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.

Age 18 / 21 Cheat-Sheet for Georgia Uniform Transfers to Minors Accounts

I typically do not recommend use of transfers to minors accounts, compared to the alternative of more-targeted trust planning. But, many clients still end up running into questions and situations dealing with transfers to minors accounts (sometimes called a minor’s custodial account).  Also, I get questions from time to time about whether a child will get the minors account property at age 18 or 21.

Here is a quick cheat-sheet. Depending on the situation, there are both age 18 and 21 answers.  This age 18 / 21 distinction under Georgia law is at O.C.G.A. Section 44-5-130.  Click here for a link to the full gamut of these Georgia transfers to minors statutes. These age 21 situations are limited exceptions to the adult age of 18.

Hands on the Account at Age 21

The minor gets the account at age 21 if the transfers to minors account was set up intentionally as a transfers to minor account. This is the most typical, garden-variety transfers to minors account where, for example, grandmother sets up and funds the transfers to minors accounts for grandchildren, etc.  Or, where the parents or anyone intentionally and purposely sets up the transfers to minors accounts.

In the above garden-variety situations, the minor has to turn age 21 before getting his or her hands on the account (even though the minor at age 18 is an adult for other purposes under Georgia law).

The other age-21 exception deals with trust and Last Will and Testament documents.  Read the following section of this blog post carefully, as it affects whether the minor gets hands-on at age 21 or earlier at age 18.

Assume a minor stands to get a distribution of cash or property from a trust or from someone’s estate under a Last Will and Testament.  If the trust or Last Will and Testament documents include an express reference — in the trust or Will document itself — allowing the trustee or executor to make the distribution into a transfers to minor account, then the trustee or executor can open and create transfers to minors accounts, make the distribution to the account, and age 21 applies.

The take-away point is that the trust document or Will must include an express reference to the trustee or executor having the power to distribute to a transfers to minors account in order for age 21 to apply.  In other words, the person who created the trust or Will must have intended for the trust and Will to use transfers to minors accounts.  This is the tie-in to my above comment about an intended use of these minors accounts.

The above age 18 / 21 point is that age 21 applies only under the above intentional circumstances.

For this intended age 21 element to apply for estate / trust planning, it is, therefore,  imperative that your trust and Will documents include express authority for the trustee or executor to make distributions to minors into transfers to minors accounts. The express power to create and make distributions into transfers to minors accounts also applies if the trust or Will document incorporates expressly by reference the Georgia fiduciary powers under O.C.G.A. Section 53-12-261 (see Section 53-12-261(b)(27)(B) referring expressly to the power to create and fund transfers to minors accounts).

Better yet, create longer-term trust provisions for the minor beneficiaries so that the trust can exist for longer periods beyond age 21.  My view is that age 21 is much too young for large amounts of property or cash to fall into the hands of any of these younger beneficiaries.

Hands on the Account at Age 18

By contrast, age 18 is the broader, general rule — even for transfers to minors accounts — when minors become age-18 adults under the law.  Accordingly, in virtually all other situations not falling under the above age 21 exceptions, the creation and funding of transfers to minors accounts is still allowable and can be created for a minor, but the minor gets the account at age 18, not 21.  The above link to the Georgia transfers to minors statutes provides much more detail than I include in this post.

Keep in mind in this age-18 situation there can (and will) exist a transfers to minors account to hold the property or cash, but the account will be subject to the age 18 element. This is because these age-18 minors accounts are not created under the above intended garden-variety and trust / Will exceptions.  The nuances above likely appear overly academic; but have real consequences for this age 18 / 21 distinction.

Now, a final, negative kicker. If the trust or Will document does not include the above authorization for use of a transfers to minors acccount and the distribution amount exceeds $10,000, then a legal guardianship (and conservatorship) will be required for oversight of the property (or cash) until the minor turns 18.  This is not an easy, cost-free option.  For readers interested in technical details about this conservatorship result, start with the link above for reference to O.C.G.A. Section 44-5-116(c)(3).  See also O.C.G.A. Section 29-3-6.

Platitudes are Most Often Useless (and Ineffective); and Dr. Martin Luther King Jr.’s Recently-Discovered December 7, 1964 Speech

I often tell clients I did not become a lawyer to “help” people.  In my view, “help” is nothing more than a conclusory term with no common meaning sufficient to guide a client or his or her lawyer through difficult disputes (and related litigation).  It is also simply  a relative word that I assume each lawyer in a dispute can easily voice as to how he or she is “helping”  their own client. Using the word “help” more accurately means a lawyer is “fighting” for his or her client’s position.

As to these kinds of legal fights, the passion and joy I get from lawyering is helping level the playing field when another party unreasonably overreaches.  The overreaching can occur for a myriad of reasons, including, as examples in many cases, an elevated sense of entitlement, an assumed superior right, or closed-minded ignorance.  As I continually assess the progress of my litigation cases, I not only have to be well-versed on the facts and law of the case, but also attuned to assessing motivations of an opposing party; again, especially when I conclude entitled overreaching is at play.

Now, what do platitudes have to do with the above paragraph, such as “be friendly”, “be a team player”, “be kind”, “be considerate of others”, “turn the other cheek”, “pull yourself up by your own bootstraps”, “god helps he who helps himself”, etc.?  My sense is these platitudes originated from those already sitting in the upper winning or dominant position.  Platitudes are merely armchair, conclusory statements that assert nothing more than their own conclusion or result.  For example, merely repeating a platitude fails to consider why someone might not be able to “pull” himself up from his own bootstraps, or why a person might need to know what to do after once turning the cheek (e.g., what does he or she do next?). Platitudes in most cases are simply diversionary icons that do nothing more than suggest their own non-substantive meaning.

I could write pages about this platitude topic in its many everyday forms and effect. But, I will not bore the reader.  However, last night I stumbled across an extremely compelling example of a speech that effectively goes well beyond simple, conclusory platitudes.  This is a December 7, 1964 speech in London by Dr. Martin Luther King Jr. that was discovered only recently by Pacifica Radio Archives.  Dr. King gave this speech before travelling shortly thereafter to Oslo, Norway to receive his Nobel Peace Prize.   Click here for his speech.

I urge readers to listen to this speech in its entirety, and keep in mind one can still substitute — even today — in the context of Dr. King’s powerful speech all marginalized groups (who are persistently subject to entitlement-minded overreaching by others). This speech, in my opinion, is an extremely effective argument against the above simple use of platitudes.  It also speaks to leveling the playing field, right up my alley.

At a minimum, listen to this speech beginning at 37:20 where Dr. King’s commentary about non-violence illustrates superbly the difference between someone merely voicing  “non-violence” as a feel-good platitude, compared to Dr. King’s powerful and substantive expression of how one actually can practice non-violence.

 

A “Directed Trust” Primer (my recent 9.19.19 Leimberg Information Services newsletter)

I published a very good primer on directed trusts last week for Leimberg Information Services. Click here for a copy of the primer. You are welcome to reprint or email this pdf primer for other readers. For many of you I believe my discussion about using a directed trustee for investment management is important, and can greatly help prevent Madoff scams.  Please contact me if you have any questions:  james@ktlawllc.com

Cryptocurrency and Digital Assets

This is my second blog post dealing with the increasing Brave New World of “digital assets” and how these assets fit with a person’s estate planning. Below are a few of my brief comments about cryptocurrency:

(1)  In the cryptocurrency world, a person’s “private key” is the crucial element separating access to one’s cryptocurrency and its loss (likely permanent). The private key is analogous to a password. My strong point here is to keep a backup of your private key, and let trusted family members know where they can find your private key in the event you are unable to provide it (your death, disability, etc.). There are hundreds of web references to individuals having permanently lost millions of dollars in cryptocurrency due to lost private keys.  Click here for an example from Wired magazine referring to a CEO who recently died;  and no one can find his private key to an estimated $137 million in cryptocurrency;

(2)  The above access / backup problem is particularly elusive, and difficult, as many cryptocurrency users are extremely private about this subject, often to the intentional exclusion of their family members, etc.;

(3)   As a related aside, the IRS, no doubt, is interested in your cryptocurrency.  IRS Notice 2014-21 is its first published guidance in the form of answers to frequently asked questions.  Click here to read this notice;

(4)  The above IRS Notice includes a great deal of information. Two points likely a surprise to most readers are:  (i) the IRS is treating cryptocurrency transactions for income tax purposes as a “sale or exchange”. For example, if you use $50,000 of  cryptocurrency to purchase an item;  you will trigger gain or loss on the $50,000 depending on your cost basis in your cryptocurrency, etc. I purposely do not include more detail about this gain / loss treatment for this post; and (ii) Notice 2014-21 expressly states the IRS will treat cryptocurrency as property, not as currency.  For estate tax planning purposes, this means cryptocurrency will be inludable in the owner’s estate at death, with a stepped-up (or stepped-down) cost basis based on the cryptocurrency FMV at the person’s death;

(5)  Finally, I strongly recommend an express provision dealing with crypocurrency be included in a person’s estate planning documents (trustee, executor, power of attorney powers, etc.). Below is my current draft of possible language for dealing with cryptocurreny (again, this is merely my example language for this post;  no reader may rely on this provision as legal or any other advice from me or my law firm):

“To handle on my behalf any of my digital asset “cryptocurrency“, defined for purposes of this DPOA [durable power of attorney] as digital assets that are exchanged electronically and based on a decentralized network or exchange, with such exchanges not requiring a reliable intermediary and managed using distributed ledger technology. In broad terms I give my agent under this DPOA the power to accept or pay on my behalf any cryptocurrency, digital asset currency, funds, or other value that substitutes for currency from one person to another person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. The above term “other value that substitutes for currency” encompasses situations in which the transmission does not involve the payment or receipt of cryptocurrency, but does include, but is not limited to, my private and public keys, blockchain and ledger information, bitcoins, bitcoin addresses, and any other cryptocurrency user or account data or information related to such transactions or to any convertible currency related thereto on my behalf. My intent also is that my reference to “cryptocurrency” under this paragraph be read together as broadly as possible in the broad context of my reference to electronic communications content and the definition of “digital assets” under O.C.G.A. Section 53-13-2 (as amended) included in paragraph (gg) below;”

(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.

Georgia; The First Progressive UDTA “Directed Trust” State in the Nation

Georgia is the first state in the nation to enact sweeping UDTA trust law changes, centering primarily on “directed trusts”, with these changes effective July 1, 2018 (I refer again to “UDTA” at the end of this post).  These new laws are under O.C.G.A. Sections 53-12-500 thru 506. I will be providing brief posts in the near future about certain aspects of these changes. The “directed trust” is the current, progressive approach around the country for optimal trust planning.

The essence of what “directed trust” means is that the trustee of the trust, or even a named non-trustee advisor (called a “trust director” under the new Georgia law), can direct others — who each then become “directed trustees” — to handle certain aspects of the operation of the trust. For example, the trustee can direct an investment trustee to handle the investment management of the trust assets. Or, as another example, the trustee can direct an administrative trustee to handle the administration of the trust.

In other words, the trustee alone does not have to carry the burden and liability for all trust functions. This team approach using other directed trustees enables the trustee to carve up the trust responsibilities, sometimes referred to as à la carte trust administration.

Below are a handful of my initial, brief comments about directed trusts for this first blog post:

(1)  I really like Georgia’s statutory endorsement of directed trusts. Especially facing inescapable, impending aging, we and our families need a team approach for the care, protection, and oversight of our assets and affairs. I am not a fan of empowering only one individual to handle all of these matters, even if that one-person is a family member. There needs to be team input, and corresponding checks and balances where the team members each have a more independent view of the team’s efforts. And, certainly in some cases, a trusted family member can be the trustee with the power to put in place these other directed trustees;

(2)  My general take on these new Georgia directed trust laws is that each team member (that is, each directed trustee) is subject to a fiduciary standard and liable for breach of trust if committed in bad faith or with reckless indifference to the interests of the trust beneficiaries [see, e.g., Georgia O.C.G.A. Section 53-12-303, captioned “Relief of liability”]. In other words, each directed trustee has to act with a fiduciary duty to the trust beneficiaries. This enhances the protective benefit of the team approach;

(3) Elder financial abuse is skyrocketing. For this reason, I strongly recommend families presently develop a relationship with a trusted, competent investment advisor who can help oversee the family’s investment assets. And, as needed, that trusted investment advisor can be, or later become, the family’s directed investment trustee. This advisory oversight, coupled with the above fiduciary duty standard and the now-stricter FINRA rules that address the financial exploitation of seniors, helps provide another team-member set of eyes and ears alert to the threat of financial abuse and fraud, etc.;

(4)  These new Georgia directed trust laws are modeled after UDTA (the “Uniform Directed Trust Act”). These new laws are very dense, and appear well-drafted and comprehensive. But, easy, quick, no-thought, simple reliance on uniform laws can blind the lawyer drafting the trust. Even with these progressive laws, there needs to be artful trust document drafting so as to take advantage of these directed trust provisions, but without leaving unintended gaps or ambiguities in the trust document that cause problems down the road. Of course, artful drafting has always been the case with virtually any trust document.

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.]