Here is the 5.12.20 Trump tax returns U.S. Supreme Court oral argument link

I listened yesterday to the lawyers ‘ recent May 12, 2020 oral argument before the U.S. Supreme Court in the Congressional House’s subpoena attempts to obtain Trump’s tax returns and various other business records. The subpoenas were not served directly on Trump himself. The subpoenas are for tax returns and business records held by certain other third-parties for time periods prior to Trump’s election as president.  This subpoena question is an extremely novel, and complex, separation of powers question.

Click here for the link to the U.S. Supreme Court webpage that includes the audio of the oral argument, as well as a pdf transcript of the argument.

I certainly have some thoughts from my lawyer perspective that touch on both sides of this subpoena issue.  But, more important than my own view, is this opportunity for you to listen to the oral arguments yourself.  Let me just say that the issue is not merely a simple, conclusory “What’s the problem? Just force them to turn over the records”.  In my view, whatever conclusion the Supreme Court makes in response to this case will be constitutionally monumental.  Your grandchildren will, no doubt, seriously study this case in their law school constitutional law classes.

A Quarantine Pastime: Listen to Georgia Court of Appeals Oral Arguments (on the Internet)

The title to this blog post is probably not stopping many readers quickly in their tracks to see what it is about.  I understand.  The blog title also is likely not edge-of-seat dinner party fodder.

Nonetheless, I generally each week read the current Georgia appeals court opinions so that I can keep up with the broad range of legal issues, changes, developments, etc. Today, among the recent opinions I read, is the March 11, 2020 opinion in Doe v. State. Click here for a copy of the Court of Appeals opinion. Click here for the website link for the related appeals court oral argument for Doe v. State.

Briefly, the above Doe v. State does not fall within my area of law practice;  but, deals with an individual who was acquitted of certain felony criminal charges and who sought to have his record expunged under the procedures of O.C.G.A. Section 35-3-37.  Here, however, is one general take-away point from this particular case. A person’s arrest record (even if not ultimately convicted) remains a public record unless the person can sucessfully get his or her record removed under these procedures.  I chose this Doe v. State for this blog post simply because it is the opinion I last read this morning among the recent opinions from the past week.  It is essentially my random selection for purposes of writing this blog post.

My suggestion, however, especially during our long, home-bound quarantine days, is that readers might find very interesting the Georgia Court of Appeals website with the audio-video recordings of the appeals court oral arguments.  This is where the lawyers stand before the Georgia Court of Appeals judges (typically three judges) and present an oral (verbal) argument to try and convince the appeals judges to see the case their way.  The judges often prod the lawyer’s argument with point-on questions, comments, requests for clarification, etc.

Very briefly as background information, litigation cases can sometimes “go up” on appeal with the appeals court having the power generally to determine whether to affirm the lower court’s decision of the case (typically the trial court); to reverse the lower court; and/or to remand the case back to the trial court. Keep also in mind when a matter goes up on appeal that the lawyers cannot for the appeal add any additional evidence, testimony, documents. There are various levels of state and federal appeals courts (e.g., Georgia Supreme Court; The Federal Court of Appeals for the Eleventh Circuit;  the U.S. Supreme Court, etc.).

The purpose of this blog post is not to elaborate further on the procedure, structure, and design of appeals courts.  But I do point out that any case on appeal is as good as it can get at that point of the appeal, depending on how well the trial court lawyers put on, and preserved, the appropriate evidence and how well they procedurally — during the trial — preserved the disputed legal questions for the appeal (This all gets into the procedural details I purposely do not include in this blog post).

Now, back to using the above Doe v. State as an example. I find virtually all appeals arguments very compelling and instructive for the following three primary reasons:

One. The Georgia Court of Appeals allows only 15-minutes of oral argument for the lawyers who represent each party in the case. This is each lawyer’s opportunity to try and hone down — convincingly — the essence of his or her 15-minute appellate argument in a focused, understandable, concise, and persuasive manner.  Keep in mind the lawyers have already previously filed written summaries of their appeals arguments (called Briefs).

This limited 15-minute oral argument means, from my liking, that the 15-minute argument compels the lawyer to get immediately to the heart of the matter without blustering, grandstanding, sidestepping, and purposeful obfuscation. By contrast, these run-of-the-mouth factors are what we lawyers (and clients) too often hear from opposing lawyers in other contexts (phone calls, discussions, trial court hearings, mediation, etc.).  I greatly enjoy the relief of brevity for these 15-minute appellate arguments.

Two.  The boiled-down directness of the lawyers’ arguments, and most often with to-the-point prodding and questions from the appeals judges, give us listeners an audible pathway directly to the heart of the issues, along with the crux of what the appeals judges are considering from their perspective. In my view, listening to these oral arguments is better than CLE (continuing legal education) in that I get can grasp and consider the essence of the issues in 30-minutes or less.  And, in a real-world context.

Three.  The appeals process (in any appeals case) often highlights the deficiencies in how the lawyers conducted the lower-court trial, particularly the existence of insufficient evidence for consideration on appeal, etc. Every appeals court opinion (and the oral arguments) provides great learning material.

Go back above and click the oral argument link.  Will cost you only 30 minutes of time.

Estate Planning and Your Lawyer’s Bias

We are each inevitably biased based on our own life experiences, education, community and family values, etc.  The key in any discussion about bias is whether we are able, or willing, to step back and try more objectively at times to observe our own bias.

This blog post is my recommendation that you be aware of your lawyer’s own bias and how it may possibly influence your estate planning.  I provide below only limited examples. But, my broader point is for you, as a client, to feel comfortable questioning and challenging your lawyer’s recommendations for the design of your estate planning.

Example One — My experience is that an abundance  of estate planning documents I have read over the years include a descendants-only feature in the event, for example, a child (we will call her Susan) dies, who at her death has no children.  In this event, this typical descendants-only provision requires that Susan’s share of the property now is to be divided only among her other siblings (and their descendants). This provision is designed to make sure Susan’s parents’ property passes only along the parents’ line of descendants. It does not include spouses of those descendants.

Carrying this Susan example further, assume Susan had been happily married for 20 years to Bob at the time of her death. Remember, Susan had no children. Bob always fit in well with all the family members, including Susan’s parents. But, with this descendants-only provision at Susan’s death, Bob gets nothing.

I am not suggesting Bob should or should not get anything. My point is that most lawyers do not address this situation adequately with clients and often use the “descendants-only” language in the estate planning document as a matter of habitual rote. I also believe many clients would be shocked to learn there are no options for a spouse under a circumstance similar to this Susan example.

Maybe your lawyer has himself or herself had a bad divorce in the past;  or had a sibling or parents who experienced a painful and costly divorce. This is an example of the lawyer’s own experiential bias that can make its way into your estate planning documents — without sufficient discussion with you about other available options.

Example Two — To my “lawful” descendants is a term I still see frequently in estate planning documents that I believe may stem from the lawyer’s own bias (religion, community, political, etc.) and that is not sufficiently discussed with clients.

Here is what you need to know about this “lawful” reference to make sure you agree or disagree to use that term in your estate planning documents. Again, my point is this reference and its potential effects demonstrate another example of rote-mentality, too often not sufficiently discussed with clients. Here is an example:

Let’s assume I have a daughter who has a young son, but she is not married to the other parent. Assume also that we all love and treat that son (a grandchild in this example) fully as a family member with absolutely no distinction as to my daughter’s non-marital status.  Assume also my own estate planning documents provide for my property to be divided and held in trust only for my “lawful descendants”. Assume also I die, in this example.

It is my opinion that my grandson (in this example) is most likely cut out of my estate plan because he is not a “lawful” descendant. Technically, he was born out-of-wedlock at the time of my death. Also, arguably this non-wedlock status is locked-in at the time of my death relevant to the “lawful” definition in my documents. I do not believe my daughter’s subsequent marriage — after my death — to the other parent cures this problem.

More importantly, I would hate for my family to face the above problem, including costly efforts to try and convince a court, etc., to include this grandson as a descendant for purposes of my estate planning.

In other words, the modifier “lawful”, in my view, does nothing more than set the stage for disagreement, disputes, and legal issues as to whether I intended to leave out my grandson with my use of that modifier in my documents. Courts are generally bound by the wording within the four-corners of estate planning documents. The term “lawful” simply creates far more problems than benefits for an estate planning document.

For those of you who wish to read more about the potential limitations of this “lawful” element, click here for a relevant 2010 Georgia court opinion in Hood v. Todd, 287 Ga. 164, 695 S.E.2d 31 (2010). Note also the dissenting opinion, indicating even the court had difficulty in determining what “lawful” meant in this case.

My recommendation is that your estate planning documents include a more expansive provision for the definition of “descendants” so as to bring the definition more fully into the light of current cultural and scientific realities. Make sure you discuss with your lawyer and conclude with a clear understanding about the final “descendants” definition in your estate planning documents.

Example Three — I remain surprised at the extent to which I see estate planning documents that fundamentally treat males and females differently. For example, the estate plan might provide for greater outright provisions for a son, but strict trust provisions for a daughter. Or, the estate planning document names only sons as fiduciaries, with the daughters not being named for these positions.

Again, I am not suggesting a right or wrong approach. But, in my experience, this is an area with a great deal of old-school lawyer bias, and without sufficient informed dialogue and consent from clients.

The Boding Danger of the Trump Impeachment Process

This blog post is merely to provide my key thoughts about this Trump impeachment process from my lawyer perspective.  I also realize my perspective is only one of millions.  It realistically has no more weight among all other views than a grain of sand.  But, nonetheless, I voice my comments not for purposes of stating my position one way or the other about what I believe should have been, or will be, the conclusion of this present impeachment effort.

Rather, I express my great concern about the persistent chipping away — for the past 40 years or so — of the sanctity of our three-branch system of government.  Our system appears to move each year toward a myopic vision of a simple-minded, one-party political system of government, blind to the three-branch element (regardless of which party).

And, I do not use the word “sanctity” in any sense of religion, morality, or political party; but, more importantly, from my great and deep respect for the ultimate importance and inviolability of our three-branch system.  In my view, the longstanding success and freedoms we have in the United States rest on the three-branch system of checks and balances. This, in my opinion, is the primary reason our country has succeeded during its long test of time.

Here are my key comments:

(1)  The House blundered, tainted a key underpinning of their procedural process, and by doing so failed to respect our three-branch system of government by not seeking judicial review of (or by not issuing) House subpoenas.  A fundamental element of our great freedom in the U.S. is the ability to obtain judicial review when we are subpoenaed and assert grounds for objection to the subpoena or to the scope of the subpoena. The government (including the House) also has the ability to obtain judicial review and assistance in determining the necessity and scope of a subpoena.  For you historical legal readers, the first U.S. Supreme Court opinion addressing House subpoenas was in 1880, in Kilbourn v. Thompson, 103 U.S. 168 (1880).  Click here for a copy.

(2)   President Trump’s blanket snubbing of the entire process of subpoenas and witnesses is itself another serious failure to respect the sanctity of our three-branch system of government.

I wrote a blog post a few months ago about the Richard Nixon subpoena situation. Search “Nixon” in my blog search above. I repeat, now again, essentially what I said in my Nixon post. That is, the following question my constitutional law professor at Emory Law School (in Atlanta) posed to our first-year law class many years ago, which I have never forgotten: “If President Nixon had refused to comply with his subpoena, we would have experienced an extremely serious (and still-unanswered) constitutional crisis that would have substantially stress-tested our three-branch system of government. And, possibly the system would have failed. The crisis would have centered on “Who would, or can, force President Nixon to comply with his subpoena?”

Keep in mind the Nixon subpoena had been issued by the Department of Justice, a part of the executive branch (not issued by the House).  Thus, if Nixon, as head of the executive branch, opted not to have his own executive branch enforce his subpoena, who would have acted to enforce it?  Our Emory constitutional law professor posed the possibility of a military coup, or military tanks rolling up to the front of the White House, to step in and take over the enforcement effort, etc.

(3)   I, candidly, have always been concerned the U.S. would not have withstood the above Nixon constitutional crisis if it had been pushed to an ultimate limit, nor recover minimally unscathed. This is the reason that particular law school class discussion is burned deeply into my consciousness. I truly believe the above Nixon crisis could have effectively dismantled, or substantially damaged, the longstanding balance of our three-branch system of government. One political party would have won the battle, but we all would have lost the war.  A crucial question we each should consider at every juncture of our own respective political moves and attacks is whether we are helping to sustain, or erode, our three-branch system of checks and balances.

(4}   We each, therefore, should also ponder seriously how all facets and participants leading up to this current Trump crisis have, or are, affecting this balance.  And, we need to rethink everyone’s relative contribution to this situation.  As an aside, I  believe Nixon understood his tremendous constitutional crisis for our country, leading ultimately to his voluntary compliance with the subpoena, and ultimately his resignation.

(5)   Back to my statement above about the success of the U.S. being based on the three-branch system of government. In my view, I do not care where one places himself or herself on a religious, moral, or political spectrum. That is one’s gift of liberty, and personal prerogative. However, the substitution of a controlling element of religion, morality, or politics, etc., as a decisive or tipping-point factor sidestepping our three-branch system of government places far too much power with, and simply by the whims of, those asserting — at any given time — their majority religious, moral, or political views.  Keep in mind, everyone once knew the earth was flat.

(anti-) SLAPP Back; Don’t Turn the Other Cheek

This anti-SLAPP blog post should be an item you keep on your litigation check-list in the event you are a defendant in a lawsuit. If anti-SLAPP applies, it can significantly short-circuit and give you an early-end to the litigation in your favor, stop costly discovery, and put you in a strong position to obtain attorneys’ fees and expenses of litigation from the person who sued you. “SLAPP” stands for “strategic litigation against public policy.”  A number of states, including Georgia, have anti-SLAPP laws that provide the above relief to defendants in certain situations.

Two days ago, June 24, 2019, the Georgia Supreme Court issued an opinion for the first time that deals with Georgia’s 2016 broad revision of its anti-SLAPP statutes under O.C.G.A. Section 9-11-11.1. The case is Wilkes & McHugh, et al. v. LTC Consulting, L.P. et al., No. S19A0146 (Ga. June 24, 2019). Click here for this opinion, which also has an excellent discussion by the Georgia Supreme Court setting forth the history and operation of Georgia’s anti-SLAPP statutes (and Georgia cases prior to the 2016 change in these statutes).

This is part one of three blog posts I will provide on this anti-SLAPP topic.

A 15-second short summary of anti-SLAPP is that if you are in litigation that enables you to file a defensive anti-SLAPP motion, the person suing you (the plaintiff) has to convince the court in response to your anti-SLAPP motion that the plaintiff’s lawsuit claims against you (his or her Complaint) are both (i) legally sufficient and (ii) supported by a sufficient prima facie showing of facts to sustain a favorable judgment in favor of the plaintiff.

Now, for a slightly longer introductory summary. Another substantial benefit of you filing an anti-SLAPP motion is that all discovery and pending hearings or motions in your lawsuit are stopped (“stayed” in lawyer jargon).  And, the court generally is required to conduct a hearing on your anti-SLAPP motion within 30 days after you file it.

The above June 24 Georgia Supreme Court opinion, in its opening paragraph, states the 2016 revision of the Georgia anti-SLAPP statutes substantially mirrors California’s anti-SLAPP statutes. Wilkes & McHugh at 1.  In expressly acknowledging that California has developed a considerable body of case law interpreting its anti-SLAPP statutes, the Georgia Supreme Court states that it may look to California case law for interpreting the Georgia anti-SLAPP statutes.  Id. at 15.  [I have experience with the California anti-SLAPP statutes and their litigation application.]

For this first blog post on Georgia’s anti-SLAPP statutes, I purposely do not get into the weeds on the details as to what these laws are and how they apply procedurally in litigation. However, a threshold point in any potential anti-SLAPP situation is to determine whether you, as a defendant, can take advantage of these favorable provisions. The general rule, and I state this broadly, is that the lawsuit you are facing must involve the plaintiff’s claims against you that arise from facts or actions stemming from your constitutional right of “free speech” or “petition”.  I will address these two elements in my next blog post.

My other key take-away points here are:

  • The above two free-speech / petition categories as to when you might be able to get the benefit of anti-SLAPP are much broader than one might initially think. Existing California case law is replete with numerous issues that fall within these favorable anti-SLAPP free speech and petition requirements; and
  • The California courts have effectively seen-through efforts by plaintiffs who, with artful drafting of a plaintiff’s Complaint, attempt to evade the reach of anti-SLAPP provisions by including mixed, unprotected non-SLAPP assertions in their Complaint to try and derail an anti-SLAPP challenge. See, for example, Baral v. Schnitt, 1 Cal. 5th 376 (2016).  I assume this drafting scrutiny will be an important focus the Georgia Supreme Court will follow as more of these anti-SLAPP cases make their way through the Georgia courts.

Subpoenas and the Executive Branch

Back in 2016, I wrote a blog post, captioned “Deju Vu. The 1974 NIXON Subpoena”;  Click here for my earlier post. This post today is merely to restate one of the most interesting, unanswered constitutional law questions that has remained in the forefront of my mind all these years after my earlier days at Emory Law School.

This is not a political blog post, but it does center on how a President can, or might, respond to subpoenas.  Here is this question’s relationship to the 1974 Nixon subpoena.

In short, in 1974 special prosecutor Leon Jaworski, while conducting the Nixon Watergate investigation, obtained a subpoena ordering President Nixon to release certain tapes and papers as to meetings between Nixon and others who had been indicted by a grand jury. Nixon refused. The US Supreme Court, in a unanimous opinion, concluded Nixon could not rely on executive privilege as immunity from complying with the subpoena. The Supreme Court ordered Nixon to turn over the tapes in response to the subpoena. Nixon ultimately agreed to comply with the subpoena.

Here is the constitutional question we discussed (and that hooked me all these years) in my constitutional law school class in response to the Nixon Supreme Court opinion. That is, how would Jaworski’s subpoena have been enforced if Nixon had snubbed the Supreme Court and taken the position he did not have to comply with the subpoena?

Because Nixon’s own executive branch was (and is) the only enforcement branch of government, what would have happened if Nixon did not allow his executive branch to enforce the subpoena? Remember, the judicial and legislative branches have no enforcement capability. Also, you and I would likely be jailed quickly by the executive branch for our failure to comply with a court order.  [Nixon ended up voluntarily complying with the subpoena, without anyone having to deal with its enforcement.]

So, would the military have stepped in to enforce the Nixon subpoena?  Would we have seen military tanks in front of the White House?  Would there be an attempted coup? Would there be vigilante enforcement, etc.? We simply have no answer.

The point of this blog post is to remind each of us of, and elevate, the sanctity and design of our US three-branch system of government. In my view, especially as a lawyer, this three-branch system is the only reason we have been able to maintain our breadth of freedoms and rights against the historical backdrop of disputes, crises, disagreements, differing political and social views, and so forth.

The crucial question, at present, of another potential subpoena stand-off should not focus only on the substance or information of what the subpoena is seeking, but rather on how does the subpoena and its compliance fit with the need of continuing the essential and crucial balance of our three-system government? My imponderable constitutional question still remains unanswered and untested. Let’s keep it that way.

 

Whoops. The No-Contest Clause Backfired!

This blog post is in response to a recent April 2019 California case dealing with disgruntled siblings and an “in terrorem” (or no-contest) clause in their late mother’s revocable trust document.  I use the California case to make the following broader comments for this blog post and tie my comments to a Georgia point.

An in terrorem clause (no-contest clause) in a Will or trust document is to prevent beneficiaries from raising issues as to the Will or trust in order, in most cases, to try and increase their share. The provisions under Georgia law for no-contest clauses are under O.C.G.A. Section 53-4-68 (for Wills) and Section 53-12-22 (for trusts).

An example of a no-contest clause in a Will is:

“If any beneficiary, alone or along with any other person or persons, directly or indirectly, contests or initiates proceedings to contest this Will in any court with a challenge to its validity of all or any part of my Will or in any manner, attacks or seeks to impair or invalidate any of the provisions of my Will or prevent any provision of my Will from being carried out in accordance with its terms, that contesting beneficiary shall be deemed to have predeceased me and as a result shall forfeit his or her interest under this Will in its entirety with his or her forfeited share passing to my other children, per stripes, as though the contesting beneficiary and his or her descendants all predeceased me.”

This blog post is not for the purpose of an extensive discussion about the design and use of a no-contest clause.  But, rather, it helps illustrate that no-contest clauses are not just simply boilerplate provisions that one can, or should, without careful thought merely cut-and-paste into a Will or trust.

Below are a couple broader comments as to no-contest clauses:

I start with reference to a recent 2019 California court opinion dealing with a no-contest clause. This case has an extremely interesting and surprising twist that one of the litigious sisters likely never expected, to her detriment. This case is Key v. Tyler, 2019 Cal. App. LEXIS 358 (April 19, 2019).  Click here for a copy.  The core facts are that three adult sisters are beneficiaries of their deceased parents’ 1999 family trust.  The family trust essentially provides for an equal split among the three sisters after their parents’ deaths. As of January 2006, the family trust was worth over $72 million.  Lawyer-sister Tyler was the trustee.

A 2007 amendment to the 1999 family trust surfaced after the mother’s 2011 death (the mother was the second parent to die). After their mother’s death, sister Key asserted that her lawyer-sister Tyler had unduly influenced their mother in 2007 to amend the 1999 family trust. The 2007 trust amendment was apparently orchestrated by Tyler and resulted in Tyler increasing her own trust share substantially in excess of her other two sisters (including Key). The 1999 family trust and 2007 amendment each included a no-contest clause.

Sister Key, after the mother’s death, filed a California court action and asserted the 2007 trust amendment was the result of undue influence over their mother by lawyer-sister Tyler . The California court agreed with sister Key, with the result that the 2007 trust amendment was essentially disregarded. Although this California opinion is rich with an abundance of procedural details, factors, concepts, and other elements in this sister- v.-sister litigation, I make only the following three comments stemming from this California case (my knowledge of the facts in this case are based solely on information in the court opinion):

One. This point centers on the 1999 family trust and the 2007 trust amendment, each having a no-contest clause.  One might reasonably ask:  With the trust document having a no-contest clause, how was sister Key (the non-lawyer sister) able to attack the 2007 trust amendment, without triggering the clause against herself (Key)?

The reason is that California law, as with some other states (but not Georgia), has an exception to the challenge to a Will or trust with a no-contest clause, if the person making the challenge can show probable cause at the time of filing the challenge, such as probable cause of undue influence, or mental incapacity, etc.

In other words, without probable cause a person cannot simply file a challenge to a no-contest clause Will or trust and hope during the discovery phase of the litigation to luck-up or stumble across evidence of undue influence, or mental incapacity, etc.  Probable cause up front reduces fishing-game litigation. Absent probable cause, the person making the challenge to the Will or trust also risks losing, with the result of being penalized by the no-contest clause.

Two. This next move in this litigation by sister Key is what greatly sparked my interest in this California case.  Here it is:  After sister Key successfully challenged and obtained the set-aside of their mother’s 2007 trust amendment, Key then filed a petition to enforce — against her lawyer-sister Tyler — the no-contest clause as to the 1999 family trust. This is the backfire.

Here the reader might say “Wait a minute, it was sister Key who challenged the 2007 trust amendment.  Lawyer-sister Tyler never asserted any challenge.  So, why now is lawyer-sister Tyler facing loss of her inheritance based on her (Tyler’s) violation of the no-contest clause? “

There are two primary reasons.  First, the California court concluded sister Key had sufficient probable cause of undue influence to file her challenge to the 2007 amendment, even with the no-contest clause.  The probable cause exception under California law provided an exception for Key to the trust amendment’s no-contest clause.  Second, and this is the part of the California court opinion that really grabs my interest.  The court, in concluding sister Key can seek to enforce the no-contest clause against Tyler, states:

“By [lawyer-sister] Tyler obtaining the 2007 Amendment through undue influence and then defending that amendment in court, Tyler sought to ‘impair’ and ‘invalidate’ the provisions of the original Trust that the 2007 Amendment purported to replace.  The No-Contest Clause therefore disinherits Tyler if it is enforceable against her.”

2019 Cal. App. LEXIS, *29.

I assume lawyer-sister Tyler was completely blindsided by now finding herself the subject of a possible no-contest clause violation, and never for a moment considered that her court fight as trustee to defend and uphold the 2007 trust amendment would (or could) be the basis of Tyler herself violating the no-contest clause. Tyler now stands to lose her share of the trust if the court ultimately concludes Tyler violated the no-contest clause [the court has not yet arrived at a conclusion].

Three. This final point ties my Georgia discussion to the above California case. Georgia does not have a probable cause exception that allows a beneficiary with probable cause to challenge a no-contest clause Will or trust. My view is that Georgia (and all other states) needs a probable cause exception.  This is up to the legislature.

Here also is my concern, merely as an example, of there being no probable cause exception in Georgia.  Assume a family friend, business associate, or even a lawyer, becomes a close friend of an elderly widow or widower.  And that person persuades the elderly person to change his or her Will to include him or her as a substantial beneficiary (or gets the elderly person to add his or her church or other charitable institution as a substantial beneficiary). Assume also that person persuades the elderly person to include a strong, no-contest clause in their Will or trust.

This could be a tragedy and, in my view, would prevent another beneficiary or family member from challenging a Will or trust that now benefits the family friend, business associate, or lawyer, even if the challenging beneficiary has probable cause. The person influencing the elderly person, therefore, shields himself or herself by influencing the person to include the no-contest clause.

My final general point is to make sure you know what documents your elderly parents have in place, and whether they are making changes, influenced by others, etc. Don’t end up with no options to challenge their situation where someone influences your parents to include him or her in the Will or trust, and also influences your parents to include a strong no-contest clause.  This person may likely end up with your inheritance,  unscathed.

One last comment for readers who wish to read the attached California court opinion.  That is, the court opinion provides a great deal of discussion about this California sister case being a SLAPP case [“Strategic Litigation Against Public Participation”]. SLAPP is essentially a procedural speed-up option available for certain litigation cases, that I also find is an extremely interesting, evolving court development.  I will write a blog post soon about what SLAPP is and why I find it a compelling and positive development in litigation.  [California has a much broader range of SLAPP options compared to Georgia.]

The 2017 Gibson Opinion. Divorce? Squirreling Away Assets in Trust?

This blog post is about whether the 2017 Georgia Supreme Court opinion in Gibson now opens the door wider for one spouse more easily – while married — to squirrel away his or her assets in a trust, and then later use that trust as a shield in a divorce proceeding. It does not.

In Gibson,the husband during his marriage funded two trusts with $3.2 million of property; the husband prevailed in keeping the $3.2 million out of his divorce proceeding without the trust assets being subject to equitable division. This is $3.2 million that otherwise would likely have been marital property in the divorce, absent the trust planning. Click here for a copy of Gibson v. Gibson, 801 S.E.2d 40, 301 Ga. 622 (2017).

The key factual distinction laying the foundation for the husband to prevail in Gibson was the lower trial court’s conclusion that the husband retained no interest in the trusts, including no interest as a trustee or beneficiary.  As I touch on again below, my experience is that most spouses who unilaterally create and fund a trust during marriage do retain interests in the trust, albeit as part of the purposeful, stealth design of certain opaque, highly-technical trust provisions.

Back to the Gibson opinion. My sense in talking with other lawyers is that some have an over-optimism leading them to conclude Gibson opens the door wider now enabling one spouse to keep his or her trust out of the divorce arena. For the reasons I state below, I disagree. The backdrop to this misplaced optimism is the following portion of the Gibson opinion:

This is not an issue of first impression for our Court, which has permitted property placed in certain types of trusts to be exempt from equitable division.  . .  . Therefore, property that has been conveyed to a third party is not subject to equitable division absent a showing of fraudulent transfer. See id. If a spouse places property in a trust of which he is the sole beneficiary, that property may be subject to equitable division. See Speed v. Speed , 263 Ga. 166, 430 S.E.2d 348 (1993). But if a spouse is not the sole beneficiary of a trust, the corpus of the trust is not subject to the other spouse’s claim of distribution. See McGinn v. McGinn, 273 Ga. 292, 292, 540 S.E.2d 604 (2001).

Excerpt from the Gibson opinion (I added the bolding and underlining).

The optimists read Gibson (and the “sole beneficiary” excerpt above) to support the notion that a spouse who funds a trust – where that spouse is not a sole beneficiary of the trust –  can now exclude the trust from claims in a divorce. This is a misreading of the above Gibson reference to sole beneficiary.

This sole beneficiary reference is merely a passing remark by the Georgia Supreme Court (what lawyers call obiter dictum) in stating the Gibson case was not a case of first impression on the question of how a trust created during marriage fares later in a divorce action. This sole beneficiary element also was not a fact for consideration as to the Gibson husband’s trusts and not part of the holding in Gibson.  [I have not seen the Gibson trust documents.]

Here are my broader Gibson points for this blog post:

One. I am called upon from time to time to assist divorce lawyers with attacking a trust in a divorce proceeding. My job is to help attack the trust and keep it in the divorce proceeding. My attack at times is directed at the deficiency and shortcomings in the trust document itself, where the drafter failed to cross the “t”s and dot the “i”s. My attack also gets into the various quasi-hidden, stealth trust powers purposely built into the design and framework of the trust that do not easily – merely on the face of the trust document – alert a non-trust lawyer to the existence of continuing powers and potential benefits the spouse retained in the trust (such as powers of appointment held by a friend or other family member; powers to decant the trust to another trust; using someone other than the spouse as the purported settlor of the trust document giving the diversionary appearance the spouse did not create the trust, etc.).

One might ask “Why would a spouse hold these stealth ties to the trust?” The answer, in my experience, is that it is a rare instance where one spouse creates and funds a trust during marriage without making sure he or she still possesses indirect options either to get back the property after the divorce situation ends or ultimately later control the property for that spouse’s own benefit.  Thus, arguably most unilateral trusts are not third-party trusts.  I use the term unilateral for when one spouse puts this trust planning in place without the knowledge of the other spouse.

Two. Whether a trust is or is not a third-party trust is not merely an easy simple ‘yes’ / ‘no’ question. The status and nature of any trust depends in most cases (divorce and non-divorce cases) on the effect of the opaque, stealth technical provisions in the trust document, as part of the purposeful design of the trust. This opaque-stealth question, in my opinion, is where the heart of the fight lies when dealing with a trust in a divorce setting.

Three.  When the trust at issue in a divorce is a third party trust (as in Gibson), that trust under the Gibson opinion will still be subject to a fraudulent transfer analysis in the divorce proceeding, as is the case with virtually any other third-party transfer of property prior to divorce.

The procedural rub is that the law requires, as generally in any fraudulent transfer attack, that the opposing party (the non-trust spouse in a divorce) bears the burden of proof for the fraudulent transfer attack.

Four. But, by contrast, I read Gibson as not changing the existing law or theories in divorce proceedings for trusts that are not third-party trusts. Those trusts are still subject to attack, but without the non-trust spouse bearing the burden of proof under a fraudulent transfer attack.  Here the burden is on the spouse who created the trust — during the marriage – to prove the trust is not marital property.

Horribly Annoying Music; Supreme Court Justice Felix Frankfurter

In restaurants, waiting rooms, dentist offices, airports, grocery stores, phone-hold, ad nauseam, we are bombarded persistently with music and television content, not of our own choosing.  This is akin to someone forcing a book or other reading material three inches away from our face with the admonition “READ THIS”.

U. S. Supreme Court Justice Felix Frankfurter and I would have likely agreed fully with one another. While reading a recent The New Yorker magazine, my wife ran across a short comment about Justice Frankfurter having recused [removed] himself from the following 1952 case.  Click here for a link to the supreme court opinion in Public Utilities Comm’n v. Pollak, 343 U.S. 451 (1952).

What triggered my interest was Justice Frankfurter’s spot-on reaction to this 1952 case, that I include further below. This 1952 anecdote also gives me pause (without my further comment) to ponder where Supreme Court justices (and potential justices) fall now in 2018 as to the notion that a Supreme Court justice lays aside private views in discharging his or her judicial function.

The issue in this 1952 Supreme Court case dealt with some Washington DC public transportation passengers who asserted their constitutional rights were violated by having to listen to streetcar, bus, and railway piped-in music, announcements and advertisements. This content consisted generally of 90% music, 5% announcements, and 5% commercial advertising. The Supreme Court did not side with these constitutional objections.

And, Justice Frankfurter had such a strong reaction (and opposition) to this forced audio content, that he recused himself from the case with the following comment (which is in the published Supreme Court opinion) [I added the underlining below]:

Justice Frankfurter:

The judicial process demands that a judge move within the framework of relevant legal rules and the covenanted modes of thought for ascertaining them. He must think dispassionately and submerge private feeling on every aspect of a case. There is a good deal of shallow talk that the judicial robe does not change the man within it. It does. The fact is that, on the whole, judges do lay aside private views in discharging their judicial functions. This is achieved through training, professional habits, self-discipline and that fortunate alchemy by which men are loyal to the obligation with which they are entrusted. But it is also true that reason cannot control the subconscious influence of feelings of which it is unaware. When there is ground for believing that such unconscious feelings may operate in the ultimate judgment, or may not unfairly lead others to believe they are operating, judges recuse themselves. They do not sit in judgment. They do this for a variety of reasons. The guiding consideration is that the administration of justice should reasonably appear to be disinterested, as well as be so in fact.

 

This case for me presents such a situation. My feelings are so strongly engaged as a victim of the practice in controversy that I had better not participate in judicial judgment upon it. I am explicit as to the reason for my nonparticipation in this case because I have for some time been of the view that it is desirable to state why one takes himself out of a case.

 

Asset Protection Trust Planning for Divorce (a Nevada Win)

Here is a link to my recent publication in Steve Leimberg’s Asset Protection Planning Email Newsletter – Archive Message #358 (dated February 15, 2018), titled “Augmenting the 2017 Nevada Trust Win in Klabacka“.   Klabacka is the name of a 2017 Nevada Supreme Court opinion. You are welcome to pass along a digital or hard copy of my Leimberg piece to any other readers.

I suggest in this piece the possible  use of a prenuptial (or in some cases postnuptial) agreement in conjunction with self-settled asset protection trusts, as a way to protect each spouse’s respective property in the event of divorce.

But, because from time to time I also assist divorce lawyers with attacking and finding  chinks in the defensive armor of a divorcing spouse’s trust, this Klabacka piece also provides a backdrop highlighting the importance in any protective trust planning situation of crossing each “t” and dotting each “i”.  The devil in the details most often is the tipping-point difference in whether defensive trust planning succeeds, or fails.

As I state in this Klabacka piece, some lawyers — with too much overconfidence — cut corners in their trust planning process, especially failing to give sufficient attention to long-arm jurisdiction exposure when (and if) the trust becomes the target of litigious attack.