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.
- CONDITIONAL GIFT: Penalty for enforcing shareholder rights upheld. The decedent's will provided certain payments to a beneficiary and also provided that the payments were to cease if the beneficiary interfered or involved himself in any business in which the estate had an interest. The beneficiary sued to enforce his minority shareholder rights, and the estate ceased payments. The court in Koeppel v. Koeppel, 701 N.Y.S.2d 382 (N.Y. App. Div. 2000), held that the penalty clause was not against public policy.
- CONSTRUCTION: Designation of named person as spouse is descriptive only. A testator's will gave part of the residue to her nephew, Galen Danner, and if he predeceased her, to "his wife, Shirley Danner." After the Danners divorced and Galen died, the testator executed a new will. Shirley challenged the admission of the new will to probate on the grounds of undue influence. The court in Estate of Kelly v. Stambaugh, 724 N.E.2d 1285 (Ill. App. Ct. 2000), held that the term "wife" was descriptive only and that divorce did not disqualify Shirley from taking under the prior will. Accordingly, she had standing to challenge the new will.
- DISCLAIMERS: Pledge of expectancy is acceptance. A mother named her daughter as the devisee of her home. While the mother was still alive, the daughter pledged her interest in the home to a lawyer in exchange for legal services. After the mother's death, her son applied for a turnover order of his sister's interest in the estate to satisfy an outstanding judgment. The daughter then disclaimed her interest in her mother's estate. In Badouh v. Hale, No. 98-1126, 2000 Tex. LEXIS 14 (Tex. Jan. 27, 2000), the court held that the daughter acted as a beneficiary in making the pledge and therefore accepted the property, barring the disclaimer.
- ESTATE TAX LIABILITY: Donees liable for estate tax on gift tax payment included in gross estate. A donor made inter vivos gifts and paid the appropriate gift tax. The donor died within three years of these gifts, and the gift taxes paid were included in the donor's gross estate. The estate lacked sufficient funds to pay the estate tax liability. In Armstrong v. Commissioner, 114 T.C. No. 5 (2000), the court held the donees personally liable for the unpaid estate taxes to the extent of the value of gifts received.
- FAMILY LIMITED PARTNERSHIP: FLP may be validly formed even if time between creation and death is short. A mother and her children created a limited partnership to manage a family ranch two days before the mother's death. The court determined that this partnership was formed for bona fide business purposes and thus the mother's estate was entitled to a refund based on the lower valuation of her partnership interest. Church v. United States, No. SA-97-CA-0774-OG, 2000 U.S. Dist. LEXIS 714 (W.D. Tex. Jan. 18, 2000).
- FIDUCIARY DUTY: Referral fee violates executor's duty. An executor accepted fees from counsel for the estate for the referral of litigation in which the estate became involved. In the case of In re Estate of Harrison, 745 A.2d 676 (Pa. Super. Ct. 2000), the court determined that the executor's actions were self-dealing because the referral fee grew in proportion to the fee charged the estate. The court also upheld a surcharge in the amount of the referral fee as punishment for the executor's wrongdoing.
- LAPSE: Residuary provision for lapsed gifts does not override anti-lapse statute. A decedent's will made general bequests without conditioning those bequests on the survival of the beneficiaries. The residuary clause expressly disposed of "legacies and devises, if any, which may lapse or fail for any reason." Several legatees did not survive the testator. The court in Blevins v. Moran, 12 S.W.3d 698 (Ky. Ct. App. 2000), held that the language in the residuary clause was not clear evidence of an intent to override the anti-lapse statute.
- NON-CLAIM STATUTE: Barred debt cannot be used as set-off. An estate sought to collect a debt owed the decedent, and the debtor asserted as set-off a debt that the decedent owed a third party that had been assigned to the debtor, the collection of which was barred by the state non-claim statute. In Imbesi v. Carpenter Realty Corp., 744 A.2d 549 (Md. 2000), the court indicated that the non-claim statute is not a statute of limitations but bars the claim entirely. Therefore, the debtor could not use the barred claim as a set-off.
- POWER OF APPOINTMENT: Residuary clause exercises general power. A decedent's inter vivos trust was expressly made revocable during life or by will. The trust was to continue after his death unless he provided for disposition of the trust by will. In First Union Nat'l Bank v. Ingold, 523 S.E.2d 725 (N.C. Ct. App. 1999), the court held that the trust created a general power of appointment that, according to statute, was exercised by the residuary clause of the decedent's will, no contrary intent being shown.
- POWER OF ATTORNEY: Annual exclusion gifts by agent included in principal's gross estate. The principal executed a durable power of attorney. Under this power, the agent made 38 annual exclusion gifts. The court in Estate of Swanson v. United States, No. 97-793T, 2000 U.S. Claims LEXIS 34 (Mar. 13, 2000), held that these gifts were part of the principal's gross estate. The power of attorney did not expressly grant the agent the power to make gifts. Thus, the gifts were revocable at the principal's death.
- PROFESSIONAL RESPONSIBILITY: Lawyer for personal representative has fiduciary duty to interested persons. A lawyer served as a personal representative, and his firm represented both the personal representative and the creditors of an insolvent decedent's estate. In Estate of Fogleman, No. 1 CA-CV 98-0610, 2000 Ariz. App. LEXIS 32 (Mar. 2, 2000), the court held that beneficiaries of the estate were not clients of the personal representative or of the law firm, but that the personal representative and the law firm owed the beneficiaries the fiduciary duties of fairness and impartiality that they breached by not disclosing the conflict of interest.
- PROFESSIONAL RESPONSIBILITY: Gift to drafter violates public policy. A decedent's will made a specific bequest of "all of my personal properties" to the lawyer who drafted the will, described in the opinion as the decedent's "very close friend." The decedent's personal property included stocks, bonds and other investments worth about $2 million. The residue of the estate, consisting of real estate of substantial value, was given to a charity. On a challenge by the charity, the court held that the gift to the lawyer, which violated Texas disciplinary rules, was contrary to public policy and therefore void. Shields v. Scottish Rite Hosp. for Crippled Children, 11 S.W.3d 457 (Tex. App. 2000).
- RESULTING TRUST: Failed disposition passes to decedent's estate. A decedent's will added his residuary estate to his revocable trust. The trust was to terminate at the death of his son (who survived him), at which time the trust property was to be divided in two parts, one of which was given to named persons, the other to the decedent's "surviving brothers and sisters." The court in Theodore Short Trust v. Fuller, 7 S.W.3d 482 (Mo. Ct. App. 1999), held that the siblings' gift was contingent on surviving the son, which none of them did. Accordingly, the failed gift passed via a resulting trust to the decedent's intestate heirs.
- SLAYERS: Taking through murdered person is not allowed. The decedent died intestate survived by eight nieces and nephews. One nephew had been convicted of the homicide of his father, the decedent's brother. The crime occurred six years before the decedent's death. In Matter of Macaro, 699 N.Y.S.2d 634 (N.Y. Sur. Ct. 1999), the court determined that the nephew was disqualified as an heir on the common law principles underlying the slayer rule, which prohibits a slayer from acquiring property by reason of the crime.
RULINGS AND REGULATIONS
- GROSS ESTATE: Life insurance maintained under divorce agreement for benefit of ex-spouse and children included in decedent's gross estate. TAM 200011008.
- GROSS ESTATE: Power to remove and replace trustee that was limited to an independent trustee as a result of declaratory judgment that original ambiguity resulted from scrivener's error does not trigger inclusion of trust in gross estate. PLR 200006027.
- INCOME IN RESPECT OF A DECEDENT: A beneficiary who receives IRD may claim an income tax deduction for the amount of estate tax attributable to the amounts included in beneficiary's income even if the estate tax has not yet been paid. PLR 200011023.
- INCOME IN RESPECT OF A DECEDENT: A bequest of vested nonqualified stock options results in charitable beneficiary receiving IRD. PLR 200012076.
- Anatomical gifts. Roderick T. Chen discusses Organ Allocation and the States: Can the States Restrict Broader Organ Sharing?, 49 Duke L.J. 261 (1999).
- Asset protection. Recent articles discussing asset protection include Ritchie W. Taylor, Domestic Asset Protection Trusts: The "Estate Planning Tool of the Decade" or a Charlatan? in 13 BYU J. Pub. L. 163 (1999), and John K. Eason, Home From The Islands: Domestic Asset Protection Trust Alternatives Impact Traditional Estate and Gift Tax Planning Considerations, 52 Fla. L. Rev. 41 (2000).
- Conservation easements. Katherine S. Anderson analyzes estate planning opportunities designed to protect land in Conservation Easements: An Essential Tool in the Practitioner's Estate Planning Toolbox, 35 Land & Water L. Rev. 183 (2000).
- Cy pres. Frances Howell Rudko discusses the development of cy pres in The Cy Pres Doctrine in the United States: From Extreme Reluctance to Affirmative Action, 46 Clev. St. L. Rev. 471 (1998).
- Dead bodies. Tanya K. Hernandez discusses ownership of a decedent's body in The Property of Death, 60 U. Pitt. L. Rev. 971 (1999), and advocates the passage of mortal remains proxy legislation.
- Disclaimers. Edward Kessell and Steven R. Klammer warn that Drye v. United States limits the effectiveness of disclaimers in Supreme Court Finds Disclaimer Ineffective to Avoid Federal Tax Lien, 92 J. Tax'n 118 (2000).
- Elder law. Joanna Lyn Grama addresses The "New" Newlyweds: Marriage Among the Elderly, Suggestions to the Elder Law Practitioner, 7 Elder L.J. 379 (1999).
- Elective share. Ronald R. Volkmer analyzes elective share statutory scheme developments in The Complicated World of the Electing Spouse: In re Estate of Myers and Recent Statutory Developments, 33 Creighton L. Rev. 121 (1999).
- Gifts by check. Mark R. Siegel suggests consistent treatment for transfers by check in The Relation-Back Doctrine: Towards a Consistent Tax Rule for Gifts by Check, 52 Rutgers L. Rev. 185 (1999).
- Guardian designation. Paul F. Stavis offers an alternative system in The Nexum: A Modest Proposal For Self-Guardianship by Contract, A System of Advance Directives and Surrogate Committees-At-Large for the Intermittently Mentally Ill, 16 J. Contemp. Health L. & Pol'y 1 (1999).
- Legal education. Wayne M. Gazur explores the law school-legal practice interface in Do They Practice What We Teach?: A Survey of Practitioners and Estate Planning Professors, 19 Va. Tax Rev. 1 (1999).
- Mediation. Roselyn L. Friedman and Sally Lawson Sargent explore the mediation process and when Applying Mediation Strategies to Trusts and Estates is Appropriate, Tr. & Est. 56 (Feb. 2000).
- Posthumous conception. Stacey Sutton explores The Real Sexual Revolution: Posthumously Conceived Children, 73 St. John's L. Rev. 857 (1999).
- Power of attorney. Wendy M. Goode emphasizes the importance of granting an agent the express power to make gifts in Gifts and POAs: Authorizing an Agent to Give Your Money Away, 88 Ill. B.J. 100 (2000).
- Private foundations. Matthew F. Jones explores The Other Family Tree: Leaving Your Legacy in a Private Foundation, 63 Alb. L. Rev. 567 (1999).
- Roth IRA. Michael S. McKinney discusses The Roth IRA-Will it Increase Savings?, 66 Tenn. L. Rev. 847 (1999).
- Valuation. Barbara A. Sloan examines revaluation of gifts under the 1998 proposed regulations in Gift Tax Return Preparation Under the Increased Disclosure Requirements, 14 Prac. Tax L. 5 (2000).
- Wealth transfer taxation. Major Joseph E. Cole provides an Introduction to Estate and Tax Planning Fundamentals in 47 A.F. L. Rev. 189 (1999).
- Indiana creates anatomical gift promotion fund. Ind. Legis. 63-2000.
- South Dakota clarifies how the settlor and beneficiary may relieve a trustee from liability and the distribution powers of a non-settlor who is both trustee and beneficiary. 2000 S.D. Laws S.B. 174.
- Utah adopts language from the Uniform Trust Act clarifying notice, consent and representation requirements for inter vivos and testamentary trusts. 2000 Utah Laws S.B. 246.