What Does the Respect For Marriage Act Mean For Estate Planning?

On December 14, 2022, President Biden signed the Respect for Marriage Act (the “Act”) repealing the Defense of Marriage Act (“DOMA”). The Act mandates that all states, United States territories and possessions, the District of Columbia, the Commonwealth of Puerto Rico, and the federal government (hereinafter “States” or “State”) must recognize as valid any marriage between two individuals if such marriage was valid in the State where such marriage occurred. Pursuant to the Act, no person, acting under color of State law may deny the laws of any other State pertaining to an act, record, judicial proceeding, right, or claim, arising from a marriage between two individuals based upon the sex, race, ethnicity, or national origin of those individuals. Further, the Act contains provisions allowing for enforcement of these civil rights by the United States Attorney General or a private person harmed by a violation of the Act. The Act does not require recognition of polygamous marriages, nor does it require religious organizations to solemnize or celebrate marriages that violate their principles.

It’s important to understand the history and evolution of Estate Planning for same-sex couples. When President Clinton signed DOMA into law in 1996, that legislation denied federal recognition of same-sex marriage by limiting the definition of marriage to the union of one man and one woman. That allowed states to refuse to honor same-sex marriages even when those marriages occurred in states that permitted same-sex marriage. Thus, if a couple married in a state that permitted same-sex marriage, then moved to another that did not, the couple needed to restructure their estate plan as though they were unmarried after moving into the new state. Further, DOMA prohibited recognition of same-sex marriages on a federal level depriving same-sex spouses of several benefits including receipt of social security survivor benefits, filing joint tax returns, and preventing gift and estate tax-free transfers between spouses. Under DOMA if a spouse wanted to give their estate to their same-sex spouse, that transfer would be subject to federal estate tax if the amount of the gift exceeded the decedent spouse’s remaining applicable exclusion amount. The applicable exclusion amount in 1996 was $600,000. Thus, anytime a spouse of the same sex as their spouse gifted that spouse more than $600,000 either during life or at death, the transfer was subject to gift or estate tax.

That did not change until the 2013 decision of United States v. Windsor, 570 U.S. 744 (2013) which held that DOMA violated the Due Process Clause and therefore was unconstitutional to the extent it denied federal recognition of same-sex marriage. Obergefell v. Hodges, 576 U.S. 644 (2015) went a step further when it required states to license and recognize same-sex marriage. After Windsor, the federal government had to give a same-sex couple the same benefits as a heterosexual couple. After Obergefell, any same-sex couple could marry in any state and could relocate without jeopardizing their marriage and their Estate Planning based upon it. Between Windsor and Obergefell, it seemed that DOMA had been gutted, and same-sex married couples had the same rights and benefits afforded to heterosexual married couples. The most significant being the ability to make unlimited gifts to a spouse during life or at death without gift or estate tax liability. Those benefits continued without question until the Supreme Court decided Dobbs v. Jackson Women’s Health Organization, 142 S. Ct. 2228 (2022).

When the Supreme Court decided Dobbs, it did so on the basis that the rights at issue were not fundamental because the rights had no basis in the Constitution or our country’s history. Many questioned whether other rights not explicitly granted in the Constitution, such as same-sex marriage, could be in jeopardy. Although the majority opinion in Dobbs indicated that the holding applied only to Dobbs, when Justice Clarence Thomas wrote “because any substantive due process decision is ‘demonstrably erroneous’ we have a duty to ‘correct the error’ established by those precedents” in his concurring opinion in Dobbs, many took note and thought that signaled a possible future reversal of Windsor and Obergefell and wondered if Estate Planning for same-sex couples needed to revert to pre-2013 planning. The Act makes clear that it does not. Marriage is marriage under state and federal law.

Hospice Care and Jimmy Carter’s Choice

Former President Jimmy Carter revealed on February 18 that he is going home from the hospital to live out the rest of his 98-year life on hospice. Back in 2015, when President Carter was diagnosed with metastatic skin cancer, I wrote a post encouraging him to set an example and go on hospice care. He instead pursued an experimental treatment that gave him eight more years of life. And that’s okay – good for him!

The news coverage over the weekend make it sound as if by going on hospice, he’s already dead. No wonder people are afraid of hospice. The problem is, most people wait too long to take advantage of the benefits of hospice. Too often, people go on hospice when they are literally at death’s door.

The guidelines for starting hospice care is a medical condition with a likelihood of causing the patient’s death within six months. Curiously, old age is not a valid diagnosis for hospice care.

Hospice is a specialized form of medical care that aims to provide comfort, support, and dignity to people who are in the final stages of a terminal illness. The primary goal of hospice care is to alleviate the physical, emotional, and spiritual pain and suffering of patients, as well as to provide support to their families and loved ones.

Hospice care can be provided in various settings, including the patient’s home, a hospice facility, a hospital, or a nursing home. Hospice care teams are typically interdisciplinary, including medical professionals, nurses, social workers, chaplains, and volunteers who work together to provide a holistic approach to care.

Care often involves managing pain and symptoms, providing emotional and spiritual support, and assisting with practical needs such as daily activities and end-of-life planning. The focus of hospice care is on the quality of life rather than the length of life, and the care is tailored to the individual needs and wishes of the patient and their family.

There’s a meme making the rounds on social media with a quote from Carter: “I have one life and one chance to make it count for something… My faith demands that I do whatever I can, wherever I am, whenever I can, for as long as I can, with whatever I have to try to make a difference.”

I hope Jimmy Carter’s choice of hospice at this point provides a teachable moment for society at large.

Lessons From Lisa Marie Presley

Elvis Presley was dubbed the King of Rock ‘n’ Roll because of his undeniable musical talent and by all accounts he was a humble, kind, and generous man who died far too young. It’s ironic that as Elvis’s life and career returned to the spotlight, his only daughter, Lisa Marie Presley, died. Lisa Marie died earlier this year from cardiac arrest at the age of 54 and left behind a tragic legacy, rivaling that of her famous father. Elvis died when Lisa Marie was just 9 years old leaving his entire estate, including his famous home, Graceland, to her. The estate was held in trust for Lisa until she attained the age of 25 in 1993. In 2004, Lisa sold 85% of Elvis Presley Enterprises for over $100 million and transferred the remaining 15% to the Promenade Trust.

Lisa Marie’s mother, Priscilla Presley, and former business manager, Barry Siegel, served as co-Trustees of the Promenade Trust for many years. Just weeks after her daughter’s death, Priscilla filed a petition challenging Lisa Marie’s Will and the “authenticity and validity” of a 2016 document. The 2016 document purports to remove Priscilla and Barry as co-Trustees of the Promenade Trust and replace them with Lisa’s daughter, Riley Keough, and Lisa’s predeceased son, Benjamin Keough, upon Lisa Marie’s death. Priscilla alleges that she never received the document changing the trustees, as required by the terms of the Promenade Trust. In addition, Priscilla’s petition alleges that the amendment misspelled Priscilla’s name and contains a signature that was inconsistent with Lisa Marie’s “usual and customary” signature. Finally, the document was neither witnessed nor notarized and the signature page was void of any of any substantive provisions of the document, which is customary.

While this case is fascinating on many levels, it’s instructive as well. The case contains several important lessons for clients regarding what an Estate Plan needs to do to protect the decedent and their loved ones. What lessons should we take from Lisa Marie? First, if privacy is important, consider using a Revocable Trust, rather than a Will, to control disposition of your estate. In most states, if the decedent used a Will to govern distribution of their estate, then the Will needs to be submitted to the court and go through a public process called probate. Usually, the probate process requires the involvement of an attorney and does not protect the privacy of the decedent, their wishes, or their loved ones. A Revocable Trust avoids probate by allowing a successor trustee to step into the shoes of the decedent trustee who is usually the trustor or grantor of the Trust and administer the Trust without court intervention or oversight.

Second, whenever you amend a Trust or exercise a power granted to you in a Trust or any other legal document, it’s vital to follow the terms of the instrument granting the power precisely. In Lisa Marie’s case, the Promenade Trust required that notice of the amendment be given to the then-acting trustees. Priscilla alleges that she never received that notice. While notice may seem trivial, it’s not. Lisa Marie’s failure to provide the required notice has led to grandmother, Priscilla, suing her granddaughter, Riley. It’s all the more heartbreaking when you consider that Lisa Marie died just a few weeks ago and the lawsuit has already been filed. It seems that the new trustees were to take over upon Lisa Marie’s death, but even that’s a bit unclear because the amendment names a now-deceased individual to serve as trustee.

This highlights the next lesson: review your plan regularly to ensure that it’s up-to-date. The amendment was purportedly executed in 2016 and named Riley and Benjamin to serve as trustees of the Promenade Trust. Benjamin died in 2020 and Lisa never updated the amendment to the trust. Had she done that, it would have allowed her to review and correct any deficiencies in the 2016 amendment. That didn’t happen and now Lisa Marie’s estate along with the Promenade Trust will end up in litigation for an unknown amount of time. Litigation will stall ultimate distribution of Lisa Marie’s estate and the Promenade Trust, cost thousands, if not hundreds of thousands, of dollars in attorneys’ fees, will be public, and will likely cause irreparable harm to the family.

Finally, consider inserting a no-contest or “in terrorem” clause in your Estate Plan. I always include an “in terrorem” or no contest clause to further evidence the testator or grantor’s intent. The use of an in terrorem clause in a Will or Trust protects the intentions of the testator or grantor from attack by a disgruntled beneficiary by completely disinheriting the beneficiary who challenges the terms of a Will or Trust. These clauses do not work the same in every state and some states impose additional requirements before disinheriting the beneficiary. It may not have mattered in this case because it seems that Priscilla is not listed as a beneficiary, but in many cases it prevents litigation.

While fascinating, it’s unfortunate, that this matter will play out on a public stage. The family is no stranger to the press, lawsuits, and negative publicity. Typically, when intrafamily litigation ensues, only the lawyers benefit. Litigation takes time and costs money during periods of significant grief. Lisa Marie’s case is even more distressing because she left behind two minor daughters. These public feuds provide great lessons about implementing safeguards against them but at a high cost to the families involved.

Show Your Love By Creating An Estate Plan

Happy Valentine’s Day! While Valentine’s Day typically focuses on celebrating romantic love, love comes in many forms and all should be celebrated. Everyone, regardless of their status or feeling about the holiday, should commemorate the holiday by creating (or updating) an Estate Plan! Estate Planning offers a practical and easy way to show your loved ones that you care.

Simply put, an Estate Plan serves as a set of instructions regarding how you want your assets to pass, to whom you want them to pass, and when you want them to pass. The plan sends a message to your loved ones that you care enough to leave your affairs in order and protect them. A basic Estate Plan consists of documents that provide instructions for what happens both during your life and at death. Those documents consist of a Living Trust, also known as a Revocable Trust (a “Trust”), a Will, a Property Power of Attorney, a Healthcare Power of Attorney, a Living Will, and a Health Insurance Portability and Accountability Act (“HIPAA”) Authorization.

Although we list the Trust first because it serves as the foundation for many Estate Plans, let us examine the Will first. Usually, a Will dictates distribution of your assets upon your death. In the Will, an individual nominates an executor or personal representative to liaise with the probate court, collect the decedent’s assets, pay the decedent’s debts, expenses, and taxes, and make disbursements of the remaining assets to the decedent’s beneficiaries. If the decedent had minor children at death, then a court would look to the Will for the individual nominated to serve as guardian of those children. If someone dies without a Will, then the state of that person’s residence has a set of laws, called “intestacy statutes” that govern the dispersal of that individual’s assets at death. The state’s distribution pattern fails to account for any beneficiary’s circumstances and usually diverges significantly from what the decedent would have wanted had they executed a Will. State intestacy laws may appoint a stranger as administrator or executor to handle these important tasks.

As noted above, the individual handling an estate needs to liaise with the court to transact the business of the estate. These tasks include selling real estate, paying attorney’s fees, or resolving a claim against the estate, some of which require prior court approval. Depending upon the laws of the domiciliary state, courts may not limit who can access these proceedings. Further, most states require engaging an attorney to complete the process which can take several months or longer. Additionally, the family needs to spend funds to pay any court fees along with attorney fees. For those desiring to avoid the foregoing, a Trust does that. A Trust serves as a Will substitute, maintains the decedent’s privacy, requires little or no court oversight, and provides significant flexibility. With a Trust, you transfer the assets to the Trust during your lifetime and manage them as the trustee. You avoid probate altogether because the Trust vests a successor Trustee with the power to make distributions upon your death without court oversight. Here, you demonstrate your love and concern by implementing a strategy designed to save your loved ones time and money, maintain their privacy, and leave a lasting legacy. The Trust also protects against incapacity by giving a successor trustee the power to make distributions from the Trust for your benefit in the event of your incapacity. Due to cases of fraud, institutions more readily recognize a successor trustee than an agent under a Property Power of Attorney.

The Property Power of Attorney allows the individual signing the document (the “Principal”) to appoint an “Agent” to act on their behalf concerning their financial affairs. The Property Power of Attorney allows the Principal to appoint one or more successor Agents to serve if the original Agent fails or ceases to act. The Property Power of Attorney gives the Agent the powers inherent to the Principal. The Property Power may give the Agent immediate power to make these decisions, even if the Principal is not incapacitated when the Agent is making the decision. Most states also give the Principal the option to make the Property Power of Attorney “springing,” meaning that the Agent’s powers “spring” into action only upon incapacity of the Principal. If anyone refers to the Property Power of Attorney as “durable” that means the Property Power of Attorney continues to be effective notwithstanding the Principal’s incapacity. Any Property Power of Attorney that is not durable prohibits the Agent from acting during the Principal’s incapacity.

A Healthcare Power of Attorney allows you to appoint an Agent to make medical decisions on your behalf if you are unable to make those decisions for yourself. If you can make these decisions, then your Agent cannot veto any medical decision you make. A Living Will sometimes called an “Advance Directive” expresses your wishes regarding end-of-life decisions. Without this document memorializing your wishes, doctors and medical professionals must keep you alive even if you have no reasonable chance of recovery notwithstanding that doing so only prolongs your suffering. Often the Living Will and Healthcare Power of Attorney are combined into one document. The Health Insurance Portability and Accountability Act of 1996 mandates that healthcare providers keep their patients’ protected healthcare information confidential. While most of us would agree that generally makes sense, sometimes you want others to have access to that information, especially the fiduciaries that you have nominated to act upon your incapacity. A HIPAA Authorization allows you to appoint one or more individuals to access or receive protected health information.

Creating an Estate Plan shows your loved ones how much you care. Thinking about the peace of mind that these documents provide gives me goosebumps. This Valentine’s Day consider the ultimate act of love and create or update your estate plan. If you already have a plan, review the documents to ensure that the individuals nominated as fiduciaries remain capable to serve in these roles. An Estate Plan provides comfort and peace of mind for both you and your loved ones upon incapacity or death. Now go enjoy those flowers and chocolates!

What Happens When You Don’t Trust Your Trustee – Part II

Estate Plans often incorporate revocable and irrevocable trusts. Regardless of the type of trust created or the reason for its creation, naming a suitable trustee to administer the trust requires careful consideration. After all, the trustee acts as the gatekeeper for the trust, doling out distributions pursuant to the terms of the trust agreement using their discretion. While some grantors name beneficiaries to serve as their own trustees, certain circumstances require a third party to act in that capacity. Beneficiaries of trusts with someone other than themselves as trustees need to understand their options when their relationship with the trustee sours.

As a quick recap, Part I explored asking the Trustee to resign, using provisions in the trust to remove the Trustee, employing Non-Judicial Settlement Agreements, and modifying by consent. If none of those options present a workable solution for the beneficiaries, then they may consider changing the situs of a trust to benefit from more favorable statutes in a new jurisdiction provided that the trust and its administration has sufficient contacts with the new jurisdiction. Failing that, decanting the trust to a new trust with a new trustee or reforming the trust to replace the undesirable trustee, may also prevent workable alternatives, but require cooperation of the trustee on some level. These options generally allow the beneficiaries and the trustee to remain out of court; however, sometimes the parties cannot avoid court.

If the beneficiaries find themselves in a situation in which the trustee refuses to cooperate, then the beneficiaries need to broaden their thinking to include court intervention. The beneficiaries may allege unanticipated circumstances. Modification because of unanticipated circumstances generally requires court approval and the modification needs to “further the purposes of the trust” which presents a significant hurdle to overcome.

Instead of trying to convince a judge that the removal of a trustee furthers the purpose of a trust, the beneficiaries may have better luck removing a trustee for lack of cooperation with co-trustees, if applicable, or for failure to administer the trust effectively. The Uniform Trust Code (“UTC”) contains several paths for removal under the umbrella of failure to administer the trust effectively, including substantial impairment of the administration of the trust, unfitness, unwillingness, or persistent failure to administer the trust effectively, or a substantial change in circumstances. These broad categories give beneficiaries several choices. The comments to the UTC underscore that the beneficiaries may demonstrate a trustee’s unwillingness by the trustee’s “pattern of indifference to some or all of the beneficiaries. As should be clear, though, the beneficiaries will have significant obstacles in pursuing this path and will likely incur significant expense as well.

Of course, if the beneficiaries have cause, for example, a breach of fiduciary duty by the trustee, then pursuing the matter in court may be their only option. This represents the most difficult, expensive, and time-consuming method for removing a trustee. Often, beneficiaries need to front these costs from sources outside the trust and the trustee may be permitted under state statute to utilize trust assets to fund their defense. This should be the last resort for removal.

These articles have demonstrated the difficulty that exists in trying to remove undesirable trustees. Well-designed Estate Plans last for years and should include provisions that allow the plan to evolve with changes in circumstances. Even if the plan lacks specific provisions regarding removal of a trustee, beneficiaries have options worth exploring when they want a new trustee. My trusts include provisions to protect the beneficiaries and allow them or a Trust Protector to remove an undesirable trustee.