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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.

ATTORNEY-CLIENT PRIVILEGE: Privilege may be waived by personal representative. In a legal malpractice case, the court held: “[J]ust as the attorney-client privilege itself survives the death of the client for whose benefit the privilege exists . . . the right to waive that privilege in the interest of the deceased client’s estate also survives, and may be exercised by the decedent’s personal representative.” Mayorga v. Tate, 752 N.Y.S.2d 353 (N.Y. App. Div. 2002).

DISCRETIONARY TRUST: Invasion for any need or condition encompasses estate planning. A husband’s will created a marital trust over which his wife had a testamentary general power of appointment and which the trustee could invade “to meet any need or condition.” Nine months before the wife’s death, the trustee approved a large invasion that the wife used to create a charitable remainder unitrust. In Smith v. First Community Bancshares, Inc., 575 S.E.2d 419 (W. Va. 2002), the court held: “[T]he word ‘need’ as used in testamentary language authorizing encroachment of a trust corpus, when not expressly limited to the comfort, support, maintenance, welfare, health, or financial condition of the beneficiary, and depending upon the overall intent of the testator as indicated by the remaining terms of the will, may refer to the necessity of invading the corpus of the trust for the purpose of estate tax planning.”

DISCRETIONARY TRUST: Refusal to pay nursing home expenses deemed abuse of discretion. The husband created a revocable trust that divided into two trusts at his death. The standard for distribution to the widow of the principal of one trust and the income and principal of the other included “support in reasonable comfort” considering “all circumstances and factors” that the trustee considered pertinent. The trustee, the husband’s daughter by his first marriage, refused to pay her stepmother more than the income of the first trust, even though she had suffered a stroke, needed constant care, and was in a nursing home. The court held that the trustee had abused her discretion and committed a breach of trust by refusing to pay for the nursing home. In re Trust of McCabe, No. 01–1972, 2002 WL 31757533 (Iowa Ct. App. Dec. 11, 2002).

FLPs: Arm s length transaction requires full and adequate consideration. The court in Kimbell v. United States, No. 7:01-CV-0218-R, 2003 WL 138081 (N.D. Tex. Jan. 15, 2003),held that for the purposes of Code § 2036(a) a transfer to a family limited partnership is not made for full and adequate consideration unless it is made in an arm’s length transaction in which full and adequate consideration is actually given. If this case is upheld, it would eliminate discounts in most, if not all, FLPs.

INHERITANCE TAX: Rate on residue consumed by tax is rate applicable to beneficiaries of specific gifts. The testator’s will made large specific bequests to lineal heirs on which the tax rate was 6% and left the residue to collateral heirs on which the tax rate was 15%. The entire residue was consumed in paying the taxes on the bequests made to the lineal heirs. The court in In re Estate of Ross, 815 A.2d 30 (Pa. Commw. Ct. 2002), held that the proper tax rate on the residue was 6% because the residue was expended for the benefit of the lineal heirs.

MALPRACTICE: No duty to have will executed promptly. An attorney prepared a draft of a will excluding certain heirs and delivered it to the client, who was hospitalized. The client requested changes. The attorney returned with the revised will three days later but determined that the client lacked capacity. The lawyer never attempted to determine whether the client regained capacity, and the client died intestate twelve days later. An intended will beneficiary sued the attorney for malpractice in federal court, which certified the question to the New Hampshire Supreme Court. The court held that the lawyer did not owe a duty to the intended beneficiary to secure prompt execution of the will. To impose such a duty would interfere with the attorney’s duty of undivided loyalty to the client. Sisson v. Jankowski, 809 A.2d 1265 (N.H. 2002).

PALIMONY: Obligation is binding on estate. Decades ago, the New Jersey Supreme Court recognized the binding nature of a promise that induces a person to cohabit in a marital-like relationship ( Kozlowski v. Kozlowski, 403 A.2d 902 (N.J. 1979)). In In re Estate of Roccamonte, 808 A.2d 838 (N.J. 2002), the court extended this principle by holding that if the promise is one of support for life, the surviving promisee is entitled to enforce the promise against the promisor’s estate.

POWER OF ATTORNEY: Fiduciary obligation inherent in agency relationship. A conservator sued the ward’s son, claiming that he transferred the ward’s property to himself using a general power of attorney. The son argued that the trial court erred in charging the jury that he owed fiduciary duties to his mother. In In re Estate of Susser, 657 N.W.2d 147 (Mich. Ct. App. 2002), the court affirmed the trial court’s charge, holding that a fiduciary duty arose out of the agency relationship and did not require specific language in the power of attorney.

PRETERMITTED CHILD: Perpetuities savings clause reference is insufficient to override statute. The decedent’s will left his entire estate to one of his children and did not specifically mention a predeceased child or that child’s living child, a grandchild of the decedent. The grandchild’s mother made a claim on her son’s behalf as a pretermitted child. The executor maintained that the rule against perpetuities savings clause vesting all interests not later than 21 years after the death of the last to die of testator’s issue living at his death was a sufficient mention of the grandchild to override the statute. Alexander ex rel. Alexander v. Estate of Alexander, 93 S.W. 3d 688 (Ark. 2002), held that the savings clause was technical and could not be said to embody the testator’s contemplation of the grandchild.

PROFESSIONAL RESPONSIBILITY: Step-grandchildren are related for purposes of rule prohibiting drafting of self-beneficiary wills. The testator’s stepson drafted her will, which contained bequests to his children. The applicable ethics rule prohibits a lawyer from drafting an instrument that gives the lawyer or certain relatives of the lawyer a gift unless the client is related to the donee. The court determined that the step-grandchildren beneficiaries are related by affinity to the testator and thus their father did not violate the rule. In re Estate of Hamilton, No. 13–01–298-CV, 2002 WL 31839177 (Tex. App. Dec. 19, 2002).

REVOCATION: Property settlement followed by divorce does not revoke will. Before their divorce, a husband and wife executed a comprehensive property settlement agreement. The husband died without changing his will, which named the wife as his beneficiary. In Hinders v. Hinders,828 So. 2d 1235 (Miss. 2002), the court explained that a pre-divorce will is not automatically or expressly revoked by a divorce accompanied by a property settlement agreement even if the provisions are inconsistent with the terms of the pre-divorce will. The court admitted, however, that an implied revocation could be demonstrated by “clear and unequivocal” evidence of the husband’s intent to revoke, but that such evidence did not exist in this case.

COMBAT CASUALTIES & TERRORISM VICTIMS: The IRS clarified the proper method for computing the estate tax under the Victims of Terrorism Tax Relief Act of 2001. Rev. Rul. 2002–86.

DISCLAIMERS: Q-TIP trust splitting allowed so surviving spouse may renounce interest. The IRS approved splitting a qualified terminable interest property trust into two trusts so the surviving spouse may disclaim the income interest in one trust without triggering a disclaimer for the other trust. PLR 200250033.

FAMILY-OWNED BUSINESS INTERESTS: Redemption by corporation of all stock in a family-owned corporation is a disposition that will trigger additional estate tax. PLR 200252084.

MARITAL DEDUCTION: Adjustments to incorrect amounts on Form 706 allowed. In CCA 200248007, the IRS indicated that the estate may adjust the amount of the marital deduction to the correct amount of the entire marital trust if the wrong amounts are shown on Form 706.

SERIES E SAVINGS BONDS: Series E bonds will not be discounted for lack of marketability. TAM 200303010.

Alternative Reproduction Technologies. Naomi R. Cahn analyzes the affect of the new biology in Parenthood, Genes, and Gametes: The Family Law and Trust and Estates Perspectives, 32 U. Mem. L. Rev. 563 (2002).

CRTs. For an extensive discussion of charitable remainder trusts, read Diane A. DiLeo, Loopholes in Federal Income Taxation: Solutions for Charitable Trust Abuse and Potential Application to Corporate Tax Shelter Abuse, 36 Suffolk U. L. Rev. 207 (2002).

Estate Sales. William Knotts discusses the complexities of purchasing property at estate sales 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).

Forced Share. Torrey Sundall discusses the history of the South Dakota spousal elective share statute in Estate of Amundson : A Look at the Public Policy Behind South Dakotas Unique Spouse Elective Share Statute. Should the Personal Representative Be Able to Elect for a Deceased Surviving Spouse?, 47 S.D. L. Rev. 344 (2002).

Future of Estate Planning. The effect of demographic shifts and tax law changes are discussed by Mark Mathewson in Whither Estate-Planning Practice?, 90 Ill. B.J. 630 (2002).

Gramm-Leach-Bliley. Helen W. Gunnarsson discusses how Bar Associations, U.S. Reps Seek Exemptions for Lawyers from Gramm-Leach-Bliley, 90 Ill. B.J. 628 (2002).

GRATs. David A. Handler and Steven J. Oshins explore the complexities and benefits of grantor-retained annuity trusts in The GRAT Remainder Sale, Tr. & Est. 33 (Dec. 2002).

Intestacy. Susan N. Gary explains the shortcomings of current intestacy statutes and makes recommendations in The Parent-Child Relationship Under Intestacy Statutes, 32 U. Mem. L. Rev. 643 (2002).

Kentucky. To learn more about Kentucky’s nonclaim statutes, read Mark A. Noel, Due Process and Kentuckys Non-Claim Statutes: A Call for Legislative Revision, 91 Ky. L.J. 231 (2002–2003).

Mediation. Andrew Stimmel explores the possibilities of using mediation as an alternative to traditional will contests in Mediating Will Disputes: A Proposal to Add a Discretionary Mediation Clause to the Uniform Probate Code, 18 Ohio St. J. on Disp. Resol. 197 (2002).

Nebraska. Cynthia J. Wooden discusses issues regarding settlor incompetence and Nebraska case law in The Supreme Court of Nebraska Determines a Courts Power to Authorize a Conservator to Exercise an Incompetent Settlors Reserved Rights to Amend or Revoke Her Trust in In re Guardianship and Conservatorship of Garcia , 36 Creighton L. Rev. 47 (2002).

Patent Rights. Zhun Lu examines the possible ways to transfer patent rights at death in Patents in Probate Court: Influence of Probate Proceedings on Patent Rights, 16 Quinnipiac Prob. L.J. 93 (2002).

Pet Animals. Mark Mathewson discusses the increasing popularity of including a client’s pets in the estate plan in Pet Project, 90 Ill. B.J. 632 (2002).

Same-Sex Domestic Partners. T.P. Gallanis provides thoughtful insights into the concerns of elderly same-sex partners and includes a comprehensive bibliography in Aging and the Nontraditional Family, U. Mem. L. Rev. 607 (2002).

Tax Planning. To learn more about tax planning options for the last three years of a client’s life, read Jonathan G. Blattmachr and Mitchell M. Gans, Deathbed Planning, Tr. & Est. 23 (Dec. 2002).

Trust Beneficiaries. Robert Whitman and Kumar Paturi examine the inadequate mechanisms for trust beneficiaries to resolve their complaints against trustees and possible alternatives in Improving Mechanisms for Resolving Complaints of Powerless Trust Beneficiaries, 16 Quinnipiac Prob. L.J. 64 (2002).

Valuation Discounts. Martin A. Goldberg and Cynthia M. Kruth explore various valuation discounts for gift and estate tax purposes in New Life for Valuation Discounts in Family Entities, 16 Quinnipiac Prob. L.J. 48 (2002).

Illinois amends Unified Child Support Services Act. 2002 Ill. Legis. Serv. P.A. 92–876.

Massachusetts restricts persons who may be beneficiaries and who are eligible to serve as personal representatives. No individual may now serve as executor or receive any portion of the estate of the deceased if the person is indicted or convicted of the manslaughter or murder of the decedent. 2002 Mass. Legis. Serv. ch. 420.

Ohio adopts the Uniform Principal and Income Act. 2002 Ohio Laws File 186.

Ohio restricts bequests and other property transfers to persons adopted as adults, unless such persons are expressly included in the instrument of transfer. 2002 Ohio Laws File 189.

Pennsylvania enacts Pooled Trust Act for the benefit of disabled persons. 2002 Pa. Legis. Serv. Act 2002–168.

Pennsylvania revises banking laws. 2002 Pa. Legis. Serv. Act 2002–209.


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.

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