DIVORCE: Revocation on divorce statute preempted by ERISA. The Pennsylvania Supreme Court held that the ERISA preemption provision (29 U.S.C. § 1144(a)) preempts Pennsylvania’s revocation on divorce statute as it applies to the designation of the employee’s spouse whom the employee later divorces as a beneficiary of a life insurance policy covered by ERISA. The court held that the “prior restraint” provision of the Pennsylvania statute shields any obligor from liability for making payments to a former spouse “that would have been proper” absent the revocation on divorce statute. In re Estate of Sauers, 32 A.3d 1241 (Pa. 2011).
EXECUTOR: Being joint tenant and having personality conflicts with beneficiary does not render person unsuitable to serve as executor. The testatrix named her son and daughter as co-executors of her will. The son agreed not to serve and then convinced the trial court to deem the daughter unsuitable. The appellate court in In re Estate of Gober, 350 S.W.3d 597 (Tex. App. 2011), began its analysis by examining the state law that disqualifies a person whom the court deems unsuitable. The statute does not provide guidance for how a court determines unsuitability and thus it is left to the court’s discretion. That discretion is not unbridled, however, and can be reviewed for abuse. The court then examined the evidence and determined that the trial court acted in an arbitrary and unreasonable manner in finding that the daughter was unsuitable. For example, the trial court relied on evidence that the daughter was living in the testatrix’s house and did not want to pay rent. The appellate court explained that title vested in the daughter as a co-beneficiary of the estate. As a co-tenant with her brother, she had the right to live in the house rent-free as long as she did not preclude her brother from using the house, and there was no evidence that she denied him access. The appellate court also rejected the trial court’s finding of unsuitability based on personality conflicts between the siblings. Mere family discord is insufficient to disqualify a person from serving as an executor. In fact, the will provided that if one child refused to serve, the remaining child could serve alone and thus any conflict regarding the administration of the estate was, in effect, removed.
NONPROBATE ASSETS: Under statute providing that will provision trumps beneficiary designation, devisee named in will becomes owner of real property testator had previously transferred to trust. In Manary v. Anderson, 265 P.3d 163 (Wash. Ct. App. 2011), the decedent’s will made a specific devise of his interest in a home that he had already transferred to himself as the trustee of the revocable trust he and his predeceased spouse created. The successor trustee and the devisee under the will litigated the question of title to the house, and the trial court quieted title in the successor trustee. The devisee appealed and the intermediate appellate court reversed, holding that under Washington State’s Testamentary Disposition of Non-probate Assets Act, which provides that the “owner’s interest” in any nonprobate asset specifically referred to in the owner’s will belongs to the will beneficiary, the interest in the house passed under the will. The statute defines “owner” as someone who has beneficial ownership of the asset during life, and a nonprobate asset includes property in a trust that becomes irrevocable on the death of the settlor.
PARENTAGE: Posthumous DNA testing is sufficient to establish paternity. In re Estate of Dicksion, No. 107295, 2011 WL 5555571 (Okla. Nov. 15, 2011), the Oklahoma Supreme Court held that paternity of a nonmarital child may be proved by DNA testing carried out after the alleged father’s death, overruling two earlier cases that held that a paternity proceeding had to be completed before the alleged father’s death. The court also held the statute dealing with the parentage of nonmarital children applies to both intestate and testate proceedings.
POWER OF ATTORNEY: Co-agent has claim for declaratory relief relating to behavior of other co-agent. A mother appointed her son and her daughter as co-agents under a Florida durable power of attorney. Suspecting that her brother was mishandling their mother’s affairs, the daughter who was domiciled in New York brought a declaratory judgment action in a Florida court asking for a declaration of her rights as a co-agent and an order for an accounting from her brother. The trial court dismissed the complaint and the intermediate appellate court reversed. Co-agents under a power of attorney are subject to the same fiduciary principles that apply to co-trustees. Accordingly, the daughter had both the right and a duty to seek an accounting from her brother. Rosenkrantz v. Feit, No. 3D11-709, 2011 WL 6183525 (Fla. Dist. Ct. App. Dec. 14, 2011).
PRECATORY LANGUAGE: Gift made with “understanding” for its use does not create conditional gift. The testator’s holographic will gave her residuary estate to her sister “with the understanding that she will take care of my mother.” In a dispute between the sister and the testator’s brother, an intestate heir, the trial court and the intermediate appellate court held that the language created a conditional gift. The Mississippi Supreme Court reversed in an opinion thoroughly analyzing the Mississippi precedents and holding that the language was precatory and thus the will gave the sister fee simple ownership of the residuary estate. Estate of Brill v. Phillips, 76 So. 3d 695 (Miss. 2011).
PRETERMITTED CHILDREN: Pretermitted child statute does not apply to nonmarital children acknowledged after execution of will. The testator learned of and acknowledged his nonmarital children a year before his death, which was 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 before execution of their parent’s last will, even though the parent learns of their existence after execution. To hold otherwise would unduly complicate estate administration. In re Gilmore, 925 N.Y.S.2d 567 (App. Div. 2011). [This summary updates the write-up of this case included in the January/February 2012 column.]
WILL CONTESTS: Discovery rule does not apply to will contest actions based on lack of testamentary capacity. More than two years after the probate of the testator’s will, a beneficiary of an earlier will attempted to contest the will based on the testator’s alleged lack of testamentary capacity. The appellate court held that a directed verdict in favor of the executor was proper because the two-year statute of limitations had expired. The contestant made two arguments, both of which the court rejected. First, the contestant claimed that the statute of limitations could not start to run until she learned of the existence of the probated will. Instead, the court held that she had constructive notice because the probate proceedings are on the public record. Accordingly, the statute of limitations began to run on the date the court admitted the will to probate. Second, the contestant claimed the will proponent was judicially estopped from probating the will because the proponent had admitted that the testator was incapacitated during guardianship proceedings, which had occurred before the date the testator executed the will. The court rejected this argument because the standards for incapacity and the standards for testamentary capacity are different and thus the will proponent did not assert inconsistent positions. The court also noted that a contest for lack of testamentary capacity does not fall within the Texas exception to the two-year statute of limitations for “forgery or other fraud,” which provides that the two-year time period runs from discovery of the forgery or fraud. Lack of capacity is neither forgery nor fraud. Evans v. Allen, 358 S.W.3d 358 (Tex. App. 2011).
RULINGS AND REGULATIONS
ESTATE TAX: Settlor’s retained power to substitute life insurance policy will not trigger inclusion in gross estate. The IRS ruled that the power of the settlor to acquire an insurance policy by substituting assets of equivalent value when the trustee has a fiduciary obligation to assure equivalence of value is not an incident of ownership under IRC § 2042. Rev. Rul. 2011-28.
Arkansas—Intentional Interference with Inheritance Rights. In her comment, Rachel A. Orr argues that although the decedent may not be concerned with seeking vengeance from the grave, it is the responsibility of the courts to ensure that justice remains for future generations. Intentional Interference with an Expected Inheritance: The Only Valid Expectancy for Arkansas Heirs Is to Expect Nothing, 64 Ark. L. Rev. 747 (2011).
ERISA Preemption. Katherine A. McAllister concludes that without congressional action to amend ERISA, the equitable outcome of the slayer rule and other state-level subsidiary laws of wills may be similarly imperiled. A Distinction Without a Difference? ERISA Preemption and the Untenable Differential Treatment of Revocation-on-Divorce and Slayer Statutes, 52 B.C. L. Rev. 1481 (2011).
Florida—Executor Nomination. In her analysis of Schleider v. Estate of Schleider, 770 So. 2d 1252 (Fla. 2000), Lauren A. Kirkpatrick argues that the opinion weakens property succession laws’ long-standing deference to testamentary freedom. Treading on Sacred Ground: Denying the Appointment of a Testator’s Nominated Personal Representative, 63 Fla. L. Rev. 1041 (2011).
Illinois—Medicaid. “Effective January 1, 2012, Illinois finally bought its Medicaid rules for long-term care into compliance with federal requirements.” As Diana Law and William Siebers explain in New Long-Term Care Medicaid Rules Finally Come to Illinois, 100 Ill. B.J. 30 (2012), “[t]he new rules make it harder for Illinois long-term care recipients to protect their assets while preserving Medicaid eligibility.”
Life Insurance. Maria Fleisher highlights the need for targeted legislation that eradicates harmful STOLI transactions but still allows for legitimate insurance sales in her comment, Stranger Originated Life Insurance: Finding a Modern Cure for an Age-Old Problem, 41 Cumb. L. Rev. 569 (2010/2011).
Louisiana—Limited Liability Company. As a result of his analysis, Jonathan J. Rose presents the limited liability company as a more effective estate planning alternative post-Cannon. Time for a New Plan: The LLC Is a Better Option for Estate Planning After Cannon v. Bertrand, 71 La. L. Rev. 1029 (2011).
Malpractice. Victoria J. Haneman suggests a unique and efficient means by which an attorney’s mistake can be addressed, property can be routed to the intended beneficiary, and a court may effectuate testator intent: the use of a constructive trust. Changing the Estate Planning Malpractice Landscape: Applying the Constructive Trust to Cure Testamentary Mistake, 80 UMKC L. Rev. 91 (2011).
Missouri—Adult Adoption. In The Benefits and Pitfalls of Adult Adoption in Estate Planning and Its Likely Future in Missouri, 80 UMKC L. Rev. 255 (2011), Russell E. Utter Jr. concludes that adult adoptions work best and fulfill their intended goals when used for the traditional purposes that general adoption serves, that is, to formalize a family relationship.
New York—Supplemental Needs Trusts. In Supplemental Needs Trusts: The Movement Towards Reformation, 25 J. Civ. Rts. & Econ. Dev. 739 (2011), Matthew M. Shatzkes argues that although the New York courts should continue to enforce the traditional no-reformation of testamentary instruments rule, they also should recognize the supplemental needs trust exception.
Pets. In Should Pets Inherit?, 63 Fla. L. Rev. 801 (2011), Frances H. Foster argues that the family paradigm fails to recognize survivors many Americans regard as their closest companions, friends, and even family—their pets. She concludes that reformers must look beyond the family paradigm’s abstractions and develop more individualized approaches that encompass a decedent’s actual natural objects be they human or nonhuman.
Posthumous Children. Kristine S. Knaplund examines the 2008 provisions of the Uniform Probate Code regarding assisted reproduction and the proposed standards for determining parentage when a child is conceived after one of the intended parents has died in The New Uniform Probate Code’s Surprising Gender Inequities, 18 Duke J. Gender L. & Pol’y 335 (2011).
Power of Appointment Trust. The purpose of Wendy C. Gerzog’s article, The New Super-Charged PAT (Power of Appointment Trust), 48 Hous. L. Rev. 507 (2011), is to attack the QTIP marital deduction, which has by far become the most popular form of the marital deduction and to promote the invigoration of the PAT mode of the marital deduction.
Publicly Held Securities. In Drafting to Effectuate Grantor’s Retention Desires with Respect to Publicly Held Securities, 46 Real Prop. Tr. & Est. L.J. 199 (2011), Trent S. Kiziah and Lori J. Campbell review the various drafting options that grantors use to effectuate their retention desires, examine the success of those drafting options, and offer other drafting alternatives that grantors may wish to consider.
Robo-Trusts. In Computer-Managed Perpetual Trusts, 51 Jurimetrics J. 399 (2011), Michael Vincent introduces the robo-trust, a trust using artificial intelligence to respond flexibly to changing world conditions. He speculates about its likely legal and computational structure.
Spousal Abuse. Carla Spivack reaches into the realm of succession law to propose that evidence of spousal abuse should raise a presumption of duress that would, unless rebutted, bar the abuser from inheriting under the victim’s will and through nonprobate transfers. Let’s Get Serious: Spousal Abuse Should Bar Inheritance, 90 Or. L. Rev. 247 (2011).
Testamentary Language. Karen J. Sneddon makes a rhetorical analysis of the genre of wills in her article, In the Name of God, Amen: Language in Last Wills and Testaments, 29 Quinnipiac L. Rev. 665 (2011). She uncovers five characteristics of the genre of wills—characteristics that flow from the history, rituals, and customs of the drafting, interpretation, and implementation of wills.
Texas—In Terrorem Clauses. In The Carrot and Stick Approach: In Terrorem Clauses in Texas Jurisprudence, 43 Tex. Tech. L. Rev. 1127 (2011), Kara Blanco and Rebecca E. Whitacre trace the history and development of in terrorem clauses, explore the development and effectiveness of such provisions in Texas, and analyze potential improvements to and drafting approaches in light of recent amendments to probate and trust statutes.
Texas—Trust Beneficiaries. In Loan Me My Money: How Texas Can Respond to the Credit Needs of Trust Beneficiaries, 17 Tex. Wesleyan L. Rev. 325 (2011), Lori Campbell explores the sources of trustee authority to lend and how each source affects credit writing, terms, and collateral requirements for the loan.
Trust Law. In The New Direction of American Trust Law, 97 Iowa L. Rev. 215 (2011), Thomas P. Gallanis offers both a descriptive and a normative analysis of where we currently stand and where we are going, arguing that American trust law, after decades of favoring the settlor, is moving in a new direction with a reassertion of the interests and rights of the beneficiaries.
Uniform Disclaimer of Property Interests Act. Adam J. Hirsch catalogs and assesses the ways in which adopting states have elected to modify UDPIA in The Code Breakers: How States Are Modifying the Uniform Disclaimer of Property Interests Act, 46 Real Prop. Tr. & Est. L.J. 325 (2011).
Uniform Prudent Management of Institutional Funds Act. Johnny Rex Buckles discusses several enigmatic legal questions raised by the explicit requirements of UPMIFA and the limitations implicit in its scope in Probing UPMIFA: The Mysteries of the Uniform Act in Light of Federal Tax and State Charity Laws and Concepts, 46 Real Prop. Tr. & Est. L.J. 281 (2011).
Washington—Long-Term Care. In Mandatory Arbitration Agreements in Long-Term Care Contracts: How to Protect the Rights of Seniors in Washington, 35 Seattle U. L. Rev. 213 (2011), Beth Davis explores the problems associated with the use of mandatory arbitration agreements in LTC contracts and proposes that Washington State legislators regulate arbitration procedures in consumer arbitrations in a manner similar to legislation adopted in California.
West Virginia—Posthumous Children. In What Sex-Ed Didn’t Teach You: Addressing the Inadequacies of West Virginia Code Section 42-1-8 and the Future of Posthumously Conceived Children, 114 W. Va. L. Rev. 239 (2011), Andrew S. Felts offers a recommendation regarding the steps West Virginia should take to handle posthumously conceived children’s rights to inheritance and receipt of other benefits.
Women’s Inheritance. Sarah J. Conroy asserts that placing conditions on aid money could help make women’s inheritance rights a reality and proposes that international economic institutions take a leadership role in enforcing these rights, primarily through conditions on aid lending, in her article, Women’s Inheritance and Conditionality in the Fight Against AIDS, 28 Wis. Int’l L.J. 705 (2011).
Illinois allows physicians to release deceased patient’s records to executor, surviving spouse, or certain relatives. The statute also provides a form for the surviving spouse or other relative to certify his or her right of access. 2011 Ill. Legis. Serv. 97-623.
Michigan modernizes its use of probate judges. 2011 Mich. Legis. Serv. 300.
New Jersey allows a marriage and the entry into a civil union by proxy under certain conditions. 2011 N.J. Sess. Law Serv. 179.
New Jersey authorizes the use of Physician Orders for Life-Sustaining Treatment. The “form complements an advance directive by converting a person’s wishes regarding life-sustaining treatment, such as those set forth in an advance directive, into a medical order.” 2011 N.J. Sess. Law Serv. 145.
Ohio adopts the Uniform Power of Attorney Act. 2011 Ohio Laws 65.