Keeping Current - Probate
Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409, gwb@ProfessorBeyer.com. Contributors include Dave L. Cornfeld, Claire G. Hargrove, Prof. William P. LaPiana, and Sean Yan.
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.
ADOPTION: The stranger to the adoption rule applies to a stepchild adopted as adult. In In re Trust of Vander Poel, 933 A.2d 628 (N.J. Super. Ct. App. Div. 2007), the court held that the stranger to the adoption rule applies to a person adopted as an adult who is therefore excluded from a class gift to the adoptive parent’s issue in a trust created by the adoptive parent’s mother even though the rule would not apply had the adoption taken place when the adopted person was a child. In addition, although the doctrine of equitable adoption probably would apply under the facts, equitable adoption would give the child legal rights only against the parent.
COMMUNITY PROPERTY: State statute provides exclusive method for creating survivorship rights in community property. In a case of first impression, the court in Beatty v. Holmes, 233 S.W.3d 475 (Tex. App. 2007), held that satisfying the requirements of Tex. Prob. Code § 452 is the sole method for creating rights of survivorship in community property, rejecting the argument that the general authorization for the creation of nonprobate property in Tex. Prob. Code
§ 450 provides an alternative method. In a companion case, Beatty v. Holmes, 233 S.W.3d 494 (Tex. App. 2007), the court applied its prior holding to the facts of the case and held that extrinsic evidence could not be considered in determining whether a brokerage account agreement satisfied the requirements of Tex. Prob. Code § 452 and that, if the brokerage agreement validly created survivorship rights, those rights did not apply to share certificates issued out of the account.
DISCRETIONARY TRUSTS: The trustee’s fiduciary duty was paramount in determining the propriety of expenditures. A grandfather created a testamentary trust directing the trustees to distribute to his granddaughter so much of the income and principal as the trustees determined to be advisable for her “proper support, education, maintenance and general welfare.” The beneficiary’s father, as co-trustee, used trust funds to pay for the beneficiary’s secondary school tuition and certain medical expenses. The beneficiary challenged those expenditures in an accounting proceeding. The court reversed the approval of the expenditures, holding that, while the expenditures were authorized by the governing instrument, a hearing was required to determine whether the trustees acted in good faith and in furtherance of the beneficiary’s best interests. In re Wallens, 9 N.Y.3d 117 (2007).
DIVORCE: The statute revoking provisions of a will in favor of an ex-spouse on the testator’s divorce did not violate a ban on retroactive laws. The testator executed a will leaving his estate to his spouse. They divorced less than one year later, and sixteen years thereafter New Hampshire enacted its version of UPC § 2-508, which revokes testamentary provisions for a spouse on divorce. The testator died seven years after the statute’s enactment and the ex-spouse petitioned for administration, alleging that the statute as applied to the testator’s will violated the state constitutional prohibition against retroactive laws. In In re Estate of Sharek, 930 A.2d 388 (N.H. 2007), the court held that the statute was constitutional and that the ex-spouse had no vested right in the testator’s will.
POSTHUMOUS CHILDREN: Posthumously conceived children are beneficiaries of a trust created by a “grandparent.” A grandfather created lifetime trusts that gave the trustees discretion to sprinkle principal among his descendants during the life of his widow. At her death, she has a special testamentary power of appointment among her husband’s descendants, who are also the takers in default. One of grandfather’s sons predeceased him by six months. Using the son’s stored semen, his widow conceived and sons were born to her 3½ and 5½ years after her husband’s death. The trustees brought a proceeding for advice and direction regarding the status of the posthumously conceived children. The court held that both children were beneficiaries of the trusts because a “sympathetic reading” of the trusts indicated that the grandfather intended “all members of his bloodline to receive their share.” In re Martin B, 841 N.Y.S.2d 207 ( N.Y. Sur. Ct. 2007).
POUROVER WILL: Real property not transferred to a trust passes with stock of a holding company. The testator’s will poured over the residue of his estate to his lifetime trust, which directed the trustee to distribute to named persons certain parcels of real property owned by a corporation of which the testator was the sole shareholder. The testator never transferred ownership of the realty to the trustee, and at his death the realty was still owned by the corporation. All the shares poured over to the trust, the residue of which passed to the testator’s widow. The trust beneficiaries of the realty sued the widow as successor trustee seeking to surcharge her for refusing to distribute the realty to them. The court in Vaughan v. Boerckel, 963 So. 2d 915 ( Fla. Dist. Ct. App. 2007), affirmed judgment for the widow, holding that the failure to transfer title to the realty to the trustee meant that title remained in the corporation, all the shares of which passed to the widow.
PRUDENT INVESTOR RULE: The trustee’s lack of diversification was not unreasonable. The beneficiaries of testamentary and lifetime trusts, which were invested in the common stock of a closely held business, objected to the trustees’ accountings, alleging liability for failure to diversify. The court affirmed the dismissal of the objections, holding that retention did not violate New York’s version of the prudent investor rule because the stock was particularly unmarketable given the capital structure of the corporation, the high dividend payout served the beneficiaries’ needs, the settlors used the trust as a device for insuring that ownership of the corporation remained in the family, and the corporate co-trustee regularly explored selling the stock and kept well informed of the corporation’s financial situation. In re Hyde, 845 N.Y.S.2d 833 (N.Y. App. Div. 2007).
REVIVAL: The withdrawal of a will from probate does not revive a prior will. After the decedent’s 2001 will was admitted to probate, the nominated executor withdrew the will from probate and offered the decedent’s 1973 will for probate. The 2001 will included a clause revoking all prior wills. The 1973 will was then admitted for probate. On appeal, the court held that if the 2001 will was validly made and executed, the 1973 will was revoked and not entitled to probate. In re Estate of Woodfield, 968 So. 2d 421 (Miss. 2007).
REVOCABLE TRUSTS: A beneficiary has no standing to challenge the actions of a trustee while the settlor can revoke. A father created a revocable trust with himself and his son as co-trustees . Before his death, the father sold stock held in the trust to his son. After the father’s death, his daughter, who was a beneficiary of the trust, brought suit against the son on several grounds, including breach of duty and negligence. Describing this as a case of first impression, the court held that the daughter lacked standing to complain about the settlor’s actions for trust property that occurred while the settlor had the power to revoke. Moon v. Lesikar, 230 S.W.3d 800 (Tex. App. 2007).
UNMARRIED COUPLES: Property to be equitably divided on the death of both parties. Washington state law has long recognized that property acquired jointly during the existence of a committed intimate relationship is subject to equitable distribution between the parties on the termination of the relationship. In Olver v. Fowler, 168 P.3d 348 (Wash. 2007), the court held that the doctrine applies when both parties are dead, requiring an equitable division of property between the two estates before a will or the intestacy statute applies to the property.
RULINGS AND REGULATIONS
APPRAISER PENALTY: IRS stated that there is no statute of limitations for Code § 6695A appraiser penalty for grossly misstating the value of property on a gift or estate tax return. EMISC 2007-0017.
GENERATION-SKIPPING TRANSFER TAX: The division of a trust by a state court will not cause a grandfathered trust to be subject to GSTT. PLR 200728017.
INCOME IN RESPECT OF A DECEDENT: Gain not considered IRD. The closing of a real estate contract entered into and intended to be closed before the decedent’s death was delayed until after the decedent’s death because of the discovery of a gas pipeline underneath the property. The IRS indicated that the gain would not be considered IRD and the estate would receive a stepped up basis. PLR 200744001.
RENUNCIATION: Renunciation of an interest in a pre-1977 trust will be considered a gift to the successor beneficiaries but will not taint grandfathering for GSTT purposes. PLR 200745016.
Class Gifts. Lawrence W. Waggoner concludes that the new Restatement will be a handy resource for trust and estate lawyers, not only in preparing to argue cases at both the trial and appellate levels, but also in the everyday work of drafting and construing dispositive provisions in wills, trusts, and other types of donative documents. Class Gifts Under the Restatement (Third) of Property, 33 Ohio N.U. L. Rev. 993 (2007).
Digital Wills. Gerry W. Beyer and Claire G. Hargrove explore the issue of whether wills should join the growing number of documents legally admissible in electronic format. Digital Wills: Has the Time Come for Wills to Join the Digital Revolution?, 33 Ohio N.U. L. Rev. 865 (2007).
Diversification. Settlors and judges can take steps to better effectuate set-tlors’ intent on investment management issues is the conclusion of Jeffrey A. Cooper in Speak Clearly and Listen Well: Negating the Duty to Diversify Trust Investments, 33 Ohio N.U. L. Rev. 903 (2007).
ERISA. In Trust Law as Regulatory Law: The Unum/Provident Scandal and Judicial Review of Benefit Denials Under ERISA, 101 Nw. U. L. Rev. 1315 (2007), John H. Langbein provides an in-depth analysis and recommends that courts restrict the power of an ERISA plan sponsor to alter the standard of judicial review.
Estate Planning for Nontaxable Estates. In Estate Planning for the Rest of Us, 95 Ill. B.J. 520 (2007), Helen W. Gunnarsson explains that, although most people don’t own enough to owe estate tax when they die, they still need the kind of estate-planning advice that a competent lawyer may provide.
Fiduciary Duties. In Frontiers in Ethics: The Estate Lawyer’s Duty of Loyalty and Confidentiality to the Fiduciary Client: Examining the Past to Make Wise Choices Now and in the Future, 33 Ohio N.U. L. Rev. 807 (2007), Charles M. Bennett traces the history, shares his views, and looks toward the future.
Gender Issues in Estate Planning. In He Says, She Asks: Gender, Language, and the Law of Precatory Words in Wills, 22 Wis. Women’s L.J. 1 (2007), Alyssa A. DiRusso asks, “If gender plays a substantial role in what language a man or woman uses, should a court base a decision on whether a document is legally binding upon the words the man or woman chose for the document?”
Illinois—Medicaid Planning. Kirsten Izatt explains that Illinois has not yet implemented the federal Deficit Reduction Act of 2005 but that it will do so shortly. In Medicaid Planning in Illinois: Are You Ready for the DRA?, 95 Ill. B.J. 586 (2007), she looks at what will and won’t change when that
Loyalty Duties. In Opening the Door for Subsequent Misapplications of the Business Judgment Rule to Claims Alleging That a Trustee Has Breached His Fiduciary Duty of Loyalty, 1 J. Bus. & Tech. L. 633 (2007), Megan L. Reuwer analyzes the Wood Prince v. Lynch case.
Michigan—Update. Robert P. Tiplady covers developments in Michigan law from June 2004 through May 2005 in Trusts and Estates, 52 Wayne L. Rev. 1019 (2006).
New York—Update. Substantial developments in estate and trust law in New York, including a handful of important legislative provisions and numerous noteworthy, interesting cases, are discussed by Terry L. Turnipseed in Estates and Trusts, 57 Syracuse L. Rev. 1135 (2007).
Powers of Appointment. Ira Mark Bloom identifies aspects of the Tentative Draft that should be clarified before final publication in Powers of Appointment Under the Restatement (Third) of Property, 33 Ohio N.U. L. Rev. 755 (2007).
Powers of Attorney: In Of Principals and POAs: When Clients Need Protection from Themselves, 95 Ill. B.J. 580 (2007), Helen W. Gunnarsson discusses the problems that may arise when a “good” agent wants to protect an “unwilling” principal.
Presumptive Heirs. In Consequences of Heirs’ Misconduct: Moving from Rules to Discretion, 33 Ohio N.U. L. Rev. 975 (2007), Anne-Marie Rhodes examines the current statutory bars to inheritance of a presumptive heir in the United States, primarily from the perspectives of the statutory conduct required, the theory underlying the statute (whether the decedent’s intent or public policy), and the consequences on inheritance of that
Revocability of Trusts. Charles D. Fox IV examines fundamental challenges facing estate planners today in How “Revocable” Is “Irrevocable”? Obtaining Flexibility in Irrevocable Trusts, 33 Ohio N.U. L. Rev. 943 (2007).
Rhode Island—Forced Share. Kenneth Rampino argues that the General Assembly should re-evaluate the state’s spousal election statute in light of concerns by advocates of both sides of the issue in Spousal Disinheritance in Rhode Island: Barrett v. Barrett and the (De)volution of the Elective Share Law, 12 Roger Williams U. L. Rev. 420 (2007).
Texas—Update. In Wills and Trusts, 60 SMU L. Rev. 1363 (2007), Gerry W. Beyer discusses judicial developments relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters. The discussion of most cases includes a moral, that is, the important lesson to be learned from the case.
California amends persona property provisions. The rights to a personality’s name, voice, signature, photograph, or likeness for commercial purposes will be effectively transferred by a provision in a testamentary instrument that provides for the disposition of the residue of the deceased personality’s assets in the absence of an express provision in the instrument. 2007 Cal. Legis. Serv. 439.
California enacts the Revised Uniform Anatomical Gift Act. 2007 Cal. Legis. Serv. 29.
Illinois authorizes a trustee, under certain circumstances, to terminate a trust when the market value of a trust is less than $100,000. 2007 Ill. Legis. Serv. 605.
Michigan modernizes provisions regarding the priority of claims and allowances against a decedent’s estate. 2007 Mich. Legis. Serv. 73.
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Vol. 22 No.2