Law Commons^™

Strengthening The Passivity Default, Ian Ayres, Edward Fox

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In The Prudence of Passivity, Bryon Harmon and Laura Fisher (hereafter HF) argue that "passive management become the default approach for the investment of trust funds, to be abandoned only when circumstances specifically dictate the use of active management."' In this comment we argue that their thesis could be strengthened (i) by more clearly distinguishing between default law and default investment practices, (ii) by more clearly articulating their favored altering rules.

Alpha Duties: The Search For Excess Returns And Appropriate Fiduciary Duties, Ian Ayres, Edward Fox

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Modern finance theory and investment practice have shifted toward “passive investing.” The current consensus is that most savers should invest in mutual funds or ETFs that are (i) well-diversified, (ii) low-cost, and (iii) expose their portfolios to age-appropriate stock market risk. The law governing trustees, investment advisers, broker–dealers, 401(k) plan managers, and other investment fiduciaries has evolved to push them gently toward this consensus. But these laws still provide broad scope for fiduciaries to recommend that clients invest instead in specific assets that they believe will produce “alpha” by outperforming the market. Seeking alpha comes at a cost, however, in …

Fraudulent Conveyances Masquerading As Asset Protection Trusts, James J. White

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Viewed with a dispassionate but slightly skeptical eye, transfers to asset protection trusts are fraudulent conveyances pure and simple. I think so and the evidence points that way.

The asset protection trust is a simulacrum of the well-known and thoroughly conventional mode of holding assets for a “beneficiary” by a “trustee” under the terms of an elaborate document. Trusts, of course, are widely used in estate planning and elsewhere in circumstances where one person, the settlor, wishes to make assets available to another on the settlor’s terms; a parent might use a trust to put aside assets for a minor …

How The Ali's Restatement Third Of Property Is Influencing The Law Of Trusts And Estates, Lawrence W. Waggoner

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Restatements, once limited to restating existing law, are now substantially devoted to law reform. The ALI's website states its law-reform policy thus: "The American Law Institute is the leading independent organization in the United States producing scholarly work to clarify, modernize, and otherwise improve the law." In 2014, the Brooklyn Law Review published a symposium issue on Restatements of the Law. A paper in that symposium argued against the ALI's law-reform policy. The authors specifically speculated that the reformist rather than restatist character of the recently completed Restatement (Third) of Property: Wills and Other Donative Transfers (Property Restatement) has "very …

Correcting The Record Regarding Therestatement Of Property’S Slayer Rulein The Brooklyn Law Review’Ssymposium Issue On Restatements, Lawrence W. Waggoner, John H. Langbein

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In 2014, the Brooklyn Law Review published a symposium issue on Restatements of the Law. The organizer of the symposium, Professor Anita Bernstein, did not afford an opportunity for Restatement reporters to comment on the articles. The organizer did invite the Director of the American Law Institute, Lance Liebman, to contribute an essay commenting on the symposium as a whole. Liebman’s essay—unintentionally no doubt—misstated the position that we took in formulating the slayer rule for the Restatement (Third) of Property: Wills and Other Donative Transfers. Liebman’s misstatement—that we recommended that the Institute adopt a rule allowing a murderer to inherit …

The Creeping Federalization Of Wealth-Transfer Law, Lawrence W. Waggoner

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This article appears in a symposium issue published by the Vanderbilt Law Review on The Role of Federal Law in Private Wealth Transfer. Federal authorities have little experience in making law that governs wealth transfers, because that function is traditionally within the province of state law. Although state wealth-transfer law has undergone significant modernization over the last few decades, all three branches of the federal government—legislative, judicial, and executive—have increasingly gone their own way. Lack of experience and, in many cases, lack of knowledge on the part of federal authorities have not dissuaded them from undermining well-considered state law. The …

Effectively Curbing The Gst Exemption For Perpetual Trusts, Lawrence W. Waggoner

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In "Effectively Curbing the GST Exemption for Perpetual Trusts," I criticized the Treasury Department’s proposal for dealing with perpetual trusts. My objection is that Treasury’s approach would leave many trusts and much wealth GST-exempt for much longer than Congress originally intended. For perpetual trusts created before enactment, Treasury’s approach would allow them to continue to be unburdened by a durational limit. For perpetual trusts created after the effective date of enactment, Treasury’s approach would still allow them to qualify for the GST exemption, but would have the exemption expire 90 years after the trust was created.

Retirees Beware: Don't Worry About The British, 'Taxmageddon' Is Coming, Douglas A. Kahn, Lawrence W. Waggoner

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"Taxmageddon" is coming. Unless Congress extends the current rates or reaches an agreement on tax reform, dividends will then be taxed as ordinary income at a marginal rate as high as 39.6 % and net capital gains will then be taxed at 20%. For high-income taxpayers, a 3.8% Medicare surtax will be added to the taxation of net capital gains, dividend income, interest, and other investment income, bringing the highest marginal rate to 43.4%.

What's In The Third And Final Volume Of The New Restatement Of Property That Estate Planners Should Know About, Lawrence W. Waggoner

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Professor John Langbein and I have just concluded a twenty-year project for the American Law Institute to restate the law of donative transfers. The official title of our three-volume Restatement is the Restatement (Third) of Property: Wills and Other Donative Transfers.1 We refer to it herein simply as the Property Restatement. The third and final volume of the work was published in the last days of 2011. Professor Langbein spoke about certain of the initiatives in the two earlier volumes, which set forth the principles governing the law of wills, intestacy, interpretation of instruments, and the nonprobate system. The concluding …

Us Perpetual Trusts, Lawrence W. Waggoner

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In 2009, the UK reconfirmed tis long-standing public policy against perpetual trusts. America has been moving in the opposite direction. Recent years have seen a movement in the states to pass legislation allowing settlors to create family trusts that can last forever or for several centuries. Sadly, and embarrassingly, the American perpetual-trust movement has not been based on the merits of removing the traditional curb on excessive dead-hand control. The policy issues associated with allowing perpetual trusts have not been seriously discussed in the state legislatures. The driving force has been interstate competition for trust business.

It Is Logic Rather Than Whom You Trust: A Rejoinder To Prof. Cohen, Douglas A. Kahn

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This article is the continuation of an exchange that has taken place between Prof. Stephen B. Cohen and me concerning the validity of criticisms leveled by Chief Justice John Roberts on an opinion by then-Judge Sonia Sotomayor writing for the Second Circuit in the case of William L. Rudkin Testamentary Trust v. Commissioner. While affirming the Second Circuit’s decision, Chief Justice Roberts, writing for a unanimous Supreme Court, criticized and rejected Justice Sotomayor’s construction of the relevant statutory provision. In an article in the August 3, 2009, issue of Tax Notes, Cohen defended Justice Sotomayor’s construction of the statute and …

Message To Congress: Halt The Tax Exemption For Perpetual Trusts, Lawrence W. Waggoner

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The federal estate tax is in abeyance this year. The popular press has picked up on the possibility that the estates of billionaires such as the late George Steinbrenner, who owned the New York Yankees, will escape the tax. The House Ways and Means Committee, chaired by Representative Sander Levin of Michigan, and the Senate Finance Committee, chaired by Senator Max Baucus of Montana, are now considering two questions: what the maximum rate and exemption will be when the estate tax returns and whether the tax will be reinstated for this year. Lurking behind the headlines but equally important is …

Rudkin Testamentary Trust -- A Response To Prof. Cohen, Douglas A. Kahn

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In the August 3 issue of Tax Notes, Prof. Stephen Cohen wrote an article about Justice Sonia Sotomayor’s opinions in three tax cases. Of those three cases, only the opinion she wrote in William L. Rudkin Testamentary Trust v. Commissioner, 467 F.3d 149 (2d Cir. 2006), Doc 2006- 21522, 2006 TNT 203-4, is worthy of comment. Although the Second Circuit’s decision in that case was affirmed by the Supreme Court under the name Knight v. Commissioner, the construction of the critical statutory language that Justice Sotomayor adopted was rejected and criticized by Chief Justice Roberts, writing for a unanimous court. …

The Upc Addresses The Class-Gift And Intestacy Rights Of Children Of Assisted Reproduction Technologies, Lawrence W. Waggoner, Sheldon F. Kurtz

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Editor's Synopsis: Recent years' advances in assisted reproduction technology have enabled the conception of children in ways in addition to the traditional way. The Uniform Probate Code was amended last year to address the status of children born from assisted reproductive technologies for intestacy and class-gift purposes. This article discusses the relevant UPC provisions and offers several hypothetical cases to show how they operate. The article concludes expressing the hope that states will consider the new UPC approach.

The Upc Authorizes Notarized Wills, Lawrence W. Waggoner

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This article reports on a 2008 amendment to the Uniform Probate Code that permits notarization as a method of will execution.

Class Gifts Under The Restatement (Third) Of Property, Lawrence W. Waggoner

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The new Restatement (Third) of Property (officially the Restatement (Third) of Property: Wills and Other Donative Transfers), in tandem with the Restatement (Third) of Trusts, is systematically proceeding through the whole field of wills, will substitutes, trusts, and estates. Both of the new Restatements should prove to be handy resources for trust and estate lawyers, not only in preparing to argue cases at both trial and appellate levels, but also in the everyday work of drafting and construing dispositive provisions in wills, trusts, and other types of donative documents. Each Restatement section is followed by a set of Comments explaining …

Dick Wellman -- A Personal Remembrance, Lawrence W. Waggoner

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Dick Wellman was my teacher, mentor, collaborator, colleague, and friend. My law school class at The University of Michigan Law School voted Dick the most enthusiastic member of the faculty, and he was that. Dick devoted his professional life to teaching and scholarship, as most law professors do, but he had another career: Dick was a key player in the Uniform Law Conference,' an organization dedicated to improving private law and promoting legislative uniformity among the states.2

The 2003 Revised Uniform Estate Tax Apportionment Act, Douglas A. Kahn

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Editors' Synopsis: This Article describes the significant sections of the 2003 Uniform Estate Tax Apportionment Act (the "2003 Uniform Act'). The Article explains the purpose and operation of the 2003 Uniform Act's various sections and notes some of the differences between the 2003 Uniform Act and its prior version.

Selected Michigan Probate Law Research Resources, Barbara H. Garavaglia

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Over the past decade, attorneys have increasingly sought free electronic resources on the web to meet their research needs in order to control research costs. The need for free or low-cost access to legal materials is especially critical for solo practitioners and attorneys with smaller practices who live in areas without access to a law library or who may find the cost of commercial print and electronic resources prohibitive.

The Rise Of The Perpetual Trust, Jesse Dukeminier, James E. Krier

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For more than two centuries, the Rule against Perpetuities has served as the chief means of limiting a transferor's power to tie up property by way of successive contingent interests. But recently, at least seventeen jurisdictions in the United States have enacted statutes abolishing the Rule in the case of perpetual (or near-perpetual) trusts. The prime mover behind this important development has been the federal Generation-Skipping Transfer Tax. This Article traces the gradual decline of the common law Rule against Perpetuities, considers the dynamics behind the recent wave of state legislation, examines the problems that might result from the rise …

The Uniform Probate Code's Elective Share: Time For A Reassessment, Lawrence W. Waggoner

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In this Article, Professor Waggoner proposes reforms to the Uniform Probate Code's (UPC) treatment of the elective share of the surviving spouse. First, the Article recommends that the UPC adopt a form of presentation that more transparently reflects the normative theories and empirical assumptions underlying the UPC's elective share framework. Second, the Article presents demographic data suggesting that the UPC's current elective share approximation schedule may be inappropriatef or a sizable faction of married couples, those remarryingf ollowing widowhood. Finally, the Article proposes two substantive revisions to the UPC's election share framework-the first proposal is to lengthen the approximation schedule; …

Tax Consequences Of Assigning Life Insurance - Time For Another Look, Douglas A. Kahn, Lawrence W. Waggoner

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The Taxpayer Relief Act of 1997 furnishes the courts and the Internal Revenue Service an opportunity to close certain loopholes in the federal tax consequences of assigning life insurance. About twenty years ago, we published an article arguing that the tax consequences of assigning life insurance affords taxpayers unwarranted opportunities for tax avoidance. Since then, developments in the case law and Internal Revenue Service rulings have broadened the loopholes. In the update of our article, we show how the new tax law supports our original position.

The Uniform Probate Code Extends Antilapse-Type Protection To Poorly Drafted Trusts, Lawrence W. Waggoner

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The Uniform Law Commission' promulgated a revised version of Article II of the Uniform Probate Code (UPC or Code) in 1990, and approved a set of technical amendments in 1993. As Director of Research and Chief Reporter for the Joint Editorial Board for the Uniform Probate Code (Board)2 and reporter for the UPC Article II drafting committee, I was privileged to serve as the principal drafter of these provisions. UPC Article II deals with the substantive rules governing donative transfers - intestacy; spouse's elective share; execution, revocation, and revival of wills; rules of construction for wills and other donative transfers; …

The Revised Uniform Probate Code, Lawrence W. Waggoner

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In 1989 and 1990, Articles II and VI of the Uniform Probate Code (UPC) were revised by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Article II covers the basic law of intestacy, wills, spousal rights, rules of construction, and perpetuities. Article VI deals with multiple-party accounts and transfer-on-death (TOD) security registration. The major innovations in the revised UPC are driven by changes in legal theory. Three grand themes are at work in the new UPC: 1. improving spousal rights and sensitizing them to changes in family structure, 2. curing intent-defeating formalism, and 3. unifying the law of …

Tribute To William F. Fratcher: Marital Property Rights In Transition, Lawrence W. Waggoner

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"Marital property rights," a term that covers a vast multitude of rights or interests conferred by law on persons who occupy the status of spouse, are in a state of transition. To discuss the themes and trends that are emerging, this Article is divided into four discrete, yet related segments. The first segment addresses how the law allocates original ownership between spouses in a marriage. The second segment turns to the intestate share of the surviving spouse. This is not a topic that much concerns high-powered estate planners because intestate estates are usually fairly small. But to the surviving spouse, …

Reforming The Law Of Gratuitous Transfers: The New Uniform Probate Code, John H. Langbein, Lawrence W. Waggoner

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In the mid-1980s the Uniform Law Commission undertook a landmark revision of the American law of gratuitous transfers. These reforms culminated in a drastically revised Uniform Probate Code ("UPC"). The revisions inspired the Albany Law Review to organize this symposium issue for the purpose of examining the 1990 UPC. In this introductory paper, we point to the main themes of the reform movement, discuss some of the traits and constraints of the uniform law process, and comment on some of the suggestions and insights that appear in the symposium articles.

The Upc's New Survivorship And Antilapse Provisions, Edward C. Halbach Jr., Lawrence W. Waggoner

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Law governing transfers of family property has long struggled with questions of survivorship in their many and varied forms. Important results can and regularly do turn on how such issues are resolved.

Marital Property Rights In Transition, Lawrence W. Waggoner

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The subject of "marital property rights" is very timely because those rights are in a state of transition. The term "marital property rights" covers a vast multitude of rights or interests conferred by law on persons who occupy the status of spouse. This lecture is divided into four discrete, yet related segments. The first segment addresses how the law allocates original ownership between spouses in a marriage. The second segment turns to the intestate share of the surviving spouse. This is not a topic that high-powered estate planners get involved in very much because intestate estates are usually fairly small. …

Spousal Rights In Our Multiple-Marriage Society: The Revised Uniform Probate Code, Lawrence W. Waggoner

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The transformation of the American family constitutes one of the great phenomenons of the past two decades. The traditional Leave It to Beaver family no longer prevails in American society. To be sure, families consisting of the wage-earning husband, the homemaking and child-rearing wife, and their two joint children still exist. But divorce rates are astonishingly high and remarriage abounds. In fact, there is an increasing prevalence in the population of marriages that are more likely to end in divorce than others-marriages in which one or both partners were divorced before and marriages of couples who cohabited prior to marriage.

The Multiple-Marriage Society And Spousal Rights Under The Revised Uniform Probate Code, Lawrence W. Waggoner

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Nearly everyone knows about the transformation of the American family that has taken place over the last couple of decades. The changes, from the latter half of the 1970s into the present, comprise one of the great events of our age. Articles on one aspect or another of the phenomenon frequent the popular press, and a special edition of Newsweek was recently devoted to the topic.' The traditional "Leave It To Beaver" family no longer prevails in American society. To be sure, families consisting of a wage-earning husband, a homemaking and child-rearing wife, and their two joint children still exist. …