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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, Erik C. Greiner, William P. LaPiana, and Meribeth Novak.
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.
ANTI-LAPSE STATUTE: Statute applies to gift of jointly held property. The decedent and his sister owned real property as joint tenants with rights of survivorship. Over a decade after acquiring the property, the decedent executed a will giving his sister “my interest in real estate that we own jointly.” The sister predeceased the decedent. The court in Hedrick v. Mosser, 591 S.E.2d 191 (W. Va. 2003), held that the anti-lapse statute applied, causing the property to pass to the sister’s issue.
CONTRACTUAL WILL: Contractual will governed by law of place of drafting. The decedent and her husband executed a joint will while living in Kansas. The will left all property to the survivor and, on the survivor’s death, equally to their respective collateral relatives, the couple being childless. The husband died while the couple was domiciled in Oklahoma and the will was admitted to probate there. The wife later moved to Colorado and executed a new will, greatly increasing her family’s share of the estate. The husband’s family objected to probate of the Colorado will. The court in In re Estate of Loflin, 81 P.3d 1112 (Colo. Ct. App. 2003), held that Kansas law governed the question of whether the will was contractual, because it was “drafted” in Kansas, and determined that the will was contractual.
FORCED SHARE: Unique test imposed for mental capacity to exercise election. In Jones v. Peacock, 591 S.E.2d 83 (Va. 2004), the court held that the lower court erred in holding that the mental capacity necessary to exercise a surviving spouse’s right of election is the same as that needed to execute a deed or contract. The proper standard requires the spouse to understand the right to elect against the will and to receive the share established by law and that the spouse know that he or she is making the election. The standard does not require the spouse to know the amount that will be received.
PRETERMITTED CHILDREN: Adult adopted after execution of will does not take as a pretermitted child. The decedent’s will made a general bequest to an unrelated legatee. Months later, the decedent adopted the legatee in an adult adoption proceeding. Under Texas law, a child born or adopted after the execution of a decedent’s will succeeds to a portion of the decedent’s estate as long as the child is not mentioned in the will, not provided for in the will, or provided for otherwise. In Ozuna v. Wells Fargo Bank, N.A., 123 S.W.3d 429 (Tex. App. 2003), the court held that the general bequest precluded taking as a pretermitted child because there is no requirement that the provision be made for the after-born or adopted person as a child.
TORTIOUS INTERFERENCE: Existing will contest prevents tort suit. The decedent’s niece and nephew challenged the admission to probate of her will. While that action was pending, they brought an action for tortious interference with an expectancy against the principal beneficiary and the drafter of the will. The court in Keith v. Dooley, 802 N.E.2d 54 (Ind. Ct. App. 2004), dismissed the tort suit because it involved substantially the same parties, subject matter, and remedies as the probate action.
TRUSTS: Anti-lapse statute does not apply to revocable trust. The settlor created a revocable trust that on his death was to be distributed in equal shares to three named persons, one of whom was his sister who predeceased him. The settlor’s son alleged that the gift to his aunt had lapsed. In Baldwin v. Branch, No. 1011214, 2004 WL 407157 (Ala., Mar. 5, 2004), the court held that the anti-lapse statute did not apply to trusts and that the sister’s interest had vested on creation of the trust. Consequently, the interest passed to her estate on her death.
TRUSTS: Remainder vests at attaining stated ages. The decedent’s will created a trust for her daughter that was to be distributed outright to her one-third at 35, one-half the balance at 40, and the remainder at 45. The daughter survived her mother by fourteen months, dying at age 41. She had received a small distribution from the trust, which had been only partially funded. The trust provided that if the daughter died before complete distribution of the trust, she would have a testamentary special power of appointment over the trust with the decedent’s brothers and sister as takers in default. The daughter’s will did not exercise the power and the takers in default claimed the trust property. In Lumbert v. Estate of Carter, 867 So. 2d 1175 (Fla. Dist. Ct. App. 2004), the court held that the daughter had a vested interest in the two-thirds of the trust to which she was entitled at age 41, and consequently this two-thirds passed to her estate with the remaining one-third passing to the brothers and sister.
TRUSTS: Trust reformed to minimize GST tax. In Florez v. Florez, 803 N.E.2d 323 (Mass. 2004), the court reformed a testamentary marital deduction trust to prevent it from merging on the death of the surviving spouse with the bypass trust created under the same will to minimize GST tax, presumably by preserving the zero inclusion ratio of the bypass trust. The court refused, however, to further reform the marital trust by giving the successor life beneficiary of the marital trust a general power of appointment because to do so would change the testator’s estate plan.
TRUSTS: Trust reformed to obtain the marital deduction. The court in Dassori v. Patterson, 802 N.E.2d 553 (Mass. 2004), reformed a trust on evidence of a scrivener’s error to eliminate language allowing the trustees to distribute income and principal in their discretion to the settlor’s issue if the settlor’s surviving spouse became incompetent, so that the federal estate tax marital deduction could be obtained for the trust. The court acted on extrinsic evidence, including correspondence between the settlor and the attorney who drafted the amendment to the trust and the attorney’s affidavit, indicating that the settlor wished to obtain the marital deduction.
TRUSTS: Trustees may not collaterally attack paternity of the beneficiaries. Local law allows trustees to petition for a determination of trust beneficiaries. In In re Trusteeship of Trust Created Under Trust Agreement Dated Dec. 31, 1974, 674 N.W.2d 222 (Minn. Ct. App. 2004), the court held that the statute did not allow a trustee to challenge a determination of the paternity of trust beneficiaries because the trustee did not have standing under the applicable parentage act.
RULINGS AND REGULATIONS
GROSS ESTATE: Restructuring of administrative powers did not cause inclusion. The IRS approved the restructuring of the administrative provisions of various trusts, including the appointment of a family bank as the trustee, for estate tax and GST tax purposes. The plan did not cause the trust’s assets to be included in either the beneficiary’s or settlor’s gross estate. PLRs 200410014 and 200410015.
INCOME TAX: Distribution of appreciated securities results in no gain or loss. The IRS indicated that the distribution of appreciated securities to a Section 501(c)(3) charity as permitted by the trust instrument was not in satisfaction of a pecuniary right and thus there was no realization of gain or loss. PLRs 200405001–004.
MARITAL DEDUCTION: Consistency doctrine applies. The IRS determined that an oil painting erroneously treated as qualifying for the marital deduction in the first spouse to die’s estate must be included in the second spouse to die’s estate under the consistency doctrine. PLR 200407018.
MARITAL DEDUCTION: QTIP election made unnecessarily on an estate tax return is null and void and thus will not cause the inclusion of the property in the survivor’s estate. PLR 200407016.
Apportionment. Douglas A. Kahn explains the purpose and operation of The 2003 Revised Uniform Estate Tax Apportionment Act, 38 Real Prop., Prob. & Tr. J. 613 (2004).
Charitable Giving. In Level Five Philanthropy: Designing a Plan for Strategic, Effective, Efficient Giving, 26 U. Ark. Little Rock L. Rev. 19 (2003), James Edward Harris speaks about maximizing philanthropy.
Construction. In No Connecticut Yankee in the Texas Supreme Court, 40 Hous. L. Rev. 931 (2003), G. Sidney Buchanan reviews the permissible use of extrinsic evidence in the construction of wills.
Creditor Payment. The importance of filing a claim with the probate court under Illinois law is emphasized in Helen W. Gunnarsson, Getting Paid, Part 2: A New Probate Pitfall to Avoid, 92 Ill. B.J. 64 (2004).
Crummey Powers. In Back to the Future Interest: The Origin and Questionable Legal Basis of the Use of Crummey Withdrawal Powers to Obtain the Federal Gift Tax Annual Exclusion, 6 Fla. Tax Rev. 189 (2003), Bradley E.S. Fogel argues that Crummey was wrongly decided and that the tax system would be better served by abrogating Crummey powers.
Family Limited Partnerships. Leslie A. Droubay analyzes IRS rulings and their relationship to family limited partnerships in The Certainty of Death and Taxes for Family Limited Partnerships, 7 J. Small & Emerging Bus. L. 523 (2003).
Forced Share. In The Uniform Probate Code’s Elective Share: Time for a Reassessment, 37 U. Mich. J.L. Reform 1 (2003), Lawrence W. Waggoner recommends a lengthening of the approximation schedule and offering enacted states a deferred community property alternative.
Georgia. Mary F. Radford discusses Wills, Trusts, Guardianships, and Fiduciary Administration, 55 Mercer L. Rev. 459 (2003), by reviewing cases decided from June 1, 2002, through May 31, 2003.
Health Care Decisions. Naomi Karp details the unfortunate situation of people who are Incapacitated and Alone: Health Care Decision-Making for Unbefriended Older Persons, 1 J. Nat’l College Prob. Judges 9 (2004).
Inheritance Rights. Ralph C. Brashier provides a thoughtful and extensive analysis of Inheritance Law and the Evolving Family (Temple Univ. Press 2004) by discussing how intestate law has failed to keep pace with families that include nonmarital children, adopted children, and children born as the result of alterative reproduction techniques as well as the lack of rights of partners in nonmarital relationships.
Long-term Care. John A. Miller discusses both the practical and policy perspectives of long-term care for the elderly in Voluntary Impoverishment to Obtain Government Benefits, 13 Cornell J.L. & Pub. Pol’y 81 (2003).
Mediation. Ray D. Madoff reviews the mediation process and its ability to resolve probate disputes in Mediating Probate Disputes: A Study of Court-Sponsored Programs, 38 Real Prop., Prob. & Tr. J. 697 (2004).
Medicaid. William J. Browning provides a Probate Judges’ Guide to Medicaid Reform, 1 J. Nat’l College Prob. Judges 21 (2004).
Medicaid Planning. Helen W. Gunnarsson explains how Preserving Nursing Home Residents’ Assets Is Harder Than Ever, 92 Ill. B.J. 118 (2004), and discusses the recent Illinois case of Gayan v. Illinois Dep’t of Human Services, 796 N.E.2d 657 (Ill. App. Ct. 2003).
Nebraska and The Uniform Trust Code. Two complementary articles provide guidance through the Nebraska version of the UTC: William J. Lindsay Jr., The Nebraska Uniform Trust Code from the Trenches: A Practitioner’s Guide to Understanding Nebraska’s New Uniform Trust Code, 37 Creighton L. Rev. 93 (2003), and Ronald R. Volkmer, The Nebraska Uniform Trust Code: Nebraska Trust Law in Transition. 37 Creighton L. Rev. 61 (2003).
Nonmarital Children. In Illegitimate Children’s Rights in Probate Proceedings—In re Estate of James A. Palmer, Deceased, 30 Wm. Mitchell L. Rev. 529 (2003), Robert A. McLeod discusses the transfer of children’s assets after death.
Pay on Death Accounts. Damien A. Gang discusses the benefits of signed writings in Newman v. Thomas: The Nebraska Supreme Court Requires Signed Writings for the Alteration of Payable on Death Accounts, 37 Creighton L. Rev. 247 (2003).
Posthumously Conceived Children. Melissa B. Vegter in The “ART” of Inheritance: A Proposal for Legislation Requiring Proof of Parental Intent Before Posthumously Conceived Children Can Inherit from a Deceased Parent’s Estate, 38 Val. U. L. Rev. 267 (2003), suggests amending the UPC as a solution.
Posthumously Conceived Heirs. The working draft of UPC § 2–108 is carefully analyzed by its primary author, Ronald Chester, in Posthumously Conceived Heirs Under a Revised Uniform Probate Code, 38 Real Prop., Prob. & Tr. J. 727 (2004).
Revocable Trusts. David M. English explains the effect of the UTC presumption of trust revocability in Revocable Trusts Under the Uniform Trust Code, 1 J. Nat’l College Prob. Judges 24 (2004).
Trust Beneficiaries. Robert Whitman, Cara Cutler, and Kumar Paturi discuss Improving Mechanisms for Resolving Complaints of Powerless Trust Beneficiaries, 1 J. Nat’l College Prob. Judges 28 (2004).
Trusts and Economics. Robert H. Sitkoff provides an economic analysis of trusts that advances the ongoing debate over whether trust law is closer to property or contract law in An Agency Costs Theory of Trust Law, 89 Cornell L. Rev. 621 (2004). In Trust Law, Corporate Law, and Capital Market Efficiency, 28 J. Corp. L. 565 (2003), he examines the application of principles applicable to donative trusts to corporate governance.
Valuation. Wendy C. Gerzog advocates using actuarial tables rather than the facts of a specific case to compute the value of property for estate tax purposes in Actuarial Tables Versus Factually Based Estate Tax Valuation: Ithaca Trust Re-visited, 38 Real Prop., Prob. & Tr. J. 745 (2004).
Wrongful Death. Jeffrey P. Foote and Christine Porter provide valuable advice on representing the family and estate of a wrongful death victim in When Your Client Is a Grieving Family, Trial, Feb. 2004, at 24.
Idaho adopts the Uniform Estate Tax Apportionment Act. 2004 Idaho Sess. Laws 54.
Idaho modernizes advance directive laws to include HIPAA provisions and broader recognition of out-of-state documents. 2004 Idaho Sess. Laws 56.
Illinois authorizes trusts for the care of pet animals. 2003 Ill. Laws 668.
Minnesota authorizes nonjudicial settlement agreements between the trustee and beneficiaries under specified circumstances. 2004 Minn. Sess. Law Serv. 146.
New Mexico clarifies determination of the parent-child relationship for intestate succession. 2004 N.M. Laws 72.