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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: Mutual funds not considered as stocks or bonds. The testatrix’ s will included a specific bequest of all corporate bonds, corporate stocks, and municipal bonds owned at death. Before her death, the testatrix created an investment account with a bank and gave the bank discretion over investment decisions. The account was continued by the testatrix’s conservator until the testatrix died. As municipal bonds matured or were called, the bank invested the proceeds in the bank’s proprietary mutual funds. In a suit by the beneficiary of the specific bequest, the court held that the mutual funds were not stocks or bonds and that the bequest of municipal bonds, which had matured or had been called, had adeemed. Mississippi Baptist Foundation, Inc. v. Estate of Matthews, 791 So. 2d 213 (Miss. 2001).
CONDITIONAL GIFT: Income interest terminated by the income beneficiary’s remarriage deemed invalid restraint on marriage . The decedent’s will created a trust that would pay income to his surviving spouse until her death, remarriage, or cohabitation. A charity received the remainder interest. The surviving spouse brought a proceeding to reform the trust to obtain the marital and charitable deductions for the estate. Using extrinsic evidence of the decedent’s intent, the court held that the limitation on the surviving spouse’s income interest was an illegal restraint upon marriage. Estate of Guidotti, 109 Cal. Rptr. 2d 674 (Cal. Ct. App. 2001).
DIVORCE: IRA beneficiary designation was not changed by divorce decree. The decedent’s spouse was awarded a portion of the decedent’s IRA in a final judgment of divorce. The spouse was also the beneficiary of the IRA. The decedent, who was incapacitated at the time of the divorce, never changed the beneficiary designation. In Luszcz v. Lavoie, 787 So. 2d 245 (Fla. Dist. Ct. App. 2001), the court held that the ex-spouse was entitled to the entire account. The IRA’s beneficiary designation may be overridden only if the naming of a specific beneficiary is a condition of the divorce. Mutual releases do not change the beneficiary because the IRA is a contract with an institution, not with a spouse.
EQUITABLE RECOUPMENT: Executor entitled to credit for overpayment of income taxes by beneficiary. A beneficiary overpaid capital gain taxes on estate property. The time period for the beneficiary to claim a refund had expired. Nonetheless, the court in Estate of Branson v. Commissioner, 264 F.3d 904 (9th Cir. 2001), held that the estate was entitled to a credit for the overpaid income tax based on the doctrine of equitable recoupment.
GROSS ESTATE: Gifts made by agent included in the principal ’ s gross estate. The principal appointed an agent under a durable power of attorney. During the principal’s incompetency, the agent made gifts. The court in Estate of Gaynor v. Commissioner, T.C. Memo 2001-206, held that the gifts were part of the principal’s gross estate. The court determined that under local law, the agent’s gifts were revocable because the power of attorney did not expressly authorize the agent to make gifts.
JOINT ACCOUNTS: Filing of suit deemed severance. Local law provides that termination of a joint tenancy in a certificate of deposit may be accomplished only by actual termination and that a party’s intent to terminate is not sufficient. In Burkholder v. Burkholder, 48 S.W.3d 596 (Mo. 2001), the court held that a partition suit filed by the sole contributor to the jointly held certificate who was unable to obtain physical possession of the certificate was sufficient to terminate the joint tenancy.
LAPSE: Survivorship language defeats statute . The court held that a gift to five named individuals “equally share and share alike, . . . or to the survivors thereof” was a gift per capita to those who survived the testator. The language evidenced the testator’s intention to override the anti-lapse statute. Polen v. Baker, 752 N.E.2d 258 (Ohio 2001) (affirming appellate court opinion reported in Nov./Dec. 2000 column).
LIFE INSURANCE: Only one-half of proceeds of policies purchased with community property included in gross estate upon death of insured. A husband purchased life insurance policies with community property and retained the incidents of ownership. His wife died first. After the husband’s death, the court in Estate of Burris v. Commissioner, T.C. Memo 2001-210, held that the husband’s gross estate contained only one-half of the insurance proceeds.
NO-CONTEST CLAUSE: Suit to remove co-trustee does not trigger forfeiture under in terrorem clause. The decedent’s trust penalized any beneficiary challenging any provision of the trust. A beneficiary who was also a co-trustee sued to remove the other co-trustee. The court in Conte v. Conte, 56 S.W.3d 830 (Tex. App. 2001), held that the no-contest clause did not apply. The trust did not expressly include a prohibition on a beneficiary suing to remove a trustee. In addition, to prohibit suit would deprive the beneficiary of a statutory right.
REMAINDER GIFT: Grandchildren deemed root of a per stirpes distribution because of express language in will. The testator provided for distribution of the remainder of a testamentary trust to “the issue then living of [three named children], per stirpes.” At the time of termination of the trust, one child had six living children, one had one child, and the third child had none. In In re Magnor, 729 N.Y.S.2d 771 (N.Y. App. Div. 2001), the court held that the trust property should be divided into seven parts because the language clearly indicated that the grandchildren were to take directly and not as representatives of their parents.
WILLS: Gift of contents of house does not include stocks and bonds. The testatrix’s handwritten will made several specific bequests including one of her home and its “contents.” The court in Last Will and Testament of Lawson v. Lambert, 792 So. 2d 977 (Miss. 2001), held that a bequest of contents encompasses only the typical personal property used in a house. A strong dissent argued that the presumption against intestacy should apply to this homemade will to include the financial assets in the bequest.
RULINGS AND REGULATIONS
CHARITABLE REMAINDER TRUST: Loan of money by an estate to a corporation owned by a charitable remainder unitrust not considered as an indirect act of self-dealing even though the decedent’s wife was sole income beneficiary of the trust, CEO of the parent corporation, and a co-trustee. PLR 200134033.
MARITAL DEDUCTION: Estate of alleged common law spouse is not entitled to the marital deduction. The IRS refused to recognize an alleged common law marriage for marital deduction purposes because local law would not validate the marriage but did not exclude possible treatment of payments to the alleged spouse as a claim in tort if permitted by local law. TAM 200132004.
NET GIFT: Disposition of qualifying income interest in marital deduction property under Code § 2519 treated as net gift. PLR 200137022.
TRUSTEE COMPENSATION: Certain arrangements for payment of trustee fees will not constitute impermissible self-dealing. PLR 200135047.
End of Life Decisions. Lorraine M. Bellard analyzes life terminating decisions in Restraining the Paternalism of Attorneys and Families in End-of-Life Decision-Making While Recognizing That Patients Want More Than Just Autonomy, 14 Geo. J. Legal Ethics 803 (2001).
Estate Administration. Robert E. Kass and Robert H. Downie provide an understandable and comprehensive explanation of the estate administration process in a book targeted at the lay audience, What Do We Do Now? A Practical Guide to Estate Administration for Widows, Widowers and Heirs (Carob Tree Press 2000).
Estate Taxes. Karen C. Burke and Grayson M.P. McCouch contemplate a tax system free of estate transfer taxes in Death Without Taxes?, 20 Va. Tax Rev. 499 (2001).
Former Spouses. Amy N. Morrissey discusses Michigan’s Estates and Protected Individuals Code and its effects on the rights of former spouses in EPIC and Estate Planning for Second Marriage, 2000 Law Rev. Mich. St. U. Det. C.L. 811 (2000).
Malpractice — Alabama Law. Kelly Burleson Rushin predicts the approach of Alabama regarding the ability of intended beneficiaries to sue drafting attorneys for negligence in Estate Planning Malpractice: Will Alabama Courts Relax the Privity Barrier?, 52 Ala. L. Rev. 1335 (2001).
Malpractice — Standard of Proof. Bradley E.S. Fogel recommends that a plaintiff be required to prove an estate planner’s negligence by clear and convincing evidence in Attorney v. Client— Privity, Malpractice, and the Lack of Respect for the Primacy of the Attorney-Client Relationship in Estate Planning, 68 Tenn. L. Rev. 261 (2001).
Mediation. To avoid trouble in the future, read Gary D. Williams’s note entitled Weighing the Costs and Benefits of Mediating Estate Planning Issues Before Disputes Between Family Members Arise: The Scale Tips in Favor of Mediation, 16 Ohio St. J. on Disp. Resol. 819 (2001).
Posthumous Reproduction. Cindy L. Steeb considers the Ohio inheritance rights of a child conceived artificially after the death of the father in A Child Conceived After His Father’ s Death? Posthumous Reproduction and Inheritance Rights: An Analysis of Ohio Statutes, 48 Clev. St. L. Rev. 137 (2000).
Property Destruction Orders. Abigail J. Sykas explains why you really “can’t take it with you” in Waste Not, Want Not: Can the Public Policy Doctrine Prohibit the Destruction of Property by Testamentary Direction?, 25 Vt. L. Rev. 911 (2001).
Russian Law. To learn the intricacies and history of the Russian Inheritance Code, read Paul T. Swann’s Russian Intestacy Law, 8 Tulsa J. Comp. & Int’l L. 133 (2000).
Self-proved Wills. Learn about the use of self-proving affidavits in wills and codicils granted by Michigan’s passage of the Estates and Protected Individuals Code in Betsy Dupree-Kyle’s comment, Michigan Self-Proved Wills: What Are They and How Do They Work?, 2000 Law Rev. Mich. St. U. Det. C.L. 829 (2000).
Valuation of Contingent Interests. Wendy C. Gerzog provides a detailed analysis of the applicable Internal Revenue Code provisions, reveals their shortcomings and suggests a solution in Contingencies and the Estate Tax, 5 Fla. Tax Rev. 49 (2001).
Alaska provides additional details regarding the operation of its “ opt-in” community property system. Issues covered by the new law include debt liability, ownership of life insurance policies, and the division of community property at death. 2001 Alaska Sess. Laws ch. 80.
Arizona fine-tunes various aspects of probate law. The new legislation covers inheritance rights in adoption cases, the homestead allowance, exempt property, the family allowance, informal probate, and liability of non-probate assets for a decedent’s debts. 2001 Ariz. Sess. Laws ch. 44.
Arkansas revises procedures for probate notices. 2001 Ark. Acts 240.
California expands the types of nonprobate transfers that will not occur upon the donor ’ s death if the donor and the donee have subsequently divorced. Examples include multiple-party accounts (joint, P.O.D., and trust), joint tenancies, and community property. 2001 Cal. Legis. Serv. ch. 417.
California modernizes allocation and payment of debts upon death of a spouse. 2001 Cal. Legis. Serv. ch. 72.
California revises public guardian provisions. 2001 Cal. Legis. Serv. ch. 232.
Colorado modifies various aspects of probate and trust law. Examples include clarification of will formalities, expansion of the court’s dispensing power to validate wills, codicils and revocation instruments that do not meet the normal formalities, and validation of trusts that would otherwise violate the Rule Against Perpetuities, if all or part of the income or principal of the trust may be distributed, in the discretion of the trustee, to a person who is living when the settlor created the trust. 2001 Colo. Legis. Serv. ch. 249.
Connecticut expands grounds upon which the court may remove a fiduciary in absence of a breach of duty. The court may now remove a fiduciary if (1) lack of cooperation among cofiduciaries substantially impairs the administration of the trust, (2) the court determines it is in the best interests of the beneficiaries to remove the trustee that is unfit or unwilling to administer the estate effectively, or (3) there is a substantial change of circumstances or all of the beneficiaries request removal and the court finds that the removal would serve the best interests of the beneficiaries and is not inconsistent with a material purpose of the governing instrument. 2001 Conn. Legs. Serv. P.A. 01-114.
Florida creates Quality of Long-Term Care Facility Improvement Trust Fund. 2001 Fla. Sess. Law Serv. ch. 2001-205.
Idaho updates tax apportionment statute. 2001 Idaho Laws ch. 262.
Illinois expands list of individuals who may make anatomical gifts of a deceased person’s organs. For example, gifts may now be made by any adult grandchild and the decedent’s surrogate decision maker under the Health Care Surrogate Act. 2001 Ill. Legis. Serv. P.A. 92-349.
Indiana strengthens anatomical gift statutes. The new provision states that a donor’s family has no legal standing or authority to modify a deceased donor’s gift or to prevent a donor’s anatomical gift. 2001 Ind. Legis. Serv. P.L. 130-2001.
Louisiana enacts comprehensive provisions for advance mental health treatment directives. 2001 La. Sess. Law Serv. Act 755.
Maryland expands guardian ’ s authority to make medical treatment decisions for a ward without obtaining court approval. 2001 Md. Laws ch. 189.
North Carolina modernizes provisions for the resignation, removal, and renunciation of trustees and for the appointment of successor trustees. 2001 N.C. Adv. Legis. Serv. S.L. 2001-413.
West Virginia revises estate and trust administration law. 2001 W. Va. Acts ch. 125.
Keeping Current—Probate Editor: Professor Gerry W. Beyer, St. Mary’s University School of Law, One Camino Santa Maria, San Antonio, TX 78228-8603, firstname.lastname@example.org. Contributors include Mark A. Cavallos, Dave L. Cornfeld, William P. LaPiana, Linda T. Ngo, and Theresa York.