Wednesday, October 28, 2015

Equitable Remedies and Judicial Activism: A Dangerous Combination

Legal remedies are judicial remedies that parties have by right as set out in law and statutes. These remedies are based on the law and statutes.  A judge simply enforces the right as established by law.

In contrast to legal remedies, equitable remedies are remedies, usually non-monetary, which a court fashions when the judge believes existing legal remedies do not adequately redress the injury or situation. Equitable remedies were developed at the time of King Henry VII in order to provide more flexible responses to changing social conditions than possible in existing laws and statutes. Equitable remedies are based on concepts of fairness and equity as determined by the judge.  Such a determination oftentimes is largely dependent on the judge's personal beliefs and attitudes.

The traditional role of a court is to interpret and enforce the Constitution and valid laws as written. The court was not to rewrite the law or impose the court's personal viewpoints regarding the law, but to take the law as written and apply it to the case as long as the law was not unconstitutional.  Federal and state legislatures created the laws; courts interpreted and enforced them. Judicial activism is the belief that judges can and should creatively reinterpret the Constitution and laws to meet the vital needs of society when the federal and state branches of government and legislatures fail to do so.  Again, this is based on the personal beliefs and viewpoints of the court as to what the vital needs of society are and how they should be met. Judicial rulings in cases of judicial activism are oftentimes based on the personal or political considerations of the judge rather than on existing law.

Unfortunately, the combination of a court having the right to fashion an equitable remedy and judicial activism can prove to be a potentially dangerous combination, especially in estate planning. A decedent does not want a judge to substitute what the judge personally believes is a fair living trust or will. For example, a decedent may have 4 adult children and leave his or her assets to the children equally; however, the trust provides that 3 of the children receive their shares immediately while the share of the 4th child remains in trust for the child's benefit.  A judge may believe it is not "fair" that the 3 children receive their shares outright while the 4th child does not. Fortunately, there is a legal principle that the intent of the decedent as expressed in the complete trust agreement or will must be followed.  Nonetheless, the combination of equitable remedies and judicial activism opens the door to judges inserting their personal beliefs and considerations into a myriad of cases.



Monday, October 12, 2015

Estate Planning Mistakes to Avoid

As an estate planning attorney, I often find it of interest to read about a celebrity’s estate plan.  Celebrity estate plans can provide both good and poor examples of what should and should not be done by all of us.  Recently, I came across an interesting article entitled “7 Estate Planning Lessons from Celebrities” which brought focus to this very topic.  I would recommend reading it as the lessons provided are applicable to those with significantly less wealth than the celebrity examples found in the article.  To bring focus to just two of the seven lessons provided in the article, I would like to focus on the estate plans of Philip Seymour Hoffman and Heath Ledger.  

Philip Seymour Hoffman didn’t want his children to become “trust-fund kids.”  However, it is reasonable to conclude that Hoffman had a desire that his children’s reasonable needs be met with his wealth.  Against the advice of his attorneys, Hoffman’s estate plan was to leave his entire estate to his long-time girlfriend Mimi O’Donnell.  It was Hoffman and O’Donnell’s mutual understanding that she would use his wealth to provide financially for the children, in her absolute discretion.  This plan had two significant flaws.  First, because Hoffman and O’Donnell were not married, the transfer of Hoffman’s estate to O’Donnell was taxable for estate tax purposes.  Second, without proper instructions and guidelines as would typically be found in a trust agreement, there is no guarantee that O’Donnell will use Hoffman’s wealth in a manner that Hoffman would have approved of in relation to the upbringing of his children.  Lesson to be learned from Hoffman’s estate plan is to not leave your estate to one person without proper guidelines and instruction in a legally enforceable document like a trust.

Although quite young at the time of his death, the 28 year-old actor Heath Ledger had a will when he died in 2008.  Apparently, Ledger had drafted his will previous to the birth of Ledger’s daughter leaving his entire estate to his parents and sisters.  Fortunately, Ledger’s family did the right thing by allowing the entire estate to pass to his daughter.  The result of Ledger not taking the time to update his will after the birth of his child could have been ugly with the worst case scenario of Ledger’s daughter receiving nothing from her father’s estate.  The lesson to be learned from Ledger’s estate is that as certain life events occur, a review and update of your estate plan should take place.