Tuesday, September 30, 2008

Schuller's Vision Beyond "Tough Times"

On Sunday, September 28, 2008, Rev. Robert H. Schuller, minister at The Crystal Cathedral, preached, in a television broadcast, an extraordinary sermon entitled "Ten Commandments for Possibility Living" that I recommend for reading by everyone, regardless of religious belief, particularly now during our mutual crisis.

Given the record-breaking decline in the stock market that occurred the day after the sermon's broadcast, when the House did not adopt an initial plan to address the national financial crisis, the principles spoken in Dr. Schuller's sermon -- which support his vision of a
debt-free America -- stand out as even more relevant and hopeful.

Possibility thinking is the ultimate need of every single person!" said this 82-year old orator & author of more than thirty books. "No matter how rich or poor you are, how educated or how uneducated you are . . . you need Possibility Thinking!"

He then focused upon Possibility Thinking in the context of our national economy:

In fact, I even applied possibility thinking to our national debt. That was ten years ago, when I wrote a book called The Power Of Being Debt Free. It was published by Nelson Publishers and sold a few hundred thousand copies.

We gave one to every senator and every congressman. At that time they all laughed at me because of the way I concluded the book.

I wrote, "If our country doesn't change course, I predict that by the end of the century our federal debt will go from $1.6 trillion to over $5 trillion." Yes, they laughed at me because I was just a television preacher. The debt couldn't go that high. * * *
Well, according to the National Debt Clock website, as of September 29, 2008, the national debt of the United States is nearly $9.9 trillion. Since September 28, 2007, this debt has increased by approximately $2.42 billion per day. Since the estimated population of the United States is 304,818,443, that website calculates each citizen's share of this debt at $32,466.92.

Despite this situation, which the world's financial markets now recognize in a crisis response, Rev. Schuller -- an older American to be sure -- still spoke about his dream:
Now that book has just been re-written and brought up to date. This time Washington is very interested. The senators have it and they are reading it.

I changed the title: America's Declaration Of Financial Independence, because I have a dream for my seventeen grandchildren!

I have a dream that they will be able to experience financial independence that when they reach the age of twenty and thirty they will be able to buy a house with a twenty or thirty year mortgage and a fixed rate of only three percent!

That's my dream and it is possible for America to become debt free. * * *
Since every dream should have a dealine too, Schuller stated one for his vision:
I have a dream that when we celebrate America's two-hundred-fiftieth birthday in the year 2-0-2-6 (I will be a hundred years old if I am still alive), we could be debt free.

Surely by the year 2-0-7-6, our three-hundredth anniversary America would be a debt-free country. * * *
He then explained "Ten Commandments for Possibility Thinking" that should be applied immediately to the financial crisis experienced by us -- both individually and collectively:

#1 Never reject a possibility because you see something wrong with it.

#2 Never reject a possibility because you won't get the credit.

#3 Never reject an idea because it's impossible.

#4 Never reject a possibility because your mind is already made up.

#5 Never reject an idea because it's illegal. * * * [Instead,] change the laws.

#6 Never reject an idea because you do not have the money, the manpower, the mental power or the muscle.

#7 Never reject an idea because it will generate conflict.

#8 Never reject an idea because it is not your style.

#9 Never reject an idea because it might fail!

#10 Never reject an idea because it is sure to succeed.

In the current financial environment characterized by fear, we need possibility thinking such as that promoted by Dr. Schuller:
Possibility thinking transcends politics, races, creeds and theologies. Yes!

Possibility thinking is the ultimate need of every single person. We are all the same! We have a brain. We can think! We can dream! We live in a free country. We can get an education!

We can do anything we want to do if we look at all the possibilities. * * *
Read his entire sermon here or watch it online here.

"If you have faith as a grain of mustard seed, say to your mountain MOVE and it will move
and nothing will be impossible to you.

-- Holy Bible, Matthew 17:20

Monday, September 29, 2008

FDIC's Interim Rule for Living Trust Deposits

On September 26, 2008, the Federal Deposit Insurance Corporation issued interim final regulations entitled Deposit Insurance Regulations; Living Trust Accounts, as published in the Federal Register, and as announced in FDIC's Press Release, "FDIC Simplifies Coverage Rules for Revocable Trust Accounts" (09/26/08).

The interim rules amend 12 CFR 330, and were effective immediately, pending a further sixty day comment period before finalization.

This is a summary of the changed regulations:

The FDIC is adopting an interim rule to simplify and modernize its deposit insurance rules for revocable trust accounts.

The FDIC’s main goal in implementing these revisions is to make the rules easier to understand and apply, without decreasing coverage currently available for revocable trust account owners.

The FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system.

The interim rule eliminates the concept of qualifying beneficiaries. Also, for account owners with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the beneficial interest of each beneficiary in the trust.

Under the new rules, a trust account owner with up to five different beneficiaries named in all his or her revocable trust accounts at one FDIC-insured institution will be insured up to $100,000 per beneficiary.

Revocable trust account owners with more than $500,000 and more than five different beneficiaries named in the trust(s) will be insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries’ interests in the trust(s), limited to $100,000 per beneficiary.

As recited in the published notice, the FDIC first attempted to clarify "living trust" coverage by an FDIC Advisory Opinion 94-32 (May 14, 1994), then by revision of 12 CFR 330.10(f) in 1998. Regulations proposed in June 2003, then adopted, after considering comments, as final regulations effective January 1, 2004, had included provisions regarding "living trust" coverage.  The provisions were clarified in an Opinion Letter (12/17/03), and then in formal Advisory Opinion 94-32 (05/18/04).

The FDIC's prior rulemaking addressed a "living trust" as a depositor in a federally-insured financial institution due to the increasing use of such a legal device.

A living trust is a formal revocable trust over which the owner (also known as the grantor) retains ownership during his or her lifetime. Upon the owner's death, the trust generally becomes irrevocable.

A living trust is an increasingly popular instrument designed to achieve specific estate-planning goals. A living trust account is subject to the FDIC's insurance rules on revocable trust accounts. Section 330.10 of the FDIC's regulations (12 CFR 330.10) provides that revocable trust accounts are insured up to $100,000 per "qualifying'' beneficiary designated by the account owner.

If there are multiple owners of a living trust account, coverage is available separately for each owner.

Qualifying beneficiaries are defined as the owner's spouse, children, grandchildren, parents and siblings. 12 CFR 330.10 (a).

The most common type of revocable trust account is the "payable-on-death'' ("POD'') account, comprised simply of a signature card on which the owner designates the beneficiaries to whom the funds in the account will pass upon the owner's death.

The per-beneficiary coverage available on revocable trust accounts is separate from the insurance coverage afforded to any single-ownership accounts held by the owner or beneficiary at the same insured institution. * * *

Despite these efforts, application of the "qualifying beneficiary" requirement in the 2004 regulations still created confusion and complications for "living trust" deposit coverage.
Despite the FDIC’s efforts to simplify deposit insurance rules in recent years, there is still significant public and industry confusion about the insurance coverage of revocable trust accounts -- particularly living trust accounts, one of the two types of revocable trust accounts.

This continuing confusion about the insurance coverage of revocable trust accounts is evidenced by the tens of thousands of deposit insurance inquiries the FDIC has received following recent depository institution failures. * * *
In response, the FDIC's Board of Directors adopted these changes to simplify the rules for determining the coverage available on revocable trust accounts.
The interim rules, which are effective immediately, eliminate the concept of qualifying beneficiaries, so that coverage is based on the naming of virtually any beneficiary.

Under the revised rules, coverage for the vast majority of account owners generally is based on the number of beneficiaries named in a depositor's revocable trust account(s). The insurance limit will still be based on $100,000 per named beneficiary.

For revocable trust account owners with more than $500,000 in such accounts naming more than five beneficiaries, the coverage is the greater of either $500,000 or the sum of all the named beneficiaries' proportional interest in the trusts, limited to $100,000 per different beneficiary. * * *

This is the comment and the advice offered by the Chair of the FDIC to "living trust" depositors:
"We believe the interim rule will not only result in faster deposit insurance determinations after bank closings, but will help improve public confidence in the banking system," said FDIC Chairman Sheila C. Bair.

"We strongly encourage owners of revocable trust accounts to make certain that the names of their beneficiaries are included in the bank's records." * * *
Comments on the interim rule will be due no later than 60 days after its publication on September 26, 2008, in the Federal Register.

Already, on some legal listservs, practitioners are commenting on the interim rules, wondering about the effect on more complicated estate planning documents.

For example, on the listserv of the
American College of Trust and Estate Counsel, Sebastian V. Grassi, Jr., Esq., of Grassi & Toering, PLC, in Troy, MI, provided some initial thoughts from a sophisticated estate planning attorney's viewpoint. I repost his comments (edited by me) with his permission:
Although the preamble to the new rules state that the FDIC is trying to align itself with 21st Century estate planning techniques, its new rules are geared to mom and pop "I love you" type revocable living trusts. These often provide a QTIP [Qualified Terminable Interest Property] interest for a surviving spouse, with remainder to children, per stirpes, with further provision (if any beneficiary has not attained a certain age) for a beneficiary's share to be held in trust until he/she attains the stated age. This is a common "simple" form of estate plan for a non-taxable estate.

In that type of trust you can ascertain the interests of the beneficiaries; and when the bank fails, you know exactly, at that moment in time, who the living beneficiaries are, ignoring the contingencies.

However, the new FDIC rules concerning revocable living trusts do not adequately deal with a sprinkle trust, such as a GST dynasty trust.

The rules attempt to clarify a situation concerning a surviving spouse's life estate with remainder over to the grantor's three children. But what if the surviving spouse was granted a testamentary limited power of appointment to any of the grantor's descendants, then what? How many remainder beneficiaries are there?

As I read the new rules, such a power would probably be treated as a contingency and therefore not be taken into consideration (i.e., the grantor's descendants would not be counted), and only the three children would be counted for the $100,000 per beneficiary limit (i.e., $300,000 of coverage - 3 kids x $100,000).

The new rules, in my opinion, generally require specifically named beneficiaries with ascertainable (i.e., statistically determinable interest, ignoring contingencies, such as the exercise of the testamentary limited power of appointment) in order to get the $100,000 FDIC coverage per beneficiary.

Thus, Sprinkle Trusts among the grantor's descendants, appear to provide only $100,000 of coverage, maximum, per trust share.

Now one way to deal with that is to have have the GST trust be divided into separate shares for the kids (a typical approach). In that case, it appears that each kid's trust share would get up to $100,000 of coverage. So, a pure credit shelter sprinkle trust (i.e., not divided among the children when the surviving spouse dies) would probably provide only $100,000 of FDIC coverage, whereas, if the trust divides per stirpes, greater coverage per trust (not per trust beneficiary since the trust is a sprinkle trust) would provide the most FDIC coverage.
The new rules took effect on September 26, 2008 for all existing and future revocable trust accounts, and for existing and future irrevocable trust accounts resulting from formal revocable trust accounts.

Update: 10/14/08:

October 10, 2008, The International Herald Tribune published an article, entitled "FDIC approves $250,000 insurance limit" that reported a temporary increase in the FDIC coverage limits through the end of 2009:
The Federal Deposit Insurance Corp. on Friday formally approved the increased insurance limit of $250,000 per regular account that was part of the financial rescue legislation enacted last week.

The FDIC board approved the temporary increase per account in a vote at a meeting. The new limits, which extend through the end of next year, also provide for an increase in the insurance ceiling on joint deposit accounts to $200,000 per co-owner of the account from the current $100,000.

The limit for retirement accounts held in banks remains at $250,000. * * *
The "Frequently Asked Questions" on the FDIC website were updated, as follows:

What are the basic FDIC coverage limits?*

  • Single Accounts (owned by one person): $250,000 per owner
  • Joint Accounts (two or more persons): $250,000 per co-owner
  • IRAs and other certain retirement accounts: $250,000 per owner
  • Revocable trust accounts: Each owner is insured up to $250,000 for the interests of each beneficiary, subject to specific limitations and requirements

*These deposit insurance coverage limits refer to the total of all deposits that account holders have at each FDIC-insured bank. The listing above shows only the most common ownership categories that apply to individual and family deposits, and assumes that all FDIC requirements are met.

For further information about all recent changes to FDIC deposit insurance coverage through October 14, 2008, see: Changes in FDIC Deposit Insurance Coverage - September-October 2008 on the FDIC website.

Friday, September 26, 2008

Attorney in PA Indicted for Will Fraud

On September 25, 2008, the U.S. Attorney's Office for the Eastern District of Pennsylvania issued a Press Release entitled "Allentown Attorney and Two Others Indicted for Fraud Involving Couple Killed in Plane Crash" (PDF, 2 pages) that announced the formal criminal indictment of a Pennsylvania lawyer, his son, and a physician on federal fraud charges arising from alleged forgeries of wills.

The Indictment, available online (PDF, 9 pages), identified federal law violations under 18 U.S.C. §371 (conspiracy to commit wire fraud - 1 count), 18 U.S.C. §1343 (wire fraud - 2 counts), and 18 U.S.C. §2 (aiding and abetting) involving various of the named defendants.

Reporter Matt Birkbeck published an article entitled "Feds: Karoly faked wills" on September 26, 2008, in The Morning Call (Allentown, PA), which reported the underlying circumstances and the alleged criminal behavior:

Two weeks after his brother Peter and sister-in-law were killed in a plane crash in February 2007, John P. Karoly Jr. learned he wasn't named as a beneficiary in their wills.

Karoly, a high-profile Lehigh Valley lawyer, requested a delay in probating the wills, claiming Peter and his wife, Dr. Lauren Angstadt, filed updated wills in 2006 that gave John Karoly a significant portion of their multimillion-dollar estate.But the new wills were fraudulent, according to a federal grand jury in Philadelphia, which on Thursday indicted Karoly, 58, his son John ''J.P.'' Karoly III, 28, and Dr. John J. Shane, 72, charging them with taking part in a carefully crafted scheme to defraud the estates of Peter Karoly and Angstadt by using the phony wills. * * *
The prosecuting U.S. Attorney was quoted in the article:
''The defendants conspired in a fraudulent scheme to forge the wills of Peter Karoly and Lauren Angstadt in order to unlawfully benefit from their tragic deaths,'' said acting U.S. Attorney Laurie Magid in a prepared statement.

''Their actions were not only illegal, they subverted the true intentions of the victims.''

Karoly, his son and Shane were each charged with one count of conspiracy to commit wire fraud, two counts of wire fraud, and aiding and abetting after a 19-month investigation by the U.S. attorney's office in Allentown and the FBI.

If convicted, each faces up to 45 years in prison and a $750,000 fine. * * *
I referenced the original dispute among family members and the surprising, subsequent involvement by the Federal Bureau of Investigation in prior postings:

An article entitled "Attorney John Karoly indicted on charges he faked millionaire brother's will" posted September 25, 2008, by The Express-Times (Lehigh Valley region, PA), identified the other subjects of the indictments, in addition to John P. Karoly, Jr.:
Also named in the indictment are John J. Shane, a doctor who often provides expert testimony for Karoly at trial, and Karoly's son, John P. Karoly III. The younger Karoly works in his father's South Whitehall Township law office.

Each is charged with single counts of conspiracy and two felony counts of wire fraud, according to federal authorities. * * *
The charges were denied in a statement prepared by Robert Goldman, the attorney representing Mr. Karoly, who was quoted in that article:
"While there may be some who were angered by Mr. Karoly's successful lawsuits against errant police officers and now cheer the announced charges, the broader community will see the case for what it is," Goldman said.
"To make the ultimate issue blatantly clear, the individuals charged in today's indictment are not guilty and will vigorously defend against the allegations."
For a similar Associated Press news report, see: "Feds: Pa. lawyer faked will after brother's death" (09/25/08) by Maryclaire Dale, published by The Times-Leader (Wilkes-Barre/Scranton, PA).

A related civil suit over the disputed wills remains pending in the Orphans Court Division, Court of Common Pleas of Northampton County, Pennsylvania. That will contest was commenced by two of Karoly's sisters, Kim Karoly Luciano and Joanne Karoly Billman, who claimed that John P. Karoly Jr. created a will to replace one Peter Karoly had drawn up in 1985.

Such allegations in the past generally were examined in civil actions brought by parties with standing to sue. To the extent criminal behavior was uncovered, referrals were made under state criminal laws to a local district attorney to be heard in a common pleas court.

Regardless of the outcome in this case, its prosecution alone could be trend-setting in a progressive way that could heighten prosecution of elder abuse generally.

To date, this case involves application of federal fraud and conspiracy laws, investigation by the FBI, examination & prosecution by the U.S. Attorney's Office, with anticipated resolution in a federal court.

This case could become a template for future prosecution of other cases involving intentional fraud in the preparation of testamentary documents offered for probate or for claim.

Update: 04/07/13:

The Orphans' Court Division of the Court of Common Pleas of Northampton County issued a ruling that the contestants to the wills did not meet the required burden of proof to overturn the questioned wills. No federal charges were pursued by the Justice Department on such matters. See: PA EE&F Law Blog posting Karoly Estates Will Forgery Case Ruling (04/07/13).

Thursday, September 25, 2008

PBA Supports SB 1203 on PA UTA

On September 23, 2008, the PA House Judiciary Committee cleared Senate Bill 1203, as amended previously in the PA Senate, for further consideration by the full House. In a letter sent September 22, 2008, the Pennsylvania Bar Association urged its passage this session, during the few days of legislative activity that remain.

Adoption during this legislative session by the House of SB 1203 without further amendment is important.

[UPDATE: 12/01/08 -- As indicated in the "Update" at the end of this posting, despite valiant efforts by proponents of SB 1203, in the crush of other matters under consideration, it was not adopted by the House during this Legislative Session. It will be re-introduced as a new bill for consideration in the 2009-2010 Legislative Session.]

Originally, SB 1203, PN 1633 (PDF) was introduced into the Senate on Friday, December 7, 2007. Generally it proposed "omnibus" changes to the PA Probate, Estates & Fiduciaries Code, summarized in its caption as follows:

An Act amending Title 20 (Decedents, Estates and Fiduciaries) of the Pennsylvania Consolidated Statutes, further providing for forfeiture, for modification of wills, for advertisement of grant of letters, for duty of personal representative, for enforcement of contribution or exoneration of Federal estate tax, for implementation of power of attorney, for applicability of rule against perpetuities, for modification of conveyance by divorce, for effect of divorce on designation of beneficiaries, for notice of representation, for creditor's claim against settlor, for actions contesting validity of revocable trusts, for claims and distribution after settlor's death, for trustee's duty to inform and report, for illustrative powers of trustee, for limitation of action against trustee, for power to convert to unitrust and for retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments; and making conforming amendments to Title 15.
That form of the bill implemented recommendations presented in the October 2007 Advisory Committee Report addressed to the Legislature by the Joint State Government Commission's Advisory Committee on Decedents' Estates Laws. The full Report remains available here (PDF, 64 pages).

For background and overview, see: PA EE&F Law Blog postings "PA PEF Code Revisions Proposed" (10/25/07) and "Omnibus Bill re PEF Code Introduced" (12/07/07).

Most of the recommendations were technical or corrective, and therefore not controversial. In these aspects, SB 1203 represents an evolution of fiduciary law that is very desirable.

Recommendations address uncertainties highlighted by recent court decisions, or sharpen provisions of the PA Uniform Trust Act (which took effect on November 6, 2006), and the PA Principal and Income Act, among other chapters of the PEF Code. Other recommendations clarified the interplay of domestic law versus estate law in divorce settings interrupted by death of a party, and the allocation of death taxes.

But, to me, the most urgent changes were amendments to Chapter 56 of the PEF Code that would limit the ability of an agent, appointed under a power of attorney, to change insurance beneficiary designations under §5603(p), or to engage in retirement plan transactions, including beneficiary changes, under §5603(q). These changes would allow the courts to correct financial abuse perpetrated by an agent's self-serving interference with a principal's existing testamentary intentions.

On May 13, 2008, the Senate Judiciary Committee reported amended SB 1203, PN 2048
(PDF) back to the Senate.

Then, the Real Property, Probate & Trust Law Section of the Pennsylvania Bar Association recommended passage of SB 1203, which was endorsed at its Annual Meeting during the first week of June, 2008.

The Pennsylvania Banker's Association raised concerns while SB 1203 was further considered by the Senate's Appropriate Committee. The main issues were a reduction for the time limit in the laches provisions of the PA UTA from its present five years under Section 7785(a)(1), and clarification of the contents of an annual report upon which that time-bar was premised under S
ection 7780.3(i)(5). See: Senate Passes Legislation Making Important Corrections and Improvements to the Pennsylvania Uniform Trust Act (UTA) with PBA Supported Amendment, posted by the bankers' association.

The compromise resulted in a further amended form sent to the Senate as SB 1203, PN 2293 (PDF format), which was adopted 50-0
on July 2, 2008. That is the current version of the bill.

It is this form of the bill that must be approved without further amendment by the House during this session. There is no time for "concurrence" in any House amendment, since the Senate will not reconvene during this session.

Earlier this week, the current President of the PBA, C. Dale McLaine, Esq., sent the following letter to each Representative, urging adoption of SB 1203:
The Pennsylvania Bar Association is on record in support of Senate Bill 1203, which makes important technical corrections and other changes to the Uniform Trust Act and the Probate, Estates and Fiduciaries Code. On behalf of the Association and its 29,000 members, I am writing to confirm that the PBA continues to endorse the enactment of Senate Bill 1203 in a form that will allow for its enactment this legislative session.

We believe that this bill takes on particular importance in light of the recent tumult in the financial sector, which has disproportionately impacted banking and trust institutions, many of which act as fiduciaries of trusts and estates. We view the immediate passage of this legislation as a step toward providing certainty in the law for individual and institutional fiduciaries, as well as for beneficiaries. Accordingly, we respectfully request your support of its passage in this legislative session.

The PBA will continue to monitor the impact of the Uniform Trust Act (and its implementation) on our constituents and the clients whom we serve, and when necessary, will weigh in on further adjustments or modifications to the law that may be advisable.
At the hearing on Tuesday, September 23rd, the Chair of the Advisory Committee on Decedents' Estates Laws,
Edward ("Ted") M. Watters, III, responded to questions from House Judiciary Committee members, who then reported it favorably, without amendment, to the House, where it received first consideration. As customary, the bill was referred to the House Appropriations Committee.

At this pace, and with such cooperation, SB 1203 can be adopted by the House, and sent to the Governor, during this legislative session; and it should be.

The most recent national (even international) financial events demonstrate what can happen when laws & regulations are not routinely reviewed, modernized, and refined. That is what SB 1203 would do in the areas that it touches --
fiduciary duties, beneficiary rights, and two egregious forms of financial elder abuse.

Both PBAs -- both the lawyers and the bankers -- urge adoption now.

Update: 12/01/08:

In an email message sent on December 1, 2008, by Edward Watters, Esq., as Chair, to fellow members of the Decedents' Estates Law Advisory Committee of the Joint State Government Commission, he advised:

The Legislature has adjourned and SB 1203 did not pass.

All provisions need to be re-introduced in some form next session.

Tuesday, September 23, 2008

PBA RPPT's Summer 2008 Newsletter Issued

On September 19, 2008, the Pennsylvania Bar Association's Real Property, Probate & Trust Law Section released its most recent bi-annual Newsletter (No. 65, Summer 2008) for members. At 72 pages, this issue is the longest ever published by the Section.

The contents of this issue of the
Newsletter include:

  • Report: From the Section Chair (p. 1, by Jill R. Fowler)
  • Photo Gallery: RPPT Section Annual Meeting, June 4-5, Hershey (p. 2)
  • Report: Vice-Chair, Probate & Trust Law Division (p. 4, by Bridget M. Whitley)
  • Report: Vice-Chair, Report, Real Property Law Division (p. 5, by William “Chip” Mackrides)
  • Update: Recent Developments in Probate & Trust Law (p. 7, by Stanley J. Lehman & Cynthia K. Rarig)
  • Announcements: List of Upcoming Courses from PBI, and PBA Midyear Meeting (p. 10)
  • Update: Recent Legislation (p. 11, by Steven Loux, of the PBA Staff)
  • Article: PA Uniform Trust Act Amendments -- SB 1203 (p. 19, by Daniel B. Evans)
  • Article: Reformation for Mistake Under Uniform Trust Act (p. 21, by Daniel B. Evans)
  • Article: Realty Transfer Taxes -- New Regulations Do Not Stand Scrutiny (p. 23, by Daniel B. Evans & Anna O. Sappington)
  • Article: Realty Transfer Taxes -- New Regulations Would Tax Assignments of Purchase Agreements (p. 25, by Harris Ominsky)
  • Article: New Realty Transfer Tax Regulations Raise a Ruckus (p. 27, by By Philip B. Korb)
  • Article: Prudent Practices for Investment Advisors Published (p. 29, by Neil E. Hendershot)
  • Article: IRS Proposes Final Preparer Penalty Regs (p. 30, by Neil E. Hendershot)
  • Article: Firefighters, First Responders and Free Wills (by p. 32, by Neil E. Hendershot)
  • Article: Evans’ Book on Estates Practice Updated (p. 33, by Neil E. Hendershot)
  • Article: PBA RPPT Section Honors Chief John Murphy (p. 34, Neil Hendershot)
  • Listserv Summaries: Probate & Trust Law Postings (p. 35, by Mark B. Hammond)
  • Listserv Summaries: Real Property Law Postings (p. 62, by Mark Hammond)
  • Roster: RPPT Section Leadership List (p. 70)
  • Roster: RPPT Committee List (p. 71)
I serve as the Newsletter's Executive Editor. Mark Hammond is the Assistant Editor, and Patricia Graybill, of the PBA's Publications Department, is Staff Editor.

Our Section's Newsletter has been, over the twenty-five years that I have edited it, a quality publication produced by Section members, with reliable and relevant content regarding this practice area.

This issue of the
Newsletter was mailed to Section members within the past few days, and was posted in PDF format in the Members Only area of the PBA website on September 19th for viewing and downloading.

However, unlike past issues, it will not be posted publicly right now. Last Friday during the monthly Section Leadership Conference Call, a new policy was adopted for online posting of Section newsletters, effective immediately.

The current Newsletter will not be available until six months after issuance, when it will be posted publicly until replaced by the next issue. All issues remain available to Section members in the Section's
Newsletter archives on the PBA website.

So, to get a copy now of the current
Newsletter, sign up to be a PBA RPPT Section member, or connect with an attorney who is.

Monday, September 22, 2008

"Liquid Trust" or "Living Trustworthiness"?

In the midst of the greatest economic crisis since the onset of The Great Depression, I pondered approaches, and now endorse one.

Since these problems are based in fear, which then create a lack of faith in business partners and among consumers, we need to restore trust, which can regenerate liquidity of funds and permit long-term workouts.

Could a simple solution be found in a bottle?

Liquid Trust is produced by Vero Labs. It is one of many such products based upon human pheromones, which are explained by Wikipedia:

A pheromone (from Greek φέρω phero "to bear" + ‘ορμόνη "hormone") is a chemical that triggers a natural behavioral response in another member of the same species.

There are alarm pheromones, food trail pheromones, sex pheromones, and many others that affect behavior or physiology. * * *
The vendor claims that its enhanced Liquid Trust can restore a feeling of trust, by employing, Oxytocin:
Liquid Trust is the world's first product that contains Oxytocin the hormone that controls the level of trust and security in people.

Scientists have proven that the hormone Oxytocin, is largely responsible for who we trust. If your boss, manager or employees have high levels of Oxytocin, you have a much better chance of getting a raise or promotion. * * *

When you spray Liquid Trust on yourself, you are gaining an instant competitive edge. Your manager and other co-workers will immediately feel strong bonds to you and your ideas.

This will actually help you get ahead because they will trust you and the work that you do. * * *
The original version of Liquid Trust was released in 2006, according to "Liquid Trust in a Bottle: New Oxytocin Product Has Hit the Market" (08/11/06) by Tori, posted by Associated Content.
Liquid Trust is a spray that comes in a little bottle that oddly resembles a nail polish bottle (in my opinion). * * *

According to their website, “There are different ways of increasing the Oxytocin levels in the people you interact with. Scientists say that simply touching someone who you are talking to, makes them produce Oxytocin.

When that happens, they start to form a very strong bond with you. They trust you." * * *
See also: "Human Pheromone Reviews - Liquid Trust" by Kyle Macrannell, posted on EZine Articles.

Many other marketed products contain pheromones, intending different results in human interactions.
See: "Most effective 'Pheromone' Product Reviews" (07/02/08), which reviewed seven products (but not "Liquid Trust"). For accounts of users' personal experiences with various products, see: "Liquid Trust" on PheromoneTalk.

However, predictable effects of pheromones remain under research, according to "Pheromones, in context" (10/02/02), by Etienne Benson, posted by American Psychological Association Online. She interviewed knowledgeable scientists, who highlighted actual research on pheromones.

She concluded that scientific research can only suggest, but not predict, specific effects of pheromones on human behavior, and therefore cannot endorse vendors' promotional claims.

It can be concluded, however, that pheromones do have a purpose:

"In animals, [pheromones] are involved very strongly in care of offspring, in recognizing members of your social group, in recognizing family members," [Martha McClintock, PhD] says.

"In thinking about what the normal function might be, we know from the animal work that we need to think broadly in social terms and that the same compound might serve differently in different contexts." * * *
Our basic biological systems sought to protect us from threats, and to promote survival, through coded material transferred naturally and interpreted in feelings by each of us.

Now, on a grand scale, the activities of financial markets are characterized by anonymity, fungibility, separation, and complexity. No one but insiders can use the "smell test" that has preserved our race in other settings.

So, pheromones won't work to guide us through a financial crisis. Indeed, their use would mislead us and mask reality.

Instead, we must rely upon societal values that promote responsible financial behavior -- the age-old, religion-endorsed, standards of honesty and accountability, which I call "living trustworthiness."

Remember what "trust" means in social and personal contexts:
Trust is a relationship of reliance.

A trusted party is presumed to seek to fulfill policies, ethical codes, law and their previous promises.

Trust does not need to involve belief in the good character, vices, or morals of the other party. Persons engaged in a criminal activity usually trust each other to some extent. Also trust does not need to include an action that you and the other party are mutually engaged in.

Trust is a prediction of reliance on an action, based on what a party knows about the other party. Trust is a statement about what is otherwise unknown -- for example, because it is far away, cannot be verified, or is in the future. * * *
Recommitment by Americans to act with "living trustworthiness" is essential. An accompanying reworking of our laws mandating "living trustworthiness" in financial dealings will institutionalize this commitment. Such laws, with provisions for disclosure, notices, source reports, periodic revaluations, investor reviews, administrative regulation, and personal responsibility, must be a societal substitute for the pheromones that our bodies developed for the very same purposes -- feeling trust in others.

Can "living trustworthiness" on a large scale be implemented?

It could, if lawmakers, business leaders, and citizens would each act as the unnamed character in the classic poem by Edgar A. Guest, "It Couldn't Be Done."

Update: 09/22/08 @ 5:30 pm:

Of all the articles I've read about implementing reforms, this one, sent to me by an MAI-rated real estate appraiser, makes the most sense, using a nuts-and-bolts approach taught by experience.

I highly recommend reading "Restoring Confidence: Learning From the S&L Crisis To Address the Subprime Mortgage Problem" (PDF, 8 pages) by Thomas Inserra, a former Resolution Trust Corporation trustee.

Friday, September 19, 2008

PA Ethical Rules for Lawyers as Fiduciaries

On September 4, 2008, the Pennsylvania Supreme Court issued an Order (PDF, 1 page), with Annexed Rule Changes (PDF, 15 pages), amending Rule 221 of the Pennsylvania Rules of Disciplinary Enforcement, and also Rule 1.15 of the Pennsylvania Rules of Professional Conduct, regarding, respectively, "Funds of clients and third persons" and "Safekeeping property", as both affect lawyers acting as fiduciaries.

The Order and the amendments will be published officially in the Pennsylvania Bulletin on September 20, 2008, at 38 Pa.B. 5157, and therefore will take effect on that date.

The amendments introduce new defined terms under those rules, including
Rule 1.15 Funds:

Rule 1.15 Funds are funds which an attorney receives from a client or third person in connection with a client-lawyer relationship, or as an escrow agent, settlement agent or representative payee, or as a Fiduciary, or receives as an agent, having been designated as such by a client or having been so selected as a result of a client-lawyer relationship or the attorney's status as such. * * *
Another defined term is Fiduciary Funds: "Rule 1.15 Funds which an attorney holds as a Fiduciary."

For purposes of these rules, Fiduciary is "a lawyer acting as a personal representative, guardian, conservator, receiver, trustee, agent under a durable power of attorney, or other similar position."

The revised Comment No. 1 to Rule 1.15 now integrates those defined terms and summarizes basic principles applicable to a lawyer who also acts as a Fiduciary:

A lawyer should hold property of others with the care required of a professional fiduciary.

The obligations of a lawyer under this Rule apply when the lawyer has come into possession of property of clients or third persons because the lawyer is acting or has acted as a lawyer in a client-lawyer relationship, or when the lawyer is acting as a Fiduciary, or as an escrow agent, a settlement agent or a representative payee, or as an agent, having been designated as such by a client or having been so selected as a result of a client-lawyer relationship or the lawyer's status as such.

Securities should be appropriately safeguarded.

All property which is the property of clients or third persons, including prospective clients, must be kept separate from the lawyer's business and personal property and, if Rule 1.15 Funds, in one or more Trust Accounts, or, if a Fiduciary entrustment, in an investment or account authorized by applicable law or a governing instrument.

The responsibility for identifying an account as a Trust Account shall be that of the lawyer in whose name the account is held. Whenever a lawyer holds Rule 1.15 Funds, the lawyer must maintain at least two accounts: one in which those funds are held and another in which the lawyer's own funds may be held. [Reparagraphing applied.]
Previously, the Court had published proposals for amendments to these rules of conduct or discipline applicable to attorneys who also hold property as fiduciaries. Such proposals generated impassioned comments, even criticisms, from members of the probate & trust sections of the Pennsylvania Bar Association, the Allegheny County Bar Association, and the Philadelphia Bar Association.

The Court's final rule amendments appear to have addressed those concerns, as reflected in Comment No. 5:
This Rule is not intended to change the substantive law or procedural rules that govern Fiduciary Funds or property with the exception of the specific recordkeeping requirements, segregation of Fiduciary Funds or property, and where Fiduciary Funds are kept in an Eligible Institution, overdraft reporting pursuant to Pa.R.D.E. 221, to the extent that those requirements underscore or supplement the requirements regarding Fiduciary Funds or property.

The goal of the amendments is to require all attorneys to keep appropriate records of entrusted funds, segregate such funds from the attorney's funds, account to those with an interest in the funds, and distribute the funds when due, and to permit the disciplinary system to respond when lawyers fail to comply with these standards.
[Reparagraphing applied.]
Furthermore, Comment No. 6 makes clear that these rule amendments do not apply where a lawyer does not possess or control fiduciary property, or where governing instruments or substantive law provide differently:
This Rule does not require a Fiduciary to liquidate entrusted investments or investments made in accordance with applicable law or a governing instrument or to transfer non-income producing fiduciary account balances to an IOLTA Account.

This Rule does not prohibit a Fiduciary from making an investment in accordance with applicable law or a governing instrument.

Funds which are controlled by a non-lawyer professional co-fiduciary shall not be considered to be Rule 1.15 Funds for the purposes of this Rule. [Reparagraphing applied.]
I thank Daniel B. Evans, Esq., of Philadelphia, PA, for drawing these rule changes to our attention before actual publication.

Thursday, September 18, 2008

"Last Will & Testament" -- The Comic Book

On September 18, 2008, BookSpot Central posted "Comic Book Review - Last Will and Testament" by Jay, which showed just how far from reality the phrase "Last Will and Testament" can stray.

The subject comic book was the joint effort of writer Brad Meltzer and pencilers Adam Kubert (also the cover artist) & Joe Kubert, as published by DC Comics in August 2008 as a "one-shot" issue.

I read Jay's review numerous times, but must confess to continuing confusion over its world of characters, settings, and forces.

[Y]ou still have a story we all understand -- about retrospect, vengeance; to remind us not only of what the heroes fight and would die for, but what they live for.

It’s about a rural couple that would raise an alien that inspires generations, it’s about a family of orphans from Gotham, a graveyard offering by a god touched Princess -- the stories that are the foundation of Super Hero comics.

The players are loud so they can have these quiet moments, but the center of the story illustrates and highlights a story of vengeance, someone who cannot allow for the chance his enemy will die with the world, someone whose pity and pain needs to do it himself. * * *
So why is this comic book named Last Will and Testament?
The term “Last Will and Testament” is a actually an ornamental term, one that employs four words to describe what one of them in fact can and is -- a Will. * * *
This is the reviewer's summation:
Meltzer’s last page is perfect. Dumas tells us that “All human wisdom is summed up in two words: wait and hope” and Meltzer and the Kuberts’ do not leave without the final ingredient.

A Flash makes a promise mindful of the history of his mantle in times of crisis and across generations, and legacies, we are reminded that facing the coming storm are the real, brave and the bold.
After reading this review of a comic book, I realized just how much more comfortable I feel reading a real "Last Will and Testament."

Update: 09/19/08:

Professor Gerry Beyer followed my posting with one of his own, entitled "Last Will and Testament" -- The Comic Book" (09/19/08):

On August 27, 2008, DC Comics released Last Will and Testament by Brad Meltzer.

I was excited at the possibility of estate planning instruction being presented in graphic novel format. I thought that this would be a great method of exposing our young people as well as older folks who enjoy comics to the benefits of estate planning in a "fun" manner.

Unfortunately, the comic is not about estate planning. Here is the publisher's description:
The final battle is quickly approaching. How do the heroes of the DCU prepare for the end? Whom do they approach and say goodbye to before they make the ultimate sacrifice?

Featuring the entire DC Universe, Meltzer takes us deep into the hearts and psyches of our heroes. It's the day before you die. What would you do?
The use of the phrase last will and testament is somewhat confusing. Here is the explanation from Jay, Comic Book Review - Last Will and Testament, Sept. 18, 2008:
The term “Last Will and Testament” is a actually an ornamental term, one that employs four words to describes what one of them in fact can and is -- a Will.
Special thanks to Neil Hendershot, editor of the PA Elder, Estate & Fiduciary Law Blog, for bringing this comic to my attention.

Wednesday, September 17, 2008

New "Ask Medicare" Caregiver Tools

On September 18, 2008, the Centers for Medicare & Medicaid Services will launch its new online service offering "information, tools, and materials to assist caregivers in making informed healthcare decisions."

The new resource was announced in a Press Release issued by CMS on September 15, 2008, entitled "Medicare Launches New Caregiving Initiative" posted by MarketWatch, Yahoo, Reuters, InsuranceNewsNet, and other media services.

The Centers for Medicare & Medicaid Services (CMS), along with representatives from partner organizations, will launch a new online Medicare caregiver initiative providing information, tools and materials to help family caregivers.

The effort will be launched with a Webcast where forum participants will take questions from caregivers and highlight personal stories and experiences. * * *
One year ago, I noted that CMS offered other educational resources for caregivers, including Internet links, satellite broadcasts, and online articles. See: PA EE&F Law Blog posting "CMS Offers Caregiving Presentation" (09/18/07).

The new web-based resource center will be launched in a
webcast on Thursday, September 18, 2008, from noon to 1:00 p.m. EDT. The presentation will feature:
  • Kerry Weems, Acting Administrator, Centers for Medicare & Medicaid Services
  • Susan Reinhard, AARP
  • Greg Link, Administration on Aging
  • Nancy Lewin, Strength for Caring
  • Gail Hunt, National Alliance for Caregiving
Visit http://www.medicare.gov/caregivers to register for the event or to post questions in advance.

The new online service seeks to educate and to support personal caregivers for ill or aged Americans:
More than 44 million Americans (one out of five) provide daily care for a chronically ill or aging loved one, friend, or neighbor that is valued in economic terms at $350 billion annually, according to AARP.

Because caregiving requires a substantial amount of time, energy, and knowledge, Medicare is launching an online initiative that will provide caregivers with help in making healthcare decisions. * * *
The Ask Medicare website also invites anyone to sign up for various CMS web alerts or newsletters, delivered by email.
As you can see by the check mark in the copied text, I signed in, then signed up for the Caregiver eNewsletter. Try it yourself.

Tuesday, September 16, 2008

"National Estate Planning Awareness Week"

On September 12, 2008, the National Association of Estate Planners and Councils and the NAEPC Foundation issued a Press Release entitled "National Estate Planning Awareness Week Declared" announcing "the third full week in October of each calendar year to be National Estate Planning Awareness Week."

Designating such a week for public education about effective estate planning is consistent with the
mission statement of NAEPC, as noted in the Press Release:

The National Association of Estate Planners & Councils and The NAEPC Foundation work together to provide continuing education for our 26,000 local council member professionals from all the disciplines involved in estate planning and to encourage multi-disciplinary cooperation so all the professionals (law, accounting, life insurance professional, trust administration and financial planning) review the plan to be sure that no aspect has been neglected. * * *
A problem recognized by NAEPC is that "[e]state planning is consistently identified as a tool lacking in the majority of American households."

More specifically, the Press Release noted a 2004 survey from Lawyers.com finding that:
58 percent of Americans lack a basic will, generally considered to be the first document in an individual's estate plan.

In addition, 69 percent lack a
living will or medical directive (both documents communicate an individuals wishes for medical life support if that person is terminally ill or permanently unconscious).

Only one-in-five, or 21%, have created a trust as a part of his/her estate plan.

Most Americans cite insufficient assets or not being old enough as their reason for not creating an estate plan. * * *
See also: EE&F Law Blog posting "Surveys Show Most Lack Last Will" (07/03/08).

In response, NAEPC devised an annual Estate Planning Awareness Week, with locally focused Estate Planning Days, for promotion by the hundreds of its affiliated estate planning councils located throughout the United States.

In an effort to combat this often-missed but critically important process, these two organizations have teamed up to encourage their network of 200+ affiliated local estate planning councils to present publicly-focused Estate Planning Day programs between October 20, 2008 and October 26, 2008. * * *
The Press Release urges consumers to "[c]heck with your local estate planning council to see if it will be hosting such a program this year. * * *

Searching NAEPC's website reveals these fourteen regional estate planning councils in Pennsylvania:
There are other local, independent estate planning councils in Pennsylvania not affiliated with NAEPC that perform much the same mission among member professionals and in their communities.

All estate planning councils in Pennsylvania -- whether or not affiliated with NAEPC -- have been listed in the sidebar of this Blog since its inception.

NAEPC's approach for the initial, annual National Estate Planning Awareness Week, including a locally-designated Estate Planning Day, is explained in its planning materials.

We provide materials for use by our 200+ local estate planning councils in holding an informative Estate Planning Day program for their community.

We anticipate many more estate planning councils joining the ranks of the councils, which annually hold such a program, when we all celebrate Estate Planning Awareness Week on October 20 through 26, 2008.

We sincerely hope that the public will become aware of estate planning and, before it is too late, seek guidance from professionals who are educated, licensed, experienced and credentialed.

Look for such a program in your area, or, better yet, as a professional, plan one!