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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.
ANNUAL EXCLUSION: Gift made by agent does not qualify unless authorized by principal. The court in Barnett v. United States, No. 07-cv-844, 2009 WL 2426246 (W.D. Pa. May 27, 2009), determined that gifts made on behalf of the principal by his agent did not qualify for the annual exclusion because the power of attorney did not authorize the gifts. Accordingly, because the principal died, these gifts were brought back into the estate.
CY PRES: Incorporated charity cannot be beneficiary of POD accounts and cy pres cannot be used to give charity the property. The decedent had named an incorporated charitable entity as the POD beneficiary of five certificates of deposit and a trust account. Because the relevant Georgia statutes limit beneficiaries of such POD accounts to “persons” and do not include corporations in the definition of “person,” the beneficiary designations were void and the property was part of the probate estate. Over a strong dissent, the majority also held that Georgia’s statutory cy pres doctrine did not apply because it authorizes the court to exercise equitable powers to effectuate as nearly as possible the donor’s charitable intent and cannot be used to do what the law prevented the donor from doing. Tuvim v. United Jewish Communities, Inc., 680 S.E.2d 827 ( Ga. 2009).
ERISA: Remedy provided by revocation-on-divorce statute not preempted. The decedent and his wife divorced. The decedent never changed the designation of his ex-wife as the beneficiary of a life insurance policy that was part of an employee benefit plan subject to ERISA. After the insurance company paid the ex-spouse, the administrator of the decedent’s estate brought a proceeding to require the ex-spouse to turn over the proceeds to the contingent beneficiary under the policy. A divided Superior Court of Pennsylvania affirmed the order requiring the ex-spouse to turn over the proceeds, reasoning that because the Pennsylvania revocation-on-divorce statute absolves the payor from any liability for making payment to the beneficiary of record and makes the ex-spouse “answerable to anyone prejudiced by the payment,” the statute did not affect the administration of the plan and therefore was not preempted. In re Estate of Sauers, 971 A.2d 1265 ( Pa. Super. Ct. 2009).
MALPRACTICE: Executor can bring suit against attorney for malpractice in advising decedent. A divided Texas Supreme Court held that a lawsuit by the executor of a decedent’s will for legal malpractice based on advice given to the decedent while acting as executor of his wife’s will is not barred by lack of privity. The majority distinguished Barcelo v. Elliott, 923 S.W.2d 575 ( Tex. 1996), as applying only to suits by disgruntled beneficiaries against the lawyer who drafted the will. Here the suit against the executor had been settled and was not involved in this suit, even though the beneficiaries of the wife’s will and the decedent’s will were the same. Smith v. O’Donnell, 288 S.W.3d 417 ( Tex. 2009).
REVOCABLE TRUSTS: Trust is not illusory so long as there is a beneficiary other than settlor. The Supreme Court of Oklahoma held in a case of first impression that a revocable inter vivos trust is a valid trust even though the settlor is the trustee and the only beneficiary with a vested interest during her life so long as there is another beneficiary who has a contingent interest (in this case, contingent on surviving the settlor). The court expressly followed Restatement (Third) of Trusts § 25, comment (b), affirming the validity of such trusts. Welch v. Crow, 206 P.3d 599 ( Okla. 2009).
SLAYERS: Verdict of not guilty by reason of insanity does not prevent forfeiture. Charged with first degree murder for the slaying of his mother, stepbrother, and his mother’s boyfriend, the defendant was found not guilty by reason of insanity. The mother’s estate received a wrongful death recovery and began a proceeding to determine statutory beneficiaries and argued that the defendant was a “slayer” under Washington’s slayer statute. In In re Estate of Kissinger, 206 P.3d 665 (Wash. 2009), a case of first impression, the Supreme Court of Washington held that the defendant was disqualified under the statute, which applies to anyone participating in a “wilful and unlawful” killing. The standard to be used is civil not criminal; “wilful” therefore is to be taken in its everyday meaning and the verdict of not guilty by reason of insanity did not make an unlawful killing lawful.
TENANCY BY THE ENTIRETY: Creditor of deceased spouse cannot levy on entirety property after debtor-spouse’s death. In a case of first impression, the Supreme Court of Alaska held that the recording of a lien against a judgment debtor does not sever a tenancy by the entirety between the debtor and the debtor’s spouse and that unless the creditor takes action to sever the tenancy following the appropriate statutory procedure, the creditor’s interest vanishes on the debtor’s death. Smith v. Kofstad, 206 P.3d 441 (Alaska 2009).
TRUST PROTECTORS: Trust agreement may create protector’s duty. A trustee and the mother of a beneficiary brought suit against the predecessor trustees and the trust protector alleging that the trustees improperly managed the trust and that the trust protector violated his duties. Finding that the Missouri statutes (identical to Uniform Trust Code § 808) does not define the function and duties of a trust protector, the court turned to the trust document, which stated that the trust protector is a fiduciary, is not to be liable for actions taken in good faith, and has the power to remove the trustee. The court held that the trust language created a duty in the trust protector sufficient to exercise the power to remove the trustee and reversed the lower court’s summary judgment for the trust protector. Robert T. McLean Irrevocable Trust v. Patrick Davis, P.C., 283 S.W.3d 786 (Mo. Ct. App. 2009).
GENERATION-SKIPPING TRANSFER TAX: Partial termination of trusts that resulted in accelerated payments of remainder interests to charities did not trigger GSTT or income tax. PLRs 200922013–200922027.
PREPARER PENALTIES: IRS details procedure for assessing penalties on persons who prepare estate and gift tax returns. Memo Control No. SBSE-04-0509-009.
SPLIT-DOLLAR LIFE INSURANCE: Collateral assignment did not trigger income or gift tax consequences. IRS approved collateral assignment of split-dollar agreement between partnership of which the insured was a general partner and a wholly owned corporation was the general partner provided the amounts satisfy requirements set forth in prior revenue rulings and notices. PLR 200925003.
TRUSTS: Conversion of nongrantor trust to grantor trust determined not to be a taxable event. Note, however, that this type of transaction may no longer work if proposed regulations treating the sale of private annuities as creating immediate gain become final. CAA 200923024.
Arizona —Pet Trusts. Shari L. Miller provides a primer on estate planning for pet owners in Arizona Attorney’s Guide to Pet Trusts, 1 Phoenix L. Rev. 473 (2008).
New York —Alternative Reproduction Children. Catherine Belfi provides a comprehensive review of how advances in reproductive technology have shaped the legal landscape of New York’s inheritance laws and highlights the areas of law that have not yet been addressed in Birth of a New Age: A Comprehensive Review of New York Inheritance Law Responding to Advances in Reproductive Technology, 24 St. John’s J. Legal Comment. 113 (2009).
North Carolina —Rule Against Perpetuities. In Allowing Perpetuities in North Carolina, 31 Campbell L. Rev. 399 (2009), John V. Orth argues that unless “perpetuity” is defined in such a way that a perpetual trust is not included in the definition, the statute allowing such trusts is unconstitutional.
Pet Trusts. An examination of how Congress should amend the charitable remainder exception to pet trusts by passing the Morgan Bill is made by Jonathan P. Wilkerson in his comment, A “Purr”fect Amendment: Why Congress Should Amend the Internal Revenue Code to Apply the Charitable Remainder Exception to Pet Trusts, 41 Tex. Tech L. Rev. 587 (2009).
Posthumous Conception. Raymond C. O’Brien assesses the law concerning posthumous conception in The Momentum of Posthumous Conception: A Model Act, 25 J. Contemp. Health L. & Pol’y 332 (2009).
Succession Without Administration. Karen J. Sneddon posits that the overlooked Uniform Probate Code’s succession without administration procedure should be reconsidered by jurisdictions to ensure the greatest number of options for the settlement of estates in her article Beyond the Personal Representative: The Potential of Succession Without Administration, 50 S. Tex. L. Rev. 449 (2009).
Testator’s Intent. In The New Restatement of Property and Class Gifts: Losing Sight of the Testator’s Intention, 22 Quinnipiac Prob. L.J. 221 (2009), Frederic C. Schwartz argues that the new Restatement violates the most fundamental principle in the law of wills.
Unconscionability. In his article Unconscionability in the Law of Trusts, 84 Notre Dame L. Rev. 1675 (2009), David Horton shows how a trust-specific unconscionability doctrine would improve outcomes in trust cases.
Uniform Power of Attorney Act. Linda S. Whitton examines policy intersections and analyzes how the new Uniform Power of Attorney Act balances competing interests to enhance the usefulness of powers of attorney while at the same time protecting the principal, the agent, and third parties who accept powers of attorney in The Uniform Power of Attorney Act: Striking a Balance Between Autonomy and Protection, 1 Phoenix L. Rev. 343 (2008).
Arizona amends its version of the Uniform Principal and Income Act. The amendments are to remedy an issue raised by Rev. Rul. 2006-26 so that a deferred compensation, annuity, IRA, or similar plan will qualify for marital deduction treatment by requiring the trustee to determine the internal income of these assets that qualify for the marital deduction. 2009 Ariz. Legis. Serv. 102.
Colorado modernizes its treatment of adopted children and children resulting from alternative reproductive techniques. 2009 Colo. Legis. Serv. 310.
Connecticut authorizes pet trusts. 2009 Conn. Legis. Serv. 169.
Delaware adopts Uniform Principal and Income Act. 77 Del. Laws 99.
Delaware modifies computation of estate tax. 77 Del. Laws 85.
Florida modifies method of computing and satisfying the forced share of a surviving spouse. 2009 Fla. Laws 115.
Florida revises statutes governing anatomical gifts. 2009 Fla. Laws 218.
Hawaii adopts Uniform Prudent Management of Institutional Funds Act. 2009 Haw. Sess. Laws 135.
Illinois enacts Uniform Prudent Management of Institutional Funds Act. 2009 Ill. Legis. Serv. 96-29 (H.B. 811).
Indiana adopts Transfer on Death Property Act. 2009 Ind. Legis. Serv. 143-2009.
Indiana creates procedure for a person to execute a Funeral Planning Declaration. A statutory form is provided. 2009 Ind. Legis. Serv. 143-2009.
Maine enacts Uniform Power of Attorney Act. 2009 Me. Legis. Serv. 292.
Minnesota adopts Uniform Disclaimer of Property Interests Act. 2009 Minn. Sess. Law Serv. 67.
Nevada authorizes electronic will storage. The legislation permits the Secretary of State to create and maintain the Nevada Lockbox, a secure on-line registry, which allows a person to post an electronic copy of a will or other document and retrieve that document when needed. 2009 Nev. Stat. 253.
Nevada updates trust law. The revisions provide for the classification of trusts, detail the administration of directed trusts, adopt provisions governing the administration of trusts, revise provisions concerning spendthrift trusts, and exempt certain property of a trust from execution and attachment. 2009 Nev. Stat. 215.
New Jersey adopts the Uniform Prudent Management of Institutional Funds Act. 2009 N.J. Sess. Law Serv. 64.
North Carolina authorizes a trustee to appoint trust property to another trust for the same beneficiary. 2009 N.C. Sess. Laws 318.
North Carolina increases the amount of the year’s allowance for a surviving spouse from $10,000 to $20,000. 2009 N.C. Sess. Laws 183.
North Carolina modernizes disclaimer law. 2009 N.C. Sess. Laws 48.
North Carolina renders void any gift in a will to the attorney who drafted the will unless the attorney is a relative of the testator. In addition, the legislation requires attorneys who draft a will or codicil to state their name on the document. 2009 N.C. Sess. Laws 182.
Oklahoma adopts Revised Uniform Principal and Income Act. 2009 Okla. Sess. Law Serv. 90.
Oregon revises how a surviving spouse’s forced share is determined. 2009 Or. Laws 574.
Texas adopts Revised Uniform Anatomical Gift Act. 2009 Tex. Sess. Law Serv. 186.
Texas authorizes convenience signers on accounts that are not expressly labeled as convenience accounts. 2009 Tex. Sess. Law Serv. 929.
Texas authorizes digital and electronic signatures on medical powers of attorney, directives to physicians, and out-of-hospital do-not-resuscitate orders. 2009 Tex. Sess. Law Serv. 461.
Texas codifies common law rule that regardless of the extent of discretion the settlor grants to a trustee, the trustee must always act in good faith and in accordance with the purposes of the trust. 2009 Tex. Sess. Law Serv. 672.
Texas codifies good faith and probable cause exception to no-contest clauses in wills and trusts. 2009 Tex. Sess. Law Serv. 414.
Texas enacts Estates Code. A nonsubstantive codification of probate-related law has begun with the enactment of the portion of the Estates Code that deals with intestacy, wills, and estate administration. To permit guardianship and other topics to be added and for corrections and substantive modifications to be made, the effectiveness of the Estates Code is delayed until January 1, 2014. 2009 Tex. Sess. Law Serv. 680.
Texas limits relocation of charitable trusts outside of Texas unless the trustee secures approval from the court or the settlor authorized a relocation in the trust. The purpose of this statute is to help remedy the orphan trust problem, when a charitable donor dies and the local trustee either dies or is acquired by multinational financial institution no longer run by the people and banks familiar with the donor’s wishes. 2009 Tex. Sess. Law Serv. 754.
Vermont adopts Uniform Trust Code. 2009 Vt. Laws 20.
Vermont enacts Uniform Prudent Management of Institutional Funds Act. 2009 Vt. Laws 9.
Washington expands slayer statute to include someone who participates, either as a principal or an accessory before the fact, in the willful and unlawful financial exploitation of a vulnerable adult. 2009 Wash. Legis. Serv. 525.Return to Probate & Property Magazine