An article I wrote on yerusha (Jewish Laws of Inheritance) and halachic estate planning was published in the October 2009 issue of Community Magazine.
See The Top 10 Questions & Answers About Wills, Inheritance & Halacha. If you’re concerned about halacha, you should, at the very least, have a will.
New York’s new power of attorney law will be going into effect on September 1, 2009. While attorneys and other financial professionals update their forms for next week, they should be prepared to have to do it again in the near future.
Back in June, two and a half months before the effective date of the statute, the New York State Assembly passed Bill No. A8392-A, which made some “technical corrections” to the statute and the statutory forms. Unfortunately, the State Senate was too busy bickering over Senate leadership to notice much of anything, least of all some technical corrections.
The bill passed by the Assembly clarifies some of language in the statute, including some changes to the statutory short form and the statutory major gifts rider. It also makes a few subtle but significant changes to the law.
For instance, the current new law states that unless the principal expressly provides otherwise, the execution of a power of attorney revokes all prior powers of attorney executed by the principal. The Assembly bill flips that around, and provides that the execution of a POA does not silently revoke all prior powers of attorney unless the principal gives written notice to the previously appointed agent.
Another change is in the limits to gifts an agent can give using the power of attorney – i.e., what the statute considers a non-major gift. The current statute allows the continuation of the principal’s customary gifts, with a limit of $500 per person or institution per year. For larger gifts, a statutory major gifts rider must be executed. The Assembly’s latest revision limits the total of all gifts taken together to $500.
These proposed changes are reflected in changes to the text of the statutory short form and the major gifts rider. So if the bill ever passes the Senate, the forms will have to be revised again. Add that to the list of results of the ridiculous power struggle in Albany.
A two hour summer commute is a proven cause of blog neglect. On the other hand, my long commute gives me time to listen to downloaded CLEs, podcasts and lectures I wouldn’t otherwise have time for.
Last night I listened to a lecture by Rabbi Hershel Schachter on the Halachic Issues of Inheritance. The lecture is an introduction to the major halachic principles regarding wills and inheritance, including halachic estate distribution, whether and when wills are accepted in halacha, bechorah, property deposited with a third party, and dina demalchuta dina.
You can download the lecture here. I haven’t explored the entire yutorah.org website, but there seems to be thousands of lectures on various topics available for download.
An article in Monday’s New York Law Journal raised the interesting question of whether a criminal trial is the best place to get to the bottom of issues surrounding Brooke Astor’s estate.
The case has all the hallmarks of a classic will contest. Anthony Marshall, Brooke Astor’s son, is accused of taking advantage of his mother’s dementia to divert assets from her estate to himself by influencing her to amend her will. The matter is now the subject of a criminal trial in State Supreme Court in Manhattan, but the issues – testamentary capacity and undue influence, among others – are most often seen in Surrogate’s Court.
It’s not just a question of which forum the case is tried in. The issues involved can get very sticky when applied in the real world. Family dynamics are always nuanced. When elderly parents, particularly those with diminishing mental capabilities, rely on their children, are the children being helpful, are they being controlling, do the parents feel controlled? What goes on outside of the earshot of the lawyers preparing the will? In the Astor case, the lawyers themselves are alleged to be part of the problem.
I noted earlier that whether someone has testamentary capacity is not a simple yes or no. Someone can suffer with Alzheimer’s disease and lack testamentary capacity, but wake up one morning with a clear mind and sign a will. The will may be valid, but proving capacity is another matter entirely.
These issues frequently arise in will contests, and Surrogate’s Court has the expertise to deal with them. A criminal fraud and conspiracy trial, on the other hand, may not be the best way to untangle what exactly was or was not on Brooke Astor’s mind when she signed the amendment to her will. In this particular case, the drama involving the so-called “doyenne” of New York society and her son, the cameo appearances of famous people like Henry Kissinger and Barbara Walters as witnesses, and news, blog and tabloid coverage (in no particular order), will certainly compound the difficulties of a careful analysis of the issues.
But there’s another important consideration. Unlike Supreme Court, Surrogate’s Court can’t impose criminal sanctions. It can order Anthony Marshall to return assets, but it can’t send him to prison for committing fraud. According to a former prosecutor quoted in the Law Journal article, “as the problem of elder financial abuse has gotten more serious, the courts have recognized that the penal law must be read more broadly to fully fulfill its purpose.”
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The New York Times published an article last week on ElderServe at Night, a night program run by the Hebrew Home at Riverdale for people suffering with Alzheimer’s disease.
Quoting from the article:
Nighttime can be treacherous for people with dementia, who are often struck by sleeplessness or night terrors and prone to wandering about. This agitation and disorientation, called “sundowning,” is especially vexing for relatives trying to care for them at home, and often hastens their placement in nursing homes.
While there are countless day care programs for the nation’s estimated 5.3 million Alzheimer’s patients, some experts believe that ElderServe at Night, which began a decade ago, is the only one of its kind in the country.
Participants are fetched from their homes by vans and spend 7 p.m. to 7 a.m. painting, potting plants, dancing and talking — or, for those immobilized by their disease, relaxing amid music, massage and twinkling lights. The patients rest as they need, for a few minutes or a few hours, and return home the next morning fed, showered and, usually, tuckered out.
The article and a video are at All-Night Care for Dementia’s Restless Minds, by Cara Buckley and James Estrin, NYTimes, 6/12/09.
The New Old Age blog linked the article and there are some excellent reader comments there that are well worth reading.
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A CNN Money/Fortune Magazine article published yesterday gives a basic overview of some estate planning fundamentals. See How to avoid the ‘death tax’ by Janet Morrissey, 6/4/09.
As we’ve mentioned, although the estate tax is set to expire at the end of 2009, Congress is expected to pass new legislation that will keep the estate tax rate at 45% with a $3.5 million exemption.
Morrissey’s article touches on gifts, life insurance, irrevocable trusts such as life insurance trusts and GRATs (grantor-retained annuity trusts), and using limited partnerships to reduce the value of assets for tax purposes. Although the article does not mention it, the Obama Administration recently proposed restricting the use of GRATs and valuation discounts going forward, so the time to take advantage may be now.
The article also stresses the importance of periodically reviewing your estate plan. Finances, relationships, and laws change over time, and an estate plan created ten years ago may no longer make sense.
A recent Wall Street Journal article by Jennifer Levitz reported that financial scams targeting seniors are on the rise, and states are responding by increasing penalties on scammers.
Seizing on fear of stock-market turmoil, sales people and fraudsters are hawking investments that claim to be “low-risk,” or a supposedly safe way to invest in the stock market and earn back losses. In fact, the products may be complex and have significant downsides.
Special mention, at least in Arkansas, goes to free lunch seminars. The seminars are pitched to seniors as educational events with complimentary lunch, but are sometimes nothing more than sales opportunities for unethical brokers who misrepresent financial products and aggressively push products that are inappropriate for older people. The article contains a helpful list of questions you might want to ask before investing.
According to the article, Arkansas recently passed a law doubling the civil penalty for securities violation when the victim is 65 or older, and ten other states (I counted Michigan, Idaho, Maryland, Minnesota, Missouri, New Jersey, Rhode Island, West Virginia, Wisconsin and Pennsylvania) have either recently passed, proposed, or are expected to introduce legislation aimed at financial scammers who target the elderly.
Read the full article here.
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- A side note to subscribers of the blog’s feed and e-mail updates. The blog has been moved to a new web address, http://trustsestateslaw.com. It also has a new and improved design. Click over, take a look, and let me know what you think.
I just came across a interview of Warren Buffett and Bill Gates which I thought was relevant to our earlier discussions of wealth, luck and whether the wealthy should complain less about their share of the tax burden. (I say “discussion” because, yes, I did get some of you to comment. And no, I didn’t pay anyone to comment.)
In the interview with Liz Claman of Fox Business News on May 4, both Buffett and Gates say they are in favor of the estate tax. They make a pragmatic point similar to the one Robert Frank of the Wall Street Journal made in passing – the estate tax raises significant revenue. If we repeal the estate tax, how will we replace the lost revenue?
Buffett also does the following calculation. Approximately 2,450,000 people in America will die in 2009, but only about 12,000 federal estate tax returns will be filed, which means that only 1 in 200 people leaves a taxable estate. If you went to a funeral every month, says Buffett, it could take 17 years to attend the funeral of someone whose estate will be federally taxed. I haven’t checked his numbers, but his point is that if we repeal the tax on 1/200th of the population, we’d have to shift the tax burden downward to everyone else.
Gates then says that people with very rich estates, himself and Buffett included, have benefitted from the rules and stability of this country. If they had to choose where to be born, they would choose the U.S., even if that meant paying the estate tax.
According to a blog post by Edward Zelinsky, a law professor at Cardozo, Warren Buffett has made the same argument in the past:
Among his other observations, Buffett has correctly noted the dangers to a democracy of inherited wealth as well as the moral obligation of those who have done particularly well in American society to give back to that society. As Buffett observed, he would not be Warren Buffett if he had been born in Bangladesh.
These concerns have led Buffett to support retention of the federal estate tax and to express dismay that his federal income tax bracket is lower than his secretary’s.
Which seems very civic minded indeed, except that, as Zelinsky notes, Buffett and Gates appear to have planned their estates around charitable giving to avoid paying federal estate tax.
Zelinsky writes:
Buffett (and Gates) might explain this apparent contradiction by arguing that their charity is an effective substitute for taxation. Thus, the argument would go, when they give $1.00 to the Gates Foundation with no corresponding tax payment, they should nevertheless be treated as if they had paid $1.00 in tax since the contributed $1.00 is devoted to public purposes.***
[But] giving money to the Gates Foundation is not the same as giving money to the federal Treasury. The federal Treasury is controlled by the people of the United States through their elected representatives. The Bill and Melinda Gates Foundation is controlled by Bill and Melinda Gates.
Zelinsky urges Buffett to put “his money where his heart is” and give charity to the Gates Foundation on a taxable basis. The logic escapes me. If Buffett really believes that the best place for his money was the federal government, he should donate it all to the Treasury and encourage Bill Gates to do the same. After all, Buffett’s estimated $37 billion is 2% of the projected $1.84 trillion federal budget deficit for 2009.
It seems to me that Buffett’s actions imply a clear distrust of governmental taxing and spending programs and their ability to improve society in an efficient manner. As we’ve said, the argument that one has a moral obligation to society for the opportunity to acquire wealth does not necessarily lead to an endorsement of government tax and spend policies. Philanthropy has a long history of improving society. Warren Buffett obviously trusts the Gates Foundation more than he trusts the Treasury to use his money wisely for the public good.
On the other hand, perhaps people who have attained a certain level of wealth stop making sense and maybe I should stop trying to figure them out. At the beginning of the clip Warren Buffett says that the income tax charitable deduction is “peanuts” to him, and he isn’t at all effected by the Obama proposal to reduce the deduction. By the end of the clip, he and Bill Gates are talking about the piles of coupons they used at McDonald’s in China. I’m sure they had a blast.
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Paula Span’s post today on the blog The New Old Age does a good job explaining the challenges of establishing whether someone with dementia had the capacity to sign or change a will.
The occasion for the post is, of course, the ongoing criminal trial of Brooke Astor’s son, Anthony D. Marshal, and lawyer, Francis X. Morrissey Jr., who are accused of diverting money from Astor’s estate. One of the issues at trial is whether Astor, who was diagnosed with Alzheimer’s disease, had the mental and legal capacity to make changes to her will.
As Paula Span writes:
Alzheimer’s sufferers may experience days of comparative lucidity alternating with days of bewilderment. Cognitive ability “may even vary throughout the day,” said Dr. Ronald C. Petersen, a neurologist at the Mayo Clinic who chairs the medical and scientific advisory board of the Alzheimer’s Association. “A person might be relatively sharp in the morning and by evening be quite confused.”
Caregivers are familiar with the late-day agitation called “sundowning.” Medications, disrupted sleep, social stimulation and even a minor cold can affect these diurnal cycles. Though a variety of doctors are expected to testify during the two-month trial, they may shed little light on whether Mrs. Astor had, in legalspeak, “testamentary capacity” on a particular January afternoon in 2004, when she altered her will.
Read the full article here. At the end is a short video of Brooke Astor speaking at her 100th birthday party. The video was recently shown in court.
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My recent post, Tough luck for dumb luck, linked an article by Robert H. Frank which disagreed with the contentions that the tax system strains the vital connection between individual effort and reward. Robert H. Frank argued that luck contributed heavily to success, and that “well-paid Americans owe an enormous, if rarely acknowledged, debt to the social investments that supported their success.”
Following an interview on Fox Business News, Robert H. Frank clarified his position this way in a Huffington Post column:
There’s no question that hard work and talent make someone more likely to achieve economic success. But for every successful person who exhibits these qualities, there are hundreds of others who are just as talented and work just as hard, yet earn only modest incomes.
Even talent and the inclination to work hard are themselves heavily dependent on chance. In combination, genes and environment ultimately account for all important individual differences, which means that someone who was born talented and brought up to be hard-working was incredibly lucky to begin with.
The Wall Street Journal journalist and author of the Wealth Report, Robert Frank (apparently no relation) appeared on Fox Business News the following day in this video:
Near the end of the clip, WSJ’s Robert Frank makes the common sense point that the discussion of luck and success is all very nice and academic, but misses the most important thing about tax policy in the current economic environment. Congress and the Obama Administration need to raise money to fund the stimulus, and the wealthy are who have it. An honest debate about tax policy should focus less on philosophy and more on what, if anything, government needs to do.
This essentially was my point when I wrote that Robert H. Frank’s point that luck plays a big role, even if true, “doesn’t necessarily lead to the belief that governmental taxing and spending is fiscally sound or that it creates the circumstances for economic and social progress.”
However, in a follow-up blog post on the Wealth Report, WSJ’s Robert Frank wrote that:
practically all of the millionaires or billionaires I have interviewed over the years were obsessive workers. Sure, people win the lottery. And some inherit their money. But they are the minority. Repeated studies show that inherited wealth accounts for 10% to 20% of today’s multimillionaires.
That isn’t to say that luck doesn’t play a role in getting rich. In a study by PNC Wealth Management of 1,500 Americans with $500,000 or more in investible assets, 37% of self-made wealthy agreed that “the money I have made so far has come from being at the right place at the right time.
One Robert Frank writes for the Wall Street Journal. The other Robert Frank writes for the New York Times and teaches economics at Cornell. They’re talking past each other, but seem to agree more than disagree that hard work leads to success if you’re lucky. Both Robert Franks focus on whether and to what extent the wealthy should congratulate themselves or all of us for their wealth, but miss the crucial questions of whether governmental taxing and spending is fiscally sound and whether it’s the right step to creating the circumstances for economic and social progress.
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