Pennsylvania Fiduciary Litigation : Pennsylvania Trusts and Estates Lawyer & Expert Witness : Patti Spencer Law Firm : Fiduciary Litigation, Planning : Lancaster, Harrisburg, Philadelphia, Pennsylvania

The October 29, 2008 edition of Trust & Estates contains this article:  A Final Win for the Lawyer of Erin Brockovich Fame. 

Edward Masry was the California trial lawyer who with the help of an assistant named Erin Brockovich brought a class action lawsuit against Pacific Gas & Electric Company for groundwater contamination which caused wide-spread illness and even death in the town of Hinkley, California.  The case settled for $333 million.  Masry got a check for $40 million.

The story of the suit was brought to the big screen in the movie version Erin Brockovich.  Julie Roberts played Erin (winning the Oscar for Best Actress in 2001) and Albert Finney played Ed Masry (nominated for best supporting actor). 

Masry married Joette in 1992.  In 2004 they created a joint trust to hold property acquired during their marriage.  Before he died in 2005, Masry revoked his interest in the joint trust and transferred his portion of the assets to a new trust controlled by his kids from his first marriage.   Joette didn't find out about this until after Ed Masry was dead.  Problem was, the trust by its terms was only revocable by the two of them.

The trial court, with whom the appellate court has agreed, found that the delivery of the notice of revocation to the other Settlor (Joette) was not required since Edward's delivery of the revocation to himself as trustee complied with the applicable provision of the California Probate Code, and the trust document did not specify the the method of revocation set forth in the document was the exclusive way to revoke the trust.

As John Brooks and Erika Alley, authors of the Trust & Estates article put it:  "Even after the lawyer of Erin Brockovich fame was dead, he managed to win a case."

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See our prior blog post on the issue of whether an inconsistent will can overcome the presumption that a joint account passes to the surviving joint owner.  (You may be surprised at what the Superior Court said.)

The Pennsylvania Supreme Court has granted the petition for Allowance of Appeal from the Order of the Superior Court in the Estate of Alice Novosielski.  The saga conitnues.  See the Order here.

In Novosielski, the executor of the decedent's estate, who was also the decedent's attorney-in-fact. took ownership of a joint account as the surviving joint owner.  In September 2000, the decedent signed a will leaving the executor approximately 10% of her estate.  Four days after the codicil was executed, the decedent signed a Treasury bill, bond, note tender prepared by the executor which created a joint interest in a treasury account between the decedent and the executor.

If the executor was the owner of the joint account, he would have received approximately 4/5 of the decedent's total estate.  The court found that there was clear and convincing evidence that the decedent did not want the executor to be the owner of the joint account, because of her mental state, the short time that had elapsed since the execution of the codicil, and the "vast difference" between what the executor would have received under the codicil and from the joint account. 

A similar result in In Re Piet makes us estate planners feel like the earth is shifting under our feet.

Here are the issues to be briefed in the Novieliski appeal:"

(1) By applying state law to override federal  treasury regulations, is the Superior Court's  award of the joint treasury account to the decedent's estate precluded by the Supremacy Clause of the United States Constitution?

(2) Did the Superior Court err in holding that  the presumption of survivorship under   20 Pa.C.S.A. § 6304(a) is defeated, per se, if the joint account results in an allocation of the estate that is  inconsistent with an existing  will?

(3) Did the Superior Court err in determining,   under 20 Pa.C.S.A. § 6304(a), that there was  clear and convincing evidence of a different  intent at the time the account was created?

(4) Did the Superior Court err in failing to accord the factual findings of the master the same weight and effect as a jury verdict?

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Billy Hamilton channels Ambrose Bierce, who gave us The Devil's Dictionary and such classics definitions as:

Conceit, n.  Self-respect in one whom we dislike.

Hand, n.  A singular instrument worn at the end of the human arm and commonly thrust into somebody's pocket.

Tarif, n.  A scale of taxes on imports, designed to protect the domestic producer against the greed of his consumer.

Tax Analysts published Hamilton's The Devil's Dictionary of Taxation, 50 State Tax Notes 118 (Oct. 13, 2008). Billy Hamilton was deputy comptroller at the Texas Office of the Comptroller of Public Accounts from 1990 until he retired in November 2006.  He is now a policy consultant.

Here are a couple of examples of the Devil's definitions of tax terms:

Capital Gains Tax: 1. A tax on the few good uses to which you have put your money since you outgrew baseball cards. 2. Circa 2008: An obsolete concept.

Charitable Deduction: Among faith, hope, and charity, the only one of the three theological virtues that can also help you avoid rendering unto Caesar.

Blogging credit to Paul Caron at Tax Prof Blog.

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"Negative inheritance," a term coined by Laurence Kotlikoff, a professor at Boston University, describes the situation when the costs to children of caring for aging relatives outstrip any gifts or bequests they might receive in return.

A large portion of baby boomers find themselves becoming the caregivers for their parents. Many of these caregivers want to care for their parents and are pleased to be able to help, but it takes a huge financial and emotional toll.

They are called members of the "sandwich generation," sandwiched between the often conflicting demands of raising and educating children and caring for aging parents and other relatives. Almost 3 in 10 of those aged 45 to 64 with unmarried children under 25 in the home were also caring for a senior. About 20% of workers 45 and older provide financial support to a parent. About 33% of workers 45 and older with a grown child over age 25 pay rent or provide housing for that child.

Providing financial help for both children and parents often that means delaying retirement. According to a survey conducted by Brightwork Partners for Putnam Investments, 42% of those supporting their parents said they'll work for pay in retirement as a result, while 26% said they'll delay their retirement. Thirty-five percent of retirees have returned to the job market, according to the survey. A year ago, the figure was 29%.

What to do? Financial planners recommend a combination of family dialogue, long-term care insurance and proactive management of aging parents' remaining assets. Family dialogue - what’s that? That means actually talking about plans for the future with your parent and siblings - something that for many families is very hard to do. Family dynamics around "money talk" are very difficult. If you are one of the parents - be a grownup and start the conversation yourself. No one knows what the future will bring, discuss various possibilities. And don’t start out by saying "you’ll never put me in a nursing home, will you?"

For those boomers who are at a higher risk of supporting and caring for their aging parents, determining the parents’ financial health and finding out what plans they have, if any, is important. If the parents are likely to run out of money, the first priority is to buy long-term care insurance. If the parents can’t or won’t pay for it, the children should. It makes much more financial sense than paying for care or sacrificing career and income when the time comes. The long-term care insurance has to be purchased before the injury or illness occurs. The parents need to be relatively healthy to qualify for a plan.

When parents can’t qualify for long-term-care insurance, it becomes even more important to manage the parents’ assets and make plans for the future. It may be necessary to sell the family home. You might try to get help from other adult children. Your parents may be able to borrow agasint life insurance policies or sell them on the secondary market. Perhaps your parents should take out a reverse mortgage on their home.

The cost to an adult child of caring for parents is not necessarily an out-of-pocket payment of Mom and Dad’s bills. Instead, the child may have to stop working to care for elderly parents or work part-time. Being stretched thin may affect performance and advancement on the job. Caring for an elderly relative itself can be a part-time job, if not a full-time job. The mental, physical and emotional pressures can be devastating for the care giver.

I agree with Stephen W. Follett, Esq., who says, "I dislike the term "negative" inheritance. I believe that it demeans the legacy of loving parents. Similarly, it diminishes the return of love by children. Caring for parents is a labor of love. Inheritances are not a right. Everything wrong with this term begins with the underlying premise that we should expect a financial inheritance from our parents." In other words, what is negative about caring for your parents? Recognize that you have no right to an inheritance.

How different this is from the attitude of another planner who asks, "What is the Black Death of a financial plan?" The answer: "It’s your parents."

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You will enjoy this post at David Giacalone's f/k/a about Frank Duci's will:

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There are good reasons and bad reasons for setting up a funded revocable living trust (RLT) -  here is one of the better reasons:  FDIC insurance has been increased and now covers each beneficiary's interest in an RLT up to $250,000 each.

 See the FDIC website explanation here.

The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.

A beneficiary must be a person, charity or another non-profit organization (as recognized by the Internal Revenue Service). All other beneficiaries are not eligible for separate coverage as revocable trust deposits.

While the owners [grantors] of a trust may benefit from the trust during their lifetimes, they are not considered beneficiaries for the purpose of calculating deposit insurance coverage. Beneficiaries are those identified by the owner to receive an interest in the trust assets when the last owner dies. Unlike POD accounts, the beneficiaries do not have to be identified by name in the deposit account records of the bank.   But the account title at the bank has to show that the account is owned by the RLT.

For example, if the RLT holds $1 million in a bank account and provides that on the grantor's death, the trust is distributed in 1/4 shares to the grantor's four children, there is $ 1 million of FDIC insurance on the account.

Blogging credit to Liza Weiman Hanks, author of  Everyday Estate Planning.

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"It’s an ill wind that blows nobody good "

                                                              –old proverb

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"Hell hath no fury like a white knight spurned."

           - Jonathan D. Glater writing for the Wall Street Journal.

Wachovia had a "silent run" losing scads of big depositors. Citigroup came to the rescue - loaning them cash.  With FDIC guidance, Citigroup stepped in to prevent Wachovia from collapsing on Monday September 29 having made a deal to buy Wachoiva for $ 1 per share. The loans, in an undisclosed amount, were made with the idea that the Citigroup acquisition of Wachovia was a done deal.

How does Wachovia thank Citigroup? By turning tail and making a deal with Wells Fargo.

Citigroup claims Wachovia was contractually barred in an exclusivity agreement from negotiating with anyone else until October 6.  The Wells Fargo deal was struck in the wee hours of the morning on October 3.

Is this deja vu? Twenty years ago the brawl was Pennzoil and Texaco over Getty Oil. In that fight Pennzoil was the jilted suitor turned away by Getty in favor of a deal with Texaco. Pennzoil claimed  that Texaco jumped into the middle of its deal with Getty Oil. There was no formal, written merger contract between Getty and Pennzoil, but the jury found that an "informal agreement" was still binding and found in favor of Pennzoil. The result: An $11 billion verdict against Texaco that bankrupted the company.

Citigroup’s press release said "a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citigroup and Wachovia. In addition, Wells Fargo’s conduct constitutes tortious interference. . . "  Sounds nasty.  Here’s a copy of the agreement. You be the judge.

As Glater reported in the Wall Street Journal, courts do not always tolerate companies’ efforts to tie their own hands, especially when doing so might hurt investors.   Wachovia might have been in worse trouble if it didn't pursue the Well Fargo deal which was a much better deal for shareholders ($7 per share instead of $ 1 per share). They could have been breaching their fiduciary duty. 

Wachovia is incorporated in North Carolina and that state's law will determine its directors' duties to its shareholders.  

The Wells Fargo/ Wachovia deal was worth $15.1 billion in stock - obivously better for shareholders than Citigroups’s proffered $2.2 billion. Not to mention the taxpayers come off better not having to absorb any Weachovia liabilities. Will Citigroup sue? And can it win? Who knows. What about all the Wachovia shareholders who dumped their stock when they heard the terms of the Citigroup deal which valued Wachovia stock at just $1 per share. Were they deceived?

This deal is far from over.  Stay tuned.

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The Toronto Sun reports that Heath Ledger's 2-year-old daughter, Matilda, will inherit his entire estate.  Apparently, the family "gave" all the money to Matilda.  Heath's estate is estimated at $16.3 million.

See the my earlier post, The Joker, describing the issues in Ledger's estate.  His will, executed two years before the birth of his daughter Matilda, did not include her.

Interestingly, Ledger's father, Kim ledger, told the newspapers that "Our family has gifted everything to Matilda."    I doubt that very much.  You think they were found to be the beneficiaries and then gave their inheritance to Matilda, paying gift tax?  I'll bet they just agreed not to pursue their claims.  However they want to spin it - the result is the same -  Keith's little girl inherits.

Blogging credit to San Diego Estate Center.

Now there is another fight.  ReliaStar Life Insurance Company is refusing to pay on Heath's $12.5 million life insurance policy claiming that he committed suicide.  The New York City inquest found that Heath's death was due to an accidental prescription drug overdose.  If the insurance company is acting in bad faith -  that could triple the award to Matilda.

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William F. Buckley, the conservative columnist who died  in February 27, 2008,  had one son, Christopher Buckley.  Christopher has two children, Caitlin and William, with his now-estranged wife, Lucy. Christopher had an affair with book publicist Irina Woelfle and together they had a son, Jonathan, now age 8.

William F. Buckley's will contained this provision: "I intentionally make no provision herein for said Jonathan, who for all purposes . . . shall be deemed to have predeceased me."

Jonathan's mother is seeking more child support form Christopher Buckley, who currently pays $3,000 per month.  Her petition notes that there has been a substantial change in Christopher's income (since his father died and he inherited).

The New York Post's headline for the story:  NOT ONE 'BUCK'LEY FOR YOU!

Why is this news?  It shouldn't be.  It is another example of the overweening sense of entitlement that children (and more remote issue) have to inherit their parents' estates.  Children have no right to their parents' estate let alone grandchildren.  How many times have I met with an ailing client's children and found that the children think the estate is already theirs -  except for the minor inconvenience that Dad is still drawing breath.  Isn't the support of Jonathan his father's problem and responsibility?  Really.

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