Recent changes were made to Pennsylvania’s power of attorney statute by Act 95 which was enacted in 2014 and amended Title 20, Chapter 56 of the PEF Code. All of the Act’s provisions have been effective since January 1, 2015.

PEF Code Section 5601.3(d)(1) provides that an agent shall not be required to disclose receipts, disbursements or transactions conducted on behalf of the principal unless ordered by the court, during the principal’s lifetime requested by the principal, the principal’s guardian, another fiduciary for the principal or a governmental agency, and after the death of the principal by the personal representative or a successor in interest to the principal’s estate.

The statute does not require an agent to disclose receipts, disbursements or transactions to an heir of the principal or a beneficiary under the principal’s will.

What to do? Petition to have a guardian appointed for the principal. The guardian clearly has standing. But this route has its own risks. What if the Petition is not granted and no guardian is appointed? Might the principal retaliate, for example, by disinheriting the petitioner?

We need more tools and more ways to hold agents accountable. The PA Supreme Court’s Elder Law Task Force suggested additional people be given legal standing to challenge the actions of someone given power of attorney.  You can read the full report here. The task force noted that nearly half the states provide legal standing to others interested in the welfare of someone who has a power of attorney handling their affairs. It said that allowing more people to challenge a power of attorney’s actions could protect people from abuse.

Thank you Gary Beyer for your post entitled "Wells Fargo Terminated as Trustee."

Beyer writes:

"On Thursday, a Circuit Judge in Wisconsin terminated Wells Fargo Bank as trustee of the Chester Bible scholarship trust, furnishing control to the Baraboo Community Scholarship Corporation (BCSC). For over a year, BCSC and Wells Fargo have disputed over the administration of the trust, which since 1991 has provided generous scholarships to Baraboo High School graduates. Yet in recent years, Wells Fargo has raised its fees for administering the fund while decreasing scholarship awards.

The judge agreed that BCSC would better serve future scholarship recipients since it is a nonprofit operated by volunteers who would administer the trust for free. "It is no longer economic to continue the trust by Wells Fargo because it failed to administer the trust effectively," wrote Judge Patrick Taggart.

Because of the legal battle, Wells Fargo charged nearly $27,000 in legal and accounting fees to the trust in 2013. Judge Taggart denied Wells Fargo’s request to have its attorneys’ fees be paid by BCSC."

On July 10, 2014 the Supreme Court of Pennsylvania ordered the adoption of new Rule 4003.5 of the Pennsylvania Rules of Civil Procedure.

The rule has been modified and the following clause (4) is added:

(4) A party may not discover the communications between another party’s attorney and any expert who is to be identified pursuant to subdivision (a)(1)(A) or from whom discovery is permitted under subdivision (a)(3) regardless of the form of the communications, except in circumstances that would warrant the disclosure of privileged communications under Pennsylvania law. This provision protects from discovery draft expert reports and any communications between another party’s attorney and experts relating to such drafts.

Ever since George Washington included arbitration provisions in his will, this idea has kicked around.  Washington’s will contained this language:

"That all disputes (if unhappily they should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chose by the disputants each having the choice of one, and the third by those two – which three men thus chosen shall, unfettered by law or legal construction, declare their sense of the Testator’s intention; and such decision is, to all intents and purposes, to be as binding as if it had been given in the Supreme Court of the United States."

John T. Brooks and Jena L. Levan writing for Wealth Management reviewed the state of the law in December 2013. See their article here.

On March 11, 2014 a California appellate court refused to enforce a mandatory arbitration provision. In the case of McArthur v. McArthur, No. A137133 (Cal.App. 1 Dist. Mar. 11, 2014)

Outsourcing Justice comments on the McArthur case as follows:

"The California appellate court also refused to enforce the arbitration provision and affirmed the denial of the motion to compel. The appellate court acknowledged the Texas and Arizona decisions involving arbitration clauses in trust agreements, as well as a few other decisions involving the trust fact pattern, and the appellate court reasoned that the plaintiff sister in this case was not attempting to accept benefits under the amended trust or enforce rights under the amended trust. Instead, the plaintiff sister argued the amended trust is invalid and should be set aside. As a result, the appellate court reasoned the plaintiff sister had not consented to the terms of the amended trust, and hence the plaintiff sister was not bound to arbitrate."

"Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses and waste of time."

                                                                                —       Abraham Lincoln   1850

Lincoln’s words are doubly true today. Our society is beset with litigation – and all too often, there are no winners, except, perhaps, the lawyers. The time for Alternative Dispute Resolution (ADR), the private resolution of disputes outside of court, has come. There are two main forms of ADR – arbitration and mediation.

In arbitration the dispute is submitted to a third party, the arbitrator, who renders a decision after hearing arguments and reviewing evidence presented in a less formal and more expeditious fashion than in court. In binding arbitration, the parties are bound by the arbitrator’s decision. In non-binding arbitration, the parties can go to court for a trial if unsatisfied with their results.

In mediation an experienced neutral party attempts to assist the parties to air their concerns, understand each other’s point of view, and find a common ground. No decision is rendered; the mediator facilitates the parties’ arriving at their own solution.

Both litigation and arbitration seek a winner and a loser and are adversarial procedures – usually further alienating the parties from each other . Many professionals believe that only through mediation is it possible to resolve the dispute and at the same time achieve reconciliation – restoring and improving the relations between the parities.

Because of the possibility of reconciliation, mediation is an excellent approach for family disputes, including disputes over estates and inheritances.

Mediation in Estate Settlement

The death of a family members often sets the stage for conflict within the family. As John Gromala and David Gage point out in the November 2000 issue of Trusts and Estates: "Where estates are concerned, intricacies of fact and law can combine with emotion, misperceptions, and complicated family dynamics to form a highly combustible mixture. Mediation can put out the fires before they consume both money and family harmony."

The traditional method of settling disputes that arise in estate administration is the litigation process from the formal pleading and response, trial and appeal. This can be extremely time-consuming and astonishingly expensive. As a result of the litigation process, family relationships can be completely destroyed or left in tatters. Not only is the inheritance consumed by fees, but the family is consumed by anger and hatred.

Mediation has been widely used in divorce and child custody disputes but few jurisdictions look to mediation in disputes involving wills and trusts. The time has come to give these disputants the same chance at resolving issues and maintaining family relationships. There is nothing to stop disputants from seeking mediation privately. Parties to any dispute can seek mediation. Lawyers need to be alerted to the possibility of seeking this kind of resolution and trained away from the immediate reaction of pursuing claims in court. (A friend remarked that it takes 10 times longer to train a lawyer to be a mediator than to train anyone else; the adversarial approach must be unlearned.)

We hope that the courts will move toward recommending, or even requiring mediation before setting hearing dates.

In mediation the parties control the process, and there is no risk of an adverse decision, since the mediator does not render a decision or judgement. Nothing said during the mediation can be used as evidence later at trial. The process is completely confidential and solutions can be arrived at that could not be ordered by the court as legal or equitable remedies – for example, an opportunity to air grievances or receive and apology.

Mediation in Estate Planning

Estate planning aims at the transfer of wealth from one generation to another in a way which minimizes taxes and maximizes economic gain. At bottom, it usually involves parents making gifts to their children, grandchildren or charities. The problem is that while many clients spend hours with attorneys, accountants and financial advisors crafting an estate plan, they spend no time with their intended beneficiaries explaining what they have done and why. After Mom and Dad are gone, the family acrimony begins – brother sues brother and sisters stop talking to one another for years.

Since your typical (dysfunctional) family has trouble communicating about day to day activities such as what to have for dinner, perhaps it is no surprise that the typical family cannot and does not communicate about dying, property division, and settling estates. Nevertheless, communicating the plan and addressing the issues before death is the best gift you can give your beneficiaries.

It is not bad manners to talk about the estate plan, and it will not make matters worse. What makes matters worse is, leaving the children to fight it out after Mom and Dad are both gone. If you are afraid to tell your kids what your estate plan is you are leaving them a legacy of acrimony. A mediator will recognize that it is up to Mom and Dad what they do with their assets and that they want all family members to feel as good as possible about the estate plan and not feel cheated or disappointed. Bringing all the parties together can ensure that hidden agendas are brought out into the open, get the most buy-in from the parties and get the best protection against the plan being contested.

Mediation is not family therapy. It is a short-term process aimed at resolving a dispute while attempting to preserve family relationships. It depends on opening lines of communication and coming up with solutions.

Mediation can also be used to discuss long term care issues with parents, to determine how siblings can equitably share the responsibility of helping aging parents, and how to deal with caregivers and medical personnel.

As far as the estate planning documents themselves go, it is entirely possible to include provisions that require the parties to submit disputes to arbitration rather than resort to the courts. Many arbitration texts point out that George Washington’s will contained such a provision:

"That all disputes (if unhappily they should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chose by the disputants each having the choice of one, and the third by those two – which three men thus chosen shall, unfettered by law or legal construction, declare their sense of the Testator’s intention; and such decision is, to all intents and purposes, to be as binding as if it had been given in the Supreme Court of the United States."

Much is at risk in estate planning, and the most important is not estate taxes. The most important factors are the beneficiaries, their lives and their relationships – in other words, your family.

On July 29, 2013, in the case of Morse v. Kraft the Supreme Judicial Court of Massachusetts held that the Trustee of an irrevocable trust in which the Trustees had full discretion to distribute trust principal "for the benefit of" the beneficiary, could, without consent or court approval, distribute the assets to a different trust with the same effective discretionary terms but modified in several ways, the key difference being the ability of the beneficiaries to serve as trustees, a power that was prohibited in the original trust.

The case was brought by the sons of New England Patriots owner Robert Kraft to modify a thirty-year old trust.  It will have far reaching impact.

The Facts:

In 1982, Plaintiff established the 1982 Trust, and four separate subtrusts therein, for the four sons of the Krafts. In 2012, Plaintiff, who had served as the sole and disinterested trustee of the trust and subtrusts, proposed to transfer all of the property of the subtrusts into new subtrusts established in accordance with the terms of a new master trust for the benefit of the Kraft sons. Plaintiff asked the Supreme Court to interpret the 1982 Trust to determine whether it authorized distributions to the new trust without the consent or approval of any beneficiary or court. The Supreme Court concluded that it did, holding that the terms of the 1982 Trust authorized Plaintiff to distribute the trust property in further trust for the benefit of the beneficiaries of the 1982 Trust without their consent or court approval.

Read the case here: 

How about Pennsylvania?



The reappearance of Brenda Heist in May after being declared legally dead has brought me all sorts of questions.

The Pennsylvania Statute that governs the property of absentees and persons presumed dead is at 50 Pa. Cons. Stat §§5701 through 5706. Generally, if a person disappears and is absent from his place of residence without being heard of after diligent inquiry, the county court may make a finding and decree that the absentee is dead and of the date of his death.

There are notice requirements. The matter must be advertised in a newspaper of general circulation in the county of the absentee’s last known residence and in the legal journal once each week for four successive weeks. Notice includes the hearing, which must be at least two weeks after the last appearance of the advertisement, when evidence will be heard concerning the alleged absence, including the circumstances and duration thereof.

An unexplained absence for seven years may be sufficient ground for finding that the absentee died seven years after he was last heard of. The seven years gives rise to a presumption but it is important to note that the court may declare an absentee dead before the expiration of 7 years. Conversely, the presumption can be overcome and a 7 year absence may not justify a finding that the absentee died. Evidence that the absent person was a fugitive from justice, had a bad relationship, was having money troubles, or had no family ties or connection to the community can be reasons not to presume death.

The fact that an absentee was exposed to a specific peril of death may be sufficient ground for finding that he died less than seven years after he was last heard of. An example would be an airplane crash. Passengers and crew of the Titanic who were not rescued by the RMS Carpathia were declared legally dead soon after Carpathia arrived at New York City.

In 2002, the statute was amended to provide that the terrorist attacks of September 11, 2001 are specific perils within the meaning of the law and a court would be justified to immediately determine that the presumed decedent died on September 11, 2001. Also, for persons presumed dead on September 11, 2001, the requirements of notice to the absentee and of the need to post a refunding bond for property distribution are eliminated.


What happens to the presumed decedent’s property?

The decedent’s property is administered by an executor of the will or administrator of the estate just as in the case of other decedents. However, the executor or administrator make not make any distributions to beneficiaries except by a court decree. The court, in awarding distribution, must require that a refunding bond, with or without security and in such form and amount as the court shall direct. The bond shall be conditioned that, if it shall later be established that the absentee was in fact alive at the time of distribution, the distributee will return the property to the preseumed decedednt, or if it has been disposed of, will make restitution

Continue Reading Return of the Legally Dead

I always say 99% of the lawyers give the rest of us a bad name.

Brianna Bailey writes for News OK:

"A federal judge has sentenced a Midwest City man who conned seniors out of their savings to serve nearly 10 years in prison and pay $4.6 million in restitution for his role in the Ponzi scheme.

Joe Don Johnson, 43, was an estate planner who drew up wills for his elder clients. He would convince the seniors to invest their life savings with the now-defunct Oklahoma City-based company Global West Funding Ltd., operated by Brian McKye.

Johnson promised his clients returns as high as 20 percent, but the bulk of the money went to pay off earlier investors, commissions to Johnson and other salesmen, as well as McKye’s personal expenses, according to court documents."

Read rest of storyhere.

Thank you to WIlls, Trusts and Estates Prof Blog for the post regarding Fisk University, Cy Pres and Georgia O’Keefe’s Art Collection.

Melanie B. Leslie (Professor of Law, Benjamin N. Cardozo School of Law) recently published her article entitled Time to sever the dead hand: Fisk University and the cost of the cy pres doctrine, 31 Cardozo Arts & Ent. L.J. 1-18 (2012). The introduction to the article is available below:

In 1949, painter Georgia O’Keeffe donated 101 valuable paintings and photographs to Fisk University, a prominent and historically important African-American university in Nashville, Tennessee. The donated art was part of a larger collection amassed by her late husband, Alfred Stieglitz, a prominent artist and collector.  Stieglitz’s will gave O’Keeffe a life estate in his collection, which included works by Picasso, Cezanne, Renoir, Toulouse-Lautrec, O’Keeffe, Demuth, Hartley, Dove and Walkowitz.  Stieglitz’s will also gave O’Keeffe the discretion to distribute the collection to nonprofit organizations of her choosing for the purpose of ensuring public access to the paintings to promote the study of art.  At O’Keeffe’s death, any pieces in his collection that she had not donated were to be distributed to nonprofit organizations "under such arrangements as will assure to the public … access thereto to promote the study of art."

O’Keeffe divided Stieglitz’s collection among six institutions: the Metropolitan Museum of Art, the Philadelphia Museum of Art, the National Gallery of Art in Washington, the Art Institute of Chicago, the Library of Congress, and Fisk University.  The donation to Fisk, a small university with no museum experience, was unusual. In choosing Fisk, O’Keeffe was making a strong social statement – the South was racially segregated at that time, and O’Keeffe wanted to ensure that the art would be displayed in a place that welcomed both black and white members of the public.

But although she wanted to benefit Fisk, O’Keeffe – like many donors before and after – could not bring herself to relinquish complete control to the donee. Instead, she imposed a series of restrictions designed to ensure both the proper display and care of the art work and the creation of a perpetual memorial to Alfred Stieglitz. To achieve those ends, O’Keeffe stipulated in a series of letters to Fisk’s President that the donated art must always be displayed together as one collection titled the Alfred Stieglitz Collection ("the Collection"), and that Fisk could never sell any piece in the Collection.  She also required that the Collection be housed in as safe a building as possible and kept under surveillance at all times when the room was not locked.  O’Keeffe severely limited the University’s ability to loan the artwork, directed that no other art work could be shown in the same room as the Collection without her consent, prohibited the removal or change of any mounting or matting of photographs, and required that the walls of the room where the Collection was displayed be painted white or some other very light color chosen by O’Keeffe. Several years later, O’Keeffe donated four paintings from her own collection, including one of her own paintings, Radiator Building – Night, New York ("Radiator Building"), to Fisk, with the stipulation that the paintings be added to the Collection. 

O’Keeffe appears to have given little, if any, consideration to the impact the perpetual restrictions might have decades down the line. Like many donors who make restricted gifts, she failed to imagine how life might change in the years following her death. For example, she  does not appear to have contemplated that Fisk might cease to exist; that the University might one day lack funds to maintain the Collection; that the matting on the photographs might deteriorate; or that she might not be around to approve the paint color of the walls. She gave no guidance as to how Fisk should respond to changed circumstances or as to which of her objectives – benefitting Fisk, creating a perpetual memorial in honor of Stieglitz, keeping the Collection together, prohibiting sale of the Collection, and ensuring the Collection remained in the South – should be given priority in the event that changed circumstances should cause them to come into conflict. 

What happened sixty years later was predictable – changed circumstances, unforeseen by O’Keeffe, rendered it impossible for Fisk to comply with all of the restrictions. Fisk was on the brink of insolvency, and had to choose whether to close the University and relinquish the Collection, or find a way to replenish its endowment and properly care for the Collection.  Fisk decided to sell two paintings – including Radiator Building. The Tennessee Attorney General approved of the sale, subject to certain conditions, and Fisk, seeking court approval, filed an action for a declaratory judgment.  The O’Keeffe Museum of Santa Fe, New Mexico ("the Museum"), and later, the Attorney General of Tennessee, intervened to enforce the sale prohibition.  After six years of litigation and two appeals, a chancery court granted Fisk permission to sell a fifty percent interest in the Collection to the Crystal Bridges Museum in Arkansas for thirty million dollars. The deal allows Fisk to exhibit the Collection six months of every year.  The payment of thirty million dollars will ensure both that Fisk will survive and that it will be able to afford to properly care for and exhibit the artwork. 

Why did resolution of this conflict require six years of litigation and the expenditure of enormous amounts of charitable and public dollars? The blame lies with the law itself: the centuries-old doctrine of cy pres, which requires courts to determine how the donor would have responded to the changed circumstances, combined with the law’s lack of clarity about who has standing to speak for the donor, practically guarantee that years of litigation will ensue when a charity finds itself unable to comply with a gift restriction. In the Fisk case, the law’s fuzziness allowed the Museum – an unrelated third party – to make a grab for the Collection under the guise of effectuating donor’s intent. The fact-specific cy pres standard also enabled the Tennessee Attorney General to make it extraordinarily difficult for Fisk to craft a solution involving entities located outside the state of Tennessee.  Although the court ultimately approved Fisk’s contract with the Crystal Bridges Museum, that approval came at an extraordinarily high cost.

The doctrine of cy pres holds that donor’s intent is of paramount value. Courts must therefore prioritize effectuation of intent over other concerns, such as donees’ present needs or the inefficient use of charitable dollars.  This preoccupation with perpetual enforcement of donor intent is justified as necessary to encourage charitable bequests and protect donors’ property rights.  Yet what the law giveth, it taketh away: the law’s commitment to donor intent stops short at granting to donors standing to enforce the restrictions they create.  Instead, enforcement power is given to the attorneys general of each state. 

The Fisk litigation is just one of several recent epic battles over restricted charitable gifts and changed circumstances, but it is important because it neatly illustrates the problems that the law creates and highlights the need for legal reform. After elaborating on this point, I examine the Uniform Trust Code ("UTC"), which changes cy pres law in significant ways. I show how application of certain UTC provisions to the Fisk case would have reduced the length of the litigation and the corresponding waste of charitable assets, to some degree. I then argue that further reforms are necessary. I suggest that perhaps the time has come to consider limiting the duration of restrictions on charitable gifts. To offset any chilling effect that such a time limit might have on charitable giving, we might allow donors and their heirs to enforce restrictions during the period of enforceability.