CAPACITY TO AMEND TRUST: Capacity to amend revocable trust is same as testamentary capacity. The settlor’s children challenged the validity of amendments the settlor made to his revocable inter vivos trust. The trial court invalidated the amendments finding that the settlor lacked contractual capacity. The intermediate appellate court reversed, holding that because the amendments were simple and related to distribution of trust property after the settlor’s death they were “indistinguishable from a will or codicil,” that the settlor did have testamentary capacity, and that accordingly the amendments were valid. Andersen v. Hunt, 126 Cal. Rptr. 3d 736 (Ct. App. 2011).
ESTATE TAX EXTENSION: Regulation restricting IRS from granting second extension to file estate tax return without good cause deemed valid. The court in Dickow v. United States, 654 F. 3d. 144 (1st Cir. 2011), held that Treas. Reg. § 20.6081-1 made it clear that only one without-cause extension is allowed.
GIFTS: Provision in contract providing for payment to promisees’ heirs or assigns is not inter vivos gift. A husband and his wife contracted to sell their stock in a corporation to the corporation in exchange for monthly payments over 15 years. In the event of the “disability or death” of either, the payments were to be made to the couple’s “respective heirs, distributees and/or assigns.” The husband died with a will disinheriting three of his four sons and creating a trust for the wife for life, with the remainder to their fourth son. After the wife’s death, the remainder beneficiary began an action for breach of contract alleging that the corporation had failed to make the required payments. The other three sons were joined as necessary parties, and the trial court granted their motion for summary judgment on the grounds that the terms of the contract showed that the husband and wife intended to make an inter vivos gift of the payments to their four sons. The intermediate appellate court reversed, holding that by the terms of the contract the husband and wife retained control over distribution of the payments and therefore did not make the irrevocable present transfer of ownership necessary to make a gift. Ross v. Ross Metals Corp., 928 N.Y.S.2d 327 (App. Div. 2011).
GOVERNMENT BENEFITS: Three-year statute of limitation applies to claims for reimbursement of medical benefits. In a case of first impression, the California intermediate appellate court held that the three-year statute of limitations applicable to a liability created by statute applies to the state’s claim for reimbursement for medical benefits against a trust established by the deceased recipient of those benefits, rejecting the remainder beneficiaries’ argument that the one-year period applicable to claims arising from “a promise or agreement with a decedent to distribution from an estate . . . or trust” should apply. Maxwell-Jolly v. Martin, 129 Cal. Rptr. 3d 278 (Ct. App. 2011).
INTENTIONAL INTERFERENCE WITH INHERITANCE RIGHTS: Statute of limitations period begins when testator dies. Oregon recognized the tort of intentional interference with an inheritance in Allen v. Hall, 974 P.2d 199 (Or. 1999). In Butcher v. McClain, 260 P.3d 611 (Or. Ct. App. 2011), the Oregon intermediate appellate court answered a question not addressed in Allen, holding that a claim based on interference resulting in the execution of a will disinheriting the plaintiffs accrues for purposes of the statute of limitations when the testator dies rather than when the will is executed.
INTEREST: Taxpayer’s estate is liable for interest on late estate tax payment despite erroneous advice of IRS employee that interest would not accrue during probate. Estate of Telesmanich v. Commissioner, T.C. Memo. 2011-181.
PARTIAL INTESTACY: Will without a residuary clause does not dispose of after-acquired property. The testatrix drafted her will using a pre-printed form. The will made specific devises but did not contain a residuary clause. After executing her will, the testatrix inherited real and personal property from her sister and then died without changing her will. In a comprehensive opinion, the intermediate Florida appellate court held that even though state law provides that the testator’s intention controls the legal effect of the dispositions in the testator’s will and that subject to that rule a will is construed to pass all property owned at death, the after acquired property passes by intestacy because the testator’s intention was limited to making specific bequests. Basile v. Aldrich, 70 So. 3d 682 (Fla. Dist. Ct. App. 2011). (This opinion replaces the court’s opinion reported in the Sept./Oct. 2011 column, which reached the opposite result.)
PER STIRPES: Gift to class “per stirpes” means equal shares. The testator gave his tangible personal property and his residuary estate to his “eight (8) children, per stirpes.” In the case of the tangibles, distribution was to be made “as and in the manner my Executor, in his or her sole discretion, determines to be reasonable” and in the case of the residue distribution was to be made “at the discretion of my executor.” The executrix, one of the decedent’s daughters, distributed all of testator’s interest in an annuity to herself. Another daughter sought construction of the will. The Georgia Supreme Court affirmed the lower court, holding that under established precedent, a gift to a class “per stirpes” means that the class members are the heads of the stirpes who take per capita. The discretion given the executor extends only to dividing nonfungible items equally. Stewart v. Ray, 715 S.E. 2d 79 (Ga. 2011).
PRETERMITTED CHILDREN: Pretermitted child statute does not apply to nonmarital children acknowledged after execution of will. The testator acknowledged his nonmarital children a year before his death and some 10 years after the execution of his last will. After his death, these nonmarital children intervened in the probate proceeding claiming that they should be treated as children born after execution of the will for purposes of New York’s pretermitted child statute. The surrogate issued an order finding that the nonmarital children were not entitled to the benefit of the statute and the intermediate appellate court agreed, holding that the legislative history of the statute indicates that the legislature did not intend it to apply to nonmarital children born after execution of their parent’s last will and that to hold otherwise would unduly complicate estate administration. In re Gilmore, 925 N.Y.S.2d 567 (App. Div. 2011).
TRUSTEE’S DUTIES: Failure of trustees to make timely distribution is breach of duty. After payment of federal estate taxes, a trust included in life income beneficiary’s gross estate held approximately $6.5 million dollars in assets, one-half of which were liquid. The remainder beneficiaries demanded a distribution of $2 million, and the trustees offered $1 million because they estimated the estate could be liable for a further $2 million in federal estate taxes. Litigation followed. Ten months after the original demand, the trial court ordered a distribution of $1.5 million. The court then found that the trustees had breached their duty to administer the trust according to its terms by failing to make timely distribution and ordered the trustees to pay damages to the beneficiaries based on the profits they would have earned during the period from their first request to the winding up of the trust three years later on investments they testified they would have made. The intermediate appellate court, over a dissent, affirmed the finding of a breach of duty, holding that, “when there is no question that a substantial portion of a trust corpus is ripe for distribution,” a failure to distribute is a breach of trust, but it reversed the finding on damages, holding that the beneficiaries were entitled only to interest on the cash portion of the court ordered distribution for the period from their demand to actual payment (minus interest or income accrued during that period) because an award of lost profits is appropriate only when a trustee has failed to make trust property productive. In re Eiteljorg, 951 N.E.2d 565 (Ind. Ct. App. 2011).
RULINGS AND REGULATIONS
DRAFTING ERROR: IRS approves judicial modification of trust to eliminate provisions causing estate tax inclusion based on scrivener’s error. PLR 201132017.
QUALIFIED PERSONAL RESIDENCE TRUST: IRS approves modification of QPRT when remainder beneficiaries have the power to direct the trustee to amend and restate the terms of the QPRT to provide a term interest to the settlor as a gift by the settlor’s children. PLR 201131006.
Community Property. In Community Property for Non-Community Property States, 24 Quinnipiac Prob. L.J. 260 (2011), Katherine D. Black explores the implications and possibilities of allowing married individuals domiciled in noncommunity property states to define their property rights to create a “community of property” for the purpose of obtaining a step-up in basis of both halves of the property on the death of the first spouse to die.
Connecticut—Probate. In her Note, The Connecticut Probate Court System Reform: A Step in the Right Direction, 24 Quinnipiac Prob. L.J. 290 (2011), Margaret E. St. John explores how the reform will affect Connecticut lawyers, judges, and citizens who use the probate courts.
Digital Estate Planning Services. In his Note, Beyond the Digital Asset Dilemma: Will Online Services Revolutionize Estate Planning?, 24 Quinnipiac Prob. L.J. 376 (2011), Michael D. Roy focuses on one of the most promising and potentially problematic uses of DEP services, that is, transferring online account login credentials to another on death, and argues the digital asset dilemma is best solved through comprehensive legislation.
Illinois—Civil Unions. In Planning
for a Civil Life, 99 Ill. B.J. 421 (2011),Katarinna McBride explains that,“[w]hile Illinois’ civil union law has made some kinds of estate planning easier (think advance directives), the differences with federal law and that of other jurisdictions poses challenges to those who advise same-sex couples.”
Illinois—Estate Planning. Steven E. Siebers explores how to advise clients in light of the possibility that the federal estate tax exclusion will return to $1 million in 2013 and the implications of decoupling the Illinois estate tax from the federal exclusion in Illinois Estate Planning in Uncertain Times, 99 Ill. B.J. 448 (2011).
Intellectual Property. In her Note, Copyrights and Creditors: What Will Be Left of the King of Pop’s Legacy?, 29 Cardozo Arts & Ent. L.J. 85 (2011), Jessica Bozarth explores creditors’ rights to intellectual property of a debtor such as the late Michael Jackson, along with the various estate planning techniques a person in Jackson’s position could implement to protect vulnerable intellectual property.
Marriage Restrictions. An argument that the modern approach of disallowing conditions or restrictions on marital freedom in legacies is a product of a bygone era and that the reasons employed for invalidating such conditions are no longer sufficient justifications is made by Ronald J. Scalise Jr. in his article, Public Policy and Antisocial Testators, 32 Cardozo L. Rev. 1315 (2011).
New York—Survey. Martin W. O’Toole provides a survey of 2009–2010 New York law in his article, Trusts and Estates, 61 Syracuse L. Rev. 961 (2011).
Sale of Testamentary Donations by Museums. In Who Are the Beneficiaries of Fisk University’s Stieglitz Collection?, 91 B.U. L. Rev. 873 (2011), Alan L. Feld analyzes a recent controversy concerning Fisk University’s proposed sale of artworks.
Social History of Wills. Stephen Duane Davis II and Alfred L. Brophy seek to join social history of the probate process with its legal history and thus illuminate the ways that the legal technology of the will was responding to testators’ desires to keep property within their families and carry out their wishes in their article, “The Most Solemn Act of My Life”: Family, Property, Will, and Trust in the Antebellum South, 62 Ala. L. Rev. 757 (2011).
Testamentary Freedom. The foundational claim of Adam J. Hirsch’s article, Freedom of Testation/Freedom of Contract, 95 Minn. L. Rev. 2180 (2011), is that associating the law of gratuities with the law of contracts, gathered within a reconfigured category of transfers, would pay conceptual dividends and, at the end of the day, promote public policy.
Texas—ERISA. In her Comment, When Happily Ever After Is Not Ever After, After All: Rectifying the Plan Documents Rule Under ERISA to Benefit the Right Person, 52 S. Tex. L. Rev. 127 (2010), Teia Moore explores both the option of imposing a constructive trust and the option of bringing a breach of contract claim under Texas law to recover distributed benefit proceeds.
Uniform Trust Code. Lauren Z. Curry observes in Agents in Secrecy: The Use of Information Surrogates in Trust Administration, 64 Vand. L. Rev. 925 (2011), that advocacy of information disclosure alone has not sufficed to persuade states to adopt the UTC’s position. She then explores and advocates for a solution that would require disclosure in all irrevocable trusts but would allow a settlor to avoid that disclosure to the beneficiaries themselves.
Virtual Adoption. A discussion of the equitable doctrine of virtual adoption and the need for, and implications of, expanding the doctrine outside of probate situations is made by Jaime P. Weisser in his Comment, Virtual Adoption: The Inequities of the Equitable Doctrine, 35 Nova L. Rev. 549 (2011).
California enacts Life Insurance Proceeds Disclosure Act. The act establishes disclosure standards for the payment of life insurance benefits to a beneficiary by means of a retained asset account if a life insurance company offers that option as an alternative to the receipt of insurance proceeds by a single payment. 2011 Cal. Legis. Serv. 130.
Illinois passes the Illinois Residential Real Property Transfer on Death Instrument Act. 2011 Ill. Legis. Serv. P.A. 97-555.
New York expands scope of its trust decanting statute. 2011 Sess. Law News of N.Y. 451.
Oregon criminalizes providing a person with substances or objects to commit suicide but includes exceptions such as for physician-assisted suicide. 2011 Or. Laws 552.
Rhode Island enacts Beneficiaries’ Bill of Rights Act. The act requires disclosure, transparency, and accountability relating to any method for the payment of life insurance death benefits and requires that beneficiaries be fully informed in bold type and in layman’s language of their options. 2011 R.I. Pub. Laws 370 and 2011 R.I. Pub. Laws 339.