Keeping Current - Probate

Keeping Current—Probate Editor: Prof. Gerry W. Beyer, St. Mary’s University School of Law, One Camino Santa Maria, San Antonio, TX 78228–8603, Contributors include: Dave L. Cornfeld, Claire G. Hargrove, Christopher L. Harris, and William P. LaPiana.

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.


CONTRACTUAL WILLS: The agreement is binding on the survivor regardless of will of first to die. The decedent and his wife entered into an agreement providing that the survivor would have the use of a farm owned as joint tenants with rights of survivorship until death, at which time the property would be devised one-half to the children of each spouse by prior marriages. The decedent’s will, however, gave the residue of his estate to his children. The court in Pace v. Burke, 150 S.W.3d 62 (Ky. Ct. App. 2004), held that the agreement did not lack mutuality and that the decedent’s failure to execute a will in conformity to the agreement was not fatal because the agreement required only that the survivor execute a conforming will.

CONTRACTUAL WILLS: Extrinsic evidence admissible. In Garrett v. Read, 102 P.3d 436 (Kan. 2004), the court held that testimony by the scrivener of reciprocal wills is admissible to prove that the wills were made in accordance with a contract, and, to establish the terms of the contract, that the surviving spouse breached a duty imposed by a confidential relationship by executing a new will, and that a constructive trust should be imposed on the beneficiaries of the new will in favor of the beneficiaries under the contractual will.

CONTRACTUAL WILLS: A statement that a will is joint and several does not defeat contract. A husband and his wife executed a joint will, which recited that they “mutually agree[d]” in consideration of each other’s promises to make “joint and several wills.” After the husband’s death, the wife executed a new will, which was admitted to probate after her death. In In re Estate of Graham, 690 N.W.2d 66 (Iowa 2004), the court held that the will was contractual notwithstanding the use of the term “several” and that the contract terms could be enforced by a constructive trust imposed on the beneficiaries of the wife’s new will.

MARITAL DEDUCTION: Limitation on the surviving spouse’s right to income prevents trust from qualifying for QTIP treatment. The court in Davis v. Commissioner, 394 F.3d 1294 (9th Cir. 2005), denied a QTIP marital deduction because the trust limited the spouse’s right to income based on the trustee’s determination of the spouse’s need.

MEDICAID: A discretionary support trust is liable to the state for reimbursement. A Medicaid recipient was the beneficiary of a trust created by her father under which she received all income. The trustees had the discretion to invade principal for her support and maintenance. The court in the case of In re Barkema Trust, 690 N.W.2d 50 (Iowa 2004), held that although the trust was a discretionary support trust, the beneficiary’s interest was sufficient to make the trust principal liable for reimbursement to the state as part of the Medicaid recipient’s estate.

MEDICAID: An elective share trust is liable to the state for reimbursement. In Estate of DeMartino v. Division of Medical Assistance and Health Services, 861 A.2d 138 (N.J. Super. Ct. App. Div. 2004), the court held that a testamentary trust, created under the will of the recipient’s spouse to hold the recipient’s elective share and under which the recipient was a mandatory beneficiary of income and a discretionary beneficiary of principal, is part of the recipient’s estate and is therefore liable to the state for reimbursement when the recipient died.

PROFESSIONAL RESPONSIBILITY: Drafting attorney owes a duty to potentially disqualified beneficiary. An attorney drafted the testatrix’s will, which left her estate to the testatrix’s care custodian. The attorney, however, did not advise the testatrix that gifts to a care custodian are presumptively invalid under local law and that this presumption may be overcome only through review by an independent attorney. In Osornio v. Weingarten, 21 Cal. Rptr. 3d 246 (Cal. Ct. App. 2004), the court held that the drafting attorney owed the beneficiary a duty of care to ensure that the statutory disqualification would be overcome.

TRUSTS—INCOME vs. PRINCIPAL: Percentage test of partial liquidation applies to amount received by the trust. California’s enactment of the Uniform Principal and Income Act includes the Act’s provision that a distribution received by a trust from an entity is considered a partial liquidation of the entity and thus allocable to principal if the amount received is greater than 20% of the entity’s gross assets. In In re Estate of Thomas, 21 Cal. Rptr. 3d 741 (Cal. Ct. App. 2004), the court held that the percentage test is to be applied to the distribution received by the trust rather than to the total amount distributed by the entity. Accordingly, the entire amount the trust received was allocated to income.

TRUSTS—INTERPRETATION: Testimony of trust scrivener deemed relevant even if the settlor is still alive. An inter vivos trust provided that, at the death of the settlor’s spouse, a portion of the trust would become an irrevocable marital deduction trust. The trust document also stated that the trust was revocable. After his spouse’s death, the settlor revoked the trust and the trust beneficiaries challenged the revocation. A grant of summary judgment for the settlor was reversed in In re Durosko Marital Trust, 862 A.2d 914 (D.C. 2004). The court held that the trust was ambiguous and that the scrivener’s testimony about the settlor’s intent was relevant even though the settlor was still living.

TRUSTS—LIABILITY: A discretionary trust is subject to the beneficiary’s child support obligations. The mother’s will created a discretionary trust for her son that gave the trustee the power to apply income and principal for the son’s support, education, and welfare. A court order directing the trustee to pay the son’s child support arrears was upheld in Drevenik v. Nardone, 862 A.2d 635 (Pa. Super. Ct. 2004), even though the trust corpus was protected from creditors. Under local law, the obligation of support is not a debt and an attempt to protect the trust from the support claim would be against public policy.

TRUSTS—REVOCATION: A requirement of notice precludes a revocation by change in title. The decedent and his wife created a self-trusteed revocable trust that became irrevocable on the wife’s death nine years later. Before her death, the couple sold their home, the only asset of the trust, and received a note and a deed of trust to which they took title as joint tenants. The trust required that it be revoked by a duly executed instrument delivered to a trustee and also allowed the trustee to hold property in the trustee’s own name without mention of the trust. After the wife’s death, the husband remarried and he and his second wife created a revocable trust to which they quitclaimed the deed of trust. After the husband’s death, the beneficiaries of the first trust claimed the proceeds of the deed of trust. In Heaps v. Heaps, 21 Cal. Rptr. 3d 239 (Cal. Ct. App. 2004), the court held that under the trust provisions, a mere change of title could not withdraw property from the trust and that the beneficiaries of the first trust were entitled to the deed of trust.

VALUATION: Buy-sell agreement was deemed a testamentary substitute and thus did not control the value of the business interests for estate tax purposes. Estate of True v. Commissioner, 390 F.3d 1210 (10th Cir. 2004).

WILLS: One subscribing witness is not “substantial compliance” with formalities. The lower court admitted to probate a document bearing the decedent’s notarized signature holding that affidavits submitted by persons who saw the decedent sign the document and heard him declare his testamentary intent showed substantial compliance with the statutory requirement of two witnesses. The court in In re Estate of Iversen, 150 S.W.3d 824 (Tex. App. 2004), reversed, holding that the statutes recognize “substantial compliance” only in connection with the language necessary to create an effective self-proving affidavit.


ESTATE TAX: Interest on a bank loan obtained to pay the federal estate tax is deductible on the decedent’s federal estate tax return as an administration expense, provided the loan is necessary for the administration of the estate. PLR 200449031.

ESTATE TAX: A will provision directing that estate taxes be paid out of the residuary estate did not waive the estate’s right to recover the tax due because of the inclusion of QTIP property in the decedent’s gross estate from the QTIP property. PLR 200452010.

MARITAL DEDUCTION: QTIP election was valid for the full correct amount notwithstanding accountant’s miscalculation of the dollar amount on the federal estate tax return. Accordingly, it is good practice to describe the QTIP interest on the return rather than merely to provide the value of the QTIP interest. PLR 200450004.

VALUATION: IRS issues final regulations to assist taxpayers who select the alternate valuation date for federal estate tax purposes. T.D. 9172 (effective Jan. 4, 2005).

VALUATION: IRS permits extension of time to file an alternate valuation date election if election was not made on the original return because of errors made by the executrix’s CPA. PLR 200452030.

VALUATION: The value of farm property in the decedent’s estate may be discounted for minority interest and lack of marketability before applying the special use valuation under Code § 2032A. PLR 200448006.


Ademption. The importance of finding out what a testator would like to happen if the exact specifically gifted item is not in the estate when the testator dies is the focus of Helen W. Gunnarsson’s article Ademption Preemption, 92 Ill. B.J. 617 (2004).

Charitable Lead Trusts. In Obtaining a Better Benefit by Using a Grantor Charitable Lead Trust, 31 Est. Plan. 579 (2004), Matthew J. Madsen contends that a grantor charitable lead annuity trust should produce a better net present value benefit than a nongrantor trust or CLAT in many situations.

Corporate Trustees. In their article, Regulatory Developments for Banks and Thrifts Conducting Trust and Fiduciary Activities, 59 Bus. Law. 1299 (2004), V. Gerard Comizio and Jeffrey L. Hare discuss how traditional banks are becoming more consumer-oriented in the face of rising competition from nonbank companies.

Family Limited Partnerships. Rebecca B. Hawblitzel analyzes the effect that the landmark Strangi case has had on the way family limited partnerships can be used to plan estates and business affairs in her article, A Change in Planning: Estate of Strangi v. Commissioner’ s Effect on the Use of Family Limited Partnerships in Estate Planning, 57 Ark. L. Rev. 595 (2004). Milton Childs advocates the use of FLPs to allow parents to retain control of the business while giving the children limited ownership in his article, Using Family Limited Partnerships for Estate Planning, 5 Marq. Elder’s Advisor 193 (2004).

Forced Shares. Shari A. Levitan explains what an “elective share” is and what effect it may have on the estate of a deceased spouse in her article, What Are the Effects When a Surviving Spouse Opts for the Elective Share?, 31 Est. Plan. 597 (2004).

Health Insurance Portability and Accountability Act. Thomas J. Murphy cautions that particular care must now be exercised when drafting documents that affect the release of health care information in his article, Dealing with HIPAA: Powers of Attorney, Record Releases, Court Orders, and Subpoenas, 5 Marq. Elder’s Advisor 183 (2004).

Illinois Update. David Berek explains recent legislation in New Small Estate, Anti-Lapse, Health POA Provisions, 92 Ill. B.J. 601 (2004).

Intestate Succession. In an article replete with sophisticated mathematical equations, Adam J. Hirsch analyzes Default Rules in Inheritance Law: A Problem in Search of Its Context, 73 Fordham L. Rev. 1031 (2004). This article explains how inheritance defaults should be structured and how lawmakers should go about discovering benefactors’ probable intent.

Malpractice. In Shape Up or Ship Out: Accountability to Third Parties for Patent Ambiguities in Testamentary Documents, 26 Whittier L. Rev. 59 (2004), Angela M. Vallario argues that third parties who lose their inheritances because of a patent defect should have legal recourse to be made whole. Authors Mark Merric, Robert D. Gillen, and Jane Freeman caution that clients whose estate plans are impaired by the adoption of the Uniform Trust Code may seek recovery from the estate planner or trustee in their article, Malpractice Issues and the Uniform Trust Code, 31 Est. Plan. 586 (2004).

Marketability Discount. Recent Cases Suggest How to Maximize the Marketability Discount, 31 Est. Plan. 605 (2004), by Espen Robak, explains how valuation experts can respond more effectively to the controversy.

Notarization. Whether lawyers should notarize their clients’ estate planning documents such as wills and powers of attorney is debated in Helen W. Gunnarsson, What Limits on Lawyer-Notaries?, 92 Ill. B.J. 565 (2004).

Summer Homes. Ken Huggins explores how to develop an agreement to help maximize the family’s enjoyment of its treasured summer home in his essay, Passing It on: The Inheritance, Ownership and Use of Summer Houses, 5 Marq. Elder’s Advisor 85 (2003).

Texas Probate Courts. Joseph R. Marrs explores why tort litigants may find it advantageous to have their cases heard in probate courts in Playing the Probate Card: A Plaintiff’s Guide to Transfer to Statutory Probate Court, 36 St. Mary’s L.J. 99 (2004).

Trust Taxation. David H. Kirk explores the brewing controversy over interpretation regarding the deductibility of miscellaneous itemized expenses in his note, To Be or Not to Be: A Trust’s Investment Expense Deduction Subject to the Two Percent Limitation Under I.R.C. Section 67, 1 Pitt. Tax Rev. 223 (2004).

Trustee’s Fiduciary Duties. The possibility that an attorney hired by a trustee may owe fiduciary duties to the trust beneficiaries is analyzed in Robert S. Held, A Trust Counsel’s Duty to Beneficiaries, 92 Ill. B.J. 636 (2004).


Michigan amends its legislation governing what notices the personal representative must give to the friend of the court in the coun­ty in which the estate is being administered. 2004 Mich. Legis. Serv. 481.

Michigan enhances common trust fund legislation and expands coverage to include collective investment funds. A collective investment fund is one maintained by a financial institution that consists solely of assets of retirement, pension, profit sharing, stock bonus, or other other trusts that are exempt from federal income tax. 2004 Mich. Legis. Serv. 586.