University and College Foundation Legal Counsel. Life After Death. Increasing Revenue from Matured Bequests

Transcription

1 University and College Foundation Legal Counsel Life After Death Increasing Revenue from Matured Bequests October 6, 2016 San Diego, CA Presenter: Kevin Coventon, Partner / Holland & Knight

2 Kevin Coventon ~ Presenter Holland & Knight Kevin Coventon leads a national team of H&K attorneys, fiduciary accountants, and probate paralegals that represent large non-profit organizations, including medical centers and universities, with respect to maximizing the value of their matured bequests. Leveraging off of his CPA and legal background, Mr. Coventon also represents banks as trustees and individual executors. Mr. Coventon has significant trial experience, both at the State and Federal Court level. He has also presented numerous oral arguments before the California Court of Appeals and the Federal Ninth Circuit Court of Appeals. H&K is an international law firm with 1,200 attorneys. Mr. Coventon is a partner and an elected member of the Director's Committee, the board that carries out law firm strategy and executive decisions. Mr. Coventon received his B.S. cum laude in Accounting from Pepperdine University in He earned his J.D. from Rutgers Law School in Prior to attending law school, Mr. Coventon worked for three years as an audit and tax specialist for PricewaterhouseCoopers. He is a member of both the California and Georgia Bars. Mr. Coventon resides and plays golf in Fayetteville, GA, with his wife Kelly and their two children, Cade & Paris.

3 Presenter Contact Information Kevin Coventon Holland & Knight Partner Trust & Estate Administration 1180 West Peachtree Street, Suite 1800 Atlanta GA

4 Matured Bequests Focus 1: Use Legal Resources to address all date-of-death forward activity Focus 2: Presentation is not about finding new bequests. It s about maximizing the value of known bequests. Focus 3: Practical ways to increase revenue now. Important Distinction Living Donors = Fundraising, Major Gifts, Planned Giving

5 Legal Application: The Probate Process Probate Court Terms of Art Estate = Executor Trust = Trustee PR = Personal Representative DOD = Date-of-Death University = Colleges / Universities / Foundations Donor Intent = Drives Every Decision PR offers original Will to the Probate Court in County where decedent was domiciled Example / NY: 22 NYCRR PR provides Notice of Probate to all beneficiaries Example / CA: Probate Code Court grants PR Powers of Appointment DOD Inventory Pay Debts / Claims against the Estate Pay Expenses / PR fees Accounting Distributions PR is Discharged

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7 Court Approval Powers of Appointment Close Relative as PR 1st & Last Experience as PR Protect Family First University Pays Fees / Taxes University Receives Money Last Key: By doing nothing, the University will receive distributions. However: (1) You will never know if it is the right amount; and (2) The distributions will be years late and net of all fees and cost.

8 LEGAL ISSUES / CHECKLIST Goal: Increase Annual Bequest Revenue (1) Determine The Value of Each Bequest; (2) Put a Plan in Place to Accelerate Distributions; (3) Stop Asset Depletion; and (4) Use Current Bequests as a Tool to Cultivate Future Giving ( 2GP ).

9 The $4 Million Rule In House Administration / Outside Counsel

10 The Legal Process Starts / Gun Goes The Date-of-Death A definitive point in time!

11 Attorney Advisory: Red Flags Notice Delay Six Month Standard No Inventory / Accounting Six Month Standard Partial Production of Gift Instrument Example: Fletcher v. Fletcher, 253 Va. 30 (1997); leading case on a beneficiary s right to the complete Trust Agreement PR is Non-Responsive Excessive Fees PR + Attorney < 6% Gross Estate Distribution delays Federal Estate Tax Return

12 10% Rule: Excessive Fees, Fraud, Gross Mistake It s not just stalled probates / delayed distributions... 10% of the time, PRs, kids and others, are stealing the University s money!

13 Example: Excessive PR Fees + Stock Loss University = 100% Beneficiary

14 Case Law Excessive Fees Florida Example A surcharge is the amount that a court may charge a fiduciary that has breached its duty. Reed v. Long, 111 So. 3d 237, 238 (Fla. 4th DCA 2013) (citing Merkle v. Guardianship of Jacoby, 862 So. 2d 906, 907 (Fla. 2d DCA 2003)). The Fifth District also wrote in Reed that "[t]he purpose of such an award is to make the estate whole when the fiduciary's actions cause loss or damage to the estate." Id. at 239 (citations omitted). Moreover, in the context of trust proceedings, "[a] surcharge action seeks to impose personal liability on a fiduciary for breach of trust through either intentional or negligent conduct." Miller v. Miller, 89 So. 3d 962, 962 n.1 (Fla. 5th DCA 2012). It is clear under the case law that a surcharge proceeding can be pursued when a fiduciary pays excessive fees to himself, herself, or agents of the fiduciary. In re Estate of Winston, 610 So. 2d 1323, 1325 (Fla. 4th DCA 1992).

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16 Example: Stale / Non Productive Assets Accelerate Liquidation!

17 Federal Estate Tax Return (Form 706) Practical Legal Applications How tax forms are used by attorneys Interpreting the Schedule O

18 Federal Form 706 Estate Tax Exemption See: Internal Revenue Code 2503 Year Top Estate Tax Rate Exemption Amount % $675, % 3,000, No estate tax Option to Pay % 5,000, % 5,120, % 5,250, % 5,340, % 5,430, % 5,450,000

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22 2nd Generation Prospects 2GP Strategy: Leverage off current bequests to produce Fundraising / Major Gift / Planned Giving prospects. Productive Prospects Have Two Key Elements: Reason to Give / Known Connect to the Organization Capacity to Give

23 2GPs: University or Individual receives > $100, Thank family for the gift; 2. Determine the story behind the gift; 3. Describe how the gift was used; and 4. Discuss continuing the parent s legacy of giving to the organization.

24 T&E Litigation Trends: Lack of Capacity & Undue Influence Case Law Example Massachusetts Adler v. Adler, Appeals Court No. 10-P-1760 (June 7, 2013) Testator with moderate / severe Alzheimer s; new Will favoring son, excluding daughter. Only Pick Fights You Can Win: 1. Risk 2. % Chance of Success 3. Projected Fees & Costs

25 Undue Influence / Lack of Capacity # of Challenges is on The Rise

26 Free Legal Resources State Attorney General State AG s have ultimate jurisdiction over non-profits. Will advocate on your behalf. Most Aggressive AG s: CA, NJ, NY and PA

27 Uniform Probate Code (UPC)... as Relevant to Lawyers (a set of laws designed to streamline probate) Free Court Support Adopted in the Following States: Alaska Maine New Mexico Arizona Michigan North Dakota Colorado Minnesota South Carolina Florida Montana South Dakota Hawaii Nebraska Utah Idaho Very Close: Texas & Wisconsin

28 Show Me The Money! (Actions you can take today) Centralize Trust & Estate Files Ask for Preliminary Distributions Partner with Outside Counsel 2GPs: Collaborate with Internal Stakeholders Life Beneficiary Trusts Partial Terminating Distributions

29 The Future of Bequest Revenue All Positive! Baby Boomers: Those born on the front edge are now 69 years old.

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