Monthly Archives: September 2023

Have you inherited your family’s photo collection? Is it overwhelming your life? What can you do to manage these photos, and how do you deal with the emotional baggage tied to all these things?

Martie McNabb, a personal historian and founder of Show & Tales and Memories Out of the Box, has helped hundreds of people deal with these issues. “It’s sentimental, it’s memories, it’s the stories that people get deeply attached to,” said McNabb. “You can’t keep a house full of stuff, and you can’t keep every photo for multiple generations. What will you do with it for the future as well?” “I encourage people to make choices, just like a museum or a documentary film maker ends up curating what they keep…. That stuff that you let go of, at the very least, you can have a photo or make a video, or even make a book about these objects, saving and sharing the story while letting the physical clutter go.”

It can be too much to focus on details at the very beginning. Set up three boxes:

• A “Keep” box, for those items you absolutely must keep;
• A “Maybe” box, if you don’t know for sure but think the photos might be important;
• And a “Toss” box, for multiple duplicates of photos, blurry images, and unremarkable landscape pictures.

Photo Curating Tips

Here are some key takeaway points from the video conversation with Gail Rubin, The Doyenne of Death®.

• To help pare down what you keep, save three to five of the best pictures from trips and special events.
• Organize the “Keepers” chronologically. “We all think, compare, and understand our lives chronologically, generally speaking,” said McNabb. “Don’t get into ‘Is this 1955 or 1956?’ An era range is fine.”
• Scanning is not the answer to everything. It can be expensive and time-consuming. Ask who are these for? Who’s the audience? Who’s going to inherit them? Who’s going to appreciate this?
• You can recycle albums that have no personal information like names, birthdates, anything that could be used for identity theft. Shred items with personal details.
• Old yearbooks can be sent to alumni associations for universities or schools. Sometimes small historical societies, museums or libraries might want them.

Photo managers, professionals who can help you tackle what can be a seemingly enormous task can also be hired to get the job done.

Gail Rubin, Certified Thanatologist and The Doyenne of Death®, is an award-winning speaker, author, podcaster, and coordinator of the Before I Die New Mexico Festival (www.BeforeIDieFestivals.com). She is also a Certified Funeral Celebrant. Her four books on planning ahead for end-of-life issues – A Good Goodbye, Kicking the Bucket List, Hail and Farewell, and Before I Die Festival in a Box™ – are available through Amazon and her website, www.AGoodGoodbye.com.

This post focuses on ways to avoid litigation suggesting things like regular, open, and honest communication with beneficiaries, ensuring that your Estate Plan contains clear directives, naming a trusted individual to serve as Trustee, anticipating potential conflicts, inserting no-contest provisions, and updating your Estate Plan regularly. Those acts may prevent litigation; however, sometimes it’s unavoidable. Let’s review the most common areas ripe for litigation in the Trusts and Estates world.

An often-litigated area focuses on the mental state of the individual who created the documents. Individuals desiring to challenge the mental state of the decedent start with a claim that the decedent lacked the mental capacity to create a Will or Trust at the time the decedent signed the documents creating or updating the Estate Plan. Most states presume competence to make a Will or Trust and place the burden on the contesting party to prove that the testator or grantor lacked capacity. Thus, a beneficiary desiring to question the Estate Plan in this way would need to gather evidence to demonstrate that the decedent lacked capacity. This could include things such as medical records demonstrating dementia, psychosis, or other diagnoses that affect the mind or witness testimony regarding the decedent’s mental state. A court may consider other factors, such as an unnatural distribution, as evidence of lack of capacity.

Even with such evidence, the documents usually withstand the challenge for two reasons. First, the testator need only demonstrate a low level of capacity to create a Will or Trust. In many states, one only needs to understand the natural objects of their bounty, the nature and extent of their property, and the effect of their Estate Plan. One need not understand each asset or the value assigned to it. If the testator lacks that understanding most of the time but executes the Will or Trust at a time of clarity, then the Will or Trust is valid. Second, the challenger typically needs to prove by a preponderance of evidence that the decedent lacked testamentary capacity in the case of a Will and potentially contractual capacity in the case of a Trust. While it sounds easy, it usually proves a high bar for the aggrieved party to clear.

Undue influence presents another potential avenue for challenge of an Estate Plan. In an undue influence situation, the testator may have had capacity, but because of their susceptibility to influence, they changed their planned disposition. Simple enough to explain but understanding what constitutes undue influence requires a close examination of the behavior and the totality of the circumstances. The American Bar Association indicates that undue influence occurs when an individual in a fiduciary capacity or other confidential relationship substitutes their own desires for that of the influenced person’s desires. Put another way, a person influenced the testator in such a way that convinced the testator to alter their Estate Plan, usually in favor of the individual exerting undue influence and to the detriment of the testator’s other beneficiaries. Each state lists certain factors that indicate the presence of undue influence, such as intimidation, physical threat, or coercion. Perpetrators of undue influence use subtle tactics and are often close to the testator. For example, the influencer may stop providing transportation to the testator or otherwise cause the testator to fear for their health and well-being. The emergence of elder abuse and mandatory reporting thereof has helped shine a light on the existence of undue influence and gives families a way to protect against it.

An interested party may challenge a Will or Revocable Trust, or to a lesser extent, a Deed or other ancillary document, by alleging the invalidity of the document. That could mean that the document lacks necessary elements or that the testator or grantor failed to sign the document with the requisite formalities. Most states require the presence of two witnesses who watch the testator sign the Will. Some states require that to occur in the presence of a Notary Public to make the Will self-proving. Although Trusts do not always require that level of formality, a few states require a Trust to be signed with the same formalities as a Will because of the testamentary provisions. Of all the potential attacks on documents, this one finds the most success because it’s a bright-line test.

Finally, many beneficiaries file lawsuits alleging breach of fiduciary duty. Anyone serving as a fiduciary, for example, a Trustee, Personal Representative, or Attorney-in-Fact, has responsibilities and duties to act in accordance with the terms of the document appointing them and in the best interests of the beneficiaries named in the document. The attorney-in-fact needs to act in the best interests of the principal. State and federal laws may impose additional duties and address conflicts between the document and state or federal statutes. If a beneficiary believes that a fiduciary has violated their duties, then the beneficiary may initiate a lawsuit. These types of cases require significant funds to undertake and require hiring a skilled Trust and Estates litigator.

While we all work diligently to avoid litigation, sometimes it’s necessary. In those situations, it’s good to understand the options that exist. If you have concerns about a parent or loved one and either their capacity at the time the plan was created or their ability to create a plan without undue influence, raise the issue with me and we can discuss. Remember it’s less expensive and stressful to address the issues while everyone is alive.

An earlier article examined “grantor trusts” and how they are an income tax issue, not an estate tax issue. As that prior aerticle indicated, grantor trusts may be drafted so they are not included in the taxable estate of the grantor for estate tax purposes, yet they are still taxed to the grantor for income tax purposes. These “intentionally defective grantor trusts” can be very powerful estate planning tools.

Let’s look at an example of such an intentionally defective grantor trust. Let’s say the power that causes it to be a grantor trust is the power to substitute assets pursuant to Section 675(4)(C). Such a power does not cause inclusion in the taxable estate of the grantor.

Mary put $1 million of XYZ stock into the Mary Smith Irrevocable Trust, drafted with such a power of substitution. The trust is for the benefit of her children. The stock pays 7% dividends, or $70,000.  Assuming Mary and her beneficiaries are in the top income tax brackets, that $70,000 of income would incur a federal tax of 23.8% or $16,660. Since the trust is drafted as a grantor trust, that $70,000 of income would go on Mary’s Form 1040 and she would owe the $16,660 of additional tax, rather than the trust itself or the beneficiaries. This would allow the assets in the trust to grow tax-free. This is the case whether the trust distributed the income to Mary’s children, the beneficiaries of the trust, or it retained the $70,000 of income and allowed it to grow.

Years go by and Mary gets a terminal diagnosis. Let’s assume the XYZ stock increased in value to $5 million. Since it would be outside of Mary’s taxable estate in the Mary Smith Irrevocable Trust, it would not get a step-up in basis at Mary’s death. However, with the power of substitution, Mary can swap $5 million of cash for the XYZ stock worth $5 million. Since it’s a grantor trust, this exchange of assets would not trigger a taxable event. It’s like taking a dollar out of your left pocket and exchanging it for four quarters in your right pocket. Now, when Mary dies, she’ll have the XYZ stock in her taxable estate, and it’ll receive a step-up in basis, while the Mary Smith Irrevocable Trust has $5 million in cash, which won’t be included in Mary’s taxable estate.

Thus, the grantor trust which is outside the taxable estate is very powerful on two fronts.

1. The growth of the assets in the grantor trust is not subject to gift or estate tax in the grantor’s taxable estate.
2. The income earned by the trust is taxed to the grantor, not the beneficiaries or the trust itself. This means the grantor pays the income tax on the income earned by the trust and doing so isn’t an additional transfer by the grantor for gift and estate tax purposes.

This magic of grantor trusts is very powerful and allows assets to grow outside the taxable estate of the grantor tax-free while the grantor pays the income tax on those assets. The power of substitution is a particularly useful power to trigger grantor trust status while not causing inclusion in the taxable estate.

Anyone who follows the news needn’t look far to catch a headline regarding Dianne. Recent articles indicate that her daughter, Katherine Feinstein (“Katherine”), acting as Attorney-in-Fact for Dianne, has initiated a third lawsuit in as many months against the Trustees of the Marital Trust established by Diane’s late husband accusing them of elder abuse, among other things.

Richard and Dianne were married in 1980 and lived together in the community property state of California until Richard’s death in February 2022. During their marriage, Richard created the Richard C. Blum Revocable Trust dated January 9, 1996, as amended (hereinafter “RCB Trust”). Michael Klein, along with Verett Mims, and Marc Scholvinck became co-Trustees of the RCB Trust upon Richard’s death.

The RCB Trust directs the co-Trustees to hold the assets received from a joint property trust created by Richard and Diane during their lives in a marital trust (“RCB Marital Trust”) for the benefit of Dianne during her lifetime. Upon Dianne’s death, the assets in the RBC Marital Trust will pass to Richard’s daughters, Annette Blum, Heidi Blum, and Eileen Blum Bourgade. In addition to the property received from the joint property trust, RCB Trust directs the Trustees to fund RCB Marital Trust with $5 million in cash and marketable securities. The terms of the RCB Marital Trust require the Trustees to provide Dianne with the entire net income in quarterly installments. If the net income is less than $1.5 million in any year and if the trust has sufficient liquidity, then the Trustees are to distribute principal in an amount that when added to the income provides Dianne with $1.5 million annually.

According to the lawsuit, notwithstanding Richard’s death over a year ago, the Trustees have failed to fund the Marital Trust, failed to make income distributions to Dianne, and ignored Dianne’s requests for information, thereby breaching their duties to administer the trust and to provide information to the beneficiary. The third lawsuit alleges that one Trustee “in an act of hostility and retribution” attempted to interfere with another trust that names Dianne as a beneficiary but of which he is not Trustee. The lawsuit also alleges that the co-Trustees have attempted to disparage Dianne in the press through their counsel who claimed that she was “engaging in some kind of misguided attempt to gain control over trust assets to which she is not entitled.” Harsh words, especially on behalf of co-Trustees who seem to be shirking their duties.

Additionally, the August lawsuit indicates that certain gifts were to be made from the RCB Marital Trust in a specific order and that the RCB Marital Trust contained provisions regarding the order in which the specific gifts were to abate. The August lawsuit indicates that the Trustees have made gifts out of order to the detriment of Dianne thereby breaching their duties of loyalty and impartiality. The lawsuit further alleges that the co-Trustees sold Richard’s interest in the Claremont Hotel in Berkeley, California for $163 million, but failed to inform Dianne of the sale or fund the RCB Marital Trust. Finally, the lawsuit alleges that these various acts or omissions constitute elder abuse given Dianne’s age and that the acts have effectively deprived her of property rights given to her by the RCB Marital Trust. The third lawsuit filed on August 8, 2023, contains 8 counts and several damning allegations.

The allegations correctly assert that the California Probate Code entitles Dianne to information regarding the assets and administration of the RCB Trust and that the co-Trustees’ failure to comply with her requests breaches their fiduciary duties. There are so many alleged breaches in this lawsuit, it’s hard to pick the most important lesson. Those interested in the details should read the entirety of the August lawsuit. On paper, Richard Blum did everything right. He left detailed instructions regarding what should occur after his death. He involved an attorney, he updated his plan regularly, and despite all of this, his trust still ended up in litigation. His failing, if one can call it a failing, was choosing the wrong individuals to serve as co-Trustees. If all the allegations contained in these lawsuits are true, or if even most of them are true, then Richard made a mistake in choosing the individuals that he chose to serve as fiduciaries.

These three lawsuits read together paint a bleak picture of the co-Trustees’ behavior, if true. Trustees have a duty to administer the trust expeditiously in accordance with the terms of the Trust and it appears that the co-Trustees of the RCB Trust and RCB Marital Trust have failed to do either. Additionally, if they have made gifts to other beneficiaries before making gifts to Dianne as required by the terms of the Trust, then they have also breached their duties of loyalty and impartiality. Finally, they have breached the duty to provide information to Dianne. Of course, these lawsuits paint the co-Trustees in the worst possible light, but if the allegations are true, then those Trustees could face serious repercussions, including removal, surcharge, and disgorgement of fees. Again, it’s unfortunate that Dianne had to travel down this path to fight for the gifts her husband of 42 years intended for her to have. This case demonstrates that even the best-laid plans can go awry. If you want to save your Estate from a fate such as this, now’s a great time to reach out to me to discuss and implement an estate plan for you.

Anyone who consumes the news needn’t look far to catch a headline regarding Dianne Feinstein. Recent articles indicate that her daughter, Katherine Feinstein (“Katherine”), acting as Attorney-in-Fact for Dianne, has initiated a third lawsuit in as many months against the Trustees of the Marital Trust established by Dianne’s late husband accusing them of elder abuse.

Richard and Dianne were married in 1980 and lived together in the community property state of California until Richard’s death in February 2022. While Richard was alive, he created the Richard C. Blum Marital Trust of 1996, dated January 9, 1996 (“Marital Trust”) naming Dianne as the sole income beneficiary for life. In addition to the income generated by the trust, the Marital Trust provides that Dianne shall receive distributions of principal for her health, education, maintenance, and support. The lawsuit goes on to indicate that Dianne incurred significant medical expenses and sought reimbursement from the Marital Trust. The lawsuit alleges that the Trustees of the Marital Trust have failed to reimburse her medical expenses. The Marital Trust contained a provision allowing Dianne, as the sole income beneficiary, to appoint a successor Trustee and Dianne appointed her daughter, Katherine.

The Trustee appointment provisions are at issue in the second lawsuit. Richard appointed N. Colin Lind (“Lind”) to serve as original Trustee of the Marital Trust during Richard’s lifetime. Lind had the power to designate “the immediate and all subsequent successor Trustees or co-Trustees to serve” were he unable or unwilling to serve. For Lind to exercise that power, he needed to designate the successor Trustee in a notarized document and then deliver the same to the Trustee, the designated successor, or the adult income beneficiaries. Upon Richard’s death, the Marital Trust appointed Richard W. Canady (“Canady”), followed by Gary Wilson (“Wilson”), serving in that order, to serve in the place of Lind, neither of whom had the power to designate a successor. In addition, pursuant to the terms of the Marital Trust, upon Richard’s death, any Trustee appointed and serving because Lind exercised his power to appoint a successor ceased serving.

After Richard’s death, Dianne received a notice pursuant to the California Probate Code indicating that Mark Vorsatz (“Vorsatz”) executed a resignation on March 15, 2022, effective on April 15, 2022 and that because of the resignation, Mark R. Klein and Marc T. Scholvinck were the trustees of the Marital Trust. Of note, the notification failed to indicate how Vorsatz was appointed, although the lawsuit presumes that Lind appointed Vorsatz during Lind’s tenure as Trustee before Blum’s death. Remember that the Trustees nominated to serve after Blum’s death, Canady and Wilson, had no power to appoint a successor Trustee. Even assuming that Lind appointed Vorsatz appropriately, Vorsatz’s tenure ended upon Blum’s death pursuant to the terms of the Marital Trust. At that time, Canady, followed by Wilson, were to serve. According to the July lawsuit, Dianne never received notification of the resignation of either Canady or Wilson.

The second lawsuit filed on July 7, 2023, contains one count and various allegations and can be found here: In the matter of: The 1996 Dianna Feinstein Trust under the Richard C. Blum Marital Trust of 1996, dtd January 9, 1996. This lawsuit, much like the one filed earlier, has a narrow focus: the proper appointment of a successor Trustee and the unreimbursed medical expenses. Given this narrow focus, it’s easy to pull lessons from the lawsuit. First, it’s imperative to follow the terms of the trust when appointing a successor Trustee. It’s unclear whether Lind appointed Vorsatz; unclear whether Canady or Wilson resigned or declined to serve; and unclear how Klein and Scholvinck were appointed. Given these uncertainties, Dianne’s allegation regarding the improper appointment of Klein and Scholvinck seems correct. Klein and Scholvinck, if they are the Trustees, have a duty to keep proper records and their inability to demonstrate how they came to hold office arguably breaches that duty. Whether the judge overseeing the case agrees with this remains to be seen.

Another valuable lesson we can take from this case involves the distribution of principal from the Marital Trust. While the terms of the Marital Trust allow the Trustee to distribute principal for Dianne’s health, education, maintenance, and support, the determination of what fits within that standard remains within the Trustee’s discretion. Should Klein and Scholvinck exercise that discretion to distribute to Dianne? Now that Dianne has initiated a lawsuit, it seems unlikely that Klein and Scholvinck will exercise their discretion and reimburse Dianne’s medical expenses. Of course, if it’s determined that they do not hold the office of Trustee and the court accepts Dianne’s appointment of her daughter as Trustee, then it seems likely Katherine will reimburse those expenses upon taking office. The lesson here is that you must be clear what is intended. It’s up to the drafting attorney to reduce the client’s intent to writing. After all, the language in the document might be interpreted years later by someone other than the drafting attorney. Thus, it’s best to ensure that your documents spell out precisely what your client wants to happen. For example, if Richard intended for the Marital Trust to cover all Dianne’s medical expenses, then the trust should have been drafted that way.

It seems clear that Richard thought about his Estate Plan, consulted attorneys in creating it, but neither he nor they anticipated the difficulty in administering it. In the prior lawsuit, the appropriately appointed Trustees failed to act expeditiously, and in this one, it’s unclear who should be serving as Trustee. More than a year after Richard’s death, three separate lawsuits have been filed but it seems little else has occurred. It’s unfortunate and undoubtedly not what Richard intended when he created the plan. When litigation ensues, only the lawyers benefit as will no doubt be the case here. Litigation takes time and costs money during periods of significant grief.