KEEPING CURRENT - PROBATEKeeping 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.
CHARITABLE GIFTS: Commodity futures contracts given as charitable gifts do not avoid long-term capital gains for the donor. A husband and wife made charitable gifts of commodity futures contracts but failed to mark the contracts to market before making the transfers and consequently did not pay tax on the long-term gains. In Greene v. United States, 79 F.3d 1348 (2d Cir. 1996), the court held that, under 1256, futures contracts must be "marked-to-market" annually. When the contract is terminated or transferred, charitable donations of futures contracts are not terminations outside the contemplated application of the statute. Thus, the accrued long-term capital gains must be recognized as income as of the date the contracts were transferred to the charity.
DISCLAIMER: Survivorship language prevented disclaimer from accelerating remainders. A husband's will created trusts benefiting his wife; then, on her death, their sons; then the sons' surviving wives; and then the surviving grandchildren. The sons disclaimed their interests and later divorced their wives. After the testator's wife died, the ex-wives and grandchildren claimed that their interests accelerated because of the disclaimers. In Wetherbee v. First State Bank & Trust Co., 466 S.E.2d 835 (Ga. 1996), the court held that the survivorship language prevented acceleration.
MALPRACTICE: Texas retains privity bar. The court in Barcelo v. Elliott, 1996 WL 242580 (Tex. 1996), held that "an attorney retained by a testator or settlor to draft a will or trust owes no professional duty of care to persons named as beneficiaries under the will or trust." The court indicated that this rule permits lawyers to "zealously represent their clients without the threat of suit from third parties compromising that representation."
MARITAL DEDUCTION: Disclaimer reduced marital deduction. A decedent's will contained a pecuniary marital deduction formula clause. The surviving spouse disclaimed a portion of this property. In Estate of Nix v. Commissioner, T.C. Memo. 1996-109, the court held that the marital deduction was reduced by the disclaimed property and could not be recalculated.
NECESSARIES: Common law necessaries doctrine held unconstitutional as violation of equal protection. In Conner v. Southwest Florida Regional Medical Center, Inc., 668 So. 2d 175 (Fla. 1995), the court refused to hold husbands or wives liable for each other's necessaries, saying that the question was one for the legislature.
TAX BASIS: Joint interests created before 1977 entitled to 100% step-up in basis. A husband deeded property to himself and his wife as tenants by the entirety in 1955. When the husband died in 1989, only 50% of the date of death value was included in his estate. The wife later sold the property and reported a taxable gain based on an adjusted basis of the other half of the property. The wife's executrix sought a refund, claiming that the wife should have used the value of the property at the date of the husband's death as the relevant basis for the entire property.
In Patten v. United States, No. 95-0276-R (W.D. Va. Apr. 12, 1996), the court held that the Economic Recovery Tax Act of 1981, which applies to the estates of decedents dying after December 31, 1981 and would have denied the wife a stepped-up basis of 100%, did not replace the Tax Reform Act of 1976, which permits the stepped-up basis for all joint interests created before December 31, 1976. Thus, the wife was entitled to the 100% stepped-up basis and her executrix in turn was entitled to a refund for the overpayment.
TRUSTS: Joint power of revocation prevents revocation after death of one settlor. A husband and wife created a trust reserving to "ourselves" the power to revoke. After the wife's death, the husband attempted to revoke the trust with respect to certain property. In Estate of West v. West, 915 P.2d 504 (Utah 1996), the court held that the language of the trust instrument created a joint power of revocation that could not be exercised by the survivor alone.
UNDUE INFLUENCE: Activity of one spouse imputed to the other in determining confidential relationship. The court in Estate of Gerard v. Gerard, 911 P.2d 266 (Okla. 1995), broke new ground by adopting a rule that imputes the activity of one spouse to the other in the exertion of undue influence. Thus, if one spouse has a confidential relationship with another person, both husband and wife may exert undue influence.
UNDUE INFLUENCE: Same sex relationship does not, as a matter of law, constitute undue influence. Two men lived together for 30 years as "lifemates." After one man died leaving a will in favor of the other, the decedent's sister challenged the will, alleging undue influence. In Evans v. May, 1996 WL 170236 (Tex. Ct. App. Apr. 11, 1996), the court refused to hold that the existence of the relationship constituted undue influence as a matter of law.
VALUATION: Increased value of stock due to lapse of restrictions on testator's death part of gross estate. Federal securities law restrictions on testator's stock caused the stock's value to be depressed during the testator's lifetime. The executor claimed that this value should be used in calculating the gross estate. In Estate of McClatchy v. Commissioner, 106 T.C. No. 9 (1996), the court held that the value of the stock "at the moment of death" was the proper amount to include in the gross estate. At the moment of the decedent's death, the restrictions terminated and thus the value of the stock instantly increased.
RULINGS AND REGULATIONS
CRUT: CRUT terms approved where unitrust payable to trust for beneficiary. Beneficiary was deemed owner of a trust CRT account, under Code 678, because of an unqualified right to withdraw. Priv. Ltr. Ruls. 96-19-042, 96-19-043, 96-19-044.
GST TAX: Grandfathered GST trust may be severed on a non-proportionate basis, without losing tax exempt status, to permit one trust to hold S corporation stock distributing income while the other trust accumulates the income. Priv. Ltr. Rul. 96-20-016.
GST TAX: Substantial modification under 26 C.F.R. 25.2703 clarified. Transfers to family members in later generations were deemed substantial modifications of shareholder buy-sell agreements resulting in loss of grandfathered status; transfers to persons other than family members were not considered to be substantial modifications. Priv. Ltr. Rul. 96-20-017.
401(k) plans. Steven J. Franz, et al., 401(k) Answer Book (3d ed. 1996 Panel Publishers), provides a detailed analysis of 401(k) plans.
Alternative reproductive technologies. Kristin E. Koehler, Artificial Insemination: In the Child's Best Interest?, 5 Alb. L. J. Sci. & Tech. 321 (1996) (discussing inheritance rights of children born after artificial insemination); Fred A. Bernstein, This Child Does Have Two Mothers . . . And a Sperm Donor With Visitation, 22 N.Y.U. Rev. L. & Soc. Change 1 (1996) (analyzing parental rights for lesbian and gay couples with biological children from alternate reproductive techniques).
Anatomical gifts. Melinda Malecki, The Lawyer's Role in Organ and Tissue Donation, 84 Ill. B. J. 261 (1996), advocates that lawyers take a more aggressive role in promoting anatomical gifts.
Assisted suicide. Recent articles on this topic include Matthew P. Previn, Assisted Suicide and Religion: Conflicting Conceptions of the Sanctity of Human Life, 84 Geo. L.J. 589 (1996) (concluding that beliefs regarding assisted suicide should be protected as religious beliefs under the first amendment); James Bopp and Richard E. Coleson, The Constitutional Case Against Permitting Physician-Assisted Suicide for Competent Adults with "Terminal Conditions," 11 Issues in Law & Med. 239 (1995); Stephen K. Bushong and Thomas A. Balmer, Breathing Life into the Right to Die: Oregon's Death with Dignity Act, 11 issues in Law & Med. 269 (1995); James S. Reitman, The Debate on Assisted Suicide - Redefining Morally Appropriate Care for People with Intractable Suffering, 11 issues in Law & Med. 299 (1995); Sylvia A. Law, Physician-Assisted Death: An Essay on Constitutional Rights and Remedies, 55 Md. L. Rev. 292 (1996); Daniel Callahan and Margot White, The Legalization of Physician-Assisted Suicide: Creating a Regulatory Potemkin Village, 30 U. Rich. L. Rev. 1 (1996); Paul J. Zwier, Looking for a Nonlegal Process: Physician-Assisted Suicide and the Care Perspective, 30 U. Rich. L. Rev. 199 (1996).
Contractual wills. Carolyn L. Dessin, The Troubled Relationship of Will Contracts and Spousal Protection: Time for an Amicable Separation, 45 Cath. U.L. Rev. 435 (1996), discusses the use of will contracts.
Durable powers of attorney. Gerry W. Beyer, Estate Plans: The Durable Power of Attorney For Property Management, 59 Tex. B.J. 314 (1996), focuses on Texas law.
Estate and gift taxes. Jonathan M. Forster, Handling Federal Estate and Gift Taxes (5th ed. 1995 Clark Boardman Callaghan), provides a comprehensive two volume reference.
Estate planning. Harold Weinstock, Planning an Estate: A Guidebook of Principles and Techniques (4th ed. 1995 McGraw-Hill), updates a classic one volume reference work.
Estate tax. John A. Miller and Jeffrey A. Maine, Fundamentals of Estate Tax Planning, 32 Idaho L. Rev. 197 (1996), reviews estate tax basics.
Family limited partnerships. Travis L. Bowen and Rick D. Bailey, Limited Partnerships: Use in Tax, Estate and Business Planning, 32 Idaho L. Rev. 305 (1996); D. John Thornton & Gregory A. Byron, Valuation of Family Limited Partnership Interests, 32 Idaho L. Rev. 345 (1996).
Gift tax. Robert G. Popovich, Support Your Family But Leave Out Uncle Sam: A Call for Federal Gift Tax Reform, 55 Md. L. Rev. 343 (1996), urges that transfers made for the support of others should be exempt from gift tax.
Government benefits. Jon C. Dubin, Developments in the Law of Government Benefit Programs, 42 Loy. L. Rev. 33 (1996), discusses recent Fifth Circuit cases.
Limited liability companies. Wayne A. Hagendorf, The Complete Guide to Limited Liability Companies (1995 Knowles Pub.), provides information on this new entity form.
Malpractice. Sheryl L. R. Miller, Attorney Malpractice Liability to Non-Clients in Washington: Is the New Modified Multi-Factor Balancing Test an Improvement?, 71 Wash. L. Rev. 233 (1996), reviews various approaches to expanding attorney liability to non-clients.
New York. John C. Welsh, Estates and Trusts, 46 Syracuse L. Rev. 567 (1995), surveys 1994 and 1996 New York legislation and case law developments concerning estates and trusts.
Non-citizen spouses. Ted Englebrecht and Alan Davis, Estate Planning for Noncitizen Spouses, 22 Int'l Tax J. 18 (1996), explores recent changes in American estate tax rules for noncitizens and suggests planning techniques.
North Dakota. Alexander J. Bott, discusses the North Dakota Probate Code: Prior and Revised Article II, 72 N.D. L. Rev. 1 (1996).
Retirement plans. Gair Bennett Petrie, Estate and Income Tax Planning for Retirement Plans and IRAs, 32 Idaho L. Rev. 253 (1996), focuses on planning for the death of both the working and the nonworking spouse.
Valuation. Roger R. Fross, Estate Tax Valuation Based on Book Value Buy-Sell Agreements, 49 Tax Law. 319 (1996), analyzes case law and current tax legislation.
Viatical settlements. Russell J. Herron, Regulating Viatical Settlements: Is the Invisible Hand Picking the Pockets of the Terminally Ill?, 28 U. Mich. J.L. Ref. 931 (1995), advocates regulation to protect patients.
Idaho authorizes conservatorships of minors to be extended to age 21. 1996 Idaho Laws ch. 423.
Idaho enacts Uniform TOD Security Registration Act. 1996 Idaho Laws ch. 303.
Iowa authorizes fiduciaries to invest in open-end or closed-end management investment companies and investment trusts. 1996 Ia. Legis. Serv. H.F. 2365.
Kansas revises homestead rights of surviving spouse. 1996 Kan. Laws H.B. 2743.
Maine reforms fiduciary prudence standards and standards for appointing and removing guardians. 1996 Me. Legis. Serv. chs. 525 & 623.
Michigan revises probate law. Topics covered include powers of attorney, estate creditors and personal representative claims. 1996 Mich. Legis. Serv. P.A. 130.
Mississippi authorizes guardians and conservators to make certain gifts of a ward's property for tax reduction purposes. 1996 Miss. Laws ch. 462.
Oklahoma permits a will to be self-proved by the written statement of the testator and witnesses without a formal acknowledgment. 1996 Okla. Sess. Law Serv. ch 107.
Virginia eases burden on nonresident fiduciaries. 1996 Va. Acts ch. 680.
West Virginia revises order in which a decedent's debts are paid. 1996 W. Va. Acts S.B. 347.
Wisconsin updates living will statutes. 1995 Wis. Act 168.
Keeping Current Probate Editor: Gerry W. Beyer, St. Mary's University School of Law, One Camino Santa Maria, San Antonio, TX 78228-8603. Contributors include: Dave L. Cornfeld, Jill Gillen, Elizabeth Thomson Hetrick, William P. LaPiana and Mark F. Maurer.Probate & Property Magazine is published six times annually and is included in section members' annual dues.