Rather than merely post updates or addenda to existing posts, I will, from time to time, be posting comments under the "Walking the Dog" subject line that represent a more distanced perspective on matters that had been the subject of earlier postings. And, it represents a great excuse to post pictures of Houston as an antidote to those detestable cat-bloggers (but see here).
In any event, some additional thoughts on Chawla and on the practice of newspapers linking (or, in the case of the Baltimore Sun, not linking) to source documents for their stories.
Chawla is technically an unpublished opinion. That is, it is not recommended for publication in the national reporting system and has no precedential authority. However, it still presents practical difficulties for planners.
The most well-known variety of trust that is designed to hold policies of insurance on the lives of the individual who established the trust is the so-called Crummey trust. Gallons of estate planning ink have been spilled describing these trusts and praising their virtues. I suspect that the total premiums paid to insurance carriers each year from Maryland residents for policies held by Crummey trusts is far in excess of the $2.45M that was at issue in Chawla.
Notwithstanding the fact that Chawla is technically "unpublished," it has been, for all practical purposes, published. Through this weblog for instance and in weblogs such as the E-LawLibrary. Is publication via a weblog with an admittedly limited readership sufficient to put practitioners on notice that there may be a fatal defect with the Crummey trust concept? Does the discussion in other professional internet outlets and the Washington Post create a situation wherein a practitioner should know of the case?
Even though the case is not precedential. What does that mean, as a practical matter, to a planner offering advice? Can he or she simply ignore the opinion? How does the planner deal with factors in the opinion that undermine its value? For instance, in Chawla the beneficiary of the trust was a person who had previously been informed that she had no insurable interest in the life of the creator of the trust. Does that mean that a trust has an insurable interest if it has as its beneficiary a person who does have an insurable interest in the creator's life (e.g., the trust settlor's child)?
As to the first question, I do not believe that we need to stop forming trusts that hold life insurance policies. At the worst, there should be a legislative fix in place by next year since there would seem to be no overarching public policy reason for the decision other than that the Court felt that it was constrained by the statute and rules of statutory interpretation. However, we are probably now required to tell clients that there is a decided case that casts a bit of a shadow on this planning technique. I believe that we are also required to inform clients who already have trusts in place that hold insurance policies if we have continuing contact and activity with respect to the clients and the trusts. We do not, however, have to contact all clients for whom we have formed trusts that continue to hold insurance policies, since we have no continuing obligation to these clients once our representation is concluded.
As to the second question, I think that we have to read the opinion as it was delivered. That is, the opinion holds, without any qualification, that trusts cannot be the beneficiaries of life insurance policies, except as set forth in the narrow exception explicitly set forth in the statute. We can tell clients that we hope that there will be a judicial "gloss" that limits the opinion, just as we could tell clients that it is, in our opinion, unlikely that other courts will reach the same conclusion. But we should not mislead clients as to what Chawla says. It says what it says, not what we hope it says.
I attempt whenever possible to link the source of material that I am discussing. I do this because it allows the curious reader to jump to the material and determine for himself or herself whether my discussion was fair and complete. Where, as was the case with Chawla, the source material is not publicly available on the web, I post it on my website and link to that location. This procedure should be standard operating procedure for all news media.
It is all well and good for newspapers to discuss and excerpt, say, the President's State of the Union Address. But they should provide an easily available link to the text of the speech. In cases like The Sunpapers v. Ehrlich, where the documents are not freely available online, mainline media should make them available online and then link to them. In that way, the reader can make a decision as to whether he or she wants to read the reporter's views on the way in which the case is developing or to read the actual filings for himself or herself to make his or her own determination. Seen in that regard, newspapers and other media become not a final destination, but a point of embarkation.
As I mentioned at the time, I thought that the Sun was not serving it's readers well when it failed to make the source documents in its lawsuit with the Governor widely available. Obviously, in many cases, news media will be our only "eyes and ears" to current events. War reporting, for instance, cannot be formated in such a way that it can be easily linked to. But when reporting on public debates on policy issues, Social Security for instance, links to source documents should be readily available. Thus, readers should be informed that (i) the various predictions as to when, if ever, the Social Security trust fund begins to run dry were conclusions developed using a variety of statistical assumptions, (ii) that the assumptions and conclusions are set forth in lengthy reports which can be easily downloaded from the web,and (iii) the reader should be given the urls where the reports can be obtained. While most readers will lack the time or inclination to read the reports, at least the media will be acting as honest brokers in giving them a roadmap to further information.