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.
- ASSISTED SUICIDE: States may ban assisted suicide. In Vacco v. Quill, 117 S. Ct. 2293 (1997), the Supreme Court unanimously held that states may prohibit assisted suicide. Although refusing to recognize a constitutional "right to die," the Court did not prohibit state legislatures from authorizing assisted suicide.
- CONSTRUCTION: Unequal distribution of residue to give effect to intent allowed. A testator's will provided that the residue of his estate be equally divided among nine beneficiaries and that his payable on death accounts held with those beneficiaries to be unequally divided among them to effectuate an equal distribution of his property. In Estate of Peterson v. Peterson, 561 N.W.2d 618 (N.D. 1997), the court approved an unequal distribution of the residue to give effect to the testator's clearly expressed intent for an equal distribution of his property, taking into account P.O.D. accounts that could not be changed by his will.
- EMBEZZLEMENT: Beneficiary entitled to proceeds of insurance policy purchased with trust property. Trustee embezzled almost the entire trust corpus using a portion to purchase an insurance policy on his own life with his wife and children as beneficiaries. In Lackey v. Lackey, 691 So. 2d 990 (Miss. 1997), the court held that the beneficiary was entitled to have a constructive trust imposed on the insurance proceeds. The beneficiaries of the policy had the burden of proving what portion of the premiums, if any, was paid with the trustee's own funds.
- ESTATE TAX: Pre-1977 spousal joint interests entitled to full basis step-up. In Patten v. United States, 116 F.3d 1029 (4th Cir. 1997), the Fourth Circuit held that a pre-1977 spousal joint interest for which no qualified joint interest election was made is subject to the basic tracing rule of 2040. Therefore, if the deceased spouse provided all consideration for the interest, the entire interest receives a basis step-up to date of death value. The court approved the Third Circuit's identical holding in Gallenstein v. United States, 975 F.2d 286 (1992).
- ESTATE TAX: Sale of remainder for actuarial value removes property from gross estate. Taxpayer sold his ranch to his sons and reserved a life estate for himself. The sales price was slightly greater than the actuarial value of the remainder under the relevant Treasury tables. The court in Wheeler v. United States, 116 F.3d 749 (5th Cir. 1997), held that 2036(a) does not apply to the transaction because the taxpayer received full and adequate consideration for the property transferred as part of a bona fide sale. Note that this technique would not work today if the sale is to a child because of 2702, but would work for a sale to a niece or nephew.
- INVESTMENTS: Excess concentration of estate in one stock leads to surcharge. Decedent owned a large block of stock in Eastman Kodak that accounted for slightly more than 71% of the value of his estate. For 20 years the executor, who later acted as trustee, maintained this large position in one security. In Matter of Lincoln First Bank, N.A., 90 N.Y.2d 41 (1997), the court upheld the trustee's surcharge for the capital lost by retaining this excessive concentration of trust property. However, the court rejected the lower court's imposition of damages for lost profits.
- MALPRACTICE: Lawyer for decedent's estate may owe duty to beneficiaries. Heirs sought damages from the administrator's lawyer for negligently preparing documents related to the sale of estate property. In McCarthy v. Landry, 678 N.E.2d 172 (Mass. Ct. App. 1997), the court upheld the heirs' action against the lawyer. The real estate passed directly to the heirs by operation of law and the administrator was a stranger to the property. Thus, with regard to the sale, the lawyer was not acting for the administrator and thus there was no conflict of interest to preclude a duty to the heirs.
- REVOCABLE TRUSTS: Settlor's power to access trust property does not make trust illusory. Husband and wife created a revocable inter vivos trust naming themselves as trustees. The trust allowed either settlor to "make use" of the trust property without notice to the trustees. The wife died leaving a pour over will. The couple's children maintained that the will was invalid because the trust was illusory, given the settlors' ability to access the trust property at will. In Estate of Groesbeck v. Groesbeck, 935 P.2d 1255 (Utah 1997), the court upheld the trust.
- TAX APPORTIONMENT: Renunciation of will in favor of elective share makes will's tax clause inapplicable. Testator's widow renounced her bequest under the testator's will in favor of her elective share. In Rockler v. Sevareid, 691 A.2d 97 (D.C. 1997), the court held that because the renunciation resulted in the widow taking her intestate share, the will was completely inapplicable to her. Thus, the statutory apportionment rule, exempting her marital deduction from bearing any portion of the tax, applied.
RULINGS AND REGULATIONS
- CHARITABLE DEDUCTION: Charitable lead trust deemed guaranteed annuity and thus qualified for gift tax charitable deduction. PLR 9725012.
- FAMILY LIMITED PARTNERSHIPS: FLPs created close to the time of taxpayers' deaths were deemed testamentary transfers and thus ignored for purpose of valuing their gross estates. TAMs 9723009 and 972002.
- MARITAL DEDUCTION: Formula QTIP election resulted in 0% election and prevented overfunding of marital deduction. PLR 9724016.
- POWER OF APPOINTMENT: Ambiguously drafted power of appointment deemed limited power and thus included in gross estate. PLRs 9725031 and 9725033.
- Advance directives. The merits and shortcomings of the PSDA are reviewed in Edward J. Larson and Thomas A. Eaton in The Limits of Advance Directives: A History and Assessment of the Patient Self-Determination Act, 32 Wake Forest L. Rev. 249 (1997). An important North Carolina case is critiqued by Jon L. Spargur Jr. in First Healthcare Corp. v. Rettinger: Are Living Wills Dead in North Carolina?, 32 Wake Forest L. Rev. 591 (1997).
- Alternative dispute resolution. The use of ADR in probate court proceedings is discussed by John A. Berman and Neil W. Kraner in Alternative Dispute Resolution in Connecticut Probate Courts, 11 Quinnipiac Prob. L.J. 29 (1997), and Susan N. Gary, Mediation and the Elderly: Using Mediation to Resolve Probate Disputes Over Guardianship and Inheritance, 32 Wake Forest L. Rev. 397 (1997).
- Ascertainable standard. Richard W. Harris discusses the tax ramifications of trust distributions in Ascertainable Standard Restrictions on Trust Powers Under the Estate, Gift, and Income Tax, 50 Tax Law. 489 (1997).
- Assisted suicide. Recent articles discussing assisted suicide include Norman L. Cantor, Two Opinions in Search of a Justice: The Constitution and Physician-Assisted Suicide, 28 Rutgers L.J. 435 (1997); Dan Crone, Assisted Suicide and the U.S. Court Appeals for the Ninth Circuit: A Philosophical Examination of the Majority Opinion in Compassion in Dying v. Washington, 31 U.S.F. L. Rev. 399 (1997); Ernest van den Haag, Whose Life Is It: Decriminalizing Assisted Suicide and Euthanasia?, 33 Crim. L. Bull. 262 (1997); Kathleen McGowan, Physician Assisted Suicide a Constitutional Right?, 37 Cath. Law. 225 (1997), Susan R. Martyn and Henry J. Bourguignon, Physician-Assisted Suicide: The Lethal Flaws of the Ninth and Second Circuit Decisions, 85 Cal. L. Rev. 371 (1997); Stephen L. Mikochik, Assisted Suicide and Disabled People, 46 DePaul L. Rev. 987 (1997); David Orentlicher, The Legalization of Physician Assisted Suicide: A Very Modest Revolution, 38 B.C. L. Rev. 443 (1997); David A. Pratt & Bonnie Steinbock, Death with Dignity or Unlawful Killing: The Ethical and Legal Debate Over Physician-Assisted Death, 33 Crim. L. Bull. 226 (1997); Marvin Zalman and John Strate, Last Rights: Assisted Suicide and the Limits of the Judicial Process, 33 Crim. L. Bull. 205 (1997).
- Blockage discount. Alan F. Rothchild Jr. in The Blockage Discount_When More Might Mean Less, 11 Pract. Tax Law. 41 (1997), explains why the market value of a large block of stock does not reflect the actual value for transfer tax purposes.
- Charitable remainder trusts. James S. Gulbrandsen's Proposed Changes in CRT Regs.: The Real Issue is Controlled Deferral, 136 Tr. & Est. 35 (1997), examines recent proposals to modify current regulations on charitable remainder trusts.
- Crummey trusts. Jonathan D. Reiff, Using Crummey Powers in Trusts for Annual Giving, 25 Tax'n for Law., 346 (1997), addresses the consequences of the lapse of Crummey powers commonly found in insurance trusts.
- Disclaimers. An intensive look at disclaimers is found in Charles W. Willey, Use of Disclaimers in Gift Tax, Estate Tax, Generation-Skipping Transfer Tax and Income Tax Post-Mortem Planning, 2 Drake J. Agric. L. 23 (1997).
- Drafting. Nancy G. Henderson, in Drafting Dispositive Provisions in Wills (Part 1), 43 Prac. Law. 33 (1997), provides advice on document preparation.
- Grantor trusts. David P. Schwartz, Grantor and Nongrantor Trusts: Asking the Right Questions, 11 Prac. Tax Law. 31 (1997), focuses on the proper use of these trusts.
- Guardianship. Comprehensive coverage of guardianship matters is found in Scott K. Summers, Guardianship & Conservatorship_A Handbook for Lawyers (ABA 1996).
- Guardianship and New York law. Julie M. Solinski, Guardianship Proceedings in New York: Proposals for Article 81 to Address Both the Lack of Funding and Resource Problems, 17 Pace L. Rev. 445 (1997).
- Inter vivos trusts. Edwin G. Fee Jr., in Living Trusts: Debunking the Myths, 43 Prac. Law. 27 (1997), reminds practitioners why inter vivos trusts may not be necessary for a well constructed estate plan.
- Joint revocable trusts. The potential benefits of this technique are detailed by Robert L. Teicher in Joint Revocable Trusts, 11 Quinnipiac Prob. L.J. 1 (1997).
- Life insurance. Kelvin H. Dickinson, Divorce and Life Insurance: Post Mortem Remedies for Breach of a Duty to Maintain a Policy for a Designated Beneficiary, 61 Mo. L. Rev. 533 (1996), reviews life insurance issues and divorce.
- Long-term care insurance. Jeffrey A. Baskies and Neal A. Slafsky, A Deposit-Based Approach to Long-Term Care Insurance Planning, 136 Tr. & Est. 41 (1997), discuss long-term care insurance in light of the Kennedy-Kassebaum health care bill.
- Medicaid. Articles discussing Medicaid planning include Brenda R. Foyt, Trusts_Payment or Distribution of Proceeds of Trust Property: Categorizing a Trust for the Purpose of Determining Eligibility for Medical Assistance_Hecker v. Stark County Social Service Board, 527 N.W.2d 226 (N.D. 1994), 72 N.D. L. Rev. 1069 (1996), and Hal Fliegelman and Debora C. Fliegelman, Giving Guardians the Power to do Medicaid Planning, 32 Wake Forest L. Rev. 341 (1997).
- Post-death paternity claims. Andra J. Hedrick, in Decedents' Estates_Bilbrey v. Smithers: Limitations on Post-Death Paternity Claims for Purposes of Intestate Succession in Tennessee, 27 U. Mem. L. Rev. 517 (1997), examines new issues for paternity claims.
- Tax payment. Jeffrey N. Pennell and R. Mark Williamson, The Economics of Prepaying Wealth Transfer Tax, 136 Tr. & Est. 49 (1997), discuss the benefits of paying transfer taxes at the first opportune moment.
- Valuation. Jay A. Soled, Transfer Tax Valuation Issues, The Game Theory, and Final Offer Arbitration: A Modest Proposal for Reform, 39 Ariz. L. Rev. 283 (1997), proposes that Congress legislatively adopt final-offer arbitration to determine the value of assets when there is no readily available market value.
- Valuation of life insurance. Barry A. Wolk, in What is the Value of Life Insurance for Income and Gift Tax Purposes?, 136 Tr. & Est. 27 (1997), reviews methods of making tax-advantageous transfers.
- Viatical settlements. The ramifications of insureds selling their life insurance policies are analyzed by Michael Todd Scott in An Illinois Lawyer's Guide to Viatical Settlements, 85 Ill. B.J. 276 (1997).
- Alabama revamps advance directive provisions. 1997 Ala. Acts 187.
- Louisiana authorizes creation of class trusts in favor of person's direct or collateral descendants. 1997 La. Sess. Law Serv. Act 682 (West).
- Louisiana revises law regarding shifting principal interests upon death of class member. 1997 La. Sess. Law Serv. Act 254 (West).
- New Hampshire permits property owner to transfer real property to a trust without loss of owner's homestead rights. 1997 N.H. Laws ch. 97.
- Texas enacts comprehensive Trust Company Act. 1997 Tex. Sess. Law Serv. ch. 769 (West).
- Texas repeals Uniform Transfer on Death Security Registration Act. 1997 Tex., Sess. Law Serv. ch. 1302 (West). SB 506
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, David Eaker, William P. LaPiana and Kendra Lashawn McCartney.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.