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.
- ADOPTION: Prohibition of adopted person inheriting from collateral kin violated state constitution. In MacCallum v. Seymour, 686 A.2d 935 (Vt. 1996), the court invalidated a state statute providing that adopted per-sons could not inherit from the ancestors and collateral kin of the adoptive parents. The court held that this prohibition violated the "common benefits" clause of the state constitution.
- AMBIGUITY AND CONSTRUCTION: Bequest of "savings account and/or savings certificate" included money market accounts, certificates of deposit and IRAs. A testatrix made a specific bequest of "savings account and/or certificate." In Sammons v. Edler, 940 S.W.2d 276 (Tex. Ct. App. 1997), the court held that the bequest included money market accounts, certificates of deposit and IRAs because they are devices to "save" (i.e., safeguard) money. The testatrix's pattern of using these accounts by making few withdrawals indicated that she treated them as vehicles for "saving."
- ELECTIVE SHARE: Illusory transfer test adopted to determine whether inter vivos trust was subject to spousal election. In Pezza v. Pezza, 690 A.2d 345 (R.I. 1997), the court adopted the illusory transfer test to determine whether an inter vivos trust was subject to a surviving spouse's right of election. The court held that a trust to which the deceased spouse had surrendered the right to revoke was not an illusory transfer.
- ESTATE TAX: Gross estate contained beneficial units in Illinois Land Trust. The court in Estate of Bowgren v. Commissioner, 105 F.3d 1156 (7th Cir. 1997), determined that land trust units were included in the taxpayer's gross estate because the decedent retained the power to direct the trust property without being subject to fiduciary obligations in favor of the other beneficiaries.
- FIDUCIARY DUTY: Finder's fee executor received for return of property stolen by decedent was estate property. Decedent died in possession of a Stradivarius violin that had been stolen from its rightful owner almost 50 years earlier. The executor of the decedent's estate negotiated with Lloyd's of London (who had paid the rightful owner for the loss and thus succeeded to his rights in the instrument) for the return of the violin and received a finder's fee on the sale of the instrument. In Hall v. Schoenwetter, 686 A.2d 980 (Conn. 1996), the court held that the finder's fee was as asset of the estate because, irrespective of how the decedent came to possess the violin, it was an estate asset and the executor had a fiduciary duty to negotiate on behalf of the estate.
- SLAYERS: Unequal division of property held jointly by slayer and victim authorized. Under state law, a joint tenancy held by a decedent and the decedent's killer is transformed into a tenancy in common. In Estate of Garland, 928 P.2d 928 (Mont. 1996), the court held that the presumption that tenants in common own equal undivided shares of the property could be rebutted according to the usual rules applicable to tenancies in common. Accordingly, an unequal division of the property between the killer and the victim's estate was possible.
- TAX COURT PROCEDURE: Tax Court postpones entry of decision until resolution of estate tax deferral request. To prevent res judicata, the court in Estate of Wetherington v. Commissioner, 109 T.C. No. 4 (1997), agreed to delay entering a decision in the case until either any extension of time elapses (or an appeal of a denial of a request to extend is final) or the estate pays all tax liability, whichever occurs first.
- TAX REFUNDS: Supreme Court rejects equitable tolling of tax refund statute of limitations. In United States v. Brockamp, 117 S. Ct. 849 (1997), the Court refused to permit a taxpayer to claim a refund after the period provided in Code 6511. The Court did not adopt the doctrine of "equitable tolling" that the lower court used to permit the taxpayer to recover because the delay was caused by the taxpayer's mental disability.
- TRUST ACCOUNTS: Survivor of multiple benefi- ciaries not take entire account. A depositor created trust accounts naming her husband and his brother as beneficiaries. Her husband predeceased her, leaving his brother as the sole beneficiary. In Estate of Wozniak, 653 N.Y.S.2d 827 (N.Y. Sup. Ct. 1996), the court held that, in the absence of survivorship language in the beneficiary designation, one-half of the balances in the accounts belonged to the surviving beneficiary while the other half belonged to the depositor's estate.
- TRUST REVOCATION: Will did not revoke inter vivos trust. An individual executed a revocable inter vivos trust, funded it with most of her property and executed a pour over will. She later executed a new will, revoking all prior wills and codicils and providing for a distribution of her estate substantially different from that provided by the trust. In Estate of Sanders, 929 P.2d 153 (Kan. 1996), the court held that the will did not revoke the trust because it did not expressly refer to the trust.
- TRUST TAXATION: Domicile of decedent may tax income of testamentary trust despite lack of other contacts. The trustee of a testamentary trust created by the will of a domiciliary of the District of Columbia challenged the constitutionality of the District's treatment of the trust as a resident for income tax purposes. The trustee, all the current and contingent beneficiaries and all of the trust assets were located outside the District. In District of Columbia v. Chase Manhattan Bank, 689 A.2d 539 (D.C. Ct. App. 1997), the court held that the continuing relationship between the testamentary trust and the District's courts was sufficient to satisfy the due process requirement of a link between the state and the person or entity it seeks to tax.
RULINGS AND REGULATIONS
- GIFT TAX: Neither gift nor income tax triggered when transfers made to comply with settlement agreement. The IRS indicated that relinquishing the trust's corpus, purchasing property from the trusts and redeeming stock held by the trusts were not taxable events under the circumstances presented. PLR 9709028.
- GRATs: Qualified interest limited to donor's retained right to receive annuity. The IRS refused to treat the spouse's retained right as a qualified interest. TAM 9707001.
- GST TAX: Grandfathered status of trusts not lost merely because trusts were modified concerning the selection of trustees. PLRs 9708009, 9708010 and 9708014.
- POWER OF ATTORNEY: Annual exclusion gifts made by agent not part of gross estate. The taxpayer appointed his daughter as his agent under the New York Statutory Short Form of Power of Attorney Act. Later the taxpayer supplemented this power with a written statement granting the agent authority to make tax motivated gifts to certain individuals. The IRS indicated that these were completed gifts and thus not includable in the taxpayer's gross estate. PLR 9708004.
- QPRTs: Requirements for qualified personal residence trust satisfied when personal residence, guest houses and surrounding real property transferred to trust. The IRS deemed it significant that the total acreage of these parcels was comparable in size to other parcels near the location of the residence. PLR 9705017.
- Assisted suicide. Comprehensive discussions of physician assisted suicide are found in the symposium issues of The Journal of Law, Medicine & Ethics (Fall 1996) and the Duquesne Law Review (Fall 1996). For additional material, see Rachel D. Kleinberg & Toshiro M. Mochizuki, The Final Freedom: Maintaining Autonomy and Valuing Life in Physician-Assisted Suicides Cases, 32 Harv. C.R.-C.L. L. Rev. 197 (1997); Stephen J. Tyde Jr., Compassion in Dying v. Washington: A Res-olution of the "Jurisprudence of Doubt" Enshrouding Physician Assisted Suicide, 47 Mercer L. Rev. 1145 (1996); and Terry Brantley, People v. Kevorkian: Michigan's Supreme Court Leads the Way in Declaring No Fundamental Right to Assist Another in Suicide, 47 Mercer L. Rev. 1191 (1996).
- Charitable gifts. Lee Slavutin, Life Insurance and Charitable Giving_Important Tax Rules, 75 Taxes 29 (1997), reviews the important tax rules pertaining to charitable gifts.
- Closely held businesses. Robert A. McLeod, Estate Taxes and the Closely Held Business: The Beginning of the End?, 22 Wm. Mitchell L. Rev. 1349 (1996), reviews basic tax issues and their solutions.
- Continuing care contracts. A wide range of issues are discussed in John H. Hass, Advising Your Client on a Continuing Care Contract, 13 Prac. Real Est. Law. 69 (1997).
- Election and joint tenancies. Craig O. Weber, Will Construction_Equitable Doctrine of Election and Joint Tenancy Property, 21 S. Ill. U. L.J. 211 (1996), analyzes a recent Illinois case holding that the survivor of jointly held property who is also a will beneficiary is not put to an election unless the testator clearly provides otherwise.
- Gifts within three years of death. Jeffrey G. Sherman, Hairsplitting Under I.R.C. Section 2035(d): The Cause and the Cure, 16 Va. Tax Rev. 111 (1996), recommends greater inclusion in the gross estate of gifts made within three years of death.
- Half-blooded heirs. Nancy I. Kenderdine, Oklahoma's Archaic Half-Blood Inheritance Statute_Still Going: A Plea for Repeal, 49 Okla. L. Rev. 81 (1996), argues that this statute should be repealed because of its frequent misapplication and its unequal treatment of similarly situated heirs.
- Life insurance. Julia K. Brazelton & Rebecca Kaenzig, Accelerated Death Benefits Finally Afforded Exclusion, 75 Taxes 57 (1997), summarize recent Code amendments that prevent these benefits from being taxed as income.
- Life-sustaining decisions. Jennifer L. Rosato, The Ultimate Test of Autonomy: Should Minors Have a Right to Make Decisions Regarding Life-Sustaining Treatment?, 49 Rutgers L. Rev. 1 (1996), concludes that minors should have this right, despite their legal in- ability to make less significant decisions, if they are sufficiently mature and the state lacks an interest that would justify withholding the right. Marina Martino, Deciding for Others: New York Law and the Rights of Incompetent Persons to Withhold or Withdraw Life- Sustaining Medical Treatment, 41 N.Y.L. Sch. L. Rev. 285 (1996), discusses a bill that would allow families of incompetent patients to make medical decisions on their behalf.
- Limited liability companies. Susan Kalinka, Death of a Member of an LLC, 57 La. L. Rev. 451 (1997), discusses the consequences of the death of a member of a Louisiana LLC and offers some suggestions for avoiding common problems.
- Modern reproductive technology. Monica Shah, Modern Reproductive Technologies: Legal Issues Concerning Cryopreservation and Posthumous Conception, 17 J. Legal Med. 547 (1996), discusses a variety of complex legal issues that arise when a person is born after the death of one or both genetic parents.
- Oklahoma estate tax. Mark R. Gillett, The Oklahoma Estate Tax: Modest Proposals for Change, 49 Okla. L. Rev. 213 (1996), suggests two diverse legislative responses that might modernize the Oklahoma estate tax.
- Trust accounts. Kara Peischl Marcus, Totten Trusts: Pragmatic Pre-Death Planning or Post-Mortem Plunder?, 69 Temp. L. Rev. 861 (1996), explores the history and modern treatment of trust accounts, with emphasis on the UPC approach.
- Trusts. Stanley Hagendorf and Wayne A. Hagendorf, in Should a Trust Be Used as a Will Substitute?, 75 Taxes 77 (1997), evaluate the factors to consider when deciding whether using a trust as a will substitute is appropriate.
- Undue influence. Ray D. Madoff, Unmasking Undue Influence, 81 Minn. L. Rev. 571 (1997), argues that the undue influence doctrine denies freedom of testation for people who deviate from judicially imposed testamentary norms, particularly failing to provide for family members.
- Arkansas enacts Trustee Division of Trusts Act. 1997 Ark. Acts 585.
- Connecticut authorizes court, on its own motion, to close conservatorships, guardianships and testamentary trusts for dormancy. The court must give public notice and find that the appointment of a successor fiduciary would serve no useful purpose. 1996 Conn. Legis. Serv. P.A. 96-43 (West).
- Idaho amends collection of personal property by affidavit procedure. 1997 Idaho Sess. Laws ch. 212.
- Idaho permits trustees to terminate trusts valued at less than $25,000. 1997 Idaho Sess. Laws ch. 211.
- Kansas amends law relating to forcible entry of safety deposit boxes to obtain testamentary instruments. 1997 Kan. Sess. Laws S.B. 88.
- New Jersey enacts Prudent Investor Act. 1997 N.J. Sess. Law Serv. ch. 26 (West).
Keeping Current_Probate Editor: Gerry W. Beyer,
Visiting Professor, Southern Methodist University School of Law, P.O. Box 750116, Dallas, TX 75275. Contributing editors: Dave L. Cornfeld, Christopher S. Jackson, William P. LaPiana, Kendra Lashawn McCartney and Tracy M. Tierne.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.