Keeping Current—Probate offers a look at selected recent cases, tax rulings and regulations, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
ANCILLARY PROBATE: Local court has no jurisdiction over estate property remitted from foreign jurisdiction. The decedent resided abroad for many decades but never relinquished U.S. citizenship. After her death in London, England, where she had resided for many years, administration was opened in an Alabama court, arguably the state of her domicile and where personal property belonging to the estate was located. Subsequently, her will was offered for probate in London. The will made no provisions for the decedent’s sole heir, a sister. The administrator, decedent’s nephew, then retained an English firm to represent him in the English probate. The administrator and the executor settled all outstanding issues except for a dispute between the administrator and his English solicitors over their charges. As part of his efforts to secure indemnification from the estate for sums owed to the solicitors, the administrator secured an order from the Alabama court ordering beneficiaries of the will who reside in Alabama to deposit into escrow any distributions received from the English administration. One beneficiary sought a writ of mandamus from the Alabama Supreme Court to vacate the escrow order. The court granted the writ, holding that the local probate court has no jurisdiction over the property subject to the English administration. Ex parte Scott, No. 1140645, 2016 WL 6310771 (Ala. Oct. 28, 2016).
ATTESTATION: Will signed by witnesses on loose page is validly executed. The decedent’s will consisted of six loose pages, numbered consecutively with a running footer declaring the pages to be 1 of 6, 2 of 6, and so on. The font and typeface were consistent from one page to the next and the document consisted of 11 consecutively numbered paragraphs. The decedent signed at the foot of page five and the witnesses’ signatures appeared on page six. Page five ended with “an inarticulate sentence fragment” that did not connect grammatically with the first sentence of page six. The rest of the text on page six was not a complete attestation clause because it failed to state that the witnesses signed in the presence of the testator. Nevertheless, the court held that in these circumstances the witnesses’ signatures were part of the will and the presumption of due execution applied. Castruccio v. Estate of Castruccio, 146 A.3d 1132 (Md. Ct. Spec. App. 2016).
BENEFICIAL TRUST INTEREST: Beneficiary’s interest in discretionary trust is not property subject to division on divorce. A beneficiary of a discretionary trust created by his father filed for divorce. The trial court included the husband’s interest in the marital estate and awarded the wife 60% of its present value. The Supreme Judicial Court reversed. The beneficiary was one of 11 current beneficiaries, and more were likely to be born. The trustee’s duty to consider the needs of each beneficiary, including those yet unborn, made the interest of each beneficiary not “fixed and enforceable.” Moreover, the beneficiary’s remainder interest in the trust was too speculative to be classified as marital property because under the trust terms termination of the trust during his lifetime was highly unlikely. Pfannenstiehl v. Pfannenstiehl, 55 N.E.3d 933 (Mass. 2016).
INTERPRETATION: Testamentary scheme supports gift by implication. The decedent’s will made gifts of $2,000 to each of her eight children and two stepchildren, gave the largest amount that could pass free of federal estate tax in trust for her husband for life, remainder in the trust corpus to the ten children and stepchildren and to the descendants of any who did not survive, and the residue to her husband. The will made no provision if the husband predeceased the decedent, which happened. At the decedent’s death, the trust could not be funded because the decedent’s applicable exclusion amount had been consumed by lifetime gifts made by her agent, one of her eight children. Had the trust been funded, the remainders in the children, all of whom survived the decedent, would have accelerated. The failure of the residuary gift meant that the residue passed under the intestacy statute to the decedent’s eight children. One of the stepchildren began a proceeding to construe the will and prevailed in the Surrogate’s Court. The appellate court affirmed, holding that the decedent’s general testamentary plan as evidenced in the will showed that the decedent intended to treat her children and stepchildren equally, with no indication of a different result if her husband predeceased. Therefore, the court carried out the general plan by implying a will provision giving the residue of the estate equally to all ten children. In re Estate of Warren, 39 N.Y.S.3d 282 (App. Div. 2016).
POWER OF ATTORNEY: Successor agent is not a fiduciary until succession is effective. Parents executed a power of attorney naming their son as successor agent and thereafter conveyed their farm to the son. Their daughter challenged the conveyance as a breach of the son’s fiduciary duties. The court dismissed the complaint, holding that a successor agent has no duty to the principal before he becomes the acting agent, which under this power occurred on a physician’s certification of the mother’s incompetency. In re Estate of Shelton, 60 N.E.3d 121 (Ill. App. Ct. 2016).
PROFESSIONAL RESPONSIBILITY: Disappointed will beneficiary has cause of action against drafting attorney as third-party beneficiary. The testator instructed her attorney to draft a will leaving her estate to her mother and, if her mother predeceased, to a named charity. The mother predeceased, but subsequent litigation determined that her will gave only tangible personal property to the charity and failed to dispose of her real property, which therefore passed through intestacy to her heirs. The charity successfully brought an action against the attorney on a third-party beneficiary theory. Third-party beneficiaries can sue on oral contracts. The applicable three-year statute of limitations began to run on the testator’s death, not when the will was drafted. The evidence was sufficient to show the testator contracted with the lawyer to draft a will benefiting the testator’s mother and the charity. One justice dissented, arguing that abolition of the common law privity requirement is a policy issue to be decided by the legislature and not by the court. Thorsen v. Richmond Society for the Prevention of Cruelty to Animals, 786 S.E.2d 453 (Va. 2016).
WRONGFUL DEATH: Personal representative may sue self for damages for wrongful death of decedent. A husband died from injuries suffered in a motor vehicle accident in which his wife was the driver. As the sole heir and personal representative of the estate, she brought suit against herself as an individual under both Utah’s wrongful death and survival action statutes, seeking to recover on an insurance policy. The trial court dismissed the actions on the ground that the statutes and public policy prevent a person from suing herself. The Utah Supreme Court reversed, holding that the plain language of the statutes permits a person acting as an heir or personal representative to sue herself as an individual for damages; that this reading of the statutes does not lead to an absurd result requiring judicial modification of the statutory text; and that there is no gap in the statutory scheme requiring the court to rewrite the statutes based on public policy. Bagley v. Bagley, No. 20150182, 2016 WL 6299507 (Utah Oct. 27, 2016).
2017 ADJUSTED ITEMS: The following adjusted items are of note for 2017. (1) The unified credit against estate tax basic exclusion amount is $5.49 million under IRC § 2010. (2) When the executor elects to use the special use valuation method under IRC § 2032A, the aggregate decrease in the value of qualified real property cannot exceed $1.12 million. (3) The applicable dollar amount for determining the “2-percent portion” of the estate tax extended as provided in IRC § 6166 for purposes of calculating interest under IRC § 6601(j) is $1.49 million. (4) The exemption amounts for the alternative minimum tax under IRC § 55(d)(1) are $84,500 for married filing jointly and surviving spouses’ returns, $54,300 for individual returns, $42,250 for married filing separately returns, and $24,100 for trusts and estates. Rev. Proc. 2016-55.
CHARITABLE DEDUCTION: Testamentary trust is not entitled to deduction for charitable contributions made earlier than allowed by terms of will. A will created a testamentary trust and provided for annuity payments to several individuals. The annuity payments were very small compared to the trust income. After the death of the last beneficiary, if the trust continued, the unused income and the remainder of the principal could be used for charitable distributions. The trustee argued that the will allowed for charitable contributions before the last beneficiary’s death, especially because of the large difference between the trust income and the annuity payments as well as the trust’s provisions allowing a foundation to be formed to dispose of the residue of the estate. The will did not expressly allow for charitable deductions before the last annuitant’s death. The Tax Court determined that during the year at issue because the annuitants were still alive, the charitable contributions were made contrary to the will and not deductible. Hubbell v. Commissioner, T.C. Summ. Op. 2016-67.
ESTATE TAX LIENS: Special estate tax lien takes priority over executor’s claim for administrative expenses. When the decedent died, her trust contained 3,970 membership units in a family-owned newspaper publishing company. The estate elected on the estate tax return to defer and pay its estate tax liability in ten equal installments under IRC § 6166. Approximately four years later, the estate agreed to the creation of a special deferred estate tax lien on the units under IRC § 6324A. The value of the units soon became less than the unpaid portion of the deferred tax and interest, and, when the estate could not provide collateral, the IRS accelerated the remaining deferred tax obligations. After the estate could not pay, the government filed an action to foreclose both the estate tax lien and an income tax lien for the estate’s unpaid income taxes. The district court granted priority to the executor’s claim for administrative expenses because they arose before recordation of the special estate tax lien. The Eleventh Circuit reversed, concluding that IRC § 6324A rejects the “first in time, first in right” principle and does not allow priority for administrative expenses, in contrast to the general estate tax lien provision (IRC § 6324). If the property value increased before being sold, the income tax lien also would take priority over the executor’s claim for administrative expenses. United States v. Spoor, 838 F.3d 1197 (11th Cir. 2016).
FILING ESTATE TAX RETURN: Personal representative’s reliance on attorney with severe medical conditions is not reasonable cause for failure to file return. An elderly woman served as the personal representative of the decedent’s estate and retained counsel to assist her with the filing of the estate tax return. The personal representative did not know that the attorney was suffering from brain cancer but knew that the estate tax return had to be filed within nine months of the decedent’s death and that it would be necessary to sell assets to pay the tax. The attorney did not prepare or file the return but falsely told her that he had obtained an extension. The court held that reasonable cause did not exist for failure to file the estate tax return. The court acknowledged that the personal representative was the victim of staggeringly inadequate legal counsel and that no evidence of purposeful delay existed but reiterated earlier decisions that the duties to file a tax return and pay taxes are nondelegable and that good-faith reliance on an attorney does not constitute reasonable cause. Spect v. United States, 118 A.F.T.R.2d 2016-5906 (6th Cir. 2016).
LIQUIDATING TRUST: Extension of trust’s term does not adversely affect trust’s status as liquidating trust under 26 C.F.R. § 301.7701-4(d). A trust was formed and operated consistently with a classification of a liquidating trust, but developments beyond the control of the trustee made it impossible to complete liquidation before the end of its five-year term. The IRS approved the taxpayer’s request for an additional three-year extension. PLR 201638019.
ABLE Act Accounts. David A. Rephan and Joelle Groshek provide a basic overview of ABLE accounts and the role they play in assisting elderly clients in planning for their own disabilities or for the disability of a family member in ABLE Act Accounts: Achieving a Better Life Experience for Individuals with Disabilities with Tax-Preferred Savings (and the Old Reliable Special and Supplemental Needs Trusts), 42 Mitchell Hamline L. Rev. 963 (2016).
Alzheimer’s Disease. Joseph Karl Grant examines the ethical dilemmas faced by attorneys who represent clients suffering from Alzheimer’s disease in Running Past Landmines—The Estate Attorney’s Dilemma: Ethically Counseling the Client with Alzheimer’s Disease, 24 Elder L.J. 101 (2016).
California—Electronic Wills. Although California’s harmless error provision is directed to paper wills, an alternative reading of the statute in conjunction with case law opens the door to permit electronic wills as Gökalp Y. Görer’s advocates in his Note, No Paper? No Problem: Ushering in Electronic Wills Through California’s “Harmless Error” Provision, 49 U.C. Davis L. Rev. 1955 (2016).
Digital Assets. (1) In his article, “Owning” What You “Buy”: How iTunes Uses Federal Copyright Law to Limit Inheritability of Content, and the Need to Expand the First Sale Doctrine to Include Digital Assets, 16 Hous. Bus. & Tax L.J. 208 (2016), Anthony C. Eichler includes a proposal for a federal solution to this problem with many digital assets and also urges each state to adopt the Uniform Fiduciary Access to Digital Assets Act as a progressive step toward modernizing our antiquated digital asset laws. (2) Elizabeth Sy advocates for the nationwide adoption of the RUFADAA in a revised form because it is the most comprehensive law that tackles both digital assets and privacy concerns in The Revised Uniform Fiduciary Access to Digital Assets Act: Has the Law Caught Up with Technology?, 32 Touro L. Rev. 647 (2016).
Firearms. The possibility of firearms ownership and possession by older patients raises a number of issues with potential legal ramifications for primary care physicians. Marshall B. Kapp’s article addresses some of the most salient law-related issues in The Physician’s Responsibility Concerning Firearms and Older Patients, 25 Kan. J.L. & Pub. Pol’y 159 (2016).
Islamic Estate Planning. Imani Jaafar’s article, Practical Islamic Estate Planning: A Short Primer, 42 Mitchell Hamline L. Rev. 925 (2016), focuses on Islamic wills and provides an overview of the origins of Islamic estate planning, an explanation of the predetermined inheritor system, and a discussion of common issues practitioners will face when assisting Muslim-Americans in drafting documents in compliance with Islamic principles.
Kentucky—Elder Abuse Disinheritance. Emily Irwin’s Note, Protecting Mamaw and Her Estate: Elder Abuse Disinheritance in Kentucky, 54 U. Louisville L. Rev. 307 (2016), explains why Kentucky should become a leader in elder abuse disinheritance legislation by amending its current statute to expand its reach and serve as a deterrent to elder abuse.
Minnesota—Trust Legislation. Jennifer A. Maas outlines major provisions in each article of the Minnesota Trust Code and notes modifications or changes to the language of the Uniform Trust Code in The New Minnesota Trust Code: Out with (Most of) the Old and in with (Most of) the UTC, 42 Mitchell Hamline L. Rev. 940 (2016).
New York—Rule Against Perpetuities. In his Comment, A Modern Guide to the Modifications of the Rule Against Perpetuities in New York, 32 Touro L. Rev. 947 (2016), Kyle G. Durante concludes that New York’s modifications to RAP have refined the common law RAP by preserving its underlying purpose as well as the intent of grantors and testators.
Reverse Mortgages. In his Note, What the HECM Is a Reverse Mortgage: The Importance of the Home Equity Conversion Mortgage in an Aging America, 54 U. Louisville L. Rev. 183 (2016), Ben Jakubowicz calls for the federal government to reform the HECM program to ensure its affordability and sustainability as the American population ages.
Revocable Trusts. David J. Feder and Robert H. Sitkoff’s article, Revocable Trusts and Incapacity Planning: More Than Just a Will Substitute, 24 Elder L.J. 1 (2016), draws attention to the common use of a funded revocable trust not only as a will substitute but also as a conservatorship substitute.
Rhode Island—Guardianship. Mark B. Heffner discusses how Rhode Island’s guardianship evolved rapidly over a comparatively short period of time and examines what has occurred (and has not occurred) in the 20 years following this period of rapid change in From Idiots and Lunatics to Incapacitated Persons and Respondents: The Evolution of Guardianship Law in Rhode Island, 21 Roger Williams U. L. Rev. 554 (2016).
Testamentary Intent. (1) Mark Glover explains how taxonomy can bring clarity and consistency to various components of the law of wills, and therefore, can foster jurisprudential coherence within the testamentary intent doctrine in A Taxonomy of Testamentary Intent, 23 Geo. Mason L. Rev. 569 (2016). (2) C. Lily Schurra’s Note, What Ghost Up Must Come Down: The Highs and Lows of Psychic Mediums in Probate Law, 29 Quinnipiac Prob. L.J. 310 (2016), examines the importance of testator intent together with the notion that life can extend beyond death. Notwithstanding traditional notions such as those of Thomas Jefferson, this Note explores nontraditional methods of determining testator intent, particularly the use of psychic mediums to devise a testator’s property.
Texas—Late Probate. The purpose of Taylor Whitlow’s comment is to determine what effect, if any, a devisee’s default in applying for probate should have on successors in interest and purchasers in Navigating the Legal Quagmire of Offering a Will for Probate After the Statutory Four-Year Period: Texas’s View on the Issue of Default, 68 Baylor L. Rev. 219 (2016).
Trustee Accountability. Alan Newman analyzes recent legislative trends in trust law that undermine—sometimes intentionally and sometimes inadvertently—fiduciary accountability in the administration of trusts in Trust Law in the Twenty-First Century: Challenges to Fiduciary Accountability, 29 Quinnipiac Prob. L.J. 261 (2016).
Uniform Trust Code. In The Uniform Trust Code and the Common Law: An Analysis of Three Sections of the Code That Deviate from the Common Law and Why the Drafters Changed the Law, 37 Cardozo L. Rev. 1907 (2016), Christina Bogdanski analyzes whether the changes are well founded and concludes by proposing modifications to those sections.
CALIFORNIA specifies that immunity provided for in its version of the Revised Uniform Fiduciary Access to Digital Assets Act does not apply in a case of the custodian’s gross negligence or willful misconduct. 2016 Cal. Legis. Serv. Ch. 585.
NEW JERSEY authorizes a personal representative to terminate a residential lease of a deceased tenant before the end of the lease without penalty. 2016 Pa. Legis. Serv. Act 2016-116.
NEW JERSEY enacts comprehensive legislation to address unclaimed life insurance benefits. 2016 Pa. Legis. Serv. Act 2016-132.
NEW JERSEY repeals the estate tax effective for individuals who die on or after January 1, 2018. 2016 N.J. Sess. Law Serv. Ch. 57.
NEW YORK adopts a customized version of the Revised Uniform Fiduciary Access to Digital Assets Act. 2016 Sess. Law News of N.Y. Ch. 354.