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Can Estate Planning be Antiracist?

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Three recent articles published in the ACTEC Law Journal discuss how estate planning can be used to help reverse some of the effects of longstanding discrimination against Black Americans.

The Legacy of Racism

In “Black Deaths Should Matter, Too!: Estate Planning as a Tool for Antiracists,” Los Angeles trusts and estates litigator Terrence M. Franklin recounts some of the history that has deprived Black Americans from creating and preserving generational wealth, starting with slavery under which they were property rather than having the right to own property. Even when slavery ended, laws and terrorism made it difficult for Black Americans to own property or build wealth. These practices included Jim Crow laws and lynchings in the South and redlining in the North.

Franklin recounts the 1898 killing of 250 Black residents of Wilmington, North Carolina, in 1898 and the better known 1921 destruction of “Black Wall Street” in Tulsa, Oklahoma. Many of the more than 4,000 documented lynchings of African Americans in the South were “immediate reactions to Black people acquiring property — a car, a home, money.”

Redlining of Black neighborhoods was put into law with the Federal Housing Authority’s 1934 creating of a risk rating system that systematically rated Black neighborhoods as too risky for financial support. Until 1950, the Realtor’s Code of Ethics barred realtors from selling homes in white neighborhoods to Black buyers. Racially-restrictive covenants were not ruled illegal until 1948.

Given this history, Franklin explains that his parents like many other Black Americans put little stock in accumulating wealth. Instead, “they rationally focused more on transferring something into ‘heads’ than into pockets.” Further, he sees a parallels in the Black Church focusing “on rewards in heaven instead of material rewards on earth, which have been so systematically and consistently taken away” and Black families taking care of their parents as they age. “Many Black people I know,” he says, “are less concerned about leaving a legacy for their children than they are about not being a burden on them.”

Franklin recounts that as far as he knows, he was the first African American fellow of the American College of Trust and Estate Counsel when he was elected in 2001, and now the membership of approximately 2,500 attorneys includes by his count only six African Americans. Franklin’s experience is that Black Americans, like many other Americans, refrain from doing estate planning, the result being that more estates end up being litigated — more work for litigators like him, but less wealth to pass on.

Franklin cites Boston University professor Xendi X. Kendi’s book, How to Be an Antiracist, in terms of how to work to change this history, focusing on two strategies. First, look to results, not motivations. Don’t just focus on “non-racist” policies if they perpetuate unequal results for people of color. Take steps that make a difference. Second, along the same lines, don’t try to change people, but change policies. “To be antiracist, Kendi starts with the premise that policies and practices that have inequitable results based on race are racist, and we should focus on changing those instead of changing hearts and minds.”

How Laws Undermine Preservation of Wealth

In her article, “To My Children in Equal Shares: The Flaw of Estate Planning When Property is Devised to Beneficiaries as Tenants in Common,” Camille M. Davidson describes a case she adjudicated as a judicial hearing officer for the State of North Carolina. (She is now dean and professor of law at Southern Illinois University.) This case involved a partition action by investors in property to force it sale. They had obtained their right to force a sale by buying out the interests of children and grandchildren of the deceased property owner.

Their mother (and grandmother) had had a will leaving the family house “to her children in equal shares.” This meant that each of her children, and the children of one child who had predeceased her, had a tenancy-in-common interest in the property which they could sell independently, which they did, the grandchildren simply taking what seemed like a windfall and one son selling, in part out of spite at his sister who wanted to maintain the house.

The result was that the property passed from a Black family to white developers. Davidson suggests that this is not an uncommon pattern, especially in parts of the country that are gentrifying, where investors track obituaries and look for opportunities to pick off family members and force partition sales at less than fair market value. She argues that wills that leave property to “children in equal shares” are not much better than no will at all and that families need to have deeper conversations about how they can plan to preserve their hard-earned property for future generations. (Some states, such as Mississippi, also permit “investors” to force the sale of property by paying unpaid property taxes.)

Mrs. Brenda’s situation highlights the importance of family conversations when it comes to estate planning. There is no “one size fits all.” Although the starting point for most individuals is from a place of equal treatment for all of their children, that may not be the best option. Mrs. Brenda had children in different situations. A family conversation would have brought the dynamics to light and would have resulted in either devising the home to the child who wanted to preserve the parents’ legacy, or at least explaining to others the intangible value of property so that they would not be inclined to sell it so quickly and cheaply.

Updating Laws to Protect Families

Interestingly, the modern estate planning presumption that inheritances be shared equally among children reverses the older practice, at least among the landed gentry, of passing on property and titles to the oldest son. That prevented properties from being split up into uneconomic shares. Davidson points out that partition is also an American innovation that did not exist under British common law, meaning that historically co-owners of property could not force a sale without the agreement of the other co-owners.

In order to protect owners of land from unfair partition, in 2010 the National Conference of Uniform State Laws drafted the Uniform Partition of Heirs Property Act, which has since been adopted by 22 states. It doesn’t bar partition all together, but limits it when co-tenants are relatives who have inherited the property. In such cases, once a partition action has been entered such family owners have stronger rights than non-family owners to buy out the others. In addition, it provides more protections that all owners will receive fair market value for their interests.

How to Encourage Estate Planning

In another article in the ACTEC Law Journal, “The Intersection of Racial Inequities and Estate Planning,” Reetu Pepoff expands on the effects of the failure to plan and the vulnerability of property to partition, relating statistics on the effects Hispanic and indigenous American families, as well as African Americans. They are much less likely than white Americans to engage in estate planning not only because they are likely to have less wealth, but as evidenced by the stories of entertainers such as Prince and Aretha Franklin who died without estate plans, but for other reasons as well. “In fact,” she says, ” the lack of estate planning may very well be intentional as it may be a result of an overall distrust of ‘the system.'”

While there are many causes of the wealth gap between white and minority Americans, inheritances, or the lack there of, is a significant contributor. “[A]lmost 30% of White American households reported having received an inheritance or gift compared to 10% of African American households, 7% of Hispanic households, and 18% of other racially diverse households,” including Asian American and indigenous families.

The reality, unfortunately, is that estate planning, to the extent it helps families preserve wealth, actually increases inequality over generations since it enables those already with wealth to pass it on to their heirs. We can’t, of course, harm our clients by not doing our best possible work for them. So, how can estate planners use their skills and experience to decrease racial inequity? Pepoff recommends taking the following steps:

First, reach out to minority groups to explain the importance of estate planning to building intergenerational wealth. She points out that the number of minority-owned businesses in the United States are growing, so now is a good time to take these steps. She quotes Earl S. Graves, Sr., the founder and publisher of Black Enterprise Magazine, who said “[e]state planning means future generations not having to start from scratch to launch their businesses, or to finance the growth of those we leave them. It means lessening our children’s and grandchildren’s dependence on student loans.” Pepoff recommends reaching out to professional organizations, such as the National Association of Black Accountants and the Asian Pacific CPA Association.

Second, discuss racial justice issues with new and existing clients. This, of course, can be difficult since it crosses the usual lines of the attorney-client relationship in which politics usually are not discussed. But one approach that may be more comfortable is to bring up social justice issues in the context of charitable giving. We can all ask our clients about including gifts to charities in their estate plans and explore the type of societal change they would like to support. Pepoff also recommends that attorneys learn more about their own implicit biases by using the Project Implicit questionnaire developed by Harvard University.

Third, invest in making your law firm more diverse. Law firms can do this by recruiting at historically Black colleges and universities, networking with minority law associations, and adopting the “Mansfield Rule,” which tracks “whether law firms have affirmatively considered at least 30% women, lawyers of color, LGBTQ+ lawyers, and lawyers with disabilities for leadership and governance roles, equity partner promotions, formal client pitch opportunities, and senior lateral positions.” While the Mansfield Rule is aimed at larger law firms, all firms can make a diversity and inclusion commitment.

It’s always a good time to start.

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