Articles Posted in Trusts & Estates

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The Ninth Circuit affirmed the district court's holding that the general partnership interests at issue qualified as securities under federal law and that defendant violated federal securities law by selling unregistered securities and defrauding his investors. In this case, the general partnership interests at issue were stripped of the hallmarks of a general partnership and marketed as passive investments. The panel held that, in light of defendant's death during the pendency of the appeal and the executor replaced as the name party, as well as intervening Supreme Court precedent, several aspects of the district court's judgment require vacatur and remand. Therefore, the panel vacated the civil penalty order and the disgorgement order, remanding for further proceedings. View "USSEC v. Schooler" on Justia Law

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The Ninth Circuit certified the following questions of state law to the California Supreme Court: California Probate Code 249.5 provides that, for probate purposes, "a child of the decedent conceived and born after the death of the decedent shall be deemed to have been born in the lifetime of the decedent if the child or his or her representative proves by clear and convincing evidence that," inter alia, "[t]he decedent, in writing, specifies that his or her genetic material shall be used for the posthumous conception of a child of the decedent." Cal. Prob. Code 249.5(a). Does a writing that specifies that some genetic material of the decedent shall be so used satisfy 249.5(a), regardless whether the genetic material specified in the putative writing includes the genetic material actually used to conceive the claimant child? Or must the genetic material identified in the putative writing include the genetic material actually used to conceive the claimant child? View "Delzer v. Berryhill" on Justia Law

Posted in: Trusts & Estates

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The Ninth Circuit vacated the district court's affirmance of the bankruptcy court's order enforcing a stipulated agreement in adversary proceedings seeking to debar an attorney from submitting claims to asbestos trusts. The trusts were created through the Chapter 11 bankruptcy proceedings of entities exposed to significant asbestos liability. In Golden v. California Emergency Physicians Medical Group, 782 F.3d 1083 (9th Cir. 2015), the panel held that assessing the validity of a settlement agreement is a question of state contract law. In this case, the district court never addressed whether federal law governed this case, and it was unclear whether the district court was even aware that the trusts contended that federal law controlled its decision. Furthermore, the district court also did not apply Golden to the settlement at issue. Accordingly, the court remanded so that the district court can decide whether federal or state law governs (including whether the federal law argument has been waived), and what impact, if any, Golden has on this case. View "Mandelbrot v. J.T. Thorpe Settlement Trust" on Justia Law

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In 1997, Michael Harris was convicted of eight federal criminal counts related to theft from an employee benefit plan. He was sentenced to 30 months in prison and ordered to pay $646,000 in restitution. He paid only a small fraction of that amount. The government later learned that Harris was a beneficiary of two irrevocable, discretionary trusts established by his parents for his support. In 2015, the government applied for a writ of continuing garnishment for any property distributed to Harris from the trusts. The trustees opposed the application on the ground that Harris had disclaimed his interest in the trusts, with the exception of several checking and investment accounts. The district court granted the writ and ordered the trustees to pay to the United States all current and future amounts distributed to Harris under the trusts. After review, the Ninth Circuit concluded that Harris’s interest in the trusts qualified as property under the federal debt collection procedure that applied in this case. “The government is not attempting to compel distributions from the trusts. However, any current or future distributions from the trusts to Harris shall be subject to the continuing writ of garnishment, until the restitution judgment is satisfied.” View "United States v. Harris" on Justia Law

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The SBA guaranteed a loan between a private bank and Michael Bensal's company, BCI. The private bank filed suit against BCI as the borrower and Bensal as a personal guarantor after BCI defaulted on the loan. The private bank recovered a default judgment and assigned that judgment to the SBA. Bensal later received an inheritance from his father's trust that he did not accept and, instead, disclaimed. Bensal's disclaimer of the inheritance legally passed his trust share to his two children and prevented creditors from accessing his trust share under California law. The SBA filed suit seeking to satisfy the default judgment. The court held that the Fair Debt Collection Practices Act (FDCPA), 28 U.S.C. 3301-3308, displaces California's disclaimer law. In this case, the court concluded that Bensal's disclaimer constitutes a transfer of property under the FDCPA, and California disclaimer law did not operate to prevent the SBA from reaching Bensal's trust share. The court also concluded that the portion of the default judgment based on the second loan, which was guaranteed by the SBA, was a debt within the meaning of the FDCPA. Accordingly, the court affirmed the judgment. View "SBA v. Bensal" on Justia Law

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Plaintiffs filed suit against USB and Recon challenging the complete foreclosure sale of their residential property. Plaintiffs sought a declaratory judgment that the trustee’s sale was invalid under the Oregon Trust Deed Act (OTDA), ORS 86.770(1), because several assignments of the Trust Deed that took place prior to the 2010 assignment to USB were never recorded. The district court granted defendants' motion to dismiss the Amended Complaint, holding that ORS 86.770(1) barred plaintiffs' claims. In this case, the only defect the foreclosure process identified by plaintiffs has to do with the content of the notice. The defect is the incorrect listing of the beneficiary in the notice they received. However, plaintiffs do not dispute that: (1) they were in default; (2) they were served in the manner required by ORS 86.740 (requiring, at a minimum, service by certified mail 120 days before the sale) and ORS 86.750 (requiring personal service on grantors who occupy the property 120 days before the sale); (3) they had no financial ability to cure the default and redeem the property; (4) they took no action to challenge the sale prior to it becoming final; and (5) they only challenged the foreclosure sale many months after the foreclosure sale was completed. Therefore, plaintiffs' post-sale claims are barred as their property interests have been terminated and foreclosed pursuant to ORS 86.770(1). Accordingly, the court affirmed the judgment. View "Woods v. U.S. Bank" on Justia Law

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At issue in this case was the extent to which a bankruptcy estate may reach a beneficiary’s interest in a spendthrift trust that consists entirely of payments from principal under the Probate Code of the state of California. The beneficiary claimed that Cal. Prob. Code 15306.5 caps the bankruptcy estate’s access at twenty-five percent of his trust interest. The bankruptcy trustee sought to reach more than twenty-five percent of the beneficiary’s interest under Cal. Prob. Code 15301(b) and 15307, which it argued was not subject to the section 15306.5 cap. The bankruptcy court ruled in favor of the beneficiary, concluding that section 15306.5 establishes an “absolute maximum cap on what is recoverable by a judgment creditor at 25 percent.” The Ninth Circuit Bankruptcy Appellate Panel (BAP) affirmed. To resolve the issue as to whether a bankruptcy estate may access more than twenty-five percent of a beneficiary’s interest in a spendthrift trust such as the one in this case under other sections of the Probate Code, the Ninth Circuit requested that the California Supreme Court exercise its discretion to accept a certified question addressing the issue. View "Frealy v. Reynolds" on Justia Law

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Petitioners challenged the Commissioner's disallowance of a $30 million deduction on the Estate's tax return for a lawsuit pending at the time of Gertrude Saunders' death (the Stonehill Claim). The court concluded that the Stonehill Claim was disputed at the date of the decedent's death, and its estimated value as of that date was not ascertainable with reasonable certainty. Therefore, the tax court properly disallowed the Estate's deduction, but correctly allowed a deduction in the amount paid to settle the Stonehill Claim after the decedent's death. Accordingly, the court affirmed the judgment of the district court. View "Estate of Saunders v. CIR" on Justia Law

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This appeal stemmed from the sale of the Chronicle Publishing Company. After the Martin Family Trusts formed a tiered partnership structure, the Martin heirs commenced a series of transactions designed to create losses that would offset the taxable gain realized from the Chronicle Publishing sale. On appeal, taxpayers argued that the 2000-A Final Partnership Administrative Adjustment (FPAA) was time-barred by the restrictive language in the extension agreements. The court agreed with the district court that the extension agreements between the IRS and First Step encompassed adjustments made in the 2000-A FPAA that were directly attributable to partnership flow-through items of First Ship; the FPAA to 2000-A extended the limitations period for assessing tax beyond the extension agreements and through the present litigation; however, the agreements did not extend to adjustments in the 2000-A FPAA that were not directly attributable to First Ship; and because the district court held more broadly that "the extension agreements encompass the adjustments made by the IRS in the FPAA issued to 2000-A," the court remanded to the district court to make a determination of which adjustments in the 2000-A FPAA were directly attributable to partnership flow-through items of First Ship. The court affirmed in part and reversed in part. View "Candyce Martin 1999 Irrevocable Trust v. United States" on Justia Law

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Bill Graham, a successful promoter of rock and roll concerts, died testate and his will created individual trusts for his sons, Alexander and David. Nicholas Clainos was the trustee of the trusts and the executor of the estate and Richard Greene, through his firm, provided Clainos legal counsel. On appeal, Alexander and David challenged the district court's disposition of a motion to dismiss, a special motion to strike under California's anti-SLAPP statute, Cal. Proc. Code 425.16(b)(1), and related attorney's fees awards. The court affirmed the disposition of the motion to strike in part and reversed in part. The court concluded that striking plaintiffs' conversion and unjust enrichment claims against Clainos was erroneous. The court also concluded that striking plaintiffs' breach of fiduciary duty claim against Clainos was erroneous. The court further concluded that plaintiffs sufficiently alleged claims for conversion, copyright infringement, and declaratory relief against the BGA Defendants and that dismissal of those claims was erroneous. In regards to attorney's fees, the court vacated the post-motion-to-strike fee award to Clainos, as well as the post-motion-to-dismiss fee award to the BGA Defendants. The court affirmed in all other respects. View "Graham-Sult v. Clainos" on Justia Law