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Keeping Current Probate
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.
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.
ATTORNEY-CLIENT PRIVILEGE: Successor trustee may assert attorney-client privilege. The original trustees were removed and replaced by a court-appointed successor. The successor trustee and the beneficiaries sought discovery. The former trustees balked, claiming attorney-client privilege. The court in In re Estate of Fedor, 811 A.2d 970 (N.J. Super. Ct. Ch. Div. 2001), held that the successor trustee holds the privilege and may waive it as to all communications between her predecessors and their attorneys and accountants.
CONSTRUCTION: Designation of wife of the life beneficiary as the remainder beneficiary referred to wife at the time the remainder interest was to take effect, not when the decedent died. The decedent's will created a trust for his widow. The trust terminated at his widow's death, and a portion of the trust property then passed to his brother or, if the brother were not then living, to his brother's wife. When the decedent died, his brother was married, but was widowed thereafter. The brother remarried. The brother died before the trust terminated, but his second wife survived. In In re Behnke Trust, No. 233677, 2003 WL 125125 (Mich. Ct. App. Jan. 14, 2003), the court held that the term "wife" was not ambiguous and was not limited to the brother's wife living at the time of the execution of the will or at the decedent's death. Accordingly, the brother's surviving spouse was entitled to the remainder.
DISCRETIONARY TRUSTS: Power to invade principal to maintain "station in life" includes authority, but not duty, to make gifts. The testator's widow asked the trustee of a testamentary trust to invade principal so that she might make charitable and family gifts. The trustee refused, asserting that the language giving the trustee power to invade principal to meet the "reasonable needs" of the widow's "station in life" did not allow invasions to make gifts. In Finch v. Wachovia Bank & Trust Co. N.A., 577 S.E.2d 306 (N.C. Ct. App. 2003), the court determined that gift-giving is included in the station-in-life test but that the trust language making the trustee's judgment "conclusive" meant that the trustee could not be ordered to invade principal.
EXONERATION: Just debts clause will not exonerate nonprobate property. Noting that the common law doctrine of exoneration is no longer favored, the court in In re Estate of Vincent, 98 S.W.3d 146 (Tenn. 2003), held that the doctrine does not apply to nonprobate property. Neither a just debts clause nor a direction to pay installment debts was sufficient to require exoneration of a mortgage on real property that passed by right of survivorship.
MARITAL DEDUCTION: Attempted QTIP trust does not qualify for the marital deduction because income distributions are limited to an ascertainable standard. The surviving spouse must have an unlimited right to all income for life to satisfy the requirements for a QTIP trust. Estate of Davis v. Commissioner, T.C. Memo 2003-55.
PENSION PLANS: Proper qualified domestic relations order may serve as renunciation. The decedent's pension plan listed his ex-wife and current wife as equal beneficiaries. At the ex-wife's insistence, the decedent entered into a QDRO assigning to the ex-wife as her sole property a new annuity created from a lump-sum transfer of 45% of the decedent's pension accumulations. All parties waived all other interests in each others' estates. The decedent never changed the beneficiary designation on file with the plan. The court in Silber v. Silber, 757 N.Y.S.2d 227 (N.Y. 2003), affirmed the lower court opinion reported in the September/October 2002 issue by holding that federalcommon law determines whether the QDRO acted as a renunciation of the ex-wife's rights to the pension plan. Because the waiver was "explicit, voluntary and made in good faith," it was deemed effective.
PERSONAL PROPERTY DISPOSITION BY NONTESTAMENTARY LIST: Trust instrument sufficient as a separate list. Local law provides that a will may dispose of the testator's tangible personal property by reference to a written statement or list in the testator's handwriting or signed by the testator. The court in In re Estate of Blodgett, 95 S.W.3d 79 (Mo. 2003), held that an inter vivos trust, created by the testator and referenced in the testator's will, that directs the trustee to distribute all of the testator's tangible personal property to a named individual satisfies the statutory requirements for a "written statement or list."
POWER OF ATTORNEY: Extrinsic evidence of authority to make gifts inadmissible. The principal executed a broad durable power of attorney giving the agent the power to do whatever the principal could do with the principal's own property. The agent transferred large amounts of the principal's property to herself. In Praefke v. American Enterprise Life Ins. Co., 655 N.W.2d 456 (Wis. Ct. App. 2002), the court held that the gifts were invalid because the power of attorney did not grant the agent the power to make gifts to the agent and that extrinsic evidence of authorization to make such gifts is inadmissible.
TRUSTEE REMOVAL: Mere dissatisfaction with the amount of income does not give beneficiaries a sufficient ground to remove the trustee. The decedent's testamentary trust provides mandatory income distributions to grandchildren with the remainder passing to their children upon death. Dissatisfied with the amount of income received and alleging that the trust was too heavily invested in equities, the grandchildren and all but one of the living remainder beneficiaries petitioned for removal of the corporate trustee. In In re Estate of Berthot, 59 P.3d 1080 (Mont. 2002), the court held that because the will directed the trustee to manage the trust in the best interests of the "trust estate," the income beneficiaries had no grounds to complain given the growth of the trust corpus.
RULINGS AND REGULATIONS
CHARITABLE DEDUCTION-ESTATE TAX: Estate tax charitable deduction not available for payment to charity in settlement of will contest. The IRS indicated that the basis for its decision was its determination that it was unlikely that the charity would have received anything if the matter had actually been litigated rather than settled. TAM 200306002.
CHARITABLE DEDUCTION-INCOME TAX: Rules clarified regarding the deductibility of patents when they are donated to charity. Rev. Rul. 2003-28.
GIFT TAX: Oral promise by donees that they would reconvey residence to donor upon request prevented taxable gifts from occurring, both when donor originally conveyed and when donees reconveyed. PLR 200308046.
POWER OF APPOINTMENT: Court's reformation of trust to prevent it from being treated as creating a general power of appointment deemed sufficient to prevent inclusion in gross estate. PLR 200311020.
TAX RETURNS: IRS announces that it will resume its Schedule K-1 (Beneficiary' s Share of Income, Deductions, Credits, etc.) matching program and modernize Schedule E (Supplemental Income and Loss). IR 200327.
Advance Directives. Scott K. Summers and Carol Krohm provide comprehensive guidance to assist attorneys in planning, writing, executing, and implementing their clients' health care desires in ADVANCE HEALTH CARE DIRECTIVES: A HANDBOOK FOR PROFESSIONALS (2002), published by the ABA's Senior Lawyers Division.
Alternative Reproduction Technologies. Martha J. Stone examines the complexities of determining inheritance rights of children born from artificial insemination and other modern infertility techniques in Tick . . . Tick . . . Tick: As Biological Clocks Wind Down, the Laws Governing Inheritance and Parental Rights Issues Heat Up, 43 S. TEX. L. REV. 233 (2001).
Asset Protection. To learn more about the historical development of asset protection, read John K. Eason's Developing the Asset Protection Dynamic: A Legacy of Federal Concern, 31 HOFSTRA L. REV. 23 (2002).
Beneficiary Protection. Robert Whitman and Kumar Paturi examine the benefits of appointing a special master or a special fact finder with regard to trust disputes in Improving Mechanisms for Resolving Complaints of Powerless Trust Beneficiaries, 16 QUINNIPIAC PROB. L.J. 64 (2002).
Charitable Trusts. Ronald Chester discusses Grantor Standing to Enforce Charitable Transfers Under Section 405(c) of the Uniform Trust Code and Related Law: How Important Is It and How Extensive Should It Be?, 37 REAL PROP., PROB. & TR. J. 611 (2003).
Disability Planning. Daniel M. Moore Jr. provides practical tips in Helping Clients Make the Most of Health-Care and Property POAs, 91 ILL. B.J. 35 (2003).
Disabled Children. The complex issues involved with providing for disabled children in estate plans are discussed by Luana Olivas in Helping Them Rest in Peace: Confronting the Hidden Crisis Facing Aging Parents of Disabled Children, 10 ELDER L.J. 393 (2002).
Elderly Clients. Marla Lyn Mitchell-Cichon discusses the difficult issues attorneys face when preparing estate plans for elderly clients in What Mom Would Have Wanted: Lessons Learned from an Elder Law Clinic About Achieving Clients' Estate-Planning Goals, 10 ELDER L.J. 289 (2002).
Estate Sales. William Knotts examines the difficulties heirs face when purchasing estate property at an estate sale in Estate of William P. Burke v. Burke: Protecting the Intent of Heirs and Third Parties in the Sale of Estate Property, 16 QUINNIPIAC PROB. L.J. 126 (2002).
Guardianship. With a focus on Illinois law, Susan Dawson-Tibbets discusses Guardianship and Its Alternatives: What' s Best for Elderly Clients?, 91 ILL. B.J. 120 (2003).
Heir Designation. In Designation of Heirs: A Modest Proposal to Diminish Will Contests, 37 REAL PROP., PROB. & TR. J. 577 (2003), Calvin Massey provides a detailed analysis on how the use of heir designation statutes could reduce the number of will contests arising when a decedent's will provides for a beneficiary who is not one of the decedent's traditional heirs.
Nonmarital Partners. For an insightful look at inheritance by nonmarital partners, read E. Gary Spitko, An Accrual/Multi-Factor Approach to Intestate Inheritance Rights for Unmarried Committed Partners, 81 OR. L. REV. 255 (2002).
Patent Rights. Zhun Lu discusses ways to properly transfer patent rights in estate plans in Patents in Probate Court: Influence of Probate Proceedings on Patent Rights, 16 QUINNIPIAC PROB. L.J. 93 (2002).
Pet Animals. Helen W. Gunnarsson discusses legislation introduced into the Illinois legislature that would authorize Pet Trusts for Trusty Pets,91 ILL. B.J. 113 (2003).
Prudent Investor Rule. C. Boone Schwartzel explains how public policy is better served by the traditional prudent person rule for evaluating trust investments in Is the Prudent Investor Rule Good for Texas?,54 BAYLOR L. REV. 701 (2002).
Spendthrift Provisions. Alan Newman discusses how newly proposed amendments to the Uniform Trust Code could affect spendthrift provisions and creditors' rights in The Rights of Creditors of Beneficiaries Under the Uniform Trust Code: An Examination of the Compromise,69 TENN. L. REV. 771 (2002).
Uniform Trust Code. To learn more about the newly adopted Kansas Uniform Trust Code, read David M. English's discussion in The Kansas Uniform Trust Code, 51 U. KAN. L. REV. 311 (2003).
Valuation Discounts. Martin A. Goldberg and Cynthia M. Kruth explore various valuation discounts with regard to family businesses in New Life for Valuation Discounts in Family Entities, 16 QUINNIPIAC PROB. L.J. 48 (2002).
Idaho codifies the liability of recipients of nonprobate transfers for the decedent's debts and for statutory allowances for the surviving spouse and minor or dependent children. 2003 Idaho Sess. Laws 61.
Idaho streamlines summary administration of estates. In certain circumstances, appearances of the petitioner and the petitioner's attorney may be made telephonically or by affidavit so that personal appearances are not necessary. 2003 Idaho Sess. Laws 60.
Montana revises the rules governing the personal representative's duty to prepare the inventory and appraisal of the decedent's estate. 2003 Mont. Laws 68.
Nebraska enacts the Uniform Trust Code. 2003 Neb. Laws 130.
Virginia permits the shortening of the normal seven-year period for presuming death if the person was exposed to a specific peril of death. 2003 Va. Acts ch. 254.
Virginia raises from $10,000 to $15,000 the size of an estate not subject to probate tax. 2003 Va. Actsch. 195.