Free for All: Cool Books for Hot Days

Remember that mimeographed sheet of paper you always received as the school term ended for the summer—the summer reading list? Remember afternoons spent curling up with a “classic for young readers” in the porch glider and going on apple-fueled journeys across the high seas, to distant and exotic lands?

We treasure those memories, and while none of us has as much time these days as we’d like for pleasure reading, VBA leaders have offered the following recommendations for good summer reading:

Prodigal Summer, Barbara Kingsolver. This will be a good read for anyone who cherishes the mountain communities of Southwest Virginia, the people, the places, and the fauna and flora. We read The Poisonwood Bible subsequently and realized that Prodigal Summer is practically light reading compared to Poisonwood Bible. Both are excellent.
Harriette Shivers, Executive Committee

A Conspiracy of Paper, David Liss. A novel depicting the months leading up to the South Sea Bubble of 1720, the first stock market crash in the English-speaking world. The characters are both fictional and historically real, and through them, Liss weaves a tale of hot financial speculation, prostitution and petty street crime, social posturing among the wealthy, and political intrigue at the highest levels.
“M”–The Man Who Became Caravaggio, Peter Robb. A remarkable act of scholarship detailing – almost on a weekly basis – the life of the painter Caravaggio from 1571 until his death in 1610. The author draws from criminal court records – Caravaggio was a recidivist street-brawler – as well as property records from across Europe, papal correspondence, the Roman newsletters that served as the16th century version of People magazine, and the paintings themselves.
Jayne Barnard, Executive Committee

Wait Until Next Year, Doris Kearns Goodwin. If you like memoir and history as well, this humorous and well-written story of growing up in the 1950s as an avid Dodgers fan will please you. (You will possibly wonder if the scorekeeping skills she acquired while a very young baseball fan somehow developed into noted presidential biographer Goodwin’s skills as an historian.)
Jeanne Franklin, VBA President

Red Tails in Love, Marie Winn. This true-life tale of birdwatching in Central Park, with celebrity, drama and adventure mixed in — all about two romantic hawks who decide to make their nest on a classy Fifth Avenue apartment building and the uproar that causes — will transport you. Puts life in refreshing perspective.
Dr. Bill Franklin, Friend of the VBA

Titan: The Life of John D. Rockefeller Sr., Ron Chernow. I recommend this book as great summer reading. Although it is lengthy, I found it fascinating throughout. Chernow’s style is most readable and his research impeccable. Rockefeller’s life was truly stranger than fiction and full of ironies. His father was an itinerant “snake-oil” salesman (also a bigamist) and yet Rockefeller went on to contribute more to world health than any person in history. Rockefeller was a religious fundamentalist and major benefactor of his church, who often used a less than religious business ethic in fashioning one of the great corporate dynasties in America. These events and a great deal more are all revealed masterfully in this first-rate biography.
Ed Betts, VBA President-elect Return to Top

President's Page: Thoughts of Summer
Jeanne F. Franklin

This summer, perhaps you will make time for

Quiet moments of the mind
Freeing memories to pass across it,
Giving rise to thoughts of friends, interesting acquaintances . . .
Pictures of those you love, each one;

Recollection of good advice, given or received,
Of encouragement, given or received,
Of kindness experienced,
Of work well done, work that was sound and true;

Appreciation of a danger averted,
A precipice of error pulled back from as though by an invisible force.

I wish you

The ability to recognize each such blessing, however slight or disguised,
To feel their accumulation, lifting the weight of any fatigue or unresolved problem,
A refreshed, rested strength
Like that felt in the gentle air of an early summer day.

I wish you such quiet moments of the mind.

Return to Top

Spotlight on Sections: Wills, Trusts & Estates Section
Helping people plan — and proposing legislation — for a more secure future

The Section on Wills, Trusts and Estates has had a busy year, but that is not really unusual.

As always, we proposed several bills that were enacted by the legislature. Among our more important legislative successes were:

• HB 1729, which specifies that a provision for a nonprobate transfer on death in an insurance policy, contract of employment, bond, mortgage, promissory note, certificated or uncertificated security, account agreement, custodial agreement, deposit agreement, compensation plan, pension plan, individual retirement plan, employee benefit plan, trust, conveyance, deed of gift, marital property agreement, or other written instrument of a similar nature is nontestamentary.

• HB 1730, which clarifies and validates the existing practice of some schools and charitable corporations that now serve as trustees of various split-interest trusts and pooled income funds.

• HB 1731, which removes the presumption that property held jointly is held as such for the convenience of the primary owner.

• HB 1733, which eliminates the rule that a trustee of a testamentary trust has 90 days after qualification as trustee to notify the beneficiaries of the trust that the decedent waived the filing of annual accountings of the trust. The trustee is still required to notify the beneficiaries, but it is no longer required that the notice be given within 90 days.

We also organized the 22nd Annual Advanced Estate Planning and Administration Seminar, held at the Tides Inn, Irvington, Virginia (as were each of the past 21 seminars). As always, the seminar was a sell-out, with more than 180 attorneys hearing major national and Virginia estate planning experts address topics such as dynasty trusts, business succession planning, and premarital agreements.

Our Section is always busy, and we are always looking for members who want to help us improve the state of the Virginia law of wills, trusts and estates. If you are interested, please contact the VBA about section membership at www.vba.org.

—Howard Zaritsky, Chair Return to Top

Legal Focus: Wills, Trusts & Estates Section
How Repeal of the Estate Tax Will Affect Estate Planning
by Howard M. Zaritsky

The modern estate, gift, and generation-skipping transfer (GST) taxes began in 1917, with an estate tax law enacted to help defray the cost of military preparedness associated with World War I.1 On May 26, 2001, however, Congress passed “The Economic Growth and Tax Relief Reconciliation Act of 2001” (“the 2001 Act”), which reforms the estate, gift, and GST taxes, increases the available exemptions, and then ultimately repeals the estate and GST taxes in 2010. This article examines how these changes will affect estate planning.

I. WEALTH TRANSFER TAX REFORM AND REPEAL UNDER THE 2001 ACT
The 2001 Act repeals the estate and GST taxes in 2010 and makes several other important changes in the estate, gift, and GST taxes during the next nine years.

A. Phase-Out of Estate and GST Taxes
The 2001 Act repeals the estate and GST taxes with respect to estates of decedents dying after December 31, 2009, by reducing the top marginal rate between 2002 and 2009, and then repealing these taxes outright in 2010. The 2001 Act reduces the rates with respect to estates of decedents dying before January 1, 2010, as follows:

B. Increased Exemptions
The 2001 Act increases the unified credit available against estate taxes from its present $675,000 exemption equivalent, to the equivalent of a $1 million exemption in 2002, a $1.5 million exemption in 2004, a $2 million exemption in 2006, and a $3.5 million exemption in 2009.

The 2001 Act ties the GST exemption to the limits on the estate tax exemption after 2003. This leaves the GST exemption at its present level of $1,060,000 plus indexing for inflation in 2002 and 2003. The GST exemption then raises it to $1.5 million in 2004, $2 million in 2006, and $3.5 million in 2009.

C. Retention of Gift Tax
The gift tax rate is the same as the estate tax rate, so the 2001 Act reduces the gift tax rate between 2002 and 2009. The 2001 Act does not, however, repeal the gift tax in 2010. Instead, the 2001 Act reduces the top gift tax rate in 2010 to the same percentage as the top individual income tax rate, which is scheduled to drop to 35 percent in 2006. The 2001 Act also caps the gift tax exemption equivalent at $1 million, without the additional increases after 2002.

Retaining the gift tax with a top rate equal to the highest marginal income tax rate applicable to individuals has the effect of imposing a flat 35 percent gift tax, because the first gift tax rate bracket on gifts of over $1 million (the new gift tax exemption equivalent) is 41 percent, which is then reduced in 2010 to the highest individual income tax rate.

D. State Death Tax Credit
The 2001 Act eliminates the state death tax credit with respect to estates of decedents dying after 2004, and reduces the allowable credit by 25 percent for estates of decedents dying in 2002, by 50 percent (from present amounts) for estates of decedents dying in 2003, and by 75 percent (from present amounts) in 2004. After 2004, an estate would be allowed a deduction for state death taxes, rather than a credit.2

E. Carryover Basis
The 2001 Act adopts a carryover income tax basis for property received from a decedent after 2009, when the estate and GST taxes have been repealed. Currently, an individual receives an adjusted income tax basis in assets received from a decedent equal to the fair market value of those assets on the date of death or, if elected by the decedent’s executor, the alternate valuation date.3 Thus, the 2001 Act replaces an estate’s liability for estate and GST taxes with liability of the estate and beneficiaries for income taxes on capital gains (but not losses) that have accrued in a decedent’s assets on the date of his or her death.

The 2001 Act would carryover to the heir the decedent’s adjusted basis in property received from the decedent (including certain property transferred by the decedent during life, if the decedent retained a right to revoke or a right to or control beneficial enjoyment). The heir will receive a basis equal to the fair market value of such assets, if that is lower than the decedent’s adjusted basis.

A decedent’s executor would, however, be permitted to increase the adjusted basis in a decedent’s assets to the lesser of $1.3 million, though the basis in no asset could be incresed beyond its actual value on the date of death. Additionally, the basis of certain property transferred to a surviving spouse could be increased by up to $3 million.

The $1.3 million figure would be increased by any unused capital losses, net operating losses, and certain “built-in” losses of the decedent, and both the $1.3 million and $3 million figures would be indexed for inflation.

The estates of nonresidents who are not U.S. citizens would be allowed a basis increase only up to $60,000 (but also indexed for inflation after December 31, 2010).

Some assets, such as retirement plan benefits and other items of income in respect of a decedent, would not qualify for these basis adjustments.4

After 2009, the carryover basis rules would be enforced, in part, by new reporting requirements. A donor would be required to report to the donee, and the donee to the IRS, certain information relating to basis and character of future gains with respect to all noncash gifts. Executors of estates that include more than $1.3 million in noncash assets or the decedents of which have transferred appreciated property received by a decedent within three years of death, would have to report similar data to the IRS and the recipients. Penalties would be imposed on failure to comply with these reporting requirements, unless due to reasonable cause.

The Treasury would be given authority to treat a transfer that purports to be a gift as having never been transferred, if, in connection with such transfer (1) the transferor (or any person related to or designated by the transferor or such person) has received anything of value in connection with the transfer from the transferee directly or indirectly or (2) there is an understanding or expectation that the transferor (or any person related to or designated by the transferor or such person) will receive anything of value in connection with the transfer from the transferee directly or indirectly.

F. Other Changes
The 2001 Act also makes several relatively technical changes in the estate, gift, and GST taxes. Specifically, the 2001 Act: (1) repeals the Qualified Family Owned Business Interest Deduction under Section 2057, with respect to estates of decedents dying after 2003; (2) slightly expand the availability of the deduction for conservation easements granted by an estate; (3) slightly liberalize the rules for the deferred payment of estate taxes attributable to certain business interests, and (4) make it easier to allocate the GST exemption to various transfers.

II. ESTATE PLANNING UNDER THE 2001 ACT
Estate planning will continue to be important, regardless of what happens to the estate, gift, and GST taxes. In many respects, however, estate planning will be more complicated, especially during the next eight years, than it has been in the past.

A. Planning for Lower Rates
The reduction in the estate tax rates should have little effect on estate planning, because most clients will be as interested in avoiding a 45 percent estate tax as in avoiding a 55 percent tax, and the same techniques that traditionally have been used to reduce or avoid estate taxes will continue to be utile. Of course, the reduction in a client’s projected estate taxes on account of lower rates will reduce liquidity requirements for an estate, and may result in a reduction in the need for life insurance and other techniques to create liquidity.

Attorneys should, however, be very careful about reducing the face amount of life insurance policies when the presently-foreseeable liquidity needs have dropped. Future growth in the value of the estate assets can increase liquidity demands, possibly when the client’s health has deteriorated and the cost of additional insurance has greatly increased. It may be better to borrow against policies that now seem to be larger than is otherwise necessary, thereby decreasing the coverage and increasing the assets available for other investments.

B. Planning for Increased Estate, Gift and GST Tax Exemptions
The increase in estate, gift, and GST tax exemptions will, however, cause estate planners to modify their practices in several respects. The most obvious effect is that some moderate-sized estates will cease to be subjected to estate taxes, and will no longer require complicated tax planning. In particular, estates of less than $1 million in 2002, can be planned without concern about estate, gift, or GST taxes. These estates might also require little special planning for carryover basis after 2009, because of the $1.3 million minimum basis adjustment.

A client whose estate plan leaves a marital share for the benefit of a surviving spouse and a nonmarital share for the benefit of a very different set of beneficiaries, should reconsider the effect of the formula clause that divides the estate between these two shares. A reduce-to-zero formula clause that creates a nonmarital share equal to the estate tax exemption may create an unintended result as the estate tax exemption is increased.

For example, in 2006, the exemption equivalent of the unified estate tax credit will be $2 million. A reduce-to-zero formula clause would raise the nonmarital share from $675,000 (in 2001) to $2 million (in 2006). The marital share for a client with a $3 million adjusted gross estate would drop from $2,325,000 to $1 million.

In such situations, it might be wise to consider a “cap” on the size of the nonmarital share, that prevents the nonmarital share from growing to the full size of the estate tax exemption. Of course, such a cap will cause the surviving spouse’s estate to be larger than it might otherwise be, but the increased exemptions may still protect the surviving spouse’s separate estate from estate taxes.5

C. Planning for Promised Repeal
Estate planners will need to adjust in several ways to the promised repeal of the estate and GST taxes. First, and probably the most significant, attorneys will need to explain to existing and future clients the continued need for estate planning, even if the estate and GST taxes disappear. Good estate planning will still be important to: (1) assure the correct disposition of the client’s assets; (2) provide appropriate management of the client’s assets in case of disability, and for the benefit of surviving spouse and other family members; (3) avoid unnecessary administration expenses; (4) limit the claims of creditors, including the former spouses of a beneficiary; and (5) avoid or minimize family disharmony in light of multiple marriages and family groups and dysfunctional relationships between family members.

Practitioners should also stress to clients that a phased-in repeal does not guarantee that repeal will ever come. What one Congress promises, the next may take away. We should, for example, consider that, in 1981, Congress enacted a phased-in reduction in the top estate tax rate from 70 percent to 50 percent. The top rate dropped as far as 55 percent, when Congress postponed the final rate cut, to preserve revenues. The final rate cut to 50 percent became effective on January 1, 1993, but later that year Congress retroactively restored the 55 percent top estate, gift, and GST tax bracket.6

The same could occur with the estate and GST taxes in 2008, when Congress faces the significant revenue losses that would attend final repeal of these taxes. Congress could, and might reasonably be expected to, decide at that time that a $3.5 million exemption and 45 percent top estate, gift, and GST tax rate constitutes a reasonable state of the law.

Furthermore, a the Tax Act of 2001 includes a “sunset”provision, that would undo the estate tax repeal (and other provisions) on January 1, 2011. This was required to comply with the Budget Acts of 1974 and 1990. If the Congress cannot agree on a bill to eliminate the sunset provision, the repeal would actually eliminate estate taxes only for estates of decedents who die in 2010.

D. Planning During the Phase-Out
Practitioners may believe strongly that estate tax repeal will never actually occur, but they must represent their clients in light of the statutory assurance that repeal will occur (albeit possibly temporarily) in 2010. This phase-out will have require several important changes in traditional estate planning.

First, estate planners should probably redraft most wills and revocable trusts for clients with estates greater than $1 million, to provide different dispositions depending upon whether there is or is not an estate tax (and the size of the estate tax exemption) on the date of the client’s death. This will give planners a good opportunity to discuss the client’s nontax objectives again, and to stress those objectives. For example, a client who has created very long trusts for descendants in order to save estate taxes at several generations, may wish to have trusts for descendants terminate earlier if there will be no estate tax.7

Second, estate planners should consider the effect of repeal of the estate tax on formula clauses. A reduce-to-zero formula that leaves to the nonmarital share the largest amount that can pass without estate taxes could create a 100 percent nonmarital disposition and no marital share, if the estate tax were repealed. Such a formula should contain an alternate arrangement if the client dies when there is no longer an estate tax.8

Third, estate planners should consider disclaimer-based estate planning, giving the surviving spouse the option of creating the estate tax saving trusts. This defers the actual decision-making process for the structure of the estate plan until after the first spouse has died, when the law may be more certain.
Fourth, estate planners should consider giving a trustee or other family member the right to modify or terminate a trust otherwise created to reduce wealth transfer taxes, if these taxes are repealed or very significantly modified. For example, the trustee could be allowed to distribute assets from a generation-skipping trust to the current adult beneficiaries, or to put a termination date on a perpetual trust, if there is no longer an estate tax to be avoided.

Fifth, estate freezing techniques, such as preferred-and-common corporate and partnership recapitalization and installment sales (including those to a grantor trust), will be important in avoiding substantial growth during the phase-out period. A client may die during the phase-out period, and one does not want to offset reduced rates and increased exemptions with increased estate values.

Sixth, attorneys should take special care in drafting natural death declarations (living wills) for clients whose age and health suggests that they have a reasonable chance of dying during the phase-out period. One may want to keep the client alive until the following calendar year, to take advantage of increased exemptions, reduced rates, or even full repeal. The duration that a client’s family will want the client to be kept alive will depend on family sentiments, the client’s expressed sentiments, the date on which the issue becomes immediately important, and the size of the client’s estate.

E. Planning Lifetime Gifts
Many clients with taxable estates will still make taxable gifts to the extent that they have sufficient gift tax exemption and $10,000 gift tax annual exclusions to avoid current tax payments. The increased gift tax exemption could prompt some clients to make even more taxable gifts, utilizing grantor retained annuity trusts (GRATs), irrevocable life insurance trusts (ILITs), qualified personal residence trusts (QPRTs), and other acronymous transactions to a greater degree than before.

During the phase-out period, however, one should avoid planning strategies that require the actual payment of gift taxes. A client should be cautious about paying a gift tax in an effort to avoid an estate tax that will either be reduced or repealed before the client’s death.

F. Planning for Carryover Basis
Substituting carryover basis for the estate tax could substantially increase the total taxes imposed on a surviving spouse receiving an estate of more than $4.3 million. The unlimited estate tax marital deduction currently eliminates all estate taxes on such an estate, but the present basis rules eliminate all taxable gains on the sale of such assets. The 2001 Act eliminates the estate and GST taxes on such an estate, but impose income taxes on any untaxed gain extant on the date of death.

Replacing the estate and GST taxes with carryover basis leaves a serious need for planning to take the maximum advantage of the substantial exemptions that will be allowed under the carryover basis rules. The law allows executors to allocate the new basis adjustments among assets, and it may become appropriate to compel allocation of such exemptions first to assets that, if sold, would produce ordinary income, and that are not passing to charities or nonresident alien individuals.

The $3 million marital deduction basis adjustment means that, even after repeal of the estate tax in 2010, wills and revocable trusts may still need to set aside a marital share at least equal to the amount that will attract the maximum basis adjustment. This may raise serious fiduciary problems, because the value of the marital share will be less important than the basis of the assets, and the allocation of high-basis assets will result in the creation of a much larger total marital share than would the allocation of low-basis assets. Presumably, the drafter should specify in the document whether the fiduciary should allocate the lowest total value of assets sufficient to utilize the entire $3 million additional basis adjustment, the highest value of such assets, or assets which fairly represent the total of appreciation and depreciation, but are sufficient to attract the $3 million additional basis adjustment.

Also, carryover basis means that estates that hold substantial interests in closely-held businesses or other illiquid assets will still need life insurance to pay the capital gains taxes on the profits from the sale of those assets after death. There will not be a certain sale within nine months after death, but unless there are clear successors, sale is certainly probable.

III. CONCLUSIONS
Estate planners have always needed to cope with reforms and revisions in the tax laws that govern much of their practice. Repeal would certainly pose a greater obstacle than the other reforms that have been enacted, but a nine-year phase-out is not an immediate repeal, and good estate planning will always remain a priority for intelligent clients.

Furthermore, the possible repeal of the estate and GST taxes means that estate planning attorneys must now, more than ever before, base their estate planning practices on relationships, rather than transactions. The estate planning attorney must be the family counselor, advising on all related areas of law, and must reduce his or her reliance on the mere preparation of wills and trusts.

It will be up to intelligent estate planners to adapt to meet the needs of their clients.

NOTES
1. More remote antecedents to the modern wealth transfer taxes include a federal documentary stamp tax on wills in 1797, 1 Stat. 527, a federal inheritance tax imposed in 1862 to help finance the War Between the States, 16 Stat. 256, and an estate tax included in the War Revenue Act of 1898, 30 Stat. 448. See B. I. Bittker & L. Lokken, Federal Taxation of Income, Estates and Gifts § 120.1.1 (2nd ed. 1991); and Eisenstein, “The Rise and Decline of the Estate Tax,” 11 Tax L. Rev. 223, 224-38 (1956). See also history of the estate tax in Knowlton v. Moore, 178 U.S. 41 (1900).
2. The deduction for state death taxes would be allowed only for taxes that are paid by the estate (a) within four years after the federal estate tax return is filed, (b) within 60 days after a Tax Court decision determining the estate tax liability becomes final, (c) the expiration of the deferred period for paying estate taxes to which Section 6166 applies, or (d) the expiration of the statute of limitations for filing a claim for refund or 60 days after the decision of a court regarding such a refund becomes final.
3. Int. Rev. Code of 1986 § 1014. The alternate valuation is usually the date six months after the date of death. Int. Rev. Code § 2032. Certain assets, such as retirement plan benefits and other items of income in respect of a decedent, are not eligible for the basis adjustment under Section 1014.
4. The 2001 Act includes several special rules affecting the impact of the new carryover basis rules. Specifically: (a) the character of gain on the sale of property received from a decedent’s estate would be determined by the character that would have applied had the property been received by gift, so that depreciation recapture and similar sources of ordinary income would be carried over from the decedent to the heir; (b) Section 684, which taxes gains on gifts by a U.S. person to a foreign trust or estate, would be expanded to apply to transfers at death to nonresident alien individuals; (c) gain or loss on the transfer of property in satisfaction of a pecuniary bequest would be recognized only to the extent that the fair market value of the property at the time of the transfer exceeds its fair market value on the date of the decedent’s death, rather than its carryover basis; (d) no gain would be recognized by the estate on the distribution of such property to a beneficiary of the estate by reason of a liability in excess of the decedent’s basis; and (e) the $250,000 exclusion for the gain on the sale of a principal residence would be extended to estates and heirs, if the decedent used the property as a principal residence for two or more years during the five-year period prior to the sale.
5. An example of such language would be:
B. Estate Tax Exemption Share. The “Estate Tax Exemption Share” shall be a fractional share of my Residuary Estate.
(1) The numerator of the fraction shall equal the largest value of my Residuary Estate that can pass free of federal estate tax by reason of the unified credit and the credit for state death taxes, to the extent the use of such credit does not increase state death taxes, allowable to my estate, but not more than one million five hundred thousand dollars ($1,500,000). This value shall be determined after being reduced by reason of my adjusted taxable gifts, all other dispositions of property included in my gross estate for which no deduction is allowed in computing my federal estate tax, and administration expenses and other charges to principal that are not claimed and allowed as federal estate tax deductions. I recognize that leaving only one million five hundred thousand dollars ($1,500,000) as the Estate Tax Exemption Share may, in some cases, increase the estate taxes due at my *spouse*’s death, but I choose to impose this limitation on the Estate Tax Exemption Share in order to assure that my *spouse* receives an amount that I believe to be sufficient.
(2) The denominator of the fraction shall equal the value of my Residuary Estate.
6. Several courts have held that Congress has the authority to make such retroactive changes in the tax law. See NationsBank of Texas v. United States, 44 Fed. Cl. 661 (Ct. Fed. Cl. 1999); Kane v. United States, 942 F. Supp. 233 (E.D. Pa.1996), aff’d, 118 F.3d 1576 (3d Cir.1997); and Quarty v. United States, 170 F.3d 961 (9th Cir. 1999).
7. Attorneys should keep copies of the earlier documents, however, to facilitate further revisions if the estate tax is ultimately not repealed.
8. For example, the following language would create a fractional reduce-to-zero nonmarital share if there is an estate tax, and a 50 percent nonmarital share, if the estate tax has been repealed.
B. Estate Tax Exemption Share. The “Estate Tax Exemption Share” shall be a fractional share of my Residuary Estate.
(1) The numerator of the fraction shall equal the largest value of my Residuary Estate that can pass free of federal estate tax by reason of the unified credit and the credit for state death taxes, to the extent the use of such credit does not increase state death taxes, allowable to my estate. This value shall be determined after being reduced by reason of my adjusted taxable gifts, all other dispositions of property included in my gross estate for which no deduction is allowed in computing my federal estate tax, and administration expenses and other charges to principal that are not claimed and allowed as federal estate tax deductions. If, however, there is no federal estate tax in effect with respect to my estate on the date of my death, the numerator of the fraction shall instead be an amount equal to one-half (½) of the value of my Residuary Estate.
(2). The denominator of the fraction shall equal the value of my Residuary Estate.

About the Author: Howard M. Zaritsky is a retired attorney residing in Rapidan, Virginia. He formerly practiced with the firm of Zaritsky & Zaritsky, where his practice was limited to estate planning, estate administration, and related tax matters. He is chair of The Virginia Bar Association Section on Wills, Trusts & Estates. Return to Top

Legal Focus: Wills, Trusts & Estates
Expanding Your Estate Planning Practice
I. Mark Cohen

The multidisciplinary practice (MDP) issue is alive and controversial. Many respected lawyers are raising questions relating to three areas of concern: (1) the unauthorized practice of law, (2) law partnerships that include non-lawyers who “split fees” with the lawyers, and (3) a practice where a lawyer provides services beyond traditional legal services.

This article focuses on the third area, discussing the expansion of an estate planning law practice to one where the attorney, or those working under the attorney’s close direction or coordination, provide legal, accounting, tax, and financial/insurance planning services to the same client.

1. Why Do It?
In the course of representing an estate-planning client, a special bond of trust is established between the attorney and the client. To do a proper job, the attorney must learn from the client details of the client’s financial situation, health, family relationships, and personal problems, fears and triumphs. The attorney is entrusted with highly personal knowledge that the client would share with no one else. Armed with this information, the attorney crafts an estate plan that custom fits the client’s needs and goals.

Our clients, however, tend to see estate planning as a part of a larger package of services they need to manage their wealth. In this regard, they currently seek advice from a number of other professionals, including accountants, financial advisors, bankers, and insurance agents. Many clients consider their most valuable asset to be their time, and many become frustrated consulting with separate professionals, bringing each up to speed, and then managing or resolving any conflicts in the advice they receive, as one professional focuses on growth, another on income tax, a third on estate taxes, and so on. Most clients would prefer a focused advisory relationship with someone they trust who can develop and implement an integrated and coordinated plan.

2. Ethical Considerations
Can a lawyer provide non-legal services to his or her client? The answer has been clearly yes for some time.1 The concern appears to be more a matter of degree. Will the relatively large commissions involved in the sale of certain financial and insurance products overcome the lawyer’s professional responsibility to the client? Or perhaps more to the point, do the legal ethics that bind the lawyer in the practice of law even apply to the lawyer selling financial products to a client? What about sales to non-clients?

The safe answer is that professional responsibility follows a lawyer wherever the lawyer goes. Legal counsel have a proud history of integrity and loyalty to their clients. Clients expect their lawyer to maintain the high standards of independent judgment, confidentiality, competence, and loyalty in providing wealth-management services. It is this trust in putting the client’s needs above the lawyer’s that both grants lawyers the exclusive franchise to practice law and provides the most compelling reason for clients to choose their lawyer for wealth-management services.

3. Competence
Lawyers are typically held to a higher standard of competence than a lay person and can expect that this will continue with the addition of wealth-management advice to their practice. For the lawyer wishing to expand his or her practice in this area, the lawyer must become competent and knowledgeable in the fields of financial and insurance planning.2 While there are many avenues available to pursue such competence, the Certified Financial Planner™3 or CFP™ credential is emerging as the standard of excellence for competent and principled financial planning. The similarities between the self-regulating Certified Financial Planner Board of Standards, Inc. (the “CFP Board”) and the State Bar are remarkable.

For example, candidates wishing to obtain a certification to use the CFP™ credential must complete a prescribed course of education and work experience that typically takes three years. They must undergo a detailed background check; pass a two-day, 10-hour exam; agree to meet and maintain certain practice standards; complete 30 hours of continuing education every two years (including two mandatory hours of ethics); and abide by a code of ethics and professional responsibility that closely matches the legal professional responsibility guidelines. Lawyers will find the philosophy of the CFP Board comforting and familiar.

4. Same Advisor, Separate Firms: Legal and Practical Problems
A primary benefit for clients of the expansion of an estate planning practice into a wealth-management practice is the client’s ability to handle wealth-management affairs in a focused manner, with one main advisor, thereby limiting conflicts and creating greater efficiencies. The current state of the law, however, does not fully support the “one stop shop” legal/financial advisory relationship that our clients are seeking. A law firm attempting to sell securities to a client, for example, will find the oversight of the various agencies regulating the sales of securities to be an unacceptable breach of client confidentiality and privilege.4 The law firm will also be concerned about a possible gap where the legal malpractice insurance stops and the errors and omissions coverage for securities sales starts. An advisor operating through sister firms, or as a subsidiary of the law firm, will avoid these problems, but must carefully navigate a series of other issues.

First, the finances of each firm must remain separate. Securities commissions, insurance commissions, and advisory fees may not be split with the law firm; and a law firm may not split legal fees or pay referral fees to a non-lawyer (or to a lawyer employed by a firm other than a law firm). One may, however, lease space or other services to the other, and they may share common resources.

Second, to avoid confusion, the clients must reasonably see the two firms as legally separate. Each should have separate signage, letterhead, filing spaces, and phone lines. While it is a good practice in any event, the law firm should always carefully define the scope of the legal engagement in writing, and should consider issuing non-engagement letters from the law firm on matters relating to the financial planning firm.

Third, even though the firms are separate, the law firm should be prepared to disclose all commissions and other compensation derived from the financial planning component of the relationship and obtain a waiver of conflicts from the client.

Finally, as discussed below, the delivery of financial services and products is conducted in a highly regulated environment. Lawyers who wish to practice financial planning should have the type of personality that can live with compliance officers pre-approving all client correspondence and state and federal regulators appearing unannounced to audit all firm files.

5. Getting Started - Licenses and Tests
The provision of financial/insurance advice or products for compensation can only be done by licensed individuals and the type of license required depends upon the financial product or service to be provided:

a. Insurance. The sale of life-insurance and health-insurance products in Virginia requires a license issued by the Virginia Commissioner of Insurance.5 Candidates for this license must first take and pass a 45-hour pre-licensing course, then pass a separate insurance licensing exam. To maintain the license, licensees must be appointed by at least one insurance company and meet a continuing-education requirement of 16 hours’ instruction every two years.

b. Investment Advisor. Anyone who charges a fee for advice regarding the value of, or advisability of investing in, a security6 must pass an exam (known as “Series 65”) and become registered with State Corporation Commission (SCC) or the Securities and Exchange Commission (SEC) as a Registered Investment Advisor (RIA) firm and individually as an Investment Advisor Representative (IAR).7 RIA firms must keep on file with the SCC or SEC a current form ADV, which is a detailed description of their business practices, client categories, and the personal history of each IAR. RIA firms must provide all clients with current information similar to that provided the SCC, have written client engagement agreements, and maintain their client files in accordance with the SCC requirements. Although there is no continuing education requirement, all RIA firms must keep books and records according to regulation and can expect periodic audits by SCC or SEC regulators.

c. Securities Sales. To become licensed to sell securities, a candidate must first establish a relationship with a Broker/Dealer (B/D) who is willing to sponsor the candidate. The candidate then submits a detailed application to the National Association of Securities Dealers (NASD) which includes fingerprints and a background check of the applicant’s criminal history and related matters. The candidate then begins a several week intensive course of study towards the federal and state securities exams which, when passed, allow the candidate to become a Registered Representative (Registered Rep) of the B/D. At this point, the Registered Rep can earn a commission on sales of securities and can expect extensive supervision and direction from the B/D on all matters relating to securities. Most of the larger well-known B/Ds will not allow their Registered Reps to have separate offices or to practice law. There are, however, smaller B/Ds that cater to independent financial advisors and are comfortable with lawyers running a financial services firm congruent with their law practice. Under these circumstances, the Virginia financial services firm can expect annual audits by the B/D, and may encounter unannounced audits by the NASD and the SEC. Finally, the B/Ds and the NASD require several hours of continuing education and attendance at certain compliance meetings.

6. Summary
While the full multidisciplinary practice is not yet a reality in Virginia, the expansion of an estate planning practice into a wealth-management services group is now possible. Most sophisticated, high-net-worth clients prefer a relationship with one trusted and principled advisor capable of coordinating or handling all of their estate, tax, insurance, and financial planning needs. The natural evolution of the estate planning attorney’s role as the client’s most trusted advisor is to become the central figure in providing wealth-management advice to the sophisticated, high-net-worth client.

NOTES
1. See, e.g., Virginia Legal Ethics Opinion (LEO) 187 — lawyer may sell title insurance to client with full disclosure; LEO 209 — lawyer receiving real estate commissions from client’s closing; LEO 1016 — accounting services; LEO 1198 — insurance products.
2. The lawyer may also want to become expert in tax return preparation, but in our practice we find it preferable to coordinate closely with the client’s accountant. He/she is already a trusted advisor of the client and can provide valuable second opinions on tax matters.
3. CFPTM and Certified Financial PlannerTM marks are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
4. All securities-related client correspondence must be reviewed and approved by the Broker/Dealer. Also, client financial planning files (which must contain sufficient personal information to make an independent determination of suitability) are subject to review at any time by a number of agencies which may include the NASD, SEC, SCC and the Insurance Commissioner.
5. The Virginia State Corporation Commission, through its Bureau of Insurance, is empowered by Title 38.2, Chapter 18, of the Code of Virginia to qualify those who wish to operate as insurance agents and consultants in Virginia.
6. See 15 U.S.C. §80b-1(11) for the definition of an “investment adviser,” and §80b-1(18) for the definition of a “security.” In general, it can be assumed that any investment that requires a third party’s activity for the investor to make a return will be classified as a security.
7. See the Investment Advisors Act of 1940, 15 U.S.C. §80b-1, et seq. The Act provides limited exceptions to the registration requirements for certain entities, including lawyers, accountants, engineers and teachers whose advice is solely incidental to the practice of their profession. §202(a)(11)(b).

About the Author: I. Mark Cohen, J.D., LL.M., is a partner with the McLean, Virginia, law firm of Cohen & Burnett, P.C., and is a Certified Financial Planner™ professional who practices financial planning together with his partner, Weston D. Burnett, J.D., LL.M., and several other professionals through Legacy Analytics, LLC, RIA. He is a member of the VBA Section on Wills, Trusts & Estates. Mr. Cohen is a graduate of California State University at Long Beach and the University of Arizona School of Law and received his LL.M. degree from the College of William and Mary School of Law. Return to Top

Lawyers and the Lively Arts
A Midsummer Night's Movie
Rod Smolla

Summer’s here and the time is right for . . . renting a movie? I guess, though I think the original lyric is actually “dancing in the streets.” Summer is for movies, at least according to the editors who asked me to write this column, for movies that nourish the lawyer’s mind and soul.

There have been hundreds of movies made about the law, including scores of good ones. And it makes sense, that there should be so many, and that so many of them should be so enjoyable, for there are few areas of human discord that do not ultimately distill into legal conflicts, and legal conflicts, particularly trials, often contain all the basic elements of good theater.

I’m not going to tell you what movies to rent—how presumptuous that would be. Nor will I tell you what movies I’m going to rent, because in a house filled with children I no longer have any choice in these matters. You undoubtedly have plenty of your own favorite lawyer-movies, and better insights than I have on why they appeal or what they reveal.

So let me instead play professor (since it’s summer I’m not an active-duty professor right now, though I play one for purposes of this column) and I’ll give you an assignment. (There’s no Virginia CLE credit for this, or credit of any kind, but there is the camaraderie of collective adventure.) I shouldn’t call it an assignment, since I have no right or power to assign, but an invitation. You are invited to e-mail me with a message telling me about your favorite legal movie. What is it and what makes you like it so My e-mail is rsmolla@richmond.edu.

To start the conversation rolling, I’ll tell you about three of mine.

A Man for All Seasons. It’s borderline whether this even qualifies as a lawyer movie. But I think our categories have to be eclectic, broad enough to embrace everything from Twelve Angry Men to Body Heat.

Now let me first tell you what I don’t like about A Man for All Seasons. I don’t like the fact that certain lines from this movie (and the original play by Robert Bolt upon which it is based) are quoted so often by Senators making speeches (during the “question” period) at confirmation hearings for Supreme Court Justices that they have become cultural cliches. Political over-quoting can ruin a great flick.
That one whining gripe aside, A Man for All Seasons is a movie I can watch and re-watch, every couple years or so, and each time I see it I come away stirred, wanting to be Sir Thomas More.
Paul Scofield’s performance as More is a masterpiece. The climax of the movie is More’s trial, his own trial, where he serves as his own lawyer. More will not renounce his religious beliefs to please King Henry VIII, who wants More’s approval for his divorce [from Catherine of Aragon, in order to marry Anne Boleyn]. Henry is played by Robert Shaw as a strapping lion, lean and mean.

More is one of the most respected citizens of the realm, a towering lawyer, a moral beacon, and when, keeping merely silent, he refuses to openly declare the righteousness of the king’s cause, his silence is deemed treasonous.

One of the great moments in the film comes when More is chastised by Cardinal Wolsey, played corpulent and corrupt by Orson Welles, saying to More: “If you could just see facts flat on without that horrible moral squint.” What matters in A Man for All Seasons is precisely More’s moral squint. He has a courage that few of us have, but that most of us long for. Watching this movie always charges me, vexes me, with the invigoration to try to be better than myself.

Inherit the Wind. This is the fictionalized movie version of the 1925 Scopes “Monkey Trial,” in which the state of Tennessee placed the theory of evolution on trial, prosecuting a school teacher who defied state law to teach Charles Darwin. In the real Scopes trial, Clarence Darrow represented Scopes and William Jennings Bryan was brought in as a guest prosecutor, a kind of celebrity Ken Starr, in the first of the last century’s numerous trials of the century.

Now the movie is not exactly historically accurate, so if that’s one of your criteria you might have your quarrels with this one. Director Stanley Kramer, who was known for his socially-conscious films (his classics included The Caine Mutiny, Judgment at Nuremberg, and Guess Who’s Coming to Dinner) did not always feel duty-bound to historical authenticity, a trait common in cinematic muckrakers.

The real Scopes case was something of a put-up job, a show trial with emphasis on the show. Little Dayton, Tennessee, the town that hosted the trial, essentially bid for the trial rights, like modern cities fight for conventions or the Olympics, and the teacher on trial, John Scopes, didn’t really care all that much about evolution, but instead volunteered for the job of defendant by teaching evolution just long enough to get himself arrested so that the American Civil Liberties Union could hire the country’s most famous defense lawyer to defend him, and a consortium of fundamentalist churches could hire the country’s most famous political opponent of godless evolution Bryan, to prosecute.

Bryan’s views were actually complex on the score. He was not simply a fundamentalist who did not believe we came from monkeys, he was a populist majoritarian who believed that the people had the right to run their own schools as they saw fit, including ordering teachers what to teach and what not to teach.

The movie makes the Clarence Darrow character, played brilliantly by Spencer Tracy, a legal demi-god, and the Bryan character, played no less brilliantly by Fredric March, a somewhat pompous and borderline-senile buffoon. Gene Kelly plays the cynical writer for The Baltimore Sun, H.L. Mencken.
The film includes a love-story subplot between Scopes and the daughter of a local fundamentalist preacher, who is somewhat off his rocker and persecutors his daughter’s fiancé, the defiant young Scopes. In reality there was no such love affair, and no such persecuting preacher. Well, picky, picky, picky.

What the film does present, and present magnificently, is the tension between science and religion, a tension in which neither is fully capable of total victory, a tension that reaches a crescendo in the greatest single courtroom examination sequence in the history of American film. (I can make such hyperbolic claims because this is my essay, but you can make your own, and should, and if you’re inclined, please e-mail them to me.) The Spencer Tracy examination of Fredric March, which runs for something like 15 continuous minutes on the screen, portrays an actual episode from the trial.
Clarence Darrow, frustrated by a series of adverse evidentiary rulings that prevented him from calling to the stand his scientific expert witnesses on evolution, called as a witness opposing counsel, William Jennings Bryan himself. In dialogue lifted quite faithfully from the original trial transcript, Tracy/Darrow subjects March/Bryan to one of the most powerful examinations ever seen in an American courtroom. Tracy and March joust over Genesis and The Origin of Species, making ‘em laugh, cry, cheer, and jeer, chin-to-chin and jowl-to-jowl, in a sequence so spectacular that every time I watch it I have to rewind the movie and play the scene over a second time.

Somewhere, sometime, for 15 minutes, I want to examine a witness that way. For 15 minutes, that’s all. I want to be Spencer Tracy.

Or maybe Jimmy Stewart. Jimmy Stewart in Anatomy of a Murder, the swanky, sexy, Otto Preminger film noir presenting a murder trial in Michigan. George C. Scott is the prosecutor, Jimmy Stewart the defense attorney. What more do you need to know? The defendant, played by Ben Gazzara, is prosecuted for killing a bartender who had made a come-on to his wife, a smoky seductress played by Lee Remick. Anatomy of a Murder is also suffused with moral content, but unlike A Man for All Seasons and Inherit the Wind, the moral content here is the content of moral ambivalence. Good and evil, right and wrong, truth and falsity, guilt and innocence are all shades of grey in this jazzy movie, and even the great Jimmy Stewart, usually an icon of ethical fibre, walks the ethical razor’s edge.

In a key scene, Stewart interviews his client in jail, explaining to him, before hearing his client’s story, the intricacies of the insanity defense. Stewart is perilously close in the scene to structuring his client’s answer. I don’t believe, in the end, that Stewart crosses the line, but that may be because he is, after all, Jimmy Stewart.

I’d be interested, though, in what you think, about Jimmy Stewart, Spencer Tracy, these films, or others of your own selection. So have a nice summer: See a movie, soak in the moonlight, nourish the mind and soul, and don’t forget the sunblock.

Rod Smolla is the George E. Allen Professor of Law at the University of Richmond, T.C. Williams School of Law. Return to Top

Young Lawyers Division:
What Does the VBA/YLD Do? (Part II)
David N. Anthony, Chair

In last month’s column, I highlighted three outstanding projects of the VBA Young Lawyers Division (VBA/YLD): the Disaster Legal Assistance Project, Town Hall Meetings and Legal Services for the Mentally Ill.

Several other projects are hallmarks of the VBA/YLD’s commitment to service to the legal profession and the Commonwealth. These programs represent the innovative thinking on how to solve problems or provide much-needed legal assistance to the public at large by utilizing the unique skills and talents of lawyers.

Child Support Enforcement Project
Recently, former Virginia Attorney General Mark Earley and others have recognized the need for greater enforcement of child support obligations from non-custodial parents. Statistics show that throughout the Commonwealth almost $1.5 billion in child support obligations have not been paid.
Through the hard work of Deputy Attorney General and VBA/YLD Executive Committee member Ashley L. Taylor Jr., Kimberlee Ramsey of Florance, Gordon & Brown and Eric Nowak, formerly of Hunton & Williams, this Committee has trained approximately 30 lawyers to serve as pro bono special counsel to the Office of the Attorney General to combat this glaring problem.

These lawyers have volunteered to undergo two to three days of training and then donate a set number of days in pursuing delinquent child support payments. All the money collected is paid directly to the custodial parent supporting the child. To date, volunteers have participated in nearly 2,000 hearings.
Currently, attorneys serve as special counsel in Chesterfield County, Henrico County, Norfolk and Richmond. Like many of its projects, the VBA/YLD is fortunate to partner its resources with other entities, the Office of the Attorney General and the Richmond Bar Association, so they may use their resources collectively to have a significantly greater impact. This program fills a gap in the system and provides real help to Virginians in need.

Turner Broughton of Hunton & Williams in Richmond and Febronia Ogle of Cooper, Spong & Davis in Portsmouth now bring exceptional leadership to the Richmond and Tidewater programs respectively.
To volunteer for this project, attorneys in the Richmond area may contact Turner Broughton at (804) 788-8632 (e-mail tbroughton@hunton.com). Lawyers who wish to volunteer in the Hampton Roads area may contact Febronia Ogle at (757) 391-3105 (e-mail fchrist@portslaw.com).

Domestic Violence Project
VBA/YLD members recognize the horrible problem of domestic abuse in our society and the long-lasting consequences on families and children in Virginia.

Mary Zinsner of Troutman Sanders Mays & Valentine, Kathy Harman-Stokes of Hogan & Hartson and Erica Beardsley of Watt, Tieder, Hoffar & Fitzgerald spent countless hours organizing this project, which enlists volunteer attorneys to represent victims of domestic violence in immediate need of a civil protective order.

Since its inception, this Committee has trained approximately 75 volunteer lawyers in Northern Virginia and assisted more than 150 domestic violence victims.

This Committee is expanding its work to other parts of Virginia and also exploring ways to address the specific problem of child abuse.

Lawyers interested in volunteering for this Committee should contact Erica Beardsley at (703) 749-1000 (e-mail: ebeardsl@wthf.com), Megan Owen of Reed Smith Hazel & Thomas at (703) 641-4335 (e-mail: mowen@reedsmith.com), Sharon Cox of McGuireWoods at (804) 775-1114 (e-mail: scox@mcguirewoods.com) or Erin McDonald of McGuireWoods at (804) 775-1842 (e-mail: emcdonald@mcguirewoods.com).

Transactional Pro Bono Clearinghouse Project
The VBA/YLD constantly is looking for additional ways to provide pro bono legal services. Traditionally, most pro bono services are litigation-oriented; however, the VBA/YLD is undertaking a project in Northern Virginia to link available volunteer transactional lawyers to discrete requests for assistance from nonprofit organizations in areas such as corporate and tax advice, labor and employment counseling and real estate representation.

In order to place the proper attorney in the appropriate situation, volunteer attorneys are asked to complete a form identifying their areas of expertise and available time commitment. The Committee, chaired by Becky Kuehn and Paige McThenia of the Alexandria office of LeClair Ryan, will then match a volunteer with a nonprofit organization seeking legal assistance.

Charlie Meyer of LeClair Ryan in Richmond has worked diligently to organize this program to better utilize corporate lawyers to provide pro bono legal services. The VBA/YLD is excited about the potential for this program and believes that it will serve as a model to be replicated in other parts of Virginia.

Lawyers interested in volunteering should contact Charlie Meyer at (804) 783-2003 (e-mail: cmeyer@leclairryan.com), Becky Kuehn at (703) 684-8007 (e-mail: rkuehn@leclairryan.com) or Paige McThenia at (703) 684-8007 (e-mail: pmcthenia@leclairryan.com).

More information about the projects and activities of The Virginia Bar Association Young Lawyers Division can be found online on the VBA/YLD page. A booklet with information about theVBA/YLD’s mission, activities and history is available from the VBA office, (804) 644-0041. Return to Top

Across the Commonwealth

Environment, Elections, Ethics and More
Summer Meeting CLE sessions provide 'inside information'

The Virginia Bar Association prides itself on its varied and timely continuing legal education offerings. The sessions planned for the VBA’s 111th Summer Meeting, July 12-15 at The Greenbrier, are no exception, with three general sessions, two reviews of recent Virginia Supreme Court decisions, and a host of other programs featuring timely topics for review and consideration.

“Virginia’s Natural Landscapes: Lasting Legacy or Paradise Lost?” is the title of a panel discussion focusing on legal issues of land use in Virginia, scheduled for Friday, July 13, from 10 a.m. to noon. Moderated by Kay Slaughter of the Southern Environmental Law Center in Charlottesville, the panel will include Steve Nash, journalist and associate professor at the University of Richmond; Gary Johnson, chair of the Urban Studies and Planning Department of Virginia Commonwealth University; Rich Collins, the Lawrence Lewis Professor and director of the Institute for Environmental Negotiation of the Department of Urban and Environmental Planning at the University of Virginia; Henry Richmond, director of the American Land Use Institute; and James A. Bacon, editor-in-chief of Virginia Business magazine.

Hanging, dimpled or pregnant? Whatever the state of their chads, Americans will never forget the controversy surrounding the 2000 presidential vote in Florida. Attorneys who were at the epicenter of last fall’s fracas (and on TV screens as well) will discuss “The Case of a Lifetime: The Inside Story of Representing Al Gore and George Bush” on Friday, July 13, from 1:30 to 3 p.m.

Representing the Gore viewpoint will be Ronald A. Klain of Washington, D.C., Gore’s chief of staff, and W. Dexter Douglass of Tallahassee. The Bush perspective will be presented by George Terwilliger of Washington and Barry Richard of Tallahassee. Mike Allen of The Washington Post will serve as moderator.

“The Ethics of Billing and Collecting Fees and Costs” will be the subject of former VBA Professionalism Task Force Chair Tom Spahn’s general session on Friday, July 13, from 3 to 4:30 p.m.

Continuing a relatively new and definitely popular Summer Meeting tradition, Hon. Jane Marum Roush of the 19th Judicial Circuit will return with her third “Annual Review of Civil Decisions of the Virginia Supreme Court” on Saturday, July 14, from 8:30 to 11 a.m.

Judge Roush’s presentation is sponsored by the VBA Civil Litigation Section, which also offers “Restructuring Federal Appellate Courts” on Friday, July 13, from 8:30 to 10 a.m. Prof. Daniel J. Meador of the University of Virginia School of Law will moderate the program; speakers include former Virginia Attorney General William G. Broaddus, Prof. Paul D. Carrington of the Duke University School of Law, and former Virginia Supreme Court Justice John Charles Thomas.

In what may become another featured Summer Meeting attraction, Prof. Ronald Bacigal of the University of Richmond School of Law will present a “Review of Criminal Law Decisions of the Virginia Supreme Court” on Friday, July 13, from 8:30 to 10 a.m.

“Sic Semper Tyrannis? Is the Use of Negotiated Rulemakings and Creative Enforcement Strategies by Administrative Agencies a Welcomed Result of Streamlined Government, or a Modern Example of Unrestrained Abuse of Government Power?” This question will be considered by panelists Prof. Lars Noah of the University of Florida College of Law, former Environmental Protection Agency Assistant Administrator for Enforcement Steven Herman, and David A. Johnson, chief deputy director of the Virginia Department of Environmental Quality, on Friday, July 13, from 8:30 to 10 a.m. The program is a joint presentation of the Administrative Law and Environment, Natural Resources and Energy Law Sections.

“New E-Commerce Liabilities—Security, Privacy and Electronic Transactions” will be offered by the Corporate Counsel, Business Law and Intellectual Property and Information Technology Sections on Saturday, July 14, from 8:30 to 10 a.m. Moderated by Jim Wheaton of Troutman Sanders Mays & Valentine, the panel includes Rod Nydam of McGuireWoods, L.L.P.; J. Douglas Koelemay, executive vice president of Williams Mullen Public Affairs and senior advisor of the Northern Virginia Technology Council; and Kenneth C. Watson of Cisco Systems, Inc., president and CEO of the Partnership for Critical Infrastructure Security and senior manager of the Critical Infrastructure Assurance Group.

Rounding out the offerings are “Employment Issues in the Electronic Workplace,” offered from 8:30 to 10 a.m. on Saturday, July 14, and presented by Labor Relations & Employment Law Section Chair Tom Lucas and speaker Kristina Vaquera, and “Representing the Non-Parent in Custody and Visitation and Constitutionality Involved,” offered by the Domestic Relations Section on Saturday from 8:30 to 10 a.m. and featuring VBA Executive Committee member Frank W. Morrison and Prof. Lynne Marie Kohm of Regent University School of Law.

Early arrivals to the meeting can view the videotaped “Introduction to the Virginia Rules of Professional Conduct” on Thursday, July 12, from 3 to 5 p.m.

While no CLE credit will be given for the VBA Legacy Series luncheon program, “Eye of the Storm: A Civil War Odyssey” promises to be a fascinating look at one Union soldier’s wartime experience. Presented by Dr. Nelson Lankford, assistant director for publications at the Virginia Historical Society, the hour-long program for VBA members and guests will begin at 12:15 p.m. on Friday, July 13.

Noted quilt artist Marty Moon of Culpeper (who is married to VBA Executive Committee member Butch Davies) will offer an overview of the history and art of quilt making on Friday, July 13, from 8:30 to 10 a.m. This program is also open to both VBA members and guests.

Additional Summer Meeting details are available at www.vba.org. Return to Top

VBA members collect honors at Virginia State Bar annual meeting

Three members of The Virginia Bar Association received major honors during the 63rd Annual Meeting of the Virginia State Bar last month.

T.L. Plunkett Jr. of Roanoke, a partner in the law firm of Plunkett & Oehlschlaeger and a former VBA vice president, received the VSB Tradition of Excellence Award from the VSB General Practice Section. The award is presented annually to an attorney who has dedicated time and effort to activities that assist the community while improving the standing and image of general practitioners in the eyes of the public.

Plunkett, a graduate of Roanoke College and the University of Virginia School of Law, is a VBA Life Member and has served as a VSB Council and Executive Committee member, president of the Roanoke Bar Association and the Conference of Local Bar Associations, and the first chair of the Roanoke Legal Aid Committee. He also serves on Roanoke’s Estate Planning Council and is a Fellow of the Virginia Law Foundation. He has served as commissioner in chancery for Roanoke city courts since 1951 and as commissioner of accounts since 1984.

Gregory T. St. Ours of Harrisonburg, a partner in the law firm of Wharton, Aldhizer & Weaver and a former chair of the VBA Health Law Section, was named Bar Leader of the Year for 2001 by the Conference of Local Bar Associations.

St. Ours, who received his undergraduate and law degrees from the University of Virginia, is a past president of the Harrisonburg-Rockingham Bar Association. Under his leadership, the HRBA was awarded the American Bar Association's prestigious Harrison Tweed Award for its pro bono program operated in conjunction with Blue Ridge Legal Services. He served for an extended time as a bar representative on the Board of Directors of Blue Ridge Legal Services, where he continued his support of equal justice for the poor. He also served on the Conference of Local Bar Associations' Executive Committee and in numerous capacities within the Conference, and has held leadership positions in both the VBA and VSB.

Edward B. Walker of Roanoke, a sole practitioner and a member of the VBA/ YLD Executive Committee, received the R. Edwin Burnette Jr. Young Lawyer of the Year Award from the VSB Young Lawyers Conference. The award, named for Lynchburg General District Court Judge Ed Burnette, a former president of the VSB and the VSB/YLC (and current chair of the VBA Substance Abuse Committee), is given to a young lawyer who exemplifies a distinguished record of service to the bar and public.

Walker is a graduate of the University of North Carolina and the Washington & Lee University School of Law. He has held a number of positions within the VBA/YLD and currently serves as statewide coordinator of the Law School Council Program. He founded the Marrow Donor Center of the Virginias in 1993 and is recognized as the founder of the Downtown Music Lab in Roanoke, an after-school recording studio and music program for local high school students. He established the Roanoke Regional Issues Group for young professionals and serves as a board member for the Center for Innovative Leadership. Walker was also the driving force behind the creation of the Allen C. Phillips Prize for Integrity in Action at Episcopal High School, of which he is an alumnus. Return to Top

'Have Ethics, Will Travel' is available to bar groups

Do you belong to a local or specialty bar association that needs a good, easy-to-produce and inexpensive program idea? The Virginia Bar Association offers a course on “Cases in Professionalism and Civility” to any local or specialty bar association in Virginia that is willing to host it.
It’s informally known as “Have Ethics, Will Travel.”

Thomas E. Spahn, a partner in the law firm of McGuireWoods,L.L.P., developed the program’s format, based on discussion of hypothetical situations involving lawyer courtesy and substantive ethics, during his chairmanship of the VBA Professionalism Task Force (1997-2000).

The interactive program, which can be one or two hours long, can be customized to fit any bar association’s needs. From a list of 60 hypotheticals, program organizers can choose 10 hypotheticals for a one-hour or 20 for a two-hour presentation, divided between lawyer courtesy and professional ethics. The VBA applies for CLE credit and provides one speaker and a copy of written materials. The host group only has to provide an audience and produce the appropriate number of copies of materials for distribution.

The host association can invite a panel of four local judges and/or lawyers to participate by fielding questions from the audience. For additional input and viewpoints, the VBA recommends that the host group invite local judges and law students to attend the program. Because the program’s length can be adjusted easily, it can be offered in conjunction with a regularly scheduled membership meeting, or as a stand-alone event, depending on the group’s preference. Many local bars have found that a post-session social time makes a good complement to the program.

An information packet about the program is available from the VBA office, (804) 644-0041. Return to Top

News in Brief

VBA member Russ Palmore of Richmond, a partner in the law firm of Troutman Sanders Mays & Valentine, L.L.P., was elected chair of the Virginia Law Foundation Fellows Council last month.

VBA Executive Vice President Breck Arrington of Richmond and Larry W. Shelton of Norfolk were elected to three-year terms ending in 2004 on the Fellows Council, and VBA members Jim McKenry and Bob Nusbaum, both of Norfolk, were reelected to their second three-year terms, also ending in 2004, on the Fellows Council.

Congratulations to VBA members Michael Glasser of Norfolk, the new president of the Virginia State Bar, and Ben DiMuro of Alexandria, the new president-elect of the VSB!

Tom Edmonds, executive director and chief operating officer of theVSB (and also a VBA member) was recognized during the VSB Annual Meeting banquet for his dedicated service to the State Bar.

The VBA Young Lawyers Division is looking for volunteers to assist in coordinating new and current projects, including projects that seek to help victims of domestic violence, children and immigrants. Volunteers do not have to be members of the VBA/YLD, but may represent all ages and levels of legal experience. If you are interested in volunteering, please contact Erica Beardsley at (703) 749-1068, ebeardsl@wthf.com, or Kathy Harman-Stokes at (703) 610-6163, kharmanstokes@hhlaw.com. Information about many VBA/YLD committees is available on the VBA/YLD page.

Support VBA activities by becoming a Patron in 2001. By contributing $100 in addition to your membership and section dues, you will provide invaluable support for the many public and professional services offered by the Association. Check the box on your membership dues statement, or mail your check separately if you’ve already sent in your dues. Call (804) 644-0041 for more information.

The Virginia Lawyer, successor to The Virginia Lawyer's Basic Practice Handbook, was first published in 1966 by the VBA/YLD in conjunction with the Joint CLE Committee. In 2000, Virginia CLE and the VBA/YLD joined in a cooperative effort to produce a new two-volume guide for practitioners designed to assist attorneys in dealing with unfamiliar areas. Details are available on the Internet at http://www.vacle.org/wn111.htm#valawyer. Return to Top

Book Review:
Successful Partnering Between Inside and Outside Counsel
Benjamin C. Crumpler and Julious P. Smith Jr.

The American Corporate Counsel Association and West Group have teamed in a joint endeavor to produce a four-volume treatise titled “Successful Partnering between Inside and Outside Counsel.” The treatise is comprised of 80 chapters, authored by more than 200 contributors. Each chapter covers a unique topic concerning the relationship between inside and outside counsel and offers guidance for both sides of the relationship.

One of the more valuable aspects of the treatise is the distinguished author team, which includes the general counsels of more than 75 Fortune 500 companies and the chairmen and senior partners of many major law firms. By selecting so large and distinguished a team, the editors have produced a treatise that offers a very comprehensive, yet very useful and practical, resource that can assist attorneys whether working as inside or outside counsel.

In first learning of the subject matter of this treatise, we must admit a little skepticism in believing that a meaningful four-volume set could be prepared on this topic. Upon reviewing the materials, however, this skepticism quickly disappeared. The chapters flow logically from one to the next, and the comprehensiveness of the treatise is impressive. In fact, we could think of very little regarding the relationship that was not covered, and the analysis of unique issues to the subject matter of the treatise proved helpful.

For example, one chapter covers the attorney-client privilege in the corporate context. The fact that a corporation is a legal entity, rather than a person, poses several unique issues in connection with the normal analysis of the attorney-client privilege, joint defense privilege and work product doctrine. The chapter presents a thorough analysis of the topic and provides valuable guidance and insight for both inside and outside counsel to understand the framework of the rules, and, more importantly, how best to work together to preserve these privileges and lessen the risk of waiving or losing them.

Other chapter topics, although prepared to advise one side of the relationship more than the other, can offer very valuable insight into the concerns and thought processes of how certain decisions are made by the other side of the relationship.

For instance, Chapter 6 deals with marketing to potential corporate clients. In analyzing the many different ways outside counsel markets to potential corporate clients, the chapter provides valuable guidance in developing and managing a successful marketing effort. However, by understanding more thoroughly how potential outside counsel will attempt to obtain legal work, the inside counsel can more effectively be prepared to handle and evaluate marketing efforts.

Conversely, Chapter 16, which covers the relationship between a corporate legal department and the other departments in the corporation, is aimed at helping inside counsel become a useful and well-functioning department within the entire framework of the corporation. Moreover, by understanding these dynamics, outside counsel can better understand how best to assist its corporate clients.

One potential obstacle to this treatise becoming a useful resource for either inside or outside counsel is fully understanding what topics are offered, and thus knowing when to consult the treatise. Unlike other treatises, some of the subject matter and information that is offered in this treatise is not immediately apparent. In that regard, spending some time reviewing and reading the treatise before consulting it as a reference may be the best way to use it, and one would undoubtedly pick up many useful ideas in the process.

For the younger attorney, spending some time thumbing through the treatise may especially help to understand the intricacies of the relationship between inside and outside counsel and learn ways to avoid certain pitfalls that often sneak up on a young attorney.

A short summary of the chapter topics follows, with the titles of a certain chapters named to offer examples of the types of topics that are included.

The establishment of a relationship between inside and outside counsel, including “Selection of Outside Counsel,” “Requests for Proposals, Bidding, and Presentation,” and “Fee Arrangements,” is the focus of Chapters 1-9.

Chapters 10-19 are concerned with managing the relationship between inside and outside counsel, including “Budgeting and Controlling Costs,” “Billing,” “Law Department Management,” and “Law Firm Staffing.”

Chapters 20-30 highlight specialized issues in the management of the relationship between inside and outside counsel, including “Local and Specialized Outside Counsel,” “Use of Contract Lawyers,” and “Representing a Client with Insurance.”

Ethical and more global-oriented issues, including “Conflicts of Interest,” “ Internal Investigations,” and “Civil Justice Reform,” occupy Chapters 31-46.

Chapters 47-56 are devoted to transactional legal issues, including “Compliance,” “Commercial Finance,” “Employee Benefits,” and “Advertising Review, Clearance and Challenges.”
Litigation-oriented legal issues are featured in Chapters 57-74, including “Alternative Dispute Resolution,” “Settlement,” “Copyright Litigation,” and “Mass Torts.”

Each of chapters 75-80 describes a case study, including “DuPont’s Legal Model for Strategic Planning,” “Federated’s Acquisition of Broadway—Deal Making at High Speed,” and “The Wal-Mart Approach to Litigation.”

As one can see from the breadth of the chapter topics, the treatise has much to offer. Once a reader understands exactly what the treatise contains, and how to use it, we believe it can serve as a valuable tool for inside or outside counsel.

West Group & ACCA, 4 vol., 6,032 pages and 4 diskettes of forms, $350, to order call 1-800-344-5009. Robert L. Haig Jr., Editor-in-Chief.
Mr. Crumpler is an associate and Mr. Smith is a partner in the law firm of Williams, Mullen, Clark & Dobbins in Richmond. Both are VBA members. Return to Top

Copyright 2007 The Virginia Bar Association