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.
* CONTESTS: Differing burdens for setting aside wills and lifetime transfers. In Estate of Todd v. Todd, 585 N.W.2d 273 (Iowa 1998), the court held that will contestants must prove the required elements by a preponderance of the evidence while persons seeking to set aside inter vivos transfers must prove their causes of action by clear, satisfactory and convincing evidence. If a confidential relationship exists between grantor and grantee, however, the grantee bears the burden of proving the absence of undue influence by clear, satisfactory and convincing evidence.
* DISCLAIMERS: Lien executed before testator's death does not prevent disclaimer. A decedent's will gave certain real property to her daughter. Before the decedent's death, her guardian obtained and recorded a judgment against the daughter. Two years later, the daughter granted a lien on her expectancy to a creditor. The daughter disclaimed her interest in the realty within nine months after her mother's death and five days after the guardian filed for a turnover order. The court in Hale v. Badouh, 975 S.W.2d 419 (Tex. App. 1998), held that the daughter's actions were not an exercise of dominion and control over the realty because she was not yet a recipient. Thus, the disclaimer was effective.
* EQUITABLE ADOPTION: Estoppel theory does not allow recovery in wrongful death action. A decedent's stepson sought damages for loss of guidance and counseling as part of a wrongful death suit, claiming the status of an equitably adopted child. In Otero v. City of Albuquerque, 965 P.2d 354 (N.M. Ct. App. 1998), the court held that equitable adoption is based on estoppel against the putative parent and cannot be based only on evidence of a loving relationship. In addition, estoppel is not applicable in a suit against a stranger.
* ESTATE TAX: Payment of surviving spouse's elective share deemed a taxable distribution of net income. Brigham v. United States, 1998 WL 777481(1st Cir. 1998).
* FORCED SHARE: Right is personal to surviving spouse and cannot be exercised by creditor. The decedent disinherited the surviving spouse, who declined to exercise the right to an elective share. The surviving spouse's creditor sought to recover against the elective share. The court in Aragon v. Estate of Snyder, 715 A.2d 1045 (N.J. Super Ct. Ch. Div. 1998), held that the elective share is personal to the surviving spouse and a creditor cannot force the surviving spouse to make an election.
* FRAUD: Beneficiaries may not take portion of punitive damages they paid to estate. A decedent's will gave one-third of his estate to each of three relatives. Two of the beneficiaries were found guilty of committing fraud on the decedent and of having breached their fiduciary duty to him. They were assessed both compensatory and punitive damages. The trial court ruled that those two beneficiaries could not take any part of the punitive damages belonging to the estate and that their share of the estate would be offset against the estate's attorney's fees from the fraud action. The court in Estate of O'Keefe, 583 N.W.2d 138 (S.D. 1998), held that the general equity power of the trial court supported the ruling on punitive damages but that there was no authority for the offset of attorneys' fees.
* LIFE INSURANCE: Statute revoking beneficiary designation of ex-spouse on divorce is constitutional. Estate
of Dobert , 963 P.2d 327 (Ariz. Ct. App. 1998), rejected the argument that the statute is an unconstitutional impairment of contract. The ex-spouse had no rights in the contract between the insurer and insured and also had no expectation of rights, because the dissolution decree awarded the policy to the insured.
* LIFE INSURANCE: Will ineffective to change beneficiary designation. The decedent attempted to devise all insurance benefits resulting from his death to his father. His ex-wife was the named beneficiary of a life insurance policy. The court in McCarthy v. Aetna Life Insurance Co., 1998 WL 802773 (N.Y. 1998), held that, although substantial compliance with the contractual requirements for changing a beneficiary designation is effective, a general testamentary statement is not sufficient.
* PARENTHOOD: Presumption of legitimacy prevents DNA testing. The decedent's ex-wife had denied the decedent's paternity of the last child born during their marriage. The decedent, however, had never disavowed the child, although a draft will disinherited the child. The decedent died intestate and the administrator sought DNA testing to establish paternity of the youngest child. The court in Contino v. Estate of Contino, 714 So. 2d 1210 (Fla. Dist. Ct. App. 1998), held that testing would not be ordered, given the strong presumption of legitimacy of a child born during marriage and the inapplicability of statutes allowing testing when the child is born outside of marriage.
* POWER OF APPOINTMENT: Contract to exercise testamentary power invalid. A decedent gave his surviving spouse a life estate in an undivided half interest in land and a general testamentary power of appointment over the remainder. The spouse purported to exercise the power by deed to her son, signed a will exercising the power in favor of her son and entered into a contract with him agreeing not to change her will in exchange for his caring for her in her old age. The son began a partition proceeding and a co-tenant questioned his ownership. The court in Carmichael v. Heggie, 1998 WL 682723 (S.C. Ct. App.), held that the spouse could not exercise the testamentary power by deed and conveyed only an estate per autre vie. The court also ruled that the contract purporting to bind her to exercise the power in her son's favor was invalid.
* RULE AGAINST PERPETUITIES: Contract construed before rule applied. A landowner granted a real estate developer an option to purchase lots included in a subdivision which would terminate two years after completion of the subdivision. The court in Coulter & Smith v. Russell, 966 P.2d 852 (Utah 1998), held that although the rule against perpetuities does apply to commercial transactions, the ordinary rules of contract construction must be applied before determining the applicability of the rule. Holding that this option would have to be exercised within a reasonable time, the court remanded for a fact finding on whether the reasonable time would be within the perpetuities period.
* VALUATION: Court approves use of 40% lack of marketability discount on closely held corporate stock. Estate of Brookshire v. Commissioner, T.C. Memo.
RULINGS AND REGULATIONS REGULATI ONS
* ALTERNATE VALUATION DATE: Conditional election to use alternate valuation date stated on Form 706 allowed. TAM 9846002.
* ANNUAL EXCLUSION: Gifts from revocable trust of incapacitated donor made pursuant to court order qualified for annual exclusion. PLR 9839018.
* GRANTOR TRUST: Ten percent ownership of corporate trustee's stock was not enough to make trustee subordinate or create grantor trust. PLR 9841014.
* IRD: Distribution of Series E and HH bonds by estate along with accrued interest to residuary charitable
beneficiaries does not trigger IRD. PLR 9845026.
* REFORMATION: Retroactive reformation of inter vivos charitable unitrust approved. TAM 9845001.
* Annuities. Private Annuities Pass Wealth to Family Members--Other Than Uncle Sam, 27 Tax'n Law. 68 (1998), by Merrie Jeanne Webel, explains how a private annuity can help transfer family wealth while saving taxes.
* Asset protection. Alan S. Gassman & James F. Gulecas review estate planning and asset protection uses of offshore trusts and Alaskan trusts in Alaska Spawns a New Trust: Alaskan and Other Asset Protection Trusts (with Sample Clauses), 13 Prac. Tax Law. 25 (1998).
* Attorney-client privilege. Howard M. McCue III discusses the implications of the Supreme Court decision confirming that the attorney-client privilege survives the death of the client in Attorney-Client Privilege: Upheld After the Death of the Client?, 137 Tr. & Est. 41 (Sept. 1998).
* Business planning. Philip R. Fink discusses Estate Planning Ideas for Qualified Small Business Stock, 27 Tax'n Law. 86 (1998).
* Children. Planning an Estate, Protecting a Child, 15 GP Solo & Small Firm Law. 40 (1998), by John F. Thomasset, addresses the importance of nonfinancial planning for clients with minor or disabled children.
* CLATs. Peter J. Melcher & Warren L. Rosenbloom explain the tax benefits of charitable lead annuity trusts in Creating "Negative Tax" Charitable Lead Annuity Trusts, 13 Prac. Tax Law. 53 (1998).
* Community property. Jonathan G. Blattmachr & Howard M. Zaritsky examine a new statute under which a married couple may elect to treat some or all of their assets as community property in Alaska Consensual Community Property Law and Property Trust,137 Tr. & Est. 65 (Nov. 1998).
* Drafting errors. Myles J. Laffey offers assistance in Common Drafting Errors, 13 Quinnipiac Prob. L.J. 57 (1998)
* Emotionally-challenged clients. Steven C. Gabrielson, et al. explain How to Deal Ethically with "Emotionally-Challenged" Clients, 137 Tr. & Est. 30 (Sept. 1998).
* ERISA. Erica S. Phillips argues that Congress did not intend ERISA to preempt state community property law regarding testamentary disposition of a nonemployee spouse's interest in pension benefits in Equality in Life, Inequality in Death: The Ramifications of the United States Supreme Court Decision in Boggs v. Boggs, 34 Idaho L. Rev. 623 (1998). ERISA Preemption: To Infinity and Beyond and Back Again? (A Historical Review of Supreme Court Jurisprudence), 58 La. L. Rev. 997 (1998) by Howard Shapiro, et al., surveys cases and attempts to identify trends. Steven J. Sacher & David Pickle review the post- Boggs decisions in The Deceptive New World of ERISA Preemption, 24 J. Pension Plan. & Comp. 1 (1998). Benefits and Compensation Planning: "DIS'ing" Has Special Meaning as it Applies to ERISA or One $600,000 Mistake is One Too Many, 24 J. Pension Plan. & Comp. 20 (1998), by Kevin J. Walsh, examines planning considerations presented by recent legislation, DOL and IRS regulations and case law.
* Estate tax. Taxing Personhood: Estate Taxes and the Compelled Commodification of Identity, 17 Va. Tax Rev. 759 (1998), by Ray D. Madoff, focuses on the impact of estate taxes on property interests that are closely aligned with an individual's identity.
* Families. Prozac® and Estate Planning for Families, 137 Tr. & Est. 73 (Nov. 1998), by Keith Schiller, explains how to avoid turning estate planning into a legal, taxation and emotional minefield.
* Intellectual property. You Can't Take It With You: Estates & Intellectual Property,137 Tr. & Est. 67 (Sept. 1998), by Robert L. Moshman, discusses the rules applicable to intellectual property.
* IRAs. Stanley D. Baum discusses how the '98 Act affects IRAs in Roth IRAs after the '98 Act--Congress Improves the Product, 89 J. Tax'n 144 (1998). Multigenerational Transfers of Wealth Using Education and Roth IRAs, 13 Prac. Tax Law. 37 (1998), by Dennis M. Sandoval, highlights the use of these two new IRAs.
* Limited partnerships. Wrong Wording Kills Exclusion for Limited Partnership Interest Gifts, 27 Tax'n Law. 98 (1998), by Robert J. Adler, offers insights into what provisions the IRS should find acceptable.
* Married clients. Janet L. Dolgin discusses the advantages and disadvantages of dual and separate representation of married couples in The Morality of Choice: Estate Planning and the Client Who Chooses Not to Choose, 22 Seattle L. Rev. 31 (1998).
* Qualified plans. Stanley D. Baum discusses IRA Compliance Programs for Qualified Plans--A Comparison After the Consolidation, 24 J. Pension Plan. & Comp. 32 (1998).
* Special needs trusts. Edward D. Beasley discusses how to draft an estate plan for children with disabilities in Special Needs Trusts: Planning for a Child with Disabilities, 15 GP Solo & Small Firm Law. 45 (1998).
* State law update. S. Alan Medlin examines current estate planning cases in State Law Update Looks at Smorgasbord of Decisions, 137 Tr. & Est. 35 (Nov. 1998).
* Transfer taxes. A Consumption Tax on Gifts and Bequests?, 17 Va. Tax Rev. 657 (1998), by Karen C. Burke & Grayson M.P. McCouch, examines the treatment of gifts under a consumption tax.
* Wealth protection. Richard A. Oshins & Steven J. Oshins examine how principal beneficiaries can have the equivalent of outright ownership of trust assets while still enjoying tax and creditor benefits in Protecting & reserving Wealth Into the Next Millennium, 137 Tr. & Est. 52 (1998).
* California enhances criminal laws relating to elder abuse. 1998 Cal. Legis. Serv. ch. 935.
* California restricts inheritance rights of person who abuses an elderly person. 1998 Cal. Legis. Serv. ch. 935.
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