Law Commons^™

An Historical And Empirical Analysis Of The Cyprès Doctrine, Christopher J. Ryan

ACTEC Law Journal

Cy près is a pivotal doctrine in estate law and indeed American jurisprudence. It places courts in the shoes of settlors of charitable trusts to discern not only their original intent but also affords the possibility of continuing the material purpose for which settlors created enduring legacies of philanthropy benefitting society. For this reason, it may well be that no other legal doctrine is as closely tied to the interests of the individual and the collective as cy près. And my first-of-its kind study puts the cy-près doctrine front and center, while providing three major contributions to the field. First, …

Trust Alteration And The Dead Hand Paradox, Jeffrey N. Pennell, Reid Kress Weisbord

ACTEC Law Journal

Trusts are popular instruments for wealth transmission because they can be crafted to suit almost any imaginable estate planning goal that is not contrary to public policy. With the abrogation of the Rule Against Perpetuities in most states, settlors may impose trust terms that will be legally enforceable for scores of future generations, if not in perpetuity. Long-term and perpetual trusts, however, present a paradox of dead hand control, because the specificity and the durability of settlor-imposed restrictions tend to be inversely related. As donative preferences become increasingly specific and restrictive, trusts become less durable with the passage of time, …

A Defense Of Perpetual Trusts, Danny Fein

ACTEC Law Journal

This essay emphatically defends perpetual trusts and recent state-level repeals of the Rule Against Perpetuities. The scholarly debate over the category of perpetual trusts has focused exclusively on one type—the Dynasty Trust—which is designed to perpetuate wealth within families by exploiting a tax loophole. The unsavory nature of both Dynasty Trusts and the legal reform movement that spawned them has blinded critics to a universe of perpetual trusts that are socially beneficial. Previously, new types of trusts that required perpetuity could only achieve it through statutory exemption. Private Foundations and Stewardship Trusts were each granted perpetuity by legislatures. Now that …

Silent Trusts Are Trending: Will They Hold Trustees To Account?, Kent D. Schenkel

ACTEC Law Journal

A common intuition is that easy money creates a disincentive to efforts for personal success. Many trust settlors seem to embrace this view but still wish to provide generously for their families. Enter the so-called “silent trust,” which seeks to moderate the disincentive effect by way of trust provisions that limit or waive notice and disclosure requirements to beneficiaries.

But a fundamental tension plagues these trusts. Beneficiaries need basic information about a trust in order to hold trustees to account. Consequently, traditional trust law provides limits on the degree to which trustees can be silent as respects a beneficiary’s right …

The Uniform Probate Code's New Intestacy And Class Gift Provisions, Mary Louise Fellows, Thomas P. Gallanis

ACTEC Law Journal

Law and society inextricably link family and wealth transmission. An individual’s right to inherit from an intestate decedent depends on whether the individual has a legally recognized familial relationship to the decedent. Similarly, when a class gift in a donative document uses a term of relationship to identify the class members, an individual’s right to share in the gift depends on the legal recognition of the relationship. The enactment of the 2017 Uniform Parentage Act required a revision of the intestacy and class gift provisions of the Uniform Probate Code.

We were the reporters, or principal drafters, of the UPC …

Rethinking The Estate Planning Curriculum, Jeffrey A. Cooper

ACTEC Law Journal

As a result of recent changes in Federal estate tax law, fewer and fewer clients need sophisticated estate tax planning. Many lawyers are thus spending less time acting as estate tax planners and instead deploying different skills and expertise.

In this brief article, I explore the extent to which law schools are rethinking their curricula as a result. The discussion proceeds in two parts. First, I discuss the curricular changes I have overseen at the law school at which I teach, setting out both the changes made and the assumptions underlying them. Second, relying on a brief survey of other …

Foreword: Twenty Years Of The Uniform Trust Code, Jeffrey A. Cooper

ACTEC Law Journal

As we approach the 20th anniversary of the codification of the Uniform Trust Code (the "UTC"), it has been enacted in 35 jurisdictions and remains under consideration elsewhere. It has proven to be both popular and influential, generating spirited debates about issues ranging from ministerial to transformative. It has impacted numerous aspects of trust and estate practice, including estate planning, trust administration, and fiduciary litigation.

This is the foreword to a special issue of the ACTEC Law Journal to be produced to mark the occasion of the UTC’s 20th anniversary. In this very brief work, I provide a quick overview …

Money That Costs Too Much: Regulating Financial Incentives, Kristen Underhill

Indiana Law Journal

Money may not corrupt. But should we worry if it corrodes? Legal scholars in a range of fields have expressed concern about “motivational crowding-out,” a process by which offering financial rewards for good behavior may undermine laudable social motivations, like professionalism or civic duty. Disquiet about the motivational impacts of incentives has now extended to health law, employment law, tax, torts, contracts, criminal law, property, and beyond. In some cases, the fear of crowding-out has inspired concrete opposition to innovative policies that marshal incentives to change individual behavior. But to date, our fears about crowding-out have been unfocused and amorphous; …

Janus As A Client: Ethical Obligations When Your Client Plays Two Roles In One Fiduciary Estate, Karen E. Boxx, Philip N. Jones

ACTEC Law Journal

Is it possible for an attorney to have a conflict of interest when the attorney represents a trustee who is also a beneficiary of the trust? Is that situation similar to having two clients? What if the trustee is not only a beneficiary, but also a claimant against the trust? Since the trustee has three roles to play, is that situation similar to an attorney having three clients? The issue presented by these potential conflicts was one of the most vexing for the drafters of the Fifth Edition of the ACTEC Commentaries. The range of possible approaches goes from a …

Magical Thinking And Trusts, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

At a time of monumental economic inequality in the United States, wealthy individuals and their tax-motivated behavior have come under significant scrutiny from all corners. In 2019, the Supreme Court issued its first major ruling in over sixty years on the state income taxation of trusts. In North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, the Court declined to close what some critics consider to be a major loophole that benefits the trusts that wealthy individuals create for family members. This Article makes two principal claims—one interpretative and the other normative. This Article explains why the …

"Undemocratic" Trusts And The Numerus Clausus Principle, E. Gary Spitko

ACTEC Law Journal

In Democracy and Trusts, Professor Carla Spivack argues that, pursuant to the numerus clausus principle, a court is empowered to impair legislation authorizing a certain trust form where the legislation was not the product of "democratic decision-making." This imaginative claim is predicated upon two antecedent claims. First, Professor Spivack argues that the numerus clausus principle should apply to equitable interests. Second, she argues that the numerus clausus principle does not invest legislatures with the sole authority to determine allowable property forms; rather, courts also have an important role to play in composing the list of property forms. This review essay …

Let My Trustees Go! Planning To Minimize Or Eliminate Virginia And Other State Income Taxes On Trusts (Powerpoint), Richard W. Nenno

William & Mary Annual Tax Conference

No abstract provided.

Let My Trustees Go! Planning To Minimize Or Eliminate Virginia And Other State 12 Income Taxes On Trusts (Outline), Richard W. Nenno

William & Mary Annual Tax Conference

No abstract provided.

Planned Parenthood: Adult Adoption And The Right Of Adoptees To Inherit, Richard C. Ausness

ACTEC Law Journal

This Article is concerned with the effect of adult adoptions on the inheritance rights (in the broad sense of that term) of adult adoptees. The Article contends many adult adoption statutes assume the existence of a parent-child relationship in which the adopter is the "parent" and the adoptee is a "child" even though this is not true of all adult adoption cases. In addition, legislatures and courts frequently fail to differentiate between "quasi-familial" adoptions and "strategic" adoptions, particularly where inheritance rights are concerned.

Portability, Marital Wealth Transfers, And The Taxable Unit, Bridget J. Crawford

Elisabeth Haub School of Law Faculty Publications

Prior to 2011, the most efficient estate tax planning for married couples required a minimal level of asset equalization. In order to take maximum advantage of all existing wealth transfer tax exemptions and credits, each spouse needed to own, in an estate tax sense, enough assets to be able to fully utilize the estate tax credit or applicable exemption. This changed with the enactment of estate tax portability in the Economic Growth and Economic Recovery and Relief Act of 2011, which became permanent under the American Taxpayer Relief Act of 2012. “Portability” refers to the ability of a surviving spouse …

Strange Bedfellows: The Federal Constitution, Out-Of-State Nongrantor Accumulation Trusts, And The Complete Avoidance Of State Income Taxation, Jeffrey Schoenblum

Vanderbilt Law Review

With the maximum rate of federal income tax at 39.6 percent, the Medicare surtax on investment income of 3.8 percent, and some state income tax rates exceeding 9 percent, taxpayers in the highest brackets have been seeking to develop strategies to lessen the tax burden. One strategy that has been receiving increased attention is the use of a highly specialized trust known as the NING, a Nevada incomplete gift nongrantor trust, which eliminates state income taxation of investment income altogether without generating additional federal income or transfer taxes. A major obstacle standing in the way of accomplishing this objective, however, …

Tax Recognition, Barry Cushman

Barry Cushman

This article was prepared for the St. Louis University Law Journal’s “Teaching Trusts & Estates” issue. Many law students take a course in Trusts & Estates, but comparatively few enroll in a class devoted to the federal wealth transfer taxes. For most law students, the Trusts & Estates course provides the only opportunity for exposure to some of the basic features of the estate tax, the gift tax, the generation-skipping transfer tax, and some related features of the income tax. The coverage demands of the typical Trusts & Estates course do not allow for intensive discussion of these issues, but …

Strange Bedfellows, Jeffrey Schoenblum

Vanderbilt Law School Faculty Publications

With the maximum rate of federal income tax at 39.6 percent, the Medicare surtax on investment income of 3.8 percent, and some state income tax rates exceeding 9 percent, taxpayers in the highest brackets have been seeking to develop strategies to lessen the tax burden. One strategy that has been receiving increased attention is the use of a highly specialized trust known as the NING, a Nevada incomplete gift nongrantor trust, which eliminates state income taxation of investment income altogether without generating additional federal income or transfer taxes. A major obstacle standing in the way of accomplishing this objective, however, …

Tax Recognition, Barry Cushman

Journal Articles

This article was prepared for the St. Louis University Law Journal’s “Teaching Trusts & Estates” issue. Many law students take a course in Trusts & Estates, but comparatively few enroll in a class devoted to the federal wealth transfer taxes. For most law students, the Trusts & Estates course provides the only opportunity for exposure to some of the basic features of the estate tax, the gift tax, the generation-skipping transfer tax, and some related features of the income tax. The coverage demands of the typical Trusts & Estates course do not allow for intensive discussion of these issues, but …

A Critical Research Agenda For Wills, Trusts And Estates, Bridget J. Crawford, Anthony C. Infanti

Articles

The law of wills, trusts, and estates could benefit from consideration of its development and impact on people of color; women of all colors; lesbian, gay, bisexual, and transgendered individuals; low-income and poor individuals; the disabled; and nontraditional families. One can measure the law’s commitment to justice and equality by understanding the impact on these historically disempowered groups of the laws of intestacy, spousal rights, child protection, will formalities, will contests, and will construction; the creation, operation and construction of trusts; fiduciary administration; creditors’ rights; asset protection; nonprobate transfers; planning for incapacity and death; and wealth transfer taxation. This essay …

I.R.C. Section 1014(E) And Gifted Property Reconveyed In Trust, Mark R. Siegel

Akron Tax Journal

The taxpayer’s method of property acquisition is significant in determining the proper income tax or adjusted basis in the property. Distinct adjusted basis rules apply to the transferee of property acquired by purchase, gift, and inheritance. A buyer who purchases property for cash receives an adjusted basis in the property acquired equal to its cost. For property acquired by gift, the general rule is that the donee’s adjusted basis equals the donor’s adjusted basis immediately prior to the transfer. A third income tax basis regime applies to the taxpayer who happens to acquire property by inheritance upon the death of …

Regulation Not Prohibition: The Comparative Case Against The Insurable Interest Doctrine, Sharo Michael Atmeh

Sharo M Atmeh

American law requires an insurable interest—a pecuniary or affective stake in the subject of an insurance policy—as a predi-cate to properly obtaining insurance. In theory, the rule prevents both wagering on individual lives and moral hazard. In practice, the doctrine is avoided by complex insurance transaction structuring to effectuate both origination and transfers of insurance by individuals without an insurable interest. This paper argues that it is time to ab-andon the insurable interest doctrine. As both the English and Aus-tralian experiences indicate, elimination of the insurable interest doctrine will have little detrimental pecuniary effect on the insurance industry, while freeing …

Death By A Thousand Cuts: The Rule Against Perpetuities, Angela M. Vallario

All Faculty Scholarship

This article suggests the policy and social justifications against dead hand control far outweigh transfer tax advantages provided to wealthy settlors and the potential revenue expected to be generated by the abolishment legislation. The abolishment legislation may be readily adopted by other jurisdictions in light of the legislatures' failure to recognize the consequences of unlimited dead hand control.

This article recognizes that the Rule is complicated, and Rule violations present harsh consequences for practitioners and their clients. In fact, violations of the Rule, due to its complexity, have been held as an attorney error, not subject to a malpractice claim. …

Planning Opportunities After Chapter 14 (Section 2701 And 2702), Frederic A. Nicholson

William & Mary Annual Tax Conference

No abstract provided.

S Corporation Stock In Trusts And Estates - Preserving The S Election And Other Practical Problems, W. Birch Douglass Iii

William & Mary Annual Tax Conference

No abstract provided.

Disparate Tax Treatment Of Different Types Of Business Organizations: Where Should We Go From Here?, Douglas A. Kahn

Articles

If several persons wish to join together in a common enterprise in order to pool their capital or labor or some of each, they may choose among a variety of available organizational structures that will serve that purpose. The most common entity forms are partnerships (including joint ventures), corporations, and trusts. While, in its typical structure, each of those entity forms has its own distinct characteristics, the structure of such organizations often is modified by agreement so as to adopt attributes of another type of entity. Because of this, the substantive distinction between entity types is blurred.

Taxation Of Distributions From Accumulation Trusts: The Impact Of The Tax Reform Act Of 1976, David T. Link, Michael J. Wahoske

Journal Articles

The complex rules governing the taxation of income from trusts and estates have at times been described as incomprehensible. Perhaps the most confusing of these are the accumulation distribution throwback rules. In an effort to alleviate some of this confusion, Congress included accumulation trusts within the purview of the Tax Reform Act of 1976. Though Congress claimed that the rules are now "considerably simplified," it is not without some effort that one is able to translate the statutory language into a form useful to the practitioner.

Given the complexity of the rules, it is necessary to begin with a caveat. …

Multiple Trusts And Income Tax Avoidance, James H. Oeser

Vanderbilt Law Review

Since the Revenue Act of 1916, the trust has been deemed a separate entity for income taxation purposes. Congress has thus sanctioned the use of the trust as a tax savings device. Under present law, a grantor may place cash or other income producing property in trust, thereby excluding the resulting income from his own tax liability. If the income is currently distributed to the beneficiary, the trust is treated as a conduit, and the beneficiary is taxed in the year of distribution. But where the income is accumulated, the tax is payable by the trust? When this "accumulation trust" …

Income Splitting As A Means Of Avoiding Taxes, Allen T. Malone

Vanderbilt Law Review

The purpose of this note is to examine the present tax treatment of the three most popular income splitting devices used to avoid taxes: the family partnership, multiple trusts, and multiple corporations. In Part II, the various congressional and judicial limits and sanctions imposed upon these devices will be discussed along with recently proposed regulatory legislation. Part III will consist of an evaluation of the suggested limitations upon the use of income splitting devices. The ultimate concern of this note is to arrive at some conclusions as to the general approach and the specific methods best suited (1) to regulate …

Decedents' Estates, Trusts And Future Interest -- 1964 Tennessee Survey, Herman L. Trautman

Vanderbilt Law Review

Validity of Instrument Which Only Appoints Fiduciary--Is an instrument which makes no testamentary gift, but only designates or appoints the personal representative to administer the estate and provides certain special powers of fiduciary administration entitled to probate as a valid will? While it has been said that there need be no dispositive gift of property to entitle a testamentary writing to probate as a will,' there seems to have been no definite court decision in Tennessee so holding until the recent case of Delaney v. First Peoples Bank of Johnson City. In that case a writing properly executed with the …