1

INSIDE FRONT COVER(BLANK)

n Chairman’s Corner 2

n Standing To Sue Under The Georgia Wrongful Death Act 3by Cal Callier 7

n Asset Protection Planning 10by James C. Morton

n Transfer Taxes After The Economic Growth and Tax Relief Reconciliation Act of 2001 13

by David F. Golden & Timothy B. Phillips

n Mid Year Meeting Luncheon 18

n When I Die... 19by Martin N. Ghen

Susan Howick

Betty Simms

S. Lester Tate, IIIChairMark F. DehlerChair ElectW. Wright GammonSecretary/TreasurerSarah B. AkinsImmediate Past Chair

S. Lester Tate, IIIMark F. DehlerW. Wright GammonJim PannellCatherine H. HelmsJefferson C. CallierRobin ClarkWilliam S. GoodmanVirgil AdamsDennis CatheyJames I. RobertsSusan HowickStephen M. OzcomertLaura AustinRobert W. Chasteen, Jr.Kellie R. CaseyMyles E. EastwoodThomas Burnside, Jr.Clifton G. Spencer

William L. Lundy, Jr.Albert Fendig, Jr.Paul M. HawkinsJohn C. Bell, Jr.John T. Laney, IIIRobert P. WilsonThomas WM. MaloneWilliam F. Underwood, Jr.Paul D, HermannRudolph PattersonJames B. PilcherJohn E. JamesVerlyn C. BakerPaul W. Painter, Jr.Joel O. Wooten, Jr.J. Sherrod TaylorJohn W. TimmonsJohn M. HyattJames H. Webb, Jr.Judge Bonnie OliverJoe A. Weeks

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Vol. VI Summer 2002 No. 1

Calendar Call is the official publication of the General Practice and Trial Section ofthe State of Georgia. Statements and opinions expressed in the editorials and arti-cles are not necessarily those of the Section or the Bar. Calendar Call welcomes thesubmission of articles on topics of interest to the Section. Submissions should bedouble-spaced, typewritten and on letter-size paper and addressed to Susan L.Howick, Macey, Wilensky, Cohen, Wittner & Kessler, LLP, Marquis Two Tower,Suite 600, 285 Peachtree Center Avenue, NE, Atlanta, Georgia 30303. Published byAppleby & Associates, Austell, Georgia.

GENERAL PRACTICE AND TRIAL SECTION STATE BAR OF GEORGIA

“Georgia’s Largest Law Firm”

EDITOR

ARTICLESEXECUTIVE DIRECTOR

2002 0FFICERS

2002 BOARD

2002 TRUSTEES

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In his memoir “Vernon CanRead,” lawyer and civil rightsleader Vernon Jordan tells aboutgrowing up in Atlanta. His motherwas a caterer and provided themeal for the monthly Lawyers’Club dinner. Vernon often workedas a waiter at these events and tellsof how watching these men, whomhe perceived as successful andpowerful, mingle and discuss theissues of the day inspired him towant to be a lawyer. Two thingsstruck me about his story.

First, it is doubtful that any of

this white male group of lawyerseven noticed the young AfricanAmerican who “neglected” hisduties in the kitchen just to heartheir after dinner speakers. And ifthey did, certainly none took himunder their wing or guided oradvised him. They were, in a man-ner of speaking, role models, butdistant and uninvolved ones.

Second, the allure of the law wasreal to Vernon Jordan, even at thisyoung age. He steadfastly movedforward toward becoming a lawyerin an era when most bright, young,African Americans were steered toeither the ministry or teachinginstead of law. Consciously orunconsciously he correctly realizedthat the “law” had the power toeffect real change in people’s lives.What is more, Jordan realized thisfact long before Brown v. Board ofEducation or the other decisionsthat ended de jure desegregation.

I wonder if we as lawyers todayfully comprehend these truths.Wherever we go and whatever wedo someone is watching, maybeeven using us as a role model. Andwhile being a role model is good,there is often much more that wecould do with a small investmentof time or a kind word. From thebeginning of our country, lawyers

have occupied a place of leader-ship, whether arguing cases thatchanged the course of history orperforming such non-legal tasks asauthoring the Star SpangledBanner or the Gettysburg Address.We should actively be involved inpassing this tradition to the nextgeneration.

I also wonder whether in themaelstrom of every day events weforget what a powerful thing thelaw is. It has the power to takeproperty, to determine who raiseschildren, to incarcerate, to compen-sate and to protect citizens, evenfrom their own government. All ofour cases big, small and mediumsized, have real effects on individ-ual lives. It doesn’t have to be anearth shattering decision to be a lifeshattering event for one of ourclients.

Young Vernon Jordan realizedthese things. Later, he was part ofthe legal team that desegregatedthe University of Georgia. Heknew as a lawyer he could do a lotmore than just read. You can too!

CHAIRMAN’S CORNER By S. Lester Tate, IIISection Chair

When the Georgia Supreme Courtwas first formed, it was only autho-rized to exist for a few years. Thethinking was that in a short time alldisputed questions of law would beresolved and the Supreme Courtwould no longer be necessary. I amreminded of this as we approach thetopic of standing to sue under theGeorgia Wrongful Death Act. It isalways amazing how concepts andideas that seem so simple andstraightforward on paper become socomplex when applied to the realworld circumstances of livinghuman beings. So it is with the Geor-gia Wrongful Death Act. Firstenacted in 1850, the Act has under-gone many major revisions and thelegislature still finds need to tinkerwith the statute every few years. Thecourts still grapple with conflictingand unresolved issues.

A principal theme and recurringproblem in Georgia’s wrongful deathlaw is that the statutory scheme isfilled with inherent conflicts of inter-est. Children are pitted against par-ents; parents are pitted against eachother; administrators are pittedagainst survivors/heirs; aunts anduncles are pitted against nieces andnephews, and so on. Often one per-son wears multiple hats as plaintiffand has the delicate task of servingmultiple masters. The fracturednature of the various causes ofaction, i.e. wrongful death, estateclaims, loss of services, loss of con-sortium, medical and funeral

expenses, etc. and the differing per-sons who may bring them are rootcauses of much of the litigation. AsJudge McMurray so aptly stated indescribing our statutory scheme:“Though this be madness, yet there ismethod in’t.” 1

Or is there? It is very easy to imag-ine that there would be a lot less liti-gation in this area if the cause ofaction were vested in the administra-tor or executor of the estate as our sis-ter states of Florida, Alabama, SouthCarolina and North Carolina havedone.

Because wrongful death claims arein derogation of the common lawand are strictly construed, there aremany cases on the books where aharsh injustice occurred because theproper plaintiff(s) failed to sue. Insome of those cases, it was clear whothe proper plaintiff should have beenand that person simply failed to assertthe action. In other cases, the personwith standing was not so clear. Onewould think that most questionswould have been answered once andfor all after so many years of litigation.However, many questions remainunanswered.

The purpose of this article is toorganize existing case law into aframework that can serve as thebeginning of more extensive research.Many endnotes are included for thispurpose.

Pleading CapacityOCGA § 9-11-9 provides:

“(a) Capacity. It is not necessary to

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Standing To Sue Under The Georgia Wrongful Death Actby Cal Callier

Taylor, Harp & CallierColumbus, Georgia

Mr. Callier is a partner in Taylor,Harp & Callier in Columbus, Georgia.The firm practices exclusively in thearea of plaintiff’s personal injury withan emphasis on wrongful death, FELA,medical malpractice, brain and spinalcord injury, and other serious personalinjury claims. Mr. Callier is a memberof the Georgia Trial Lawyers Associa-tion and the Association of TrialLawyers of America. He is a Fellow ofthe Lawyers Foundation of Georgia.He received his B.A. and J.D. degreeswith Honors from Mercer Universityand was an Editor of the Mercer LawReview. Prior to joining the firm, hewas a clerk to Honorable Justice HardyGregory, Jr., Georgia Supreme Court.

This article is an adaptation, reprinted with per-mission, from the GTLA Verdict.

aver the capacity of a party to bringor defend an action, [or] the authorityof a party to bring or defend anaction in a representative capac-ity…When a party desires to raise anissue as to the legal existence of anyparty, the capacity of any party tobring or defend an action, or theauthority of a party to bring ordefend an action in a representativecapacity, he shall do so by specificnegative averment.”

A challenge to capacity is timely ifraised at any time before judgment.2

The goal, of course, is to choose theproper party [ies] at the outset so thatwe will not have to concern ourselveswith section 9-11-9, waiver, substitu-tion, adding parties, relation back,etc. These topics are outside thescope of this article, although a post-verdict amendment can sometimessave the cause of action.3

Pleadings often describe the plain-tiff with different “tags” stuck on theend. For example: “individually,” “assurviving spouse of,” “as parent of,”“as child of,” etc. These tags seem tobe merely another way of saying thatthe plaintiff sues “individually,”which of necessity encompasses therelation as parent, spouse, or child ofthe deceased. Nevertheless, it is prob-ably wise to follow this practice andsue in the name of the plaintiff “indi-vidually,” and then describe the rela-tionship to the deceased (“as surviv-ing spouse of,” etc.).

Further, the plaintiff can sue as therepresentative of another. If theplaintiff sues as representative, hedoes so because he has fulfilled somelegal requirement to gain the right torepresent the other’s interest. Histitle, as representative, will be what-ever the law says it is (i.e. adminis-trator, executor, guardian, etc.) andthis should be clearly set forth on thepleadings.

Standing as a Substantive MatterOur courts seem to treat the subject

of “standing” as a substantive matterrather than a procedural matter.4 Inthe case of Record Truck Line, Inc. v.

Harrison, Administrator, 109 Ga. App.653 (137 SE2d 65) (1964), the plaintiff,as administrator, brought a wrongfuldeath action in Georgia for a deathoccurring in Alabama. The law ofAlabama governed all substantivematter (lex loci delicti). UnderAlabama law, the cause of actionvested in the personal representative.The plaintiff lost in Record Truck Linebecause he failed to plead and provethe law of Alabama authorizing theaction to be brought by the personalrepresentative.

The lesson from Record Truck Line isthat a suit in Georgia applying for-eign substantive law will succeed ifbrought by the plaintiff in the “capac-ity” established by the foreign law, ifthe foreign law is properly plead andproved. (See OCGA § 9-11-43). Donot file a lex loci delicti case solely inthe “capacity” established by Georgialaw (if it is different than the foreignlaw) or you may end up trying toconvince our appellate courts that“capacity” is a matter of procedure.To stay out of trouble, the safestcourse is to file suit in both the capac-ity required by Georgia law and bythe foreign law. This seems the surestway to avoid any conflict of lawissues.

Georgia’s two year statute of limi-tations is the public policy of thisState and must be complied with.5

STANDING TO SUE UNDERTHE GEORGIA WRONGFUL

DEATH ACTThe Wrongful Death Act (Title 51,

Ch. 4) tells us that the damages underthe Act are confined to “the full valueof the life.” Other damages that maybe recoverable (pain and suffering,property damage, etc.) are not wrong-ful death damages but stem fromsome other authority, such as the“survival” statute (OCGA § 9-2-41).6

The following principles governstanding in Georgia wrongful deathcases:

1. If a person dies and leaves aspouse or child surviving, OCGA §51-4-2 governs.

2. If a person dies and leaves nospouse or child surviving, but one orboth parents is alive, OCGA § 19-7-1governs.

3. If a person dies and leaves nospouse, child, or parent surviving,OCGA § 51-4-5 governs.

4. Always look to the time of deathand determine which persons havestanding at that time and underwhich statute the standing vests. Thecases seem to confirm the principlethat once standing vests under a par-ticular statute at the time of death,you will never change statutes. If theplaintiff dies, standing will survive(a) first to another named personunder the same statute, then (b) to thepersonal representative of a personnamed under the same statute byoperation of section 9-2-41.

5. Grandparents, grandchildren,siblings, aunts, uncles, nephews,nieces, and cousins never have stand-ing, unless in a representative capac-ity for one of the statutory plaintiffs.

OCGA § 51-4-2Prior to 1985 OCGA §§ 51-4-2 and

51-4-3 addressed the rights of benefi-ciaries in wrongful death claims. Sec-tion 51-4-3 dealt with the rights ofbeneficiaries of deceased women,while section 51-4-2 dealt with bene-ficiaries of deceased men. Beneficia-ries of deceased women had broadrights. Beneficiaries of deceased menhad restrictive rights. The GeorgiaSupreme Court in Tolbert v. Murrell,253 Ga. 566 (322 SE2d 487) (1984)held the disparity unconstitutionaland declared that all beneficiarieswould have equally broad rightswhether the deceased was a man or awoman. The legislature defied theGeorgia Supreme Court and enacteda version of OCGA § 51-4-2 in 1985which imposed on all beneficiariesthe more restrictive rights. Eventhough Tolbert was nullified by the1985 amendment, Tolbert is an impor-tant case in order to appreciate thelaw regarding wrongful death stand-ing to sue.

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Actions by Surviving SpousesUnder OCGA § 51-4-2

If a deceased is survived by aspouse or children, OCGA § 51-4-2governs standing. Section 51-4-2 (a)provides as follows:

“(a) The surviving spouse or, ifthere is no surviving spouse, a childor children, either minor or sui juris,may recover for the homicide of thespouse or parent the full value of thelife of the decedent, as shown by theevidence.”

A surviving spouse, if there is one,is the sole person who may bring awrongful death claim.7 Survivingspouse includes common-lawspouse.8 Surviving spouse meansthat person to whom the decedent ismarried at the time of death.9 A sur-viving spouse does not have to bemarried to the deceased spouse at thetime the injuries are inflicted; butonly at the time of death, since that isthe date the cause of action accrues.1 0

Separation by the surviving spouseand the deceased spouse beforedeath is no defense and the right ofaction is not cut off by remarriage.1 1

A surviving spouse has sole author-ity to settle the claim; and settlementby the surviving spouse, even iffraudulent, is binding on all thewrongful death beneficiaries, whothen have no recourse against thetortfeasor.1 2 OCGA § 51-4-2 says thata settlement by a surviving spouse isvalid even without approval of theguardian or representative of thechildren and without any order ofcourt. If the surviving spouse fails orrefuses to bring the wrongful deathclaim, the remaining wrongful deathbeneficiaries have no legal right to doso.1 3 Naming additional beneficiariesas plaintiffs, along with the survivingspouse, is prohibited.1 4 Minor bene-ficiaries cannot appear on the plead-ings with the surviving spouse evenif the surviving spouse purports toact “as next friend” of the minors.1 5 Abeneficiary cannot intervene in anaction brought by the survivingspouse.1 6 A beneficiary cannot com-

pel the surviving spouse to join theaction as an “involuntary plaintiff” inorder to perfect standing.1 7 A surviv-ing spouse cannot relinquish,renounce, or assign the right to bringthe claim to any other person.1 8 Thesurviving spouse holds and dis-burses the proceeds as set forth insection 51-4-2(d). The recoverypasses as set forth in the statute evenif this is antagonistic to thedeceased’s will.1 9 The spouse owes aduty to the other beneficiaries andcan be held liable to them for breachof duty as a representative.2 0

In a claim for the wrongful death ofJohn Doe, if the plaintiff survivingspouse (Jane) dies, the cause of actionsurvives under section 51-4-2 toJohn’s children. The cause of actionsurvives under section 51-4-2 toJane’s personal representative only ifJohn left no surviving children.2 1

Presumably, Jane’s personal repre-sentative would have preference overthe personal representative of anyJohn’s children who died after John.

If John dies leaving a survivingspouse or child, section 51-4-2 is fixedat the time of death as the statutefrom which the plaintiff derivesauthority to sue. The cause of actionpasses to the surviving spouse, sur-viving children, or their personal rep-resentatives under section 51-4-2.Section 19-7-1 never comes into playunless John left no surviving spouseor child. Likewise, section 51-4-5never comes into play unless Johnleft no surviving spouse, child or par-ent.

Surviving children do not havestanding and rights vis-a-vis the tort-feasor while the surviving spouse isalive. However, the spouse owes aduty to the children and can be heldliable to them for breach of duty as arepresentative. Therefore, the lawyerfor the surviving spouse has duties tothe children, or other statutory bene-ficiaries, and must take great care toprotect the interests of all beneficia-ries both in prosecuting the claim andin disbursing the proceeds. In Home

Insurance Company v. Wynn, 229 Ga.App. 220 (493 SE2d 622)(1997), thesurviving spouse and her lawyerwere held liable for breaching theirduties to protect the interests of thestatutory beneficiary children.

Actions by Surviving ChildrenUnder OCGA § 51-4-2

If there is a surviving spouse andshe brings suit and then dies “pend-ing the action,” the cause of actionsurvives under section 51-4-2 to thesurviving children of the wrongfuldeath decedent. If there are no suchchildren, then the claim passes to therepresentative of the deceased sur-viving spouse. Likewise, if there isno surviving spouse, the cause ofaction vests initially in the survivingchildren. One would think that thecause of action would pass the sameway even if the surviving spouse diesbefore bringing the suit. However, atleast one case has held that if the sur-viving spouse died before bringingsuit, the cause of action did not sur-vive to the children.2 2 Notably, thiscase was decided before the 1952amendment to section 9-2-41 whichnow provides for the survival of bothactions and causes of actions. See Westv. Mathews, 104 Ga. App. 57 (121SE2d 41) (1961).

For purposes of the WrongfulDeath Act, the fact that a child wasborn out of wedlock is no defense.2 3

There is no requirement as to depen-dency.2 4 Minor children and sui jurischildren are treated equally.2 5 Aminor child, of course, would bringthe action through a guardian or by a“next friend.”2 6 Adoption of a childby a third person, prior to the deathof the natural parent, cuts off theright of the child to bring or share inan action or recovery for the death ofthe natural parent.2 7 Adoption of achild by a third person, after thedeath of the natural parent, does notcut off the child’s rights.2 8 A child hasno right of action for the wrongfuldeath of a step-parent or for onestanding in loco parentis.2 9 If a plain-

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tiff surviving child dies, the cause ofaction appears to survive under theterms of section 51-4-2 to the remain-ing surviving children. Where thereare no other surviving children, thecause of action survives to the plain-tiff child’s personal representative.3 0

There is no language in the statuteindicating that the cause of actionsurvives to the personal representa-tive of the deceased child as long asthere remain other surviving chil-dren and section 9-2-41 would seemto prohibit this.

Tolbert v. Maner, 271 Ga. 207 (518SE2d 423) (1999) is an interesting case.In Tolbert, a unanimous SupremeCourt reversed the trial court and aunanimous Court of Appeals panel,which of itself demonstrates greatuncertainty in the area. Technically,Tolbert was not a standing to sue case.The focus of Tolbert was the division ofsettlement proceeds. The issue waswhether a grandchild of the wrongfuldeath decedent could share in thoseproceeds where the grandchild’s par-ent had predeceased the wrongfuldeath decedent. The Supreme Courtsaid no. The Court employed muchlanguage addressing standing to sueissues. For example, the Court heldthat “a deceased child’s rights in awrongful death action do not pass toanyone unless the child was an origi-nal wrongful death claimant whodied during the pendency of theclaim.” It will be interesting to see ifthis language really means what itsays when applied to a true standingto sue case.

Prior to 1985, the law provided thatactions under Section 51-4-3 could bemaintained by fewer than all the sur-viving children,3 1 while all childrenhad to be joined as plaintiffs underSection 51-4-2.3 2 Since the currentsection 51-4-2 (enacted in 1985) virtu-ally mirrors the former section 51-4-2, we can look to the former section51-4-2 case law to see what happenswhen there are multiple childrenvested with the cause of action.

Apparently, all surviving children

are deemed necessary parties andjoint action is required by them orelse the action is defective.3 3 How-ever, if the tortfeasor settles with oneor more of the children, the remain-ing children can proceed with thesuit for their proportionate share ofthe full value of the life.3 4 If all thechildren cannot be added before therunning of the statute of limitations,the remaining children can be addedafter the statute has expired and theamendment relates back.35

OCGA § 19-7-1If a decedent leaves no surviving

spouse or child, the cause of actionvests in the surviving parents.OCGA § 51-4-4 refers us to OCGA§19-7-1 to determine a parent’s rightto bring a claim for the death of achild. Section 19-7-1 provides:

“(C) (1) In every case of the homi-cide of a child, minor or sui juris,there shall be some party entitledto recover the full value of the lifeof the child, either as provided inthis Code section or as providedin Chapter 4 of Title 51.

(2) If the deceased child does notleave a spouse or child, the right ofrecovery shall be in the parent orparents, if any, given such a right bythis paragraph as follows:…”

The statute then goes on to providethat the right is jointly in both parentsif alive and living together. If one par-ent is deceased, the right is in the sur-viving parent. If both parents are liv-ing but are divorced, separated, or liv-ing apart, the right shall be in bothparents. The cause of action is jointand the third dismissal, by either par-ent, is on the merits.3 6 If one parentrefuses to proceed or cannot belocated to proceed, the other parenthas the right to contract for represen-tation for both parents and also theright to proceed on behalf of both par-ents to recover for the homicide of thechild. In 1980, section 19-7-1 wasamended to eliminate custody as afactor in determining standing to sue.Either parent has the statutory right

to intervene in an action filed by theother.3 7The division of the proceeds isa different matter and is addressed insection 19-7-1. The trial court’s divi-sion of the proceeds will not be setaside absent an abuse of discretion.3 8

An obvious question is what hap-pens if an action is brought in thename of one parent and the other par-ent does not join in the action butthere is no showing that the non-par-ticipating spouse refused to proceedor could not be located. The GeorgiaSupreme Court answered this inBlanton v. Moshev, 262 Ga. 254 (416SE2d 506) (1992). In Blanton thewife/mother brought a wrongfuldeath claim without the husband/father being a party plaintiff,although he did become a party afterthe statute of limitations expired,which was too late. The SupremeCourt held that the non-participatingspouse is bound in the action broughtby the other spouse. The court notedthere was no detriment to the defen-dant because both spouses are boundby the result. Therefore, the hus-band/father was not a necessaryparty to the action. Whether the hus-band/father had initially refused toparticipate or could not be locatedwas not a factor in the court’s opinion.What was important to the court isthat one spouse can proceed aloneand if the other spouse does not par-ticipate, he is nevertheless bound bythe result. The reason for the absenceof the non-participating spouse isimmaterial.

The fact that the child was born outof wedlock shall be no bar to recov-ery and a parent can sue for the deathof children both minor and sui juris.3 9

There does not appear to be any clearauthority that failure to support thechild, short of a termination ofparental rights, cuts off the rights tothe cause of action for the child’sdeath.4 0 However, failure of the par-ent to provide support for the childdoes diminish the parent’s right toshare in the recovery.4 1 A parent canintervene in an action brought by the

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other parent because it is a jury ques-tion which parent is liable for and hasincurred the medical and funeralexpenses.4 2 Adoption of the child bya third person prior to the child’sdeath cuts off the right of the naturalparents to assert the wrongful deathclaim.4 3 A foster parent cannot suefor the death of a foster child.4 4

Where a surviving parent brings anaction for the wrongful death of achild and the plaintiff parent diesduring the pendency of the action,the parent’s cause of action for thewrongful death of the child survivesto the parent’s representative.4 5 InCaylor v. Potts, 183 Ga. App. 133 (358SE2d 291) (1987), the court noted thatthis is also true regardless of whetherthe action was filed during the par-ent’s lifetime. Since section 19-7-1expressly gives both surviving par-ents the right of action, potentiallythere could be two plaintiffs: theremaining surviving parent and thepersonal representative of the nowdeceased surviving parent.

However, in Hosley v. Davidson, 211Ga. App. 529 (439 SE2d 742) (1993),the court limited Caylor and held that“where one of the parents of a minorchild dies before instituting an actionfor the child’s wrongful death, therepresentative of that parent’s estateis not authorized to bring such anaction if there is a surviving parent orother person entitled to it.” Theunderpinnings of Caylor and Hosley,decided barely six years apart, maywell be mutually exclusive anddemonstrate the difficultly our courtscontinue to have with survivorshipissues.

OCGA § 51-4-5OCGA § 19-7-1 provides that if the

wrongful death decedent leaves nosurviving spouse, children, or parentvested with the wrongful death causeof action under either section 51-4-2or section 19-7-1, the right of recoveryis then determined by section 51-4-5.Section 51-4-5 is a catch-all provisionwhich insures that there will be some

person who may recover the fullvalue of the life of the deceased. Sec-tion 51-4-5 vests the decedent’sexecutor or administrator with thecause of action to recover the fullvalue of the life of the decedent forthe benefit of the “next of kin.” Nextof kin are determined by section 53-2-1, the law of descent and distribu-tion.4 6 The minority of the next of kindoes not toll the statute of limita-tions4 7nor does any time that passesbetween the date of death andappointment of the representative.4 8

EQUITABLE RELIEFBecause of the rigid statutory

scheme for determining standing, thebooks are full of cases where injusticeoccurred by virtue of the statutoryplaintiff not asserting the appropriateaction. Even when our courts havetried to judicially remedy this situa-tion (Tolbert v. Murrell, supra, wouldhave vested children with a jointcause of action for death of a parent),the legislature has thwarted theseefforts (see 1985 amendment to sec-tion 51-4-2, rejecting Tolbert).

The answer to this may be found inBrown v. Liberty Oil Company, 261 Ga.214 (403 SE2d 806) (1991), in which asurviving husband, having aban-doned the family, failed to bring suitfor the death of the wife/mother.Under every principle of law, the sur-viving husband, solely, was vestedwith the wrongful death cause ofaction. Just before the expiration ofthe statute of limitations, the surviv-ing children filed suit in equity, ratherthan at law. The Georgia SupremeCourt held that the equitable powersof the superior courts were greatenough to confer standing on thechildren despite what the law pro-vided. In every circumstance whereit appears that an injustice will occurbecause of the lawful plaintiff’s fail-ure to assert the cause of action(either spouse, child, or representa-tive), counsel should consider callingupon the equitable powers of thesuperior courts to preserve the action

on behalf of any person who has aproperty interest in the recovery.

Funeral, Medical, and OtherExpenses

OCGA § 51-4-5 provides that thepersonal representative of thedeceased can recover medical andfuneral expenses. This is limited bythe more general rule that suchexpenses are recoverable by the per-son legally liable for the expenses.Therefore, there is no need to set upan estate to recover medical orfuneral expenses of a minor child.Since the parents are liable for thenecessaries of a minor child, the par-ents have the right to recover themedical and funeral expenses.4 9 Theparents are entitled to recover theseexpenses, not the child’s personalrepresentative. Section 51-4-5 veststhe claim in the personal representa-tive of the minor child only whenthere is no surviving parent.5 0

For deceased adults, medical andfuneral expenses are recoverable bythe personal representative.5 1 Unlikeminor children, there is no longer apresumptive duty that one adult isliable for the debts of another adult.

Comparative Negligence andImmunities

Wrongful death claims sometimesinteract with other substantive lawsand result in broader avenues ofrecovery. For example, some claimsthat are traditionally barred byspousal or other immunity can beasserted in the wrongful death con-text.5 2 Further, the statutory wrong-ful death plaintiff may be one of thetortfeasors whose negligence con-tributed to the death. This does notbar the wrongful death claim and thestatutory plaintiff, even if one of thetortfeasors, is nevertheless the personwho must bring the action.53 If theplaintiff’s negligence bars him fromsharing in the recovery, the recoverywould be held by the plaintiff for thebeneficiaries on whose behalf hesues. The negligence of the statutory

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1 Matthews v. Douberly, 207 Ga. App. 578 (428 SE2d588)(1994) quoting William Shakespeare, Hamlet,Act 2.

2 Patterson v. Duron Paints of Ga. Inc., 144 Ga. App.123 (240 SE2d 603) (1977).

3 Weldon v. Williams, 170 Ga. App. 589 (317 SE2d570) (1984).

4 Green v. Johnson, 71 Ga. App. 777 (32 SE2d 443)(1944).

5 Taylor v. Murray, 231 Ga. 852 (204 SE2d 747) (1974).

6 Anderson v. Jones, 508 F. Supp. 399 (N.D. Ga. 1980).7 Mack v. Moore, 256 Ga. 138 (345 SE2d 338) (1986).8 Georgia Osteopathic Hosp. v. O’Neal, 198 Ga. App.

770 (403 SE2d 235) (1991).9 Odom v. Atlanta & W.P.R.R., 78 Ga. App. 477 (51

plaintiff is not imputed to thedeceased or to the other beneficiaries.For an excellent discussion of this, seeMatthews v. Douberly, 207 Ga. App.578 (428 SE2d 588) (1993).

Other Recoverable DamagesUpon the death of a minor child,

the parents have the right to recoverfor the loss of services of the child.5 4

This is considered a loss to the per-sonal property of the parent and thestatute of limitations is four years.5 5

The parents bring this claim in theirindividual capacity.

Upon the wrongful death of aspouse, the surviving spouse has aloss of consortium claim for theperiod of time between the injuryand the resulting death.5 6 This is aloss to the personal property of thesurviving spouse and the statute oflimitations is four years.5 7

Property damage claims are vestedin the owner of the property. If thedeceased was the owner of the dam-aged property, the claim is broughtby the deceased’s personal represen-tative.5 8

A separate cause of action exists forthe pain and suffering of thedeceased prior to death.5 9 Thisincludes pre-injury shock, fright, andterror.6 0 The statute of limitations istwo years measured from the date ofinjury rather than from death. SeeOCGA § 9-3-33. The claim is broughtby the personal representative of thedeceased.6 1 The proceeds pass withthe decedent’s estate. The resolutionof a personal injury claim is not a barto a later wrongful death claim evenwhere the death occurs as a conse-quence of the original injuries.6 2 Forthis reason, in serious injury cases,defendants sometimes seek a wrong-ful death release even though thedeath has not occurred. This circum-stance raises delicate issues regard-

ing division of the proceeds.Under Lee v. State Farm, 272 Ga. 583

(533 SE2d 82) (2000), a parent nowhas a cause of action for the parent’sown emotional distress in witnessinga child’s death, subject to the impactrule.

Punitive damages are not recover-able in wrongful death actions.6 3

Without an award of actual damages,even nominal damages, punitivedamages cannot be recovered.6 4 Thepunitive damage claim is brought bythe person who has the cause ofaction for the underlying claim uponwhich the punitive damage award issought. Although punitive damagescannot be awarded in the wrongfuldeath portion of the claim, punitivedamages are properly awarded ifthere is an underlying suit for prop-erty damage6 5or pain and suffering.6 6

Joinder of ClaimsThe defendant can force joinder of

the wrongful death and pain and suf-fering claims.6 7 Presumably, this isalso true for loss of consortium/lossof services claims.68 A property dam-age claim can be brought separately.

Joinder of Multiple PartiesIf there is a surviving spouse, there

is no issue of joinder of partiesbecause there can be only one surviv-ing spouse and that person, oncedetermined, has the sole cause ofaction. However, there can be a dis-pute to determine who is the surviv-ing spouse. In Tarver v. Martin, 175Ga. App. 689 (334 SE2d 18) (1985)two women, both claiming to be thewidow of the deceased, brought sep-arate suits for the death of theiralleged husband. The trial courtjoined the actions. The court ofappeals held that joinder was errorsince only one of the women couldpossibly be the proper plaintiff. The

correct procedure would have beenfor the defendant to file a motion fora declaratory judgment.

The declaratory judgment proce-dure is not limited to use by defen-dants but can be used by a potentialplaintiff to establish the right to theclaim.6 9

If multiple children are potentialplaintiffs under section 51-4-2, join-der does become important. Ourcourts have held that all children arenecessary parties to a wrongful deathaction for the death of a parent; there-fore the non-participating childrenshould be subject to joinder as invol-untary plaintiffs.70

If the potential plaintiffs are theparents under section 19-7-1, there isno need to join the non-participatingparent because Blanton v. Moshev,supra, makes clear that one parent canprosecute the action in the absence ofthe other.

CONCLUSION Litigation under the Wrongful

Death Act during the past decadeonly spotlights that there remain trou-blesome and unresolved issues.Much uncertainty exists in the area ofsurvivorship of causes of action asdemonstrated by the tension betweenCaylor and Hosley, supra. Further, theimpact of Tolbert v. Maner, supra, intrue standing to sue cases, andwhether it can be applied consistentlywith other authority, remains to beseen. Counsel should approach thisarea with great caution.

As always there remain those caseswhere family members are pittedagainst each other for the right to thecause of action or a share of the pro-ceeds. When courts have to reachinto equity, see Brown v. Liberty Oil,supra, to find justice, that is a suresign that there are holes in the statu-tory scheme.

8

9

SE2d 466) (1949).1 0 Lovett v. Garvin, 232 Ga. 747 (208 SE2d 838) (1974). 1 1 Central of Ga. Ry. v. Bond, 111 Ga. 13 (36 SE 299)

(1900).1 2 Odom v. Atlanta & W.P.R.R., 78 Ga. App. 477 (51

SE2d 466) (1949).1 3 Mack v. Moore, 256 Ga. 138 (345 SE2d 338) (1986);

O’Kelley v. Hosp. Auth., 256 Ga. 373 (349 SE2d 382)(1986).

1 4 Western & Atlantic R.R. Co. v. Davis, 16 Ga. App.831 (159 SE2d 134) (1967).

1 5 Lynn v. Wagstaff Motor Co., 126 Ga. App. 516 (191SE2d 324) (1972).

1 6 General Motors Corp. v. Rasmussen, 255 Ga. 544 (340SE2d 586) (1986). This case was based on Tolbert v.Murrell as interpreted before the 1985 amendmentbut apparently is still good law on this point.

1 7 Lawrence v. Whittle, 146 Ga. App. 686 (247 SE2d212) (1978).

1 8 Bloodworth v. Jones, 191 Ga. 193 (11 SE2d 658)(1940).

1 9 Boggan v. Boggan, 145 Ga. App. 401 (243 SE2d 664)(1978).

2 0 O’Kelley v. Hosp. Auth., 256 Ga. 373 (349 SE2d 382)(1986).

2 1 Campbell v. Western & A.R.R., 57 Ga. App. 209 (194SE2d 927 (1938). This case also discusses the pro-cedure to be followed after the death of the namedplaintiff.

2 2 Hood v. Southern Ry., 169 Ga. App. 168 (149 SE898) (1929).

2 3 OCGA § 51-4-2(f).2 4 Peeler v. Central of Ga. Ry., 163 Ga. 784 (137 SE2d

24) (1927).2 5 OCGA § 51-4-2(a).2 6 OCGA § 9-11-17; Weldon v. Williams, 170 Ga. App.

589 (317 SE2d 570) (1984).2 7 Johnson v. Parrish, 159 Ga. App. 613 (284 SE2d 111)

(1981).2 8 Emory University v. Dorsey, 207 Ga. App. 808 (429

SE2d 307)(1993).2 9 Weems v. Saul, 52 Ga. App. 470 (183 SE2d 661)

(1936).3 0 West v. Mathews, 104 Ga. App. 57 (121 SE2d

41)(1961).3 1 OCGA § 51-4-3 (b) (2); American Erectors Inc. v.

Hainie, 157 Ga. App. 687 (278 SE2d 196) (1981).3 2 Gordon v. Gillespie, 135 Ga. App. 369 (217 SE2d 628)

(1975).3 3 Gordon v. Gillespie, 135 Ga. App. 369 (217 SE2d 628)

(1975) and Pollard v. Reid, 56 Ga. App. 594 (193 SE370) (1937).

3 4 Lynn v. Wagstaff Motor Co., 126 Ga. App. 516 (191SE2d 324) (1972); Southeastern Greyhound Lines v.Wells, 204 Ga. 814 (51 SE2d 56) (1949).

3 5 Southern Ry. v. Waldrup, 76 Ga. App. 356 (45 SE2d775) (1947). This case was decided under former51-4-3 but should apply to 51-4-2 as it is writtentoday.

3 6 Belco Electric, Inc. v. Bush, 204 Ga. App. 811 (420SE2d 602) (1992).

3 7 Hulsey v. Hulsey, 212 Ga. App. 269 (441 SE2d 477)(1994).

3 8 Wymbs v. Stokes, 236 Ga. App. 742 (512 SE2d 669)(1999); Richardson v. Barber, 241 Ga. App. 254 (527SE2d 8) (1999).

3 9 OCGA § 19-7-1.4 0 Deloach v. Floyd, 160 Ga. App. 728 (288 SE2d 65)

(1981). But see Pickett v. Amoco Oil Co., 735F.2d445 (11th Cir. 1984) in which a father was deniedthe right to intervene in an action brought by themother of an illegitimate child because of thefather’s failure to provide reasonable support andSapp v. Solomon, 252 Ga. 532 (314 SE2d 878) (1984).

4 1 This is the rule for causes of action arising afterJuly 1, 1987. Dove v. Carter, 197 Ga. App. 733 (399SE2d 216) (1990).

4 2 Atkinson v. Atkinson, 249 Ga. 247 (290 SE2d 423)(1982).

4 3 Johnson v. Parrish, 159 Ga. App. 613 (284 SE2d 111)(1981).

4 4 Smith v. Jones, 72 Ga. App. 638 (34 SE2d 623)(1945).

4 5 Caylor v. Potts, 183 Ga. App. 133 (358 SE2d 291)(1987); Roadway Express Inc. v. Jackson, 77 Ga. App.341 (48 SE2d 691) (1948).

4 6 Stewart v. Bourn, 250 Ga. App. 755 (552 SE2d450)(2001).

4 7 Deloach v. Emergency Medical Group, 155 Ga. App.866 (274 SE2d 38) (1980).

4 8 Patellis v. King, 52 Ga. App. 118 (182 SE 808) (1935).4 9 Caylor v. Potts, 183 Ga. App. 133 (358 SE2d 291)

(1987); Atkinson v. Atkinson, 249 Ga. 247 (290 SE 2d423) (1982).

5 0 Cobb & Eldridge, Georgia Law of Damages, 3rdEd. § 37-8.

5 1 Forrester v. Southern Ry., 268 F. Supp. 194 (N.D. Ga.1967); Georgia Osteopathic Hosp. v. O’Neal, 198 Ga.App. 770 (403 SE2d 235) (1991).

5 2 Jones v. Jones, 259 Ga. 49 (376 SE2d 674)(1989);

Trust Co. Bank v. Thornton, 186 Ga. App. 706(368SE2d 158) (1988); See also Barnwell v. Cordle, 438F.2d 236 (5th Cir. 1971).

5 3 Lynn v. Wagstaff Motor Co., 126 Ga. App. 516 (191SE2d 324) (1972); Walden v. Coleman, 217 Ga. 599(124 SE2d 265) (1962); Happy Valley Farms, Inc. v.Wilson, 192 Ga. 830 (16 SE2d 820) (1941); and Ful-ford v. ITT Rayonier, 676 F. Supp. 252 (S.D. Ga.1987).

5 4 Caylor v. Potts, 183 Ga. App. 133 (358 SE2d 291)(1987); Peppers v. Smith 151 Ga. App. 680 (261 SE2d427) (1979).

5 5 Silvertooth v. Shallenberger, 49 Ga. App. 133 (174 SE365) (1934).

5 6 Walden v. Coleman, 217 Ga. 599 (124 SE2d 265)(1962).

5 7 Silvertooth v. Shallenberger, 49 Ga. App. 133 (174 SE365) (1934).

5 8 Jackson v. Central of Georgia Ry. , 82 Ga. App. 498 (61SE2d 586) (1950).

5 9 Spradlin v. Ga. Ry. & Elec. Co., 139 Ga. 575 (77 SE799) (1912); Complete Auto Transit Inc. v. Floyd, 214Ga. 232 (104 SE2d 208) (1958).

6 0 Monk v. Dial, 212 Ga. App. 362 (441 SE2d857)(1994).

6 1 Georgia Osteopathic Hosp. v. O’Neal, 198 Ga. App.770 (403 SE2d 235) (1991).

6 2 Winding River Village Condominium Assn. v Barnett,218 Ga. App. 35 (459 SE2d 569)(1995).

6 3 Engle v. Finch, 165 Ga. 131 (139 SE 868) (1927). D o n-son Nursing Facilities v. Dixon, 176 Ga. App. 700(337 SE2d 351) (1985); Ford Motor Co. v. Stubblefield,171 Ga. App. 331 (319 SE2d 470) (1984); GeorgiaOsteopathic Hosp. v. O’Neal, 198 Ga. App. 770 (403SE2d 235) (1991).

6 4 Daiss v. Woodbury, 163 Ga. App. 88 (293 SE2d 876)(1982); Foster v. Sikes, 202 Ga. 122 (42 SE2d 441)(1947).

6 5 Colonial Pipeline v. Brown, 258 Ga. 115 (365 SE2d827) (1988).

6 6 Stubblefield v. Ford Motor Co., 111 Ga. App. 331 (319SE2d 470) (1984).

6 7 Stenger v. Grimes, 260 Ga. 838 (400 SE2d 318)(1991).

6 8 Stapleton v. Palmore 250 Ga. 259 (297 SE2d 270)(1982).

6 9 Cobb & Eldridge, Georgia Law of Damages, 3rdEd. § 37-10.

7 0 Gordon v. Gillespie, 135 Ga. App. 369 (217 SE2d 628)(1975).

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Forget about the Silicon Age. Aswe enter the 21st century, we areliving in the Age of Liability. Oursociety increasingly rejects thenotion that living carries inherent,unavoidable risks. Instead, forevery injury, someone else must beat fault and should pay big dam-ages; plaintiffs rarely are verychoosy about who that should be.And no injury ever is caused bymere accident or negligence; italways results from conduct that is“willful, wanton and in bad faith”entitling the injured party to stu-pendous punitive damages. Jurytrials have become lotteries, andwoe to the person whose numbercomes up.

Fact: In a dispute between busi-ness partners, a Gwinnett County,Georgia jury awarded $454 millionto the plaintiffs. The verdict includ-ed $257 million in punitive dam-ages. Not only is it the largest juryaward ever in Georgia (by severaltimes), it is one of the ten largestverdicts ever reported in the coun-try.

Fact: In September 1999, a FultonCounty, Georgia jury returned averdict for $136 million in a lawsuitby a sales representative for unpaidcommissions. The plaintiff origi-nally claimed $182,000. The juryawarded $1.2 mill ion in actualdamages and almost $135 million inpunitive damages.

These numbers were notdreamed up for the climax in a John

Grisham novel. They actually camefrom your neighbors, in real cases,here and now. And we’re not talk-ing about exotic theories of person-al injury liability applied to sellersof hot coffee and makers of guns.These were just disputes betweenpeople engaged in ordinary busi-ness transactions.

And if you think your insurancewill bail you out, you’d better care-fully read your policy. While intheory punitive damages can beinsured against in Georgia, insurerscarefully write most policies toexclude them.

What, then, can people do to pro-tect their assets from these kinds ofclaims?

The emergence of litigation-as-casino has prompted the growinguse of offshore trusts to place assetsbeyond creditors’ reach. The assetprotection function of offshoretrusts can level the playing fieldbetween plaintiffs and defendants.While in the past only a fewwealthy individuals sought andenjoyed this protection, anyonewith net worth of $250,000 or morecan benefit from asset protectionplanning.

An offshore trust can be usefulfor a number of purposes in addi-tion to sheltering assets from credi-tors with inflated or unjustifiedclaims: estate planning, economicdiversification, pre-marriage pro-tection of separate assets, confiden-tiality, purchasing foreign securities

10

PREVENTIVE LAW

Asset Protection Planningby James C. Morton

After graduating with honors in 1979from the State University of New YorkLaw School, Jim was law clerk to U.S.District Judge Newell Edenfield inAtlanta. Jim has done civil trial andappellate work in state and federalcourts in Georgia and other states.These cases have involved contractdisputes, secured and unsecured indebt-edness, the Uniform Commercial Code,business torts, RICO, governmentadministrative litigation, attorney andaccountant professional liability, claimsagainst directors and officers, insurancecompany insolvency, corporate gover-nance, shareholder rights and part-nership dissolution.

Jim speaks at legal educationseminars on federal court practice,bankruptcy issues and internet anddigital technology law.

not offered in the U.S., holding titleto foreign property and to plan forchanging your domicile or citizen-ship. Basic Concept

The concept of the trust has beenrecognized by the law for hundredsof years. A trust is a three-corneredarrangement. It is created whensomeone (the “grantor(s)”) trans-fers legal title to property to some-one else (the “trustee(s)”) to holdand administer for the benefit of athird party (the “beneficiary(ies)”)according to the terms of the trustdocuments.

Trusts commonly provide thatthe beneficiary cannot transfer,pledge or assign his interest in thetrust, voluntarily or involuntarily,which keeps the trust property freefrom claims by the beneficiary’screditors. Lawyers have dubbedthis kind of provision a “spend-thrift clause”. A spendthrift clauseallows the trustee to control thedisposition of the trust assets,rather than the beneficiary or hiscreditors.

The grantor can be a beneficiaryof the trust he creates (a “grantortrust”). Many years ago, someoneclever combined a grantor trustwith a spendthrift clause to allowpeople to defeat their creditors’claims by putting their property ina trust that made payments tothem, but that their creditors couldnot reach. It is not surprising thatevery state in the United Statesenacted laws prohibiting this typeof trust.

The offshore trust is popular pre-cisely because it does permit thisarrangement. The grantor transfersassets to a foreign trust adminis-tered by a foreign trustee, such as abank. The offshore trust generallyis a discretionary trust, meaningthat the trustee distributes thetrust’s money as and when it pleas-es. However, the trustee actuallyfollows a “letter of wishes” fromthe grantor telling it how to pay

out the trust’s funds. Since the for-eign trustee’s “discretion” decideswhen and how to pay, it may denycreditors’ requests for distributionfrom the trust to satisfy a debt ofthe grantor. When a trust is prop-erly established under the laws of aforeign country, obtaining jurisdic-tion over the trustee through a U.S.court action generally is impossi-ble, forcing creditors to file a law-suit in the foreign country in theirattempt to reach the trust assets. Ifthe foreign legal system will notenforce liability against the trustassets, removal of the assets fromthe U.S. may totally defeat recoveryby a creditor.

Two other provisions are includ-ed in an effective offshore trust: a“duress” clause and a “migration”clause. The duress clause requiresthe foreign trustee to refuse tocarry out any instruction from thesettlor made under duress. Thisclause will preclude a court or gov-ernment agency from forcing thesettlor to make the trust assetsavailable under threat of sanctions.Under a duress clause, the trusteewill exercise independent controlover the trust until the settlor nolonger is acting under duress.

The migration clause requires thetrustee to move the trust assets toanother jurisdiction if there is anyattempt by a governmental agencyor creditor to collect informationfrom or assert a claim against thetrust.

The combination of these, andother, provisions makes the off-shore trust a potent means of secur-ing assets.

Potential Locations for anOffshore Trust

Selecting the best location for anoffshore trust requires consideringseveral important factors.Primarily, a grantor will seek ajurisdiction where enforcing a for-eign judgment against a trustee isso difficult that claimants won’teven bother to try. Grantors also

should consider the country’sbanking and investment infrastruc-ture, language, political stability,economy, communication capabili-ties, access to qualified trustees,specific trust laws, time zones, andset-up and maintenance costs.

Popular jurisdictions for offshoretrusts include:

• Bahamas• Bermuda• British Virgin Islands• Cayman Islands• Cook Islands• Isle of Man• Turks and Caicos• St. Kitts and Nevis.

Other less well-known jurisdic-tions that have enacted asset pro-tection laws are Belize, Cyprus,Gibraltar and Mauritius. Each ofthese jurisdictions has advantagesand disadvantages. The Bahamasoffer professional services, such aslicensed banks, trust companies,and insurance management, whichare exceptional and well estab-lished, and are particularly goodfor banking. Bermuda is part of theUnited Kingdom with a currency atpar with the U.S. dollar. TheBritish Virgin Islands are attractivebecause the currency is the U.S.dollar, but there are few profes-sional services. The Cook Islandsoffers very aggressive trust law,but has limited professional ser-vices, and the location is remote.The Isle of Man is under its owncourt system, the professional ser-vices are excellent, and aggressive-ly seeks these investments. TheTurks and Caicos are self-govern-ing and dynamic, but are relativelynew offshore players, and there arefew professional services. Lastly,St. Kitts and Nevis provide aggres-sive trust law, but both are similarto the Turks and Caicos in that theyare new players in the offshorefinancial market and have few pro-fessional services.

Recently, the Cook Islands courts

11

handed down a decision thatstrengthened its asset protectionlaws. In that case, a U.S. court heldtwo U.S. citizens in contempt ofcourt when they claimed to beunable to bring back funds soughtby the FTC for alleged consumerfraud violations. After the con-tempt finding, and faced withimprisonment, the U.S. citizensattempted to turn over the moneyby directing the trustee in the CookIslands to make the FTC a trusteewith power to direct the money.The trustee sought guidance fromthe Cook Islands court, which heldthat the attempted change intrustee was void and unenforce-able. Thus, even when the trustgrantor and beneficiary instructsthe Cook Islands trustee to returnthe money, it will not be done if thetrustee determines that the requestis made under duress.

Tax IssuesA foreign trust can be created

with almost no tax implications,both regarding the amount of taxpayable and the reporting thatmust be made. Generally, a U.S.grantor of a foreign trust onlyneeds to see that the trust files anannual information return with theIRS, and has a representative in thiscountry to respond to any informa-tion requests by the IRS. Theserequirements assist the IRS in col-lecting proper taxes from offshoretrusts, and should not impair theasset protection and other purposesbehind creation of the trust in lightof the taxpayer privacy require-ments imposed on the IRS.

Recent State Law ChangesWithin the recent past, Alaska

and Delaware have enacted laws tooverturn two centuries of U.S. lawprohibiting grantor spendthrifttrusts intended to be immune fromcreditor claims. These changeswere made in an effort to capturesome of the billions of dollars thatare sent to offshore trusts each

year. Although these new lawshave the potential to be attractive,because of their recent enactment anumber of important issues remainunlitigated and unresolved. Untilthose questions are resolved, it willbe risky to rely upon those statelaws for asset protection from cred-itors.

Fraudulent Conveyance LawsUnder Georgia law, certain trans-

fers of property are labeled fraudu-lent and void as to creditors. Theseare:

(1) transfers by a personwhose liabilities exceed theirassets either before or after thetransfer, into a trust in whichthe grantor retains a benefit;(2) transfers made with theintention to hinder, delay ordefraud a creditor, where theintention is known or should beknown by the transferee; and(3) gifts by a person whose lia-bilities exceed their assets eitherbefore or after the transfer.Because these transfers are voidas to creditors, the creditor mayseek to recover from the trans-feree the property conveyed.

The relation of debtor and credi-tor exists under Georgia law“[w]henever one person, by con-tract or by law, is liable and boundto pay to another an amount ofmoney, certain or uncertain.” Forthat reason, it is questionablewhether a Georgia court wouldfind a transfer fraudulent as tocreditors whose claims did notexist and were not reasonablyanticipated at the time of the trans-fer.

Under federal bankruptcy law, afraudulent transfer is one madewithin one (1) year before the bank-ruptcy is filed either with the intentto hinder delay or defraud creditors,or for less than a reasonably equiva-lent value if the debtor was insol-vent before or after the transfer. Abankruptcy trustee may avoid

fraudulent transfers and recover thesubject property. Of course, thislaw only applies if a voluntary orinvoluntary bankruptcy case is filedby or against you within one yearafter a transfer.

It is because of these laws that cre-ation of an offshore trust should beviewed as a “vaccine” against futureasset protection problems, ratherthan a “cure” for existing ones.

ConclusionAn offshore trust can be useful to

achieve a number of objectives,including protecting assets fromseizure by creditors. The time toestablish such a trust is beforeassets are threatened, in order toavoid a claim of fraudulent con-veyance. In addition, the populari-ty of these trusts has causedincreased attention from Congressand government regulators, whichsuggests that attempts may bemade to curb their use.Accordingly, if you intend to createan offshore trust, it may be prudentto do so without unnecessarydelay.

12

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On June 7, 2001 President GeorgeW. Bush signed into law the Eco-nomic Growth and Tax Relief Rec-onciliation Act of 2001 (“EGTRRA”or the “2001 Tax Act”). 1 Proponentsclaimed that the 2001 Tax Act wasthe most sweeping and significanttax relief in twenty years, but itschanges primarily affect individuals.The amendments to the Code2

reduce individual income tax rates,provide relief to married couplesand lessen the burdens of the alter-native minimum tax. Yet, the crownjewel of the legislation considered toprovide the greatest relief to individ-uals and their heirs was the “repeal”of the estate tax. However, despitethe extensive media coverage sur-rounding repeal, the reality of the2001 Tax Act is that repeal is onlyeffective for one year - 2010 - afterwhich the estate tax returns to its pre- 2001 Tax Act level.

Thus, practitioners (and theirclients) who perceived that Con-gress was taking steps to simplifythe planning process for transfer-ring wealth, have been deceived. Infact, the new laws we must interpretand apply have been appropriatelydescribed as perplexing andquixotic,3 resulting in an “estateplanning roller coaster.”4 In aneffort to ease the anxiety attendantto the roller coaster ride, this articlehighlights certain transfer tax pro-visions of the 2001 Tax Act of whichthe practitioner should be aware.

“Repeal” of the Estate GST TaxesThe federal transfer tax system

13

Transfer Taxes After The Economic Growth and TaxRelief Reconciliation Act of 2001

David F. Golden is a partner inTroutman Sanders LLP. He is a memberof the Trust and Estates practice group.His practice focuses primarily on estateand tax planning for closely held busi-nesses and their owners. He received hisJ.D. from the University of GeorgiaSchool of Law, his B.S. from the OhioState University and a LLM fromEmory University. He is a past pres-ident of the Taxation Section of theAtlanta Bar Association.

Timothy B. Phillips is an attorney withTroutman Sanders LLP. He is a memberof the Tax, Trust and Estates andMultifamily Housing practice groups.Mr. Phillips specializes in exempt orga-nizations, affordable housing devel-opment and the structuring of wealthtransfer transactions. Mr. Phillipsreceived his B.S. in Political Sciencefrom the United States Naval Academyand his J.D. from the University ofVirginia.

imposes a tax on the transfer ofproperty from one individual toanother5, whether the transferoccurs during life (the gift tax) or atdeath (the estate tax). In addition,there is a separate tax imposed on atransfer of property from one indi-vidual to another individual who istwo or more generations below thetransferor (the generation skippingtransfer, or “GST,” tax). The mostcommon context in which the GSTtax is imposed is on a transfer froma grandparent to a grand child.

Under new provisions of the Code,the estate tax and the GST tax willgradually be phased out over an eightyear period pursuant to new sched-ules of tax rates and exemptions con-tained in Code Sections 2001 and2010. The table in EXHIBIT Ashowsthe maximum estate and GST ratesand exemptions from 2001 (beforechanges) to 2011 (when original ratesare scheduled to return). As the tabledemonstrates, the increase in theexemption combined with thedecrease in maximum rate results in amaximum tax of 45% on estates inexcess of $3.5 million just prior torepeal. However, in 2011, an estate inexcess of $3.5 million would onlyqualify for a $1 million exemption.The remaining estate would be taxedon the basis of the pre - 2001 Tax Actgraduated rates (37% - 55%). Thus,wealthy clients who fail to properlyplan in anticipation of permanentrepeal may pay dearly for the gamble.

A “Byrd” into the SunsetCongress did not “pay for” the

cost of repeal through permanentspending cuts. Rather, Congress“borrowed” the cost based on antic-ipated budget surpluses. Becausefewer than 60 senators voted for thetax bill, a fiscal responsibility ruleknown as the “Byrd rule” applies tothe legislation. Under the Byrd rule,any tax cut that is not offset by per-manent spending cuts must expire,or “sunset,” in ten years. Thus,although the estate and GST taxesare repealed effective January 1,

2010, the taxes will be reinstated atpre-2001 Tax Act levels, i.e., 55% toprate with $1 million exemption onJanuary 1, 2011. Therefore, assum-ing the 2001 Tax Act survives thefive future Congresses and threeadministrations that could takeoffice during its tenure, an individ-ual must die in 2010 in order to trulybenefit from repeal. Such an anom-alous provision has added new lifeto the prospect of tax planningthrough living wills.

De-Unification - Retention of theGift Tax

Surprisingly, the 2001 Tax Act didnot repeal the gift tax. The table inEXHIBIT B shows the gift tax ratesand exemptions from 2001 (beforechanges) to 2011 (when original ratesare scheduled to return). The tabledemonstrates that the 2001 Tax Actreduces the marginal gift tax ratesgradually, in step with the marginalestate and generation skipping trans-fer tax rates shown in EXHIBIT A, butthe corresponding increase in exemp-tion amount is frozen at $1 millioneffective as of January 1, 2002. Theresult is a de-unification of the giftand estate tax regimes. Formerly, thetransfer system was designed to beneutral as between transfers duringlife and those at death. The unifiedsystem of rates and exemptions nei-ther encouraged nor discouraged life-time versus testamentary transfers.However, after the 2001 Tax Actclients will no longer be neutral withregard to their decisions to makeintervivos transfers of wealth. Effec-tive use of leveraged lifetime giftingstrategies is now more importantthan it was under the unified regime.

Most commentators cite preven-tion as Congress’ rationale forretaining the gift tax.6 Congressapparently feared that there wouldbe an additional of loss in revenuegenerated when taxpayers in higherincome tax brackets shifted appreci-ated assets to taxpayers in lowerincome tax brackets, by means of agift, without having to pay a tax.

Effective January 1, 2010, new CodeSection 2511(c) changes the rulesgoverning the determination of acompleted gift. Under the newrules, any lifetime transfer to a trustthat is not a grantor trust,7 in itsentirety with respect to the grantoror his spouse (regardless of theretained powers that would havemade the transfer an incomplete giftunder pre-EGTRRA rules) will betreated as a complete gift for tax pur-poses. Thus, the new transfer taxsystem (should it remain intact until2010) broadens the definition of ataxable lifetime transfer and equal-izes the rate of tax on such transferswith the highest marginal incometax rate scheduled to be in effect atthe time of repeal - 35%.8

Watch Your Step! - Step-Up inBasis Repealed

Currently, under Code Section1014, property transferred at deathgenerally receives a “Step-up” inincome tax basis from the decedent’spre-death basis to the property’s fairmarket value. Thus, an heir whoreceives stock worth $1 million thathad a pre-death basis of $100,000could immediately sell the stock for$1 million and recognize no gain.From a practitioner’s standpoint, thestep-up in basis rule is beneficialbecause it simplifies the determina-tion of the bases of a decedent’sassets.

The 2001 Tax Act repealed thestep-up in basis rule for assets trans-ferred at death upon repeal of theestate tax. Under new Code Section1022, which applies to estates ofdecedents dying after 2009, a trans-feree of property from a decedenttakes a carryover basis in that asset.Thus, unless he or she may benefitfrom one of the exceptions describedbelow, the heir in the earlier exam-ple would recognize $900,000 of cap-ital gain upon the sale of the stock.

Exceptions to the CarryoverBasis Rule

The 2001 Tax Act provided some

14

relief from the effect of carryoverbasis by permitting executors to allo-cate $1.3 million of basis increaseamong the estate’s assets transferredto a non-spouse.9 The $1.3 millionlimit may be increased by the dece-dent’s unused capital losses, netoperating losses, and certain built-inlosses.1 0 Executors may allocate anadditional $3 million of basis increaseto the estate’s assets transferred to aspouse—either outright or through aspecial type of trust commonlyreferred to as a qualified terminableinterest property (“QTIP”) trust..1 1

Pursuant to such a trust, the spousereceives all income and is the onlybeneficiary of the trust during his orher lifetime. The result is a $4.3 mil-lion step-up in basis for assets pass-ing to a spouse in 2010. Thereafter,basis increases will be indexed peri-odically for inflation, with suchincreases occurring in high, fixed dol-lar amounts—$100,000 for non-spouses, $250,000 for spouses.

The new rules prohibit executorsfrom increasing the basis of an assetabove its fair market value,1 2and notall property is eligible for a basisincrease. Property such as income inrespect of a decedent, generallyincome earned prior to death putpaid subsequent to death, whichwas ineligible for a step-up in basisunder prior law, will continue to beineligible. In addition, property of adecedent acquired by gift from anon-spouse less than three yearsbefore death is excluded. This pre-vents gifts of low-basis assets inanticipation of a basis step-up.

The carryover basis regime will bemuch more complicated for thepractitioner, and record keepingrequirements will be increasinglyburdensome for executors. Undernew Code Section 6018 (effective in2010), in the case of transfers from adecedent of assets (other than cash)in excess of $1.3 million, the executormust file a return, reporting (foreach asset): the name and taxpayeridentification number of the recipi-

ent; a description of the asset; theasset’s fair market value at death;the decedent’s basis, holding periodand sufficient information regardingcharacter of gain that would be rec-ognized upon disposition (ordinaryor capital); the amount of basisincrease allocated to the asset; andsuch other information as the IRSmay prescribe in Regulations. Itbears mentioning that carryoverbasis rules have been previouslyenacted. In 1976, Congress insti-tuted a carryover basis regime. Theregime proved so difficult to admin-ister that it was repealed, retroac-tively, in 1980.1 3

Federal Government’s Gain isStates’ Loss - Elimination of State

Death Tax CreditBeginning in 2002, the state death

credit under Code Section 2011 isgradually phased out over a fouryear period. The 2001 Tax Act pro-vides that for estates of decedentsdying after 2001, the state death taxcredit cannot exceed the “applicablepercentage” of the credit that wouldotherwise be available under CodeSection 2011. The applicable per-centages are 75% in 2002; 50% in2003; and 25% in 2004. In 2005, thecredit is completely eliminated, andat that time, new Code Section 2058will provide a deduction from thegross estate for any state and localdeath taxes paid.

Currently, 37 states and the Dis-trict of Columbia impose a “pick-up” inheritance tax. Heretofore, thepick-up tax has operated as a meansof revenue sharing between thestates that have enacted it and thefederal government. Formerly,Code Section 2011 permitted a dollarfor dollar reduction in the federalestate tax liability for the amount ofstate inheritance taxes paid (subjectto a cap of 16%). Thus, the pick-uptax is an inheritance tax imposed bya state that exactly equals the statedeath tax credit allowed. However,under the 2001 Tax Act, the state

revenue generated by the pick-uptax will be gradually reduced andultimately eliminated unless there isaction at the state legislative level.The cost to the federal governmentfor the change? Nothing. If any-thing, the federal government willhave increased its revenues at thecost of the states.

It is certainly reasonable to expectstate legislatures to act to preventthe enlargement of their everincreasing budget shortfalls. Wherenot constitutionally prohibited,practitioners can anticipate legisla-tion to enact taxes in some form torecover revenues lost as a result ofthe elimination of the state death taxcredit.

Other Notable Changes

Expansion of Deferral ThroughInstallment Payments

Prior to the 2001 Tax Act, an execu-tor could elect to pay all or part of theestate tax attributable to an “interestin a closely held business” in install-ments if the interest was greater than35% of the decedent’s gross estate.1 4

An executor could elect to pay the taxin two or more (up to a maximum often) equal installments, with the firstinstallment due on the fifth anniver-sary of the due date of the estate taxreturn. For purposes of the deferral,an “interest in a closely held busi-ness” generally meant an interest inan active trade or business or an inter-est as a partner in a partnership car-rying on an active trade or business.1 5

The 2001 Tax Act expanded thedefinition of an interest in a closelyheld business to include interests ina “qualified lending and financebusiness” and certain holding com-pany stock. To be a qualified lend-ing and finance business (“QLAFB”)the business must satisfy one of twosets of criteria:

(1) During at least three of thefive years preceding the dece-dent’s death, the business musthave employed at least one full-

15

time employee, engaged in theactive management of the busi-ness; ten full-time employees(none of whom were owners) whoprovided services directly relatedto the business; and the businesshad to have $5 million or more ingross receipts from the activitiesof a QLAFB; or(2) There was substantial activityimmediately before the decedent’sdeath with respect to the lendingand financial business carried onby the corporation rendering ser-vices or making facilities availableor by another corporation that is amember of the same affiliatedgroup.Although Code Section 6166 has

been expanded to include interestsin larger companies and partner-ships engaged in a broader range offinancial activities, the deferralperiod for estates that hold suchinterests has been decreased. Theinstallment limitation for tax pay-ments is reduced from ten to five. Inaddition there is no five year graceperiod after the date the estate taxreturn is due. Thus, the effectivefourteen year deferral period for thetraditional interest in a closely heldbusiness has been reduced to fourfor the expanded interests.

Qualified Family Owned BusinessInterest Repeal

For estates of decedents dyingafter 2003, the rule which permittedexecutors to exclude all a portion ofthe value of a family held businessfrom a decedent’s estate1 6 isrepealed. The extra exemption pro-vided by QFOBI relief is effectivelyswallowed by the increase in avail-able exemption effective in 2004—up to $1.5 million. Thus there is no“net loss” to taxpayers from therepeal. However, the recapture pro-visions of QFOBI relief are retained,even after repeal. Under the recap-ture provisions, if an interest fromwhich relief was elected is soldwithin ten years of the filing of theestate tax return claiming the exclu-

sion, the tax is recaptured. Thus,although the estate tax is suspendedin 2010, because QFOBI reliefexpires as late as 2003, an estate thatclaimed the exclusion could be sub-ject to estate tax in the form of recap-ture as late as 2013..

Conservation Easements Broadened

The 2001 Tax Act significantlybroadened the rule for the exclusionof certain conservation easementsfrom a decedent’s gross estate.17 Theact eliminated the requirement thatthe land subject to the easement belocated near areas such as a nationalpark or historic building. Effectiveupon enactment, the only require-ment for location of the real propertysubject to the easement is that it be inthe United States or one of its posses-sions. However, like QFOBI relief,the recapture provisions of the con-servation easement exclusion willremain effective even after repeal.

Residential ReliefUnder Code Section 121, taxpay-

ers may exclude up to $250,000($500,000 for married taxpayers fil-ing jointly) of gain realized on thesale or exchange of a principal resi-dence from gross income. Forestates of decedents dying after2009, the exclusion of gain on thesale or exchange of a principal resi-dence carries over to the decedent’sestate, heirs and a trust establishedby the decedent that immediatelyprior to the decedent’s death, was aqualified revocable trust.1 8

Generation Skipping TransferTax Provisions

Increased ExemptionAs noted above, the GST exemp-

tion amount is scheduled to increaseduring the next eight years to a max-imum of $3.5 million in year 2009,prior to repeal in 2010. After repeal,the exemption returns to its pre -2001 Tax Act level of $1,060,000. (SeeTable in EXHIBIT A).

Automatic Allocation for Indirect Skips

Prior to the 2001 Tax Act, the Codeprovided certain relief in the form adeemed allocation of GST exemp-tion for transfers during lifetime to aperson (including a trust in whichgrandchildren or lower generationsare the only present and future ben-eficiaries) who is more than one gen-eration below the transferor. Thetransfer to the “skip person” wouldbe allocated sufficient GST exemp-tion to make the inclusion ratio forthe property equal zero, i.e., to makethe transfer exempt from GST tax.However, the Code did not providefor such automatic allocation of GSTexemption in the case of transfers toso-called “dynasty trusts.” In a typ-ical dynasty trust a grandparenttransfers property to a trust, whichpays income to the parent (grand-parent’s child) for life and principalis held for the health, maintenanceand welfare of the parent. Upon thedeath of the parent, the trust is heldfor the benefit of the grandchildrenon the same terms, and this chaincontinues subject only to the state“rule against perpetuities” limita-tions, if any.

In the case of dynasty trusts, prac-titioners often failed to allocate a suf-ficient amount of the grandparent’sGST exemption to the trust underthe mistaken belief that such trustsqualify for the GST tax annual exclu-sion. Dynasty trusts do not qualifyfor the exclusion either before orafter the 2001 Tax Act. The transfersare not direct skips. However, if theparent dies, the result would be ataxable termination of the trust andthe transfer to the grandchild wouldbe fully taxable on the date of theparent’s death. The 2001 Tax Actadded new Code Section 2632(c)which provides for an automaticallocation of a transferor’s remain-ing GST exemption in “indirectskips,” where an indirect skip isdefined as any lifetime transfer ofproperty (other than a direct skip),

16

EXHIBIT A

MAXIMUM ESTATE AND GST TAX RATES AND EXEMPTIONS: 2001 to 2011

Calendar Year Estate / GST Exemption Estate and GSTMaximum Tax Rate

2001 $ 675,000/$ 1.06 million 55% + 5%2002$ 1 million/$ 1.06 million 50%2003$ 1 million /$ 1.06 million 49%2004$ 1.5 million 48%2005$ 1.5 million 47%2006$ 2 million 46%2007$ 2 million 45%2008$ 2 million 45%2009$ 3.5 million 45%2010 Tax repealed for one year 0%2011 $1 million/$ 1.06 million 55% + 5%

17

EXHIBIT B

GIFT TAX RATES AND EXEMPTIONS: 2001 to 2011

Calendar Year Gift Tax Exemption Gift Tax Maximum Rate2001 $ 675,000 55% + 5%2002 $ 1 million 50%2003 $ 1 million 49%2004 $ 1 million 48%2005 $ 1 million 47%2006 $ 1 million 46%2007 $ 1 million 45%2008 $ 1 million 45%2009 $ 1 million 35%2010 $ 1 million 35%2011 $1 million 55% + 5%

which is subject to gift tax and ismade to a GST trust1 9

Administrative Relief - Late Elections

Prior to the effective date of the2001 Tax Act, there was no authorityfor an extension of time for a practi-tioner to file an election to allocateGST exemption to a transfer. Thus,if a gift tax return was not timelyfiled, the value of the gift to whichGST exemption was allocated wasthe value of the property transferredas of the date of the filing the late

election with the IRS, rather than thedate of the gift. This often resultedin a “loss” of GST exemptionbecause of the increase in value of anasset such as stock.

The 2001 Tax Act directed theTreasury Secretary to prescribe reg-ulations setting forth circumstancesand procedures under which exten-sion of time to make allocations willbe granted. Notice 2001-50,2 0estab-lished that the standards and proce-dures used by the IRS will be similarto those used to determine whetheradministrative relief should be

granted in other contexts2 1. Thus,although the IRS will generally baseits decision on all relevant facts andcircumstances, the primary determi-nation will be whether the transferoracted “reasonably and in goodfaith.”2 2 A transferor may meet thisstandard because of reasonablereliance on a tax return preparer orother tax professional who failed totake the proper action or because ofa misunderstanding based on thecomplexity of the law. In eithercase, practitioners should review theGST allocations of their clients and

act swiftly to request relief, if neces-sary.

ConclusionThe uncertainty of repeal is the

only thing that is certain at thispoint. Forgetting for a moment thatrepeal came with a giant stringattached— mandating that it bepulled back after a mere year in exis-tence— there remain five congresses

and potentially three Presidentialadministrations that this legislationmust survive. The events of Sep-tember 11, our military response andthe effects of a slowing economy onthe anticipated budget surplusesprovide further reason to questionpermanent repeal. What we maysee instead is a gradual decrease inthe top estate and GST tax ratescombined with the gradual increase

in exemptions until the point whereonly those estates in excess of $4 or$5 million would be subject to tax.Of course, itit’s anyone’s guess whatthe reality of repeal will be comeNew Year’s Eve 2009, but one thingis certain, to neglect estate planningin anticipation of repeal is fool-hearty.

18

1 Pub. L. No. 107-16 (6/7/01)2 All references to the Code are references to the

Internal Revenue Code of 1986, as amended.3 William M.Vandenburgh and Philip J.

Harmelink, Transfer Taxes - The Uncertainty ofDeath and Taxes, Journal of Accountancy, 10-01J.A. 95 (October 2001)

4 Ronald D. Aucutt, An A-to-Z to Do List FollowingEGTTRA, Estate Planning, 28 Est. Plan. 606,December 2001.

5 Transfers to spouses, during life or at death, aregenerally exempt from transfer tax.

6 Vanderburgh and Harmelink, 10-01-J.A. 95(October 2001); Jeffrey K. Eisen, Estate PlanningUnder 2001 Tax Act Presents New Challenges, 28Est. Plan. 515 (November 2001).

7 A grantor trust is a trust from which all income,gain, loss, deduction and credit are attributed tothe grantor for tax purposes.

8 The highest personal income tax rate is reducedby the 2001 Tax Act to 35%, effective 2006.

9 Code Section 1022(b)(2)

1 0 Code Section 1022(b)(2)(c)1 1 Code Section 1022(c)1 2 Code Section 1022(d)1 3 Pub L. No. 96-223, Sec. 401(a) (repealing Sec.

2005(a)(1) of Pub. L. 94-455 (effective for dece-dents dying after 12/31/1976)

1 4 Code Section 61661 5 Code Section 6166(b)1 6 Code Section 20571 7 Code Section 2031(c)1 8 As defined in Code Section 645(b)(1)1 9 New Section 2632(c)(3(B) defines a GST trust as

any trust that ultimately may produce a taxabletermination or taxable distribution except:- A trust which requires that 25% or more of itsprincipal be distributed to (or which permitssuch amount to be withdrawn by) a beneficiarywho is not a skip person (e.g., a child): (1) beforethe beneficiary reaches age 46, or (2) who is liv-ing on the date of death of another person iden-tified in the trust instrument who is more thanten years older than such nonskip beneficiary. If

a trust requires more than 25% of its principal tobe distributed to a nonskip beneficiary on theoccurrence of such an event, a transfer to such atrust will not qualify for the automatic allocation.- A trust which provides that if a nonskip persondies on or before a date or event described above,more than 25% of the trust principal (1) must bedistributed to the nonskip person’s estate or (2) issubject to the nonskip person’s general power ofappointment.

- - A trust any portion of which would be includedin the gross estate of a nonskip person (otherthan the transferor) if such person died immedi-ately after the transfer.

- A trust which is a charitable remainder annuitytrust, a charitable remainder unitrust a charitablelead annuity trust or a charitable lead unitrust.

20 Notice 2001-50, 2001-34 IRB 1892 1 See, e.g., Treasury Regulations Section 30

1.9100 et., seq.2 2 Treas. Reg. Section 301.9100-3(b)

SIGN UP A NEW MEMBER TODAY

Help your Section grow by signing up a newHelp your Section grow by signing up a newmember. Copy the membership form from themember. Copy the membership form from theback of this magazine and give it out at yourback of this magazine and give it out at your

local Bar Meetings.local Bar Meetings.

19

MID YEAR MEETING LUNCHEON

(l-r) Susan Howick, Joe Weeks and Wright Gammon.

Chairman Lester S. Tate, III, presents Sally Akins with her Chairmanplaque at the Mid-Year Section Luncheon

(l-r) Past Chair Sally Akins, Judge Marion T. Pope, Jr. andJudge Bonnie Oliver

(l-r) Ken Shigley, John Barrow, Secretary of State, Cathy Cox, Justice George H. Carley.

Chief Justice Norman S. Fletchergave a wonderful speech at theGeneral Practice and Trial SectionLuncheon held at the Mid-Year BarConvention

20

Many more of us are practicingas solos. Many more of us are notremembering to take a few minutesto plan for the unfortunate andunexpected termination of our abil-ity to practice law, such as anuntimely death. Taking a few min-utes to let our loved ones knowhow we manage our practices andpreparing one or two documentswill maximize the value of ourpractices to our estates.

Should you suddenly die, yoursurvivor is faced with some uniquepost mortem problems:

n Pending matters must bereviewed immediately by anattorney to determine if a statuteof limitations is running, if a trialdate is pending, or a pleading isdue or an appearance scheduled.Courts, agencies, and opposingcounsel must be notified. In somecases the client may have to benotified immediately.

n Clients with pending mattersmust be notified, and their files

referred for proper handlingwith an equitable arrangementfor the estate to receive reason-able value for the work per -formed.

n Wills kept for safekeeping andother client property or funds,and closed files must bereturned, transferred, or proper-ly disposed.

n Where permissible, arrange-ments made for the sale of thepractice.

The uniqueness of the situation iscomplicated by client confidentiali-ty and control. Nevertheless, if asolo’s office is well organized andthe practitioner has prepared, theseproblems can be easily overcomeby a surviving spouse or estate rep-resentative. Most important is theprotection of a client’s claim orpending lawsuit. Time may be tooshort to wait for the review of thewill , or the appointment of areceiver. Without a system in placefor immediate review and action, aclient’s claim may be time barred ora pending matter may be forfeitedfor the failure to timely file a plead-ing. How can your planning of afuture action on your client’s behalfbe documented for action by a suc-cessor? Your thoughts and plansfor your clients cannot be trans -ferred for action by a successor ifthe thoughts die with you. The keytherefore to a successful transitionof your clients’ matters is a wellorganized and well documentedpractice.

First and most important is thatyou have and use a calendaringsystem that is easy to understand.The first place a successor willsearch, with or without the assis-tance of your office staff, if youhave one, will be your current cal-endar where, hopefully, you havedocumented all your deadlines,client appointments, court hearingsand appearances, deadlines forcourt filings, and even statutorydeadlines for every matter fromlimitations on actions to motionsand pleadings.

Second, you need to record thecontact information for every oneof your open files; such as clientname, address and phone number,type of matter, date of any statuteof limitation, other contacts such asopposing counsel’s address andphone number, and alternativecontacts.

With these two important prac-tice tools in place and current, it isimportant for you to leave instruc-tions to your survivor how to usethem. With this information a sur-viving spouse or successor attorneywill have an easier time of notify-ing the right people of youruntimely demise and getting timefor replacement counsel. If astatute is running, the client can beimmediately contacted andarrangements made with substitutecounsel to see that the appropriatewrit or pleading is timely filed.Immediate situations resolved,your survivor will have time tomake a proper disposition of your

When I die...By Martin N. Ghen

“We carry an awful lot of information

in our heads -and when we’re

gone, it’s gone too.”

Ross A. Sussman, Esq.

21

open files, dispose of client proper-ty and closed files, and, if allowedin your jurisdiction, for the sale ofthe law practice.

The best way to leave theseinstructions is in a letter to your sur-viving spouse or significant other.This letter should spell out theimportant office systems and proce-dures you use, things that will haveto be done and when, who shoulddo them, and other pointers to assistin the winding up of your law prac-tice. Also, you must discuss thisinformation with that importantperson. Both of you should makegood notes and an outline of thingsto be done. The best procedure is todiscuss what will have to be done,show your loved one where the doc-uments and information are located,and be sure he or she knows youradvisors. Then write the letter anddiscuss it. The first time may be thehardest, but it is most important.You both should review and updatethe letter annually. I have tried totake into consideration that many ofus rely on computer programs andstored data. If not, referencesshould be made to your unique cal-endaring or client filing system. Ichose to write to my wife, and Irepeat this introduction . . .

A SAMPLE LETTER

Dear...

When I die, there will be a lot ofthings to do. But, before I explainthem, let me thank you for yourlove, support, and encouragement.We’ve had a good life together and

I’m gone, I want to make the detailsas easy as possible for you. That’swhy I like to meet with you eachyear to review and update this let-ter. This is a summary of the thingswe discussed. While there aremany items, I have divided theminto sections because not every-thing has to be done at once.

FOR IMMEDIATE ACTION

Client Matters: You should contactmy secretary Susan and as soon aspossible you and she can meet at theoffice. It is important for her toreview my calendar for the immedi-ate future to take the appropriateaction to notify the client, court andopposing counsel. Each client fileand directory in the computer con-tains an “Information” form withthe important contact information.You can ask my good friend LindaShick to help with those litigationmatters that need immediate atten-tion. She is a very competent trialattorney and she is familiar with thetype of personal injury matters I ampresently handling. If immediateaction is required on other types ofmatters, Linda can seek help if sheneeds it from my brother Greg, orRobert Ruehl whom we met with todiscuss our estates and prepare ourwills.

Bar Associations: I have beenactive in the Solo and Small FirmSection of both the PennsylvaniaBar Association and Bucks CountyBar Association. I suggest you callSection Relations Coordinator atPBA, Michael Shatto (800-932-0311)to let him know of my demise.

Also contact Ellen Friedman, LawPractice Management Coordinatorfor the PBA with whom I work onvarious projects (800-932-0311, ext2228). You may want to post anotice on our listserver. At theBucks County Bar Association,please contact Patricia Martin,Executive Director (215-348-9413),and the Chairman of our section,Nancy Taylor (215-340-5039).These persons are aware of myactivities and will see that someonetakes over my projects. I’ve tried tokeep the Bar Association materialup-to-date. The project files I havebeen working on should go to theappropriate association.

Our Wills and Trusts: These docu-ments are in my office desk filedrawer under “Wills and Trusts.”

FOR ACTION IN FIFTEEN DAYS

Insurance: I have put a “PersonalNotebook” together and you willfind it in my office desk file drawer.Section I contains a summary of mylife insurance, including the poli-cies and claim forms. Our otherinsurance - home, car, and accidentpolicies, are summarized and theactual policies there. Section II hasmy business policies. I am sure youwill be in touch with Irv Rubin, ourinsurance agent and friend, aboutthese policies.

Financial: In addition to the insur-ance money, there will be moneyfrom the law practice, social securi-ty, and other investments. I suggestyou sit down with our accountantGerald Cherry (215-348-5477) and

Every lawyer owes it to his family and those who have to pick up the pieces of his professional affairs after death to make

arrangements while his health is good and his mind is clear for the eventuality of death.”

—Scott McArthur, Esq.

22

discuss your entire financial andincome situation with him. I’vemade a rough draft of the incomeyou might expect and put it inSection III of the notebook. Also, mybanker is Terry McGlinchey atHarleysville (215-230-5532). He isknowledgeable about my businessfinancial accounts. You will findthat if I have a balance on any linesof credit which I use in some litiga-tion matters, it will be covered byinsurance. He can discuss these andother banking matters with you.

FOR CONSIDERATION INTHIRTY DAYS

Office: I have put a notebooklabeled “Office Notebook” in thedrawer next to the “PersonalNotebook.” In the Office NotebookI summarize the procedures I use inthe office to open and close files. Idescribe my billing practices andbilling system, as well as where andhow to find my client lists of bothopen and closed files. As you knowI am an advocate of using the com-puter to the max so my client mat-ters are in WordPerfect directories,and the client lists and billings are inTime and Billing. Unfortunately, Ihave not acquired a computerizedbookkeeping system, so you willfind the financial records under asafeguard system located in thebookkeeper’s desk. You rememberCindy, she is still my bookkeeperand will work with you and Jerry. Ialso describe other programs on ournetwork that I use for word process-ing and billing. You will see thatthe client files are kept in numericalorder and are in the cabinets. Alldocuments we create are in clientfolders alphabetized in WordPerfectdirectories. You should makearrangements with Susan andCindy regarding their staying onfor a time to help with the transi-tion of my clients’ matters and clos-ing the office.

FOR CONSIDERATION IN THENEAR FUTURE

Office Arrangements: ThePennsylvania Supreme Court hasjust changed the rules to allow theestate of a lawyer to sell a law prac-tice. This may or may not be aviable alternative for you, but youshould consider it . Besides the“good will” I may have created, ifyou could negotiate with a willingattorney to buy the practice, someof the advertising positions (phonenumbers) and the location of theoffice may mean additional incomefor the estate. Robert, Greg andLinda will discuss this possibilitywith you. The rules are new. Theclients must give their consent. Iwant to be sure they are wellserved. If a sale of the practice isnot to be, once my client mattershave been transferred to appropri-ate attorneys, any client propertyreturned, and the closed files prop-erly disposed of, you should sellthe books, furniture and equipmentor give it away to a charity.

Office Lease: The office lease withJeffrey Naftulin (215-348-5455) runsyear to year and it is in the OfficeNotebook. You should talk toJeffrey. I am sure he will cooperatewith you while this transitionprocess takes place. If the practiceis sold, the buying attorney maywant to keep the location and he orshe must come to terms withJeffrey. If not, you and Jeffreyshould come to an agreement con-cerning terminating the tenancy.

Malpractice Insurance: In theInsurance Section of the OfficeNotebook is a copy of my currentmalpractice policy with WestportInsurance. The policy wasobtained through USI ColburnInsurance Service (610-833-1800).My contact there is Mary FrancesBenussi, she is a SeniorUnderwriter and she knows me

from my work with the PBA. Shecan help arrange for a special poli-cy to cover any claims against myestate. This coverage is importantand will protect you and my estatefrom any future claim. Also, retainthe old policies for as long as possi-ble in case they are needed.

Remarriage: Should you considerremarrying, and I hope you do, youshould have a Pre-NuptialAgreement. This agreement willinsure that all we have worked forduring our marriage will remainyour and our children’s property tohave and control. Please discussthis with Robert or an attorney ofyour choosing familiar with Pre-Nuptials.

Thank you for everything. Love.

Marty

Your letter, of course, should coveryour own particular and personalsituation. You should include ref-erences to your office procedures,location of important documentssuch as leases and insurance poli-cies, your advisors and professionalfriends. If you have a specializedpractice, it is important that yoursurvivor be directed to the rightprofessional who knows your typeof practice. The important thing isto let your loved one know thisimportant information about yourpractice and document that forwhen it may be needed.

Martin N. Ghen is a solo practi-tioner in Doylestown, PA. He isSecretary of the Solo and SmallFirm Section of the PennsylvaniaBar Association, and a Founderand Past Chairman of the Solo andSmall Firm Section of the BucksCounty Bar Association.

23

The First Annual General Practice and Trial SectionInstitute a Great Success

When youreceive nextyears programearly in the yearmake sure you register early as we expect a sell-out

Beautiful view of the oceanfrom the resort pavillion

The audience learned a great deal of valuable information fromthe excellent speaker presentation.

Mark Dehlerchaired thetrial practicesession on thelast day

RudolphPatterson,past chair ofthe sectionand past president ofthe State Barspoke onsocial securityappeals

Wild Dunes Resort, Isle of Palms, South Carolina

NOTES

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25

APPLICATION FOR MEMBERSHIP IN THE GENERAL PRACTICE & TRIALSECTION OF THE STATE BAR OF GEORGIA

For members of the State Bar of Georgia:

Name __________________________________________________________ State Bar # ____________

Address ____________________________________________________________________________

City, State & Zip ______________________________________________________________________

E-Mail: ______________________________________________________________________________

Application date __________________________

Cost: $35, payable by check to the State Bar of Georgia, 50 Hurt Plaza, 80 The Hurt Building,Atlanta, GA 30303

Signature

Susan L. HowickEditor, Calendar CallMacey, Wilensky, Cohen, Wittner & Kessler, LLPMarquis Two Tower, Suite 600285 Peachtree Center Aveue, NEAtlanta, Georgia 30303

GENERALPRACTICE& TRIAL SECTION

PRESORTEDSTANDARD

U.S. POSTAGEPAID

Atlanta, GeorgiaPermit No. 1447

GENERAL PRACTICE AND TRIAL SECTION STATE BAR OF GEORGIA

Georgia’s Largest Law Firm”

Vol. VI Summer 2002 No. 1

GENERAL PRACTICE AND TRIAL SECTION STATE BAR OF GEORGIA

Standing To Sue

Asset Protection Planning

When You Die...