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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.
CASHIER’S CHECK: Cashier’s check is payable to surviving joint payee. Among the decedent’s effects was a cashier’s check representing the decedent’s own funds payable to decedent "or" his son. In Raichel v. Raichel, 65 S.W.3d 497 (Ky. 2001), the court held that the check was not part of the decedent’s probate estate but was instead a joint account. Accordingly, the son as the surviving payee was entitled to the funds, and the funds were not subject to claims by the surviving spouse.
DISCLAIMER: Executor may disclaim contaminated property. Local law permits a personal representative to renounce the right to administer property that is of no value to the estate. In the case of In re Estate of Coombs, 784 A.2d 150 (Pa. Super. Ct. 2001), the court held that an executor may properly renounce contaminated real property that is the subject of a federal environmental law suit.
DISCLAIMER: Valid disclaimer changes measure of damages for wrongful death. Decedent died in a traffic accident. Under local law, his mother as his sole heir would be the beneficiary of any recovery in a wrongful death action. Mother disclaimed all her interest in decedent’s estate as well as in any wrongful death award, making decedent’s sister, whom decedent had supported, his sole heir. In DeLuca v. Gallo, 735 N.Y.S.2d 596 (N.Y. App. Div. 2001), the court held that the disclaimer made the sister the beneficiary of the wrongful death action and that damages are to be measured by the sister’s pecuniary loss.
DUTIES OF TRUSTEE: Duty to inform beneficiaries enforced. A father created a discretionary trust for his wife and their descendants and a trust for each of four children and their descendants. The children were led to believe that their descendants were only remainder beneficiaries of their respective trusts and that only the wife received distributions from her trust. In a suit by one child, the court in McNeil v. Bennett, No. Civ.A.15875, 2001 WL 815443 (Del. Ch. 2001), held that the trustees violated their duty to inform the child of his interest in the wife’s trust. The court also found that the trustee gave preferential treatment to other children and therefore surcharge and removal of the institutional trustee were justified. The court approved a plan to divide the wife’s trust and to administer it on a unitrust basis.
INTESTACY: Posthumously conceived children are heirs. In Woodward v. Commissioner of Social Security, 760 N.E.2d 257 (Mass. 2002), the court held that posthumously conceived children can be heirs if the genetic relationship to the decedent can be shown and the surviving parent or personal representative can also show that the decedent affirmatively consented to the conception and to the support of any resulting child. The conception must also be timely, but the opinion, rendered in response to a certified question from the federal district court, does not define timeliness.
LIFE INSURANCE: Suicide exclusion clause not applicable if the insured was killed by another person although at the insured’s request. An insured purchased several life insurance policies that contained suicide exclusion provisions. The insured’s personal and business financial situations deteriorated and she sought to commit suicide with the help of a friend who held a shotgun as the insured pulled a string connected to the trigger. When the gun did not fire, the insured asked the friend to pull the trigger himself and he complied. The insurance company refused to pay, claiming that the insured committed suicide. The court in Fister v. Allstate Life Ins. Co., 783 A.2d 194 (Md. 2001), held that the insured did not commit suicide; instead, she was a victim of a homicide. Accordingly, the beneficiaries named in the policies were entitled to the proceeds.
NET GIFTS: Potential obligation of donees to pay additional taxes does not reduce value of gift. In Estate of Armstrong v. United States, 277 F.3d 490 (4th Cir. 2002), the court held that the possible obligation of the donees to pay additional gift and/or estate taxes if the donor dies within three years of the date of the gift was deemed too speculative a contingency and thus did not reduce the value of the gift.
PROFESSIONAL RESPONSIBILITY: Attorney has no duty to advise principal regarding principal’s choice of agent. The principal was defrauded by her agent. The principal’s conservator sued the attorney who drafted the power of attorney, claiming breach of duty because the attorney did not dissuade the principal from nominating an incompetent agent. The court in Persinger v. Holst, 639 N.W.2d 594 (Mich. Ct. App. 2001), held that the attorney has no duty to ensure that a client is choosing an appropriate agent.
SLAYERS: Family members of slayer may receive property from victim. A husband killed his wife and then committed suicide. They had a joint will, leaving everything to the survivor and, on survivor’s death, one-third to his parents, one-third to her parents, and one-third to be divided equally among their siblings. In the case of In re Estates of Covert, 761 N.E.2d 571 (N.Y. 2001), the court held that the slayer’s innocent family members are not disqualified by reason of their relative’s crime and therefore take the probate assets under the will, that the nonprobate assets with named beneficiaries pass to those named, and that the couples’ jointly held property is divided between the estates of the husband and wife.
TRUSTEES: Right to appoint successor trustee is protected by due process. A decedent’s will created a charitable trust to support a prize in medicine. The will also provided that the treasurer of a medical organization be a co-trustee or that the organization be allowed to appoint a co-trustee. A co-trustee brought an action to modify the provisions relating to the appointment of the co-trustee but failed to give notice to the medical organization. In Estate of Sigourney v. American Psychoanalytic Ass’n, 113 Cal. Rptr. 2d 274 (Cal. Ct. App. 2001), the court held that the organization’s power to appoint a co-trustee was "property" entitled to due process protection and that the organization was entitled to notice of the action to modify the trust.
Rulings and Regulations
CHARITABLE GIFTS: Charitable deduction permitted even though donor imposes conditions such as requiring the donated artwork to be permanently displayed at a museum. PLR 200202032.
CHARITABLE GIFTS: Conversion of charitable remainder unitrust to a charitable gift annuity approved. PLR 200152018.
ESTATE INCOME: Estate of nonresident alien is not subject to income tax on income until actually collected by U.S. ancillary administrator. A constructive receipt approach was rejected because the estate does not have unfettered control over the date of actual receipt of interest and dividends. PLR 200203006.
INFLATION ADJUSTMENTS: IRS announces 2002 inflation adjustments. Effective for 2002, the annual exclusion is $11,000, the gifts to a noncitizen spouse exclusion is $110,000, and the generation-skipping transfer tax exemption is $1.1 million. Rev. Proc. 2001-59.
LIFE INSURANCE TRUST: Discretionary power of trustee of life insurance trust to pay estate obligations, including estate tax, did not trigger estate tax inclusion. PLR 200147039.
POWER OF APPOINTMENT: Power of appointment construed as limited even though appointer was arguably within the class of potential appointees. PLR 200152026.
PROFIT-SHARING PLANS: Receipt of entire account balance of a profit-sharing plan considered as a lumpsum distribution. If a portion of the balance is then transferred to a charitable remainder unitrust, no immediate taxable income or gain is realized. PLR 20020078.
SPLIT-DOLLAR LIFE INSURANCE: IRS revokes Notice 2001-10 and foreshadows new regulations. The IRS announced that it intends to publish proposed regulations to provide comprehensive guidance regarding the federal tax treatment of split-dollar life insurance, outlined the rules expected to be included in the proposed regulations, and provided assistance in valuing current arrangements. IRS Notice 2002-8.
Disclaimers—Reform Suggestions. Andrew S. Bender proposes a legislative change to gratuitous gift disclaimer law to achieve consistency with bankruptcy and fraudulent conveyance law in Disclaimer Law: A Call for Statutory Reform, 2001 U. Ill. L. Rev. 887.
Disclaimers—Uniform Act. Adam J. Hirsh provides a thoughtful critique of The Uniform Disclaimer of Property Interests Act: Opportunities and Pitfalls, 28 Est. Plan. 571 (2001).
Dynasty Trusts. Alaskan self-settled trusts can allow settlors to avoid estate and generation-skipping taxes. To learn more, read Stephen E. Greer, The Alaska Dynasty Trust, 18 Alaska L. Rev. 253 (2001).
EGTRAA 2001. Richard A. Campbell and Mary C. Talarico summarize and comment upon EGTRAA in Estate and Gift Tax Changes: What’s New in the New Law?, 90 Ill. B.J. 24 (2002), and provide sage advice in The New Estate and Gift Tax Law: Estate-Planning Pointers, 90 Ill. B.J. 80 (2002).
Family Limited Partnerships. Walter D. Schwidetzky discusses the proposals for reform of family limited liability entities created to avoid estate taxes in Last-Gasp Estate Planning: The Formation of Family Limited Liability Entities Shortly Before Death, 21 Va. Tax Rev. 1 (2001).
Forced Shares. To find out whether the interest of a surviving spouse in an elective share trust may allow for a qualified terminable interest property exemption, read Lauren B. Epstein’s The QTIP Trust and Elective Share Trust: Are They Really Parallel?, 53 Fla. L. Rev. 965 (2001).
Funding Inter Vivos Trusts. Richard P. Miller explains the critical importance of transferring property into trust in Funding Living Trusts: An Overview and Introduction, 89 Ill. B.J. 628 (2001).
Georgia. Mary F. Radford explains changes to Georgia probate law in Wills, Trusts & Administration of Estates, 53 Mercer L. Rev. 499 (2001).
Inheritance. In The Family Paradigm of Inheritance Law, 80 N.C. L. Rev. 199 (2001), Frances H. Foster describes the unfairness of current intestacy provisions that are based purely on family relationships and explores potential solutions.
Internet. Adria P. Olmi details Estate-Planning Internet Resources for Illinois Lawyers, 90 Ill. B.J. 49 (2002).
Jurisdiction. Peter Nicolas explains how subject matter jurisdiction is not enough to keep a probate matter in federal court in Fighting the Probate Mafia: A Dissection of the Probate Exception to Federal Court Jurisdiction, 74 S. Cal. L. Rev. 1479 (2001).
Michigan. Robert P. Tiplady discusses recent judicial changes to Michigan probate law in Annual Survey of Michigan Law, June 1, 1999–May 31, 2000: Trusts and Estates, 47 Wayne L. Rev. 797 (2001).
Rule Against Accumulations. Often overshadowed by the Rule Against Perpetuities, the Rule Against Accumulations can derail a perpetual trust. Karen J. Sneddon explains how in The Sleeper Has Awakened: The Rule Against Accumulations and Perpetual Trusts, 76 Tul. L. Rev. 189 (2001).
Slayer Statutes. Julie J. Olenn criticizes New York’s slayer rule and its application in murder-suicide cases in ’ Til Death Do Us Part: New York’s Slayer Rule and In re Estates of Covert, 49 Buff. L. Rev. 1341 (2001).
Statute of Charitable Uses. Four hundred years ago, the Statute of Charitable Uses spawned the seeds of charitable giving. Penina Kessler Lieber discusses the history and effects of the statute in 1601–2001: An Anniversary of Note, 62 U. Pitt. L. Rev. 731 (2001).
Virginia. For an update on legislative and judicial changes to Virginia estate planning law, read J. Rodney Johnson, Wills, Trusts, and Estates, 35 U. Rich. L. Rev. 845 (2001).
Illinois authorizes electronic reporting of deaths. 2001 Ill. Legis. Serv. PA 92-0141.
Illinois enacts Joint Tenancy Act. The conveyancing instrument no longer must state that the grantees are husband and wife. Likewise, the instrument no longer needs to indicate that neither a joint tenancy nor a tenancy in common is being created. 2001 Ill. Legis. Serv. PA 92-0136.
New Jersey raises fees for probate of wills, estate administration, and related matters. 2001 N.J. Sess. Law Serv. ch. 370.
Wisconsin amends estate tax provisions. 2001–02 Wis. Legis. Serv. Act 16.
Keeping Current—Probate Editor: Gerry W. Beyer, St. Mary’s University School of Law, One Camino Santa Maria, San Antonio, TX 78228–8603, gwb@ProfessorBeyer.com. Contributors include Mark A. Cevallos, Dave L. Cornfeld, William P. LaPiana, and Linda T. Ngo