Category: Estates & Wills

As a concerned citizen I often wonder whether AI will elevate our society, freeing us from the burdens of life or single-handedly will undermine all advancements we’ve achieved over the last 2000 years.  We are all worried about how it will affect jobs for obvious reasons.  I wrote a brief article entitled AI: What It Means for Future Jobs ~ One Opinion last month and circulated it to hundreds of thousands of people and it was read by more than ten thousand people.  I began by analyzing Stephen Hawkins famous warning in a 2017 letter he wrote, cosigned by four others where he opined “Success in creating AI could be the biggest event in the history of our civilization,” but he went on to say “but it could also be the last – unless we learn how to avoid the risks. Alongside the benefits AI will also bring dangers like powerful autonomous weapons or new ways for the few to oppress the many”.  I concluded that Mutually Assured Destruction suggested that autonomous weapons were the lesser concern.  JFK nailed that in a famous speech where he spoke “we are all mortal and all breath the same air.” thereby encapsulating the MAD theory which makes us think long and hard before we act.  

I had my first exposure to AI’s impact dealing with AI and its potential impact in May of 2024.  The year started slowly and I was very interested in a case involving multiple trusts with one-quarter billion dollars in total assets.  I acquired a previous trust matter involving a one-hundred-twenty-million dollars in assets in the same location four years earlier and had no problem securing funds to pay for my services.  Here I was told that their multi-jurisdictional law firm owned AI equipment which produced a result that they intended to use at a hearing and required actuarial testimony that it was accurate.  I was uncomfortable testifying to a result that I had not worked on and was asked what I was requiring in funds.  I looked into the matter and determined that the law firm was misrepresenting why they needed my testimony.

  The primary beneficiaries decided amongst themselves to terminate the trusts.  A secondary beneficiary learned about it and decided to challenge it.  As the court was not going to like what they did they wanted my testimony that this time-limited trust would end before any secondary beneficiary’s interestwould begin thereby lessening their client’s misconduct as irrelevant to the outcome. This is a frequent problem liquidating a trust instrument with multiple beneficiaries. If the grantor wanted only these two to receive the proceeds, he could have provided a simple trust instrument that would do that.  But with this much money involved greed and arrogance take over. The case four years earlier involved the same issues. The law firm would argue the relevance with my supporting the AI result that it was less than one in one-million chance that because of the 20-year time limit that any secondary beneficiary would receive anything from the multiple trust funds. 

This is central to how AI is going to ruin entire industries.  First, there are no facts that would make the failure to disclose to all beneficiaries irrelevant.  I will explain exactly why.  Second, no AI equipment can determine an exact probability as theirs was alleged to have done.  It is far more complicated, and its acceptance relies on just how complicated securing reliable data is. There is a job listing in LinkedIn currently from an insurance company willing to pay up to $70 per hour for government licensed actuaries to program their AI equipment.  I don’t earn anything close to what I earned in the 80s when my services were in great demand.  But even today I will earn $3,000 for a day’s work, not the few hundred dollars per day this insurance company will pay.  But it is no coincidence that this occurs during times when reporting the truth can be a crime and there are no consumer protection anymore.  

​There are no empirical formulas for determining the probability of survival as apply to gambling.  The probabilities for survival are based on volumes of data measured on a snapshot basis as the data is in constant flux as medical discoveries occur and demographic data is in flux with economic development.  This then requires measuring multiple groups providing different probabilities based on different groups. Actuaries are taught that people lie in surveys for all different reasons and the questions we ask are asked many different ways to expose lies and unearth who is lying, tossing suspect responses. The small holes or anomalies created when small amount of data is tossed are corrected through techniques of curve smoothing or graduation. The latter is a time-testedmethod for identifying the formula reproducing the curve, which before high-speed computers was the method by which the military used for navigational purposes of our weaponry.

​Now we have a reliable database that can be used to extrapolate probabilities of survival.  Regardless, it should not take explaining the accuracy is extremely good only with large groups because on an individual basis people die at all ages.  Thus, any kind of accuracy of results rely on its measurements to known groups.  To improve upon accuracy requires extensive underwriting, which involves lifestyle, where you live, your access to medical care, and the availability of funds to pay for quality care. Therefore, to suggest accuracy to one in one million accuracy is absurd.

​Then, what is the individual health status of the two primary beneficiaries as either or both may be impaired and serve as the reason why either or both want their liquidated value now. If AI were correct with its one in one million result,discovery that just one of the two primary beneficiaries is in poor health would drastically change probabilities from the near impossible one in one million  result to a very unlikely one in one thousand.  But if the trust were terminated given its likelihood of distribution figured into the process, a one in one million chance changes a $250 distribution to a $250,000 distribution, when one in one-thousand is used instead, which no court would consider as insignificant, explaining why a court would not likely entertain terminating it without all beneficiaries on board and all in agreement with the amount they will receive.

​The wills and estate attorneys are at far greater risk of these disastrous results caused by AI because they cater to the super rich clients and don’t tell them what they need to hear. When I entered the actuarial profession actuaries were in far greater use in wills and estates because all of the valuation issues areactuarial.  Today, actuaries are seldom used in this profession,and I can only speculate why.  The section exploded to include middle class people few of whom can afford an actuary.  What I do not pretend to understand is why rich people understand the benefits of an actuary in all areas of law except in wills and estates and I suspect it has to do with the explosion in size where many issues deal with middle class people.  But that change leaves you vulnerable where false promises are more easily believed.  Yet the only time I was ever faced with an expert who charged double what I charged followed the explicit instructionsof how he should do his work written on the attorney’s stationery.  I expected his testimony to be excluded as bought and not independent. 

Steven Hawkins, a world-renowned applied mathematician and physicist, may have fancied science fiction movies and the books behind them as so many mathematicians do.  One of the best science fiction movies of all time was Forbidden Planet, released in 1956 .  There was no book upon which the movie was based but the product of the creative screen writing from Allen Adler & Irving Block, who wrote the film story that was used by Cyril Hume, who wrote the movie script.  

The movie was about: read here for the crucial details. Or you could proceed to read this latter if you need more information about the movie in order to understand some of the conclusions I reached.

The 50s saw a deluge of science fiction movies dealing with monsters created by atomic radiation after atomic bombs were dropped on Hiroshima and Nagasaki.  This was the most horrible thing known to civilization.  The last 75 years taught us that the fear of nuclear holocaust is universal and so far is preventing its use in war again.  The Great Depression caused the worst suffering of the last several centuries and was universally felt across the globe.  Unlike a pandemic which nature cause, man creates economic collapse from his uncontrolled lust for money and power.  Society only remembers it a very short time and we never seem to learn from our mistakes.  The very rich are getting much richer and society refuses to restrain their worst impulses of unrestrained greed and power.  This is why I do not believe our greatest fear should be with autonomous weapons, because like President Kennedy spoke, we are all mortal and we all breathe the same air.  Even the super wealthy understand that.  But society taught the super-rich that they are too rich to fail, which only reinforced what they believed anyway (see City Group Worldwide, Plutonomy Reports, (Oct. 2005) and they operate with that belief.  That is why AI will destroy our society.  

If Trump had been president when Obama was in 2009 the Great Recession would have been worse than 1929. He would have been totally unrestrained.  His Republican Congress knew after the Smoot Hawley Act was enacted in 1930 you don’t depress trade with a massive Tarriff Act during a depression.  It deepens a severe recession into a massive depression. That is what we learned from 1930 and why Bush asked Congress for nearly a trillion dollars to establish a floor underneath to support the failing economy from total collapse instead of leaving the mess for the incoming administration to deal with.  And Trump’s reckless stewardship began just two years after the economy was booming where he totally dismantled the protections enacted to stave off another economic collapse the first two years Obama’s stewardship began.  Apparently, he didn’t get the same message from Richard Nixon, as George Bush did, when Nixon justified his spending to boost the economy after the Vietnam War ended with comments like these days we all are Keynesian Economists.

Estates involving trusts often involve complicated financial instruments and terms that define them. Beneficiaries have rights to their proceeds governed by the terms of the estate trusts and state law. Disputes can result from the administration of these trusts or on issues involving disputes over entitlement and there can be many reasons involved and the court is asked to resolve them. What surprises me is this area of law can and often involve large sums of money, yet trust attorneys understand rights from governing trusts and appears less interested in the value of the rights the litigation expert deals with. That may be because the beneficiaries were not their initial clients when their estates were created and their initial clients were more interested in different goals than just value. The values needed to administer the estate are often defined for administrative and simplicity in the IRS Code. But when used for enforcement of rights in a court of law these rights are valued under a contract right of value. Contract right of value always uses facts, the legal trust that governs their disposition and apply state law to facts to determine their value.

When value is used in the administration of state trusts simplicity and uniformity are essential. The county appraiser uses defined value to assess property tax in the same way the IRS uses defined value to assess an income tax. Real value is determined with market forces, when such market exists. And the market has to identify a willing buyer and a willing seller. That is an IRS term that only applies for court purposes when market forces are at work. But the IRS especially understands that risk plays a huge part in value. But assets can have several different values and each of them is real and is driven by its purpose for seeking them, the codes, statutes and rules that govern them. In the world of finance, a transaction that triggers a debt creates a corresponding asset for the person that holds the promise to pay, the invoice or the note. This is where some confusion arises in this modern world of finance.

A debt can be liquidated in one clean transaction involving money. This gets back to basic concepts like the IRS market value. But it can often involve risk, which takes the same market value and allows the money to purchase much more assets and leverage it to increase wealth. and these can be accomplished with simple instruments, such as loans and annuities. But as financial instruments get more complex the risk becomes less understood by the public and favor the person, the corporation or institution that can take the risk and can easily violate principles of fairness, regulations or laws to prevent fraud. The latter three are just looked at as different forms of risk. The strategy can backfire and create a windfall for the borrower when the greedy institutions underwrite the untrustworthy for the loan. When repayment is involved, the debt is leveraged with a higher rate of return, if in fact realized can halve its liquidation value by using that simple fact. The same asset measured with risk changes in value and sometimes substantially. But that works only when the buyer or seller wants to engage in risk, or when the buyer has identified a larger buyer of risk, which could be a very large insurance company that sells reinsurance or a large corporation that sells derivatives.

Yet in the real world that happens with more than just money. We are taught in grade school that the shortest distance between two points is a straight line.  I could get into complex scientific issues that would challenge that.  We don’t have to.  There are an abundant number of examples to show this is one observation that appears to be a law of nature, but that appearance is all it is: an assumption. Let’s suppose that you are a city manager, and you have to determine how many fire stations your city needs and where to build them. Both are determined by an ellipse with two equidistant focal points.  But it draws a much different area than a normal ellipse does because it changes that shortest distance concept to the sum of vertical and horizontal blocks in city street geometry, where blocks are constant in measured feet.  That is because the shortest distance is no longer a straight line but the sum of horizontal and vertical lines to get there on account the fact that cities have commercial real estate on each city block that prevent fire trucks travelling through buildings. 

Arithmetic itself uses ten as its base.  Everything in arithmetic is based on 10. The only reason for it was when all we could do was count we used our fingers.  Had chickens been the predominant species, we would count on our toes 1, 2, 3, …6, 10 and memorized our multiplication tables only with numbers, 1 through 6, where then what’s natural would be based on a lifetime of different learned experiences

Because the stated purpose of this blog is to help the consumer navigate through the waters of litigation, when the issue is enforcement of rights, enforcement of rights has a contract right of value, and part of that enforcement process involves determining the value of  the rights so the court can sort out how it can best deal with the disagreement.  Each post will deal with different issues giving rise to litigation.  It is an area fraught with problems because the estate attorney designs estates to please the benefactor, but the litigation is between those alive after the death of the benefactor. 

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