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 WILL: Condition enforced, triggering intestate distribution. A husband and wife executed a joint will. The will left the total estate to the survivor and provided that, if they should die "simultaneously or within a short time of each other," the assets would pass to three of their four children. The wife died more than three years after her husband's death. In Estate of Blankenship, No. 3002, 1999 WL 350523 (S.C. Ct. App. 1999), the court held that the will was conditional and that the second estate passed by intestacy to all
* DISCLAIMERS: Medicaid reimbursement claim. A husband predeceased his wife by three months. The wife's executor timely disclaimed property passing to the wife under the husband's will and survivorship interests in jointly held property. The appropriate agency sought reimbursement for Medicaid benefits paid for her and challenged the disclaimer as contrary to public policy. The court in Estate of Kirk, 591 N.W.2d 630 (Iowa 1999), upheld the disclaimer.
* ELECTIVE SHARE: Trust interest offset against elective share. In Estate of Myers, 594 N.W.2d 563 (Neb. 1999), the court held that a surviving spouse's interest in an inter vivos trust that received the residue under the decedent's will must be applied in satisfaction of the elective share. The court also upheld the lower court's use of IRS tables to value the surviving spouse's income interest even though the corpus of the trust consisted largely of non-income producing stock.
* EQUITABLE RECOUPMENT: Credit for overpayment of income taxes. A beneficiary overpaid capital gain taxes on estate property. The court in Estate of Branson v. Commissioner, 113 T.C. Memo 1999-231, held that the estate was entitled to a credit for the overpaid income tax based on the doctrine of equitable recoupment, even though the statue of limitations had run on the beneficiary's claim for a refund.
* ESTATE TAX: Retroactive increase constitutional. In August 1993, OBRA increased the estate tax rate retroactively to include the estates of decedents who died on or after January 1, 1993. The court in NationsBank of Texas v. United States, No. 98-21T, 1999 U.S. Claims LEXIS 209 (1999), held that the retroactive increase did not violate due process, equal protection, the takings clause or the prohibition against ex post facto laws.
* EXCULPATORY CLAUSE: Negligent acts not exculpated. A corporate trustee asserted an exculpatory clause excusing "any mistake or errors of judgment made . . . in good faith" as a defense to an action based on failure to diversify. Although holding that the clause was not contrary to public policy, the court held that it did not protect against liability for negligence. In re Trusteeship of Williams, 591 N.W.2d 743 (Minn. Ct. App. 1999).
* LIFE INSURANCE: Proceeds payable to victim's family, not deceased murderer's relatives. A husband obtained life insurance on his wife under his employer's group policy. The policy provided that death benefits on the wife would be paid to the husband or to his relatives if he were deceased. The husband killed his wife and then committed suicide. The husband's siblings claimed the proceeds of the policy. In Diep v. Rivas, 727 A.2d 448 (Md. Ct. Spec. App. 1999), the court held that the slayer's rule prevented the siblings from taking. Thus, the wife's family members were entitled to the proceeds.
* LIFE INSURANCE: Waiver of all rights as beneficiary sufficiently specific. A couple divorced and their separation agreement provided for a mutual waiver of rights as beneficiary of any life insurance policy. The husband died 23 years later without changing the beneficiary of his life insurance policy. In Robinson v. Rodi, No. 96 C058, 1998 WL 574757 (Ohio Ct. App. 1998), the court held that the separation agreement was sufficiently specific to satisfy the waiver requirement of ERISA as a matter of federal common law.
* POWER OF ATTORNEY: Agent precluded from making transfers to self. In Schock v. Nash, 732 A.2d 217 (Del. 1999), the court held that an agent's fiduciary duty of loyalty prevents gifts of the principal's property to the agent unless the principal consents. Absent such consent, the transactions are voidable. Although the court affirmed the lower court's finding that the trans-actions were not authorized, the court rejected the lower court's adoption of a bright line test requiring that the power of attorney expressly authorize such transfers.
* POWER OF ATTORNEY: Agent may not revoke trust. In Guardianship of Lee, No. 90,753, 1999 WL 342727 (Okla. Ct. App. 1999), the court held that an agent under a durable power of attorney may not revoke the principal's revocable lifetime trust absent authority in the power of attorney. Accordingly, the trust became irrevocable on the principal's incapacity.
* REVOCABLE TRUST: Trust revocation limited to method stated in trust. The settlor's trust provided that it could be amended only by a writing executed and acknowledged by the settlor and the trustee. The trust was to terminate when the settlor died, subject to exercise of the settlor's power of appointment "either by specific reference . . . or by general residuary clause." The settlor's will did not mention the trust and gave the residue to two individuals. The settlor's executor claimed the trust property for the estate, which had insufficient property to satisfy preresiduary bequests. In One Valley Bank v. Hunt, 516 S.E.2d 516 (W. Va. 1999), the court held that the trust could be revoked only in accordance with its terms and that the will did not satisfy those terms. Thus, the trust had to be distributed to the residuary
beneficiaries under the will.
* UNDUE INFLUENCE: Sibling relationship does not trigger presumption of undue influence. A decedent and his brother were tenants in common in realty and business partners. The decedent's will left everything to his brother. In Crumbley v. McCart, No. S99A0719, 1999 WL 358664 (Ga. 1999), the court held that the confidential relationship that might exist between the brothers would only relate to business or real estate transactions. The court refused to infer a confidential relationship that would give rise to a presumption that the beneficiary brother exerted undue influence.
RULINGS AND REGULATIONS
* CHARITABLE DEDUCTION: Reformation of trust to meet requirements of a charitable remainder trust allowed; thus the trust qualified for the estate tax charitable deduction. PLR 199924029.
* DISCLAIMER: Surviving spouse's disclaimer of specific assets caused those assets to pass as residuary gift. TAM 199924002.
* GRANTOR-RETAINED INTEREST TRUSTS: Proposed regulations would disallow use of notes and similar instruments to satisfy the annual payment obligation. Prop. Treas. Reg. § 108287-98.
* POWER OF APPOINTMENT: Court-ordered division of pre-1942 trust treated as exercise of beneficiary's power of appointment. PLR 199924014.
* POWER OF APPOINTMENT: Partial release of general power of appointment under pre-1942 trust determined not to be an exercise of the power. PLR 199923028.
* Alternative reproduction technologies. Kristin Antall's Who Is My Mother?: Why States Should Ban Posthumous Reproduction by Women, 9 Health Matrix 203 (1999), advances an argument, supported by constitutional and societal interests, against posthumous reproduction by women. For a comprehensive discussion of the social, medical and legal issues of assisted reproduction, see Michelle Brenwald & Kay Redeker, A Primer on Posthumous Conception and Related Issues of Assisted
Reproduction , 38 Washburn L. J. 599 (1999).
* Anatomical gifts. Shelby Robinson advances three models for compensating organ donors in Organs for Sale? An Analysis of Proposed Systems for Compensating Organ Providers, 70 U. Colo. L. Rev. 1019 (1999).
* Business entity selection. Jeffrey Galant and Andrew Wilson discuss the consequences of selecting various business forms in A Primer on Entity Selection for the Estate Planner, Tr. & Est. 46 (May 1999).
* Charitable trusts and private foundations. In Charitable Remainder Trusts and Private Foundations: A Letter to a Client, Prac. Tax Law. at 37 (Spring 1999), Morton Harris describes the respective advantages of charitable remainder trusts and private foundations.
* Employee stock ownership plans. Richard Lang explains the tax and estate planning opportunities for C corporation owners in selling to an ESOP in Life in The Cash Lane: Post-ESOP Estate Planning, Tr. & Est. 27 (May 1999).
* Health care surrogates. Aaron Krupp proposes changes to state health care surrogate statutes to minimize unethical behavior by physicians and surrogates in Health Care Surrogate Statutes: Ethics Pitfalls Threaten the Interests of Incompetent Patients, 101 W. Va. L. Rev. 99 (1998).
* Malpractice. Jacob Todres analyzes reported tax malpractice cases to determine whether particular areas of tax law or practice are more prone to malpractice claims in Malpractice and the Tax Practitioner: An Analysis of the Areas in Which Malpractice Occurs, 48 Emory L.J. 547 (1999).
* Marital deduction. Beverly Budin discusses proposed IRS regulations in IRS Issues Proposed Regulations After Estate of Hubert: New Terminology and Maybe New Problems, J. Tax'n 227 (May 1999).
* Nuncupative wills. Patricia Critchley questions the validity of oral wills for seamen and soldiers in Privileged Wills and Testamentary Formalities: A Time to Die?, 58 Cambridge L.J. 49 (1999).
* QTIP trust. James Gulecas discusses proper drafting of the inter vivos QTIP trust in Drafting the Lifetime QTIP Trust, Prac. Tax Law. 13 (Spring 1999).
* Restrictions on gifts. Adam J. Hirsch argues that the law governing gifts restricted to specified noncharitable purposes should be unified using charitable gift doctrine in Bequests for Purposes: A Unified Theory, 56 Wash. & Lee L. Rev. 33 (1999).
* Transfer taxes. Jay A. Soled and Charles Davenport discuss problems of the transfer tax system and offer a solution in Cremating Transfer Taxes: Is There Hope for a Resurrection? 34 Wake Forest L. Rev. 229 (1999).
* Voluntary employees beneficiary association. For a discussion of VEBA and its benefits, see Allen Ross's Estate Tax Planning for Business: The Efficient VEBA, Tr. & Est. 62 (May 1999).
* California adopts Uniform Principal and Income Act. 1999 Cal. Legis. Serv. ch. 145.
* Colorado enacts Uniform Custodial Trust Act. 1999 Colo. Legis. Serv. ch. 295.
* Connecticut abolishes merger of estates and permits one person to be a trust's sole beneficiary and sole trustee. 1999 Conn. Legis. Serv. P.A. 99-103.
* Connecticut enacts Uniform Principal and Income Act. 1999 Conn. Legis. Serv. P.A. 99-164.
* Florida revises computation of surviving spouse's elective share. 1999 Fla. Sess. Law Serv. ch 99-343.
* Nevada updates and revises intestacy, will and trust provisions. 1999 Nev. Stat. ch. 467.
* North Carolina enacts Uniform Prudent Investor Act. 1999 N.C. Sess. Laws 1999-215.
* North Carolina provides procedure for guardians to make gifts from incompetent wards' estates. 1999 N.C. Sess. Laws 1999-270.
* Texas exempts Roth IRAs from creditors' claims. 1999 Tex. Sess. Law Serv. ch. 106.
* Texas permits trustee exercise of cy pres to designate new charitable beneficiary. 1999 Tex. Sess. Law Serv. ch. 63.
* Texas removes sale of books and computer software from definition of "practice of law" if they clearly state that they are not a substitute for the advice of a lawyer. 1999 Tex. Sess. Law Serv. ch. 799.
* Texas revises law relating to advance directives. 1999 Tex. Sess. Law Serv. ch. 450.
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.Probate & Property Magazine is published six times annually and is included in section members' annual dues.