ALSO INSIDE: Two New Member Benefits • Legislative Monitoring Committee Begins Work

Volume 90 — No. 2 — February 2019

Estate Planning

contents February 2019 • Vol. 90 • No. 2

THEME: Estate Planning Editor: Amanda Grant

FEATURES PLUS 6 Issues in Unplanned and Poorly 36 Legislative Monitoring Committee Begins Planned Estates Its Work to Keep Members Informed By Cody B. Jones and Ashley Ray By Angela Ailles Bahm 12 Guide to Organ and Tissue Donation 38 Two New OBA Member Benefits Added in Oklahoma By Julie A. Bays By Jennifer L. Wright 40 Applicants for February 2019 Oklahoma 18 Powers of Attorney With Gifting Powers: Bar Exam The Double-Edged Sword of Elder Law By Tessa Baker and H. Terrell Monks

24 Creditor's Rights in Revocable Inter Vivos Trusts After the Death of the Settlor By Ashley A. Warshell and H. Terrell Monks 30 Deferred Sales Trust – What’s All the Hype? By Dawn D. Hallman DEPARTMENTS 4 From the President 42 From the Executive Director PAGE 36 – Legislative News 44 Law Practice Tips 48 Ethics & Professional Responsibility 50 Board of Governors Actions 54 Oklahoma Bar Foundation News 56 Young Lawyers Division 58 For Your Information 61 Bench and Bar Briefs 63 In Memoriam 66 Editorial Calendar 69 What’s Online 72 The Back Page PAGE 44 – Lost Client Files From The President Major Legislative Changes in Store for 2019 By Charles W. Chesnut

HE OKLAHOMA LEGISLATURE CONVENED on other things going on, there is no way a new TFeb. 4. This legislative session should be interesting. legislator, and maybe even an experienced We have a new governor and lieutenant governor, 46 new one, could begin to keep up with all the bills members of the 101-member House of Representatives introduced each session. (Last year accord- and 11 new members of the 48-member Senate. ing to LegiScan, 4,572 new pieces of legisla- During last year’s legislative session, 21 lawmakers prac- tion were introduced.) In addition, they may ticed law. There were five in the Senate and 16 in the House of have little to no knowledge about many of Representatives. For the 2019 session, our profession’s ranks the bills introduced. The OBA is trying to do dwindled to 14 (four in the Senate and 10 in the House). Some its part in impacting that in a positive way. of the attorneys were termed out, others left to run for positions One of the jewels of the Oklahoma Bar in the judicial branch or other elective positions, others didn’t Association is the 300-member Legislative win re-election and at least one just chose not to run again. The Monitoring Committee chaired by Angela consensus on the causes for the erosion in the percentage of Ailles Bahm. The OBA held the OBA Reading lawyers appears to be too little money and too much time. Day on Feb. 2. At Reading Day, attorneys Half a century ago, the notion lawyers wrote most of the presented about 90 bills in various areas of the laws was pretty accurate. That began to change in the 1960s law. Following the presentation of the bills, and 1970s. Legislative sessions became longer, making it Administrator of the Courts Director Jari difficult for attorneys to keep up with their practices while Askins presented a brief talk on the funding they served in office. Legislative pay fell further and further of the judiciary. At noon, during a pizza lunch, behind the amount lawyers could earn on the private side. members of the Legislature held a panel discus- Lawyers gained permission to advertise for clients, chal- sion on what they thought would be important lenging the traditional idea that serving in office was the during the 2019 session. The free event provided best way to promote one’s name and attract new business. attorneys with two hours of MCLE credit. Also, it became common to campaign for fewer lawyers in This year we invited all of our state the Legislature. The argument normally advanced was that legislators to come to Legislative Reading lawyers somehow or another had too Day. We thought it was a great opportunity much influence in affecting the legisla- for them, as well as our OBA members, to tive process. Actually, having lawyers in obtain information on the legal and practical the Legislature is a plus. Legal training effect of some of the proposed legislation. I provides a better understanding of how believe it would be helpful for the OBA to passing or changing a law can affect peo- become known as a resource from which ple. It affords an opportunity to do some legislators could get an explanation on the careful tweaking of language that has effects of bills. We could make that happen. the major advantage of fixing unantici- I think it is a primary responsibility pated consequences. Legal training gives of our bar association to serve our mem- a lawyer more confidence in expressing bers. By helping our members become oneself on controversial issues. Finally, more aware of pending legislation and its the most important benefit – it gives one potential impact, it helps us become better the opportunity to shape the state’s laws. informed both as citizens and lawyers. President Chesnut practices in Miami. With respect to new incoming If you have any ideas for your bar asso- [email protected] 918-542-1845 legislators, I’ve always thought being ciation that would help improve its service a new legislator would be like trying to its membership, send me an email. I’d be to drink from a fire hose. With all the glad to hear from you. 4 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL is a publication of the Oklahoma Bar Association. All rights reserved. Copyright© 2019 Oklahoma Bar Association. Statements or opinions expressed herein are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Volume 90 — No. 2 — February 2019 Board of Editors or staff. Although advertising copy is reviewed, no endorsement of any product or service offered by any advertisement is intended or implied by publication. JOURNAL STAFF BOARD OF EDITORS Advertisers are solely responsible for the JOHN MORRIS WILLIAMS MELISSA DELACERDA, Stillwater, Chair content of their ads, and the OBA reserves Editor-in-Chief the right to edit or reject any advertising copy [email protected] LUKE ADAMS, Clinton for any reason. Legal articles carried in THE OKLAHOMA BAR JOURNAL are selected CAROL A. MANNING, Editor CLAYTON BAKER, Vinita by the Board of Editors. Information about [email protected] submissions can be found at www.okbar.org. AARON BUNDY, Tulsa MACKENZIE SCHEER Advertising Manager PATRICIA A. FLANAGAN, Yukon BAR CENTER STAFF [email protected] John Morris Williams, Executive Director; AMANDA GRANT, Spiro Gina L. Hendryx, General Counsel; Joe LACEY PLAUDIS Balkenbush, Ethics Counsel; Jim Calloway, Communications Specialist VIRGINIA D. HENSON, Norman Director of Management Assistance Program; [email protected] Craig D. Combs, Director of Administration; C. SCOTT JONES, Oklahoma City LAURA STONE Susan Damron, Director of Educational Communications Specialist SHANNON L. PRESCOTT, Okmulgee Programs; Beverly Petry Lewis, Administrator [email protected] MCLE Commission; Carol A. Manning, LESLIE TAYLOR, Ada Director of Communications; Robbin Watson, Director of Information Technology; Loraine Dillinder Farabow, Peter Haddock, Tracy Pierce Nester, Katherine Ogden, Steve Sullins, Assistant General Counsels OFFICERS &

Les Arnold, Julie A. Bays, Gary Berger, BOARD OF GOVERNORS Debbie Brink, Melody Claridge, Cheryl CHARLES W. CHESNUT, President, Miami; Corey, Ben Douglas, Dieadra Florence, Johnny Marie Floyd, Matt Gayle, Suzi LANE R. NEAL, Vice President, Oklahoma City; SUSAN B. SHIELDS, Hendrix, Debra Jenkins, Rhonda Langley, President-Elect, Oklahoma City; KIMBERLY HAYS, Immediate Past Jamie Lane, Durrel Lattimore, Renee President, Tulsa; MATTHEW C. BEESE, Muskogee; TIM E. DECLERCK, Montgomery, Whitney Mosby, Lacey Enid; MARK E. FIELDS, McAlester; BRIAN T. HERMANSON, Plaudis, Tracy Sanders, Mackenzie Scheer, Ponca City; JAMES R. HICKS, Tulsa; ANDREW E. HUTTER, Mark Schneidewent, Laura Stone, Margaret Norman; DAVID T. MCKENZIE, Oklahoma City; BRIAN K. MORTON, Travis, Krystal Willis, Laura Willis, Oklahoma City; JIMMY D. OLIVER, Stillwater; MILES T. PRINGLE, Jennifer Wynne & Roberta Yarbrough Oklahoma City; BRYON J. WILL, Yukon; D. KENYON WILLIAMS JR., Oklahoma Bar Association 405-416-7000 Tulsa; BRANDI NOWAKOWSKI, Shawnee, Chairperson, OBA Toll Free 800-522-8065 Young Lawyers Division FAX 405-416-7001 Continuing Legal Education 405-416-7029 The Oklahoma Bar Journal (ISSN 0030-1655) is published monthly, Ethics Counsel 405-416-7055 except June and July, by the Oklahoma Bar Association, 1901 N. Lincoln General Counsel 405-416-7007 Boulevard, Oklahoma City, Oklahoma 73105. Periodicals postage paid Lawyers Helping Lawyers 800-364-7886 at Oklahoma City, Okla. and at additional mailing offices. Mgmt. Assistance Program 405-416-7008 Mandatory CLE 405-416-7009 Subscriptions $60 per year that includes the Oklahoma Bar Journal Board of Bar Examiners 405-416-7075 Court Issue supplement delivered electronically semimonthly. Law Oklahoma Bar Foundation 405-416-7070 students registered with the OBA and senior members may subscribe for $30; all active members included in dues. Single copies: $3

Postmaster Send address changes to the Oklahoma Bar Association, www.okbar.org P.O. Box 53036, Oklahoma City, OK 73152-3036.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 5

Estate Planning Issues in Unplanned and Poorly Planned Estates By Cody B. Jones and Ashley Ray

HE TERM “ESTATE PLANNING” IMPLIES THAT A PLAN for the administration Tof an estate exists, which, of course, most estate planning attorneys would prefer. However, those same estate planning attorneys likely spend much of their time administering estates of decedents who did not have a plan in place at their death or who had a plan in place that was poorly prepared or never updated. This article addresses some common issues attorneys might encounter in unplanned or poorly planned estates.

IMMEDIATE NEEDS UPON Stat. §1158 (2011), which is similar including provisions within the DECEDENT’S DEATH to the statute determining those individual’s estate planning doc- individuals who will have priority uments to provide accordingly. A Disposition of Remains to serve as administrator of an pet owner might consider creating intestate estate.1 The Oklahoma a “pet trust” for the benefit of his When a loved one dies, Court of Civil Appeals has previ- or her domestic animals.3 Without addressing the immediate needs ously found it is “highly imprac- such planning in place, what hap- of the individual’s estate can be tical” to obligate a funeral home pens when the care for pets has chaotic for the family. One of the to determine all persons who are not been considered in advance? first decisions the family must in the same degree of kinship to By statute, dogs are considered the make is determining the manner the decedent and obtain consent personal property of the owner, of the disposition of the decedent’s from all of them.2 Thus, in poorly and by analogy other domesti- remains. If family members all get planned estates, the decisions cated pets may also be considered along, this may not be a conten- regarding disposition may be personal property.4 Thus, the tious decision. When emotions run decided on a first-come-first serve provisions for personal property high and family members do not basis. In order to avoid such dis- under a will and the provisions for see eye to eye, this decision may putes among children, for instance, exempt property allowed the fam- become volatile. If the decedent an assignment of right regarding ily likely control pursuant to 58 had exercised thoughtful foresight disposition of remains is advisable. Okla. Stat. §12 (2011). The greater while alive, he or she could have concern, however, is the immedi- executed an assignment of right Pets ate welfare of the animals. If law regarding disposition of remains enforcement has reason to believe pursuant to 21 Okla. Stat. §1151 The welfare of pets is also an an animal has been abandoned (2011), which would have delegated immediate concern upon some- or neglected by the owner and no to someone the right to control the one’s death. If it is not desired for one is coming forward to care for decisions regarding the decedent’s pets to be surrendered to the local the animal, the officer may obtain remains. If no such assignment shelter, an individual should have a a warrant and the animal will be exists, the individual with pri- discussion with friends and family impounded.5 The owner (or the ority to control the decisions is to identify who would be willing deceased owner’s representative) determined pursuant to 21 Okla. to care for the pets – perhaps even will receive notice of a hearing to

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 7 determine if the animal was in fact linger indefinitely if no one is documents, if any, and safely secur- abandoned, and if the court deter- appointed personal representative. ing them for as long as necessary mines a violation has occurred, Upon appointment as executor because documents can and do go the animal will be surrendered to or administrator of the estate, the missing if not properly secured. If a shelter or euthanized, depending personal representative is given an individual has a planned estate, on the circumstances, and costs the power by statute to control the yet the plan cannot easily be located, will be allocated to the owner decedent’s social networking, blog- then even the best laid plan can or the owner’s estate.6 Thus, it is ging and emailing service websites.7 go awry quickly. The original docu- in the best interests of the estate However, each website has its own ments may identify the nominated for the personal representative policy and procedures. For example, personal representative, which will or immediate family members to Facebook allows users to appoint give the personal representative care for the pets of the decedent or a “legacy contact” to manage the assumed authority to make decisions locate someone who can until fur- decedent’s page, which can be regarding the safety of the decedent’s ther disposition can be made. memorialized or deleted following pets, the security of the decedent’s the decedent’s death.8 Most other home and the security of the dece- Social Media Accounts social networking websites require dent’s accounts. The original will an immediate family member or should be delivered to the named Another issue that may be an personal representative to contact executor in the will or otherwise filed immediate concern after death the company to either memorial- with the district court, if possible, is an issue that has arisen with ize, deactivate or delete the user’s pursuant to 58 Okla. Stat. §21 (2011). the growth of social media. What account.9 Memorializing an account, While determining if a probate of the should the family do with the which prevents others from mak- will is necessary, the named executor decedent’s social media accounts, ing changes to the account, is an should secure the document in order especially when the unfortunate immediate action on most network- to avoid proceedings to prove a lost news about the decedent’s death ing websites. Deleting the account, will under 58 Okla. Stat. §81 (2011), if is spreading? Being aware of the however, may take several months. a probate is ultimately deemed war- options for management of a Thus, it is in an individual’s best ranted. Practitioners should make a deceased person’s account for each interests to explore relevant social habit of noting in their clients’ files networking website can prevent media website policies in advance where their client intends to store additional, unnecessary anxiety in order to control the account their original documents, hopefully for the family. Although thoughts, management soon after death. ensuring someone other than the prayers and fond memories may be client will have access to them when publicly expressed and appreciated Original Documents needed. Although the practice cannot on social media sites, awkward prevent the loss of all documents, or inappropriate messages may Lastly, another immediate this file note may be invaluable when also be posted to the decedent’s concern upon death is locating the the family contacts the decedent’s page, in which case they may decedent’s original estate planning attorney upon the decedent’s death.

Although thoughts, prayers and fond memories may be publicly expressed and appreciated on social media sites, awkward or inappropriate messages may also be posted to the decedent’s page, in which case they may linger indefinitely if no one is appointed personal representative.

8 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL ISSUES DISCOVERED deed is expressly not a testamentary ex-spouse must subsequently AFTER IMMEDIATE disposition, so 84 Okla. Stat. §114 waive such interest, otherwise the NEEDS ARE ADDRESSED (2011) is seemingly inapplicable plan will be administered with to a transfer-on-death deed.12 The benefits being paid to the named The Effect of Divorce on transfer-on-death deed is also not ex-spouse, which may or may not Beneficiary Designations a bargained for contract in which be part of the divorce settlement. consideration is exchanged, so 15 After the obvious concerns are addressed in the first few days after a death, issues in the decedent’s estate tend to surface. Discovering the decedent failed to update ben- eficiary designations before death is one of the most common issues estate attorneys must face. Although property division is a significant issue dealt with during a divorce, updating the beneficiary designa- tions on such property postdivorce can often be overlooked. By statute, all provisions in a will in favor of a decedent’s ex-spouse are revoked.10 Likewise, all provisions in a trust created by a decedent in favor of the decedent’s ex-spouse, which are to take effect upon the death of the decedent, are also revoked.11 Okla. Stat. §178 (2011) is also seem- The Effect of the Beneficiary What happens to assets naming the ingly inapplicable. Thus, arguably, Predeceasing the Decedent ex-spouse as primary beneficiary if a transfer-on-death deed designa- a property owner fails to update the tion may survive a divorce, which Perhaps more commonly than beneficiary designations on assets is something family law practi- after divorce, owners fail to update passing by contract outside of the tioners should be mindful of in beneficiary designations after a decedent’s probate or trust estate? addressing a property division. named beneficiary dies. This may be For instance, are the provisions of a One other exception to the due to the owner’s neglect or due to payable-on-death designation on a revocation of a beneficiary des- the owner’s incapacity and inability financial account enforceable upon ignation upon divorce involves to change beneficiary designations. the decedent’s death? Under 15 the ex-spouse’s interest in ERISA Upon the owner’s death in such situ- Okla. Stat. §178 (2011), “all provisions benefit plans.13 In Egelhoff v. ations, the language of the document in the contract in favor of the dece- Egelhoff ex rel. Breiner, the United will typically control if the asset dent’s former spouse are thereby States Supreme Court held that passes 1) to the estate of the deceased revoked” upon divorce, subject to a a Washington statute revoking beneficiary, 2) to a contingent bene- few exceptions. This statute applies the beneficiary designation of an ficiary or 3) to the decedent’s estate. to life insurance, annuities, com- ex-spouse was pre-empted as it If a contingent beneficiary is not pensation agreements, retirement applied to ERISA benefit plans.14 named, most assets will default to arrangements and other contracts Given this decision, Oklahoma’s the estate of the decedent. executed on or after Nov. 1, 1987, version of the Washington statute, However, if a contingent ben- and to depository agreements and 15 Okla. Stat. §178 (2011), would eficiary is not named on a bank security registrations executed on be ineffective in terminating an account, the share of the deceased or after Sept. 1, 1994. This begs the ex-spouse’s interest in a dece- primary beneficiary shall be paid question, is a transfer-on-death deed dent’s ERISA plan. Therefore, to the deceased beneficiary’s naming an ex-spouse still enforce- a divorced decedent must have estate rather than the decedent’s able at death if it was never revoked updated the ERISA plan’s bene- estate.15 This runs contrary to by the grantor-owner? Although ficiary designation to someone most expectations that a gift to a similar to a will, a transfer-on-death other than the ex-spouse, or the deceased beneficiary will lapse.16

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 9 In the case of real property under must distribute the balance of the allowed the four children to each the Nontestamentary Transfer of account by the end of five years.21 establish an inherited IRA for each Property Act, a gift of real prop- If the original account holder did respective share. Thus, failed desig- erty pursuant to a transfer-on- survive past the age of taking man- nations may not have negative tax death deed will lapse if the grantee datory distributions, then the even- consequences, but this is by beneficiary does not survive the tual takers may stretch the IRA no means guaranteed. owner.17 If no contingent benefi- distributions over a period calcu- ciary is named, the real property lated by “[u]sing the life expec- The Backfiring of will be trapped in the name of the tancy listed next to the owner’s age Joint Tenancy Ownership deceased owner and default to the as of his or her birthday in the year deceased owner’s estate. of death” and “[r]educ[ing] the life Oftentimes, the death of a Failure to update benefi- expectancy by one for each year named beneficiary triggers issues ciary designations on individual after the year of death.”22 While the when individuals exercised self- retirement accounts can trigger second option does not allow the help to avoid probate. One of the unwanted estate administration individuals to stretch the IRA over more common options for avoiding as well as unwanted tax conse- their own lifetimes, it will allow probate is titling assets in joint ten- quences. When there is no living some benefit from delaying distri- ancy with rights of survivorship. beneficiary designated for an IRA, bution, and the resulting tax, of This can be dangerous planning for upon the accountholder’s death, the entire amount. individuals, particularly the orig- the IRA passes according to the To qualify for inherited IRA inal owner, because it exposes the terms of the associated financial treatment, 26 U.S.C. §408(3)(C)(ii) asset to the creditors of all the joint institution’s plan. If an account (2018) requires that the “individ- tenants. Additionally, if the joint holder fails to name a designated ual for whose benefit the account tenants do not die in the expected beneficiary, then oftentimes the or annuity is maintained acquired order, the use of joint tenancy may IRA benefits are distributed based such account by reason of the backfire. For example, if the oldest on who the financial institution death of another” and that they owner, typically the one who was states is the default beneficiary. The were not the “surviving spouse.” trying to avoid probate, is the institution may have a few layers of default beneficiary designations for the account – such as passing to the decedent’s spouse, then children and then to the estate.18 These default designations may result in negative tax consequences Failure to update beneficiary designations that could have been avoided if the account holder had updated the on individual retirement accounts can trigger beneficiary designations. When an IRA is made payable unwanted estate administration as well as to a decedent’s estate there is a unique scheme for distributions unwanted tax consequences. because the IRS does not consider an estate to be an individual.19 Logically, a nonindividual, such as an estate, does not have a life expectancy over which to stretch Although not binding authority, in sole surviving owner, the owner out required minimum distri- a private letter ruling (PLR) the IRS may no longer be able to make butions. Whether there ends up discussed the issue of whether the alternative arrangements due to being a more or less favorable ultimate beneficiaries of an estate incapacity. Joint tenancy may also outcome for the eventual takers of can qualify for inherited IRA treat- create confusion if utilized only the estate depends on if the orig- ment.23 In that PLR, an estate was for convenience prior to the dece- inal account holder survived to the designated IRA beneficiary, dent’s death, in which case the use the age of taking mandatory dis- received the IRA and conveyed it to of joint tenancy on a bank account tributions.20 If the account holder a trust. The trust was to terminate may result in a constructive trust did not reach such age, then and distribute all assets to the argument.24 Self-help through the eventual takers of the IRA deceased’s four children. The IRS joint ownership might also create

10 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL inequitable results. Many times, over the annual gift tax exclusion will College of Law, where she serves as joint tenancy is utilized by the dece- reduce the survivor’s lifetime gift tax an assistant managing editor of the dent subject to the mutual under- exclusion amount, creating potential Oklahoma Law Review. Ms. Ray can standing between the owners that problems if the surviving owner be reached at [email protected]. the survivor will manage and dis- already has a substantial estate. tribute the assets according to the ENDNOTES decedent’s wishes. However, the CONCLUSION 1. See 58 O.S. §122 (2011). surviving joint owner may decide As is evident, the road to avoid 2. Brady v. Criswell Funeral Home, Inc., 1996 OK CIV APP 1, ¶9, 916 P.2d 269, 271. not to fulfill the decedent’s wishes, conflicts and cost after death is 3. 60 O.S. §199 (2011) (stating trusts for the in which case the surviving owner often paved with good intentions. “care of domestic or pet animals is valid” and such instrument shall be liberally construed). may reap a windfall. Additionally, Practitioners clearly cannot follow 4. See 21 O.S. §1717 (2011). the surviving joint owner may lack their clients throughout their life- 5. 4 O.S. §512(A) (2011). 6. Id. §512(C). capacity or have new creditor issues, times making sure fiduciary powers 7. 58 O.S. §269 (2011) (stating the personal in which case even if the surviving are adequately assigned, assets are representative has power “to take control of, conduct, continue, or terminate any accounts joint owner was well-intentioned, appropriately titled and benefi- of a deceased person”). the decedent’s wishes for the prop- ciary designations are frequently 8. See “Managing a Deceased Person’s Account,” Facebook www.facebook.com/ erty will remain unfulfilled. reviewed. Perhaps it would be useful help/275013292838654 (last visited Oct. 3, 2018) Tasking the surviving joint owner to give an estate information hand- (select “Facebook Help Center”; then follow “Polices and Reporting”; then follow “Managing to fulfill the decedent’s wishes may book to clients to review and com- a Deceased Person’s Account”). also trigger gift tax consequences plete independently on an annual 9. Practitioners and clients should explore policies for addressing decedent’s accounts on for the surviving owner’s estate. For basis, providing them a convenient Twitter, Instagram, LinkedIn, Facebook and Pinterest a surviving owner to fulfill a dece- resource for all their beneficiary des- and discuss such matters with their clients. 10. 84 O.S. §114 (2011). dent’s wishes for others to benefit ignations, funeral wishes, fiduciary 11. 60 O.S. §175 (2011). Note §175(B)(6) permits the from the asset now wholly owned appointments, online information trustor to name the ex-spouse as a beneficiary in an amendment executed after the divorce or annulment. by the survivor, the survivor must and any other relevant asset infor- 12. 58 O.S. §1258 (2008), stating a transfer- give the assets to other individuals. mation. Such handbook would not on-death deed “shall not be considered a In doing this, the survivor must prevent the consequences of an testamentary disposition.” 13. See Egelhoff v. Egelhoff ex rel. Breiner, keep in mind that these transactions unplanned estate, but it might pre- 532 U.S. 141 (2001). may have gift tax consequences. vent what was once a well-planned 14. Id. at 147-51 (“The [state] statute binds ERISA plan administrators to a particular choice of Each individual has a lifetime gift estate from turning into a poorly rules for determining beneficiary status . . . [I]t runs tax exclusion representing the total planned estate due to circumstances counter to ERISA’s commands that a plan shall ‘specify the basis on which payments are made amount they can give away over beyond the estate attorney’s control. to and from the plan,’ §1102(b)(4), and that the their entire lifetime without gift tax fiduciary shall administer the plan ‘in accordance with the documents and instruments governing consequences. With the passage of the plan,’ §1104(a)(1)(D), making payments to a the Tax Cuts and Jobs Act (TCJA) ‘beneficiary’ who is ‘designated by a participants, ABOUT THE AUTHOR or by the terms of [the] plan.’ §1002(8).”). in 2017, the basic exclusion amount Cody B. Jones is an attorney at 15. 6 O.S. §2025(A)(2) (2011). increased significantly. After being McAlister, McAlister, Baker & Nicklas 16. 84 O.S. §142 (2011). 17. 58 O.S. §1255(B) (2011). indexed for inflation, the thresholds PLLC in Edmond. Her practice 18. See, e.g., Morgan Stanley Funds for 2019 are now $11,400,000 for an focuses on estate planning, trust Designation of Beneficiary Form, Morgan Stanley Investment Group (March 2017) www. individual and $22,800,000 for a administrations, probates and morganstanley.com/im/publication/forms/msf/ couple.25 Additionally, each year an guardianships. Ms. Jones received designationofbeneficiaryform_msf.pdf. 19. I.R.S., Dep’t of the Treasury, Publication individual may gift a certain amount her J.D. from the OU College of Law, 590-B, Distributions from Individual Retirement without cutting into their lifetime where she served on the editorial Arrangements (IRAs) 9, 10 (Feb. 6, 2018). 26 20. See I.R.S., Dep’t of the Treasury, basic exclusion amount. The individ- board of the Oklahoma Law Review. Publication 590-B, Distributions from Individual ual may give up to $15,000 annually She is a member of the William J. Retirement Arrangements (IRAs) 10 (Feb. 6, 2018). 21. Id. to any person as of 2019 without Holloway Jr. American Inn of Court 22. Id. utilizing his or her lifetime exclusion and the OBA Estate Planning, 23. See I.R.S. Priv. Ltr. Rul. 2012-08-039 (Nov. 17, 2011). amount. In order to avoid any gift Probate and Trust Section Legislative 24. See Isenhower v. Duncan, 1981 OK tax consequences while honoring the Committee. Ms. Jones can be CIV APP 31, 635 P.2d 33 (“The proper basis for decedent’s wishes, a surviving joint reached at [email protected]. impressing a constructive trust is to prevent unjust enrichment.”). See also 60 O.S. §74 (2011) owner must avoid giving more than Ashley Ray is a law clerk and future (discussing joint tenancy); 60 O.S. §137 (2011) $15,000, or potentially $30,000 for a associate at McAlister, McAlister, (explaining when a trust is presumed). 25. See Tax Cuts and Jobs Act of 2017, Pub. L. 27 donor couple, in a taxable year. If the Baker & Nicklas PLLC in Edmond. No. 115-97, §11061, 131 Stat. 2054, 2091 (2017). surviving owner decides to gift more She is a third-year law student 26. See 26 U.S.C. §2503 (2017). 27. See 26 U.S.C. §2513 (2017). than this in the taxable year, the sum obtaining her J.D. from the OU

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 11 Estate Planning Guide to Organ and Tissue Donation in Oklahoma By Jennifer L. Wright

HE ESTATE PLANNING CONVERSATION SHOULD INCLUDE a discussion about Torgan and tissue donation. Clients may have questions related to organ and tissue dona- tion or may have reached a decision based on misinformation. Attorneys should be prepared to provide information and resources to the client so an informed decision can be made.

Typically, the primary focus and political factors, that may be The Uniform Anatomical Gift of the estate planning process is relevant to the client’s situation.”2 Act (UAGA) was first drafted in 1968 on the client’s assets. Planning Comment 2 to Rule 2.1 states, “[a] and has been adopted in some form for incapacity and end-of-life care lthough a lawyer is not a moral in all 50 states.5 Oklahoma’s version is just as important as planning advisor as such, moral and ethical of the UAGA can be found at 63 O.S. for the distribution of assets; considerations impinge upon §2200.1A, et seq. The UAGA provides however, these topics usually do most legal questions and may a legal framework for organ and not receive as much attention in decisively influence how the law tissue donation and transplantation the estate planning conversation. will be applied.”3 The decision to processes. The latest revision of the In particular, the topic of organ become an organ and tissue donor UAGA added language to increase and tissue donation can be over- is certainly a personal decision; the focus on personal autonomy in looked. Clients may not know how however, lawyers have a duty to the donation process. An individ- to approach the subject or what competently advise their clients ual’s decision to become an organ questions to ask. Lawyers may in these difficult decisions. This and tissue donor is a legally bind- shy away from this conversation article is intended to provide ing gift and is referred to as “first because they are uncomfortable an overview of organ and tissue person authorization.” First person with the topic or lack the knowl- donation in Oklahoma and answer authorization cannot be amended edge and information to provide related questions that arise in the or revoked by anyone other than the meaningful advice to the client. estate planning practice. donor.6 Even if the donor’s family Discussions about end-of-life care, objects to donation, the donor’s including organ and tissue dona- APPLICABLE LAWS decision is final and medical provid- tion, are difficult because these The United States has adopted ers have an obligation to respect the hard choices can be emotional and an opt-in organ donation system, wishes of the donor. involve medical, legal, religious meaning an individual must opt In 1984, Congress passed the and social aspects.1 into organ donation by making the National Organ Transplant Act The Oklahoma Rules of decision to be an organ and tissue which established the Organ Professional Conduct permit donor. Some countries have adopted Procurement and Transplantation lawyers to refer to these other laws which make organ donation Network (OPTN). The United aspects in advising clients. Rule the default option at the time of Network for Organ Sharing is a 2.1 states, “[i]n rendering advice, death, and an individual would have private, nonprofit organization a lawyer may refer not only to to opt out of organ donation if they that administers the OPTN under law but to other considerations do not want to be an organ donor.4 federal contract. The OPTN main- such as moral, economic, social tains a national registry for organ

12 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL matching and created a system of provide oversight of the processes.10 of the donor, so long as the power organ procurement organizations While this article is intended to pro- of attorney or other document (OPOs) throughout the United vide resources and assist the estate does not prohibit the agent from States. OPOs are nonprofit organi- planning attorney in guiding clients, making an anatomical gift.12 zations designated under federal it is not an exhaustive review of Becoming an organ and tis- law as the only organizations all applicable laws and regulations sue donor can be as simple as that can provide organ and tissue related to organ and tissue dona- authorizing the organ donation donation services.7 Oklahoma’s tion and transplantation. symbol be placed on the donor’s OPO is LifeShare Transplant Oklahoma state driver’s license.13 Donor Services of Oklahoma. HOW TO BECOME An expired, suspended or revoked LifeShare works closely with AN ORGAN DONOR driver’s license will not invalidate transplant centers and health care In Oklahoma, a competent the anatomical gift.14 A donor can organizations across the state individual can become an organ also make an anatomical gift in of Oklahoma in performing the and tissue donor during the indi- a will.15 The gift designated in recovery of organs and tissue for vidual’s lifetime if the individual the will is effective upon death transplantation. LifeShare also is over the age of 18, is over the and without the necessity of a provides resources and education age of 16 if eligible to obtain an probate.16 A finding that the will to help raise awareness for organ, Oklahoma driver’s license or is an is invalid after the donor’s death eye and tissue donation.8 emancipated minor.11 An autho- will not invalidate the gift.17 A The donation and transplantation rized person can make an ana- donor who has a terminal illness processes are heavily regulated by tomical gift on behalf of someone or injury may make an anatomical state and federal statutes and regula- else. The statute defines “autho- gift by any means of communi- tions.9 In addition, numerous federal rized person” as the parent of an cation if addressed to two adults, agencies under the U.S. Department unemancipated minor donor, the so long as one of them is a dis- of Health and Human Services guardian of the donor or the agent interested party.18 A donor may

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 13 authorize an anatomical gift by 2) Spouse; the form can appoint a health care signing an organ donation card or 3) Adult child; proxy and make advance decisions other record.19 If the donor is unable 4) Parent; concerning the administration of to sign, another individual may 5) Adult sibling; life-sustaining treatment and arti- sign at the direction of the donor 6) Adult grandchildren; ficially administered nutrition and if the signature is witnessed by 7) Grandparents; hydration. The advance directive two adults, one of whom must be a 8) Adult who exhibited special also includes a section for the client disinterested party.20 A donor may care and concern for decedent; to complete if the client wishes to also make an anatomical gift in the 9) Guardian of the person; or make an anatomical gift. While this Advance Directive for Health Care 10) Any other person having article focuses on how the advance form, which is discussed below. authority to dispose of directive relates to organ and tissue A donor or authorized person the body. 26 donation, estate planners may wish can execute an amendment or to also refer to W. Thomas Coffman’s revocation of an anatomical gift.21 Making a time-sensitive deci- article “Advance Planning for End- If the individual is unable to sign, sion about organ donation immedi- of-Life Care in Oklahoma” for a another individual may sign the ately following a loved one’s death broader overview of the advance amendment or revocation at the can be extremely burdensome and directive as well as other end-of-life individual’s direction with the emotional, especially if the dece- planning practices.28 signature being witnessed by two dent’s wishes are not known by In the anatomical gifting section adults, one of whom must be a dis- the decision maker. As part of the of the advance directive, indi- interested party.22 An anatomical estate planning process, attorneys viduals may select the purpose or gift may be revoked if the donor should discuss the significance of purposes for which the gift is being or authorized person destroys the these decisions with clients as well made from the following choices: document making the gift with as the importance of communicat- 1) transplantation; 2) therapy; the intent of revocation.23 If the gift ing wishes to loved ones to help 3) medical science, research or is made by will, the same meth- relieve some of this burden. education; and 4) dental science, ods allowed by law for revoking research or education.29 These or amending wills are effective. ADVANCE DIRECTIVE terms are not defined in the In addition, a donor making an FOR HEALTH CARE Oklahoma Advance Directive Act, anatomical gift by will can amend In the estate planning prac- nor are they defined in the UAGA, or revoke the gift by signing a tice, the discussion of anatomical but comments to Section 4 of the document to that effect.24 gifting occurs most frequently Revised Uniform Anatomical Gift An anatomical gift of a donor when clients are executing the Act (2006) provide some guidance: will be honored at the time of Oklahoma Advance Directive for death unless there is an express, Health Care form. The advance The terms “transplantation”, contrary indication by the donor.25 directive is a statutory form set “therapy”, “research” and “edu- At the time of death or removal of forth in the Oklahoma Advance cation” are not defined in this life support, if an individual has Directive Act.27 Clients completing [act]. Rather, they are defined not made an anatomical gift and no express refusal to make an anatom- ical gift exists, the organ recovery team will approach the family or other authorized person and seek consent for organ and tissue dona- tion. The following individuals, in the order named, may authorize organ and tissue donation of an individual at the time of death:

1) Agent of decedent so long as the power of attorney or other document does not prohibit the agent from making an anatomical gift;

14 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL The remaining portion of the anatomical gifts section of the advance directive asks individuals to choose what specifically they wish to donate, either the entire body or selected organs or parts.

by their common usage in the therapy research or education, the to receive life-sustaining treatment communities to which they body or part passes to the person and/or artificial nutrition and apply. In general terms, trans- responsible for the disposition of hydration is not considered an plantation refers to the removal the decedent’s remains.33 expression of contrary intent.37 and grafting of one individu- For an individual who is at or Another potential conflict exists al’s body part into the body of near death, the use of life support with the Oklahoma Physician another individual. Research systems or other measures may be Orders for Life-Sustaining is a process of testing and necessary to ensure the suitability Treatment (POLST). The POLST observing, the goal of which is of organs and tissue for transplan- form is not an estate planning to obtain generalizable knowl- tation. This presents a conflict if the form, but rather a medical order edge, while therapy involves the donor completed an advance direc- that must be completed by a med- processing and use of a donated tive and selected that life-sustaining ical professional to address the part to develop and provide treatment and/or artificial nutrition patient’s current medical condi- amelioration or treatment for a and hydration not be administered tion.38 The POLST form includes disease or condition. Education to the donor. Under Section 14 of the directions on the use of life-sustaining posits the use of the whole body UAGA, when a prospective donor treatment.39 It is not clear if the or parts to teach medical profes- who is at or near death is referred execution of a POLST form direct- sionals and others about human to an OPO, the OPO will conduct ing physicians to withhold or anatomy and its characteristics.30 an examination to determine the withdraw life-sustaining measures suitability of the prospective donor’s would constitute an “expression The remaining portion of the organs or parts.34 During this exam- of contrary intent” for purposes anatomical gifts section of the ination, life support systems that of continuing life support systems advance directive asks individuals ensure the viability of the organs to ensure viability of organs or to choose what specifically they or parts may not be withdrawn parts of a prospective donor. Estate wish to donate, either the entire regardless of the prospective donor’s planners should inform clients of body or selected organs or parts. selection on the advance directive the existence of the POLST and If the donor selects more than that life-sustaining measures not how it relates to the client’s estate one purpose on the form, the be administered.35 If the hospital planning documents. organ or part would first be used knows the prospective donor has Some feel that the requirement for transplantation or therapy, if made an expression of intent to the under Section 14 of the UAGA that found to be suitable.31 If the gift is contrary then the life-sustaining life support systems be initiated or not suitable for transplantation or measures may be withdrawn.36 The continued for the sole purpose of therapy, it would then be used for statement in an advance directive determining suitability for dona- research or education.32 If the gift or health care power of attorney tion infringes on the individual’s is not suitable for transplantation, that the individual does not wish right of autonomy, while others

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 15 feel the requirement supports the ensure the documents reflect can only occur after death individual’s decision to donate.40 It the client’s intent to avoid any has occurred.44 The organ is clear a conflict exists within the conflicts at the time of death. and tissue recovery team is UAGA, which is acknowledged in Clients should be encouraged separate from the treating Section 21 of the UAGA. Section 21 to communicate their decisions physician and the treating provides that where such conflict about end-of-life care and organ physician’s team.45 exists, the physician shall attempt and tissue donation to their loved „„ I can’t be an organ donor to resolve the conflict expeditiously ones. Assisting clients in making because of a past illness. Very by conferring with the donor, or informed decisions about organ few medical conditions or if the donor is unable to confer, and tissue donation and memo- illnesses will prevent some- the donor’s agent or other per- rializing those decisions in the one from being an organ or son authorized by law to make client’s estate planning documents tissue donor. Active cancer medical decisions for the donor.41 will give the client peace of mind or some types of infection This conflict can be avoided with and provide clarity to the client’s would prevent donation.46 advance planning if the attorney loved ones and medical providers. Physicians will make a deter- mination about whether organs or tissue can be used at the time of death. „„ I don’t want my family to be responsible for the cost of Assisting clients in making informed decisions organ donation. The donor is not responsible for the about organ and tissue donation and cost of donation and neither is the donor’s family. The memorializing those decisions in the client’s donor is responsible for all medical care up until estate planning documents will give the client the time of legal death and the costs associated with funeral, cremation and/or peace of mind and provide clarity to the client’s burial expenses.47 „„ I don’t want to have my loved ones and medical providers. funeral delayed. Organ and tissue donation should not cause a delay in the funeral or memorial services. The includes carefully drafted language Common Myths organ procurement team in the client’s advance directive to „„ I am too old to be an organ works as quickly as possible more clearly state the client’s intent, donor. There is no age limit and will return the body to such as stating that an exception to on organ donation. The the family. Organ donation the withholding of life-sustaining oldest organ donor in the will not prevent an open treatment and/or artificial nutrition United States was 92 years casket funeral.48 and hydration be made to allow for old and donated his liver.42 organ and tissue donation. „„ It is against my religion. None of the major religions ABOUT THE AUTHOR CONCLUSION forbid the receipt or dona- Jennifer L. Wright is a senior attorney In advising clients about estate tion of organs or are against at Ball Morse Lowe and leads the planning and end-of-life care, transplantation.43 Estate Planning, Probate and Elder attorneys should include a dis- „„ The doctors or emergency Law Practice Group for the firm. cussion about organ and tissue medical personnel will not try She serves as the Membership donation and provide clients with as hard to save me if I am an Committee chair for the OBA Estate information and resources to assist organ donor. The first prior- Planning, Probate and Trust Section. them in making an informed ity of medical professionals Ms. Wright is a 2005 graduate of the decision. In drafting estate plan- is to save the patient’s life. OCU School of Law. ning documents, attorneys should Organ and tissue donation

16 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL ENDNOTES 17. Id. 1. Hank Dunn, Hard Choices for Loving People, 18. 63 O.S. §2200.5A(A)(3) (2009). at p. 10 (5 ed.) (2009). 19. 63 O.S. §2200.5A(B) (2009) (To request 2. Rule 2.1, ORPC. an organ donation card, contact LifeShare at 3. Rule 2.1, ORPC, cmt 2. 800-826-LIFE (5433). A donor may also register 4. See S. Davidai, T. Gilovich, & L. Ross, “The online at www.lifeshareregistry.org/register.). meaning of default options for potential organ 20. 63 O.S. §2200.5A(B) (2009). donors,” Proceedings of the National Academy 21. 63 O.S. §2200.6A (2009). of Sciences, 15201-15205 (2012) (Psychologists 22. Id. examined beliefs of participants in opt-in and 23. Id. opt-out countries and determined that changing 24. Id. policies and laws in the United States to become 25. 63 O.S. §2200.8A (2009). an opt-out country would change individuals’ 26. 63 O.S. §2200.9A (2009). beliefs about organ donation from being a 27. 63 O.S. §3101.4 (2006). significant action to an insignificant action, which 28. W. Thomas Coffman, “Advance Planning would result in an increase in donations.); see for End-of-Life Care in Oklahoma,” Oklahoma Bar also L. Shepherd, R. E. O’Carroll and E. Ferguson, Journal, Vol. 78, No. 15, 1285-1290 (May 12, 2007). “An International Comparison of Deceased and 29. Id. Living Organ Donation/Transplant Rates in Opt-in 30. National Conference of Commissioners on and Opt-out Systems: A Panel Study,” BMC Uniform State Laws, Revised Uniform Anatomical Medicine, 12:131 (2014) (Opt-out countries have a Gift Act (2006, last revised or amended in 2009), higher number of deceased donors, but a reduced tinyurl.com/yasgbauo. number of living donors.). 31. 63 O.S. §2200.11A (2009). 5. See National Conference of Commissioners 32. Id. on Uniform State Laws, Revised Uniform Anatomical 33. Id. Gift Act (2006, last revised or amended in 2009), 34. 63 O.S. §2200.14A(C) (2009). tinyurl.com/yasgbauo. 35. Id. 6. 63 O.S. §2200.8A (2009) (In the case of an 36. Id. unemancipated minor who dies, a parent may 37. National Conference of Commissioners on revoke or amend the minor’s gift or refusal.). Uniform State Laws, Revised Uniform Anatomical 7. List of OPOs for each state, www.aopo.org/ Gift Act (2006, last revised or amended in 2009), find-your-opo. Comments to Section 14, tinyurl.com/yasgbauo. 8. LifeShare’s website provides helpful 38. 63 O.S. §3105.4 (2016). resources and information, including the Donor 39. Id. Family Resource Guide, www.lifeshareoklahoma. 40. J. L. Verheijde, M.Y. Rady & J. L. McGregor, org/family-services.html. “The United States Revised Uniform Anatomical 9. See organdonationalliance.org/organ- Gift Act (2006): New challenges to balancing patient donation-toolbox-legal for a list of federal and rights and physician responsibilities,” Philosophy, state statutes and regulations; see also www. Ethics, and Humanities in Medicine: PEHM, 2:19 organdonor.gov/about-dot/laws/history.html (2007), doi.org/10.1186/1747-5341-2-19. for Statutory and Regulatory History of Organ 41. 63 O.S. §2200.21A(B) (2009). Transplantation. 42. See www.organdonor.gov/about/donors/ 10. Federal agencies involved in the organ seniors.html. and tissue donation and/or transplantation 43. P. Bruzzone, “Religious Aspects of Organ processes include the Centers for Medicare and Donation,” Transplantation Proceedings, Vol. 40, Medicaid Services, Centers for Disease Control Issue 4, 1064-1067 (May 2008). and Prevention, National Institutes of Health, 44. 63 O.S. §3122, Declaration of Death (1986). Agency for Healthcare Research and Quality 45. 63 O.S. §2200.14A(I) (2009). and the Food and Drug Administration. 46. More information on who can be a donor 11. 63 O.S. §2200.4A (2009). can be found at www.organdonor.gov/about/ 12. Id. donors.html. 13. 63 O.S. §2200.5A(A)(1) (2009) and 63 O.S. 47. See www.lifeshareoklahoma.org/ §2211 (2004). frequently-asked-questions.html. 14. 63 O.S. §2200.5A(C) (2009). 48. 63 O.S. §2200.14A(H) (2009). See also 15. 63 O.S. §2200.5A(A)(2) (2009). cloud.3dissue.com/144102/144275/168702/ 16. 63 O.S. §2200.5A(D) (2009). DonorFamilyResourceGuideBooklet/index.html.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 17 Estate Planning Powers of Attorney With Gifting Powers: The Double-Edged Sword of Elder Law By Tessa Baker and H. Terrell Monks

HREE YEARS AGO, BILLY BEGAN TO SUFFER SIGNS of dementia and it became Tapparent that he needed someone to assist in the management of his affairs. Great- nephew Zeke came to the rescue. Zeke’s spouse, an educated and generally sharp individual, drafted a power of attorney for Billy to sign granting Zeke a general durable power of attor- ney that included gifting powers. Zeke, using that power of attorney, executed beneficiary designation forms, joint tenancy deeds, and other such documents to assure that he received Billy’s worldly goods. Eventually, Billy succumbed to dementia. The heirs at law, which did not include Zeke, were furious. Litigation commenced and insults were exchanged.

On the other hand, consider be devastating for Mary and her using the power of attorney he Mary and William who have been husband William. has brought. Even more unfortu- married almost 58 years. Mary’s William takes his power of nate, Mary is fully incapacitated health has deteriorated and she attorney and visits his friend, and can neither sign the deed nor now needs long-term care. The attorney Mark, to inquire about grant a new power of attorney. only substantial asset remaining the preparation of a quit-claim These two scenarios and thou- is the homestead, which is held in deed to be executed using the sands more like them, demon- joint tenancy. Fortunately, William power of attorney. Attorney Mark strate both the need for gifting holds Mary’s general durable has recently been involved in a powers in a power of attorney as power of attorney. Unfortunately, case wherein the title attorney well as the danger of abuse that this power of attorney is the state reviewed a deed that had been accompanies such power. There statutory form,1 which contains executed by an agent holding a appears to be an important gap in no gifting powers. Mary is receiv- general power of attorney without Oklahoma law that deals with the ing Medicaid assistance to pay gifting powers. The title attorney use of gifting powers. There are, the substantial cost of her care, declined to issue title insurance to however, some Oklahoma cases and William has been advised the prospective buyer of the prop- that should be considered. that he has one year to remove erty because the power of attor- Mary’s name from the title to their ney did not grant the agent the ESTATE OF ROLATER homestead. The social worker has authority to gift property of the First, consider In re Estate of advised that if Mary’s name is still principal. Mark tells William this Rolater, wherein an agent trans- in title at the end of the year, Mary story and advises that under the ferred certain stock belonging to will have too many assets to be circumstances, William does not the principal into his own name eligible for Medicaid assistance. have the authority to gift his wife’s using a general durable power of Such a loss of assistance would homestead interest to himself attorney.2 The court admitted that

18 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL it was difficult to read the copy of the power of attorney document, but from the language recited by the court, there appeared to be no gifting power in the document.3 The court held that there was no presumption of the principal’s intent to give and that the ele- ment of donative intent, the first essential element of a gift, must be proved by evidence that is “clear, satisfactory, and unmistakable…”4 The court opined that the agent had acted under a misapprehen- sion that his power of attorney gave him more or less “omnip- otent control of his principal’s property.”5 The court advised that such a notion was ill-founded.6 The court held that “in exercising granted powers, the attorney is bound to act for the benefit of his principal avoiding where possible that which is detrimental unless expressly authorized.”7 The concept of acting “for the benefit of his principal” appears to be the crux of an important question that remains unanswered in the current state of Oklahoma law. Although Oklahoma statutes do state that an attorney in fact, “whether acting pursuant to a durable or nondurable power of attorney or otherwise, is bound by standards of conduct and

THE OKLAHOMA BAR JOURNAL liability applicable to other fidu- Estate of Stinchcomb10 and held that STEHLIK V. RAKOSNIK ciaries,”8 it is not completely clear the recipient of the principal’s prop- Among cases that could be to what level the agent must act erty must prove by clear, explicit considered is the Nebraska case exclusively in the best interest of and convincing evidence all the of Stehlik v. Rakosnik,15 wherein the the principal when the language elements necessary to establish an agent received a power of attorney of the document includes gifting inter vivos gift.11 In Estes, the agent that included the power to make and self-dealing powers. I would used a power of attorney to transfer gifts.16 The agent utilized the power state the question like this: Where almost all of the principal’s assets of attorney to make transfers of the principal executes a power of into her name or into joint tenancy the principal’s money and real attorney containing gifting pow- with rights of survivorship.12 The estate to himself and others.17 The ers, must those gifting powers be agent argued that the principal agent used funds from the princi- executed and applied only for the intended her to take these actions pal’s checking account for his own benefit and best interest of the but the court did not appear to give personal purposes.18 The Nebraska principal, or may those gifting serious weight to this self-serving court considered a line of Nebraska powers be used for the benefit of testimony of the agent.13 The court cases, as well as cases from other the agent or other person cho- also considered that the principal’s jurisdictions, which were based sen by the agent? The secondary name remained on title to some of upon policy concerns, to reach the question that arises out of the the subject property.14 conclusion that the broad power Rolater case is whether a general Unfortunately, for those of us of gifting in a power of attorney gifting power contained within a practicing in the area of estate is ineffective to empower the general durable power of attorney planning, the above cases do not fiduciary to make a self-dealing is sufficient to demonstrate the appear to turn on power of attor- gift without a specific statement principal’s donative intent. The ney forms with gifting powers. allowing self-dealing.19 The court, practitioner may find this particu- Therefore, there remains a real therefore, reached the conclusion larly problematic where the gifting chance that an appellate court that an agent only has authority to power is contained in a laundry could find that where such a effectuate a self-interest transfer list of other powers. power is found in a power of attor- of the principal’s assets where ney form, the facts of the matter 1) expressly authorized by the ESTATE OF ESTES would fall outside of the existing power of attorney form or 2) when The Oklahoma Supreme Court case law in Rolater, Stinchomb and the act is in the best interest of the has provided something of a Estes. If that should occur, the principal or consistent with the primer on the issue of gifting and court may look to the decisions purpose and intent of principal.20 agency in the case of In re Estate of of other states for guidance as If an Oklahoma court were to Estes.9 In very abbreviated terms, there is not a developed body of find this case compelling, one the court cited with approval In re Oklahoma law directly on point. might reasonably expect that the

The Nebraska court considered a line of Nebraska cases, as well as cases from other jurisdictions, which were based upon policy concerns, to reach the conclusion that the broad power of gifting in a power of attorney is ineffective to empower the fiduciary to make a self-dealing gift without a specific statement allowing self-dealing.

20 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL appellate court would set aside York’s power of attorney statute27 (c) An agent may make a gift of attempted transfers made by an and that statute is not replicated in the principal’s property only as agent under a broad gifting power. Oklahoma law. Oklahoma courts the agent determines is consis- Such a decision may be of lim- may, however, still find the New tent with the principal’s objec- ited value in future cases because York court’s reasoning and focus tives if actually known by the those agents who are sufficiently on the general purpose of power agent and, if unknown, as the educated or lucky will simply add of attorney persuasive. agent determines is consistent self-dealing powers to the general power of attorney that they pre- pare for the principal to execute in their favor and the abuse will continue unabated. In Ferrara, the New York Court of Appeals found ESTATE OF FERRARA Another informative case may that attorneys-in-fact were required to act in the be the New York case of In re Estate of Ferrara. 21 In Ferrara, the New York best interest of the principal when making gifts, Court of Appeals found that attorneys- in-fact were required to act in the best interest of the principal when even when the power of attorney document making gifts, even when the power of attorney document specifically specifically allowed them to self-deal. allowed them to self-deal.22 In Ferrara, the principal had exe- cuted a will bequeathing his estate to a charity.23 While the principal’s UNIFORM POWER with the principal’s best inter- health was deteriorating, one of the OF ATTORNEY ACT est based on all relevant factors, attorneys-in-fact transferred nearly Finally, in 2006 the Uniform including: (1) the value and all of the principal’s assets to him- Power of Attorney Act was promul- nature of the principal’s prop- self.24 Despite the existence of the gated and certain sections of that erty; (2) the principal’s foresee- will to the contrary, the attorneys- act speak directly to the issue of able obligations and need for in-fact argued that the self-dealing self-dealing under a power of attor- maintenance; (3) minimization of was in the best interest of the ney. This act has been adopted by a taxes, including income, estate, principal because it furthered the majority of the states, with still more inheritance, generation-skipping decedent’s wishes.25 After examin- considering adoption currently.28 transfer, and gift taxes; (4) eligi- ing legislative history, statutes and Although, Oklahoma has not yet bility for a benefit, a program, the general purpose of a power of adopted the act, the proposed or assistance under a statute or attorney, the court determined that revisions may still be persuasive regulation; and (5) the principal’s an attorney-in-fact has a duty to act to fill gaps in Oklahoma’s Uniform personal history of making or in the best interest of the principal Durable Power of Attorney Act29 joining in making gifts.31 at all times, and that the attorney- not yet addressed by Oklahoma in-fact here had not demonstrated courts or Legislature. Section 201 Although Oklahoma does not that such self-dealing was in the of the Uniform Power of Attorney currently have a statute requiring principal’s best interest.26 Act discusses the types of authority the attorney-in-fact to consider While the decision of this case that require specific grants: “(a) An these factors when making a gift of goes directly to the question of agent under a power of attorney the principal’s property, Oklahoma whether an agent must exercise may do the following on behalf of courts have stated that the attorney- his duties in the principal’s best the principal or with the principal’s in-fact is required to act for the interest even when the power of property only if the power of attor- benefit of the principal. 32 These attorney contains a gifting power, ney expressly grants the agent the factors found in the Uniform the persuasiveness of the case authority… (2) make a gift.”30 Power of Attorney Act may pro- may be questionable as the court’s Section 217 of the Uniform vide persuasive avenues for deter- decision appears to turn largely Power of Attorney Act specifically mining what type of actions are on the legislative history of New deals with gifts. This section states: for the “benefit of the principal.”

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 21 Going back to the story of ENDNOTES husband and wife, Mary and 1. Okla. Stat. Tit. 15, §1003. 2. In re Estate of Rolater,1975 OK CIV APP 60, William, one can reasonably reach ¶5, 542 P.2d 219. the conclusion that there will be 3. Id. ¶4. instances, and probably increas- 4. Id. ¶15. 5. Id. ¶20. ingly common instances, that an 6. Id. agent will need to self-deal and 7. Id. 8. Okla. Stat. Tit. 58 O.S. §1081. gift assets of the principal. There 9. In re Estate of Estes, 1999 OK 59, ¶¶29-31, may also be situations where the 983 P.2d 438. 10. 1983 OK 120, 674 P.2d 26. courts will find such gifting and 11. Id. ¶29. self-dealing to be not only appro- 12. Id. ¶¶7-13. 13. Id. ¶31. priate, but even necessary for the 14. Id. integrity of the aging family. This 15. Stehlik v. Rakosnik, 24 Neb. App. 34, 881 N.W.2d 1(2016). may occur even where there is a 16. Id. at 36. complete absence of evidence that 17. Id. 18. Id. there was the “donative intent,” as 19. Id. at 41. required by the current case law. 20. Id. at 45. 21. In re Estate of Ferrera, 852 N.E.2d 138, 7 In conclusion, there appears to N.Y.3d 244, 819 NYS2d 215 (N.Y., 2006). be a growing need for a statutory 22. Id. at 144. 23. Id. update on the issue of powers of 24. Id. at 140-141. attorney that authorize gifting and 25. Id. at 140. 26. Id. at 144. self-dealing in Oklahoma. Our 27. Id. current statutory scheme leaves 28. Uniform Law Commission (2018), https://my.uniformlaws.org/committees/ unprotected the most vulnerable community-home?CommunityKey=b1975254-8370- members of our population, the 4a7c-947f-e5af0d6cb07c (last visited Sept. 27, 2018). 29. Okla. Stat. Tit. 58 O.S. §1071. elderly and infirm, and do not pro- 30. Uniform Power of Attorney Act §201 vide the courts strong tools to rem- (emphasis added). edy abuses of power by those who 31. Uniform Power of Attorney Act §217 (emphasis added). take advantage of their principals 32. Rolater, 542 P.2d at 223. by exploiting important tools used by thoughtful elder law attorneys.

ABOUT THE AUTHORS Tessa Baker practices estate planning and probate law with Oklahoma Estate Attorneys PLLC. She interned for the firm for three years as she attended the OCU School of Law. She graduated from the OCU School of Law in May 2018. H. Terrell Monks practices estate planning and probate in Midwest City and Edmond. He is an adjunct professor at Rose State College and is a 1997 graduate of the OCU School of Law. He is chair of the OBA Legal Internship Committee and a OBA Law Schools Committee member.

22 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Estate Planning Creditor’s Rights in Revocable Inter Vivos Trusts After the Death of the Settlor By Ashley A. Warshell and H. Terrell Monks

24 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL EVOCABLE INTER VIVOS TRUSTS HAVE BECOME a common estate planning tool in ROklahoma and elsewhere, often functioning as a “will substitute” for those who wish to avoid probate and maintain some control over assets after their death. Although estate planning attorneys may presume that similar legal analyses will apply to wills and these estate planning “substitutes,” that is not always the case, even in circumstances this may seem to be warranted as a matter of public policy.1 One of these circumstances, for example, involves the ability of a settlor’s creditors to reach assets in a revocable inter vivos trust upon the death of the settlor.

Although the assets in such a In Thomas, the wife funded a forced-share claim), it is not clear trust are generally available to revocable living trust with sepa- the same decision would result in the settlor’s creditors during his rate inherited assets, appointing a case involving creditor claims. or her lifetime, the beneficiaries herself and Bank of Oklahoma Arguments similar to those in normally change upon the settlor’s as co-trustees and maintaining Thomas may be made in response death, converting the trust into full dominion and control over to the claims of other creditors of one that is no longer self-settled, the trust assets until the time of an estate, e.g., that since the assets and therefore is beyond the reach her death.4 The trust agreement were owned by the trustees as of the settlor’s creditors. This directed that, upon her death, such, they pass pursuant to those article discusses the case law and the assets were to be distributed terms, outside the jurisdiction of a policy considerations implicated equally between her surviving probate court and are not subject in addressing this issue. husband and two children.5 The to the procedure for paying debts husband elected to take a forced of an estate set forth in 58 O.S. §§1, THOMAS V. BANK share and demanded that the et seq. Creditors might argue that OF OKLAHOMA, N.A. trust assets be included in the this should not be permitted, e.g., In Thomas v. Bank of Oklahoma, wife’s estate for that purpose.6 because it would allow the settlor N.A.,2 the Oklahoma Supreme Bank of Oklahoma, the remaining and trust beneficiaries to avoid the Court held that a revocable inter trustee, objected, arguing that debts of the settlor. Similar to the vivos trust could not be used to since the wife did not have legal holding in Thomas, the federal gov- defeat the forced share of a surviv- title to the trust property at the ernment does not permit this in the ing spouse. Although the reason- time of her death, it could not be context of tax liability; the Internal ing of the Thomas court could be included in her estate or be subject Revenue Service (IRS) considers extended to the claims of other to the spousal share.7 As noted, property in a revocable trust to be creditors, no Oklahoma court has while the Thomas court rejected property of the estate for estate tax done so, leaving the issue unset- this argument on the facts of that purposes.8 Applying the reasoning tled under Oklahoma law.3 case (in the context of a spousal in Thomas, an Oklahoma court

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 25 “health, support in reasonable comfort, best interests and wel- fare” of Lela.12 However, the trust ended upon Lela’s death, with the trust property passing directly to the successor beneficiaries at that time. On these facts, the Burford Manor court found that, as a matter of equity, the trust assets passed to the successor beneficia- ries subject to an implied equitable lien in favor of the nursing home. The court reasoned that:

[A]t the death of Lela, title to the trust’s real property passed to the legatees named in Homer’s will encumbered, however, with an equitable lien for valid trust debts. These constituent circum- stances give rise to a significant would not permit such avoidance is less certain. The aforementioned factor overshadowing the entire in the context of a forced spousal statutory provision is limited to set- situation-one recognized by share. But is there also an analyt- tlors who are also beneficiaries – a the trial court-that a cloud of ical basis for a contrary rule with condition that changes at the death conflicting interests hovered regard to ordinary private credi- of the settlor. As noted above, the over both of the Lela trust trust- tors’ claims? In other words, what interests of at least two other types ees arising from the fact that policy would be served by distin- of creditors – the spouse electing they were to eventually receive guishing other types of creditors a forced share and the IRS – have whatever was not spent on Lela and excluding them from the same been recognized and addressed in during her lifetime. type of protection? favor of a policy that prevents trus- tors from using a vehicle designed … “Equitable liens grow out of a THE OKLAHOMA TRUST ACT as a will substitute to avoid paying duty or obligation on the part of As long as the settlor is liv- certain claims that would have the owner of property to make it ing and the trust is revocable, otherwise been paid in a probate.10 answerable for a debt.” Jones on the applicable Oklahoma statute But are these (IRS and spousal) Liens, 3rd Ed., §28.13 is clear that trust assets may be claims distinguishable on legal and reached by the settlor’s creditors: policy grounds from the claims of Although Burford Manor may ordinary creditors, so as to warrant weigh in favor of creditors, it fails H. Nothing in this act shall disparate treatment? to provide the bright line rule authorize a person to create a necessary to settle this issue in spendthrift trust or other inalien- BURFORD MANOR INC. V. DEEL the context of revocable inter vivos able interest for his own benefit. The Oklahoma Court of Civil trusts generally. In Burford Manor, The interest of the trustor as a Appeals addressed at least one the contingent beneficiaries were beneficiary of any trust shall be variation of this issue in Burford also the trustees at the time the freely alienable and subject to Manor Inc. v. Deel.11 In Burford Manor, debt was incurred, creating some the claims of his creditors.9 the beneficiaries of a trust sought potentially conflicting interests on to avoid paying their deceased this issue that might not always be In other words, a revocable mother’s nursing home expenses. present. Moreover, the doctrine of living trust for the benefit of the During her lifetime, the mother equitable lien, relied on by the court, settlor generally does not provide (Lela) was the beneficiary of a trust is inherently flexible and subject to asset protection during the set- established by her late husband subjective considerations. Thus, in tlor’s lifetime; however, what hap- (Homer), which directed the trustee most cases, reasonable arguments pens upon the death of the settlor to distribute trust assets for the will remain on either side.

26 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL For example, the facts of a given THE THIRD RESTATEMENT with any other person, is liable case may easily be distinguished AND LEGISLATIVE for the expenses of the admin- from those in Burford Manor, where TREATMENT istration and obligations of the the defendant successor benefi- Outside of Oklahoma, this issue decedent’s estate to the extent ciaries had direct contact with the is commonly resolved in favor the decedent’s estate is insuffi- nursing home by leaving their of the creditor. For example, the cient to pay them as provided in incapacitated mother in the nursing Restatement Third of Trusts recog- §§733.607(2) and 736.05053.17 home’s round-the-clock care and nizes a policy in favor of apply- allegedly promising to pay for its ing substantive restrictions on Additionally, upon the settlor’s services.14 This could also be viewed testation and the rules applicable death, the trustee of the trust as creating a quasi-contractual obli- to testamentary distributions to described above must, upon the gation to pay, or at least as support- revocable inter vivos trusts: settlor’s death, file a notice of trust ing an equitable claim for unjust with the court in the county of the enrichment. In addition, trust assets This result is not dependent settlor’s domicile and the court with had been used to pay for at least on the trust being “illusory” jurisdiction of the settlor’s estate, some of Lela’s nursing home care or “testamentary,” or on the thereby providing public notice to before the trustees discontinued transfer being a fraudulent creditors who could otherwise be payments, perhaps evidencing an conveyance, but is based on the unaware of the settlor’s death or the implied contract based on a course sound public policy of basing existence of a trust.18 Other states of conduct.15 In contrast, in many the rights of creditors on the addressing such issues legislatively other cases involving a revocable substance rather than the form include Utah,19 Wyoming,20 New living trust, the creditor and the suc- of the debtor’s property rights.16 Mexico,21 Colorado22 and Kansas,23 cessor beneficiaries will be strang- making Oklahoma the only state ers both to each other and to the Other states have gone a step fur- within the jurisdiction of the 10th estate plan and the factors relevant ther by enacting statutes expressly Circuit United States Court of in Burford Manor will be absent. In in favor of the creditor. For exam- Appeals to leave the issue in the such a case, the court will be left to ple, the applicable Florida statute discretion of the courts. weigh the equities based on other states that: factors – a discretionary determi- THE STATUS OF nation depending on the conduct (3) Any portion of a trust with OKLAHOMA LAW of the parties, the type of debt and respect to which a decedent who Based on the relevant factors other various circumstances. This is the grantor has at the dece- noted above, it is reasonable leaves the courts without a concise dent’s death a right of revoca- to surmise that an Oklahoma benchmark for the consistent resolu- tion, as defined in paragraph (e), court would follow the rule tion of these cases. either alone or in conjunction of the Restatement (as noted

The counterpoint, that upon the death of the settlor the trust has become irrevocable, does not change the fact that the creditor claims in question (against the settlor) accrued before the settlor’s death and therefore were enforceable against the trust corpus (and should be deducted from it) at the time it passed to the successor beneficiaries.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 27 previously), consistent with the ABOUT THE AUTHORS 16. Restatement (Third) of Trusts §25 (2003) statutory approach of the other (emphasis added). Ashley A. Warshell is an attorney at 17. Fla. Stat. §733.707. 10th Circuit states, and as applied Hall & Ludlam PLLC, practicing in 18. See Fla. Stat. §736.05055. in both Thomas and Burford Manor. 19. See Utah Code Ann. §75-7-505, stating the areas of contract drafting and the following: The counterpoint, that upon the negotiation, civil litigation, estate (3) After the death of a settlor, and subject to death of the settlor the trust has the settlor’s right to direct the source from planning, real estate, consumer which liabilities will be paid, the property become irrevocable, does not financial services law, regulatory of a trust that was revocable at the settlor’s change the fact that the creditor death, but not property received by the trust compliance and debtor/creditor as a result of the death of the settlor which claims in question (against the law. She served as a compliance is otherwise exempt from the claims of the settlor) accrued before the settlor’s settlor’s creditors, is subject to claims of the officer and vice president of Home settlor’s creditors, costs of administration death and therefore were enforce- Savings and Loan Association of the settlor’s estate, the expenses of the able against the trust corpus (and settlor’s funeral and disposal of remains, of Oklahoma City. She has been and statutory allowances to a surviving should be deducted from it) at the certified by the National Association spouse and children to the extent the settlor’s time it passed to the successor of Federally-Insured Credit Unions probate estate is inadequate to satisfy those claims, costs, expenses, and allowances. beneficiaries. The trustee, as a fidu- (NAFCU) as a NAFCU certified 20. See Wyo. Stat. Ann. §4-10-506, stating ciary, has a duty to pay such claims compliance officer. the following: (d) After the death of a settlor, and subject to and this is not changed by a subse- H. Terrell Monks practices estate the settlor’s right to direct the source from quent death of the settlor or ulti- planning and probate in Midwest which liabilities will be paid, the portion of a trust that was revocable at the settlor’s death, mate termination of the trust. This City and Edmond. He is an adjunct and the property subject thereto, is subject is a simple matter of debtor-creditor professor at Rose State College and to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the law and a duty of the trustee to pay is a 1997 graduate of the OCU School expenses of the settlor’s funeral and disposal claims against the trust corpus. of Law. He is chair of the OBA Legal of remains to the extent the settlor’s probate Furthermore, courts have recog- estate is inadequate to satisfy those claims, Internship Committee and an OBA costs of administration and expenses. nized that agreements contrary to Law Schools Committee member. 21. See N.M. Stat. §46A-5-505, stating public policy may not be enforce- the following: (3) after the death of a settlor, and subject to 24 able; and Oklahoma law other- the settlor’s right to direct the source from ENDNOTES which liabilities will be paid, the property wise recognizes a policy in favor of 1. See Welch v. Crow, 2009 OK 20, 206 P.3d 599 of a trust that was revocable at the settlor’s (holding that Oklahoma’s pretermitted heir statute the claims of certain creditors after death is subject to claims of the settlor’s does not apply to revocable inter vivos trusts). 25 creditors, costs of administration of the death. Thus, the result in Burford 2. 1984 OK 41, 684 P.2d 553. settlor’s estate, the expenses of the settlor’s 3. See Varley H. Taylor, Jr., 6A Vernon’s Okla. Manor appears to be more broadly funeral and disposal of remains and statutory Forms 2d, Estate Planning §7.2 (“Although the allowances to a surviving spouse and children grounded in basic legal doctrine Oklahoma Supreme Court has held that a surviving to the extent the settlor’s probate estate is spouse can include assets of a revocable living trust as than the court’s narrow reasoning inadequate to satisfy those claims, costs, a part of the estate which forms the basis for computing expenses and allowances. would suggest, and the law on this her “forced share”… in an opinion suggesting that it 22. See Colo. Rev. Stat. §15-15-103, stating might apply to creditor claims as well, it is not clear point should be considered clearer the following: whether that will ultimately be the case.”). …[A] transferee of a nonprobate transfer is than as indicated in the limited 4. Thomas, 684 P.2d at 553. subject to liability to any probate estate of 5. Id. Oklahoma judicial authority. the decedent for allowed claims against the 6. Id. See 84 Okla. Stat. §44, giving a surviving decedent’s probate estate and statutory Nonetheless, in the absence of spouse the right to elect to take one-half of joint allowances to the decedent’s spouse and industry property in lieu of their share under the a bright-line statutory or case law children to the extent the estate is insufficient decedent’s will. to satisfy those claims and allowances. rule, neither debtors nor creditors 7. Id. 23. See Kan. Stat. §58a-505, stating the following: 8. 26 CFR 25.2511-2; Sanford’s Estate v. can know for certain where they …(3) After the death of a settlor, and subject Comm’r of Internal Revenue, 308 U.S. 39, 49, 60 S. to the settlor’s right to direct the source from stand on these issues; and no Ct. 51, 58, 84 L. Ed. 20 (1939). Note that treatment which liabilities will be paid, the property of a differs for an irrevocable trust, which represents a apparent public policy is served trust that was revocable at the settlor’s death fully vested gift but remains potentially avoidable is subject to claims of the settlor’s creditors, by the current uncertainty in by creditors as a fraudulent transfer. See Uniform costs of administration of the settlor’s Oklahoma law. Clear guidance from Fraudulent Transfer Act, 24 O.S. §§112 et seq. estate, the expenses of the settlor’s funeral 9. 60 O.S. §175.25 (referencing revocable and disposal of remains, the homestead, the Legislature or the Oklahoma trusts). homestead allowance, the elective share Supreme Court would be beneficial 10. Note that although 58 O.S. §259 charges rights of the surviving spouse pursuant to the personal representative of an estate with a duty to the parties on both sides of these K.S.A. 59-6a209, and amendments thereto, to recover property conveyed by the decedent with and statutory allowance to a surviving spouse issues. The current state of the law an intent to defraud creditors, this by no means and children to the extent the settlor’s provides a straightforward or unequivocal means of presents an opportunity to articu- probate estate is inadequate to satisfy those collection and is especially ineffective when there is claims, costs, expenses, and allowances. late a more deliberate public policy, no probate or when the personal representative is 24. Eakle v. Grinnell Corp., 272 F. Supp. 2d also the successor trustee and/or beneficiary. based on substance as opposed to 1304 (E.D. Okla. 2003). 11. 1994 OK CIV APP 66, 877 P.2d 623. 25. See 58 O.S. §594 (requiring a personal form, for the treatment of living 12. Id. at 626. representative to pay funeral expenses, expenses 13. Id. trusts now commonly utilized as of the last sickness and a family allowance as 14. Id. at 624. soon as funds are available). will substitutes. 15. Id. at 624-625.

28 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Estate Planning Deferred Sales Trust – What’s All the Hype? By Dawn D. Hallman

N EMERGING ALTERNATIVE TO THE §1031 EXCHANGE,1 wherein the taxpayer Ahas the opportunity to defer the gain on a sale, is a deferred sales trust (DST). Unlike a §1031 exchange, a DST does not require the taxpayer to reinvest in like-kind replacement property and is not subject to the timeline restrictions of a §1031 exchange.2 In short, a DST is an irrevocable trust that utilizes the installment sale treatment under the Internal Revenue Code (IRC) §453 in order to defer the taxes due on the sale of a business, real estate or other taxable assets. The grantor sells the asset to the DST in exchange for a prom- issory note or deferred installment contract. The DST then owns and controls the asset until it is sold to another third-party for the full sales price. Then, the proceeds of the sale are used to pay the grantor under the promissory note or deferred installment contract.

The DST can, but is not required tax due on a transaction since the at once may pay tax only on the to, reinvest the sale proceeds sale did not produce immediate gain realized on the sale and only into other investments; there is no cash. Furthermore, if the purchaser in proportion to the amount of timeline or like-kind reinvestment defaulted on the installment note, installment payments received in requirement. The grantor only pays the seller may have paid tax on such year.7 The current law install- capital gains tax on the principal money he never actually received. ment method applies only to sales payments received from the DST, The Installment Sale Revision Act of real estate, except sales in the thus deferring the taxes due by vir- of 1980 (1980 act)4 restructured ordinary course of business, and tue of the installment sale.3 Some the installment sales provisions sales of personal property, which of the main issues to be addressed of section 453 and attempted is not inventory property.8 There in a DST are the use of an indepen- to simplify the provisions and are some other specific rules for dent trustee, transfer of the asset increase the availability of install- the sale of farm property, resi- ownership without retained inter- ment reporting. The 1980 act also dential lots and timeshare rights.9 est, constructive receipt of the sale changed the definition of “related The eligibility rules come down proceeds, trust distributions, trust persons.”5 Congress has since made to this: is the deferred payment restrictions and trust legitimacy. many changes in order to restrict on the sale of property that was Before exploring the mechanics of the availability of installment sale held as a capital asset or as a §1231 how the DST works, it is important reporting and deter abuse, most asset? If yes, the sale can qualify to understand why it works. notably was the Tax Reform Act of for installment sale reporting.10 IRC §453 is used to afford 1986 (1986 act)6 dealing with install- Under IRC §453(i), the portion of deferred tax treatment on install- ment sale of marketable securities. the gain realized upon the sale of ment sales. Historically, this was In summary, a taxpayer who an asset that would be character- designed to eliminate the hard- does not receive all of the pro- ized as ordinary income under ship of immediately paying the ceeds from a sale of property the depreciation recapture rules

30 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL is not eligible for deferral under the using a DST. A taxpayer is entitled and identifies the importance of an installment method.11 Installment to installment sale treatment, but independent trustee.19 In Roberts, sale reporting is mandatory unless only if she does not directly or the court held that an irrevocable the taxpayer elects not to use the indirectly have control over the trust established by the taxpayer installment method under section proceeds from the sale or possess for the benefit of his children was, 453(d), and thus reports the entire economic benefits therefrom.17 in fact, an independent entity of gain in the year of the sale.12 The definition of “related real substance.20 The court rea- persons” is in IRC §1239(b). With soned that the taxpayer’s stock sale THE NECESSITY OF AN respect to installment sales to to an irrevocable trust in exchange INDEPENDENT TRUSTEE related parties, IRC §453(e) provides: for a promissory note was an actual The IRS successfully challenged sale, and thus entitled to install- installment sale treatment in A) any person disposes of ment sale reporting for the realized Lustgarten v. Comm’r.13 In Lustgarten, property to a related person gain.21 In Roberts, the taxpayer had a father/taxpayer entered into the (hereinafter in this subsec- no control over the trust or the following agreements with family tion referred to as the “first trustees. Once the sale of stock was members for a stock sale in 1971: disposition”), and made to the trust, the taxpayer no B) before the person making longer had any personal interest „„ Installment sales contract – the first disposition receives or control regarding the sale; the father sells stock to son all payments with respect sale by the trustee was not for the „„ Installment note – father to such disposition, the taxpayer’s benefit, but for diversifi- paid in installments related person disposes of cation of the trust corpus.22 „„ Escrow agreement – monthly the property (hereinafter in A direct sale to a third party payments made to father out this subsection referred to under section 453 possesses the of escrow fund, and escrow as the “second disposition”), inherent risk of the taxpayer/seller fund could be terminated if then, for purposes of this carrying the note for an unrelated father and son jointly agreed section, the amount realized third party. The seller is essentially „„ Irrevocable trust – father as with respect to such second assuming the traditional risk that a grantor, daughter as bene- disposition shall be treated financial institution (bank) would ficiary, son and his uncle as as received at the time of incur when lending money to buyer co-trustees the second disposition by for the purchase. While the deferred „„ Joint venture agreement – the person making the first tax treatment of an installment sale between son and his uncle as disposition.18 may be preferred, the escalated risk trustees for irrevocable trust to the seller of collecting the note It is imperative to understand the may not. The seller/noteholder runs The court held that the taxpayer importance of “related parties” the risk of buyer default, reduction did not qualify for installment within the meaning of the IRC. IRC in value of the collateral, future sale treatment because he had §267 (b)(2) provides that related delays due to litigation, bankruptcy, “constructive receipt” of the entire persons include an individual and probate, etc. The DST is designed to proceeds immediately.14 The court corporation, where more than 50 utilize the tax benefits of the install- reasoned that the son was a little percent of the value of the out- ment sale under IRC 453, without more than an agent for the father, standing stock is owned directly, or the risk of carrying the note, or the father retained control over indirectly, by or for such individual. essentially lending directly to the decisions to reinvest escrowed IRC §267(c)(1) states that for the pur- unknown buyer. funds and the son could not inde- poses of determining ownership of The DST is an irrevocable trust pendently order the sale.15 Section stock, in applying subsection (b), the and, like all irrevocable trusts, the 453 does not apply if a taxpayer ownership of stock owned directly grantor (in this case, the taxpayer) has entered into an arrangement or indirectly, by or for a corporation, cannot be the trustee. However, to which is in form but not in sub- partnership, estate or trust shall be maintain independence, the DST must stance a true installment sale.16 considered as being owned propor- go one step further and have an inde- This case provides the founda- tionately by or for its shareholders, pendent, unrelated third party serve tion for why an unrelated third- partners or beneficiaries. as trustee. It is imperative for capital party trustee is necessary, and a Roberts v. Comm’r, even though gains tax deferral that the DST must true transfer of ownership and con- it was decided before the 1980 act, be considered a bona fide, third-party trol of the asset is required when is still used as precedent today trust with an independent trustee.

32 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL ONCE THE DST recapture and capital gains taxes the taxpayer was still empowered IS ESTABLISHED on the sale. The DST may provide to “operate the company to the Once the DST is established, the an alternative solution, whereby same extent as if he were the next step is to transfer the asset the proceeds of the sale are paid owner”; thus, installment treatment into the DST, which must be done directly from the qualified inter- was not allowed.28 The court further before the sale. The taxpayer must mediary to the DST. It remains reasoned that the trustee was not relinquish full ownership and con- important that the taxpayer does independent because she “had no trol of the asset to the DST. If the not have constructive receipt of the meaningful role,” the trust did little DST does not actually own and proceeds; otherwise, the beneficial to change the taxpayer’s relation- control the asset, the taxpayer will tax treatment is lost. ship to underlying business, and be viewed as owning the asset at the taxpayer did not respect trust the time of the sale, and thus the CONCERNS AND form.29 Essentially, the Markosian IRS will disallow the installment CONSIDERATIONS test was not met, it was considered sale treatment. One of the primary concerns a “sham trust” and the installment With respect to control and is that the DST is viewed as a treatment was disallowed. distributions from the DST, the legitimate trust and not a “sham Another consideration of the IRS has been very clear that the trust.” An entity without economic DST is that not all depreciation taxpayer cannot have constructive substance is considered a “sham” recapture taxes are deferred. There receipt of the proceeds when dis- by the IRS, and hence is not recog- are two situations where the gain, posing of the asset. Lustagarten is a nized for federal tax law purposes.25 all or part, cannot be deferred: 1) if perfect example of such construc- In Markosian v. Comm’r, the tax court the character of the gain realized tive receipt, which disqualified the developed a four-factor test: from the sale is treated as ordi- installment sale treatment.23 The 1) is the taxpayer’s relationship to nary income because of the depre- independent trustee should have the transferred property differed ciation recapture rules30 and 2) if full control over the asset sale and materially before and after the the seller pledges the installment distributions, as seen in Roberts.24 trust’s creation; 2) does the trust obligation as collateral for a loan.31 If the recapture of depreciation is not eligible for deferral under the installment sale, then the recap- ture portion of the gain must be reported at the time of the sale; If the DST does not actually own and control however, the remaining portion of the gain (the §1231 portion of the asset, the taxpayer will be viewed as owning the gain) can be deferred.32 Of course, the DST is not with- the asset at the time of the sale, and thus the out some disadvantages. Like most tax planning strategies, it IRS will disallow the installment sale treatment. is expensive and complex to set up, as there are many rules and regulations. However, the income that can be generated from invest- ing the full sale proceeds, due to DSTs have also been used to have an independent trustee; 3) is an the tax deferred treatment of the rescue a taxpayer from a failed economic interest passed to other trust capital gain, may far outweigh the IRC §1031 or IRC §721 exchange. beneficiaries; and 4) is the taxpayer administrative and legal costs of When an asset is sold under a respecting the restrictions placed on setting up the DST. The DST can be §1031 or §721 exchange, the sale the trust’s operation as set forth in the difficult to launch and manage, as proceeds are required to be held trust documents.26 compared to a Delaware Statutory by a qualified intermediary on The Sparkman court applied this Trust or a §1031 exchange. behalf of the taxpayer in order to “sham trust” test and held that the Remember, tax deferral does close on the replacement property trust organization lacked eco- not mean the tax is eliminated. within the requirements of the nomic substance, and thus had to Under a DST, the capital gains tax IRC. If this type of exchange fails, be disregarded for income tax pur- exposure occurs when the tax- the taxpayer must pay depreciation poses.27 The court reasoned that payer receives principal payments

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 33 from the trust. Depending on the timing of the corpus payments, A DIAGRAM OF the tax deferral could potentially outlast the taxpayer. THE DST AT WORK

THE DST AT WORK Step 1: While the concept seems simple, Taxpayer the application is not. This is a very useful tool to share with clients; notwithstanding, careful selection of the drafting attorney and the third-party trustee is paramount to the success of the DST. Having Installment Asset a working knowledge of the DST Note allows you to identify potential users. There are many intricacies to make a DST work as planned. This is not a mere form that an attorney can “fill in the blank.” An error or omission in creation of the DST DST, transfer of the asset, opera- tion or management of the DST or the asset could ultimately be very costly to the taxpayer, especially if the installment sale treatment is Step 2: successfully challenged. DST

ABOUT THE AUTHOR Dawn Hallman is the principal attorney and founder of Hallman & Associates and focuses on estate $$$ Asset and tax planning for millionaires and billionaires. Ms. Hallman is the past chairman of the OBA Estate Planning, Probate and Trust Section, chartered Legacy Rotary Club and serves as vice chairman Third-Party for both Washita State Bank and Purchaser Frontier State Bank.

ENDNOTES 12. See IRC §453 (d). 25. Sparkman v. Comm’r, 509 F.3d 1149 1. See IRC §1031. 13. Lustgarten v. Comm’r, 639 F.2d 1208 (9th Cir. 2007). 2. Id. (5th Cir. 1981). 26. Markosian v. Comm’r, 73 T.C. 1235, 3. See IRC §453. 14. Id. at 1211. 1243–44, 1980 WL 4562 (1980). 4. See Installment Sales Revision Act of 1980, 15. Id. at 1210. 27. Sparkman v. Comm’r, 509 F.3d 1149 Pub. L. No. 96-471, 94 Stat. 2247. 16. Id. (9th Cir. 2007). 5. See IRC §1239 (b). 17. Id. at 1211. 28. Id. at 1155. 6. Pub. L. No. 99-514, 100 Stat. 2085, 2365- 18. See IRC §453 (e). 29. Id. 2372 (1986). 19. Roberts v. Comm’r, 643 F.2d 654 30. IRC §453 (i). 7. Lustgarten v. Comm’r, 639 F.2d 1208 (5th (9th Cir. 1981). 31. IRC §453 (a) (1). Cir. 1981). 20. Id. at 657. 32. David F. Shores, “Closing the Open 8. David F. Shores, “Closing the Open 21. Id. at 656. Transaction Loophole: Mandatory Installment Transaction Loophole: Mandatory Installment 22. Id. at 657. Reporting,” 10 Va. Tax Rev. 311, 320 (1990). Reporting,” 10 Va. Tax Rev. 311, 320 (1990). 23. Lustgarten v. Comm’r, 639 F.2d 1208 9. See IRC §453 (a). (5th Cir. 1981). 10. Planning for the Principal Owner, SL054 24. Roberts v. Comm’r, 643 F.2d 654 ALI-ABA 633, 640-641. (9th Cir. 1981). 11. Id. at 641.

34 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Legislative News Legislative Monitoring Committee Begins Its Work to Keep Members Informed By Angela Ailles Bahm

APPY VALENTINE’S DAY OBA DAY AT THE CAPITOL legislator and be an active participant – Hfrom your OBA Legislative MARCH 12 they are passing LAWS. Monitoring Committee. Hopefully On Tuesday, March 12, the com- Lawyer legislators are: someone will be doing something mittee will be hosting the annual sweet for you. Speaking of which, Day at the Capitol. Mark your cal- Sen. Michael Brooks the committee continues to provide endar now! Registration will begin (D-Oklahoma City) you free CLE – that’s pretty sweet. at 9:30 a.m. Presentations will start Sen. Julie Daniels (R-Bartlesville) Earlier this month, we presented the at 10 a.m. We will have a variety Sen. Kay Floyd (D-Oklahoma City) annual Reading Day and provided of speakers, a legislative panel, Sen. Brent Howard (R-Altus) attendees with two hours of free lunch and then everyone will go to Rep. Jon Echols MCLE credit, while educating them the Capitol to meet our legislators. (R-Oklahoma City) on new bills that might affect their Details for morning programming Rep. Chris Kannady business. I cannot thank the pre- and online RSVP can be found at (R-Oklahoma City) senters enough for donating their www.okbar.org/dayatthecapitol. Rep. Ben Loring (D-Miami) time and energy – and doing such Do you have a new legislator Rep. Jason Lowe an excellent job. Sometimes they you would like to meet? Odds (D-Oklahoma City) review hundreds of bills to whittle are, you do. Forty-seven of the 101 Rep. Terry O’Donnell (R-Catoosa) the list down to the top 10 and pre- members of the House and 11 of Rep. Mike Osburn (R-Edmond) pare their presentations. Thank you! the 48 members of the Senate are Rep. David Perryman Valentines are in the mail. new. This would be a great oppor- (D-Chickasha) If you missed Reading Day tunity to schedule a meeting with Rep. Emily Virgin (D-Norman) and want to read the bills that your representative. Please encour- Rep. Collin Walke were reviewed, log onto MyOKBar age them to contact you with any (D-Oklahoma City) Communities, select Legislative questions. Even if the issue is out of Rep. Rande Worthen (R-Lawton) Monitoring Committee and look your wheelhouse, I bet you know for the information under the Latest someone who could help provide After this session of the Shared Files heading. Committee some perspective on the issue. Legislature concludes, the committee membership is required, but it’s anticipates having another Debrief very easy to sign up at www.okbar. NUMBER OF LAWYER Day as we did in 2018. We will org/committees. The areas of law LEGISLATORS DECREASES review those bills that passed into addressed were: family law, crimi- While I am writing about the law. I anticipate it will be in August nal law, estate planning/banking/ new Legislature, were you aware again. More details to come later. general business, civil procedure/ we lost many lawyer legislators courts, natural resources/environ- in the House and Senate and now mental, health law, schools, Indian/ only have 14, TOTAL? This is all the real estate law and marijuana law. more reason you need to know your

36 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL The view looking up into the Capitol dome.

JOIN THE COMMITTEE scheduled for the second Tuesday Ms. Ailles Bahm is the managing I will continue and continue of every month, at noon at the bar attorney of State Farm’s in-house to urge you to become a member. center in Oklahoma City. If you office and also serves as the Executive Director John Morris cannot attend in person to enjoy Legislative Monitoring Committee Williams tells me we are already lunch with us, you can attend by chairperson. the largest committee with more phone. Just the things I learn from than 300 members. We invite members as we are discussing more! If you are already a mem- legislation, state and federal, is ber, continue to sign on and use worth the investment of time. You the Communities page on the can keep informed of what the OBA site to communicate with me committee is doing and upcoming and other members and to keep events at www.okbar.org/legislative. informed. And, if you have a bill As usual, if you have any sugges- that needs to be posted for others tions, do not hesitate to email me to see, please do so. through LMC Communities. Our objective is to provide you with information and then YOU decide what to do with that information. We have meetings

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 37 OBA News Two New OBA Member Benefits Added By Julie A. Bays

S LAWYERS LOOK FOR Amore efficient ways to serve their clients, companies are devel- oping new and innovative ways to meet this demand. OBA members can now take advantage of dis- Kurent is a cloud-based billing counts on two additional services. service that tracks time, creates and sends invoices, manages trust accounts and receives payments. This product integrates with LawPay and QuickBooks. Kurent is designed to get bills out fast. It was developed for solo and small firms and is less expensive than other full practice management products. The cost starts at $26 a month per user. OBA members sub- scribing for the first time receive a 10 percent discount for the monthly or yearly subscription for the first year. Casetext is a legal research tool that uses artificial intelligence tech- HOW TO FIND nology to search for cases faster. THESE BENEFITS Their database includes all federal More details about these two and 50-state cases, statutes and new OBA member benefits and the regulations. It includes articles by discounts and features they provide attorneys, briefs and summaries of are available online. To access them, black letter law. CARA, Casetext’s log in to your MyOKBar account artificial intelligence technology, through www.okbar.org and click finds cases and other matters by the “Practice Management Software dragging and dropping in a brief Benefits” link in the box under or complaint that the user has your profile information. downloaded or is working on. OBA members will receive a 15 percent discount for life with the cost start- Ms. Bays is practice management ing at $55.25 a month ($663 a year) advisor in the OBA Management for a single-user subscription. Assistance Program Department.

38 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Board of Bar Examiners Applicants for February 2019 Oklahoma Bar Exam

HE OKLAHOMA RULES of Amos Teah Kofa TULSA TProfessional Conduct impose Nathan Alan Lobaugh Jessica Christine Allen on each member of the bar the Margaret Spence Moon Erik Sven Anderson duty to aid in guarding against the Jaron Tyler Moore Aisosa Arhunmwunde admission of candidates unfit or Ashton Nichole Paschal-Wilson Jeffrey Douglas Bacon Jr. unqualified because of deficiency in Raymond Dale Rieger Zackary Austin Brown either moral character or education. Jacob Marland Sargent James Linden Curtis To aid in that duty, the following is Christine Suzanne Schem Rodney Gavin Fouts a list of applicants for the bar exam- Alina Ruth Carlile Sorrell Jose Valentin Gonzalez ination to be given Feb. 26-27, 2019. Jose Alberto Villarreal Logan Andrew Harrison The Board of Bar Examiners Bailey Malone Warren Christopher James Hollingsworth requests that members examine Priscilla Jean Jones this list and bring to the board’s OKLAHOMA CITY Ronald Cecil Jones II attention in a signed letter any Joshua Wayne Anderson Henry Herman Klaus information which might influence Jason Craig Bollinger Mary Estelle Leavell the board in considering the moral Jessica Lyn Brown Michael Vincent Martin character and fitness to practice of Farrah Yong Burgess Ashley Swindell Nix any applicant for admission. Send Jeffrey Taylor Cummings Colton Loy Richardson correspondence to Cheryl Beatty, Allison Jane Daugherty Hope Elizabeth Sheppard-Mahaffey Administrative Director, Oklahoma David Anthony Davis Paul Alan Sims Board of Bar Examiners, P.O. Box Joseph Lee DeGiusti Keaton Anthony Michael Taylor 53036, Oklahoma City, OK 73152. Anthony Bruce Dickenson Natalie Anne Tupta Anja du Toit Nicholas Charles Williams EDMOND Joseph Albert Griffin Emily Kathleen Wilson Erika Louiez Artinger Rilee Dean Harrison John Paul Yeager Logan Ashton Blackburn Javier Giovanny Hernandez Jazmin Guadalupe Zaragoza Brian Gary Bond Taylor Nathan Kincanon Charles Ellis Hart Lisa Leigh Lopez OTHER OKLAHOMA CITIES Carrie L Kincade Brittany Faithe McMillin AND TOWNS Tamara Webster Kinyanjui Taylor Anthony Moult Misbauddin Ahmed, Moore Jonathan Lance Kurz Bryan Ashton Don Muse Jacob William Allison, Nichols Hills Erin Lalani Monroe Hunter Christian Musser Wriley Kenneth Anderson, Moore Matthew Carson Porter Christie Ann Porter Scott Thomas Beyea, Lawton Valerie Marie Salem Kristen Annette Prater Allison Nicole Biscoe, Weatherford Andrew Lawrence Junk Winningham Marjon Jacqueline Creel Stephens Krystal Brooke Browning, Duncan Charles Martin Woner Brandt Steven Sterling Shondra Beth Brumbelow-Neal, Jonathan Kyle Tully Moore NORMAN Carson Quay Turner Isaiah Nathaniel Brydie, Owasso Ryan Paul Caron Darrell Leon Buck, Yukon Erin Nicole Fuller Whitney J. Dockrey Miller, Shawnee

40 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL Donald Martin Fahrny, Depew Francisco Jasso Jr., Amarillo, TX Mollie Miranda Jo Fields, Blanchard Thomas Richard Jones III, William Richard Frank, Moore Pasadena, MD Stacy Nichole Fuller, Owasso Michelle Kruse, Rowlett, TX Paige Nicole Green, Yukon Andrea Lynne Mills, Derby, KS Lindsay Nicole Hearn, Broken Arrow Garrad Duane Mitchell, Marietta, GA Lindon Thomas Hogner, Bixby Andrew Edward Polchinski, James Derick Hopper, Broken Arrow Dallas, TX Nekanapeshe Peta James, Wagoner Morgan Taylor Lee Smith, Terrell, TX Brayden Micah Jennings, Moore James Arthur Trummell, Leslie Lanay Jones, Piedmont Henderson, NV Zachariah Ahmad Kanaa, Moore Gentry Carlin Wahlmeier, Alma, AR William Ray Keene, Pawhuska Nicholas Weeks, Elkins, AR Tiffany Amber Lueck, Broken Arrow Brandon Jacob Williamson, Kelby Winson Luna, Sulphur Perryton, TX Daniel Patrick McClure Jr., McLoud Dakota James Wrinkle, Abilene, TX Jacob Alan McDonald, Dewey Amity Eileen Ritze, Broken Arrow Dalton Bryant Rudd, Davis Colton Grant Scott, Claremore Brent Allen Smith, Tahlequah Kelly Rae Sweeney, Oologah Spencer Byron Torbett, Okmulgee Miroslava I. Vezirska-Gabrovski, Bethany

OUT OF STATE James Edward Blaise, Tomball, TX Candace Lee Carter, Shady Shores, TX Jason Lee Cotton, Sherman Oaks, CA Emilee Noelle Crowther, Odessa, TX Robert Evan Davis, Montrose, CO Edward Fonseca, Littleton, CO Lauren Ashley Fournier, Manhattan, KS Colin Wade Holthaus, Topeka, KS John Marshall Homra, Jackson, TN Dallas Myrl Howell, Parks, AZ Brian Edward Jackson, Waldorf, MD Joshua Welch Jackson, Fort Smith, AR

FEBRUARY 2019 | 41 From the Executive Director Not Feeling the Love By John Morris Williams

T’S FEBRUARY, AND I I did respond to that correspondence Iimmediately thought of and do want to set the record Valentine’s Day. Then I realized straight for any others who may be I don’t know anything about St. under the incorrect assumptions stated Valentine. I Googled it and found in the above referenced letter. Our OBA Facts that the records are not so clear, and record is not cloudy, and I can assure there may have been more than one you I know the complete facts about St. Valentine. It appears that perhaps the OBA and how its finances work. Last dues increase even the concept of our modern-day celebration of the day may have „„ The OBA has not had a dues 2004 come from 15th century literature. increase since 2004, and none expected The record is certainly cloudy, and none is anticipated at this between church history and folk- time. Although the cost of lore there is enough to conclude we living has increased over the really don’t know the complete facts years, the OBA has held the Cheapest about St. Valentine and the total line and every year oper- state bar origins of the day in which sweet- ated with a budget surplus hearts lay out some serious claim. due to our very conserva- in U.S. It is reported that more than tive operations. Given all $30.3 billion will be spent on the functions we perform, Valentine’s Day in the United the OBA is the cheapest States. Total average per-person state bar association in the Number spending will equal $200.50. The country. You may find some total number is greater than the that publish cheaper dues; of staff budget for the state of Oklahoma. however, you will also find decreased The per-person average is greater license fees, client security than dues for a bar member with fund add-ons, etc. that less than three years of practice increase the actual cost of and only $74.50 less than dues for practicing. In Oklahoma, we Consistently OBA members with more than have a one-stop, one-fee set balanced three years of practice. up that offers great member I recently received a resigna- value for the lowest price. budget tion letter that was critical of the „„ The OBA has decreased staff OBA. The letter complained of and has not cut any member dues continuing to go up, and the benefits. In the last five years, OBA was “acting more like a gov- the OBA has decreased staff Agency of ernmental agency with a continu- and no member benefits or the Supreme ing request for budget increases services have been curtailed. while increasing personnel but Like everyone else these Court not providing better service.” days we are learning to do Obviously, I did not feel the love. more with less.

42 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL „„ The OBA budget requests are subject to Supreme Court to the Oklahoma Supreme superintending control. All Court have been fairly level rules relating to practic- for the past several years. ing law in Oklahoma are Although we have seen a Supreme Court rules. The decrease in dues collections OBA is an administrative because of an aging mem- agency created to assist in bership and less new mem- regulating and enforcing of bers, we have consistently Supreme Court rules. The submitted budgets that are OBA does nothing without balanced. On occasion we Supreme Court permission. will draw upon reserves for capital expenditure. Rest assured the OBA loves its However, we consistently members every month, and we are operate in the black on the very clear on our role and responsi- operations side and do not bilities. Please feel free to contact me ask for budgets that go at any time if you have concerns or beyond our means. have suggestions on how we can give „„ We did have changes to greater value to your membership. MCLE and senior mem- ber status. These changes reflect that people are living longer and practic- ing longer. More than 60 percent of OBA members are over age 50. The rules To contact Executive Director Williams, now provide that regardless email him at [email protected]. of age, if you are practicing, you will pay dues and get MCLE. If you don’t practice in Oklahoma, regardless of age, you are exempt from MCLE requirements. At age 70, if you don’t practice, you can take retired status and be exempt from dues. „„ The OBA is a governmental agency. It is an agency of the Oklahoma Supreme Court. The OBA makes no rules, and all decisions of the OBA

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 43 Law Practice Tips Eliminating the Terror of Lost Client Files By Jim Calloway

O ERR IS HUMAN, as the opinion that cloud-based practice it was not a windy day. That Tsaying goes. management tools are important illustrates that having critical We human beings make mis- for many lawyers, including most client information stored only takes. We forget. We don’t follow lawyers in a small firm setting with- in physical client files is not through on carefully crafted plans out IT staff. One reason was that if risk-free either. In earlier times sometimes; but the legal profes- all documents in the client files are that was a lawyer’s only choice. sion is an exacting undertaking, digitized and properly stored in the Today you need a backup of the requiring attention to detail, and cloud, it is extremely unlikely (near data – and a way to keep your the legal system is sometimes impossible) they will become lost. law practice operating in the very unforgiving of errors. Many lawyers still use tradi- face of any disaster. Several years ago, as those tional client files with physical of us who advise lawyers were client documents contained in file That observation about risk focused on trying to get lawyers folders. This column is directed at still applies to lawyers who want to use practice management soft- lawyers who prefer to use tradi- to operate from traditional client ware to manage digital client files, tional client files in folders. files. The risk is that the lawyers there were a lot of statistics floating I concluded the column noted may believe that they have a good around about how many hours per above with a memory of a mistake backup of their traditional file week law firms wasted looking for that I made: when they don’t. lost files or lost documents. It was an impressive number of hours. The I’m a lawyer who once drove off WHAT’S IN A CLIENT FILE? cost was eye-catching, the hours with my briefcase full of client All lawyers who have been in were multiplied by the hourly rate files on the top of my vehicle’s private practice understand the of the lawyer and legal assistants trunk instead of inside it. I saw nature of their files. The concept who were looking for the lost file. the resulting disaster in my rear- is simple. In my Law Practice Tips column view mirror. I recall thinking I last month, “Cloud Computing for needed to buy a new briefcase „„ A client (or matter) file is a Lawyers – 2019,” I reiterated my anyway and being quite grateful binder of all the documents associated with the matter. „„ A client file traditionally did not contain everything about a matter. It generally did not contain bills or billing This column is directed at lawyers who prefer to entries. Calendars contain important client information use traditional client files in folders. stored outside of a file. „„ Many lawyers appearing in Oklahoma courts still want to carry a physical client file with them, even if they are

44 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL using digital files while in the office. Depending on the cir- cumstances, this may include only documents relevant to the scheduled hearing. „„ Simple matters that may only involve a dozen or so docu- ments can still be managed quite well with a traditional physical client file in a file folder. Larger cases involving many boxes of documents are almost always digitized today as physically searching through hundreds of doc- uments becomes too time consuming.

So, what happens if a file gets lost? Maybe it was someone’s error. Maybe a lawyer’s car was stolen and when it was recovered, the brief- case full of client files in the back seat was missing. Well, thankfully, almost all the lost files I referenced earlier were only mislaid and eventually found in the wrong file drawer or a lawyer’s briefcase. Of course, the initial concern is where the file might be and is there any chance that a client’s confidences could be exposed. One soon begins hoping that the file was inadvertently sent to the shredding service or landfill.1 Do you have an obligation to notify the client of the lost file? That is a fact-dependent deter- mination, but in many situations,

THE OKLAHOMA BAR JOURNAL perhaps most, the lawyer will a backup. Making an additional correspondence and pleadings need to notify the client. For a photocopy of all documents a the lawyer has received from “law school hypothetical,” I would lawyer might receive into the cli- others. I still believe the scanned suggest if a box of closed files that ent file is cost prohibitive and not documents are better organized had been untouched for years was something anyone is likely to do. in a practice management solu- accidently sent off to the shred- tion than Windows folders; but ding service a year earlier than SIMPLE PROCEDURES however you organize them, it planned, that may not require a Today’s paper file lawyer can is the best practice today to scan notice to the client. create the backup in a few steps so every paper document you receive Generally, if you don’t know there’s always a complete copy of as well as any handwritten notes where the file is located, you the client’s file available. you take. most likely have an obligation to If you don’t have a good scanner, inform the client of the possible 1) Create folders on a com- I recommend the Fujitsu ScanSnap. compromise of the information puter on the network for In October 2018, the company in the file. Recently released ABA each client matter. (You announced a new desktop scanner Formal Opinion 482 (September 19, have probably already model the Fujitsu ScanSnap IX1500 2018) Ethical Obligations Related done this to organize the at roughly the same price point as to Disasters cites both Rule client documents the firm its popular IX500 model. I’m certain of Professional Conduct 1.15 creates.) These folders or we will be seeing many of those (Safekeeping property) and drives should be automati- appearing in law offices this year. Rule of Professional Conduct 1.4 cally backed up off-site. Hopefully you will never person- (Communication with the client) 2) Every time a document the ally have to deal with losing a client in favor of disclosure.2 firm creates is finalized and file, but having a complete backup of printed off for the physical every client file is a good insurance IMPACT ON THE CLIENT client folder, also save a policy. And when (or if) you decide AND LAW FIRM PDF version of the docu- to convert to a practice management Needless to say, there will be ment to the folder. solution, you will be ahead. many times that such a disclosure 3) All correspondence and to the client will have a very neg- deliveries received should ative impact on the attorney-client be scanned and saved to Mr. Calloway is OBA Management relationship. That depends on the the folder as they are placed Assistance Program director. Need nature of the attorney-client rela- into the physical client file. a quick answer to a tech problem tionship and the nature of the mat- Email attachments that are or help solving a management ter. The client’s confidence in you filed in physical file should dilemma? Contact him at 405-416- suffers when you tell them a file is also be saved in the folder as 7008, 800-522-8060, jimc@okbar. lost or even temporarily misplaced. PDF files and maybe in the org. It’s a free member benefit! Then there are situations where original file format as well. there is a negative impact on or 4) Any document that is ENDNOTES prejudice to the client’s matter. The executed or file-stamped 1. It is not recommended that closed client files be sent to a landfill without first being lost file damaging the client’s mat- should be scanned when a shredded. ter, while rare, is the nightmare sce- copy is placed in the physi- 2. www.americanbar.org/content/dam/aba/ administrative/professional_responsibility/aba_ nario. A grievance or professional cal client file. formal_opinion_482.pdf liability action may be the result. So, the “primary paper file Assuming your online backup lawyer” and the “primary digital works properly, you will now and file lawyer” have the same goals. “forever” have a complete copy of They want to be able to assure the client file. the client that nothing has really The scanning piece is very been lost in a way that impacts important. Without the scanning, the client’s matter negatively. A your computer system only has physical folder may be (hopefully half of the client file – the docu- temporarily) unavailable, but ments you created. Scanning is there’s a copy of every document. to ensure you have a digital copy Yes, a paper file lawyer still needs of the client file that includes

46 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL OBA ad 2019 for Feb issue copy.pdf 1 1/11/2019 1:37:56 PM

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HE FOLLOWING IS A with his client on three separate and that Smalley repeatedly told Tsummary of several attorney evenings when he was prepar- her that he and the judge on discipline matters recently issued ing for the pretrial in the client’s her case were good friends. The by the Oklahoma Supreme Court. child custody case. Furthermore, court held that Smalley violated The court has exclusive, original Smalley was charged with attor- Oklahoma Rules of Professional jurisdiction over the licensure and ney misconduct and conflict of Conduct 1.7 (Conflict of Interest); discipline of Oklahoma attorneys. interest when he attempted to 1.8(j) (lawyer prohibited from engage in a personal relation- having sexual relations with a STATE EX REL. OKLA. BAR ship with one of the parties in client); and 8.4(d) (professional ASS’N V. DUNIVAN, 2018 OK 101 a divorce case wherein he was misconduct to engage in conduct On Dec. 4, 2017, attorney John D. the court appointed guardian ad that is prejudicial to the adminis- Dunivan entered an Alford plea in litem. The mother testified that tration of justice). Blaine County District Court to one she feared losing her children misdemeanor count of violating a victim protective order stemming from his sending of harassing and inappropriate text messages to his former spouse. Pursuant to Rule 7 of the Rules Governing Disciplinary Proceedings, the Oklahoma Supreme Court found that Dunivan’s disobedience of a valid judicial order was a direct reflection of his unfitness to prac- tice law. Dunivan was suspended from the practice of law for one year retroactive to Dec. 18, 2017, the date on which his interim suspen- sion was imposed.

STATE EX REL. OKLA. BAR ASS’N V. SMALLEY, 2018 OK 97 The Oklahoma Supreme Court suspended Norman attorney Richard E. Smalley III from the practice of law for six months for having an inappropriate sexual relationship with a client and for having a personal conflict of inter- est while acting as guardian ad litem in a different matter. Smalley admitted to engaging in a sex act

48 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL STATE EX REL. OKLA. BAR or respond to any of the allegations The court approved his resignation ASS’N V. OLIVER, 2018 OK 95 against him. The court found that and removed his name from the The Oklahoma Supreme Court Minks violated numerous provi- roll of attorneys. Following the approved J. Edward Oliver’s res- sions of the Oklahoma Rules of requisite five year waiting period, ignation from membership in the Professional Conduct includ- Taylor applied for reinstatement Oklahoma Bar Association. Oliver ing neglect of client matters, to the Roll of Attorneys in August submitted his resignation during failure to communicate with his 2017. In denying his bid for rein- the pendency of disciplinary clients, failure to earn fees and statement, the court found that proceedings wherein he acknowl- properly safekeep same. Minks Taylor had engaged in the unau- edged that the Office of General cannot apply for reinstatement for thorized practice of law while Counsel was investigating two a period of five years and must under suspension and that his separate grievances that alleged show that he has reimbursed ongoing addiction, significant debt he had failed to report certain unearned fees to his clients. and failure to accept responsibility assets on his personal bankruptcy indicate “the potential for greater petition, he had been accused of IN THE MATTER OF THE malfeasance, harm to clients, and defrauding creditors and he had REINSTATEMENT OF TAYLOR, disrespect upon all who practice made a false oath. The second 2018 OK 78 law in Oklahoma.” Taylor must grievance, submitted by a client, Michael C. Taylor applied for wait at least one year from the alleged that Oliver accepted a fee reinstatement to the practice of denial before applying again to file a motion to modify custody law in Oklahoma after resign- for reinstatement. and visitation, failed to do so and ing his bar membership in 2011 failed to return the unearned fee. pending disciplinary proceedings. The court accepted his resignation Following an evidentiary hear- Ms. Hendryx is OBA general counsel. which is tantamount to disbarment. ing, the three-person trial panel Oliver cannot apply for reinstate- recommended denial of reinstate- ment for a period of five years and ment. The Oklahoma Supreme will be required to reimburse any Court agreed that Taylor had not funds paid by the Clients’ Security met his burden and denied rein- Fund on claims received from his statement. Taylor was admitted former clients as a condition prec- to practice in 1982. He had been edent to reinstatement. previously disciplined in 2000 and 2003 for mishandling client trust STATE EX REL. OKLA. BAR funds. In 2011, Taylor was interim ASS’N V. MINKS, 2018 OK 92 suspended while facing discipline LeFlore County attorney Steven P. charges that he misappropriated Minks was disbarred by the approximately $80,000 in cli- Oklahoma Supreme Court in ent settlement funds. The OBA December 2018. Multiple counts of had alleged that Taylor used the criminal convictions and mishan- money to gamble at casinos. Taylor dling of client cases and funds resigned his bar membership were alleged. Minks failed to pending disciplinary proceedings appear at his disciplinary hearing on these allegations.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 49 Board of Governors Actions Meeting Summary

The Oklahoma Bar Association Board REPORT OF THE Meeting and Oklahoma County of Governors met on Friday, Dec. 7, EXECUTIVE DIRECTOR Bar Association meeting. He also 2018, at the Oklahoma Bar Center in Executive Director Williams hosted the Oklahoma Criminal Oklahoma City. reported he attended OBA Annual Defense Lawyers Association Meeting events, including the Christmas party. Governor Fields REPORT OF THE PRESIDENT Past Presidents Dinner, General reported he attended various OBA President Hays reported Assembly and House of Delegates, Annual Meeting events and the at the Annual Meeting she in addition to the Legislative Pittsburg County Bar Association attended OBA CLE Wednesday Monitoring Committee meeting, meeting. Governor Hermanson, and Thursday, OBA President’s monthly staff celebration, Bar unable to attend the meeting, Reception, Kim and Alan’s House Center Facilities Committee meeting reported via email he attended Party, Delegates Breakfast and and hearing at the Supreme Court the OBA Annual Meeting, District House of Delegates. She presided on the OBA budget. He participated Attorneys Council Fall Conference, over the Annual Luncheon and in the Lawyers Helping Lawyers DAC board meeting, ODAA board General Assembly, presenting interview for the program audit and meeting, Justice Assistance Grant President’s Awards at both events. consultations with President-Elect Board meeting, Kay-Noble County She assisted the OBA Family Law Chesnut on planning for 2019. Community Sentencing Planning Section with 2019 planning and Council meeting, Judge Ross’ attended a meeting with COLAP REPORT OF THE retirement dinner and Elected about the Lawyers Helping PAST PRESIDENT District Attorneys Conference. He Lawyers program review. Past President Thomas reported also served as master of cere- she attended the Oklahoma Fellows monies at the Tree of Honor and REPORT OF THE VICE of American Bar Foundation Remembrance Ceremony at the PRESIDENT reception, Washington County Cox Convention Center. Governor Vice President Stevens reported he Bar Association monthly meeting, Hicks reported he attended the TU attended the OBA Annual Meeting. Oklahoma County Bar Association College of Law awards luncheon, holiday event, Oklahoma Criminal OBA Annual Meeting, including REPORT OF THE Defense Lawyers Association the Annual Luncheon and House PRESIDENT-ELECT Christmas party and the OBA of Delegates and Tulsa County President-Elect Chesnut reported Annual Meeting attending the Bar Association Christmas party. he attended the Oklahoma Bar OBA President’s Reception, Governor Hutter reported she Foundation meeting and Annual Past Presidents Dinner, Annual attended numerous OBA Annual Meeting events including the OBA Luncheon, Kim and Alan’s House Meeting events and the Board of President’s Reception, Annual Party, Delegates Breakfast, General Governors holiday party in addi- Luncheon, Kim and Alan’s House Assembly and House of Delegates. tion to the Cleveland County Bar Party, Delegates Breakfast, General Association executive meeting and Assembly and House of Delegates BOARD MEMBER REPORTS regular meeting. Governor Kee meeting, at which he presided. He also Governor Beese reported he reported he contacted the nine attended the hearing on the OBA bud- attended numerous Annual Meeting county bar association presidents get at the Supreme Court, consulted events in addition to the Muskogee in his district and complimented with Executive Director Williams County Bar Association monthly them on serving as president. He regarding 2019 planning and commit- meeting and annual banquet. said seven of the counties do not tee appointments and worked on his Governor Coyle reported he have regular bar meetings. He first president’s message. attended the OBA Annual encouraged them to meet more

50 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL often and advised them the OBA REPORT OF THE YOUNG Governor Will reported the Bar could help with speakers and LAWYERS DIVISION Center Facilities Committee possible CLE for their meetings. Governor Richter reported he has $50,000 budgeted for 2019 Governor Morton reported he attended the OBA Annual Meeting, to improve the exterior of the attended the OBA Annual Meeting YLD Wills for Heroes event, Oklahoma Bar Center. A portion and Legislative Monitoring Canadian County Bar Association of Phase 1 will be started early in Committee meeting. Governor meeting, Robert J. Turner Inn of the year to improve the sprinkler Oliver reported he attended the Court meeting and YLD Executive system and update the landscaping OBA Annual Meeting and Payne Committee 2019 planning meeting. on the east side of the building. County Bar Association Christmas party. Governor Will reported BOARD LIAISON REPORTS REPORT OF THE he attended the OBA Bar Center Governor Morton reported the GENERAL COUNSEL Facilities Committee meeting and Legislative Monitoring Committee General Counsel Hendryx OBA Annual Meeting, including is gearing up for Legislative reported the Professional the Annual Luncheon and House Reading Day on Saturday, Feb. 2. Responsibility Tribunal has begun of Delegates. Governor Williams They are working on narrowing holding disciplinary hearings in reported he attended the TU down the topics. OBA Day at the counties other than Oklahoma College of Law alumni luncheon, Capitol has been set for March 12. County. These alternative venues OBA Annual Meeting, Tulsa Governor Williams reported the are to accommodate the schedules County Bar Association November Diversity Committee is starting of judges, attorneys and witnesses Board of Directors meeting, to plan for 2019. Governor Morton in the individual cases. She further American Inn of Court Pupilage reported the Member Services reported that the OBA remains a Group VI meeting and Board of Committee approved two new defendant in one state court civil Governors holiday party. practice management member matter and provided board mem- benefits – Casetext and Kurrent. bers with the details.

General Counsel Hendryx reported the Professional Responsibility Tribunal has begun holding disciplinary hearings in counties other than Oklahoma County. These alternative venues are to accommodate the schedules of judges, attorneys and witnesses in the individual cases.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 51 CLIENTS’ SECURITY FUND OKLAHOMA BAR JOURNAL Hicks, Tulsa, and Mark E. Fields, RECOMMENDATIONS CONTRACTS McAlester, terms expire 12/31/2019; Chairperson Micheal Salem Communications Director Matthew C. Beese, Muskogee, term reviewed the recommendation of Manning reported the transition expires 12/31/2020; Miles Pringle, the committee to reimburse seven of the bar journal to a full-color Oklahoma City, term expires clients for a total of $120,350.41 magazine and totally electronic 12/31/2021. for the misdeeds of four former delivery of court issues has gone or deceased attorneys. The board well. Magazine quality is excel- Investment Committee – approved the claims and authorized lent. She said with approval from reappoint M. Joe Crosthwait, the distribution of a news release Executive Director Williams, con- Midwest City, chairperson; and approved by the president and the tracts were renewed for 2019 with Kendra Robben, Oklahoma City, Clients’ Security Fund chair. Walsworth, magazine printer, and vice chairperson, terms expire Steve Wallace, court issue artist, 12/31/2019; and reappoint member PROPOSED MEDICAL at the same rates as last year. She Renee DeMoss, Tulsa; and appoint MARIJUANA POLICY noted Walsworth has also printed Adam W. Christensen, Oklahoma Executive Director Williams the CLE Department’s fall maga- City; and David A. Poarch, Norman, reviewed the proposed OBA zine for the past several years, and terms expire 12/31/2021. medical marijuana employee the company prints several other policy. He said the policy has been bar association magazines. Legal Ethics Advisory Panel – shared with staff and discussed at reappoint Steven Balman, Tulsa, an employee meeting. The board YLD LIAISON as panel coordinator, term expires approved the policy. APPOINTMENTS 12/31/2019. Oklahoma City panel: YLD Chair-Elect Nowakowski reappoint Susan Bussey, Norman; PROPOSED SEAT BELT POLICY reported she has appointed a YLD liai- Rex Travis, Oklahoma City; Executive Director Williams son to each OBA standing committee. and appoint Paige A. Masters, said the OBA has received a Oklahoma City; Tulsa Panel: $100,000 National Highway APPOINTMENTS reappoint Leonard Pataki, Tulsa; Training Safety Act federal grant President-Elect Chesnut appoint James R. Hicks, Tulsa; and through the Oklahoma Highway announced he has made the Mbilike Mwafulirwa, Tulsa; terms Safety Office that requires employ- following appointments: expire 12/31/2021. ees to use a seatbelt when driving while performing duties for the Board of Medicolegal NEXT MEETING OBA. The board approved the Investigations – reappoint Glenn D. The Board of Governors met new seat belt use policy. Huff, Oklahoma City, to a one-year in January. A summary of those term expiring 12/31/2019. actions will be published in the Oklahoma Bar Journal once the Audit Committee – appoint minutes are approved. The next Jimmy D. Oliver, Stillwater, chair- board meeting will be at 10 a.m. person, term ends 12/31/2019; Friday, Feb. 22, at the Oklahoma appointment of members James R. Bar Center in Oklahoma City.

52 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL JOIN US FOR THE MIDWEST’S PREMIER ESTATE PLANNING EVENT

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Like us on Connect Follow us on Twitter Presented in cooperation with the University of Missouri-Kansas City School of Law Facebook on LinkedIn @KCEPSOfficial Bar Foundation News Get to Know 2019 President Jennifer Castillo

Why did you decide to be a lawyer? I was finishing a master’s degree in communication at OU and took a First Amendment and communication class. It was so interesting I decided to apply to law school instead of a Ph.D. program. The rest, as they say, is history.

Explain the leadership roles you hold, whether professional or in the community, and why these responsibilities are important to you. I have served in a variety of leadership roles within the Oklahoma Bar Association and the Oklahoma Bar Foundation. In fact, it was my pleasure to serve as OBA President Linda Thomas’ vice president in 2017. I have also volunteered and served on the boards of several non-legal organizations including the Oklahoma Academy for State Goals and the deadCenter Film Festival, as well as the PTA at my sons’ elementary school. I was also appointed by Gov. Fallin to the Oklahoma Water Resources Board in 2018.

What would you tell current law students and young associates about the importance of professional and civic responsibility? I take my professional and civic responsibilities very seriously. I am responsible for making my part of the world better, and, because of my Jennifer Castillo legal education, have the knowledge and experience to help the less fortunate access justice. Additionally, getting involved as a law student or young associate brings opportunities to meet judges and more expe- Law School: OCU School rienced lawyers who can serve as mentors. of Law Graduation 2002 What is your biggest pet peeve with modern technology? Year: I hate that people communicate more via text and email than face to face. I fear the art of conversation is losing the battle against the conve- Current Oklahoma nience of other forms of communicating. Employer: Gas & Energy Company What is on your bucket list? My bucket list includes lots Location: Oklahoma of travel with my family. City What are your goals as 2019 OBF board president? As 2019 OBF board president, I want to continue educating lawyers and others in the state about the important work done by OBF grantees and to bring in more dollars to support the work of those grantees. Additionally, I am work- ing with OBF Communications Director Candice Pace to plan a fun event for lawyers and OBF grantees in 2019. Check this column in the coming months for more information!

54 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Young Lawyers Division A Great Start and Looking Forward By Brandi Nowakowski

HE YLD IS OFF TO A great YLD and the OBA at large. His YLD Executive Committee Tstart in 2019! In January, we leadership has ensured the YLD members also recently returned held an orientation for our newly would continue to be a successful from the American Bar Association’s elected board members, followed and integral part of the OBA it is Young Lawyers Division Midyear by our first board meeting of the today. The dinner and festivities Meeting in Las Vegas. This meet- year. After the meetings, cur- allowed us to say thank you and ing, and other ABA YLD meetings rent and outgoing board mem- also provided a wonderful oppor- we attend throughout the year, bers joined together to celebrate tunity for new and existing board serve as a valuable opportunity our YLD Immediate Past Chair members to get to know each to collaborate with young lawyers Nathan Richter and recognize him other. I am excited and confident from around the country, hear and for his time and dedication to the looking forward to the year to come! discuss national trends in the legal

From left Tessa Hager, Margaret Cook, T. Chase McBride, Dylan Erwin, Brandi Nowakowski, Rhiannon Baker, Bevan Graybill Stockdell and Alyssa King attend the orientation for newly elected YLD board members.

56 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL YLD members celebrate the leadership of Immediate Past Chair Nathan Richter at an event honoring him at TopGolf in Oklahoma City. profession and make recommendations the YLD provides an avenue for will remember receiving these handy for policy changes affecting the Oklahoma’s young lawyers to bags filled with pens, pencils, stress legal profession. These meetings network and serve others through balls and other goodies intended to are our platform to voice concerns work on both bar-related and make the bar exam just a little bit eas- over trends that may negatively public service-related projects. ier. We will meet at 10 a.m. Saturday, impact the state of the legal pro- Additionally, the YLD provides an Feb. 23, at the Oklahoma Bar Center fession in Oklahoma, as well as to opportunity for involvement and in Oklahoma City to assemble praise and possibly adopt those leadership in the bar association the kits and conduct our regular that may positively influence our as a whole. The YLD serves as the monthly meeting. We would be careers. It further provides a venue link connecting young lawyers thrilled if you could join us! to share ideas, projects, programs with active experienced bar lead- If you are interested in getting and network with young lawyers ers through various committees, involved, go to www.okbar.org/ from across the nation. projects and initiatives. There are yld/committees to see all the ways After reading about our recent so many areas in which to be of to participate, and watch the bar events, many of you might be service within the OBA that every- journal for upcoming YLD events. wondering what all the YLD does one can find something they are We welcome your participation and and how you too can get involved. passionate about. Moreover, the greatly appreciate your service. The first thing to know is you may YLD provides leadership training, already be a YLD member and networking, business development not even realize it! All members and an opportunity to have a voice Ms. Nowakowski practices in of the Oklahoma Bar Association to impact our association. Shawnee and serves as the YLD in good standing and admitted Looking forward, the YLD will chairperson. She may be contacted to practice law (for the first time) soon be assembling and handing out at [email protected]. Keep within the past 10 years are auto- bar exam survival kits for those tak- up with the YLD at www.facebook. matically YLD members. Second, ing the February exam. Many of you com/yld.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 57 For Your Information

NEW BOARD MEMBERS TAKE OATH IMPORTANT UPCOMING DATES Nine new members of the OBA Board of Governors were sworn in to their positions Jan. 18 in the Supreme Court Hearing Room at the Oklahoma Judicial Center. Officers taking the oath were Chuck Chesnut, Miami, president; Susan B. Shields, Oklahoma City, president-elect; and Lane Neal, Oklahoma City, vice president. Sworn in to the Board of Governors to represent their judi- cial districts for three-year terms were David T. McKenzie, Oklahoma City; Timothy E. DeClerck, Enid; Andrew E. Hutter, Norman; and Miles T. Pringle, at large, Oklahoma City. Sworn in to one-year terms on the board were Kimberly Hays, Tulsa, immediate past president and Brandi Don’t forget the Oklahoma Nowakowski, Shawnee, Young Lawyers Division chairperson. Bar Center will be closed Monday, Feb. 18, in observance of Presidents Day. Also, be sure to docket the 2019 Solo & Small Firm Conference in Tulsa June 20-22 and the OBA Annual Meeting in Oklahoma City Nov. 6-8.

CONNECT WITH THE OBA THROUGH SOCIAL MEDIA Have you checked out the OBA Facebook page? It’s a great way to get updates and information about upcoming events and the Oklahoma legal community. Like our page at www.facebook.com/ OKBarAssociation and be sure to fol- Oklahoma Supreme Court justices congratulate 2019 OBA President-Elect Susan low @OklahomaBar on Twitter and Shields and OBA President Chuck Chesnut (center) on being sworn in. @OKBarAssociation on Instagram.

10 YEARS OF A WARM TRADITION The West Law Firm celebrated the 10th anniver- sary of the firm’s annual coat donation program with the Salvation Army in Shawnee. Since the program began in 2009, West Law Firm has contrib- uted more than 2,600 new winter coats to children and adults, along with assorted hats and gloves. This year the firm donated 284 coats, which were distributed by the Salvation Army of Shawnee during the month of December. “The coat donation program is one of our favorite charitable activities each year,” said law firm partner Bradley West. “As we celebrate the 10th anniversary of this program, we are especially pleased to partner Salvation Army Captains Jamie Clay and Russell Clay (left and right) with the Salvation Army in helping those in need in pick up the 2018 coat donations from Bradley West (center) at the Shawnee and Pottawatomie County.” West Law Firm.

58 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL OBA MEMBER RESIGNATIONS The following members have resigned as members of the association and notice is hereby given of such resignation:

David Randall Christian Tiffany Beth Kieffer Deanna Holt Sinclair OBA No. 1671 OBA No. 31337 OBA No. 22594 32810 Edgewater Dr. 4111 E. 37th St., N. 7550 E. 53rd Ave. Magnolia, TX 77354 T6L P.O. Box 5423 Wichita, KS 67220 Denver, CO 80217 Robert Wesley Clark OBA No. 1710 Debra Lynn Weinberg Kurzban Beverly Joyce Trew 1259 Springwater Dr. OBA No. 16910 OBA No. 9087 Mandeville, LA 70471 7228 N. Pinebrook Rd. 1452 Laurel Drive Park City, UT 84098 Sewickley, PA 15143 Frederick William Cullins OBA No. 16207 David Alan Kutik Kimberly S. Edwards Welty 1361 Cnty. Rd. 1600 OBA No. 20446 OBA No. 2643 Caney, KS 67333 North Point 11007 Caloden St. 901 Lakeside Avenue Oakland, CA 94605-5548 Jennifer Wolfe Davalos Cleveland, OH 44114-1190 OBA No. 20398 David Ernest Zelnick 1900 Preston Rd., #267-233 Diann McMahan OBA No. 21875 Plano, TX 75093 OBA No. 6054 150 Lincoln St., #4 12952 W. 61st Circle Worcester, MA 01605 Samuel James Glover Arvada, CO 80004 OBA No. 20400 Anne M. Zimmerman 3201 Center St. Gary Wayne Pilgrim OBA No. 20900 The Village, OK 73120 OBA No. 17121 367 Novara Drive 2818 E. 85th Street Ballwin, MO 63021 Roger Alan Grove Tulsa, OK 74137 OBA No. 3641 11816 Lorenta Circle Scott W. Putney Edmond, OK 73013 OBA No. 19276 9512 Bay Front Dr. P.O. Box 14075 Norfolk, VA 23518

LHL DISCUSSION GROUP HOSTS MARCH MEETING “Finances and the Practice of Law” will be the topic of the March 7 meeting of the Lawyers Helping Lawyers monthly discussion group. Each meeting, always the first Thursday of the month, is facilitated by committee members and a licensed mental health professional. The group meets from 6 to 7:30 p.m. at the office of Tom Cummings, 701 N.W. 13th St., Oklahoma City. There is no cost to attend and snacks will be provided. RSVPs to [email protected] are encouraged to ensure there is food for all.

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 59

Bench and Bar Briefs

ON THE MOVE AT THE PODIUM

Kyle Killam and Andrea Brown groups. Mr. Sokolosky is a member Lorrie Corbin Bamford was a joined the Tulsa-based firm Berlin of the firm’s Bankruptcy & featured moderator at the Global Law Firm as associates. Mr. Killam Creditor’s Rights, Indian Law & Gaming Expo in Las Vegas, pre- practices criminal defense with his Gaming and Litigation & Trial senting “The Power of Tech II: A primary focus on domestic assault practice groups. Ms. Clifton prac- Casino Operators’ Perspective on and battery. Ms. Brown practices tices general litigation and serves in How to Capture, Maintain and defense of persons charged with the Litigation & Trial practice group. Grow Revenue While Maintaining sex crimes, crimes against children Ms. Kinser is a member of the firm’s Data Integrity.” and domestic assault and battery. Banking & Financial Institutions, Bankruptcy & Creditor’s Rights, Real John Lieber of Tulsa presented Deric McClellan and Alexander Estate and Wind & Renewable Energy a three-hour CLE at the Tulsa Sokolosky joined the Tulsa office Practice Groups. Ms. Majoue practices County Bar Association titled of Crowe & Dunlevy. Lauren K. commercial litigation and complex lit- “Stress Management Workshop Clifton, Kelly S. Kinser, Aimee igation matters in the Administrative & for Attorneys.” Through audi- Majoue and William O. Moon Regulatory, Criminal Defense, ence participation, brainstorming joined the firm as associates in Compliance & Investigations, Energy, and lecture, workshop attendees its Oklahoma City office. Mr. Environment & Natural Resources learned skills and strategies to McClellan handles general litigation and Litigation & Trial practice deal with the unique stresses matters in the Appellate, Energy, groups. Mr. Moon is a member of the faced by lawyers. Environment & Natural Resources Cannabis Industry and Intellectual and Indian Law & Gaming practice Property practice groups.

KUDOS

Lloyd T. Hardin Jr. of Oklahoma Lorrie Corbin Bamford of The Garfield County Bar City has been selected as a Fellow Newcastle was named a Rising Association presented awards of the Construction Lawyers Star at the Global Gaming Women’s to: Elizabeth W. Beam, Lifetime Society of America (CLSA). The Annual Women of Gaming Awards Achievement Award; Linda CLSA is an honorary association 2018 in Las Vegas. She serves McKnight Pickens, Lifetime of lawyers practicing in construc- as the chief compliance officer Achievement Award; Karig P. tion law and related fields. and general counsel for Gaming Culver, Professionalism Award; Capital Group LLC. Benjamin J. Barker, Oustanding Young Lawyer Award and; Richard M. Perry, President’s Award.

HOW TO PLACE AN from you. Sections, committees, Submit news items to: ANNOUNCEMENT: and county bar associations The Oklahoma Bar Journal are encouraged to submit short Lacey Plaudis welcomes short articles or news stories about upcoming or recent Communications Dept. items about OBA members and activities. Honors bestowed by other Oklahoma Bar Association upcoming meetings. If you are an publications (e.g., Super Lawyers, Best 405-416-7017 OBA member and you’ve moved, Lawyers, etc.) will not be accepted as [email protected] become a partner, hired an associate, announcements. (Oklahoma based taken on a partner, received a publications are the exception.) Articles for the April issue must be promotion or an award, or given Information selected for publication received by March 1. a talk or speech with statewide or is printed at no cost, subject to national stature, we’d like to hear editing and printed as space permits.

In Memoriam

ohn Curtis Branch of Association. Mr. Brumbaugh the Oklahoma Medical Research JOklahoma City died Dec. 6, served his industry as the presi- Foundation or the Central Humane 2018. He was born Oct. 1, 1934, dent of the Oklahoma Mortgage Society of Oklahoma City. in Buffalo. While attending Bankers Association. He also vol- Northwestern Oklahoma State unteered regularly at the Food for Michael Lang of Sand University, he joined the U.S. Kids program in Okmulgee County. R.Springs died Dec. 1, 2018. He Army National Guard and served He loved to travel, golf and entertain was born Oct. 1, 1939, in Tulsa. He with the 7th U.S. Army 35th friends and family. attended Central High School and Field Artillery during the Korean Georgetown University. He received War. After graduating from heodore Q. Eliot of Tulsa died his J.D. from the TU College of Law Northwestern University with a TNov. 30, 2018. He was born in 1963. Before going into private Bachelor of Science in biology and March 18, 1954. He was a grad- practice, Mr. Lang was a claims chemistry, he went on to complete uate of Drake University in Des adjuster for USF&G as well as being his master’s degree in preventive Moines, Iowa, and the OU College a public defender for the city of medicine and public health from of Law (1979) where he was on the Tulsa. He was in private practice the OU Medical Center in 1963. He Oklahoma Law Review. He was a for 46 years. He was president and then accepted a research position shareholder at Gable & Gotwals lieutenant governor of the Tulsa with focus on parasitology at OU for 28 years and retired as a share- County Bar Association. Mr. Lang Health Sciences Center, graduat- holder at Hall Estill in 2015. Mr. Eliot joined Windycrest Sailing Club ing with a Doctor of Philosophy in practiced litigation in the oil and in 1974, helping junior sailors and preventive medicine. On com- gas industry. He also served on the sitting on the Windycrest board. He pletion of his doctorate degree Board of Directors of the Summit was founder and chairman of the in 1964, Mr. Branch accepted the Club and was a member of the Windycrest Charity Regatta (1980- professorship of biology with Nature Conservancy of Oklahoma 2012), which raised over a million OCU, serving for a time as head of and Ducks Unlimited. He loved dollars for multiple sclerosis. He also the department. He attended the waterfowl hunting, fishing, trav- served on the board of the Gull Bay OCU School of Law, earning his eling, good food, practicing law, Homeowners Association. He loved J.D. in 1980. He became a found- the state of Oklahoma and reading to sail and travel. Memorial dona- ing partner at the Branch & Hurtt a well-written book. Memorial tions may be made to Porta Caeli Law Firm PC. Memorial donations donations may be made to Ducks House, P.O. Box 580460, Tulsa, 74158 may be made to the local Regional Unlimited at www.ducks.org. or to the American Cancer Society, Food Bank, 3355 S. Purdue St., 4110 S. 100th E. Ave, Tulsa, 74146. Oklahoma City, 73179. inda M. Harris of Oklahoma LCity died Dec. 12, 2018. She aria Evelyn Robles Meyers illiam M. Brumbaugh of was born July 16, 1937, in Ponca Mdied Nov. 5, 2018. She was WTulsa died June 16, 2018. He City. She graduated from Ponca born May 3, 1955, in El Salvador. was born Jan. 27, 1930. He gradu- City High School in 1955. She She received a degree in account- ated from Will Rogers High School received a bachelor’s degree in ing from the University of San and the TU College of Law. Mr. English from OCU. In 1979, she Francisco. Ms. Meyers practiced as Brumbaugh worked in mortgage received a J.D. from the OCU a CPA prior to earning her J.D. at banking, property development School of Law. Ms. Harris taught the OU College of Law and estab- and property management. In 1975, school for five years, obtained a lishing her own law firm. She prac- he purchased Mager Mortgage Co., master’s degree in library science ticed health care and employment the oldest mortgage banking com- from OU and practiced oil and law. Donations in her honor may be pany in Oklahoma. It was renamed gas law and business law for 20 made to Infant Crisis Services Inc. to Brumbaugh & Fulton Co. He also years. She loved cats, dogs, music, founded Tallasi Land & Development art, reading, travel, needlework Co. and Prestige Management and spending time with friends Ltd. He served his alma mater as and family. Memorial donations the president of the TU Alumni in her honor may be made to

THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 63 In Memoriam

enneth A. Nash of Oklahoma homas Albert Ryan of KCity died Nov. 2, 2018. He was TOklahoma City died Dec. 7, born Aug. 23, 1930, in Oklahoma 2018. He was born July 4, 1975, in City. He graduated with a Bachelor Oklahoma City. He was a 1994 grad- of Arts from OU, Master of Public uate of John Marshall High School. Administration from OU and a He earned three degrees from OU, J.D. from the OCU School of Law a bachelor’s degree in letters, a J.D. (1956). Mr. Nash was a member (2004) and a MBA. Mr. Ryan enjoyed of the Oklahoma City Police his career as an attorney, serving Department from 1952 to 1972. He his clients and producing his legal was the director of the Oklahoma writings. He was proud to have his City/County Criminal Justice works as the subject of two pub- Coordinating Council from 1972 lished opinions held by the Court to 1985. He was assistant munic- of Civil Appeals of the State of ipal attorney from 1985 to 1999 Oklahoma. He enjoyed acting both and retired as chief prosecutor on stage and on screen, standup for the city of Oklahoma City. He comedy and screenwriting. He was served under four governors on also an avid pool player, ballroom the Oklahoma Crime Commission. dancer and Dungeons and Dragons Mr. Nash was a founding mem- player. Donations in his honor ber of the Oklahoma City Police may be to The Oklahoma Medical Association. He was president of Research Foundation, 825 NE 13th the Council on Law Enforcement St., Oklahoma City, 73104. Education and Training, Oklahoma County Mental Health Association, arl Lee Yeary of Oklahoma Fraternal Order of Police Lodge CCity died Dec. 10, 2018. 123 and Board of Directors of He was born April 19, 1956, in Municipal Employees Credit Oklahoma City. He graduated Union. He was an adjunct pro- from Southeast High School fessor at OSU-OKC and OCU. in 1973. Mr. Yeary received a Mr. Nash was chairman of the Bachelor of Arts from OU in 1979 Oklahoma Police Retirement and a J.D. from the OU College of Board. He also served on the Law in 1987. After being in private board of Sunbeam Family Services practice at Holliman, Langholz, for many years. Donations in his Runnels & Dorwart PC., he began name may be made to the Special a 28-year career in public service Olympics, Catholic Charities or at the Oklahoma Department of Our Lady’s Cathedral. Securities. He was an avid sports fan and won numerous fantasy league championships.

64 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL

Oklahoma Bar Journal Editorial Calendar

2019 ISSUES

MARCH AUGUST NOVEMBER Criminal Law Access to Justice Indian Law Editor: Aaron Bundy Editor: Melissa DeLacerda Editor: Leslie Taylor [email protected] [email protected] APRIL Deadline: May 1, 2019 Deadline: Aug. 1, 2019 Law Day Editor: Carol Manning SEPTEMBER DECEMBER Bar Convention Starting a Law Practice MAY Editor: Carol Manning Editor: Patricia Flanagan Technology [email protected] Editor: C. Scott Jones OCTOBER Deadline: Aug. 1, 2019 Appellate Law Editor: Luke Adams [email protected] Deadline: May 1, 2019

2020 ISSUES

JAUNARY MAY OCTOBER Meet Your Bar Association Diversity and the Law Mental Health Editor: Carol Manning Editor: Melissa DeLacerda Editor: C. Scott Jones [email protected] [email protected] FEBRUARY Deadline: Jan. 1, 2020 Deadline: May 1, 2020 Family Law Editor: Virginia Henson AUGUST NOVEMBER [email protected] Children and the Law Alternative Dispute Resolution Deadline: Oct. 1, 2019 Editor: Luke Adams Editor: Aaron Bundy [email protected] [email protected] MARCH Deadline: May 1, 2020 Deadline: Aug. 1, 2020 Constitutional Law Editor: Clayton Baker SEPTEMBER DECEMBER [email protected] Bar Convention Ethics & Professional Responsibility Deadline: Oct. 1, 2019 Editor: Carol Manning Editor: Amanda Grant [email protected] APRIL Deadline: Aug. 1, 2020 Law Day Editor: Carol Manning

If you would like to write an article on these topics, contact the editor.

66 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL INNOVATION COMESSTANDARD

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THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 69 Classified Ads

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70 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL POSITIONS AVAILABLE POSITIONS AVAILABLE

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THE OKLAHOMA BAR JOURNAL FEBRUARY 2019 | 71 The Back Page Digging Pro Bono By Jimmy K. Goodman

OME PEOPLE ASK why I the hope it will renew or inspire veteran under the OBA’s veteran S“dig” public service work. an urge to do more pro bono by assistance project, Oklahoma Professionally, we use pro bono as all OBA lawyers, but especially Lawyers for America’s Heroes short for pro bono publico, which the young ones who have sharper Program. We are assisting him in loosely translates to “for the public minds – and stronger backs. seeking redress from his neighbor good.” So pro bono is then service Recently – well, in May 2017 – due to a water flooding problem “for good.” This story is about Margaret Travis referred to me a he is having – that he claims is digging for good. It is shared with pro bono matter for an Oklahoma due to the actions of his neighbor. It has been quite a long process in trying to work this out for him. In the course of looking for an out-of-court resolution, the neighbor had an engineer draw up plans to correct the problem, but the con- tractor would not bid for the work without “eyeballing” a storm sewer junction box on our client’s property that had been covered up with soil. So three young associates at our firm, Ryan Wilson, Will Moon and Tim Sowecke, and I went out to do just that. We began the dig thinking we were dealing with about 12-15 inches of soil over a 6 feet x 6 feet area. So, we anticipated digging up 45 cubic feet of dirt – but it turned out to be more like 90 cubic feet. We felt the “burn,” (especially me), but when finished, we all felt the “good.” I am sure this is representative of the variety of non lawyer services that all Oklahoma attorneys wind up providing during the course of their work for veterans – albeit a unique one. You’ll find more info about the program at www. okbarheroes.org, and please find your own way to go digging for good.

From left Crowe & Dunlevy attorneys Jimmy Goodman, Ryan Wilson, Tim Sowecke Mr. Goodman practices in and William Moon pitched in to help a heroes client with more than free legal advice. Oklahoma City.

72 | FEBRUARY 2019 THE OKLAHOMA BAR JOURNAL