DEVIATION: Court declines to deviate merely because the settlor has “change of heart” over a decade after creating the trust. The settlors created four irrevocable trusts naming their five grandchildren as beneficiaries. The settlors’ two children (the parents of the beneficiaries) were named as the trustees. Over a decade later, the trustees filed a petition to terminate these trusts claiming that the settlors’ intent was really to provide for them, not their grandchildren. Thus, deviation from the terms of the trusts would be appropriate. One of the settlors testified that he did not understand the difference between being a beneficiary and a trustee and thus termination of the trusts would further the purpose of the trusts. Despite the lack of any additional evidence, the trial court found that a mistake was made in drafting the trusts and thus terminated the trusts. The trial court then distributed the trust assets outright to the two trustees. The guardian ad litem appealed on behalf of the three minor grandchildren (the adult grandchildren did not appeal). The court in In re White Intervivos Trusts, 248 S.W.3d 340 (Tex. App. 2007), reversed on the minor beneficiaries. The court explained that the trusts named the grandchildren as beneficiaries and were expressly stated to be irrevocable. The settlors’ children were clearly and unambiguously named as trustees, not beneficiaries. The court explained that deviation from the terms of the trusts was not appropriate because there was no evidence of “circumstances not known to or anticipated by the settlor.”
ESTATE TAX: Title companies lack standing to question the amount of estate tax due from the decedent’s estate. First American Title Ins. Co. v. United States, 520 F.3d 1051 (9th Cir. 2008).
ESTATE TAX DEDUCTIONS: Estate tax deduction allowed for the executor’s attorney’s fees in a will contest but not for the beneficiaries’ attorney’s fees. Kessler v. United States, No. C 06-07492 RS, 2008 WL 706533 (N.D. Cal. Mar. 14, 2008).
POWER TO ADJUST: Special trustee may exercise the power to adjust for the year preceding the year of appointment. The beneficiary-trustee obtained the appointment of a special trustee whose sole responsibility was to decide on the propriety of the use of the power to adjust under Nevada’s version of the Uniform Principal and Income Act. The trustee was appointed in 2005 and petitioned for approval of the decision to exercise the power to adjust for the year 2004. The court held in In re Orpheus Trust, 179 P.3d 562 ( Nev. 2008), that the statute contemplates that at a minimum a special trustee may exercise the power to adjust for the year before the trustee’s appointment.
SAME-SEX MARRIAGE: Ban on same-sex marriages declared invalid by California Supreme Court. In the case of In re Marriage Cases, 183 P.3d 384 (Cal. 2008), the California Supreme Court held in a 4–3 opinion that two state laws that had limited marriages to opposite-sex partners were unconstitutional and held that single-sex couples have a constitutional right to marry. The court explained that it could not “find that retention of the traditional definition of marriage constitutes a compelling state interest.” The court concluded that “[p]laintiffs are entitled to the issuance of a writ of mandate directing the appropriate state officials to take all actions necessary to effectuate our ruling in this case so as to ensure that county clerks and other local officials throughout the state, in performing their duty to enforce the marriage statutes in their jurisdictions, apply those provisions in a manner consistent with the decision of this court.”
TRUST FUNDING: A deed designating the trust as the grantee is sufficient to pass legal title to the trustee. Prior state law provided that a deed that simply added the words “trustee” or “as trustee” to the name of the grantee conveyed to the grantee a fee simple estate unless the contrary intention appeared on the face of the conveyance, or the beneficiaries or nature and purpose of the trust were set forth in the deed, or the declaration of trust was on file in the land records. In Raborn v. Menotte, 974 So. 2d 328 (Fla. 2008), the court held that a deed that identifies the grantor as the creator of and the grantee as trustee of a named trust shows sufficient “contrary intention” and grants legal title as trustee to the grantee.
TRUST REFORMATION: The settlor has standing to seek reformation. In Bilafer v. Bilafer, 73 Cal. Rptr. 3d 880 (Ct. App. 2008), the court held that the settlor of an irrevocable trust of which the settlor was neither a beneficiary nor a trustee has standing under the common law to petition the appropriate court for reformation of the trust on the basis of drafting errors that defeated his intent in creating the trust.
WILL ATTESTATION: The notary may be counted as a witness. A dispute arose whether the witnesses attested in the testator’s presence. Three witnesses signed the testator’s will, one of them a notary public who testified that she was present not to act as a witness but “to notarize the witnesses.” Nevertheless, because she testified that she witnessed the testator sign the will and signed the will herself, the notary could be a witness. The state statute disqualifying a person from acting as both notary and witness did not apply and the will was deemed not self-proving so the services of a notary were unnecessary. Land v. Burkhalter, 656 S.E.2d 834 ( Ga. 2008).
WILL ATTESTATION: Signatures of the witnesses on the self-proving affidavit deemed sufficient. The testatrix signed her will following the testimonium on page three of the document, which recited that the will consisted of five pages. The notary public present at the execution then printed the names of the three witnesses on the lines for witnesses’ signatures following the testator’s signature. The testator and the witnesses then signed the self-proving affidavit attached to the will and numbered as pages four and five. The court in Hampton Roads Seventh-Day Adventist Church v. Stevens, 657 S.E.2d 80 ( Va. 2008), held that the witnesses’ signatures complied with the statutory requirement that the witnesses subscribe the will in the presence of the testator.
WILL EXECUTION: Texas follows continuous transaction approach. In In re Estate of Pruitt, 249 S.W.3d 654 (Tex. App. 2008), the evidence revealed that the witnesses attested to the will before the testatrix signed the will. The trial court determined that this “backward” order was fatal to the validity of the will and granted a summary judgment that the testatrix died intestate. The beneficiaries named in the will appealed. The appellate court reversed. The older Texas cases had adopted a strict rule that the attestation must occur after the testator signs the will because witnesses cannot attest to something that has not yet happened. The modern Texas cases, however, adopt a contemporaneous transaction approach so that if the execution and attestation occur at the same time and place and form part of the same transaction, it does not matter in which order the events occur. The court adopted this latter approach.
ALTERNATE VALUATION: IRS issues Proposed Regulations to provide guidance relating to the availability of the election to use the alternate valuation method under Code § 2032. The method would be available to estates that experience a reduction in the value of the gross estate following the date of the decedent’s death because of market conditions but not because of other post-death events. REG-112196-07.
GIFT TO TRUST: When trustee erroneously issued K-1 to beneficiary causing her to pay income tax on amount of principal she never received, reimbursement of additional tax and interest eliminated any prior constructive transfer by her to trust. PLR 200816008.
GROSS ESTATE: Settlor’s retention of power to substitute assets of equal value will not cause estate inclusion under Code §§ 2036 or 2038 under certain conditions. The trustee must ensure that the trust receives equal value and the substitution must not shift benefits among trust beneficiaries. Rev. Rul. 2008-22.
GST TAX: Exercise of limited power of appointment will not cause trust to be ungrandfathered. PLR 200821013.
IRA: Make-up RMD cures prior failure. The IRS indicated that a nonspouse beneficiary of an IRA who failed to take the minimum distribution by the end of the year following the death of the IRA owner could nevertheless take a lifetime payout by taking make-up payments and paying the excise tax on the late payments. PLR 200811028.
TRUST REFORMATION: IRS approves judicial reformation of NIMCRUT into standard CRUT. PLR 200818002.
TRUST REFORMATION: IRS refuses to approve reformation of pre-1969 trust into a CRUT because the trust did not function exclusively as a CRUT since its creation. PLR 200818003.
Adjustment Power. In Limitations on the Trustee’s Power to Adjust, 42 Real Prop. Prob. & Tr. J. 717 (2008), S. Alan Medlin explains that the Uniform Principal and Income Act provides a fairly comprehensive set of rules and guidelines covering many situations trustees face.
Advance Payment Retainers— Illinois. In Engagement Letters, Fees, and the Dowling Case, 96 Ill. B.J. 262 (2008), David A. Berek and Fred R. McMorris discuss the effect of a recent Illinois case on the use of advance payment retainers in the estate planning context.
Deathbed Marriages. The only person allowed to challenge the validity of a marriage (or, by extension, the property consequences thereof) after the death of one of the spouses is normally the surviving spouse. In How Do I Love Thee, Let Me Count the Days: Deathbed Marriages in America, 96 Ky. L.J. 275 (2007–2008), Terry L. Turnipseed explores how this rule developed, whether it should be changed, and how far society can go to restrict the ability of someone, even on his or her deathbed, to marry.
ERISA and Discretionary Clauses. Joshua Foster argues that the current system has benefited the parties that ERISA legislation was intended to protect while providing additional benefits to the judicial system in his Note, ERISA, Trust Law, and the Appropriate Standard of Review: A De Novo Review of Why the Elimination of Discretionary Clauses Would Be an Abuse of Discretion, 82 St. John’s L. Rev. 735 (2008).
Financial Abuse and Life Insurance. The life insurance industry’s role in financial elder abuse is examined by Johnny Parker in his article, Company Liability for a Life Insurance Agent’s Financial Abuse of an Elderly Client, 2007 Mich. St. L. Rev. 683.
Investment Advisory Fees. In Supremes Limit Trusts’ Ability to Subtract Investment-Advice Costs, 96 Ill. B.J. 123 (2008), Helen W. Gunnarsson discusses the case of Knight v. Commissioner, 128 S. Ct. 782 (2008), in which the Court held that “trusts are subject to a two-percent floor for subtracting advisory fees from their taxable income.”
Lost Will—Texas. In A Lost Will, a Photocopy of the Original, and Two “Snakes in the Grass”: Is It Time to Update Section 85 of the Texas Probate Code, 40 Tex. Tech L. Rev. 89 (2007), Charles M. Davis comments on the proof necessary to prove a lost will under Texas law.
Revoked Wills—Illinois. Assume that you have prepared a client’s will and you have retained the original will in your firm’s safe deposit box. The client then executes a subsequent will. What should you do with the “old original”? For a discussion of how to handle this under Illinois law, see Helen W. Gunnarsson, Where There Are Two Wills, Is There a Way?, 96 Ill. B.J. 232 (2008).
Surrogacy—Connecticut. Christine A. Bjorkman discusses the current state of surrogacy in Connecticut, surrogacy in general, and policy concerns surrounding the use of surrogate parenting agreements as well as various approaches states have taken in the regulation of surrogate parenting agreements in her Note, Sitting in Limbo: The Absence of Connecticut Regulation of Surrogate Parenting Agreements and Its Effect on Parties to the Agreement, 21 Quinnipiac Prob. L.J. 141 (2008).
Trust Privacy. Frances H. Foster reconsiders the very notion of trust privacy through a humanistic approach that essentially looks beyond abstractions to consider the actual effect of laws on people in Trust Privacy, 93 Cornell L. Rev. 555 (2008).
Trusts in Latin America. Dante Figueroa reviews the essential aspects of trusts in both Anglo- and Latin-American legal systems in his article, Civil Law Trusts in Latin America: Is the Lack of Trusts an Impediment for Expanding Business Opportunities in Latin America?, 24 Ariz. J. Int’l & Comp. L. 701 (2007).
Unitrusts. In The Power to Adjust and Total-Return Unitrust Statutes: State Developments and Tax Considerations, 42 Real Prop. Prob. & Tr. J. 657 (2008), Richard W. Nenno covers traditional ways to address the problem, describes recently developed statutory solutions, and discusses relevant federal tax considerations that arise in the context of adjustments between income and principal and conversions of traditional income trusts to unitrusts.
UPIA Twins. Christopher P. Cline addresses the innovations of the Acts, the problems they solve, and those they create in The Uniform Prudent Investor and Principal and Income Acts: Changing the Trust Landscape, 42 Real Prop. Prob. & Tr. J. 611 (2008).
Witnessing After Death. In his Casenote, Estate of Saueressig and Post-Death Subscription: The Protective Function Reborn, 39 McGeorge L. Rev. 359 (2008), Matthew D. Owdom argues that the bright-line rule adopted in Saueressig is superior to the “reasonable time” rule adopted by other jurisdictions and promulgated in the 1990 Uniform Probate Code.
Colorado creates personal representative oversight procedure. The purpose of this statute is to “maintain the degree of supervision necessary to ensure the timely and proper administration of estates by fiduciaries over whom the court has obtained jurisdiction.” The court may order accountings and inventories either on its own motion or on the motion of an interested party. No reason or justification is required. The statute provides detailed procedures and penalties and requires personal representatives to keep the court notified of their addresses and telephone numbers. 2008 Colo. Legis. Serv. 149.
Georgia enacts Revised Uniform Anatomical Gift Act. 2008 Ga. Laws Act 545.
Idaho authorizes wills and self-proving affidavits to be signed by the testator’s proxy. 2008 Idaho Sess. Laws 76.
Idaho clarifies rules regarding notice in probate proceedings. 2008 Idaho Sess. Laws 75.
Idaho enacts Uniform Power of Attorney Act. 2008 Idaho Sess. Laws 186.
Idaho grants spouses the ability to hold community property with rights of survivorship. 2008 Idaho Sess. Laws 175.
Idaho revamps allowances for a surviving spouse and children. 2008 Idaho Sess. Laws 182.
Indiana precludes a parent who illegally kills the other parent from inheriting from the deceased parent’s child. No connection between the child’s death and the conduct of the disinherited parent is required to trigger the disqualification. 2008 Ind. Legis. Serv. P.L. 101-2008.
Iowa enacts Viatical Settlement Act. 2008 Ia. Legis. Serv. S.F. 2392.
Kansas increases the allowance for spouses and minor children from $35,000 to $50,000. 2008 Kan. Sess. Laws S.B. 431.
Maine adopts the Revised Uniform Anatomical Gift Act. 2008 Me. Legis. Serv. 601.
Oklahoma enacts the Nontestamentary Transfer of Property Act to authorize transfer-on-death deeds for real property. 2008 Okla. Sess. Law Serv. 78.
Utah modernizes its Advance Health Care Directive Act. 2008 Utah Laws 107.
Virginia makes it harder for killers to inherit by adding voluntary manslaughter as a disqualifying crime. 2008 Va. Laws 822.
West Virginia enacts Revised Uniform Anatomical Gift Act. 2008 W. Va. Laws 191.
West Virginia enacts Viatical Settlements Act. 2008 W. Va. Laws 124.