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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.
ADEMPTION: Option on shares does not adeem bequest. The testator devised his shares in a closely held business to his son (the other shareholder) subject to a charge for the benefit of the testator's two other children. Several years later, the testator entered into a redemption agreement with the corporation and his son, giving them the right of first refusal for his shares. The corporation exercised its right after the testator's death. The court held that the right of first refusal did not adeem the bequest of the shares; the proceeds of the sale passed to the son who received them subject to the charge in favor of his siblings. In re Estate of Poach, 600 N.W.2d 172 (Neb. 1999).
CONSTRUCTION: "Personal property" does not include intangibles. The testatrix's will left her residence "and all of the furniture and personal property located in and about" the residence to friends. She gave the residue of her estate to charity. After her death, stock certificates and traveler's checks were found in the residence. The court in Turner v. Reed, 518 S.E.2d 832 (Va. 1999), held that although personal property usually includes intangibles, the language referring to furniture and use of "in and about" indicated that the testatrix intended to limit the bequest to tangible property.
DISCLAIMER: Valid disclaimer does not defeat federal tax lien. In Drye v. United States, 120 S. Ct. 474 (1999), the Supreme Court held that a valid disclaimer under state law does not prevent an existing federal tax lien from attaching to the disclaimed property.
ELECTIVE SHARE: Elective share applicable to intestacy and excludes homestead. In Estate of Antonopoulos, No. 81,008, 1999 WL 1023778 (Kan. Nov. 12, 1999), the court held that the elective share scheme applies to both intestate and testate estates and that the value of the statutory homestead and Tier I railroad retirement benefits are excluded from the augmented estate.
ERISA: State law invaliding beneficiary designation of ex-spouse not preempted. In In re Estate of Engelhoff, 989 P.2d 80 (Wash. 1999), the court held that the application of a state statute revoking provisions for the transfer of a nonprobate asset to a spouse on the dissolution or invalidation of the marriage was not preempted by ERISA as to an employer-provided life insurance policy and as to the decedent's pension. The life insurance was part of a welfare benefit plan, it was not a pension plan, and the statute did not have a sufficient connection to the pension plan.
POWER OF ATTORNEY: Express power to change ownership of principal's assets subject to good faith exercise. The principal executed a power of attorney granting the agent the power to cash his certificates of deposit and change their ownership. The agent placed the proceeds of the certificates in joint accounts to which she and her principal were parties. After the principal's death, the executors of his will sued for recovery of the proceeds of the joint accounts. In Wabner v. Black, 7 S.W.3d 379 (Ky. 1999), the court held that the power of attorney authorized the change in ownership of the certificates of deposit and that whether the agent acted in utmost good faith was a jury question.
PROFESSIONAL RESPONSIBILITY: Privilege shields attorney-trustee communications. Under the holding in Wells Fargo Bank v. Superior Court, 990 P.2d 591 (Cal. 2000), a trustee may assert the attorney-client privilege against trust beneficiaries for communications dealing with trust administration as well as communications dealing with allegations of misconduct. The court also indicated that the beneficiaries may not discover work product of the trustee's counsel.
REVOCABLE TRUST: Beneficiary may not compel accounting while trust is revocable. The settlor-trustee of a revocable trust became incompetent. The named successor took over the trust and the court appointed a professional conservator. A trust beneficiary began a proceeding to compel the trustee to account. The court in Johnson v. Kotyck, 90 Cal. Rptr. 2d 99 (Cal. Ct. App. 1999), refused to compel the accounting. Because the conservator may revoke the trust with the court's consent, the beneficiary had no enforceable right under a state statute that postpones the rights of the beneficiaries of a revocable trust while the trust is revocable and the person holding the power to revoke is competent.
UTODSRA: Uniform Transfer on Death Security Registration Act (UTODSRA) does not retroactively impair existing rights. The decedent created an IRA in 1983 and named his sister as the beneficiary. Shortly thereafter, he executed a will leaving his entire estate to his wife. Before his death, the UTODSRA was enacted, applicable to all existing and future registrations in beneficiary form. The surviving wife challenged the application of the act to the IRA. In Bielat v. Bielat, 721 N.E.2d 28 (Ohio 2000), the court held that the UTODSRA was not a retroactive law and did not impair an existing right.
RULINGS AND REGULATIONS
ADMINISTRATION EXPENSES: IRS issues final regulations distinguishing between estate transmission expenses, which reduce the value of property for the marital and charitable deductions, and estate management expenses, which generally do not reduce the value of property for these deductions. These regulations were issued in response to Commissioner v. Estate of Hubert, 117 S. Ct. 1124 (1997). T.D. 8846.
GIFT DISCLOSURE: IRS issues final regulations regarding acts that constitute adequate disclosure on a gift tax return to begin the running of the period of limitations on determining the value of a gift. T.D. 8845.
POWER OF ATTORNEY: Gifts by agent under durable power of attorney deemed not subject to tax in principal's estate. TAM 199944005.
QTIP: IRS permits IRA to be treated as QTIP property. "An executor may elect . . . to treat an IRA and a trust as QTIP when the trustee of the trust is the named beneficiary of the decedent's IRA, the surviving spouse can compel the trustee to withdraw from the IRA an amount equal to all the income earned on the IRA assets at least annually and to distribute that amount to the spouse, and no person has a power to appoint any part of the trust property to any person other than the spouse." Rev. Rul. 00-2.
SEPARATE SHARES: IRS issues final regulations regarding separate share rules for estates and trusts. TD 8849.
Alaska Trust Act. In Self-Settled Spendthrift Trusts and the Alaska Trust Act: Has Alaska Moved Offshore?, Jeremy M. Veit provides an overview of the history, operation and obstacles of the 1997 act. 16 Alaska L. Rev. 269 (1999).
Anti-lapse and future interests. David M. Becker discusses Uniform Probate Code Section 2-707 and the Experienced Estate Planner: Unexpected Disasters and How to Avoid Them, 47 UCLA L. Rev. 339 (1999).
Civil law. Barbara R. Hauser explores Estate Planning In and For Civil Law Countries, Tr. & Est. 45 (Dec. 1999).
Cryopreservation. Jennifer Hodges proposes a legislative solution to embryo disposition after analyzing current legal theories in Thursday's Child: Litigation Over Possession of Cryopreserved Embryos as a Call for Legislation, 40 Santa Clara L. Rev. 257 (1999).
Cy pres. See Frances Howell Rudko's comments for an overview of The Cy Pres Doctrine in the United States: From Extreme Reluctance to Affirmative Action, 46 Clev. St. L. Rev. 471 (1998).
Non-traditional elders. Matthew R. Dubois examines estate, health care, insurance and financial issues in Legal Planning for Gay, Lesbian, and Non-Traditional Elders, 63 Alb. L. Rev. 263 (1999).
Equitable adoption. James R. Robinson offers con-siderations for the courts in Untangling the "Loose Threads": Equitable Adoption, Equitable Legitimation, and Inheritance in Extralegal Family Arrangements, 48 Emory L.J. 943 (1999).
ESOPs. Gina Marie Agresta-Richardson examines ESOPs and ERISA and suggests guidelines for fiduciaries in Employee Stock Ownership Plans: Uncertainties Plaguing the Duties of ESOP Fiduciary with Respect to Voting and Defensive ESOPs, 14 Akron Tax J. 91 (1999).
Gift tax. Allan M. Kaplan, et al. compare techniques for avoiding the payment of gift taxes in Private Split Dollar vs. Three Alternative Gifting Options, Tr. & Est. 35 (Dec. 1999).
Gifts. Michael J. Jones and DeeAnn L. Thompson offer a practical approach to gifts in Lifetime Gifts: A Non-Tax Perspective, Tr. & Est. 27 (Dec. 1999).
GRATs. David A. Handler and Steven J. Oshins introduce a way to avoid the estate tax inclusion period in GRAT Remainder Sale to a Dynasty Trust, Tr. & Est. 20 (Dec. 1999). Learn to eliminate the mortality risk associated with GRATs in David A. Handler and Deborah V. Dunn's "Guaranteed GRATs": GRATs Without Mortality Risk, Tr. & Est. 30 (Dec. 1999).
GST tax. Andrew J. Willms offers techniques for avoiding taxes in New Approaches to Dealing with Generation-Skipping Issues Created by Life Insurance Trusts (With Sample Provisions), Prac. Tax L. 29 (Fall 1999).
International trusts. Bruce Zagaris explores A Brave New World: Recent Developments in Anti-Money Laundering and Related Litigation Traps for the Unwary in International Trust Matters, 32 Vand. J. Transnat'l L. 1023 (1999).
IRAs. For a discussion of the tax, family and financial considerations of beneficiary designations, see Diane R. Lederman and Mazalle H. Cole's Taking the Ire Out of IRA Planning, Tr. & Est. 66 (Nov. 1999).
Life support. Michelle M. Mello explores the differences between individuals in a "persistent vegetative state" and those in a "minimally conscious state," and proposes a new judicial standard in Death, Life, and Uncertainty: Allocating the Risk of Error in the Decision to Terminate Life Support, 109 Yale L.J. 635 (1999).
Marital deduction. Mitchell M. Gans explores alternatives to the over-emphasis on state law in Federal Transfer Taxation and the Role of State Law: Does the Marital Deduction Strike the Proper Balance?, 48 Emory L.J. 871 (1999).
Medicaid planning. Lisa Schreiber Joire asserts that lawyers face an intolerable choice in After New York State Bar Association v. Reno: Ethical Problems in Limiting Medicaid Estate Planning, 12 Geo. J. Legal Ethics 789 (1999).
Michigan. Quadiru Kent reviews judicial changes in Michigan's estate planning law in Trusts and Estates, 45 Wayne L. Rev. 1343 (1999).
Prior death tax credit. Joseph R. Oliver and Charles A. Granstaff discuss how to get the most out of the prior death tax credit in Planning for the Sec. 2013 Credit for Terminable Interests, Tr. & Est. 61 (Nov. 1999).
Retirement. Stuart Levine recommends self-planning in Rehearsal for Retirement: Drafting Provisions to Consider, Prac. Tax L. 55 (Fall 1999).
Rule against perpetuities. Richard A. Campbell and Christopher D. Dwyer discuss planning options now that Illinois has repealed the rule in Making the Most of the New Illinois Perpetuities Statute, 87 Ill. B.J. 594 (1999).
Stock options. Robert Siwicki explores The Gifting of Stock Options as an Estate Planning Strategy, Tr. & Est. 49 (Nov. 1999).
Surrogacy. Donald D. Moreland examines current surrogacy legislation, common law treatment and its potential impact on Connecticut probate law in Reproductive Technology Outpacing Connecticut Lawmakers, 14 Quinnipiac Probate L.J. 287 (1999).
Trust alternatives. Alan S. Gassman and James F. Gulecas discuss alternatives in Comparing the GRAT to the Installment Sale to a Defective Grantor Trust and Who's Afraid of the Exhaustion Test?, Prac. Tax L. 43 (Fall 1999).
UPIA. David Schaengold reviews the controversial "trustee's power to adjust" provision in New Uniform Principal and Income Act Being Promulgated, Tr. & Est. 38 (Dec. 1999).
Virginia. For a review of recent legislative and judicial changes in Virginia estate planning laws, read J. Rodney Johnson's Wills, Trusts, and Estates, 33 U. Rich. L. Rev. 1075 (1999).
Illinois revises guardianship law relating to disabled adults. 1999 Ill. Legis. Serv. P.A. 91-671.
Pennsylvania excludes wills, codicils and testamentary trusts from coverage by the Electronic Transactions Act. 1999 Pa. Legis. Serv. 1999-69.
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.