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.
ADEMPTION: Replacement certificates of deposit passed as if they were the original certificate. The decedent's will made a specific bequest of a certificate of deposit referred to by bank and account number. Before the testator's death, the CD matured and the testator reinvested the proceeds in two CDs, which bore much higher interest rates. The total amount of the two certificates exactly equaled the proceeds of the first CD. In Parker v. Bozian, No. 1012252, 2003 WL 1439644 (Ala. Mar. 21, 2003), the court held that the bequest of the CD did not adeem. The court made reference to the form-versus-substance test and also read the evidence adduced at the trial as showing the testator's intent that the gift not adeem.
ANTI-LAPSE STATUTE: Disinheritance clause does not override anti-lapse statute. The testator made a will in which he expressly stated his intent to dispose of all his property. He left his estate to his spouse and, if she should not survive him, to his nephew. There was no gift over if nephew also predeceased the testator. Both the testator's spouse and the nephew died first. The will also contained a clause expressly disinheriting all of the testator's heirs except to the extent that they were mentioned in the will. The court in Lindsey v. Burkemper, 107 S.W.3d 354 (Mo. Ct. App. 2003), held that the disinheritance clause did not override the anti-lapse statute and that the nephew's descendants took under the anti-lapse statute.
ANTI-LAPSE STATUTE: Survival requirement overrides anti-lapse statute. The decedent's will left the residue of the estate to three relatives in fixed percentages and provided that if any of those beneficiaries predeceased her, the gift would lapse and "augment proportionally the remaining shares." All three beneficiaries predeceased the testator. In Bridges v. Taylor, 579 S.E.2d 740 (Ga. 2003), the court held that the language of the will made the beneficiaries' interests conditional on surviving the testator and therefore the anti-lapse statute would not apply. Accordingly, the residue of the estate passed via intestacy.
FORMULA CLAUSES: Nonqualifying marital gift reduces credit shelter bequest. The decedent's will made a pecuniary credit shelter bequest of the amount by which the federal taxable estate could be increased, without reference to the gift itself, without causing an increase in federal tax. A codicil to the will gave the surviving spouse two life estates that did not qualify for the marital deduction. The value of these two gifts exceeded the applicable exclusion amount. The court in In re Estate of Weissman, 755 N.Y.S.2d 562 (Sur. Ct. 2003), held that the formula language required the credit shelter gift to be reduced and therefore eliminated by other dispositions not qualifying for the maritaldeduction.
GROSS ESTATE: Family limited partnership assets includable in the decedent's gross estate. In Estate of Strangi v. Commissioner, T.C. Memo. 2003-145, the court held that under Code § 2036 the family limited partnership assets were includable in the decedent's gross estate.
IN TERROREM PROVISION: Offer of codicils did not violate no contest provision. The decedent's relatives offered four handwritten documents as codicils to her will. The will contained an elaborate no contest clause. The four documents were denied probate as lacking testamentary intent. The court held that the no contest clause was not invoked by the offering of these subsequent documents for probate because doing so was not a challenge to the will. In re Estate of Schiwetz, 102 S.W.3d 355 (Tex. App. 2003).
IN TERROREM PROVISION: Request for an accounting did not violate no contest clause. Four of the five residuary beneficiaries of the decedent's will funded litigation against the decedent's conservator that resulted in a substantial recovery. The two beneficiaries who had been appointed co-administrators began an accounting proceeding to distribute the final assets of the estate in which they proposed a final distribution excluding the beneficiary who had not participated in the litigation. The excluded beneficiary contended that the proposed distribution violated the no contest clause in the will. The court disagreed, holding that the no contest clause did not by its terms extend to proceeds of litigation that did not even exist at the time of the testator's death. The court analogized the issue to the refusal to apply a no contest clause to actions to interpret a will and to assertions of rights independent of a will. Estate of Strader, 132 Cal. Rptr. 2d 649 (Cal. Ct. App. 2003).
JOINT TENANCY: Joint tenant may not unilaterally sever a joint tenancy. The court in Canterbury v. Kovacich, No. 02CA0197, 2003 WL 1562282 (Colo. Ct. App. Mar. 27, 2003), held that a joint tenant with a right of survivorship may not sever a joint tenancy in real property by making a deed to him- or herself. Involvement of the other joint tenant is required.
PROFESSIONAL RESPONSIBILITY: A lawyer who drafted a will including a gift to himself was suspended indefinitely from the practice of law. A lawyer drafted a will for a longtime client under which he was a residuary beneficiary. The applicable rule of professional conduct prohibits a lawyer from drafting a will in which he or she is a beneficiary unless the lawyer is related to the testator or the testator has the benefit of advice from independent counsel. In Attorney Grievance Comm'n of Maryland v. Stein, 819 A.2d 372 (Md. 2003), the court suspended the attorney indefinitely. The court, however, did not require the lawyer to disclaim the gift as a condition of possible reinstatement.
SLAYER'S STATUTE: Simultaneous Death Act prevails over slayer's statute. A husband shot his wife and then killed himself. Under the applicable slayer's statute, the husband was deemed to have predeceased his wife. The wife's mother as representative of the wife's estate claimed the wife's intestate share in the husband's estate. The court in In re Estate of Miller, 840 So. 2d 703 (Miss. 2003), held that the slayer's statute did not make the wife an heir of her husband and that the simultaneous death act applied. Because there was no sufficient evidence of the order of death, each spouse was deemed to have predeceased the other spouse. Accordingly, the husband's child by his first marriage was his only heir.
UNDUE INFLUENCE: Marriage is not a confidential relationship in the context of determining whether a spouse was subject to undue influence. In In re Estate of Karmey, 658 N.W.2d 796 (Mich. 2003), the court held that, even though marriage is a "confidential relationship," it is not the sort of confidential relationship that gives rise to a presumption of undue influence for purposes of a will contest.
RULINGS AND REGULATIONS
GIFT TAX: Relinquishment of interest in a trust not treated as a gift. A husband and a wife created trusts on the same day with community property but with different trustees. The IRS recognized these as separate trusts so that a disclaimer by the surviving spouse of the interest in one trust had no adverse interest for the other trust under Code § 2519. PLR 200319002.
GRANTOR RETAINED ANNUITY TRUST: IRS refuses to give effect to retroactive reformation of a GRAT to conform to Walton v. Commissioner, 115 T.C. 589 (2000). TAM 200319001.
GROSS ESTATE: IRS approves reformation of trust to correct scrivener's error that would otherwise result in life insurance proceeds being included in the decedent's gross estate. PLR 200314009.
GROSS ESTATE: One-half of the proceeds of a life insurance policy deemed to be community property includible in deceased owner's estate. Rev. Rul. 2003-40.
INCOME TAX: Estate of deceased spouse may continue or initiate innocent spouse relief under Code§ 6015. Rev. Rul. 2003-36.
QUALIFIED PERSONAL RESIDENCE TRUST: Sample QPRT form issued. Rev. Proc. 2003-42.
SECTION 645 ELECTION: IRS extends time for termination of estate treatment for qualified trusts for decedents dying before effective date of regulations (Dec. 24, 2002). Notice 2003-22.
Anatomical Gifts. In Rethinking the Prohibition of Death Row Prisoners as Organ Donors: A Possible Lifeline to Those on Organ Donor Waiting Lists, 34 ST. MARY'S L.J. 687 (2003), Donny J. Perales urges states to allow organ donation by death row prisoners.
Commercial Trusts. The operation and potential benefits of commercial trusts are examined by Steven L. Schwarcz in Commercial Trusts as Business Organizations: Unraveling the Mystery, 58 BUS. LAW. 559 (2003).
Creditors of Trust Beneficiaries. Alan Newman discusses The Rights of Creditors of Beneficiaries Under the Uniform Trust Code: An Examination of the Compromise, 69 TENN. L. REV. 771 (2002), and recommends changes such as permitting tort plaintiffs with claims based on more than the beneficiary's mere negligence to recover despite the existence of a spendthrift provision.
Estate Tax. Sergio Pareja recommends that the unused basis step-up of the first spouse to die should be automatically transferred to the surviving spouse in Estate Tax Repeal Under EGTRRA: A Proposal for Simplification, 38 REAL PROP., PROB. & TR. J. 73 (2003).
Family Limited Partnerships. Brant J. Hellwig provides a comprehensive discussion of using FLPs to generate valuation discounts in Estate Tax Exposure of Family Limited Partnerships Under Section 2036, 38 REAL PROP., PROB. & TR. J. 169 (2003).
Interpretation. Scott T. Jarboe recommends that courts admit extrinsic evidence of the testator's use of language to resolve ambiguities in Interpreting a Testator's Intent from the Language of Her Will: A Descriptive Linguistics Approach, 80 WASH. U. L.Q. 1365 (2002).
Pets. Christine Cave recommends that the Oklahoma legislature enact specific provisions authorizing trusts for pet animals in Trusts: Monkeying Around with Our Pets' Futures: Why Oklahoma Should Adopt a Pet-Trust Statute, 55 OKLA. L. REV. 627 (2002). Rebecca Huss addresses the importance of planning for the care of a companion animal after the owner's death in Separation, Custody, and Estate Planning Issues Relating to Companion Animals, 74 U. COLO. L. REV. 181 (2003).
Self-Settled Spendthrift Trusts. The fear that the protection given to self-settled spendthrift trusts will not apply if significant acts occur outside of the states that authorize them (Alaska, Delaware, Nevada, and Rhode Island) is detailed by Bryan Nichols in "I See the Sword of Damocles Is Hanging Above Your Head!" Domestic Venue Asset Protection Trusts, Credit Due Judgments, and Conflict of Law Disputes, 22 REV. LITIG. 473 (2003).
Tortious Interference with Inheritance Rights. Diane J. Klein analyzes tort remedies in traditional will contest situations in The Disappointed Heirs' Revenge, Southern Style: Tortious Interference with Expectation of Inheritance—A Survey with Analysis of State Approaches in the Fifth and Eleventh Circuits, 55 BAYLOR L. REV. 79 (2003).
Trusts in China. Frances H. Foster provides an insightful examination of the potential difficulties with the 2001 Trust Law of the People's Republic of China in The Dark Side of Trusts: Challenges to Chinese Inheritance Law, 2 WASH. U. GLOBAL STUD. L. REV. 151 (2003).
Unitrusts in Illinois. Louis S. Harrison, Erica E. Lord, and Kirk W. Dillard explain how Total Return Trusts Give Trustees Flexibility in Ever-Changing Markets, 91 ILL. B.J. 240 (2003).
Arizona adopts the Uniform Trust Code. 2003 Ariz. Legis. Serv. 212 .
Colorado enacts the Disposition of Last Remains Act. The Act includes a statutory form that a person may use to give specific instructions or to delegate decisions to an agent. 2003 Colo. Legis. Serv. 185.
Indiana adopts the Uniform Custodial Trust Act. 2003 Ind. Legis. Serv. P.L. 3.
Indiana revises will execution and attestation requirements. 2003 Ind. Legis. Serv. P.L. 176.
Maryland permits the extension of time for final report and distribution. Extensions may be granted for 90 days upon the consent of the personal representative and all interested persons. 2003 Md. Laws 233.
Minnesota adopts the Uniform Guardianship and Protective Proceedings Act. 2003 Minn. Sess. Laws Serv. 12.
Montana adopts the Uniform Prudent Investor Act. 2003 Mont. Laws 484.
Montana replaces the Uniform Principal and Income Act with the Montana Uniform Principal and Income Act. 2003 Mont. Laws 506.
Oklahoma enhances methods of making anatomical gifts. An anatomical gift may now be proved by a donor card, a state identification card, or an on-line donor enrollment form as well as by an advance directive, driver license designation, or will. 2003 Okla. Sess. Laws 176.