to get it. The surest way to stop him from selling his kidney is to make it worthless, by flooding the market with free organs. If you haven’t filled out a donor card, do it now.
Both quotes bring to mind a recent quote I’d read, reportedly from an upcoming book by Pope Benedict XVI:
Confronted with the abuse of economic power, with the cruelty of capitalism that degrades man into merchandise, we have begun to see more clearly the dangers of wealth and we understand in a new way what Jesus intended in warning us about wealth.
As Thomas Berg has blogged, “great disparity seems likely to make it harder for people to practice the value of solidarity, that is, ‘see[ing] the “other”. . . not just as some kind of instrument, . . . but as our “neighbor,” . . . to be made a sharer on a par with ourselves in the banquet of life to which all are equally invited by God.’” (citing Solicitudo Rei Socialis, para. 39).
I look forward to seeing what the distinguished legal scholars attending the upcoming Class Crits Workshop (hat tip: Feminist Law Profs) at the SUNY Buffalo Law School have to say on these and related topics. (Note–they are still accepting proposals until April 23).
posted by Kaimipono D. Wenger
Anna Nicole Smith’s will is recently available online at various venues, such as CNN. The will, in interaction with the facts, raises a number of questions. It’s practically a real-life law exam. This post will discuss a few of the many issues raised by the will.
This discussion is limited in a number of important ways. For example, there are messy jurisdictional questions; there may be questions about the existence of other potential heirs (an interesting possibility, raised in this news article); it seems not outside the realm of possibility that a later will or codicil will surface. There are also a whole array of questions falling under the broad umbrella of undue influence or related impropriety. Conspiracy theorists are already suggesting that the lawyer, Howard Stern, orchestrated a complicated web of murder. Even less exotic and more mundane possibilities, like plain vanilla undue influence, could still drastically affect the distribution. Finally, there are big question marks relating to the value of the estate. The $80 million question is the litigation over the estate of Ms. Smith’s late husband. The ultimate value of her estate could vary greatly depending on how those issues are ultimately resolved.
But even setting aside those questions, the will still leaves a number of interesting issues. Questions that come out of the will itself include whether Anna Nicole Smith’s daughter will be treated as a pretermitted child, and the question of how to treat the lapsed bequest to Anna Nicole Smith’s son, Daniel. We can frame the query in a way that highlights these sub-issues. In fact, it makes quite a nice law-exam-style question.
“Anna executes a will in California in 2001. She leaves her entire estate to her son Daniel, to be held under various trust provisions. She also explicitly disinherits any other relatives, as well as any future spouses or children she might have. Her will contains no residuary clause. In 2006, Daniel dies suddenly, leaving no issue. Later in 2006, Anna’s daughter Dannielynn is born. In 2007, Anna dies. How is her estate distributed under California law?”