The Impact of Federal Law on a Decedent’s Digital Assets

Naomi R. Cahn, Probate Law Meets the Digital Age, 67 Vand. L. Rev. 1697 (2014), available at SSRN.

Recently, estate planners and scholars have begun to grapple with the problem of transferring digital assets at death. In Probate Law Meets the Digital Age, Professor Naomi Cahn adds an interesting new dimension to this relatively new issue. She focuses on the effect of the Stored Communications Act (“SCA”) on estate administration. Although the SCA does not affect a fiduciary’s ability to distribute assets once they are discovered, it affects the fiduciary’s ability to examine on-line accounts to discover those assets.

The SCA, which was enacted nearly two decades before the development of Facebook, was passed in response to privacy concerns related to the internet. It was not aimed at transfers at death, but it certainly can impact probate administration in an era when most people have some sort of on-line presence. This has created a great deal of uncertainty for internet service providers as well as for fiduciaries, including personal representatives, agents, conservators, and trustees. As Professor Cahn points out in her piece, this uncertainty currently impacts anyone who dies with an e-mail account.

At its most basic level, the SCA does two things. First, it limits the government’s ability to require internet service providers to disclose information about subscribers unless an exception applies. The most notable exception is when the disclosure occurs with the consent of the subscriber or the intended recipient of an electronic communication. Second, the SCA limits the ability of the internet service provider to voluntarily disclose the information. Although a court could interpret the SCA to allow disclosure by, for example, determining that the fiduciary stands in the place of the decedent for consent purposes, this result is far from certain.

In Part II of her article, Professor Cahn discusses difficulties related to the inheritance of digital assets under state law. Digital assets include any information that is stored on a digital device or on the internet, including electronic documents, e-mails, bitcoins, music, social media profiles, photos, and websites. These assets are a unique form of intangible asset. Unlike other more traditional intangible assets, such as trademarks and copyrights, digital assets can raise unique privacy concerns. The rights of the account owner are typically governed by a terms-of-service agreement that, in turn, is governed by state law. This agreement may give the account owner an ownership interest in an asset that can be transferred at death, or it may give the account owner a license that terminates at death.

In Part III, Professor Cahn analyzes federal statutes that impact the inheritance of digital assets. Here, she focuses on the SCA and notes that it was concerned only with protecting the privacy of the account holder; it was not concerned with ownership of the account or ownership of communications. The SCA sets out the procedures that the government must follow to force an internet service provider to disclose information, and it also sets out penalties for unauthorized disclosures. She notes that while an internet service provider may disclose non-content based communications (the envelope rather than the letter) to a fiduciary, it may only disclose content-based communications in seven situations, including with the consent of the account holder. Unfortunately, the SCA does not explicitly address whether a fiduciary automatically has lawful consent to access the decedent’s digital assets. This has caused some internet service providers to refuse to disclose information rather than risk liability.

The SCA House Committee Report emphasized that the account holder’s consent does not need to be explicit, and it gives examples of acceptable forms of implied consent. Professor Cahn argues that state-recognized fiduciaries should be included within the lawful consent exception. She notes that the fiduciary obligations of executors to administer estates in the best interest of the beneficiaries are frustrated if they cannot have access to digital assets.

In Part IV, Professor Cahn proposes changes to existing state and federal laws. She first argues that there is a simple way to legislatively fix federal law: just add “or state-recognized fiduciary” to the list of people who can provide lawful consent for disclosure. Despite the apparent simplicity of this solution, Professor Cahn recognizes the inherent political difficulty of trying to change a law that deals with sensitive issues of national security and privacy. As an alternative to a specific legislative change, Professor Cahn argues that courts should interpret the law to permit fiduciary access.

In the absence of federal legislation and judicial decisions interpreting federal law, Professor Cahn argues that states should enact laws that define lawful consent and that define the scope of access to clarify whether digital assets should be treated the same as non-digital assets. Although states cannot require federal courts to interpret federal statutes in a specific way, those courts can seek interpretive guidance from state laws.

Professor Cahn has written an extremely thought-provoking piece. I tend to agree that a decedent would want a named fiduciary to have access to his or her digital assets. Implying that consent makes all the sense in the world to me. That said, I probably would come out slightly differently with respect to fiduciaries who were not expressly named by the decedent, such as administrators of an intestate estate. Although I have no basis for knowing this, something tells me that decedents generally would only want expressly-named people to have unfettered access to their digital life. Regardless of my personal opinion on that issue, I cannot help but conclude that Professor Cahn has made a wonderful contribution to this very important and current issue.

Cite as: Sergio Pareja, The Impact of Federal Law on a Decedent’s Digital Assets, JOTWELL (March 9, 2015) (reviewing Naomi R. Cahn, Probate Law Meets the Digital Age, 67 Vand. L. Rev. 1697 (2014), available at SSRN), http://trustest.jotwell.com/the-impact-of-federal-law-on-a-decedents-digital-assets/.
 
 

Erasing the Lines Between Contracts, Gifts, and Wills

Adam J. Hirsch, Formalizing Gratuitous and Contractual Transfers: A Situational Theory, 91 Wash. U.L. Rev. 797 (2014).

Imagine that I asked your opinion about a dispute concerning the purchase of a new car; or whether I was entitled to a necklace my friend promised to give me; or about the devise of land by my father. You would likely analyze each transaction against the rules of contracts, gifts, and estates and trusts, respectively. Was there a signed contract for the purchase of the car? Was the necklace delivered? How many witnesses signed the will? As Adam Hirsch’s Formalizing Gratuitous and Contractual Transfers: A Situational Theory points out, however, the laws of contracts, gifts, and estates and trusts are all fundamentally about transfers. And perhaps we could considerably simplify the law if we abolished doctrinal categories and instead focused on the circumstances under which transfers occur.

At present, each doctrinal category has its own set of requirements for a valid transfer. Broadly speaking, contracts must comply with the statute of frauds; gifts must be delivered, and wills must be written, signed, and witnessed. But each of these formal requirements has exceptions. Lots and lots of exceptions, as well as inconsistencies, and Hirsch details most of them. These exceptions have sprung up over time, as legislatures and judges try to account for the varying circumstances under which transfers occur.

Hirsh argues that the situational context of the transfer—and not doctrinal category—should dictate the optimal level of formality that is required for a valid transfer. He identifies three different situational contexts. First, there are “spot transfers,” where the exchange or handing over occurs right on the heels of making the decision to transfer. Examples of spot transfers include short-term contracts and inter vivos gifts. Second are “anticipatory transfers,” where an interval of time elapses between the decision to make the transfer and the transfer itself, as with wills and relational contracts. Last, there are “eleventh hour” transfers, where the decision to make a transfer occurs very close to death. Examples include gifts causa mortis and deathbed wills. Hirsh suggests that each of these situational contexts necessitates a different level of formal requirements. Critically, however, these formalities could be the same across all doctrinal categories. For example, lawmakers could allow gifts to be promised in the present but given (i.e., delivered) in the future, provided that donors formalized the gift the same way they would formalize a will.

Hirsch suggests that applying rules across doctrinal lines will simplify existing doctrines. As he reviews the labyrinth of exceptions to existing rules (such as all the instances in which the statute of frauds does not apply, holographic wills, harmless error rules, and so forth), he makes the case for the necessity of reform. Still, I’m not entirely certain that we will eliminate exceptions and inconsistencies by focusing on situational context. Hirsch’s article is focused exclusively on the timing of the transfer, but timing is only one element of a transaction’s overall context. Unless we confine “situational context” to timing alone, there are plenty of ways to distinguish one transfer from another, which means there are ample opportunities to create exceptions and create apparent inconsistencies.

For me, however, the hallmark of a good article is when I continue to play with the ideas the article presents even when I’m done reading it. As law students, we learned by doctrinal category and as professors we often teach by doctrinal category. But Hirsch’s article encourages us to think outside the box and across doctrinal lines. In doing so, Hirsch suggests reforms that may make it easier for people to engage in legally valid transfers.

Cite as: Sarah Waldeck, Erasing the Lines Between Contracts, Gifts, and Wills, JOTWELL (February 4, 2015) (reviewing Adam J. Hirsch, Formalizing Gratuitous and Contractual Transfers: A Situational Theory, 91 Wash. U.L. Rev. 797 (2014)), http://trustest.jotwell.com/erasing-the-lines-between-contracts-gifts-and-wills/.
 
 

The Heir Who Laughs, Laughs Last

John V. Orth, “The Laughing Heir” What’s So Funny?, 48 Real Prop., Tr. & Est. L.J. 321 (2013).

Professor John V. Orth takes a look at the limitations of intestate succession in his recent article, “The Laughing Heir” What’s So Funny. Unless an individual is the last human being on earth, when he or she dies, a surviving relative will exist. How closely related should the relative be to the decedent in order to inherit the decedent’s estate through intestate succession?

Common law canons of inheritance did not include a decedent’s ancestors as his or her heirs. Surviving spouses were also excluded. If a decedent had no descendants, his or her nearest collateral relatives inherited the estate. As long as there was proof of a blood relationship, a remote collateral could inherit the decedent’s estate.

Now, in the United States, surviving spouses are heirs. Also, ancestors may inherit when a decedent is not survived by a spouse or descendants. About half of states have unlimited collateral succession. The other half limit intestate succession by collaterals based on either parentelic lines, degree of relationship or some combination of the two. When limitations are strict, the likelihood of a decedent’s estate escheating increases. So the question becomes, who has the last laugh? The state or a remote collateral relative.

Professor Orth suggests that a 1935 article by Professor David Cavers influenced states to adopt limitations on intestate succession. In the article, Cavers suggested that only descendants of a decedent’s parents (first parentelic line) should inherit through intestate succession. His suggested limitation was based on the shift from rural to urban life. He argued that relatives who are scattered in different locales have no “sentiment of relationship” and “family pride” diminishes. For such individuals to inherit is a social injustice, according to Cavers, because they suffer no sense of loss. In the years following the Cavers article, many states began to place limitations on intestate succession. Professor Orth challenges the Cavers assertion. No state intestate succession statute lists the emotional reaction of the decedent’s death as a requirement for inheritance. There are plenty of close relatives who have no emotional connection to a decedent. So, if intestate succession is an “estate plan by default” then why do we impose any limits?

Professor Orth leaves us to ponder whether a state should have the last laugh. I would love to see an article answering the question in the negative. Both Professor Orth and I teach in North Carolina where the intestate succession limitation is the second parentelic line (descendants of a decedent’s grandparents) and fifth degree of relationship. Most of my students think this limitation is too rigid. I tend to agree with them. Such limitation eliminates relatives who are a far cry from “laughing.” As an example, since both of my “ninety- something” year old grandmothers are alive, my children are blessed to know their great-grandmothers—third parentelic line relatives. According to North Carolina and the Uniform Probate Code, such great-great mothers are too remote to inherit from my children through intestate succession. If they were my children’s only surviving relatives, my children’s estates would escheat.

When I teach Decedent’s Estates, we look at the case of Newlin v. Gill1, a North Carolina case where the first cousin of the decedent’s mother claims that he is entitled to the decedent’s estate. Unfortunately, as a third parentelic line relative, he was not able to inherit through intestate succession and the decedent’s estate escheated.

Professor Orth says the only reason to limit intestate succession is to increase the chances that the state will receive the windfall. Is the government better able to make use of the funds than private individuals? There is no consensus on the answer. But, if intestate succession statutes are to replicate what an individual would do had he taken the time to draft a will, then most individuals do not list the state as their residuary beneficiary. So, who would you rather have laugh all the way to the bank? A first cousin once removed, your great-grandmother, or the state?



  1. Newlin v. Gill, 293 N.C. 348, 237 S.E.2d 819 (1977). []
Cite as: Camille Davidson, The Heir Who Laughs, Laughs Last, JOTWELL (January 5, 2015) (reviewing John V. Orth, “The Laughing Heir” What’s So Funny?, 48 Real Prop., Tr. & Est. L.J. 321 (2013)), http://trustest.jotwell.com/the-heir-who-laughs-laughs-last/.
 
 

Compassionate Care for the Living and the Dying

Lois L. Shepherd, The End of End-of Life Law, 92 N.C.L. Rev. 1693 (2014).

As an elder law attorney, I spent my career helping my clients prepare for incapacity and death. A part of that preparation entailed assisting them with the execution of living wills and/or other health care directives. My goal was to ensure that their wishes with regards to end-of-life care were known and respected. Because of my experiences comforting and counseling sick and dying clients I have spent my academic career researching and writing about the ethical and legal issues surrounding end-of-life decision-making.

Two phenomena make a discussion of this subject so important. First, due to the aging baby boomer population, the number of patients who face these types of decisions will continue to increase. Second, as a consequence of the existence of medical technology that enables physicians to artificially sustain life longer, more people will be forced to make end-of-life decisions. Legislatures and courts have taken steps to establish processes that make it easier for patients to provide information to their health care providers about their choices with regards to end-of-life care. Nonetheless, Professor Shepherd claims that laws exclusively designed to help patients express their end-of-life preferences may not be needed. According to Professor Shepherd, the better approach would be for health care providers to treat end-of-life choices similar to other types of medical decisions.

Professor Shepherd starts the article by discussing two instances. The first case involved a conflict between the contents of a living will and the opinion of the patient’s health care agent. Relying on the living will, the hospital asked the patient’s wife who was also his health care agent for permission to remove him from life support. After the wife objected, the hospital successfully obtained a court order to discontinue life support in accordance with the wishes the patient had expressed in his living will. Professor Shepherd opines that the court’s decision may not have respected the patient’s autonomy. She feels that it is problematic that the court determined that the provisions of the boilerplate-filled living will should be given more weight than the directives of the woman the patient was married to for over fifty years. Professor Shepherd’s second example was related to a discussion she had with members of a book club after reviewing changes to North Carolina’s law pertaining to health care agents and living wills. During her conversation with the members of the book club, Professor Shepherd realized that the statutory revisions had rendered the living wills of some of the women obsolete. She also recognized that the law was too complicated and could not provide for all of the concerns raised by the women.

Professor Shepherd asserts that decisions about end-of-life case should be treated similar to other choices that impact the patient’s health. In the remainder of the article, Professor Shepherd sets forth eight principles she feels health care providers should consider when decisions need to be made. The first articulated principle states that physicians should respect and care for patients by balancing their expressed wishes, values and interests. For example, instead of just relying on what is stated in a form, the physicians should speak to those persons who are closest to the patient to ascertain the actions that would best conform to his or her desires. Professor Shepherd next suggests that every patient should have a surrogate decision maker. Therefore, if a patient does not pre-select an agent, one should be appointed for him or her. She also argues that the law should not give pre-selected agents more deference than the ones appointed by default. Thirdly, Professor Shepherd recommends that the law lessen the formalities currently required for an advanced health care directive to be valid. She feels that this will make it easier for persons to indicate their choices. Some jurisdictions have taken this approach by recognizing holographic wills. Fourthly, Professor Shepherd contends that, if possible, patients should not be treated as if they are obligated to stick to their pre-selected choices. In particular, she states “We must be especially cautious in following advance instructions that are contrary to a patient’s current, individualized best interests or contrary to a patient’s current expressions, even if the patient’s decision-making capacity may appear diminished at the time.” Professor Shepherd’s position acknowledges that patients do not regularly update their advanced directives. Hence, those documents may not be reflective of their changing values or life circumstances.

Professor Shepherd’s fifth principle stems from the concern that some end-of-life decisions are made too quickly. She gives two examples of cases where families and patients were given a short period of time to answer the question or whether or not a patient would want to “live like that.” To decrease the possibility of that happening, Professor Shepherd counsels that, absent an emergency, physicians should slow down the process to give patients the opportunity to embrace the altered state of their health. As a sixth principle, Professor Shepherd states that physicians should be encouraged to have more conversations with their patients about all health care matters. The law should not dictate the content of those conversations. Instead, physicians should be compensated in some manner for taking the time to communicate with their patients. In recognition of the fact that the number of patients with some form of cognitive impairment has increased, Professor Shepherd maintains that suitable safeguards need to be put in place. However, those protections must only be aimed at patients who are shown to lack decision-making capacity. In enumerating her principles, Professor Shepherd concludes by proclaiming that physicians should always recognize the reduction of pain and suffering as a crucial goal of patient care.

In light of medical advances and increasing health care costs, conversations about end-of-life care will continue to occur. A significant portion of the discussion will focus on ways to handle surrogate decision-making. The practical suggestions Professor Shepherd includes in her article could be a valuable part of that dialogue.

Cite as: Browne Lewis, Compassionate Care for the Living and the Dying, JOTWELL (December 9, 2014) (reviewing Lois L. Shepherd, The End of End-of Life Law, 92 N.C.L. Rev. 1693 (2014)), http://trustest.jotwell.com/compassionate-care-for-the-living-and-the-dying/.
 
 

Transmitting Retirement Accounts: Getting It Right

Stewart E. Sterk & Melanie B. Leslie, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession, 89 N.Y.U.L. Rev. 165 (2014).

Articles routinely appear that serve up a simple, everyday scenario that has potential to morph into a terribly complex legal situation and in the process, twist legal doctrines pretzel-like to reach the preferred result. We read them, digest them for the nugget to divulge in class, and file them away to cite in a later article. Rare is the article that serves up a simple everyday scenario that could have a disastrous effect that causes us to actually do something to avert the potential disaster. Stewart E. Sterk and Melanie B. Leslie have done just that in their masterful, co-authored piece, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession.

Starting with the fairy tale beginning of “once upon a time,” the authors bring us back to the days when wills controlled the disposition of property at death. Judges were in control of the probate process, much, if not most, property was probate, and rules had developed to ameliorate the routine mistakes and missteps that occur between the signing of the will and the date of death. Marriage, birth of a child, divorce, and the death of a beneficiary no longer have to upset the decedent’s presumed intent for his heirs, as we had developed rules for the probate process to reach the preferred result. As the non-probate revolution has settled into mainstream life, the issue has become how many of those presumed-intent rules apply. So far pretty standard fare, but consider $9 trillion in retirement accounts (a most significant non-probate asset), a changing American family, and the impending demise of the baby boomer generation, and the consequences have the potential to be dramatic and, in the view of the authors, intolerable.

Sterk and Leslie dig deep into the succession law of retirement accounts to reveal an unsettling and uneven picture as to how those accounts may be distributed upon the participant’s death. Their article first discusses the growing importance of retirement accounts, noting in particular the impact of companies switching from defined benefit plans to defined contribution plans. In many defined benefit plans, there was no asset to pass on after the participant’s (and usually the participant’s spouse’s) death. A consequence was that as employers set up these plans, there was no focus on transfers at death, because there probably wasn’t going to be anything left to pass on. These accounts were not, and are not seen as, will substitutes.

The beating heart of the article is the description of the current state of the law governing the distribution of these accounts at death. Sterk and Leslie analyze the materials in the context of four common life changes: marriage, birth of a child, divorce, and death of a beneficiary. First, they consider those participants who do not try to change their beneficiary designations. They show the different treatment that may be afforded the same person depending on whether the account is an IRA account or one governed by ERISA. Second, they compare the results that can occur when one tries to change the beneficiary designation but does not fully comply with the plan requirements. Results can vary depending on the judicial standard of review and depending on the type of document that attempted the change (will or trust provision, prenuptial, or divorce decree). This section is comprehensive and particularly impressive in its clear presentation of results that are hard to justify.

The article next argues that the connection between the beneficiary designation and the participant’s intent for the passage of property at death is tenuous. There are several reasons advanced: the passage of time, the lack of foresight, inattention, and bureaucratic obstacles, including opaque forms. The obvious problem is that in many plans the beneficiary designation remains the sole evidence of the participant’s intent, despite changes in the participant’s life.

The authors propose potential reforms, including statutory, recognizing that those reforms would have to be at the state and federal level. Another avenue for reform is the industry itself, which could begin by redesigning beneficiary forms. The authors helpfully nudge that process by including suggested language. Equally important, they encourage lawyer consultation in the process, a suggestion they readily acknowledge that “may seem quaint” in today’s online world. Yet, the authors remind us that the “oft-identified ‘ritual’ and ‘protective’ functions of formalities have not disappeared.”

It is almost impossible to read this wonderfully written article without a sense of disbelief at the complexity and injustice of the system. The disconnect between what the participant-decedent intended and what the system delivered can be striking. “Can be” is the operative phrase. I urge all of you to double check your beneficiary designations on all your retirement accounts. My guess is that some of you will be surprised at what is on file, and some of you will discover that you do not have any form on file. Accidental inheritance is not something that a T&E professor’s estate should stumble upon.

Cite as: Anne-Marie Rhodes, Transmitting Retirement Accounts: Getting It Right, JOTWELL (November 24, 2014) (reviewing Stewart E. Sterk & Melanie B. Leslie, Accidental Inheritance: Retirement Accounts and the Hidden Law of Succession, 89 N.Y.U.L. Rev. 165 (2014)), http://trustest.jotwell.com/transmitting-retirement-accounts-getting-it-right/.
 
 

Reenvisioning DRR as a Two-Stage Interpretive Tool for Determining the Testator’s Probable Intent

Richard F. Storrow, Dependent Relative Revocation: Presumption or Probability?, 48 Real Prop. Tr. & Est. L.J. 497 (2014), available at SSRN.

Professor Richard F. Storrow’s comprehensive article about the doctrine of dependent relative revocation (DRR) is one that I like lots because I learned so much reading it. I will try to summarize some of the highlights of the article—there are many more (including, for example, a discussion of student responses to one of his exam questions invoking DRR).

Professor Storrow notes that the body of jurisprudence around DRR “lacks coherence” (P. 499), and he provides, throughout the article, many different formulations of the doctrine from courts and commentators. He notes that DRR “holds that revocation [of a will] is legally invalid if a testator has made some sort of mistake in performing it—specifically a mistake either related to her motivation for revoking the will or related to what she desires that revocation to accomplish.” (P. 501.) He writes that some courts have viewed it as a rule of construction/interpretive device while other courts have viewed it as a rule of law/legal principle. (P. 499.) Ultimately, Professor Storrow proposes that DRR be situated “within the familiar framework of will interpretation” (P. 541) as an interpretive device that has two stages: the first stage “would ask whether the circumstances surrounding the revocation render the intent to revoke ambiguous,” and the second stage “would examine the probable intent of a reasonable testator to revoke or not to revoke in those circumstances” (P. 499).

In the first main part of the article, Professor Storrow provides the doctrinal underpinnings of DRR. He notes that, in most jurisdictions, common law limits corrections of wills to: “(1) misdescriptions of property or beneficiaries, (2) mistakes brought about through fraud, and (3) DRR.” (P. 500.) DRR has been “defined in various ways,” and Professor Storrow synthesizes certain common definitions of DRR to note that “DRR cases are of two types: one involving a new will or an intent to make one and another involving the testator’s misapprehension of the law or a fact material to the revocation.” (P. 501.) The Restatement acknowledges this “dual definition” and “recognizes that DRR applies when a testator revokes his or her will ‘in connection with an attempt to achieve a dispositive objective that fails’ and also when he or she does so ‘because of a false assumption of law’ or fact.” (PP. 501-502.) Professor Storrow notes, “Courts tend to apply the doctrine only if (1) an alternative testamentary scheme fails, or (2) the mistake is set forth in the writing that revoked the will and the mistake is beyond the testator’s knowledge.” (P. 502.)

Professor Storrow writes, “The law does not make perfectly clear whether DRR is a primary presumption, a presumption used to negate competing presumptions, or a canon of construction that establishes the probable intent behind a revocation.” (P. 503.) The policy behind DRR is “to help effectuate the testator’s intent.” (P. 503.) Professor Storrow then provides a comprehensive summary of the doctrines of revocation and revival, and (within his discussion of revocation) a summary of the following presumptions: (1) “a testator has revoked his will by physical act if the will was in his possession immediately before his death, but then after his death cannot be found,” (2) “when a testator has performed a revocatory act on a will, he did so with the intent to revoke it,” and (3) “one against intestacy.” (PP. 504-507.)

In the next main part of his article, Professor Storrow discusses the “substantive imprecision” of DRR, showing how it is “plagued with definitional variation” such as being defined as “a doctrine of presumed intention of what a testator would have done had he or she known that the new disposition that he or she was attempting to execute would be invalid” as well as “a doctrine of mistake” and “a doctrine in service of ‘the law’s preference for a testate disposition.’” (PP. 512, 513.) Professor Storrow then writes that “harmonizing the various iterations of the doctrine reveals that it can apply to three distinct types of revocation” (P. 513): (1) impliedly conditional revocation, (2) ineffective revocation, and (3) mistaken revocation. (PP. 513-526.) As to the view of DRR as mistaken revocation, Professor Storrow summarizes three sets of cases: (1) a cancellation of a will followed by a set of notes/a rough draft for future changes, (2) a partial revocation of a will by physical act and an attempted amendment to the will, and (3) a new will that validly revokes an earlier will but has dispositive provisions that are legally invalid. He discusses certain analytical problems with the three views of DRR, among them: (1) “impliedly conditional revocation” can be a “legal fiction that does not advance the analysis” (P. 516), (2) “ineffective revocation” can be “too broad . . . to accurately describe DRR” (P. 517), and (3) “mistaken revocation” can shift the focus away from what one court “rightly focused” on—the testator’s “lack of revocatory intent” (P. 521).

Concerned that “decisions applying DRR will continue to exhibit discontinuity and incoherence,” Professor Storrow suggests courts use a two-step process that “mirrors the familiar process of will interpretation.” (P. 530.) Courts should apply DRR when confronted with “ambiguous revocations, not ineffective, conditional, or mistaken ones.” (P. 530.) The first step is “to ascertain whether the facts and circumstances surrounding the revocation reveal that the intent behind the revocation is ambiguous” (which, he notes, “parallels the approach to disclosing latent ambiguities in wills”), and, at the second step, “the ambiguity must be resolved either with evidence of the testator’s actual intent or with canons of construction that impute intent based on what we conclude a reasonable testator would intend under the circumstances.” (P. 530.)

Professor Storrow then persuasively applies his proposed two-step analysis to certain cases he previously discussed. (PP. 532-535.) In general, he notes that, if a court uses DRR as a canon of construction, it need not discuss whether the revocation was mistaken or conditional and can instead focus on what the reasonable testator, under the circumstances presented, would intend. (P. 532.) Professor Storrow concludes that positioning his reenvisioned DRR “as a tool for determining a testator’s probable intent” (P. 541) provides three advantages: (1) promoting judicial economy, (2) harmonizing DRR with the law of will interpretation, and (3) serving as a reminder that DRR is “a tool for ascertaining probable intention.” (PP. 541-542.)

Cite as: Michael Yu, Reenvisioning DRR as a Two-Stage Interpretive Tool for Determining the Testator’s Probable Intent, JOTWELL (October 24, 2014) (reviewing Richard F. Storrow, Dependent Relative Revocation: Presumption or Probability?, 48 Real Prop. Tr. & Est. L.J. 497 (2014), available at SSRN), http://trustest.jotwell.com/reenvisioning-drr-as-a-two-stage-interpretive-tool-for-determining-the-testators-probable-intent/.
 
 

Descendibility: The Neglected Stick in the Bundle

David Horton, Indescendibility, 102 Calif. L. Rev. __ (forthcoming, 2014), available at SSRN.

Should the right to transfer an asset after death extend to kidneys, personal injury claims, or frequent flier miles? In Indescendibility, Professor Horton provides a fascinating and in-depth examination of this neglected right in property law’s bundle of sticks. He maps out a theoretical justification for indescendibility, grounding it in a set of practical concerns about the administration of posthumous property, and offers several suggestions for law reform. Professor Horton has a knack for unearthing unique and cross-cutting themes in the law of trusts and estates, and this piece again provides readers with significant food for thought.

Part I takes us on a tour of the variety of things that have been made indescendible by law, as well as the diverse sources of law from which this indescendibility flows. The United States Constitution prohibits the descendibility of noble titles and hereditary privileges, a move by the early American political elites to distinguish themselves from the British. Indescendibility is also the standard rule for body parts, where descendibility has been regulated by statute or outright prohibited because body parts have not typically been considered to be property. The common law doctrine of abatement restricts descendibility of legal claims for physical injury. While this doctrine has been superseded by survival statutes in nearly all states, these statutes are inconsistent in their scope and application, sometimes leaving the abatement rule intact in practice. Indescendibility by contract is the newest frontier of interest, where fine print often prevents sports fans from passing season tickets to their heirs.

Part II turns to the existing theoretical justifications for indescendibility, none of which Professor Horton finds persuasive. Many of these are only partial defenses of indescendibility in a particular domain. The first account of indescendibility connects it to market-inalienability in the realm of body parts. Many of the rationales for market-inalienability, however, do not apply to indescendibility. A paternalist rationale for prohibiting market sales of organs during life does not apply to the dead, who do not suffer welfare losses from the sale of organs. Concerns about commodification are also less salient, as transferring organs without compensation after death is consonant with altruistic motives, and it is difficult to argue that it devalues the bodily integrity of the living when organs are harvested after death. In other words, indescendibility is not market-inalienability, nor should it be.

The second justification for indescendibility is formalistic in nature. Simply put, whether an object or entitlement is descendible turns on whether that object or entitlement is the decedent’s property. This argument is unappetizing to Professor Horton, who prefers to focus on whether granting a thing property status in life or at death serves relevant policy interests. This more contextual approach draws support from existing case law, which has recognized quasi-property rights in body parts under certain circumstances.

The third justification for indescendibility applies to the domain of legal claims. The reasoning here is that certain causes of action redress wrongs that are “personal” in nature. Professor Horton notes that this argument is rooted in the historical evolution of tort law, which replaced the personal duel between two combatants with a tort action as a way of channeling personal injury disputes into less violent avenues. Thus, the application of this understanding of the personal to descendibility is an historical artifact, and the “word balloon” of “personal” cannot otherwise be filled with coherent substantive content. Instead, he suggests that we focus on the deterrence rationale of tort law, which supports the descendibility of legal claims when a defendant might need to be discouraged from future misconduct.

In Part III, Professor Horton provides a cogent theoretical basis for indescendibility. He first puts indescendibility in the context of the law of inheritance, noting its mandatory nature. Once a person dies, anything and everything that is considered property of the decedent must pass to someone else. This process may not be so smooth for some types of property, engendering management, signaling, and line-drawing problems. Professor Horton labels these “administrability” concerns, and it is in them that he finds the justification for indescendibility.

With this theoretical grounding, Professor Horton offers several legal prescriptions. In the realm of body parts, he notes the various administrative issues with managing body parts after death. Once someone dies, organs must be harvested without delay to be useful, and thus physicians would need to ascertain decedent intent with respect to those organs immediately. Further, the inheritability of body parts may subject medical professionals to liability for failing to process organs quickly and get them to appropriate recipients. Despite these concerns, he is optimistic that these administrative issues might be overcome and suggests that we allow states to experiment with different regulatory regimes and financial incentives to determine potential paths forward.

For causes of action, Professor Horton advocates the abolishment of the abatement doctrine for existing claims, while being more circumspect for future claims, particularly those involving publicity rights. In supporting the abolishment of the abatement doctrine, he notes that the doctrine of mootness can perform the function of conserving judicial resources, which was in any case performed more clumsily by abatement.

Professor Horton again relies on existing doctrines to get the job done with indescendibility by contract. This time, he turns to unconscionability to police indescendibility terms in boilerplate contracts. The best candidates for application of the doctrine, he argues, are those terms that simply eliminate an asset in a way that benefits the drafter of the contract, such as provisions that terminate frequent flier miles at the death of their owner. The court should be less inclined to strike down terms that return a resource to a common pool, such as season tickets, or that protect an interest that the decedent might have had, such as a privacy interest in personal emails.

This piece stimulates readers to think critically about property rights taken for granted in other contexts, and it provides the best normative understanding of indescendibility to date. While no one would describe the suggested solutions as revolutionary, they reflect an understandably incremental or cautious approach to a contentious area of law.

Cite as: Alexander Boni-Saenz, Descendibility: The Neglected Stick in the Bundle, JOTWELL (September 22, 2014) (reviewing David Horton, Indescendibility, 102 Calif. L. Rev. __ (forthcoming, 2014), available at SSRN), http://trustest.jotwell.com/descendibility-the-neglected-stick-in-the-bundle/.
 
 

Teaching Trusts and Estates

Robert H. Sitkoff, Trusts and Estates: Implementing Freedom of Disposition, 58 St. Louis U.L.J. 643 (forthcoming, 2014), available at SSRN.

Professor Robert Sitkoff’s article, Trusts and Estates: Implementing Freedom of Disposition, provides practical information and addresses major themes for professors teaching trusts and estates including intestacy, wills, trusts and planning for incapacity. It is a wonderful primer for professors and students new to the area of estates and trusts. For the more seasoned professors, Professor Sitkoff provides policy questions that will certainly provide an opportunity for healthy debates amongst the students. There are only a handful of articles that explicitly address trusts and estates pedagogy; this article does not simply summarize the curriculum, but rather it encourages law faculty to think in a big picture way about the overarching issues. As such, it is an important contribution to the scholarly literature.

Professor Sitkoff suggests that the subject be viewed through the lens of “freedom of disposition,” in contrast to the more traditional approach that usually proceeds according to methods of succession (probate succession by will and intestacy, and non-probate succession by inter vivos trust, pay-on-death contract, and other such will substitutes). While recognizing there are limitations on the freedom of disposition, he convincingly argues that law and policy start with this premise and that our analysis of them should also start that way. The priority, in a property transfer transaction, is placed on the intent of the transferor over the putative rights of the recipient of the property, whether the property passes via intestacy, will, trust, or nonprobate transfer.

The article starts with a discussion of intestacy and how intestacy statutes are based on the probable intent of the typical decedent. Professor Sitkoff explains the need for legislators to update intestacy laws to deal with evolving societal norms and changing family dynamics. For instance, same sex couples are recognized as a family unit yet most intestacy statutes do not adequately address property disposition from same sex couples to each other because they may not be legally married. Further, because only one parent may have a blood relationship to a child, most intestacy statutes would exclude that child from inheriting from the other parent. In situations such as these, the intestacy statues do not reflect the probable intent of the testator.

In cases where the decedent has made a will, the law imposes measures to ensure a will is authentic and made voluntarily to protect the freedom of disposition. In the early era of the Wills Act, certain wills were denied probate if the will violated any of the formalities, even if it was clear the testator made the will voluntarily. What purpose is served by denying a will that clearly reflects a testator’s intent or not revoking a will that testator clearly intended to revoke? Over time, legislatures have altered the laws to provide a greater balance between following formalities (ensuring authenticity) and honoring a testator’s intent (freedom of disposition). Professor Sitkoff also discusses how trusts have become the primary source for passing property at death. Trusts perfectly embody freedom of disposition as the trust instrument determines the trustee’s action and dictates when and how a beneficiary will receive distribution(s). He explains the creation and effective use of trusts, and introduces nonprobate transfers, also known as will substitutes. More wealth passes by will substitutes than wills and will substitutes are testamentary in nature. As such, should will substitutes be subjected to the Wills Act? Should will substitutes be subjected to subsidiary law of wills such as elective share, simultaneous death, divorce and antilapse the same as their wills counterparts?

By making transfers in trust, a settlor creates a situation in which a trustee will take control of and manage the trust property. The trustee has the responsibility of managing, investing and distributing trust property for the benefit of the beneficiaries. Because the trustee may have no beneficial interest in the trust, the fiduciary duties are designed to compel the trustee to act in the best interest of the beneficiaries—otherwise, beneficiaries would be at the mercy of any trustee mismanagement. Fiduciary duties are designed to protect the interests of the beneficiaries, but Professor Sitkoff points out that a trust is still an exercise of the settlor’s freedom of disposition. As such, should the settlor’s intent or purpose, regarding the trust, take priority when doing so would not be advantageous for the beneficiary? For instance, should a settlor have the freedom to abolish the duty to diversify when the risk of loss is shouldered by the beneficiary?

Finally, wealth transfer taxation is an important limitation of the freedom of disposition. Initially, the role of transfer taxation was strictly for raising revenue, then after World War I, it shifted to combating wealth inequality. The gift tax was implemented to prevent estate tax avoidance by transferring property inter vivos, and the generation skipping transfer tax was implemented to ensure taxation at each generation. How much should tax policy affect or limit freedom of disposition? Professor Sitkoff ends the discussion with what I perceive as a challenge for us to enter the debate regarding the proper scope of transfer tax policies when balanced against the freedom of disposition—the foundational premise of property transfers.

Overall, this article provides an insightful overview of the topics found in a typical trusts and estates course. The policy questions encourage engaged pedagogy. I enjoyed reading it and will require it for my students.

Cite as: Phyllis C. Taite, Teaching Trusts and Estates, JOTWELL (August 8, 2014) (reviewing Robert H. Sitkoff, Trusts and Estates: Implementing Freedom of Disposition, 58 St. Louis U.L.J. 643 (forthcoming, 2014), available at SSRN), http://trustest.jotwell.com/teaching-trusts-and-estates/.
 
 

Trusts and Estates Law and the Question of Wealth Distribution

Early in the introduction to his arresting new book on wealth distribution, the French economist Thomas Piketty asserts that “the distribution of wealth is too important an issue to be left to economists, sociologists, historians, and philosophers.” (P. 2.) “Everyone,” he writes, should be interested. It seems to me that, on the issue of wealth distribution, trusts and estates scholars should be at or near the front of the queue. In any event, that is my excuse for choosing a book on economics as a JOTWELL selection for trusts and estates.

In the short time the English translation of Capital in the Twenty-First Century has been available (March, 2014), Piketty has achieved near rock-star status. The hard-copy version of the book, which runs 577 pages excluding the footnotes, is sold out on Amazon as I write this. It has been reviewed by all the major newspapers, discussed in all the business and academic journals, and debated across the blogs, and its themes have been batted around by commentators of all stripes. The New York Times, not content to restrict discussion of the splash the book is making to its opinion pages, recently featured Piketty in its Sunday Styles section. Reviews, references, debates and interviews continue. All of which seems to indicate that at least the chattering and scribbling classes, if not the public at large, are rather intrigued by the themes offered by the book.

In case you haven’t been paying attention, or if you haven’t yet been Pikettyed out, let me summarize a couple parts of the book that should be of particular interest to the trusts and estates lawyer. As noted, the book concerns itself with the distribution of wealth, a question with which Piketty has been engaged his entire career. It will no longer be a surprise to us that the ownership of wealth is highly skewed among the populace, but it is the fact of this disparity on the question of inheritance that I want to focus on in this review. First, Piketty’s data on the distribution question are the most comprehensive yet compiled. They show that the share of total wealth held by the top 10% in the United States is extraordinarily large, some 70% of the total and rising, with the top 1% holding over 30% of all wealth in the United States. Perhaps more importantly, the vast majority of Americans hold almost no wealth at all, with the entire bottom half owning only two percent. (P. 257.)

As to the question with which the trusts and estates lawyer concerns herself, that of inheritance, Piketty delivers an alarming message. His claim is that when the rate of return to capital exceeds the rate of economic growth, capital’s share of economic spoils becomes increasingly dominant. This, he says, will lead to what he calls a “patrimonial” society, the term he uses to indicate that inheritance, not work, will determine who gets what. And since he predicts that rates of growth are quite likely to be less than returns to capital going forward (P. 84, 95, 378 and others), inherited wealth will predominate. (also P. 351.)

Three factors produce a population’s “flow of inheritance.” (P. 385.) They are (i) the mortality rate (expressed as a percentage of the population); (ii) the ratio of average wealth of the dying to the average wealth of the living; and (iii) the capital income ratio (total capital stock/annual income flow). Aging baby boomers are expected to increase the mortality rate from our current point forward for the next few decades. As to the dying/living wealth ratio, Piketty’s data suggests that the famous “Modigliani Triangle,” which holds that wealth increases only until retirement and then decreases, is false. Especially when lifetime gifts are added back in, the dying have significantly more wealth than the living. The third factor, the capital income ratio, will increase with predicted lower growth rates, so long as savings rates are stable or increasing.

Unfortunately, Piketty does run into some problems in gathering hard inheritance data for the United States. Estate tax returns are insufficient, as the federal estate tax has never applied to other than a small percentage of the population. Nonetheless, he draws some conclusions. He admits that, throughout the twentieth century, inherited wealth probably constituted a smaller percentage of the total in the U.S. than in France, primarily due to higher growth rates in the U.S. (Higher growth rates reduce the capital/income ratio, factor (iii), above.) He nonetheless estimates that “inherited wealth accounted for at least 50-60 percent of total private capital in the United States” beginning in 1970. And if population growth decreases, then inherited wealth will claim an increasingly larger share of the total.

I am certainly not qualified to critique Piketty’s economic theories and predictions, so will leave that to the economists. But his data showing high levels of wealth concentration speak for themselves. And given the legal mechanisms of inheritance, Piketty’s findings and predictions have some interesting implications for the T&E lawyer. If, as Piketty claims, inherited wealth will come to predominate, what role will the law of trusts and estates play in this process? It is no secret that U.S. trust law enables far more dead hand control of wealth than that of England. To take just a couple of examples, do Piketty’s claims, if credible, lend support to the position that mechanisms such as spendthrift trusts and Claflin restrictions are ill-advised? Can we afford to be sanguine about jurisdictions eliminating their Rules Against Perpetuities? Unless we wish to leave the important issue of wealth distribution to “economists, sociologists, historians, and philosophers,” these are the types of questions with which we must engage.


Editor’s note: For other Jotwell reviews of Thomas Piketty’s Capital in the Twenty-First Century see:
Cite as: Kent D. Schenkel, Trusts and Estates Law and the Question of Wealth Distribution, JOTWELL (July 8, 2014) (reviewing Thomas Piketty, Capital in the Twenty-First Century (2014)), http://trustest.jotwell.com/trusts-and-estates-law-and-the-question-of-wealth-distribution/.
 
 

Navigating the Complexities of Assisted Reproductive Technology

Kristine S. Knaplund, Assisted Reproductive Technology: The Legal Issues, Prob. & Prop. Mag., Mar./Apr. 2014, at 48.

Kris Knaplund is one of the leading American scholars in the area of postmortem conception and its theoretical and doctrinal implications for the field of inheritance law. In her article, Assisted Reproductive Technology: The Legal Issues, Knaplund lays out the complex planning issues that arise in a variety of scenarios involving Alternative or Assisted Reproductive Technology (ART). This clear and succinct article is a must read for professors, practitioners and students alike. Knaplund educates readers about the increasing number of situations and clients that involve ART, ranging from a trust beneficiary who is planning to use a gestational surrogate to a hospital faced with the widow of a recently deceased man who wants to harvest his sperm to have future children.

Knaplund begins by defining assisted reproductive technology as “the handling of gametes (sperm or ova) outside the human body in order to achieve a pregnancy.” She notes that the three most common forms of ART are assisted insemination, in vitro fertilization, and gestational carriers. She then proceeds to illustrate the kind of legal issues that attach to each of the three forms. For example, in assisted insemination (more commonly known as artificial insemination) the sperm donor is typically not the legal father if the sperm has been given to a licensed physician. But if a donor dispenses with the physician and donates directly to the intended mother, the statutory safe harbor no longer applies. Knaplund outlines several state cases including Jhordan C. v. Mary K., 224 Cal. Rptr. 530 (Ct. App. 1986) where that scenario results in the sperm donor being declared the resulting child’s legal father.

Knaplund then provides a brief description of the parentage issues that can arise with the second and third forms of ART, noting that the use of donated gametes in IVF can result in questions of who may be a child and parent. This is also true in the case of a gestational surrogate and Knaplund notes the failure of state law to address this issue on a consistent basis, if at all. The Uniform Parentage Act (UPA) does contain a comprehensive framework that requires the intended parents to obtain court approval of any surrogate arrangement, with checks and balances built in to ensure that all the parties to the contract fully understand the rights and duties involved. One of the interesting points Knaplund makes is that, under the UPA, only heterosexual couples can seek such judicial approval. The result is that a same-sex couple seeking such validation would be denied judicial relief and the gestational carrier would be deemed to be the legal mother of the resulting child. Unlike the UPA, the 2008 amendments to the Uniform Probate Code (UPC) allow for a parent-child relationship to be established either by court order or by the intended parent functioning as a parent within two years of the child’s birth. This second method thus allows for an intended parent to establish legal parentage, even when there may be an unenforceable contract. However, most states have no statutes regulating gestational agreements and thus the intended parents usually adopt the child to establish legal parentage.

Having established the complexity of legal parentage issues that can arise when ART is used, Knaplund goes on to posit three important issues that arise and that should be addressed by scholars, practitioners and legislators: (1) Who is a descendent when donated gametes are used?; (2) Should estate planners anticipate that sperm or ova may be retrieved and used after a person has died; and (3) How long should the estate be left open awaiting a postmortem conception child to be born.

First, Knaplund illustrates the question of “who is a descendant” using the following case: settlor creates a trust in 1959 for his “issue” or “descendants” which provides that “adoptions shall not be recognized.” Forty years later, the settlor’s daughter and her husband contract with a gestational surrogate and they use a donated egg and the husband’s sperm to have twins. A California court determined that the daughter and her husband were the twins’ legal parents. A New York court was asked to interpret the trust and it found that the twins could be beneficiaries, even though New York does not recognize surrogacy contracts. (Since the California court conferred legal parentage on the settlor’s daughter, she did not have to adopt the twins.) The New York court declared that its public policy would not prohibit the court from giving recognition to the California court’s determination of parentage.

Second, it is not only estate planning clients that lawyers need to counsel on ART matters. ART raises ethical issues for clients like hospitals who are now often asked to retrieve sperm and sometimes even ova from patients who are in a persistent vegetative state or within 48 hours of death. Knaplund notes several cases, including In re Daniel Thomas Christy, No. EQVO68545 (Sept. 14, 2007) where an Iowa court ordered a hospital to go forward with postmortem sperm retrieval, finding that the decedent’s consent to be an organ donor under the state’s version of the Uniform Anatomical Gift Act extended to posthumous sperm retrieval. Knaplund also highlights the issues raised by previously deposited sperm, including whether a decedent can bequeath frozen sperm for future procreation.

Finally, Knaplund turns to a third issue that is very central to the probate administration process. If the goal of probate is to gather assets, pay debts and distribute to beneficiaries as efficiently as possible, ART by its very nature raises tremendous problems for the goal of a quick and efficient conclusion to the probate process. Knaplund cites UPC §2-120 as one statutory framework that gives courts explicit guidance as to the time by which a postmortem conception child must be either in utero—not later than 36 months after the decedent’s death—or be born—not later than 45 months after the decedent’s death. She goes on to describe the patchwork of approaches, or failure to even have an approach, to this issue in the various states. The reader is left with the a strong sense that this inconsistent approach must continue to be the focus of trusts and estates scholars, practitioners and legislators if we are to have a fair and comprehensive solution to the issues ART raises for our field.

In the final part of her article, Knaplund concedes that science is “rapidly outpacing the law” in this area of ART. While these developments challenge us as scholars and practitioners, they generate intellectual excitement and new opportunities to theorize as well. With crisp, clear prose, Knaplund has given the reader an excellent primer in the brave new world facing all of us involved in inheritance law and estate planning.

Cite as: Paula Monopoli, Navigating the Complexities of Assisted Reproductive Technology, JOTWELL (June 13, 2014) (reviewing Kristine S. Knaplund, Assisted Reproductive Technology: The Legal Issues, Prob. & Prop. Mag., Mar./Apr. 2014, at 48), http://trustest.jotwell.com/navigating-the-complexities-of-assisted-reproductive-technology/.