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.
Amount in controversy determined separately in consolidated proceeding. A beneficiary brought two cases alleging a breach of fiduciary duties by the trustee in state court, which consolidated the cases. The trustee removed to federal court on diversity grounds, and the beneficiary moved for remand. In Gray v. Gray, Civil No. 22-cv-560-LM, 2023 WL 3719834 (D.C. N.H. May 30, 2023), the district court for New Hampshire held that, in the absence of state law determining whether consolidation is a merger of the cases or an administrative procedure that retains their separate identities, the court must determine whether each case meets the amount in controversy requirement. The court also held abstention is not required under Burford v. Sun Oil Co., 319 U.S. 315 (1943), because the matters do not present “difficult questions of state law” the decision of which could disrupt New Hampshire policy applicable to trust administration, a policy that is not unique to the state, in part because the state has adopted the UTC.
Gift of motor vehicle does not require transfer of title. Shortly before dying, the donor told a friend that the donor wanted the friend to have the donor’s motor vehicle and repeated that desire in a video call with the donee, the donee’s spouse, the donor’s child, and an employee of the donor who was directed to give the keys to the vehicle to the donee. After the donor’s intestate death, the donor’s child as administrator refused to turn over title to the donee. At the donee’s request, the district court ordered the administrator to deliver title, and, on appeal, the Colorado intermediate appellate court affirmed in In re Estate of Liebe, No. 22CA1076, 2023 WL 4055341 (Colo. App. June 15, 2023). The court found that all the elements of an inter vivos gift were present and held that a formal transfer of title is not necessary to complete a gift of a motor vehicle.
Execution of sales contract severs joint tenancy. The decedent and two other persons held real property as joint tenants with rights of survivorship. All three signed a contract to sell to third parties. The decedent died before closing. The decedent’s surviving spouse as executor of the decedent’s will brought a declaratory judgment proceeding seeking one-third of the proceeds of the sale. The circuit court granted the summary judgment motion brought by the other two vendors, and on appeal, the Supreme Court of Alabama reversed in Upchurch v. Upchurch, SC-2022-0478, 2023 WL 2818554 (Ala. Apr. 7, 2023). The court held that by entering into the sales contract, the sellers evidenced the intention to sever the joint tenancy. In addition, the sales contract said nothing about holding the proceeds in a joint tenancy.
Unilateral creation of joint tenancy by fee simple owner is a completed gift. In a case of first impression, the New Jersey intermediate appellate court held in Branco v. Rodrigues, 297 A.3d 669 (N.J. Super. Ct. App. Div. 2023) that a transfer of real property by a fee simple owner by deed to the owner and another as joint tenants is a gift to the other joint tenant when the owner dies first after recording the deed, even though the owner never informed the other joint tenant. The court affirmed summary judgment for the surviving joint tenant in a quiet title proceeding over the objection by the owner’s administrator that the transfer was an ineffective gift because of a lack of donative intent. First, recording the deed raises a strong presumption of delivery; second, the creation of a joint tenancy is presumed to be a gift, and the presumption was unrebutted; third, the presumption of a gift means that acceptance is presumed; and, fourth, the donor could not unilaterally revoke the gift and recreate the fee simple.
Trustee who sued in name of the trust may amend pleading to sue as the trustee. In a dispute over a mortgage on real property held in trust, a related party was allowed to intervene and moved to dismiss. The motion was granted on the ground that the trust is not an entity capable of maintaining a suit. The court denied a motion by the trustee to amend the complaint, holding that under Oliver v. Swiss Club Tell, 35 Cal. Rptr. 324 (Cal. Ct. App. 1963), the action was void ab initio and the statute of limitations had run. The trustee appealed and the intermediate appellate court reversed in Jo Redland Trust U.A.D. 4-6-05 v. CIT Bank N.A., 309 Cal. Rptr. 3d 339 (Cal. Ct. App. 2023). The court distinguished Oliver as being decided after the entry of judgment and emphasized the trial court’s power to determine its own jurisdiction.
Tax arrearages are not waste. Reversing the Superior Court’s grant of summary judgment, the District of Columbia Court of Appeals held in Nelbach v. Nelbach, 291 A.3d 1129 (D.C. 2023) that because under DC law waste must involve some “lasting, detrimental injury to the property that compromises the remainder interest,” the life tenant’s failure to pay property taxes, the attachment of the lien for those taxes, and the issuance of a notice of delinquency will not support an action for waste under D.C. Code § 42-1601.
Prohibition on sale of marital residence without agreement of both ex-spouses is void. Husband and wife divorced. The separation agreement, approved in the divorce proceeding but not merged into the judgment and thus surviving as an independent contract, provides that the former marital residence, in which the parties are now tenants-in-common, can be sold only by mutual agreement and that the agreement is binding on the estates of the parties. The former wife filed a petition asking for partition, which the court dismissed on the grounds that the separation agreement was “unambiguous and binding.” In Bonilla v. Najera, 208 N.E.3d 736 (Mass. App. Ct. 2023), the intermediate Massachusetts appellate court reversed, holding that the agreement created an unreasonable restraint on alienation because it is of indefinite duration and therefore violates the Rule Against Perpetuities; the restraint does not serve a worthwhile purpose; it applies to any attempt to transfer a party’s interest and affects an unlimited number of persons.
Heirs related to the decedent through the slayer may inherit. Like UPC § 2-803(f), Delaware’s slayer statute, 12 Del. Code § 2322, requires that the statute be construed in accord with the state’s policy “that a person shall not be permitted to profit by that person’s own wrong.” In Matter of Estate of Cordray, 294 A.3d 99 (Del. Ch. 2023), the Delaware chancery court held that the statute does not prevent inheritance as next of kin of the child of a slayer who killed the child’s other parent by the descendants of the slayer’s parents, the child’s grandparents.
Corporation’s fair market value included life insurance proceeds intended for stock redemption. Two brothers were the sole shareholders of a building materials corporation. To help keep the corporation in the family and provide for a smooth transition upon a death, the brothers and corporation entered into a stock-purchase agreement where the surviving brother had the right to buy the shares. If the brother declined, the corporation had to redeem the shares. The brothers always intended the corporation would redeem the shares. The corporation had life insurance on each brother to fund the redemption. When one brother died, his estate included his stock interest in the corporation. After an audit, the IRS assessed taxes on the decedent’s estate, stating the corporation had not been valued properly. The estate sued for a refund. The Eighth Circuit in Estate of Connelly v. U.S., 70 F.4th 412 (8th Cir. 2023), upheld the district court’s refusal to grant a refund and determination that the fair market value of the corporation should have included the life insurance proceeds.
IRS can pursue lien of restitution-based assessment. The executor filed a false Form 706. After entering into an agreement with the Department of Justice, he had a restitution-based assessment. The IRS filed a Notice of Federal Tax Lien against the executor for the unpaid balance. The executor contested the notice through the collection due process hearing, claiming that he had paid part of the taxes owed that had not been credited, that he had adhered to the court-ordered payment schedule, and that the notice was filed prematurely. The settlement officer placed the executor on currently-not-collectible status due to his income but sustained the notice of federal tax lien until the balance could be satisfied. The Tax Court in Seggerman v. Commissioner, T.C. Memo. 2023-78 (2023), held that the settlement officer did not abuse discretion in sustaining the Notice of Federal Tax Lien. The lien was properly filed as statutory law allows the IRS to administratively collect criminal restitution and is not bound by the payment schedule set forth in the order for criminal restitution.
Adequate disclosure of gift on return starts the clock on the statute of limitations. The taxpayer was the policyholder of a life insurance policy issued in 2006. The policy was funded by stock and cash from an entity solely owned by the taxpayer. He then assigned ownership of the policy to several family members. In 2013, the taxpayer submitted a disclosure packet to the IRS Offshore Voluntary Disclosure program that included a gift tax return for 2006 to inform the IRS that he had made gifts of the EMG stock to those family members. The taxpayer identified four documents to support his disclosure: (1) the gift tax return, (2) a protective filing attachment, (3) Schedule F of Form 5471 for his 2006 tax return, and (4) the Offshore Entity Statement. The IRS disagreed concerning both the characterization of the gift as well as the timing of the gift and concluded that he made the gift in 2007 and did not adequately disclose the gift and that the period of limitations had not commenced. The Tax Court in Schlapfer v. Commissioner, T.C. Memo 2023-65 (2023), concluded that the taxpayer adequately disclosed the gift on his 2006 gift tax return and that the statute of limitations barred the IRS from assessing the gift tax.
In Beneficiaries as Trustees: Here’s the State of Things, 36 Quinnipiac Prob. L. J. 277 (2023), Richard Ausness explains that although appointing beneficiaries as trustees is a common practice, there are serious risks, as demonstrated by cases of alleged fiduciary duty breaches. The article explores these risks and proposes drafting options to minimize the potential for litigation and protect the interests of all parties.
Eric Chaffee questions whether business trusts should exist in Justifying Business Trusts, 64 B.C. L. Rev. 523 (2023). He argues “an unequivocal yes,” highlighting the growing popularity of index funds often organized as business trusts. Chaffee explains the critical role business trusts play in the US economy by (1) permitting diversification in investment, (2) promoting efficiency through regulatory competition, and (3) “revealing knowledge about how to regulate business activity as a spontaneous order system.”
California—Conservatorships
In her Comment, Toxic: The Case of Britney Spears Sheds Light on Issues with California Conservatorship Laws, 52 Golden Gate U. L. Rev. 217 (2022), Berenice Quirino examines the issues associated with the highly publicized conservatorship of Britney Spears, which existed for nearly 14 years. Following the end of her conservatorship, California amended the law to address some of the glaring issues. These changes include guidance for court investigators reviewing a conservatorship to consider a conservatee’s preferences and a burden of proof requirement to show a conservatorship is still needed by clear and convincing evidence. Finally, she suggests additional amendments to protect the rights of persons placed under conservatorship.
In Why Foreign Limited Liability Companies Are Ultimately More Protective Than Domestic Limited Liability Companies, 50 Est. Plan. 04 (2023), Eric Kaplan highlights foreign limited liability companies’ effectiveness as an asset preservation tool. Practitioners often suggest using an LLC to safeguard a client’s assets from creditors because it traps liability at the entity level and provides more favorable tax treatment. Foreign LLCs can provide enhanced protection compared to domestic LLCs by avoiding preemption issues, reducing the choice of law risks that could benefit creditors, and making it more expensive for creditors to pursue legal actions against a client.
Desiree Hensley highlights how heirs property disproportionately affects minority communities, hindering their wealth accumulation in the United States in Property Law and the Intestacy Entitlement, 85 Alb. L. Rev. 557 (2021). Because this property is transferred to an heir outside of property law, it has no reliable record of ownership. Over generations, the uncertainty of the title can make the property unmarketable. Hensley argues that property law’s negligence directly causes the heirs property problem of uncertainty. Because property law has tools to manage this kind of uncertainty, like the Rule Against Perpetuities and the Rule Against Restraints on Alienation, states can introduce legislation to remedy this significant issue.
In Modernizing Iowa’s Wealth Transfer Through Directed Trusts and Decanting, 70 Drake L. Rev. 667 (2023), Carter Albrecht examines Iowa’s 2020 Trust Code updates, specifically the introduction of decanting and directed trusts, as important steps to provide wealthy individuals with greater flexibility for their intricate estate planning needs. Albrecht argues that compared to South Dakota’s more advanced trust and tax provisions, however, Iowa still needs to modernize to retain wealthy and multi-faceted estate planning business.
In her Comment, Electronic Wills: A Distinction Without Difference for Mississippi, 92 Miss. L. J. 799 (2023), Hannah Elliott advocates for Mississippi to adopt the Uniform Electronic Wills Act. She argues that the benefits of electronic wills, including increased accessibility and convenience, far outweigh the drawbacks and are necessary to modernize the legal system and decrease intestacy.
In End of Life, Elder Abuse, and Guardianship: An Exploration of New York’s Surrogate Decision-Making Framework, 38 Touro L. Rev. 45 (2022), Tristan Sullivan-Wilson, Deidre Lok, and Joy Solomon explore New York’s guardianship process for older adults facing elder abuse. They explain Article 81, which outlines the guardianship process, and the Family Health Care Decision Act, which guides surrogate decision-making for those who cannot make their own healthcare choices. Finally, the authors address the remaining practical barriers and provide recommendations for end-of-life care.
Aimee Sheetz advocates for Ohio to legalize alkaline hydrolysis and human remains composting to align with other states’ environmentally friendly and cost-effective alternatives to burial or cremation in A Call for the Legalization of Two Sustainable Means of Final Disposition in Ohio, 71 Clev. St. L. Rev. 915 (2023).
In Conditional Purging of Wills, 54 U. Rich. L. Rev. 275 (2023), Mark Glover discusses the majority and minority approaches to purging testamentary gifts of interested witnesses and examines whether a growing minority approach aligns with the policy goals of wills. Although most states void a testamentary gift made by an attesting witness, an increasing number of states are adopting the minority approach, which considers factors such as a testator’s intent, procedural considerations, or the substance of the gift. After a thorough analysis, Glover argues that this trend of conditional purging is “misguided” and suggests that policymakers should stick to the majority approach or carefully tailor conditional purging to align with the policy goals of wills.
Alexander Anselment discusses in his Note, New York Executive Order 202.14: A Temporary Fix to a Temporary Problem, or a Framework to Change Estate Planning Document Execution?, 32 Alb. L.J. Sci. & Tech. (2022), the impact of the COVID-19 pandemic on estate planning requirements. Anselment focuses on New York Executive Order 202.14, authorizing the witnessing of documents via video conferences. He advocates adopting EO 202.14, or a modified version thereof, into New York state law to ensure that estate planning practices adapt to modern society.
In The Secure 2.0 Act: Impact on Retirement Savings and Plans, 50 Est. Plan. 09 (2023), C. Lafond and Tom Adams explore the key takeaways of the Secure 2.0 Act, passed by Congress on December 29, 2022. They explain how one of the main reasons many Americans are not prepared for retirement is that they are either not offered a retirement savings plan by employers or decline to participate in one. To fix this problem, Secure 2.0 requires 401(k) and 403(b) plans to automatically enroll those eligible unless an employee opts out. Furthermore, this Act aims to offer increased tax benefits for small employers and greater flexibility for those saving for retirement.
Alabama provides for supported decision-making agreements as an alternative to guardianships. 2023 Ala. Laws Act 2023-134.
Alabama raises the amount of an uneconomic trust subject to termination from $50,000 to $100,000. 2023 Ala. Laws Act 20230176.
California enacts an updated version of the Uniform Principal and Income Act. 2023 Cal. Legis. Serv. Ch. 28.
California updates provisions relating to transfer on death deeds. 2023 Cal. Legis. Serv. Ch. 62.
Florida creates the crime of exploitation of a person 65 years of age or older. 2023 Fla. Sess. Law. Serv. Ch. 2023-133.
Georgia requires the personal representative to send notices to beneficiaries within 30 days of the issuance of letters testamentary or letters of administration. 2023 Ga. Laws Act 346.
Iowa allows the remote notarization of wills and codicils. The act also allows for wills and codicils to be executed in one or more counterparts by parties located in different locations with the multiple counterparts to be aggregated to comprise a completed will or codicil. 2023 Ia. Legis. Serv. H.F. 397.
Iowa requires tortious interference with inheritance claims to be joined with will contests. 2023 Ia. Legis. Serv. H.F. 232.
Louisiana raises the age of adulthood under its version of the Uniform Transfers to Minors Act from 18 to 22 years old. 2023 La. Sess. Law Serv. Act 60.
Maryland conforms the time for making a portability election for state estate tax purposes to the same time period as is required under federal law. 2023 Md. Laws Ch. 713.
Maryland passes the Maryland Trust Decanting Act. 2023 Md. Laws Ch. 715.
Michigan updates provisions relating to the Michigan Statutory Will. 2023 Mich. Legis. Serv. P.A. 72.
Nevada modernizes Power of Attorney for Health Care provisions and the statutory form. 2023 Nev. Laws Ch. 98.
Texas allows the creation of purpose trusts. 2023 Tex. Sess. Law Serv. Ch. 975.
Texas authorizes various probate notices to be given via other delivery services (e.g., UPS and FedEx) rather than registered or certified US mail. 2023 Tex. Sess. Law Serv. Ch. 205.
Vermont enacts the Uniform Power of Attorney Act. 2023 Vt. Laws. No. 60.
