Keeping Current - Probate
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.
- J URISDICTION: Will disposing of real estate subject to court of situs. The decedent owned real estate in Florida. After her death, beneficiaries under an alleged lost Florida will moved to establish the will in a Florida court. At the same time, beneficiaries under a will executed in Mexico moved for ancillary probate. Beneficiaries of the Florida will alleged that the Mexican will was the product of fraud and undue influence. The trial court ordered that all proceedings be held in Mexico. On appeal, the court held that the validity of a will executed in another country is subject to the jurisdiction of the Florida courts for determination of its validity when offered for probate to pass real property in Florida. In re Estate of Barteau, 736 So. 2d 57 (Fla. Dist. Ct. App. 1999).
- NEGLIGENT MISREPRESENTATION: Even if privity is a bar to a malpractice action against the lawyer, the lawyer may nonetheless be liable for negligent misrepresentation. A husband died leaving a 1983 will and a 1985 codicil that substantially reduced the size of the share of one of his four children. That daughter contested the will and codicil. The wife, individually and as the executor of her husband's will, along with his other children sued the lawyers who drafted the will and codicil. They alleged that the lawyers represented the husband and wife jointly in preparing the estate plan and that they were negligent in doing so. The lawyers responded that they were not liable for a variety of reasons including lack of privity. The trial court granted the lawyers' motion for summary judgment. The court in Estate of Arlitt v. Paterson, 995 S.W.2d 73 (Tex. Ct. App. 1999), reversed. The court agreed that a plaintiff must show privity under Texas law to prevail on a legal malpractice claim. Privity, however, is not needed to establish a duty not to commit negligent misrepresentation. The court explained that negligent misrepresentation is not the same as malpractice and that a lawyer may be subject to a negligent misrepresentation claim even though the lawyer is not subject to a malpractice claim.
- TAXATION: Decedent did not own QTIP trust for purpose of pick-up tax. The decedent was a resident of California and the beneficiary of a QTIP trust established under the will of her husband, a resident of the Virgin Islands. The corpus of the trust consisted of securities held by an investment firm in New York. California taxing authorities claimed that California's "sop tax" extended to the trust property. The court held that California was not entitled to tax the trust property as part of the decedent's estate because she did not own it under California or Virgin Islands law. The court did not reach the question of situs. Hoffman v. Connell, 87 Cal. Rptr. 2d 272 (Cal. Ct. App. 1999).
- TRUSTS: Agent may not exercise reserved power to revoke a trust. The settlor created an inter vivos trust and reserved to herself the power to revoke the trust. After becoming incapacitated, her agent petitioned to set aside the trust citing the Oklahoma version of the Uniform Durable Power of Attorney Act, which gives the agent the same power to amend that the principal would have if not incapacitated. The court held that the statute could not operate to grant the agent the power to revoke the trust if the power of attorney made no reference to the trust. In addition, trust became irrevocable on the settlor's incapacity. In re Guardianship of Lee, 982 P.2d 539 (Okla. Ct. App. 1999).
- UNDUE INFLUENCE: Burden of proof on individuals contesting validity of revocable trust. The settlor amended her revocable trust to remove certain beneficiaries and add others. The beneficiaries who had been removed sued the new beneficiaries with whom the settlor had a confidential relationship alleging undue influence. The court held that, given the similarity of a revocable trust to a will, the burden of proof is the same as in a will contest-that is, the individuals contesting the trust have the burden of proving undue influence even in the case of a confidential relationship. Upman v. Clarke, 736 A.2d 380 (Md. Ct. Spec. App. 1999).
- VALUATION: Option to purchase farm means at value for farm use. A decedent's will granted his son the option to purchase the decedent's farm "at the value appraised for the farm at the time of my death" if the son had actively farmed for ten years. The executor maintained that the appraised value was the value at its highest and best use, approximately twice the value of the real estate as a farm. The court held that the decedent intended the option to be exercised at the lower farm use value given the requirement that son farm the land for ten years. In re Estate of Cashen, 715 N.E.2d 922 (Ind. Ct. App. 1999).
- VALUATION: Thirty percent lack of marketability discount upheld. The decedent owned 22% of the stock in a closely held corporation. Various experts testified that the discount could be as low as 15% or as high as 60%. The court considered the lack of a ready market, the comparatively small size of prior transactions relative to the size of the decedent's block of stock and the experts' credibility. The court concluded that a 30% lack of marketability discount was appropriate. Estate of Marmaduke v. Commissioner, T.C. Memo. 1999-342.
RULINGS AND REGULATIONS
- ANNUAL EXCLUSION: Gifts of family limited partnership interests determined to be present interests qualifying for the annual gift tax exclusion. TAM 199944003.
- CHARITABLE DEDUCTION: Estate tax charitable deduction available for proceeds of an IRA and a qualified retirement plan that pass to a private foundation that qualifies as a Code § 501(c)(3) charity. PLR 199939039.
- EDUCATIONAL EXCLUSION: Payments of tuition to educational institution for future years qualified for the gift tax exclusion under Code § 2503(c). TAM 199441013.
- GROSS ESTATE: Trusts created under a power of attorney that did not specifically grant the agent the power to make gifts were not includable in the gross estate of the principal. TAM 199944005.
- GROSS ESTATE: Decedent's gross estate included the value of closely held stock that the decedent transferred to a partnership because he had the power to vote the stock in his capacity as a general partner. TAM 199938005.
- GST TAX: Executor exculpated from failure to file Schedule R allocating the GST tax exemption because the trust agreement was found sufficient to do so under the substantial compliance doctrine. PLR 199937026.
- GST TAX: In a series of rulings, the IRS indicated that the exemption from GST tax is not lost when changes are made to trusts having grandfathered exempt status. PLRs 199942013, 199942016, 19994230-199942033, 199944027, 199946021.
- SPECIAL USE VALUATION: State death tax credit is to be recomputed for recapture purposes under Code § 2032A if there is an early disposition of specially valued property. TAM 199940005.
- VALUATION: Protective election of the alternate valuation date, which was to be effective only if it would reduce the decedent's estate tax, was permitted. PLR 199942015.
- Anatomical gifts. For an overview of proposed organ donation regulation, see Laura E. McMullen's Equitable Allocation of Human Organs: An Examination of the New Federal Regulation, 20 J. Legal Med. 405 (1999). For a comprehensive review of non-consensual organ harvesting, see Alexander Powhida's Forced Organ Donation: The Presumed Consent to Organ Donation Laws of the Various States and the United States Constitution, 9 Alb. L.J. Sci. & Tech. 349 (1999).
- Charitable gifts. Learn to avoid pitfalls while taking advantage of opportunities in Grace Allison's Administering Split-Interest Charitable Trusts: Five Myths, Tr. & Est. 56 (Oct. 1999). For an overview of recent developments, see Howard M. McCue's Charitable Split Interest Giving-Evolving Techniques, Tr. & Est. 32 (Oct. 1999). Find out if public charity rules apply when the donor keeps control in John McGown Jr.'s Major Charitable Gifts-How Much Control Can Donors Keep and Charities Give Up?, 91 J. Tax'n 279 (1999).
- Closely held stock. Peter B. Tiernan explores How 50% Ownership Affects Estate Planning for Closely Held Stock, 91 J. Tax'n 232 (1999).
- Disinheritance of children. Brian C. Brennan explores whether the United States has failed by permitting Disinheritance of Dependent Children: Why Isn't America Fulfilling Its Moral Obligation?, 14 Quinnipiac Prob. L.J. 125 (1999). J. Thomas Oldham offers his theories on why state laws do not ban disinheritance of children in What Does the U.S. System Regarding Inheritance Rights of Children Reveal about American Families?, 33 Fam. L.Q. 265 (1999).
- ESOP. Michael Glanzer analyzes The 1042 ESOP: An Overlooked Alternative, Tr. & Est. 46 (Sept. 1999).
- Foreign trusts. Steven W. Rabitz provides an Overview Concerning Certain Recent Changes for Foreign Compensatory Trusts: 402(b) Trusts, Grantor Trusts and "Rabbi" Trusts, 4 Fla. Tax Rev. 429 (1999).
- GRIPT. For a discussion of grantor retained income and property trusts, see David Saul Vogel's Estate Planning for Cash-Poor Millionaires: A New Look at Retained Interests in Trust, 91 J. Tax'n 143 (1999).
- Holographic wills. Michael G. Rogers reviews holographic wills and the effect that the courts' decisions have on them in Put on Your Blinders and Get Your Earplugs: The Nebraska Supreme Court's Construction of the Nebraska Holographic Will Statute Excludes Evidence of Testator Intent in Estate of Foxley v. Hogan, 78 Neb. L. Rev. 147 (1999).
- Illinois. Donald A. LoBue reviews recent estate planning law changes in Probate and Estate Planning Update for General Practitioners, 87 Ill. B.J. 544 (1999).
- Life insurance. For an overview of the Taxpayer Relief Act of 1997 as it applies to life insurance policies and proceeds, see Douglas A. Kahn and Lawrence W. Waggoner's Tax Consequences of Assigning Life Insurance - Time for Another Look, 4 Fla. Tax Rev. 381 (1999).
- New York. John C. Welsh analyzes recent New York legislative changes to gift and estate taxes in Estates and Trusts, 49 Syracuse L. Rev. 473 (1999).
- Offshore asset protection. For a comparison of "Americanized" asset protection trusts with those offshore, see Paul M. Roder's American Asset Protection Trusts: Alaska and Delaware Move "Offshore" Trusts onto the Mainland, 49 Syracuse L. Rev. 1253 (1999).
- Partial interests. Jonathan G. Blattmachr and Edward H. Heintzberger discuss valuation in Adventures in Partial Interests, Tr. & Est. 44 (Oct. 1999).
- Protective proceedings. Susan G. Haines and John J. Campbell discuss whether guardian and conservator appointments affect a liberty interest in Defects, Due Process, and Protective Proceedings: Are Our Probate Codes Unconstitutional?, 14 Quinnipiac Prob. L.J. 57 (1999).
- Retirement benefits. Natalie B. Choate argues for a change in the IRS' position in The "Estate" As Beneficiary of Retirement Benefits, Tr. & Est. 41 (Sept. 1999).
- Superwills. Cynthia J. Artura argues for a change in scope for Washington law in Superwill to the Rescue- How Washington's Statute Falls Short of Being a Hero in the Field of Trust and Probate Law, 74 Wash. L. Rev. 799 (1999).
- Texas. Lynne McNiel Candler reviews recent intestacy, wills and trusts case law developments in Probate and Trusts, 52 SMU L. Rev. 1373 (1999). Jerry Frank Jones summarizes new legislation in Legislative Update: Probate, Guardianship & Trust, 62 Tex. B.J. 766 (1999).
- Will contests. Veena K. Murthy explores how sex influences the courts' decisions in will contests in Undue Influence and Gender Stereotypes: Legal Doctrine or Indoctrination, 4 Cardozo Women's L.J. 105 (1997).
- Dynasty trusts. Brian Layman discusses Perpetual Dynasty Trusts: One of the Most Powerful Tools in the Estate Planner's Arsenal, 32 Akron L. Rev. 747 (1999).
- California enacts comprehensive Health Care Decisions Law. 1999 Cal. Legis. Serv. ch. 658.
- California revises factors to determine compensation of public guardians. 1999 Cal. Legis. Serv. ch. 866.
- Pennsylvania grants orphans' courts jurisdiction over all matters pertaining to the exercise of powers by agents under powers of attorney. 1999 Pa. Legis. Serv. Act 1999-39.
Keeping Current-Probate Editor: Gerry W. Beyer, Visiting Professor, Santa Clara University School of Law, 500 El Camino Real, Santa Clara, CA 95053. Contributors include Alexandra F. Caradimitropoulo, Dave L. Cornfeld, William P. LaPiana, Bridget Lovett and Theresa A. Sutton.
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