No sooner had I written a blog post on how the Academy Awards relate to estate planning, did one of the award recipients bring up another legal topic that needed to be covered!

Best Actress winner Frances McDormand gave a powerful speech about gender equality in Hollywood. Her words seemed a fitting continuation of the #MeToo movement and Time’s Up initiatives that had a clear presence (both spoken and unspoken) in Los Angelas’ Dolby Theatre. At the conclusion, Ms. McDormand said, “I have two words for you: inclusion rider.”

https://www.facebook.com/ABCNetwork/videos/1880602121983915/

What is a Rider?

You may already know that a “rider” is an addition or extra to the main contract. Riders have special meaning when it comes to the entertainment world.

Perks!

Riders can be used to grant certain perks to an artist (like all of the actors and actresses present at last night’s Academy Awards).

Does a principal dancer want a certain kind of water available backstage? Is the guitarist picky about what foods will be available in the green room before and after a concert? If you’re an entertainer (dancer, comic, actor, musician, speaker, etc.) with a reasonable amount of bargaining power (i.e. star power!), you would want to be sure that your contracts include all your favorite little extras. These extras, or demands, should be placed in writing in each legal contract so that they must be honored by the other party such as a film production company, concert promotor, performance venue, and the like.

guitarist on stage

Finance

Riders can also cover specific financial elements. If a pop star, for example, wants a percentage of a concert’s profits, she might request this through a rider. A television actor could attempt to request something similar from online streaming sales.

Inclusion Rider 

Tack the specific word “inclusion” onto rider and you have a contractual clause that actresses/actors can insist be inserted in contracts that requires cast and crew on a film to meet a certain level of diversity (both racial and gendered).

The concept was explored in a TED talk in 2016 by Stacy Smith. Smith, director of USC Annenberg’s Media, Diversity & Social Change Initiative, believes that inclusion riders (also called an “equity clause”) could be part of the solution for the lack of diversity in films. In a 2014 piece she penned for The Hollywood Reporter, she wrote:

What if A-list actors amended every contract with an equity rider? The clause would state that tertiary speaking characters should match the gender distribution of the setting for the film, as long as it’s sensible for the plot. If notable actors working across 25 top films in 2013 had made this change to their contracts, the proportion of balanced films (about half-female) would have jumped from 16 percent to 41 percent. Imagine the possibilities if a few actors exercised their power contractually on behalf of women and girls. It wouldn’t necessarily mean more lead roles for females, but it would create a diverse onscreen demography reflecting a population comprised of 50 percent women and girls.

Smith asserts that there’s no reason why the majority of the minor roles (on average, 30-ish or so roles) cannot reflect the demographics of the realistic environment where a story is taking place. An A-list actor or actress can use their contract to stipulate that the supporting roles in the film (or show) reflect equitable diversity in terms of both race and gender.

Smith said she’s worked with attorneys in the past to craft specific language for the provisions where if the other party failed to meet the inclusion rider requirements, they would need to pay a penalty to a fund or charitable cause that supports underrepresented persons in the industry.

It’s a smart, common sense move that could mean a big change in countering the bias (both conscious and unconscious) in auditions and casting. The intended result is for greater representation and opportunities for women, persons of color, the LGBT community, and persons with disabilities in entertainment. Plus, as actress and comedian Whitney Cummings said, this increased pressure for inclusivity “will make movies better.

McDormand on Inclusion Riders

Backstage after the Oscars ceremony, McDormand said of inclusion riders, “I just found out about this last week. There has always been available to all, everybody who does a negotiation on a film, which means you can ask for or demand at least 50 percent diversity in not only the casting and the crew. The fact that I just learned that after 35 years in the film business – we aren’t going back.”

Inclusion Riders & You

While you may not be nominated for an Academy Award anytime soon, the takeaway is twofold.

First: if you support increased representation of different genders and races in movies you can support the films that respect inclusion riders with your money. You can also spread the word with the tag #EquityRider when tweeting to actors and actresses asking for them to support the concept through their own contract.

Second: this goes to show the power of the contact and negotiation process. Because the contract can dictate how the relationship between employer and employee (or production company and talent, for instance) run, it’s important to hire an attorney to help you stand up for your wants and needs in respect to the relationship.

To this point, if you’re a nonprofit organization looking to make some new hires or an employee wondering if the contract you’re about to sign will actually be in your best interest, don’t hesitate to contact me.

A will may provide for disposition of the testator’s assets at the time the will is executed, but of course it may be many years—many decades, even—between the will’s execution and the testator’s death. What if between the execution of the will and the testator’s death, there are changes in circumstances (such as the death of beneficiary) which make it impossible for the executor to follow the dispositive provisions of the will? That’s where estate planning gets complicated and can open the door to litigation.

Changed Circumstances = Default

Of course, we would first look to the language of the will. But, what if the will fails to address the changed circumstances? In such cases, Iowa law provides default rules. Obviously, it is much preferable for the estate planner to raise the possibility of changed circumstances with the testator during the drafting process, and address them accordingly with clear language in the will. (Yet, another reason to use a lawyer to draw up your estate plan.) And, yes, you should keep your will (and overall estate plan) updated.

Death of a Beneficiary

If Grace provides in her will, “I give Lawrence $10,000,” and Lawrence dies before Grace, the will can’t be followed exactly as written. Of course, this situation can and should be avoided by careful drafting – the estate planner asking what the testator wants if a beneficiary should predecease the testator. If, continuing this example, Grace wants the bequest to pass to Lawrence’s estate or Lawrence’s children if Lawrence predeceases her, Grace should so specify in her will. If instead Grace wants the bequest to go to other beneficiaries, the will should spell that out, too.

The Doctrine of Lapse

Let’s take our example and apply the doctrine of lapse. Under the common law, a bequest would fail, or lapse, if the beneficiary predeceased the testator. The bequest would simply fall back to the estate.

Iowa’s Anti-Lapse Statute   

Iowa is among the majority of states which have adopted anti-lapse statutes. Iowa Code Section 633.273 provides that if a beneficiary (actually, the statute uses the legal term devisee) dies before the testator, leaving children who survive the testator, the devisee’s children inherit the property devised, unless the terms of the decedent’s will is clear and explicit to the contrary.

Real Life Case

Clyde Guthrie executed a will in 2002 and died in 2006. His wife predeceased him, and so did two of his five children. Both of the predeceased children died before Guthrie executed his will. That turned out to be a key fact. Guthrie’s will left his entire estate equally to his five children except “in the event any of my children should predecease me leaving issue who survive me, then the share of such predeceased child shall go in equal shares to his or her issue who survive me . . .” His three surviving children claimed that the will language meant to include only them—the decedent’s children that survived him, and not the grandchildren of one of their deceased siblings. That predeceased sibling only had one child, and that child also predeceased the decedent, but left two surviving children–great-grandchildren of the decedent. (The other predeceased child died without having had children).

 

old hand and baby hand

Application of Facts to Iowa Code Section 633.273

On first glance Guthrie’s will appeared to be clear. Again, his will stated that if children predeceased him, “the share of such predeceased child shall go in equal shares to his or her issue who survive me.” However, the Iowa anti-lapse statute defines “devisee” as a person who dies after execution of the decedent’s will unless the will clearly specifies otherwise. Here the pre-deceased child that left surviving issue died long before the decedent executed his will. So, the anti-lapse statute didn’t apply, and the great-grandchildren were not beneficiaries of their great-grandfather’s estate.

Guthrie of course knew that two of his children had already died. The language of the Guthrie’s will, the Iowa Court of Appeals reasoned, could only possibly refer to the possibility of any or all of the three remaining children dying before he did – and the decedent’s will did not clearly state that issue of an already pre-deceased child should be included. (Review the case: Estate of Guthrie v. Busch, No. 8-093/07-1427 (Iowa Ct. App. May 14, 2008).

Back to the Basics: Let’s Review

With that example in mind, let’s review again the basics of the doctrine of lapse. Under the common law, if a beneficiary dies before the testator, the bequest lapses, i.e., goes back to the estate.

Iowa changed this rule by adopting an anti-lapse statute. Under current Iowa law, if the beneficiary dies before the testator, but leaves children who survive the testator, the beneficiary’s children inherit the property devised, unless the terms of the decedent’s will are clear and explicit to the contrary.

Of course, the problem of lapse/anti-lapse can be avoided through careful drafting by a trained professional, as well as annual reviews to see if your estate plan needs updating.


Have questions about your own estate plan that may be in need of revisions after learning about lapse? Contact me and we can talk about what changes would be wise for you to incorporate into your estate plan.

hammers and tools hanging in garage

Three Parties

I’ve previously written about the three parties necessary for every trust: (1) the settlor (sometimes called the donor or grantor); (2) the trustee; and (3) the beneficiary.

Two Other Elements

Besides three parties, at least two other elements are necessary for a valid trust.

  1. The trust instrument is the document that sets forth the terms of the trust.
  2. The other necessary element is property. After all, the trustee must be holding something for the benefit of the beneficiary.

Property of the Trust

When laypersons use the word “property,” I believe they usually mean real estate. But, lawyers use the term “property” much, much more broadly, to mean literally any transferable interest. Sometimes trust property is also referred to as the res or corpus or assets of the trust. (Bonus words!)

Any property can be held in trust. Seriously, check out this list of 101 assets which would fit in a trust. You could likely think of literally hundreds more types or categories of property to place in your own individual trust.

Pour Over Trust

How about an unfunded trust that will receive property at some point in the future? Can you even do that?

Yes, that can certainly be done. This is usually called a pour over trust. (More bonus words!) The pour over trust deserves its own blog post. Briefly, a pour over trust is usually set up by language in a will. A will may validly devise property to a trust, established during the testator’s lifetime, and then funded at her death.

Example

Let’s take a very simple example. Kate has a lawyer write her will, including language that at her death all her Monster Truck memorabilia be placed in a trust for the benefit of her nieces and nephews. Only at Kate’s death will the property be transferred into the trust, not before.

monster truck as a type of property

Take Aways

The important points are that property is necessary, at some point, to make a trust valid, and that literally any transferable interest in property – anything! – can be held in a trust.

Let’s Talk Trusts

It can be difficult to determine on your own if a trust may be right for your personal situation. It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.