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Probate & Property

March/April 2024

Keeping Current—Probate

Gerry W Beyer, Julia Koert, Paula Moore, William P La Piana, and Jake William Villanueva

Summary

  • In cases, No-Contest Clauses: Clause not violated where beneficiary seeks to enforce fiduciary duty in good faith.
  • In literature, Charitable Gifts: In Laws Governing Restrictions on Charitable Gifts: The Consequences of Codification.
  • In tax cases, rulings and regulations, LIENS: Spouse’s separate share of proceeds from sale of residence cannot be taken to satisfy the decedent’s IRS lien.
  • In legislation, Michigan enacts the Uniform Power of Attorney Act. 2023 Mich. Legis. Serv. P.A. 187.
Keeping Current—Probate
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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.

CASES

CONTRACTUAL WILLS: Agreement creating contractual wills must be valid as a postnuptial agreement. In 1989, Doris and Nathan entered into an agreement to execute wills that would, when both spouses were dead, benefit equally the couple’s children, who were the children of previous marriages of both spouses. In 2015, Nathan executed a will giving his entire estate to Doris if she survived and, if she did not, to her children. Nathan’s children prevailed in their summary judgment motion requesting a determination of the validity of the agreement. Doris’s children appealed, and the intermediate Tennessee appellate court reversed and remanded in Etheredge v. Estate of Etheredge, 2023 WL 5367681 (Tenn. Ct. App. Aug. 22, 2023). The court held that the contract was a postnuptial agreement which is valid only if “knowledgably entered into.” Because the trial court had upheld the validity of the agreement solely on the existence of consideration for its creation, the matter must be remanded for a determination of whether it was actually entered into knowledgeably.

DEEDS: Deed purporting to create tenancy by the entirety construed to create joint tenancy. A father executed a deed purporting to convey residential real estate to himself and his son, Eric, as tenants by the entirety and “unto the survivor of them.” After the father’s death, the probate court interpreted the deed to create a joint tenancy with the right of survivorship. The father’s estate appealed and the District of Columbia Court of Appeals affirmed in In re Estate of Hamilton, 299 A.3d 542 (D.C. 2023). The court held that the case was governed by precedents dealing with attempts to create tenancies by the entirety between two persons who might be able to marry. Those precedents looked to the intent of the grantors of the deeds, decided that the grantor intended to create a joint tenancy with the right of survivorship, and governed this case. In addition, the words of the deed giving the property to the survivor’s personal representatives and assigns are further evidence of the grantor’s intent.

LIFE ESTATES: Damage caused by a remainder beneficiary during the life tenancy may be considered in partition action. After the surrender of the life estate by the grantor, two of the three remainder persons petitioned for partition and asked that the distribution of proceeds reflect the damage the third remainder person, who lived for a time with the grantor, caused to the property. The court granted the petition but ordered that the proceeds of the sale be distributed equally among the remainder persons, holding that only the life tenant is liable for waste committed during the tenancy. On appeal, the intermediate Massachusetts court in Lodigiani v. Pare, 217 N.E.3d 640 (Mass. App. Ct. 2023), reversed, holding that the court has the discretion in distributing the proceeds to consider damage caused by a remainder person. The court expressly did not reach the question of when the life tenant can be held responsible for the acts of others and remanded the case for determination of whether and how discretion should be exercised.

NO-CONTEST CLAUSES: Clause not violated where beneficiary seeks to enforce fiduciary duty in good faith. The testator’s daughter brought an action seeking to have the decedent’s executor remove a bank account belonging to the beneficiary from the estate and to deduct on the estate tax return the outstanding value of mortgages on real property held in the decedent’s revocable trust and included in the gross estate. The daughter prevailed in the trial court, which also dismissed the testator’s son’s allegation that the daughter had violated the identical no-contest clauses in the will and trust by challenging the actions of the executor and trustee. The Supreme Court of Connecticut affirmed in Salce v. Cardello, 301 A.3d 1031 (Conn. 2023). In an elaborate opinion extensively citing precedents from other states, the court held that actions enforcing a fiduciary’s duties do not violate a no-contest clause so long as enforcement is undertaken in good faith. One justice dissented on the grounds that the policy of allowing beneficiaries to enforce the supervision of fiduciaries does not prevail over the policy of enforcing the testator’s and settlor’s intent.

PET TRUSTS: Remainder beneficiary of lapsed pet trust must be decided by extrinsic evidence. The decedent’s will created a trust for the decedent’s dog with the remainder to charities to be selected by the trustees. The residuary clause gave the residue to the trustees of the pet trust. The dog predeceased the testator. Some of the decedent’s heirs opposed probate of the will, and the trial court granted summary judgment for the executor, holding that the remainder to charity took effect under the doctrine of acceleration of remainders. In Matter of Estate of Jablonski, 214 N.E.3d 1051 (Mass. 2023), the Massachusetts Supreme Judicial Court held that the trust had lapsed because under the pet trust statute, Mass. Gen. Laws ch. 203E, § 408, the trust must terminate at the death of the animal or animals it was created to benefit. The remainder could not be accelerated because the testator’s failure to name a specific charity to receive the remainder creates an “ambiguity” regarding the decedent’s intent if the pet did not survive to be the beneficiary of the trust. Because extrinsic evidence is necessary to resolve the ambiguity, summary judgment was improper, and the court remanded the case.

PRETERMITTED CHILDREN: Devise to class including children prevents pretermission. Oklahoma law, 84 Okla. Stat. tit. 2021 § 132, provides that when a testator omits to provide in the testator’s will for any of the testator’s children or the issue of deceased children, the omitted persons are entitled to the share of the estate they would receive had the testator died intestate unless it appears that the omission was intentional. The testator’s children were not mentioned by name in the testator’s will and objected to probate, asserting the statutory provision applied to them. The district court ruled it did not. The children appealed and the intermediate appellate court affirmed in Matter of Estate of Shepherd, 534 P.3d 1061 (Okla. Civ. App. 2023). The court agreed with the district court that a devise in the will to “all relatives” included the children and therefore the statute did not apply.

SIGNATURE ON WILL: Electronic signature generated by DocVerify is not signature on the will. The decedent executed a document purporting to be the decedent’s will by using DocVerify to affix an electronic signature to the document while in a video conference with the attorney who drafted the will, another witness, and a notary public authorized to perform remote notarization who managed the DocVerify process. The will was denied probate, and on appeal the Pennsylvania Superior Court affirmed in In re Estate of Kittler, 303 A.3d 463 (Pa. Super. Ct. 2023), holding that an electronic signature, even though it is an image of the decedent’s signature, does not meet the statutory requirement under 20 Pa. Cons. Stat. § 2502 that the testator signs the will. The court cited both the statutory requirement that undefined terms be construed according to “their common and approved usage” under which “sign” means to affix by hand and the statutory exclusion of wills and trusts from the sorts that documents that may be signed electronically under 73 Pa. Cons. Stat § 2260.104.

TRUST CREATION: Trust created using void power of attorney is void ab initio. A parent executed a power of attorney appointing his child as his agent. The parent later allegedly orally revoked the power of attorney and executed a new one naming another of the parent’s children as agent. Before the time at which the child claims to have learned of the revocation, the child as agent created an irrevocable trust for the parent’s benefit and transferred a substantial amount of the parent’s assets to the child as trustee of the newly created trust. The child began a declaratory judgment action for a declaration that the trust was valid. The trial court held that the power of attorney was void because it was improperly executed and that the trust was therefore void. The child appealed and the intermediate appellate court reversed, citing Pa. Cons. Stat. § 5608, which grants immunity to persons accepting a power of attorney without actual knowledge of its revocation. In In re Koepfinger, 302 A.3d 630 (Pa. 2023), the Pennsylvania Supreme Court reversed, holding that because the power of attorney was void, the creation of a trust by exercising authority purportedly granted by the power of attorney was also void.

TAX CASES, RULINGS, AND REGULATIONS

LIENS: Spouse’s separate share of proceeds from sale of residence cannot be taken to satisfy the decedent’s IRS lien. A husband and wife owned a house in Ohio as joint tenants with rights of survivorship. The husband died unexpectedly and left his wife destitute, unable to pay the two mortgages or federal tax debt. The bank moved to foreclose on the property, the IRS filed a tax lien, and the wife filed for and received innocent spouse relief. The wife sold the home before the foreclosure, and the proceeds went to pay the mortgages and the IRS lien. After receiving the innocent spouse relief, she only owed the IRS a few thousand dollars and requested a refund for overpayment. The IRS denied her claim. The Tax Court in O’Nan v. Comm’r, T.C. Memo 2023-117, held that the IRS owed her a refund for overpayment. After receiving innocent spouse relief, the wife’s tax debt should be viewed as married filing separately. Accordingly, the tax lien against the wife was much smaller than the tax lien against the husband. The Tax Court ordered the IRS to refund the proceeds in excess of the wife’s separate tax debt. The court held that the entirety of the husband’s one-half share in the home had been exhausted by payment of the two mortgages and that all proceeds paid to the IRS came from the wife’s separate share.

LITERATURE

ALABAMA—WILL FORMALITIES: In Strict Adherence to the Wills Act Formalities in Alabama: When Did Dead Hand Control Die?, 46 J. Legal Pro. 341 (2022), Callie Shearer explains how strict adherence to the Alabama Wills Act can sometimes lead to unjust outcomes. Instead of strict adherence, Shearer proposes embracing the harmless error rule and recognizing holographic wills in Alabama to protect the testator’s wishes.

CHARITABLE GIFTS: In Laws Governing Restrictions on Charitable Gifts: The Consequences of Codification, 70 UCLA L. Rev. Discourse 424 (2023), Nancy McLaughlin discusses how the adoption of the Uniform Trust Code and Uniform Prudent Management of Institutional Funds Act resulted in unintended negative consequences for laws governing charitable gifts. McLaughlin outlines these issues and proposes possible solutions.

CHOICE OF LAW: In Alien Powers: Powers of Appointment, “Dogma,” and the Pure Theory of Jurisdiction-Selecting Choice of Law, 97 Tul. L. Rev. 1047 (2023), James Spica discusses the difficulties when trusts are subject to different state laws and the current issues with choice-of-law rules, specifically Restatement § 274(a) and UPAA § 103(2). Spica suggests adjusting Restatement § 274(a) to better align with the preferences for choice-of-law rules.

COMMUNITY PROPERTY: In Community Property and Conflict of Laws: A Cacophony of Cases, 97 Tul. L. Rev. 657 (2023), Karen Boxx highlights the complexity of conflict-of-law issues in cases involving marital property in different states. Instead of traditional choice-of-law jurisprudence, which has proven inadequate, Boxx suggests courts use a case-by-case approach, considering specific interests, policies, and their effects before making a ruling.

CONFLICT OF LAWS: In Life and Death Matters in Conflict of Laws, 97 Tul. L. Rev. 703 (2023), Alyssa DiRusso explains the complexities of deciding when someone is legally dead because of new advancements in medicine and inconsistencies among state laws. DiRusso emphasizes a need for a clear and consistent way to determine death and provides potential solutions.

DIRECTED TRUSTS: In Directed Trusts and the Conflicts of Laws, 97 Tul. L. Rev. 957 (2023), Jeffrey Schoenblum explains how many settlors are dissatisfied with traditional trust laws. These dissatisfied settlers have leveraged conflict of laws to establish directed trusts in other states while still living in their home states.

DISPOSITION OF REMAINS: In Ashes to Ashes and Dust to a Coral Reef? Modern Disposition of Remains, 50 Est. Plan. 04, Alyx Durachta and Lauren Wolven investigate a range of options for final resting arrangements, highlighting new approaches such as incorporating cremains into artificial reef formations.

DNA TESTING: In Genealogy Sites and Adoptions—Connecting Families or Ruining Them?, 38 Touro L. Rev. 1399, Taylor Bialek examines the impact of genealogy sites on fundamental constitutional rights like the right to privacy and the right to parent and direct a child’s upbringing. The current lack of regulation in genealogy sites poses many risks to these constitutional rights, and Bialek offers possible solutions.

ELDER FINANCIAL EXPLOITATION: In S(OLD) Multilevel Marketing Organizations and Elder Financial Exploitation, 30 Elder L. J. 451 (2023), Christopher Opie explores the heightened risk of financial abuse for seniors involved in multilevel marketing companies. Further, Opie proposes improvements in Adult Protective Services statutes and recommends enhanced education for law enforcement, lawyers, and case workers to raise awareness of legal solutions available to elder individuals involved in MLMs.

FEDERAL GIFT & ESTATE TAX: Gary R. Gehlbach explains planning strategies estate planners should consider, anticipating that “[o]n Jan. 1, 2026, the federal lifetime estate and gift tax exemption will be cut in half (adjusted for inflation)” in To Gift or Not to Gift, Ill. B.J. Sept. 2023, at 38.

GRANTOR TRUSTS: In Can the Surviving Spouse Own a Grantor Trust?, 50 Est. Plan. 08 (2023), Howard Zaritsky, Karen Boxx, Steven Gorin, and Ann Wilson question the grantor status of a spouse after the death of the first grantor. Although some suggest that a married couple can create a joint grantor trust where the surviving spouse automatically becomes the deemed owner, the authors argue that a comprehensive reading of regulations requires each spouse to be deemed the owner “only of the portion of the trust attributable to their contribution.” Thus, a surviving spouse will not automatically transition to a “deemed owner” of the entire trust for income tax purposes unless he or she contributed all the trust assets.

GUARDIANSHIPS: In Guardians of the Elderly: Not Always So Heroic, and Sometimes, Unnecessary and Abusive, 30 Elder L. J. 383 (2023), Kellen Dykstra explores how guardianships can be misused to exploit the elderly. Dykstra proposes legal and administrative procedure changes to help prevent abusive guardianships, such as standardized laws across states, raising certification requirements for guardians, and enhancing court oversight.

HEIR HUNTERS: In Sticky Omitted Choice-of-Law Clauses: The Case of Heir Hunters, 97 Tul. L. Rev. 847 (2023), David Horton explores the assumption that contracts evolve over time and drafters usually only keep the useful clauses while deleting the others. But some scholars challenge this assumption showing that contract terms or gaps can be “sticky” or resistant to change. Horton examines the puzzling absence of choice-of-law clauses in heir-hunting contracts and proposes possible explanations and how these reasons provide insight into the “sticky” contract terms.

HEIRS PROPERTY: In Splitting Heirs: How Heirs’ Property Continues the Legacy of Challenges to the Accumulation of Wealth for Black Americans, 32 U. Fla. J. L. & Pub. Pol’y 573 (2022), Ryan Cook explores the challenges posed by heirs’ property that often lead to cycles of poverty in Southern Black American communities. Cook analyzes the effect of the Uniform Partition of Heirs Property Act and discusses additional actions to offer much-needed protection in the community.

HOLOGRAPHIC WILLS: In Don’t Let Death Be Your Deadline to Get a Will Before It’s Too Late: Expand Holographic Wills Law to Incentivize Will-Making, 30 Elder L. J. 349 (2023), Angela Vallario investigates the reasons behind the lack of wills among Americans and suggests two main ways to encourage will creation. First, she advocates for educating people about why a will is essential. Second, she urges jurisdictions to expand holographic will legislation, making the process more accessible.

ILLINOIS—CO-AGENTS FOR HEALTH CARE: In Amending the Illinois Power of Attorney Act: Co-Agents for Health Care Power of Attorney, 72 De Paul L. Rev. 731 (2023), Isabella Loverde explores the benefits of co-agency and urges the Illinois General Assembly to amend the Act to permit the appointment of co-agents for health care powers of attorney.

INHERITED RETIREMENT ACCOUNTS: In The Declining Appeal of Inherited Retirement Accounts, 42 Va. Tax Rev. 267 (2023), Richard Kaplan discusses recent legislation and regulations that have greatly restricted a non-spousal beneficiary’s ability to manage inherited retirement accounts and explores some planning strategies considering those changes.

MISSOURI—ULTIMATE DEAD HAND CONTROL: In Missouri’s Ultimate Dead Hand Control: The Development and Relationship between Donative Arbitration Provisions and No-Contest Clauses in Wills & Trusts, 2 J. Disp. Resol. 129 (2023), Hunter Hummell suggests using no-contest clauses and arbitration clauses in wills as a tool to mitigate conflicts. Furthermore, Hummell reviews recent developments and the enforceability of these clauses to serve the client’s interests in preventing litigation.

PARTY AUTONOMY: In Rethinking Party Autonomy in Trust Law, 97 Tul. L. Rev. 1097 (2023), Stewart Sterk questions why individuals should be able to choose the law governing their trusts and avoid their home state’s regulations. Sterk argues that the choice-of-law doctrine needs to be reevaluated to prioritize the settlor’s home state interests and the protection of third parties with claims to trust assets.

PUBLIC POLICY DOCTRINE: In Trust Law’s Public Policy Doctrine: Major Policy Fault Lines, Aggressive Home Rule Legislation, and Implications for Conflicts Reform, 97 Tul. L. Rev. 1147 (2023), Reid Weisbord highlights the tension between settlor intent and public policy doctrine in conflict of law disputes for trust law. Weisbord examines recent developments in public policy doctrine, including “(1) the validity of self-settled asset protection trusts, (2) the use of trusts by applicants for government assistance, and (3) the enforceability of trustee exculpation provisions.”

RETIREMENT: In The Great American Retirement Fraud, 30 Elder L. J. 265 (2023), Michael Doran argues that the retirement-reform project starting in 1996 continues to be a “policy scam.” Instead, he suggests a substantial retirement policy reform by reducing subsidies for wealthier individuals, converting tax deductions and credits for lower-income earners into government-funded support for retirement like Social Security, and maintaining the current system for middle-income earners.

SETTLOR’S CHOICE OF LAW: In Trusts and the Choice of Law: What Role for the Settlor’s Choice and the Place of Administration, 97 Tul. L. Rev. 805 (2023), Thomas Gallanis has a timely analysis of the central question: to what extent should a settlor be permitted to select favorable trust law? As billions of dollars are moving into states that supply favorable trust laws, this analysis provides advice for the American Law Institute drafting of the Restatement (Third) of Conflict of Laws and the Uniform Law Commission’s drafting of a uniform act on the conflict of laws in trusts and estates.

STEP UP BASIS: Les Raatz explores strategies to increase basis while limiting exposure to creditors or spendthrifts in Need a Step Up in Basis, 50 Est. Plan. 18 (2023).

SUCCESSION: In Situs and Domicile in Choice of Law for Succession Issues, 97 Tul. L. Rev. 1181 (2023), Christopher Whytock challenges the traditional choice-of-law rule for real property succession issues. He favors a unified approach by proposing an extension of the decedent’s domicile law to encompass both personal and real property succession issues.

TENANCY BY THE ENTIRETY: In Tenancy by the Entirety Property and Transfers to Trusts, 36 J. Am. Acad. Matrim. L. 33 (2023), Julie Cheslik explores the risk to creditor protection when tenancy by the entirety property is transferred to a trust. She examines the laws in many of the tenancy by the entirety jurisdictions in the United States that continue to shield spouses from one partner’s creditors, even if they transfer property to a trust.

TRUSTEE FEES: Jay E. Harker explains that “[a] corporate trustee may be marginally more expensive than leaving the management of a trust to an individual trustee, but the extra cost may not be worth the risk of a total meltdown of the estate plan due to trustee mismanagement or inexperience” in Busting the Myth About Corporate Trustee Fees, Ill. B.J., Sept. 2023, at 34.

VALIDITY OF WILLS AND TRUSTS: In Validity in Wills and Trusts: Conflict Rules in Search of a Theory, 97 Tul. L. Rev. 887 (2023), Ronald Scalise explores the increasingly common conflict-of-laws issues in trusts and estates. He specifically addresses the complex issue of determining the validity of wills by looking at formalities, capacity, and free consent. Further, Scalise suggests the urgent need to rethink conflict-of-law rules to align with modern society. This article serves as a theoretical basis for evaluating and updating the current conflict rules.

WYOMING—TRUSTS: In The Magnificent Seven: Key Advantages of Wyoming as a Trust Jurisdiction, 46 Wyo. L. 14 (2023), Tassma Powers explains how Wyoming is a lesser-known but top-tier trust jurisdiction and highlights seven unique features that make it a preferred trust jurisdiction.

LEGISLATION

CALIFORNIA adopts the Uniform Directed Trust Act. 2023 Cal. Legis. Serv. Ch. 721.

CALIFORNIA mandates greater oversight of conservators. 2023 Cal. Legis. Serv. Ch. 705.

CALIFORNIA prohibits a health care agent from committing the principal to a mental health facility and consenting to convulsive treatment, psychosurgery, sterilization, and abortion. 2023 Cal. Legis. Serv. Ch. 171.

CALIFORNIA provides for the creation of an online notarization platform providing for online notarizations using audio-video communication.

MICHIGAN enacts the Uniform Power of Attorney Act. 2023 Mich. Legis. Serv. P.A. 187.

NORTH CAROLINA revises allowances for the surviving spouse and children. 2023 N.C. Laws S.L. 2023-120. 

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