Estates and Trusts Commons^™

Punitive Surcharges Against Disloyal Fiduciaries--Is Rothko Right?, Richard V. Wellman

Michigan Law Review

This Article criticizes the award of a penalty surcharge in the name of appreciation damages. Contrary to the statements in the Rothko opinions, neither precedent nor treatises offers clear support for the shocking awards made against Rothko's disloyal executors. Furthermore, even if appreciation damages were to be viewed, against the thesis here advanced, as an appropriate remedy for some kinds of fiduciary breach, the measure is inappropriate for cases which, like Rothko, involve hidden conflicts of interest. This is so because the threat of severe penalties in hidden-conflict cases adds unacceptable legal costs to honest administrations-costs that cannot be …

Republicanism And The Law Of Inheritance In The American Revolutionary Era, Stanley N. Katz

Michigan Law Review

This Article deals with the history of the law of inheritance during the era of the American Revolution, but its focus is actually more general, for it ultimately seeks to determine what sort of revolution we experienced. For the historian the problem is quite familiar, but a few observations seem pertinent. It is at least possible to argue that our colonial forefathers were not waging a revolution at all. Rather, one might say they were fighting what we should now call a colonial war of independence in which the overriding issue was "home rule." On this hypothesis, the main slogan …

Giving Or Leaving--What Is A Will?, Olin L. Browder

Michigan Law Review

The question raised by the title of this essay should be essentially as simple as that: Do you want to give property, so that, having given it, it is no longer yours, or do you want to leave it behind at your death, directing who will receive it at that time? The statement of that issue suggests obvious differences in the consequences of inter vivos and testamentary dispositions. Most people also understand that a testamentary disposition invokes the elaborate machinery involved in the administration of a testator's estate, which confers special rights in the creditors and the spouse of the …

Federal Taxation Of The Assignment Of Life Insurance, Douglas A. Kahn, Lawrence W. Waggoner

Articles

The most litigated estate tax issue concerning life insurance is whether the proceeds should be included in the insured's gross estate. This question usually is governed by section 2042 of the Internal Revenue Code of 1954, the estate tax provision directed specifically at life insurance. While the Tax Reform Act of 1976 wrought enormous changes in many areas of estate taxation, Congress did not change section 2042. Thus the several unresolved questions concerning the interpretation of that section remain unsettled. But the question of the includability of life insurance proceeds in the gross estate of the insured is not always …

Prudence In Trust Investment, Thomas D. Johnston

University of Michigan Journal of Law Reform

Part I of this article presents a brief history of the prudent man standard and explores the meaning of "prudence." Part II discusses the shift in legal theory to include equities as prudent investments. Part III articulates the weaknesses in the method currently used by courts to assess investment prudence in view of the exigencies confronting today's trustee-investor. Finally, part IV shows that the same factors which justified the creation of the Prudent Man Rule and its expansion to include equities will support its modification to encompass modern investment theories and techniques.

Recent Developments In Gift And Estate Taxation, Douglas A. Kahn

Other Publications

A summarization of recent tax cases.

Transactions Subject To Gift Tax, Douglas A. Kahn, Earl M. Colson

Articles

The gift tax is imposed on the "transfer of property by gift." The term gift is not expressly defined either in the Code or in the Treasury Regulations. However, section 2512(b), dealing with the valuation of gifts, states that "where property is transferred for less than an adequate and full consideration in money or money's worth," the difference between the value of the property transferred and the consideration received constitutes a gift. Thus, for gift tax purposes, the determination of whether a gift was made does not turn so much on the intent of the transferor as it does on …

Estate And Gift Taxation, Douglas A. Kahn

Book Chapters

ANSWERING TAX EXAMINATION QUESTIONS

The key to writing a successful answer to a tax question (as with any law exam) is to locate the relevant issues and to analyze them by interrelating applicable legal principles with the basic facts of the question. This determination of relevant issues must be tied to the facts presented in the question.

The first step in question analysis is to read the facts closely and note each element in the facts that is relevant to issues you have studied in the subject being tested since it is likely that the examiner intended that those issues …

Trusts And The Doctrine Of Estates, Olin L. Browder Jr.

Michigan Law Review

The "doctrine of estates" is the common law system for the classification of divided ownership. Its primary purpose is to differentiate the legal consequences of the variety of concurrent, present, and future estates, but it also serves to differentiate the dispositive language required to create or transfer such estates. The doctrine of estates, therefore, embraces a sizable part of the law of conveyancing, including the large body of doctrine known as rules of construction.

In modern practice the classification and construction of present and future interests usually occurs with respect to beneficial interests in trust. It has not been sufficiently …

The Tax Recommendations Of The Commission On The Bankruptcy Laws--Income Tax Liabilities Of The Estate And The Debtor, William T. Plumb Jr.

Michigan Law Review

The Commission on the Bankruptcy Laws of the United States (Commission), pursuant to congressional mandate, has reported its recommendations for the first comprehensive revision of the bankruptcy laws since the Chandler Act of 1938. This Article deals with the proposals concerning the obligation of the trustee in bankruptcy to file returns of income and to pay federal and state taxes on the income, and concerning the calculation of the taxable incomes of the bankrupt estate and the debtor (including their rights to utilize each other's carryovers), as well as with certain problems in those areas in which the Commission has …

Delegation Of Investment Powers By Charitable Trustees, Richard B. Urda Jr.

University of Michigan Journal of Law Reform

Over the past few years the activities of philanthropic organizations have been undergoing considerable critical scrutiny. Congressional committees, private commissions, and individuals have extensively analyzed institutionalized charity. An area of particular concern involves problems created by the investment policies of charitable organizations. One investment problem that has not received much attention, however, is the plight of the natural person trustee of a charitable trust who, in general, is legally prohibited from delegating his responsibility for investment of trust funds. Almost one-third of all charitable foundations take the legal form of trusts. Of the foundations organized as charitable trusts, over 60 …

The Real Estate Investment Trust: State Tax, Tort, And Contract Liabilities Of The Trust, Trustee, And Shareholder, Michigan Law Review

Michigan Law Review

This Comment will attempt to alert potential investors in and trustees of REITs to the full extent of the liabilities that they could suffer for contract debts incurred in the name of the trust and torts committed by trust personnel. Since state tax considerations also play a significant role in investment decisions, the manner in which each state taxes the REIT and its shareholders on income derived from property and business in that state will also be investigated. Finally, a rational path out of the morass created by current state law will be articulated in order to prompt renewed discussion …

The Impact Of The Uniform Probate Code On Court Structure, Ralph P. Dupont

University of Michigan Journal of Law Reform

After considering the present pattern of probate court structure in the United States, this article considers the need for probate court reform as reflected in the deficiencies of the present system. It further indicates that a realistic choice of court structure by legislatures will ultimately be made from among three options: (1) to enlarge the jurisdiction of the present probate court of the state more nearly to approximate the form currently obtaining in several states; (2) to appoint a new body of probate judges and thus create an entirely new court; and (3) to enlarge the jurisdiction of the present …

Bankruptcy Proceedings For Insolvent Decedents' Estates, Richard V. Wellman

University of Michigan Journal of Law Reform

Under present law, bankruptcy proceedings cannot be instituted by or against insolvent decedents' estates. Creditors of insolvent decedents must look to state probate laws for satisfaction. But these laws are more concerned with the control of solvent estates than with the affairs of the impecunious. Also, transfers of wealth at death by nonprobate means are coming to be the rule rather than the exception, and it is frequently very difficult for creditors of decedents to obtain satisfaction of unsecured claims from nonprobate assets. This article advocates the extension of bankruptcy laws to insolvent decedents' estates and explores problems and solutions …

Private Trusts For Indefinite Beneficiaries, George E. Palmer

Michigan Law Review

Recently, in McPhail v. Doulton (In re Baden's Deed Trusts), the House of Lords reached a decision that marks an important change in the English law of trusts which could be important also for American law. It held that there is a single test of validity for private trusts and for powers of appointment where the issue is whether the beneficiaries of the trust or the objects of the power are sufficiently definite, and that this single test is that applicable to powers of appointment. For nearly 170 years, since the decision in Morice v. Bishop of Durham, …

Kahn, Colson, & Craven: Federal Taxation Of Estates, Gifts, And Trusts, Richard D. Hobbet

Michigan Law Review

A Review of Federal Taxation of Estates, Gifts, and Trusts by Douglas A. Kahn, Earl M. Colson, and George Craven

Dependent Relative Revocation And Its Relation To Relief For Mistake, George E. Palmer

Michigan Law Review

When an intended legal act is induced by mistake in the sense that it would not have occurred had the actor known the truth, the generally accepted method of analysis in our law is that the act is legally effective; the mistake becomes important only in determining whether it provides a ground for setting aside or rescinding the transaction. If a donor makes a gift while laboring under some fundamental mistake such as the identity of the donee or the donee's relationship to him, the gift is in the first instance effective, but the donor may be able to obtain …

A Guide To The Estate And Gift Tax Amendments Of 1970, Douglas A. Kahn

Articles

The Excise, Estate, and Gift Tax Adjustment Act of 1970 [Pub. L. No. 91-614 (Dec. 31, 1970) made a number of amendments to the federal estate and gift tax laws. The estate tax laws were amended to shorten the period of time for filing estate tax returns and for the alternate valuation date and for several related items. In addition, for income tax purposes, the holding period of property that was included in a decedent's gross estate and that was acquired from the decedent was altered; and fiduciaries were granted additional means of obtaining a discharge of their personal liability …

Restructuring Federal Estate And Gift Taxes: Impact Of Proposed Reforms On Estate Planning, Verner F. Chaffin

Michigan Law Review

It is undeniable that estate and gift taxes, in contrast to income taxes, have not received the legislative attention that they deserve. Congress has largely ignored these important segments of our tax structure for many years, and during that time a host of defects and inequities have become apparent. This congressional indifference in the estate and gift tax field can be attributed to the fact that these taxes, unlike the income tax, affect relatively few people, and that they produce less than two per cent of our total tax revenue. It is understandable, therefore, that while the major thrust of …

Uniform Probate Code--Illegitimacy--Inheritance And The Illegitimate: A Model For Probate Reform, Michigan Law Review

Michigan Law Review

The Uniform Probate Code (Code), which was approved by the American Bar Association in August 1969, deals with the problem of inheritance by illegitimates both with regard to intestate succession-section 2-109-and also with regard to the construction of a bequest to "children" by will-section 2-611. This Note will examine the issue whether the Code, which presents a comprehensive model for probate reform, deals with the problem of inheritance by illegitimates in an appropriate, desirable, and constitutional manner. The Code provisions concerning illegitimacy relate to many other provisions of the Code in which childhood status is relevant; therefore, it will be …

Intestate Succession Under The Uniform Probate Code, Thomas J. Mulder

University of Michigan Journal of Law Reform

The pervasive social policy underlying the Anglo-American law on succession of property at death is freedom of testation. Our law makes meaningful one's right to decide who shall inherit his property by providing a legal instrument, the will, to distribute property to chosen recipients. When a man dies without having exercised this right, however, the laws of intestate succession determine who shall receive his property, and in what shares it shall be received. In effect, the laws of intestate succession are an estate plan written for the decedent by his state legislature. These laws do not function as a restriction …

Informal Proceedings Under The Uniform Probate Code: Notice And Due Process, Roger A. Manlin, Richard A. Martens

University of Michigan Journal of Law Reform

The Uniform Probate Code's formal procedures, which require that notice be mailed or be personally delivered to interested parties prior to any formal proceeding, seem to offer little difficulty in terms of due process. However, the Uniform Probate Code's informal procedures, insofar as they encompass no-notice proceedings, have suffered some criticism." It is the purpose of this article to respond to these criticisms, and to demonstrate that the informal procedures of the Code as accepted by the National Conference of Commissioners on Uniform State Laws do in fact offer all interested persons adequate protection of their interests in an estate …

Mandatory Buy-Out Agreements For Stock Of Closely Held Corporations, Douglas A. Kahn

Articles

A buy-out of a shareholder's stock is a sale of his stock holdings in a specific corporation pursuatnt to a pre-existing contract. In recent years such arrangements have, deservedly, become an increasingly popular planning device for shareholders in closely held corporations; they make it possible to limit the class of potential shareholders, provide liquidity for the estate of a deceased shareholder, and establish a value for stock which has no active market. There are two popular categories of buy-out plans. If the prospective purchaser of a decedent's shares is the corporation that issued them, the plan is called an "entity …

Homicide And Succession To Property, William M. Mcgovern Jr.

Michigan Law Review

Today, most jurisdictions bar a killer from succeeding to his victim's property. The traditional rationale for that result is that a criminal should not be allowed to enrich himself by his crime. Assuming that this principle is sound, its application in individual cases often proves troublesome. What would happen, for example, if the crime were of a lesser degree than murder, and the killer had no intent to enrich himself? If the killer is barred, who should take what would have been his share under a will? Or, if the decedent and murderer held property jointly, should the killer forfeit …

Recent Patterns Of Testate Succession In The United States And England, Olin L. Browder Jr.

Michigan Law Review

This study purports to be in part a comparison of American and English testamentary practices. The virtual absence in England of estate records as we know them imposed limitations on the attainment of this objective. For present purposes, data concerning English practices were derived almost entirely from one hundred English wills selected at random from those filed during the year 1963 in the Principal Probate Registry in London. To the extent that these wills came from all over England and Wales, they can be regarded as representative of English practices generally. But the much smaller size of the sample in …

Through A Test Tube Darkly: Artificial Insemination And The Law, George P. Smith Ii

Michigan Law Review

A surge of interest and direct involvement with artificial insemination has interposed complicated and presently unsolved legal, social, cultural, religious, emotional, and psychological problems. It is not the purpose of this Article to undertake an exegesis of these interrelated areas or their ramifications. Central consideration, instead, is given to the special legal problems of adultery, illegitimacy, and support and inheritance manifest in any discussion of artificial insemination.

The Uniform Probate Code And The International Will, William F. Fratcher

Michigan Law Review

Emily Graham left her assets in England when she married a French naval officer and went to France to live with him. After her husband died, Emily announced that she was returning to England for the rest of her life and bundled her children and baggage aboard a channel ferry. Before the ferry cleared French waters she became ill and was taken ashore at another French port. While waiting impatiently to recover sufficiently for a final return to England, Emily executed a will of her English assets in the form prescribed by English law, that is, in writing, signed by …

The Effect Of Guardianship On Estate Plans, George T. Stevenson

Michigan Law Review

One responds to the certainty of death with dread and respect, and one lays plans for the event. Few, however, admit or even think of the possibility that they may become incompetent in their old age; hence, provision is rarely made for this possibility in estate plans. The increased longevity resulting from the recent rapid strides in medicine has as its corollary an increase both in the number of persons who become incompetent before death and the duration of their affliction. This poses a challenge to estate planners and the law of guardianship.

Today the guardianship of the person of …

Gifts-Lnformal Writing As Substitute For Delivery, Michigan Law Review

Michigan Law Review

Traditionally, three requirements must be satisfied in order to make a valid inter vivos gift of personal property: (1) the donor must demonstrate his intention to make such a gift; (2) there must be a delivery to the donee of the property itself or of an instrument or deed of gift; and (3) the donee must accept this delivery. If the subject matter of the gift is not susceptible of immediate delivery, a question arises as to the means by which the delivery requirement may be satisfied. Although a donor in such a situation commonly delivers an informal writing which …

Inter Vivos Trusts-Potential Beneficiary's Right To Compel Trustee To Render A Formal Accounting And Disclose Information, Michigan Law Review

Michigan Law Review

In recent years the inter vivos or living trust has become a popular method of disposing of property and in the future its use is likely to be even more widespread. Consequently, it has become increasingly important that the law governing such dispositions be both unequivocal and just. Unfortunately, in at least one situation this is not the case: When a person, believing himself to be a potential beneficiary of an inter vivos trust, seeks to compel the trustee to render a formal accounting or disclose information concerning the extent of his interest, he will find the law ambiguous and …