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THE ACTEC FOUNDATION
by Luther J. Avery and Thomas P. Sweeney1
SETTING UP THE FOUNDATION—Luther Avery
The Articles of Incorporation of the American College of Probate Counsel Foundation were delivered to the California Secretary of State on June 30, 1982, and the corporation came to life on July 2, 1982. It was to be a public foundation and a “nonmember” organization.
The original directors of the Foundation were the Executive Committee of the College. The original Statement of Domestic Non-Profit Corporation showed the following first officers: Rudolph O. Schwartz, President; J. Thomas Eubank, Vice-President; and Joe C. Foster, Jr., Secretary.
The IRS issued an exempt status ruling November 16, 1982, and also determined that the ACPC Foundation was not a private foundation. On November 22, 1982, the California Franchise Tax Board determined that the ACPC Foundation was tax-exempt under California law from July 2, 1982, the date the articles were filed.
The ACPC Foundation was truly in business and was then obligated to file Form 990 with the federal government and Form 199 with the state of California, as well as CT1 (a one-time filing within six months of receipt of its first charitable gift) and CT2, to be filed annually with the California Attorney General. The ACPC Foundation and its successor, the ACTEC Foundation, have filed such forms through 1995 without incident, i.e., no audits of the Foundation have occurred.
On November 7, 1982, democracy reared it ugly head and the Directors amended the bylaws to change the composition of the Board of Directors to “six members: the immediate Past President, the current President, and the President-Elect of the college, along with three members, chosen in the same manner and by the same persons who selected the directors of the College.” The original three nominees from the ranks were Harold Fallon, Harrison F. Durand and myself. The ACPC officers serving on the Board at that time were Tom Eubank, Rudy Schwartz and George Nofer. The officers of the Foundation continued to be the officers of ACPC.
Thereafter, the Board commenced a debate over what type of solicitation letters to write to the members of ACPC to seek funds to do something. The occasion of discussing fundraising letters raised the chicken and the egg quandary: Do we develop a project for which we ask for funding, or do we ask for funding with which to develop the project to be funded? Bravely, the directors authorized and sent out a request for funds even though they had no plans on how to spend the money (other than in keeping with the charitable purposes of the Foundation).
The year 1984 was spent raising funds. The Foundation Board, at its August 3, 1984 meeting, adopted the investment policy that the funds of the Foundation should only be invested in U.S. Treasury obligations with maturities of less than three years.
By February 5, 1985, the Foundation had raised $73,683 and had pledges of $8,700, for a total of $83,383. Sentiment began to build for spending the money. Projects were proposed and everyone had a pet project. The fundraisers were beginning to clamor for some evidence of progress with the money they had raised. The Foundation created a Grant Proposal Committee to develop a plan for how to obtain proposals. The first chair of the Committee on Grants was Ed Halbach. The following projects were suggested:
- A practical and usable disclaimer statute
- An enhanced Uniform Transfers to Minors Act
- A study of non-probate transfers at death
- Rules for modification, deviation, and termination of trusts
- The “blockbuster will”
- Substituted judgment in conservator-, guardian-, committee-ships
- Assisting the aged, especially the aged poor
- Professional conduct rules
- An accessions tax
- Funding of an American-Assembly Type Venture to study the reasons for and sources of certain highly technical bodies of rules we now work in or near, such as employee benefits, charitable giving, special use valuation, marital deduction, and trust taxation.
By 1985, Gerry Vogt had become Executive Director of the ACPC; she was responsible for the administration of the ACPC office and the Foundation. At its annual meeting on March 18, 1985, the Foundation Board adopted the policy established by the ACPC Board to expand the Foundation Board to twelve members and amended its by-laws to change the composition of the Board of Directors to include the Immediate Past President of ACPC and the five officers of ACPC and six members chosen by the Board of Regents. In addition, the Board of the Foundation adopted a resolution requiring that an amendment of the bylaws of the Foundation must be approved by a vote of two thirds of the members of the ACPC Board of Regents.
At the same meeting the Foundation Board approved its first grant: $2,000 to Professor Jeffrey N. Pennell for work in assistance to the ACPC Committee on Professional Standards. On April 19, 1985, the Foundation turned down a grant request for the first time, a request for $10,000 to study the cost of implementing the Wisconsin Marital Property Reform in 1985. The Board also rejected a proposal for financial assistance to determine the applicability of probate laws to nonprobate transfers in Australia. This decision was later reversed and in September 25, 1985, a grant of $5,500 was made. In June of 1985 the Foundation granted $10,000 for a study of the accessions tax to assist the ACPC Accessions Tax Committee.
By April 30, 1985, the Foundation treasury had increased to cash of $78,166 and pledges of $14,425, or a total of $92,591, and the Board vigorously explored investment options. With true speculative fervor the Board had all the cash invested in U.S. Treasury Notes and cash in bank (a big bank). On July 31, the total assets of the Foundation were $102,441 (including $7,881 earned on the funds on hand). By November 30, 1985, the total assets of the Foundation were $113,038. By December 31, 1985, the total funds were $125,035. By October 15, 1986, the fund total was $140,266.
As part of its fiscal prudence, the Foundation Board had convinced the Board of ACPC to pay all of the Foundation’s administrative expenses. Thus, all the Foundation had was grants and income on the grants, with one small project demanding payment. At the March 18, 1985, meeting, a Finance Committee was created, with the CFO of the Foundation as its chair. The first investment decision of the Committee was to agree that any stock contributed to the Foundation would be sold. At its October 12, 1985, meeting the Foundation adopted a policy of investing $50,000 in long-term growth securities.
Much of 1986 was spent debating the significance of the fact that the ACPC Foundation was an IRC § 501(a)(9) entity. The question of whether the administration of the ACTEC Foundation was consistent with the IRS regulations was analyzed with all the care of medieval scholars who debated how many angels could dance on the head of a pin. The final resolution of the Board was to continue to abide by the law as it had been doing since the inception of the Foundation.
On December 5 and 6, 1987, the Foundation presented “A Colloquy on Estate Planning, Financial Planning, and Beyond: The Next Progression; The Role for Lawyers; the Role for Law Schools.” The brainchild of Thomas Eubank, the colloquy was held in Houston, Texas and was of significant assistance in charting the future of the ACPC Foundation. Many participants felt the colloquy was the first in-depth analysis of serious shortfalls in meeting the needs of the American citizenry for certain aspects of estate planning, financial planning, and counseling of the kind traditionally provided by versatile lawyers.
By November 30, 1987, the Foundation's balance was $185,118 (including pledges of $6,075 and income as of November 30, 1987 of $28,533).
In January 1988 the usual debate commenced about the annual fundraising drive. This time, creativity reigned and the first ACPC bike ride fundraiser was planned. In order to draw attention to the Foundation's fundraising efforts, on March 5, 1989 ten brave members of ACPC (W. Thomas Coffman of Tulsa, the originator of the idea and organizer of the event, Leopold Amighetti and James G. Carphin of Vancouver, Robert J. Durham, Jr. of San Diego, Irwin D. Goldring and Bruce S. Ross of Los Angeles, Stanard T. Klinefelter of Baltimore, Robert J. Rosepink of Scottsdale, Kenneth L. Schubert, Jr., of Seattle, and Fredric A. Sytsma of Grand Rapids) departed from San Diego and rode on to Tucson in time for the Annual Meeting of the College on March 9, 1989. ACPC members were asked to pledge a contribution equal to one billable hour to the Foundation. The expenses of the riders were paid by a $5,000 donation by an anonymous donor, so none of the pledges were used for expenses and every dollar went to the Foundation.
The literature encouraging support pointed out that the Foundation hoped to develop and support changes in law schools and CLE curricula and to educate estate planning lawyers to meet their roles as personal counselors2. Thomas Eubank, as President of the Foundation and developer of the Colloquy, was a leader in the development of changes in the legal profession.
In 1989 ACPC commenced a debate concerning a name change to the American College of Trust and Estate Counsel (ACTEC), and therefore the Foundation also began to consider a name change. By a vote of its membership at the February 1990 Annual Meeting, the name of the American College of Probate Counsel was changed to the American College of Trust and Estate Counsel. After the usual Foundation administrative paper-shuffling, the wheels were put in motion to amend the Articles to change the name. Unfortunately, the California State Banking Department reared its bureaucratic head — no corporation can have the term bank or trust in its name without the approval of the state banking department. On June 6, 1990 we received a “Certificate of Approval of Name,” which entitled us to file amended articles of incorporation to change the name. The Certificate of Amendment was filed June 11, 1990, and the organization officially became the ACTEC Foundation.
The change of name gave rise to immediate need to respond to such lawyerly questions as: Do we need to do anything about the trademark registration? Do we need to file a Fictitious Name Certificate? Do we need to change the insurance? What other changes do we need to worry about? The answers were: yes, no, none. But that did not defeat the ingenuity of the Foundation Board. The Foundation was planning to provide a grant to a professor in New York to write a pamphlet for law school use. Would such activity be improper because the ACTEC Foundation had not received a New York state charitable exemption? Would the ACTEC Foundation be considered as doing business in New York after receiving funds from New York ACTEC members and disbursing them in New York to support a research project relating to New York law? Would the ACTEC Foundation subject itself to the labor law regulations of the state of New York with all the related regulations relating to employees? No. No. No. Just follow the same advice you would give a similarly situated out-of-state client who wanted to avoid doing business in New York and labor regulations and taxation by New York.
On August 31, 1994, the total assets of the Foundation were $519,949, including $11,605 in pledges receivable, and the Foundation had $95,000 in grant commitments. On January 22, 1992, in preparation for the 1992 Annual Meeting, an effort to amend the bylaws commenced. In addition, at the March 4, 1992, meeting, after a lengthy discussion of investment standards, the Board continued its usual conservative investment policies, but agreed to buy a small mutual fund investment for growth. The Foundation also embarked upon a project to develop standardized forms to supply to grant applicants and to process grant applications. Grant administration forms were completed by the end of 1993. At the 1995 Annual Meeting, the Foundation Board approved revised Bylaws that updated the Bylaws and made them more workable and more consistent with the timing of action by the ACTEC Board of Regents.
THE LUSTGARTEN AND SWEENEY YEARS—Thomas P. Sweeney
The years 1989 through 1994 might be described as the Ira Lustgarten years since he was President of the Foundation during that period of time. During Ira Lustgarten's presidency, as a result of grants from the Foundation, three modules were published, i.e., Entitlements by Professor John J. Regan, An Introduction to Modern Financial Theory by Professor Jonathan R. Macey, and How Families Work: A Guide to Understanding Family Businesses by John E. Fitzpatrick and Anne Francis. Also during the Lustgarten era, through a grant from the Foundation, Professor John R. Price produced the first edition of the Commentaries on the Model Rules of Professional Conduct.
At the 1994 Annual Meeting, I was elected President of the Foundation, and I placed additional emphasis was placed on obtaining grant applications for worthy projects. During 1994, Professor Regan produced a revision of the Entitlements module, and Professor David M. English was provided a grant to develop a compilation of American trust statutes, entitled The Converging Law of Wills and Trusts. In addition, another bike-a-thon was proposed for the 1995 Annual Meeting, which was scheduled to take place in Scottsdale, Arizona.
The Directors of the Foundation debated such issues as how the Foundation's funds should be invested, and whether a greater portion thereof should be invested in equities; they ultimately agreed that one-third of the Foundation's funds could be invested in equities.
At the 1994 Summer and Fall meetings of the Foundation, there was debated the worthiness of a grant application for $75,000, $25,000 a year for three years, submitted by Temple Law School, dealing with Integrated Transactional Program which included units with respect to trusts and estates, professional responsibility and interviewing, counseling and negotiating, designed to promote interest in estate planning and estate administration. Ultimately, the Board of the Foundation approved the grant, but not without a great deal of careful debate.
During this same period of time, the Foundation Board approved a $10,000 grant to join with the Real Property, Probate and Trust Law Section of the American Bar Association to produce and distribute a brochure on organ and tissue donations for the purpose of assisting estate planning and other attorneys in discussing this subject with their clients, and to make their clients aware of the opportunity to become donors.
Through the efforts of Tom Coffman, who then was an incoming Director of the Foundation, the second bike ride provided in excess of $40,000 in pledges to the Foundation. In addition, the Professional Standards Committee approved the Second Edition of the Commentaries on the Model Rules of Professional Conduct with the result that the Foundation approved a grant of $12,500 to Professor John R. Price in connection with the preparation of the Second Edition of the ACTEC Commentaries.
During the summer and fall 1995 meetings of the ACTEC Foundation, a great deal of discussion was had with respect to possible additional grants to be made, but no definitive grant applications were positively considered by the Grant Committee.
At the 1996 Annual Meeting of the Foundation, it was noted that the percentage of Fellows who give to the Foundation varies from year to year between eight and ten percent. It was also noted that the interest in the Second Edition of the ACTEC Commentaries exploded, and there were constant requests from Bar Association CLE programs and law schools for copies of the Second Edition of the ACTEC Commentaries on the Model Rules of Professional Conduct. As a result, the Commentaries were reprinted in order to meet the demand since the Board of the Foundation had agreed that it would provide grants for the reprinting of the Commentaries and would only request that the Bar Associations, CLE programs and law schools pay the cost of shipment.
It was during 1996 that the Foundation received a number of contributions in memory of J. Pennington (Joe) Straus, and the Foundation President appointed a committee to ascertain the appropriate use of these contributions. After consulting with Joe Straus' widow, Rosemary, it was concluded that the contributions in memory of Joe Straus would be dedicated to a grant for underwriting the printing and distribution of the ACTEC history. Also, in 1996, the Foundation Board approved a grant to a group headed by Susan Westerman to underwrite out-of-pocket costs involved in a project dealing with preparation of materials for a manual for use by adjunct professors to teach federal and state gift tax courses at law schools. In addition, in 1996, the Board approved a grant in the amount of $15,000 to Professor Sheldon F. Kurtz in connection with a project to develop multi-media set of demonstration teaching materials to be used in teaching trusts and estates courses and related courses in law schools.
At the fall 1996 Foundation meeting, the issues with respect to what the Foundation should put on the public access and the private access of the ACTEC Web Page was debated at length, and ultimately resolved by concluding that whatever was available for public consumption of the materials funded by the grants from the Foundation should be on the public portion of the ACTEC Web Page.
At the 1997 Annual Meeting of the Foundation, it was agreed that the Foundation funds should be invested so that 50 percent was in equities, and the remaining 50 percent was in fixed income obligations. At that time, the market value of all of the assets of the Foundation exceeded $615,000. In addition, at the 1997 Annual Meeting, the Foundation Board approved a $10,000 grant to the National College of Probate Judges to assist its project to establish and facilitate interstate cooperation in guardianship cases including transfer of the guardianship proceeding from one state to another.
The Foundation Board, at the 1997 Annual Meeting, also approved an additional $25,000 grant to the Temple University School of Law to assist it in disseminating to other law schools the Integrated Transaction Program developed by Temple for use in teaching in the trusts, estates, and tax areas.
Also at the 1997 Annual Meeting, the Foundation Board approved a grant of $5,000 to Professor Richard V. Wellman for the development of an informal pamphlet for bank and credit union depositors regarding multiple-name account options.
Finally, at the 1997 Annual Meeting, the Foundation Board approved a grant for $10,000 to Professor Jonathan R. Macey for the preparation of a Second Edition of An Introduction to Modern Financial Theory.
The Foundation Directors also authorized during 1997 an additional reprinting of the Second Edition of the ACTEC Commentaries because of the increased demand for the Commentaries.
The annual, summer and fall meetings of the Foundation for calendar year 1998 all produced significant discussions of possible grants, including a proposal to support the Inside the Law PBS program at the suggestion of the Real Property, Probate and Trust Law Section. In addition, a proposed grant application was submitted by Tax Analysts and Ed Benjamin suggested that a professor be found to submit a grant application to study the comparison of alternative transfer tax proposals to the current transfer tax. The Tax Analysts grant application to support the completion of its study on the tax legislative process was declined with the recommendation that Tax Analysts consider submitting a new grant application on a subject that was more confined to the transfer tax area. The Inside the Law proposal was accepted in concept with the suggestion that the proposal be more refined and resubmitted for approval by the Foundation Board.
At the 1999 Annual Meeting, the Foundation Board approved a $100,000 grant to the Inside the Law program with a tentative title “Smart Shopping for Estate Planning Advice.”
At the 1999 Annual Meeting, the Board also approved a $50,000 grant to Boalt Hall School of Law for the Edward C. Halbach, Jr., Chair in Trust and Estate Law.
The final grant approved at the 1999 Annual Meeting of the Foundation was a grant to underwrite the cost of printing and disseminating the Third Edition of the ACTEC Commentaries on the Model Rules of Professional Conduct, as well as the Professional Standards Committee project on engagement letters, which contain annotations to the Third Edition of the ACTEC Commentaries of the Model Rules of Professional Conduct. It was estimated that the cost of producing 5,000 copies of the Third Edition and the engagement letters would approximate $23,000.
At the 1999 Annual Meeting, it was noted that the assets of the Foundation had grown to $877,573. It was also noted that there had been $4,250 contributed as memorials to Joe Straus, which would be used to fund the printing and dissemination of the ACTEC History in accordance with prior Board action awarding a grant for that purpose.
At the 1999 Annual Meeting of the Foundation, the Sweeney era was concluded, and Norman J. Benford was elected as the new President of the ACTEC Foundation.
1ACTEC President 1992-93; ACTEC Foundation President 1994-99.
2In April of 1990, the College initiated the law school liaison program. Its principal objective was to pair a designated Fellow of the College with each ABA-accredited law school for one-on-one contact with the administration, faculty and student body of that law school. The program was discontinued in October 1993. See Waller Horsley’s memoirs for a more detailed discussion of the law school liaison project.
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