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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.
ADEMPTION: Conveyance of family farm to a corporation a change of form that does not trigger ademption. The court in In re Will of Redditt, 820 So. 2d 782 (Miss. Ct. App. 2002), held that the testator’s conveyance of the family farm to a corporation in exchange for corporate stock does not result in an ademption of specific bequests of the land because the transfer was only a change of form.
ADOPTION: Adopted adult inherits as a child. In Tinney v. Tinney, 799 A.2d 235 (R.I. 2002), the court held as a matter of statutory interpretation that the word “child,” as used in the statute making a lawfully adopted individual a child of the adopting parent, includes persons adopted as adults for purposes of inheritance.
CONDITIONAL GIFT: Charitable bequest limiting use of money to members of stated race passes to charity without racial restriction. The testator’s will contained a charitable bequest to Hospital One for the construction of a building for “white patients who need physical rehabilitation.” The will provided that if Hospital One found the gift unacceptable, the bequest would pass to Hospital Two for similar purposes but without the racial restriction. Because the racial restriction was clearly unenforceable, the issue arose as to which hospital should receive the bequest. In Home for Incurables of Baltimore City v. University of Maryland Medical System Corp., 797 A.2d 746 (Md. Ct. App. 2002), the court struck the racial restriction and allowed Hospital One to receive the gift. The court determined that to allow Hospital Two to receive the gift would be tantamount to enforcing the racial restriction. The court rejected the argument that it was precluded from applying cy pres to excise the racial restriction because of the gift over to Hospital Two.
DUTIES OF TRUSTEE: Duty to inform beneficiaries enforced. The Delaware Supreme Court has on all issues but one affirmed the lower court’s opinion in McNeil v. Bennett, 792 A.2d 190 (Del. Ch. 2001), as reported in the May/June 2002 column. The court agreed that the trustees had breached their duty to furnish information to the beneficiaries, a duty which is independent of the duty of care. The court, however, reversed the lower court’s appointment of a successor trustee, holding that the provision of the trust agreement for the appointment of successor trustees must be followed. McNeil v. McNeil, 798 A.2d 503 (Del. 2002).
LAPSE: Testator’s inclusion of lapsed legacies in residue overrides the anti-lapse statute. A testatrix’s will made numerous specific bequests to her son and daughter. The residuary clause expressly included “all lapsed legacies and devises.” Her son predeceased her, and his son (the testatrix’s grandson) argued that the anti-lapse statute applied to the specific bequests to his father. In Colombo v. Stevenson, 563 S.E.2d 591 (N.C. Ct. App. 2002), the court held that the inclusion of lapsed gifts in the residue was sufficient to override the anti-lapse statute.
MALPRACTICE: Privity requirement retained. The Alabama Supreme Court affirmed the dismissal of a legal services action brought by a decedent’s child and heir alleging that the decedent’s lawyers negligently failed to comply with the decedent’s request to revoke her will. In Robinson v. Benton, No. 1010167, 2002 WL 1044713 (Ala. 2002), the court affirmed existing precedent requiring privity between the attorney and the litigant as a prerequisite to maintaining a negligence action.
MEDICAID: Revocable remainder interest subject to state’s reimbursement claim . A mother deeded the family home to her daughters while retaining a life estate and the right to revoke the remainder. After the mother’s death, the state claimed reimbursement for Medicaid funds expended on the mother’s behalf. Her daughters argued that the remainder was not part of the estate against which the state had a claim. The court in Bonta v. Burke, 120 Cal. Rptr. 2d 72 (Ct. App. 2002), held that under federal law and state regulations that the revocable remainder was part of the mother’s estate because the daughters took their interest by surviving their mother.
POWER OF ATTORNEY: Capacity to execute a power of attorney is the same as for making a will. The court in Dowdy v. Smith, 818 So. 2d 1255 (Miss. Ct. App. 2002), held that the level of competence necessary for executing a power of attorney is the same as for executing a will.
POWER OF ATTORNEY: Principal may confer benefits on agent. The applicable state statute indicated that language in a statutory short form power of attorney giving the agent authority with respect to insurance transactions permits the agent to change beneficiaries provided that the agent cannot be a new beneficiary. In Kipke v. Kipke, 645 N.W.2d 727 (Minn. Ct. App. 2002), the court held that this statutory provision does not prevent the principal from changing a beneficiary designation in favor of the agent after the principal grants the power of attorney.
RECIPROCAL WILLS: Gift over in event of simultaneous deaths effective even though deaths not simultaneous. A husband and wife executed reciprocal wills that left the estate to the survivor, or, in case of simultaneous deaths, in equal shares to two nieces (the couple had no children). Two weeks after his wife’s death, the husband executed a new will with the same substantive terms. At his death a year later, his heirs claimed the estate, arguing that the will disposed of the property only if the husband and wife died simultaneously. The court in Painter v. Coleman, 566 S.E.2d 588 (W. Va. 2002), held that the husband knew that simultaneous deaths were impossible when he executed the will after his wife’s death and that his clear intent to give his property to the nieces should be given effect.
TRUST AMENDMENTS: Writing documenting a trust amendment must be delivered to the trustee before the settlor’s death. A settlor created an inter vivos trust with a bank as the trustee. The settlor could revoke or amend the trust with a writing delivered to the trustee. After the settlor’s death, her daughter faxed to the trustee a purported amendment executed three years before the settlor’s death. In Reid v. McCoy, 46 P.3d 188 (Okla. Ct. App. 2002), the court held that the amendment was ineffective because the delivery requirement could be satisfied only by delivery during the settlor’s life.
TRUST REVOCATION: Trusts are not revocable by will. The settlor created a revocable inter vivos trust with her daughter as trustee and deeded her condominium to the trustee. The trust did not specify a means of revocation. Shortly before her death, the settlor executed a will purporting to devise the condominium to a friend. After the settlor’s death, the state legislature enacted a statute that allows a trust to be revoked by a writing other than a will. The court in In re Will of Tamplin, 48 P.3d 471 (Alaska 2002), held that this new statutory rule was also the common law of the state.
UNDUE INFLUENCE: Agent who did not exercise authority is not in a confidential relationship with the principal. The decedent executed a will making her cousin sole beneficiary and a power of attorney naming the same cousin as her agent. The cousin learned of both documents only after their execution and never exercised her powers as an agent. In response to a challenge to the will, the court in Childress v. Currie, 74 S.W.3d 324 (Tenn. 2002), held that a confidential relationship does not arise as a matter of law if an agent does not exercise his or her powers.
RULINGS AND REGULATIONS
CHARITABLE GIFTS: Gift tax deduction available for gift to foreign charity. PLR 200226012.
CHARITABLE GIFTS: IRS issues proposed regulations relating to charitable guaranteed annuity and unitrust interests. Prop. Reg. 115781-01.
CHARITABLE GIFTS: Severance of CRUT in settlement of dispute allowed. PLR 200229046.
GIFT TAXES: IRS proposes rules providing for net gift treatment of QTIP distributions upon trust termination. Prop. Reg. 123345-01.
GST TAX: IRS finds substantial compliance with allocation rules even though Schedule R of Form 706 was not completed because a copy of the trust was attached to the return. PLR 200224018.
MARITAL DEDUCTION: Severance of QTIP trust into separate QTIP trusts with different children as remainder beneficiaries permitted. PLR 200229018.
QTIP ELECTION: QTIP election that was not needed to reduce estate tax to zero deemed void. PLR 200226020.
SPLIT DOLLAR LIFE INSURANCE: IRS issues proposed regulations governing the income, employment, and gift taxation of split-dollar life insurance arrangements between an employer and an employee, between a corporation and a shareholder, and between a donor and a donee. Prop. Reg. 164754-01.
Asset Protection Trusts. Robert T. Danforth argues that asset protection trusts should be, at least to some extent, effective against the settlor’s creditors in Rethinking the Law of Creditors’ Rights in Trusts, 53 Hastings L.J. 287 (2002).
Charitable Trusts. Racial discrimination in charitable trusts and the historical impact of Hermitage Methodist Homes v. Dominion Trust Company is explored in Dean Barclay’s Dead Hands and State Actors: The Racially Discriminatory Charitable Trust in Hermitage Methodist Homes, 7 Wash. & Lee Race & Ethnic Ancestry L.J. 85 (2001).
Connecticut. Ingi-Mai Loorand explores the Connecticut probate process of appeal and the rights of bidders in “ Sold”: A Bidder’s Right to Appeal a Connecticut Probate Court Decree Ordering the Sale of Real Estate, 15 Quinnipiac Prob. L.J. 365 (2001).
Grantor Trusts. Matthew A. Stevens examines the tax implications of grantor trusts in A Grantor Trust Visits Subpart F: Ruminations on Textron v. Commissioner and Other Anomalies, 21 Va. Tax Rev. 507 (2002).
Nonmarital Children. Aimee Danielson discusses the complexities estate planning attorneys must confront when representing both spouses in A. v. B. v. Hill Wallack : Disclosure of Illegitimate Children in Estate Planning, 15 Quinnipiac Prob. L.J. 335 (2001).
Retirement Assets. James M. Wingate and Dawn E. Fowler explain how to determine whether an increase in value of retirement plans that occurs after marriage should be classified as community or separate property in Characterization of Retirement Assets: Divestiture of Separate Property Is Alive and Well in Texas, 65 Tex. B.J. 584 (2002).
Tenancy by the Entirety. Helen W. Gunnarsson explains the impact of United States v. Craft, 122 S. Ct. 1414 (2002) (holding that a husband’s interest in property held as tenants by the entirety with his wife constitutes property or rights to property to which a federal tax lien may attach, as reported in the September/October 2002 column), in Uncle Sam Sidesteps Tenancy-by-the-Entirety Restrictions, 90 Ill. B.J. 341 (2002).
Testamentary Intent. In Clear and Convincing Evidence of Testamentary Intent: The Search for a Compromise Between Formality and Adjudicative Justice, 34 Conn. L. Rev. 453 (2002), Emily Sherwin provides a careful examination of the conflict between strict rule enforcement and no rule enforcement, specifically with regard to the Uniform Probate Code’s dispensation rule.
Transfer Taxes. Joel C. Dobris provides his insights into Federal Transfer Taxes: The Possibility of Repeal and the Post Repeal World, 48 Clev. St. L. Rev. 709 (2000). Note that Prof. Dobris made these predictions before the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001.
Arizona modifies the taxation of estates and trusts. 2002 Ariz. Legis. Serv. 130.
Colorado doubles family allowance to $24,000. 2002 Colo. Legis. Serv. 190.
Connecticut authorizes transfer on death designations on motor vehicle certificates of registration. 2002 Conn. Legis. Serv. P.A. 02-105.
Delaware limits liability of fiduciaries on contracts and for torts. 2002 Del. Laws 409.
Florida authorizes trusts to provide for the care of pet animals. 2002 Fla. Sess. Law Serv. 2002-82.
Florida enacts comprehensive trust accounting provisions. 2002 Fla. Sess. Law Serv. 2002-82.
Florida enacts Uniform Principal and Income Act. 2002 Fla. Sess. Law Serv. 2002-42.
Georgia revises statutes regarding the inheritance rights of children born out of wedlock. 2002 Ga. Laws Act 968.
Kansas passes comprehensive guardianship act. 2002 Kan. Sess. Laws 114.
Kentucky doubles family allowance in intestate personal property to $15,000. 2002 Ky. Acts 362.
Maryland authorizes unitrust conversions and adjustments between principal and income under specified circumstances. 2002 Md. Laws 478.
Minnesota details effect of marriage dissolution on existing estate plans. 2002 Minn. Sess. Law. Serv. 347.
Nebraska updates its estate and generation-skipping transfer taxes. 2002 Neb. Laws. L.B. 905.
New Jersey revises its estate tax. 2002 N.J. Sess. Law Serv. 31.
Pennsylvania passes Do-Not-Resuscitate Act. 2002 Pa. Legis. Serv. Act 2002-59.
Tennessee enacts Uniform Prudent Investor Act. 2002 Tenn. Pub. Acts 696.
Keeping Current—Probate Editor: Professor Gerry W. Beyer, St. Mary’s University School of Law, One Camino Santa Maria, San Antonio, TX 78228-8603, gwb@ProfessorBeyer.com. Contributors include: Dave L. Cornfeld, Christian J. Hack, William P. LaPiana, and Alicia Pierce.