Keeping Current Probate

Volume 27 No. 2

Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409, gwb@ProfessorBeyer.com. Contributors: Dave L. Cornfeld, Kerri G. Nipp, Claire G. Hargrove, and Prof. William P. LaPiana.

Keeping Current—Probate offers a look at selected recent cases, rulings and regulations, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

CASES

DIVERSIFICATION: Concentration of investments must take into account entire portfolio. The beneficiaries of a testamentary trust objected to the trustee’s accounting, alleging lack of diversification. Shares in a closely held family business constituted 60% of the value of the trust portfolio and, of the remaining 40%, three-quarters of the value was attributable to the stock of four different companies. The surrogate dismissed the objections, holding that the Uniform Prudent Investor Act requires that judgments about the trustee’s performance be based on the entire portfolio, and therefore a decision on whether the positions in the four publicly traded stocks resulted in a lack of diversification could not be made without taking into account the value of the nonpublicly traded stock. In re HSBC Bank USA, 952 N.Y.S.2d 740 (Sur. Ct. 2012).

ELECTIVE SHARE: Statutory list of nonprobate assets subject to elective share cannot be expanded by judicial decision. In Sieh v. Sieh, 713 N.W.2d 194 (Iowa 2006), the Iowa Supreme Court held that the property in a revocable trust created by a deceased spouse was subject to the surviving spouse’s right of election. Subsequently, the legislature amended that section to codify the result in Sieh. In In re Estate of Myers, No. 11-1378, 2012 WL 5373711 (Iowa Nov. 2, 2012), the Iowa Supreme Court reversed the trial court’s holding that under the rationale of Sieh, various POD accounts created by the deceased spouse are subject to the survivor’s elective share rights. The court held that the text and the legislative history of the amendment do not allow extension of the rationale of Sieh to other forms of nonprobate property.

INTESTACY: Agreement donating sperm to widow of depositor was not sufficient to show consent to being father of posthumously conceived child. Under Utah law, a deceased spouse is not the parent of a child conceived through use of the decedent’s sperm unless the decedent “consented in a record” to be the parent of the posthumously conceived child. In Burns v. Astrue, 289 P.3d 551 (Utah 2012), the Utah Supreme court held that the sperm storage agreement executed by the husband, which required that after his death his stored sperm be donated to his wife, does not show his consent to be the parent of a child conceived by the wife using the deposited sperm. The mere act of preserving sperm does not show such consent. In addition, the court held that the agreement at issue was unambiguous and therefore extrinsic evidence of the decedent’s intent was inadmissible.

NO CONTEST CLAUSE: Clause held enforceable although purporting to disqualify beneficiary who cooperates or aids in challenge. A father’s lifetime trust and pourover will disinherited his son and contained a no contest clause purporting to apply to contests whether or not taken in good faith or ultimately successful and to anyone cooperating or aiding in any contest. The son settled his claims against his father’s estate, but only after the trial court ruled that the no contest clause was unenforceable because it impeded son’s discovery efforts. On appeal by the personal representative, the Arizona intermediate appellate court reversed, holding that the applicable statute, which makes no contest clauses unenforceable if probable cause exists for taking a prohibited action, does not conflict with the clause at issue and that the clause’s prohibition on cooperating or aiding does not violate public policy because it should be limited to voluntary cooperation and not apply to testifying in court or answering a subpoena for documents. In re Estate of Stewart, 286 P.3d 1089 (Ariz. Ct. App. 2012).

NO CONTEST CLAUSE: Clause not enforceable after testator’s estate is closed. The testator devised real property to his children for life, remainder to the last surviving child. His will included a no contest clause and a prohibition on any of the life tenants’ commencing a partition proceeding. More than 20 years after testator’s death, two of the children began a partition action, which was dismissed. Two other children then brought a declaratory judgment action to enforce the no contest clause. The trial court dismissed and the Nebraska Supreme Court affirmed, holding that the partition action could not be a will contest because it was filed after the estate was closed. Martin v. Ullsperger, 822 N.W.2d 382 (Neb. 2012).

RULINGS AND REGULATIONS

DEFINED VALUE CLAUSES: IRS issues nonacquiescence in Wandry v. Commissioner, T.C. Memo. 2012-88. In Wandry, the tax court held that the use of a formula gift clause was an appropriate method to avoid an inadvertent gift tax on property that could be re-evaluated by the IRS to exceed the amount that was gifted. I.R.B. 2012-46.

LITERATURE

Assisted Reproduction. Kristine S. Knaplund explores the legal landscape for children conceived through assisted insemination, in vitro fertilization, intracytoplasmic sperm injection, and other techniques. She notes the need for legislation, the virtues of the UPC over the UPA, and the hope that states will address everyone who uses ART, including gay and lesbian couples and single parents. Children of Assisted Reproduction, 45 U. Mich. J.L. Reform 899 (2012).

Economic Analysis. Daniel B. Kelly makes an attempt to apply many of the fundamental ideas and advances within the economic analysis of law to the Uniform Probate Code and the law of succession. Toward Economic Analysis of the Uniform Probate Code, 45 U. Mich. J.L. Reform 855 (2012).

Elder Law—Abusive Beneficiaries. In Killing Me Softly: A Comparative Review of Chinese Inheritance Law to Address the Problem of Elder Abuse and Neglect in the United States, 22 Ind. Int’l & Comp. L. Rev. 71 (2012), Adam G. Province raises the issue of whether testamentary beneficiaries should be allowed to inherit from a decedent if elder abuse or neglect occurs.

Elder Law—“Granny Snatching.” The goal of Brittany Griffin Smith’s Note, Granny Snatching and Personal Jurisdiction—An Argument for a New Federal Interpleader, 100 Ky. L.J. 411 (2011–2012), is to offer a preventive tool for families of incapacitated persons who suspect a family member of ill intentions.

Elder Law—International. An update on international elder law research covering the last five years is found in International Elder Law Research: An Updated Bibliography, 5 J. Int’l Aging L. & Pol’y 76 (2011).

Exculpatory Clauses. Louise Lark Hill takes the position that the revisions to the Uniform Probate Code should have addressed exculpatory clauses rather than leaving the matter to other laws. Fiduciary Duties and Exculpatory Clauses: Clash of the Titans or Cozy Bedfellows?, 45 U. Mich. J.L. Reform 829 (2012).

Gift Tax and Future Interests. William C. Brown considers the implications of the application of the Hackl and Price formulation of the present interest requirement to transfers of business interests, whether such an application is consistent with the policy for the present interest requirement of the gift tax annual exclusion, and whether such an approach should be applied to business interests in the absence of further legislative action in Judicial Expansion of the Future Interest Exception to the Gift Tax Annual Exclusion—Examination of the Legislative History and Policy Basis for the Future Interest Exception, 65 Tax Law. 477 (2012).

Guardianship—Court as True Guardian. In his Comment, The Ultimate Guardian: The Court’s Role in Guardianship Administration, 5 J. Int’l Aging L. & Pol’y 57 (2011), Reilly F. Morrison discusses the idea of the court as the true guardian of the ward and the guardian as the ward’s agent, the shortcomings of this view, and the negative consequences of this approach in mending the guardianship process.

Guardianship—Decision Standard. Lawrence A. Frolik and Linda S. Whitton argue that, although the UPC “dual mandate” for guardian decisions was, in theory, a step forward, the standard has fallen short of intended law reform goals. They propose a revision to provide better guidance to guardians and to harmonize the surrogate decision-making standard of the UGPPA with other existing uniform acts. The UPC Substituted Judgment/Best Interest Standard for Guardian Decisions: A Proposal for Reform, 45 U. Mich. J.L. Reform 739 (2012).

Guardianship—International. In their essay, Guardianship and Autonomy: Foes or Friends?, 5 J. Int’l Aging L. & Pol’y 40 (2011), Volker Lipp and Julian O. Winn praise the United Nations Convention on the Rights of Persons with Disabilities for its paradigm shift in the way it treats people with disabilities as subjects, not just objects, of care.

Heirs. Susan N. Gary examines the UPC’s treatment of family members as intestate takers and looks at provisions from other state intestacy statutes. She then proposes an intestacy statute that provides a relatively simple default rule for inheritance and permits judicial discretion to determine the proper heirs of an intestate’s property. The Probate Definition of Family: A Proposal for Guided Discretion in Intestacy, 45 U. Mich. J.L. Reform 787 (2012).

Illinois—Decanting and Directed Trusts. Mary D. Cascino, Lyman W. Welch, and Susan T. Bart discuss new Illinois statutes in Trusts & Trustees Act Modernized: Decanting and Directed Trusts, 100 Ill. B.J. 596 (2012).

Illinois—Long-Term Care. William Siebers and Zach Hesselbaum discuss Paying for Long-Term Care in Illinois, 100 Ill. B.J. 536 (2012), through five methods: private pay, long-term care insurance, Medicare, Medicaid, and veterans’ benefits.

Illinois—Powers of Attorney. In Defending Your Principals: Suing Agents Under the Revised Illinois Power of Attorney Act, 100 Ill. B.J. 548 (2012), Ray J. Koenig III and MacKenzie A. Hyde explain that “[s]uits against POA agents for breach of fiduciary duty and other claims are growing more common” and provide “an in-depth review of the causes of action available against an agent . . . and how lawyers on either side can serve their clients.”

Illinois—Spendthrift Trusts. In Supreme Court: Decedent Can’t Use Spendthrift Trust to Back Out on Gift, 100 Ill. B.J. 578 (2012), Adam W. Lasker discusses Rush Univ. Med. Center v. Sessions, 980 N.E.2d 45 (Ill. 2012), which “barred a decedent from using a spendthrift trust to effectively revoke his irrevocable gift.”

Indiana—NIMCRUTs. In his Note, Net Income with Make-Up Charitable Remainder Unitrusts and Trustee’s Power to Adjust Under Indiana’s Uniform Principal and Income Act, 45 Ind. L. Rev. 841 (2012), Ted Batson Jr. provides contextual background describing the NIMCRUT and the policy rationale behind the power to adjust, examines the power to adjust as found in the Indiana act, and advocates an amendment to the act to clarify the availability of the power to adjust to Indiana NIMCRUT trustees.

Nonmarital Children. Paula A. Monopoli acknowledges that the UPC has fulfilled its promise that all children regardless of marital status are equal for purposes of inheritance from or through parents with one exception: its adoption of an agency approach to the inclusion of such children in class gifts from nonparent transferors. The author suggests a return to a previous default rule under the UPC would be a more equitable approach. Toward Equality: Nonmarital Children and the Uniform Probate Code, 45 U. Mich. J.L. Reform 995 (2012).

Retained Asset Accounts. Michael A. Barrese offers a description of the pros and cons of retained asset accounts as well as recommendations for changes to policy disclosures that would improve the image of this type of account in his Note, Not in the Fine Print: Recommended Changes to Life Insurance Policy Disclosures Regarding Retained Asset Accounts, 18 Conn. Ins. L.J. 533 (2012).

Retirement Planning for Lawyers. Gary R. Gehlbach explains that “[a]s attorneys age and the practice of law becomes more challenging, retirement beckons for many. Planning for that day, however, should be an early-career project.” Planning for Retirement: A Life Guide for Attorneys, 100 Ill. B.J. 530 (2012), “offers some suggestions—financial, professional, and personal—from a seasoned lawyer.”

Settlements. To address the deficiencies of probate, John H. Martin recommends that the UPC adopt a nonjudicial estate settlement option in Non-Judicial Estate Settlement, 45 U. Mich. J.L. Reform 965 (2012).

South Africa—Discriminatory Testamentary Bequests. In Constitutionalism, Public Policy and Discriminatory Testamentary Bequests—A Good Fit Between Common Law and Civil Law in South Africa’s Mixed Jurisdiction?, 27 Tul. Eur. & Civ. L.F. 97 (2012), Francois du Toit investigates the South African courts’ treatment of discriminatory testamentary bequests in the pre- and post-constitutional eras and asks whether, given the mixed nature of its legal system, the current South African position on such bequests achieves a good fit between the common law and civil law.

Succession and Family Caregiving. The way in which the American law of succession might realistically recognize and promote family caregiving is addressed by Thomas P. Gallanis and Joesphine Gittler in Family Caregiving and the Law of Succession: A Proposal, 45 U. Mich. J.L. Reform 761 (2012).

Teaching. Carolyn Grose discusses her interesting teaching experience in Outcomes-Based Education One Course at a Time: My Experiment with Estates and Trusts, 62 J. Legal Educ. 336 (2012).

Trusts—Charitable. Kelly McNabb argues in his Note, What “Being a Watchdog” Really Means: Removing the Attorney General from the Supervision of Charitable Trusts, 96 Minn. L. Rev. 1795 (2012), that state attorneys general are not the most effective parties to govern charitable trusts and concludes that oversight by an independent quasi-state agency reduces political influence on supervision and ensures that the oversight of charitable trusts will remain a priority to protect the public interest each charitable trust serves.

Trusts—Shapeless. Adam Hofri evaluates the efficacy of shapeless trusts and settlor title retention trusts by examining the history of the Chinese Trust Act’s principal predecessor, the Israeli Trust Act of 1979, which established the world’s first shapeless trust regime. Shapeless Trusts and Settlor Title Retention: An Asian Morality Play, 58 Loy. L. Rev. 135 (2012).

Trusts—Special Needs. Ruthann P. Lacey and Heather D. Nadler explain the types of special needs trusts and how they work with the public benefit eligibility rules of four of the principal federally funded programs that provide benefits to the aged, blind, or disabled. Special Needs Trusts, 46 Fam. L.Q. 247 (2012).

Will Construction. Shelly Kreiczer- Levy argues that although it is widely accepted that testamentary construction rules should track the owner’s presumed intent, there is also room alongside these intent-furthering rules for intent-defeating rules in inheritance law. Deliberative Accountability Rules in Inheritance Law: Promoting Accountable Estate Planning, 45 U. Mich. J.L. Reform 937 (2012).

Will Revocation. In his Note, Conflict of Law Regarding Revocation of Wills: Mutiny on the Situs Default, 39 Fla. St. U. L. Rev. 1105 (2012), John P. Gaset argues that a more functional baseline should be employed in lieu of the rigid application of the common law currently used.

LEGISLATION

California enacts Burial with Honor Act of 2012. This act requires the public administrator to make every reasonable effort to determine if the unclaimed remains of a decedent belong to a veteran or a dependent of a veteran. 2012 Cal. Legis. Serv. 722.

California codifies result when a party over-withdraws from a multiple-party account. If a party makes an excess withdrawal, the other parties “have an ownership interest in the excess withdrawal in proportion to the net contributions of each to the amount on deposit in the account immediately following the excess withdrawal, unless there is clear and convincing evidence of a contrary agreement between the parties.” 2012 Cal. Legis. Serv. 235.

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