Keeping Current - Probate

Volume 27 No. 3

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

DIRECTED TRUSTEES: Directed trustee may be liable for attorney’s fees. In Shelton v. Tamposi, No. 2010-634, 2013 WL 132721 (N.H. Jan. 11, 2013), the New Hampshire Supreme Court affirmed the order of the trial court removing an “excluded fiduciary” (equivalent to a “directed trustee”) and ordering her to pay individually the attorney’s fees of the opposing parties, agreeing with the trial court that she brought the proceeding questioning the actions of the trust’s investment advisors in bad faith.

EXONERATION: No obligation to exonerate jointly held property. In In re Estate of Afrank, 291 P.3d 576 (Mont. 2012), the Supreme Court of Montana in a matter of first impression held that the statutory non-exoneration provision applied to the decedent’s jointly held property. Accordingly, the surviving spouse could not require the estate to contribute to paying debt on jointly held property passing to the spouse by right of survivorship.

LAPSE: Noncontingent interests in revocable trust do not lapse if beneficiary predeceases settlor. The settlor’s revocable trust made outright gifts at the settlor’s death to relatives and step-relatives. Several of them predeceased the settlor, and after his death, litigation arose. The trial court ruled that the gifts did not vest until the settlor died and therefore the named beneficiaries and their successors in interest had no claim. The Arkansas Supreme Court reversed, holding that the interest of a beneficiary of a revocable trust “vests at the time the trust is created” and does not lapse when that beneficiary predeceases the settlor. Tait v. Community First Trust Co., No. 12-406, 2012 WL 6055972 (Ark. Dec. 6, 2012).

POWER OF APPOINTMENT: Extrinsic evidence admissible to determine whether will exercises power of appointment. A husband and his wife executed a marital property agreement in accordance with Wisconsin law, giving the survivor a testamentary, nongeneral power of appointment over the survivor’s probate property to be exercised by specific reference to the power in the survivor’s will. In default of appointment, the property passed equally to the couple’s three children. The husband survived and left a will making no reference to the power of appointment, which gave the residuary estate in equal shares to two of the three children, the remaining third being divided equally among one child and her two daughters. The intermediate Wisconsin appellate court affirmed the trial court’s finding that the will exercised the power, holding that, because the donor’s intention in requiring a specific reference to exercise a power of appointment is presumed to be to prevent an inadvertent exercise and because the will was ambiguous, the testimony of the drafting attorney that the omission of a reference to the power was a drafting error was admissible. In re Estate of Shepherd, 823 N.W.2d 523 (Wis. Ct. App. 2012).

PRE-DOMESTIC PARTNERSHIP AGREEMENT: Agreement executed before entering into domestic partnership survives parties’ later marriage. Before entering into a registered domestic partnership under California law, a same-sex couple executed a domestic partnership agreement that waived all property claims arising from the partnership including those arising on death. The parties later married during the brief period that same-sex marriages were legal in California. One of the parties then died and the other claimed the rights of a pretermitted spouse. The intermediate appellate court affirmed denial of the claim, holding that the agreement was enforceable as a pre-marital agreement and that the parties’ subsequent marriage did not invalidate the agreement. Estate of Wilson, 150 Cal. Rptr. 3d 699 (Ct. App. 2012).

SLAYERS: Contingent beneficiaries who are children of the slayer are disqualified also from taking under victim’s will. Rhode Island’s slayer statute disqualifies the slayer and anyone taking “through” the slayer. In Swain v. Estate of Tyre ex rel. Reilly, 57 A.3d 283 (R.I. 2012), a divided Rhode Island Supreme Court held that the statute disqualifies the children of a slayer who are the contingent beneficiaries of the victim’s will, who were otherwise entitled to the residuary estate should the slayer, their father, predecease the victim, their stepmother. The court found that, because the children maintained their father’s innocence and stated that they would use estate assets to aid his defense, to allow them to take under the will would confer a benefit on their father and thus violate the statute.

TRUSTEE LIABILITY: Beneficiaries of revocable lifetime trust have cause of action against trustee for actions during settlor’s lifetime. Under California law, so long as the person who has the power to revoke a trust is competent, that person has the rights afforded a beneficiary and the duties of the trustee are owed to that person. In In re Estate of Giraldin, 290 P.3d 199 (Cal. 2012), a divided California Supreme Court held that both California statutes and the common law of trusts do not prevent the beneficiaries of a revocable trust from having standing to sue the trustee after the settlor’s death for violations of the trustee’s duties owed to the settlor while the settlor was alive.

TRUSTS: Other assets of beneficiary taken into account in evaluating trustee’s exercise of extended discretion. The trust instrument directed the trustee to distribute principal and income in trustee’s sole discretion to provide for the beneficiaries’ “maintenance, support, education, health and welfare” and purported to exempt the trustee’s exercise of discretion from judicial review. The beneficiaries petitioned for removal and replacement of the trustee, their mother and daughter of the settlor, on the grounds that the she refused to make distributions to pay for the beneficiaries’ college education and to purchase automobiles. The trial court granted the petition and the appellate court reversed, holding that, although the language purporting to forbid judicial review of the exercise of discretion was nugatory, it did indicate that the settlor intended the trustee to have the greatest latitude permitted by law. The court then held that the beneficiaries had other resources, including 529 plans, adequate to pay their college expenses. In re Trusts for McDonald, 953 N.Y.S.2d 751 (N.Y. App. Div. 2012).

WILLS: Testator’s signature on self-proving affidavit does not cure lack of signature on will. The named executor offered for probate a two-page document purporting to be the decedent’s will. The testator and the witnesses had initialed page one but only the witnesses signed page two; the testator’s signature did not appear on the will. The testator and the witnesses did sign the self-proving affidavit accompanying the will. The trial court denied probate, a divided intermediate appellate court reversed, and the Tennessee Supreme Court reversed and denied probate. The court held that the will was not signed by the testator because the self-proving affidavit is a separate document that is not part of the will and stated that the court had no authority to relax the statutory requirements for properly executing a will. In re Estate of Chastain, No. E2011-01442-SC-R11CV, 2012 WL 5828609 (Tenn. Nov. 16, 2012).

RULINGS AND REGULATIONS

DEFICIENCY: Extension not available for unrelated assets. An estate made a IRC § 6166 election for part of a closely held business. On audit, a deficiency was assessed because of unrelated assets. The IRS indicated that the estate tax deferral would not be expanded to cover the deficiency. CCA 201304006.

INTEREST: Interest runs from date return on unreported gift is due even if that gift could have been protected by unified credit. The taxpayer used the unified credit to shelter later gifts, and thus it could not be applied to the prior unreported gift. CCA 201249015.

LITERATURE

Arkansas—Attorney Client Privilege. In her Comment, Who Is the Client? Who Has the Privilege?: The Attorney Client Privilege in Trust Relationships in Arkansas, 65 Ark. L. Rev. 637 (2012), Molly S. Magee examines three different approaches that courts take concerning the application of the attorney-client privilege in litigation between trustees and beneficiaries and proposes a rule to create predictability and certainty for attorneys and their clients in these situations.

Arkansas—Changing IRA Beneficiary by Will. In her Note, Estate and Probate Law—Testamentary Disposition of Non-Probate Assets: Whether IRAs Are Comparable to Life Insurance Policies and Whether Testators Should Be Able to Change an IRA Beneficiary by Will, 34 U. Ark. Little Rock L. Rev. 153 (2011), Ashley L. Haskins examines the inherent differences between life insurance policies and IRAs and argues that such distinctions require IRAs to be treated differently than life insurance policies by not allowing testamentary changes to IRA beneficiaries.

Caregiver Agreements. In her Note, Eldercare for the Baby-Boom Generation: Are Caregiver Agreements Valid?, 45 Suffolk U. L. Rev. 1271 (2012), Sheena J. Knox explores the benefits and burdens of courts acknowledging and upholding caregiver agreements, ultimately arguing for more recognition of caregiving agreements to encourage greater numbers of caregivers for the burgeoning elder population.

Cuba. Because the estate becomes “blocked” whenever a Cuban national is an heir of a decedent or is the deceased, Enrique Zamora warns that extreme caution must be exercised in Impact of the Cuban Embargo on Inheritances by Cuban Nationals, 24 St. Thomas L. Rev. 525 (2012).

Estate Tax—Portability. Nathan L. Wadlinger discusses how federal law allowed the transfer of a decedent spouse’s estate tax exclusion to his or her surviving spouse in The Portability Pill: Examining the Trial Stages of Federal Estate and Gift Tax Spousal Portability, 47 Real Prop. Tr. & Est. L.J. 367 (2012).

Fiduciary Standards. In The Trustee and the Prudent Investor: The Emerging Acceptance of Alternative Investments as the New Fiduciary Standard, 53 S. Tex. L. Rev. 653 (2012), Philip J. Ruce details the history of a trustee’s accepted investment practice and uses this history as a backdrop for the analysis of modern-day investment decisions by investment managers.

First Amendment. In his article, Testation and Speech, 101 Geo. L.J. 61 (2012), David Horton argues that wills and trusts rules fail First Amendment scrutiny and must make room for testation’s expressive function. He then goes on to assert that even when the First Amendment does not apply, the fact that a bequest is expressive should affect a court’s decision about whether to enforce it.

Illinois—Estate Tax. In Making Gifts Can Reduce Illinois Estate Taxes, 100 Ill. B.J. 646 (2012), Robert J. Kolasa explains: “Recent legislation made the Illinois estate tax permanent and set exclusion amounts at $3.5 million in 2012 and $4 million in future years. While the higher limits exempt many estates, wealthier clients should consider making gifts to substantially reduce Illinois estate taxes.”

Illinois—Land Trusts. In Real Estate and Avoiding Probate: The Case for Land Trusts, 101 Ill. B.J. 86 (2013), David J. Lanciotti argues: “While both the Illinois land trust and the Illinois Transfer on Death Instrument allow residential real estate to change hands outside probate, the land trust has important advantages for some clients.”

Outcomes-Based Education. Carolyn Grosse explores the effectiveness of outcomes-based education in the context of the planning and delivery of an estates and trusts course in Outcomes-Based Education One Course at a Time: My Experiment with Estates and Trusts, 62 J. Legal Educ. 336 (2012).

Partial Invalidity. Alan J. Oxford II believes that courts should reexamine how they view insane delusions and be willing to void a will partially in lieu of completely destroying it, arguing that courts violate testators’ freedom to transmit their property by will when they hold that the insane delusion destroys testamentary capacity and take an “all or nothing” approach to insane delusions. Salvaging Testamentary Intent by Applying Partial Invalidity to Insane Delusions, 12 Appalachian J.L. 83 (2012).

Reformation. In her Note, Pellegrini v. Breitenbach and Courts’ Reluctant Power to Reform Innocent Mistakes in Wills, 26 Quinnipiac Prob. L.J. 46 (2012), Ann E. Breuer proposes an alternative rule that would allow courts to modify a mistake in an unambiguous will when the only party detrimentally affected by the reformation is a tax collecting authority.

South Dakota—Committed Partners and Intestacy. Brittany H. Hatting urges the South Dakota legislature to create a “committed partner” status for the purposes of intestate succession between committed heterosexual partners who meet the criteria set forth in “totality of the relationship” test in Love Isn’t All You Need: An Argument for Statutory Recognition of Committed Heterosexual Relationships Under Intestacy Laws in South Dakota in Response to In re Estate of Duval, 57 S.D. L. Rev. 369 (2012).

Texas—Conflict of Interest. In her Comment, Removal of Independent Executors: Examining the Standard in Texas After the Addition of “Material Conflict of Interest” to Section 149C of the Texas Probate Code, 44 St. Mary’s L.J. 281 (2012), Elizabeth R. Kopecki argues that the legislature can reduce the superfluous litigation this amendment will inevitably create by removing the material conflict of interest provision from this section. Alternatively, the legislature should add another section to the Probate Code that clearly defines the situations that give rise to a material conflict.

Therapeutic Jurisprudence. Although therapeutic jurisprudence reveals that testamentary formality can produce both therapeutic and antitherapeutic effects, Mark Glover argues that will formalities ultimately achieve a net therapeutic outcome. The Therapeutic Function of Testamentary Formality, 61 U. Kan. L. Rev. 139 (2012).

Trust Arbitration. S. I. Strong considers the various issues that arise when two separate bodies of law—trust law and arbitration law—collide, using recent developments in the field of international commercial arbitration to address some of the more intransigent problems facing trust arbitration. Arbitration of Trust Disputes: Two Bodies of Law Collide, 45 Vand. J. Transnat’l L. 1157 (2012).

Trusts—Arbitration Clauses. S. I. Strong discusses model trust clauses prepared by the American Arbitration Association and the International Chamber of Commerce in Empowering Settlors: How Proper Language Can Increase the Enforceability of a Mandatory Arbitration Provision in a Trust, 47 Real Prop. Tr. & Est. L.J. 275 (2012).

Trusts—Life Insurance. Trent S. Kiziah discusses the laws of 13 states in Statutory Exculpation of Trustees Holding Life Insurance Policies, 47 Real Prop. Tr. & Est. L.J. 327 (2012).

Virginia—Legislative Update. J. William Gray and Katherine E. Ramsey explore legislation enacted by the Virginia General Assembly in the 2012 session in Wills, Trusts, and Estates, 47 U. Rich. L. Rev. 343 (2012).

Will Contests. Joyce Moore raises pertinent issues in will and trust contest litigation and provides pragmatic approaches to these issues in Will Contests: From Start to Finish, 44 St. Mary’s L.J. 97 (2012).

LEGISLATION

Michigan updates its exclusion of trusts from the Rule Against Perpetuities. 2012 Mich. Legis. Serv. 484.

New York enacts comprehensive provisions in relation to unclaimed life insurance benefits. 2012 N.Y. Sess. Laws 495.

Ohio adopts Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act. 2012 Ohio Laws 163.

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