In Massachusetts as of 2012, executors for your will are now called personal representatives. Even the best drafted will can lead to problems for your estate when you choose the wrong personal representative. Conversely, if you choose the right personal representative, your estate plan may benefit your loved ones and beneficiaries for generations.

The history behind the Nobel Prize is a remarkable story about an executor / personal representative. The creation of the Nobel Prize depended on the executors of Alfred Nobel’s estate.[1] In the will of the Swedish scientist Alfred Nobel, he created international prizes in 1895.[2] After Mr. Nobel invented dynamite in the 1800s, he made a huge fortune selling his invention to mining and military operations.[3]

From 1901 to present, the Nobel prize has been awarded over 570 times to over 900 different people or organizations.[4] In 1888, a French newspaper mistakenly reported that Mr. Nobel died and called him the “Merchant of Death.”[5] After Mr. Nobel read the article, it is believed that he made a final will giving over 90% of his assets to the creation of the Nobel Prize Foundation.[6] However, Mr. Nobel upset his surviving family with his final will because most of his assets were not bequeathed to them.[7]

In Mr. Nobel’s will, Ragnar Sohlman and Rudolf Lilljequist were named executors.[8] The will read: “As Executors of my testamentary dispositions, I hereby appoint Mr. Ragnar Sohlman, resident at Bofors, Vamland, and Mr. Rudolf Lilljequist, 31 Malmskillnadsgatan, Stockholm, and at Bengtsfors near Uddevalla. To compensate for their pains and attention, I grant to Mr. Ragnar Sohlman, who will presumably have to devote most time to this matter, One Hundred Thousand Crowns, and to Mr. Rudolf Lilljequist, Fifty Thousand Crowns; – Alfred Bernhard Nobel, will dated Paris, 27 November 1895.”[9]

To establish the Nobel Prize, Sohlman spent several years.[10] The will did not detail the rules for selecting award recipients.[11] As a further difficulty, Sohlman had to gather all of Mr. Nobel’s assets spread across several European countries.[12] One anecdote describes how Mr. Sohlman and Mr. Lilljequist decided to move most of Mr. Nobel’s assets to Sweden, but they feared that the French government would prevented that vast amount of money (roughly $150 million) from leaving its country.[13] As a result, the executors traveled around Paris with a horse and carriage collecting shares, bonds and legal documents of the Nobel estate. Then, the assets were shipped to Sweden on rail as registered luggage.[14]

Here, Nobel’s will is an interesting example of the application of the “dead hand.”[15] In this context, Nobel’s dead hand was an overwhelmingly huge hairy one. The creation of the Nobel Foundation is unique because the foundation acts like an investment company and is tax exempt from all taxes in Sweden and in the United States.[16] Also, the monetary award is roughly $100 thousand for the recipient.[17] Further, separate committees complete the actual selection process for the award.[18] As stated earlier, the structure and guidelines for the Nobel Prize are the creation of Mr. Sohlman and were not actually in Mr. Nobel’s will.[19] Fortunately, Mr. Sohlman was an exemplary executor who understand Nobel’s intent in his will for the creation of the Nobel prizes.[20]

Thus, one’s dead hand is only as good as his executors.[21] And in Massachusetts, the importance of the right personal representative is just as important.

[1]See The Conundrum of Alfred Nobel, National Geographic 8-11 (July/August 2017) (summarizing historic context and facts surrounding the Nobel Prize creation).

[2]Id.

[3] Evan Andrews, Did a Premature Obituary Inspire the Nobel Prize, History (Dec. 9, 2016), http://www.history.com/news/did-a-premature-obituary-inspire-the-nobel-prize [https://perma.cc/Z3QA-B434].

[4]Nobel Prize Facts, Nobelprize (Mar. 4, 2018), https://www.nobelprize.org/nobel_prizes/facts.

[5]See supra note 3.

[6]See supra note 1.

[7]Id.

[8]Id.

[9]Full Text of Alfred Nobel’s Will (Feb. 15, 2018), https://www.nobelprize.org/alfred_nobel/will/will-full.html [https://perma.cc/S73F-JF5P].

[10]See supra note 1.

[11]Id.

[12]Id.

[13]Id.

[14]Id.

[15]See, e.g., Garrett Ham, The Problem of the Dead Hand, GarrettHam (Sept. 20, 2013), https://www.garrettham.com/dead-hand/ (discussing the limitations of the deceased to control the living).

[16]See supra note 1.

[17]Id.

[18]Id.

[19]Id.

[20]See Ragnar Sohlman – Executor of the Will, Nobelprize (Mar. 5, 2018), https://www.nobelprize.org/alfred_nobel/will/sohlman.html (summarizes how Sohlman executed Nobel’s will).

[21]See Ham, supra note 15.

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The Probate Court Is Closed, But We Can Still Prepare & File Petitions

Whether you’re dealing with opening an estate, filing for guardianship or any other family law related proceeding, we can help. The probate court is now only holding proceedings on an emergency basis – and by electronic means for the most part – but our office can still prepare and file proceedings. The Court (as of now) will still accept these filings on a limited basis throughout the State’s quarantining efforts. While these efforts may expand, the State still understands work must continue.

In Person Meetings Are Risky – So We’re Leaning on Teleconferencing and Video Conferencing

While our attorneys will always prefer face-to-face meetings in safer times, video conferencing and screen sharing apps are plentiful and easy to use in 2020. Most of our clients, (if they haven’t already used these apps), learn within minutes how to use these tools, with little more than 2 or 3 clicks of the mouse to update their preferred internet browser. Using these apps enables the participants to share a document or screen with many parties, and talk simultaneously right through their computers. Our office is happy to help clients understand these new tools.

Employees are Working from Home

We’d already begun using secure cloud document management services years ago. This enabled us to work virtually anywhere with an internet connection, including of course our homes. Phone calls can now be forwarded to our cell phones or home phones, meaning clients can call the office no matter where we happen to be at that time.

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In exchange for such benefits, non-profits and charities naturally must abide by certain guidelines under United States and Massachusetts law. Unfortunately, however, there is little enforcement in the non-profit sector, oversight and compliance is left to the Attorney General offices in each state, offices that already enforce a broad range of other state laws and regulations. This lack of oversight predictably results in a wide range of inappropriate and illegal behavior among non-profits. This article explains some common red flags in non-profit governance.

The Inverted Board of Directors

The structure of many organizations naturally tends towards a reliance on the executive of the entity. We see this trend in our own U.S. government as an example, where powers have increasingly collected in the office of the President. But it happens throughout organizations in the public and private sectors; city councils find convenience in deferring to the acts of mayors, select boards defer to instructions from town managers, and boards of directors often defer to presidents or chief executive officers.

While such deference is not itself a violation, any organization that leaves all of its decision-making authority to one individual is obviously at a higher risk of abuse. It should traditionally be the board, council, or legislature that is charged with setting the direction of the organization, while an executive or manager simply determines how to carry out those directions. Whenever a problem arises in a Massachusetts non-profit, it will very often be accompanied by an imbalance of these powers.

Conflicts of Interest Not Identified

A non-profit, like any company, will often favor convenience when seeking to purchase a product or service. Its members, employees and at times beneficiaries will likely be considered in this process. As a relatively benign example, a CEO might employ a relative who owns a cleaning business to service the non-profit’s offices. In a more sensitive scenario, a board member might charge the non-profit for his or her “consulting” services if she considers herself a professional of some kind.

Whether benign or not, however, any non-profit should have clearly written conflict procedures whenever such circumstances arise. The procedures for engaging in this transaction not only should be written out, they should be practiced in each and every transaction where an officer, employee or board member stands to benefit from that transaction. The policies are quite easy to follow, and merely require a vote of the disinterested directors on the board, i.e. those who do not stand to benefit from the transaction. Because these processes are so simple, there really isn’t any reason for a Massachusetts non-profit to forego them, and failing to have or honor conflict policies most certainly creates a serious risk at minimum, if not outright suspicion of wrongdoing.

Absence of Fiduciary Behavior

Fiduciary relationships are very common, and can be found in trustees, or executors (personal representative) in Massachusetts estates, and even broker dealers of stocks. In a non-profit, all of the management and board of directors owe a fiduciary duty to the corporation itself, as well as to the beneficiaries of that corporation according to its mission. A fiduciary duty is simply a legal obligation for one party to act in the best interest of another, over and above that party’s own interest. In the earlier “board member consultant” example, her status as a fiduciary means she should not have charged for her services if those services could have been obtained for free, or e.g. if the non-profit didn’t need the services at all for its mission.

An individual who enjoys this type of authority, and yet breaches her fiduciary duty, is often easy to identify in these circumstances. The reason for this is that people rarely behave out-of-character, and if they act outside of a fiduciary capacity in one instance, it is a good bet they do so quite often. In non-profits, when we discover a board member breaches her fiduciary duty in one instance, we usually discover a pattern of behavior consistent with that breach.

Transactions Inconsistent with Contract Law

This may sound obvious, but a hard rule on transactions within the company is that if it’s illegal outside of the company, it’s illegal inside the company. In other words, no transaction in Massachusetts is legal if it fails to adhere to Massachusetts contract law. Sometimes officers may want to waive certain legal requirements in favor of being expedient or ensuring smooth operations. Again using the board member consultant as an example, this board member might attempt to bill for her consulting services a decade ago, when the statute of limitations on contracts in Massachusetts is only 6 years.

Attempting to collect on a debt this old would be illegal between any two parties in Massachusetts, so that it too should not be practiced within the organization. Board members should be cognizant of this requirement, and should raise this issue of illegality if they see it anywhere within their non-profit.

Inaccurate Tax Filings

We are all aware that non-profits, especially charitable ones, require very rigid and detailed tax filings on a quarterly basis. In such filings, every service provided to that organization should be detailed and expensed in the year such service was provided. It most certainly would not make sense if a non-profit or any officer could simply siphon off its earnings with expenses that were not reported in any given year. Using our errant board member in yet another example, her attempt to charge the non-profit for services not expensed in the tax filings from a decade ago would essentially amount to tax fraud.

Board members, employees, officers or even members of the public who are suspicious of inaccurate tax filings from a non-profit can actually research what is going on from a great resource, http://foundationcenter.org/find-funding/990-finder. While some might hesitate to report this behavior for fear of hurting the mission of the non-profit, fixing the problem (or problem board member) early is a much safer strategy than allowing the problem to continue indefinitely.

Conclusion

The above examples are just a handful of potential problems that indicate a Massachusetts non-profit might be non-compliant. If you or someone you know suspects malfeasance at a non-profit or charity that is of concern, reach out to our offices today for a consultation with a business attorney.

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William M. Yates, J.D., M.B.A.

Lieutenant Colonel, USMCR, (Retired)

Lt Col Yates obtained his JD from the New England School of Law and began the practice of law in 1999.  After five years with a Hyannis Law firm, Attorney Yates opened his own practice April of 2004.  Attorney Yates’ practice focuses on Estate Planning, Estate Administration, Elder Law, Medicaid Planning, and Business Law. Since 2013, Attorney Yates continues to act as of counsel on occasion.

Private Yates enlisted in the Marine Corps Reserve on August 11, 1970 at the Amphibious Tractor Battalion Unit in Tampa, Florida.  After three years in the Reserves Corporal Yates applied for the Platoon Leaders Class and attended Officer Candidate School.  After graduation from the University of South Florida in 1974, 2^nd Lieutenant Yates received orders to The Basic School followed by orders to Naval Flight Training in Pensacola, Florida.  Receiving his Wings (designation as a Naval Aviator) on April 1, 1976, 1^st Lieutenant Yates received orders to the Naval Air Station, New River, NC with HML-167.  After completing advanced training in the UH-1N (Huey) 1^st Lt Yates was transferred to HML-268 where he was sent for Logistics and Embarkation Training and then attached to HMH-362 for a six month Med Cruise.

Upon return to CONUS, 1^st Lt Yates was assigned to MAG-29 as the Assistant Training Officer and Nuclear, Biological, & Chemical Warfare Officer.  Shortly after his promotion, Captain Yates received orders to Pensacola, FL to be a Flight Instructor.  After a year with VT-2 in the training department, Capt. Yates was selected to be one of seven instructors to design and implement a new standardization and training  unit to train replacement pilots for all three VT squadrons.  In order to complete his Master’s Degree at the University of West Florida, Captain Yates left active duty and returned to the Reserves.

After three years with several different units, Captain Yates joined the Full-Time Reserve Program and received orders to the Naval Air Station, South Weymouth, MA with HML-771 as the Logistics Officer.  During his 5 years at South Weymouth, Major Yates held billets as the Operations Officer and Executive Officer of MAG-49 Det. A.  Being selected for promotion, Lieutenant Colonel Yates was transferred to Marine Corps Reserve Support Command (MCRSC), Overland Park, KS.  While attached to MCRSC, Lieutenant Colonel Yates held billets as the Head of IMA & MTU Branch and Officer-in-Charge Prior Service Recruiting for the New England Region.  Lieutenant Colonel Yates retired from Active Duty with the United States Marine Corps January 1, 1997.

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Tim is also a vocal advocate for businesses and has appeared before many Cape Cod and southeastern Massachusetts town and city historical, zoning, planning and select boards for a wide range of permit and approval hearings. He has been invited to speak on legal matters for a variety of organizations including for estate planning for the local Military Officers Association of America chapter, as well a business law primer for Entrepreneurship for All, a local organization that mentors, educates and accelerates business plans for budding business owners.

Tim McNamara graduated from Barnstable High School and Massachusetts College of Liberal Arts in North Adams where he earned a B.S. in Business Administration. He later studied at the University of New Hampshire School of Law and completed a Summer Term at Tsinghua University School of Law in Beijing. He enjoys boating and sailing in the summer, snowboarding in the winter and otherwise hiking or relaxing at home with his wife and dog Mara. He can be contacted via email at tim@cape-law.com or by phone at 508-888-8100.

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