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.
ADOPTION: Second adoption precludes inheritance from first adoptive parent. A husband and wife adopted a child but later divorced and the wife's second husband adopted the child. The first husband consented to the adoption and relinquished his parental rights. When the first husband died, the child claimed his estate by inheritance. The court held in Rist v. Taylor, 955 P.2d 436 (Wyo. 1998), that the child could not inherit because the adoptive relationship must exist at the time of the adoptive parent's death.
ANTI-LAPSE STATUTE: Requirement that trust beneficiary survive negates statute. A settlor created an inter vivos trust using a pre-printed form that gave her a choice between giving the remainder beneficiaries their interest "in equal shares, or the survivor of them" or "per stirpes." She struck the phrase "per stirpes" and initialed the form at the strike-out. One beneficiary predeceased the settlor and was survived by children. On the settlor's death, the surviving beneficiary claimed the entire trust corpus to the exclusion of the predeceased beneficiary's children. The court in Erlenbach v. Estate of Thompson, 954 P.2d 350 (Wash. Ct. App. 1998), held that the trust required survival for a beneficiary to take and thus the anti-lapse statute did not apply to save the gift for the predeceased beneficiary's children.
APPORTIONMENT: Will provision directing payment of all taxes and expenses from residue avoids apportionment. A testator's will directed that all taxes and expenses be paid from the residuary estate. The estate was solvent but the residue was insufficient to pay the taxes. In Stickley v. Stickley, 497 S.E.2d 862 (Va. 1998), the court held that by directing identical treatment of taxes and expenses, the testator overrode statutory apportionment, making the taxes a general charge on the remainder of the estate.
GIFTS: Attempted gifts by checks that were uncashed at decedent's death failed. Under a durable power of attorney, a decedent's agent wrote many checks shortly before the decedent's death in an attempt to make annual exclusion gifts. The checks were not cashed before the decedent died. The court in Estate of Newman v. Commissioner, 111 T.C. No. 3 (1998), held that the gifts were incomplete and the funds in the account when the decedent died were part of the gross estate.
GIFTS: Letter of instructions to trustee deemed completed gift. The settlor of a revocable inter vivos trust directed the trustee by letter to make gifts "immediately" to certain individuals. The letter was delivered to a trust officer on Friday, too late for the transactions to be accomplished before the close of business. By the time the trustee reopened for business on Monday, the settlor had died. The court in Naylor v. U.S. Trust Co., 711 So. 2d 1350 (Fla. Dist. Ct. App. 1998), held that the letter constituted a constructive delivery of the funds and thus the gifts were complete.
INTER VIVOS TRUST: Jury trial not available on question of trustee's prudence. Remainder beneficiaries challenged the trustee's management of trust assets. In Messer Trust v. Remainder Beneficiaries, 579 N.W.2d 73 (Mich. 1998), the court held that the statute granting the probate court jurisdiction over trusts did not change the long established rule that the question of a trustee or other fiduciary's prudence is not a question for the jury.
INTER VIVOS TRUSTS: Revocation effective when direction given. The settlor directed the trustee to transfer the trust principal to another financial institution. Before the trustee complied, the settlor died. The trust provided that on the settlor's death the trust property would pass to the settlor's estate. The estate attempted to recover this property. In Estate of Noell v. Norwest Bank Wyoming, N.A., 960 P.2d 494, 960 P.2d 499 (Wyo. 1998), the court held that the trust was revoked as soon as the trustee received the settlor's written notice and the estate had no standing to maintain the suit.
INTER VIVOS TRUSTS: Trust subject to tort claim after settlor's death. A husband and wife created revocable inter vivos trusts. They were killed in an accident that also killed the driver of the other car. The executor of the other driver's estate brought a declaratory judgment action seeking a ruling that the trusts were available to pay any judgment arising from the accident. The court in Estate of Nagel v. Roe, 580 N.W.2d 810 (Iowa 1998), held that the trusts would be subject to any judgment despite the vested interests of the couple's children in the trusts.
INTERPRETATION: Remainder accelerated by life tenant predeceasing testator. The testator's will bequeathed her residuary estate to a trust with her mother as the life beneficiary "if my mother . . . shall survive me." Even though the testator's mother predeceased her, the court in Matter of Bieley, 695 N.E.2d 1119 (N.Y. 1998), found a gift by implication to the remainder beneficiaries.
JOINT TENANCY: Survivor not entitled to contribution to mortgage. Two individuals purchased a home and held title as joint tenants with rights of survivorship. They both contributed to the down payment although one party contributed more, and both signed a promissory note for the remaining purchase price. After one party died, the survivor paid the balance of the note and then sued the decedent's estate for one-half of the amount paid. In Mellor v. O'Connor, 712 A.2d 375 (R.I. 1998), the court held that the survivor was not entitled to contribution because the decedent's estate had no interest in the property.
LIFE ESTATES: Life tenant can also have vested remainder. The testator's will devised a life estate in certain real property to her daughter. At the daughter's death, the remainder passed one-half to another daughter, with the remaining half to be divided between the life tenant and another child. The life tenant died two years after the testator, leaving the life tenant's father as her sole heir. In Coleman v. Coleman, 500 S.E.2d 507 (Va. 1998), the court heldthat the life tenant also owned a vested remainder that passed through her estate to her father.
MALPRACTICE: Action against negligent lawyer permitted despite lack of privity. A beneficiary sued the decedent's lawyer who failed to have a conservatee's will executed before a judge as required by state law. In Hesser v. Central Nat'l Bank & Trust Co., 956 P.2d 864 (Okla. 1998), the court held that the beneficiary could maintain a cause of action against the lawyer as a third party beneficiary and remanded the case to determine whether the beneficiary was harmed by the lawyer's negligence.
MALPRACTICE: Lack of privity bars suit against negligent lawyer. In Noble v. Bruce, 709 A.2d 1264 (Md. 1998), the court followed the traditional privity rule and rejected the argument that unhappy beneficiaries should be able to sue the drafting lawyer as third party beneficiaries of the contract between the lawyer and the testator. Likewise, in Ferguson v. Cramer, 709 A.2d 1279 (Md. 1998), the same court held that lack of privity also barred a suit by beneficiaries against the personal representative's lawyer.
PRETERMITTED SPOUSE: Gift in will prevents spouse's claim under statute. The decedent executed his will before marriage and made a gift to his future spouse, who was referred to as a "friend." Local law provides a statutory share for a spouse if a testator fails "to provide by will" for the spouse. The court in Herbach v. Herbach, 1998 WL 306569 (Mich. Ct. App. 1998), refused to read a requirement into the statute that the testamentary provision be in contemplation of marriage and permitted the surviving spouse to claim only the gift under the will.
TRUSTS: Beneficiary deemed settlor of trust funded in settlement of litigation. The mother of a disabled daughter created a discretionary trust for her daughter in settlement of an action involving the mother's misuse of the daughter's Social Security benefits. The mother funded the trust using inherited funds. In In re Hertsberg Inter Vivos Trust v. Dep't of Mental Health, 578 N.W.2d 289 (Mich. 1998), the court held that the disabled daughter was the settlor of this trust and thus the state could reach the trust to pay for her care.
UNDUE INFLUENCE: Burden to rebut undue influence shifts to proponent if proponent closely connected to will execution. A testatrix executed her will approximately two weeks before her death. One of her sons used a commercial software package to draft the will, which revoked a prior will that divided her estate equally between her two sons. The new will increased the portion of the estate left to the family of the son who drafted the will. The court in Will of Melson v. Melson, 711 A.2d 783 (Del. 1998), held that the presumption of testamentary capacity did not apply and the burden of proof on the claim of undue influence shifted to the proponent because the contestant established by clear and convincing evidence that the testatrix was of weakened intellect, a person in a confidential relationship with her drafted the will and the drafter received a substantial benefit under the will.
RULINGS AND REGULATIONS
DISCLAIMERS: Disclaimer of property equal in value to the decedent's GST tax exemption operated as qualified disclaimer. PLR 9822014.
ELECTING SMALL BUSINESS TRUST: IRS permission not needed to revoke qualified Subchapter S election to convert trust to ESBT. PLRs 9823034, 9823036 and 9823038.
GROSS ESTATE: Alimony trust was included in the decedent's gross estate but the estate could deduct the value of the ex-spouse's interest in this trust. PLR 9826002.
GST TAX: GST tax on direct skip is tax exclusive and thus interest on tax underpayment did not reduce taxable amount of direct skip. PLR 9822001.
GST TAX: Modification of charitable lead trust as to identity of charities did not taint GST tax grandfathered exemption. PLR 9823009.
QTIP: Payment of deceased spouse's retirement plan benefits to trust that then makes distributions to the surviving spouse qualifies for QTIP treatment. PLR 9822031.
Crummey provisions. Edward A. Hauder discusses the use of Crummey powers with life insurance trusts
in Not-So-Crummey Gifts, 86 Ill. B.J. 388 (1998).
ERISA. In Boggs v. Boggs: State Community Property and Succession Rights Wallow in ERISA's Mire, 28 Golden Gate U. L. Rev. 571 (1998), Tony Vecino discusses the extent of ERISA preemption. ERISA issues are also covered by George A. Norwood in Who Is Entitled to Receive a Deceased Participant's ERISA Retirement Plan Benefits_An Ex-Spouse or Current Spouse_The Federal Circuits Have an Irreconcilable Conflict, 33 Gonz. L. Rev. 61 (1998).
Income tax. In Simplifying Models for the Income Taxation of Trusts and Estates, 14 Am. J. Tax Pol'y 127 (1997), Joseph M. Dodge delineates possible solutions to the complexities of trust and estate taxation.
Malpractice. In Ferguson v. Cramer: Denying Estate Beneficiaries Standing to Sue in the Absence of Privity, 12 Quinnipiac Prob. L.J. 343 (1998), Suzzanne K. Guidara outlines how beneficiaries can avert the privity requirement that still exists in many states.
Marital deduction. Mary Moers Wenig explores federal tax consequences on the transfer of property from deceased spouses to surviving spouses in Taxing Marriage, 6 S. Cal. Rev. L. & Women's Stud. 561 (1997).
Retirement plans. In Planning for Distributions From Qualified Retirement Plans, Tr. & Est., July 1998, at 36, Louis A. Mezzullo discusses the benefits of tax-deferred growth as a means of providing for retirement needs. Allen Ross delineates strategies that will enhance the preservation of the client's estate while reducing taxes in Estate Planning Strategies Using Qualified Plans, Tr. & Est., July 1998, at 51.
- Alaska enacts extensive provisions relating to trusts, including trustee powers and duties, and formalizes choice of law rules for wills. 1998 Alaska Sess. Laws ch. 105.
- Connecticut probate courts granted power to apply cy pres. 1998 Conn. Legis. Serv. 98-219 (West).
- Illinois adjusts income tax rates for trusts and estates. 1998 Ill. Legis. Serv. 90-655 (West).
- Missouri amends investment standards for financial transactions by fiduciaries. 1998 Mo. Legis. Serv. 136 (West).
- Oklahoma authorizes summary administration under limited circumstances. 1998 Okla. Sess. Law Serv. ch 359 (West).
- Oklahoma enacts Uniform Statutory Form Power of Attorney Act. 1998 Okla. Sess. Law Serv. ch. 420 (West).
Keeping Current_Probate Editor: Gerry W. Beyer,
Professor, St. Mary's University School of Law,
One Camino Santa Maria, San Antonio, TX 78228-8603.
Contributing editors: Dave L. Cornfeld, Vionette Douglas, William P. LaPiana, Steven Lovett and Bridget Neu.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.