Keeping Current—Probate

Cases

Adoption

Adoption after parent’s death does not change status as heir. The decedent’s child was adopted after the decedent’s death by the other parent’s spouse. Forty years later, the child sought a declaration of heirship in the decedent’s estate proceeding to make a claim to the decedent’s share of real property held as tenants in common with the parent’s siblings. In Estate of Duncan, 688 S.W.3d 293 (Mo. Ct. App. 2024), the Missouri intermediate appellate court affirmed the probate court’s determination that the child was the parent’s heir because the adoption occurred after the determination of the decedent’s heirs at the decedent’s death.

Adoption

Use of “issue” or “descendants” does not exclude adopted persons. The intermediate Connecticut appellate court in Buzzard v. Fass, 315 A.3d 1119 (Conn. App. Ct. 2024), held that under the statute governing the effect of adoption (Conn. Gen. Stat. § 45a-731), the use of words “issue” or “descendants” in a testamentary trust created in 1947, when the common law stranger to the adoption rule was treated as a presumption, is not clear and convincing evidence that the testator intended to exclude adopted persons as beneficiaries of the trust.

Beneficiary Designations

Change of beneficiary fails because of breach of material term. The owner of an IRA completed a beneficiary designation in 2008 using the owner’s form, which was accepted by the custodian. In 2013, the owner created another beneficiary designation form and signed it in the office of the beneficiary’s attorney, who sent it to the custodian by first-class mail without any provision for a return receipt. After the owner’s death, the custodian could find no record of the 2013 designation. In the resulting contest between the two sets of beneficiaries, the circuit court ruled for the beneficiaries under the 2008 designation. The Florida intermediate appellate court in Sobel v. Sobel as Trustee of Testamentary Trust, 384 So. 3d 791 (Fla. Dist. Ct. App. 2024), affirmed, finding that acceptance by the custodian was a material term of the contract which could not satisfied by substantial compliance.

Contractual Wills

Premarital agreement is a valid contract to make a will. The Nebraska Supreme Court in White v. White, 6 N.W.3d 204 (Neb. 2024), held that the provision in a premarital agreement stating that if Spouse 1 survives Spouse 2, Spouse 1 “shall receive” $100,000 from Spouse 2 is a valid contract to make a will and that Spouse 1’s claim for payment is not governed by statutes governing claims against the estate (Neb. Rev. Stat. §§ 30-2209(4) & 30-2485).

Devise

Devise of “primary residence” includes dwelling and separate adjacent lot. The testator’s will devised “my primary residence” to one of the testator’s two children. The testator resided in a brownstone appurtenant to which was a lot containing a backyard, private garden, parking pad, and driveway. The brownstone and lot have two separate numbers on the county tax map and bear two different street addresses. After finding that the facts create a latent ambiguity, the New York Surrogate court in Matter of Pearce, 207 N.Y.S.3d 427 (Sur. Ct. Kings Co. 2024), held that the extrinsic evidence showed that the testator treated both the brownstone and the appurtenant lot as her “residence.”

Survival

Express requirement of survival prevents application of anti-lapse statute. The decedent’s will made a gift of designated investment accounts to the decedent’s mother “if she survives me.” A gift of other accounts to a sibling was similarly conditioned and the terms of the will defined survival as surviving the testator by at least 90 days. The gift of tangible personal property as well as the residuary devise was made to named individuals “per stirpes.” The mother predeceased the testator, and the executor filed a complaint seeking a declaration that the anti-lapse statute did not apply to the gift to the mother. The trial court granted summary judgment to the executor, and the decedent’s sibling appealed. The Massachusetts Supreme Judicial Court affirmed in Gibney v. Hossack, 230 N.E.3d 1009 (Mass. 2024). The court held there is no need to substitute the anti-lapse statute for the testator’s express requirement that a beneficiary survive and found support in the legislature’s failure to enact Uniform Probate Code § 2-603(b)(3), which expressly makes a requirement of survival without more insufficient to prevent application of the anti-lapse statute.

Tortious Interference with Inheritance

Failure to object in probate proceeding bars tortious interference claim. In its decision in Salmon v. Tafelski, 235 N.E.3d 867 (Ind. Ct. App. 2024), the Indiana intermediate appellate court dismissed an action for tortious interference with inheritance brought by the intestate decedent’s child against another child of the decedent, an action that alleged that the second child fraudulently induced lifetime transfers by the decedent to the second child. The court held the tort action could not proceed because there were adequate remedies under the probate code.

Trust Termination

Charitable trust cannot be terminated because of costs related to being a private foundation. The settlor created a trust which after the death of the settlor’s spouse continued in perpetuity to benefit the foundation supporting the Virginia Military Institute, from which the settlor graduated in 1924. Shortly after the settlor died in 1968, the trust became subject to the private foundation rules which subjected the trust to the 1.3 percent excise tax and the 5 percent annual distribution requirement. In 2019, the foundation petitioned to terminate the trust and have the property distributed to the foundation because the excise tax and the alleged limitations on investments caused by the 5 percent rule were “unreasonably out of proportion to the charitable benefits” and therefore justified termination under 20 Pa. Cons. Stat. § 7740.3(e). The trial court granted the trustee’s motion for summary judgment, and the Superior Court affirmed, as did the Pennsylvania Supreme Court in In re Trust B Under Agreement of Richard H Wells, 311 A.3d 1057 (Pa. 2024). The court held that the costs associated with being a private foundation did not justify termination, the 5 percent rule did not limit investment authority, and all parties stipulated that the trustee’s fees were reasonable.

Tax Case, Rulings, and Regulations

Gift Tax

Estate not liable for gift tax once marital trust terminated. A husband and his wife established a family trust. At the time of the husband’s death, the property held in the family trust, including the husband and wife’s shares in a company, passed to marital trusts. The wife held an income interest for life in the trust, and the husband’s children held contingent remainder interests. A QTIP election was made on the estate tax return for the property passing to the marital trusts, and the estate claimed a corresponding marital deduction for the QTIP. Several years later, a state court terminated the marital trusts with the consent of the wife and children, and the property was distributed to the wife. The wife made a gift of some of the shares of the company to the children and then sold the remaining shares to the children and grandchildren for interest-bearing promissory notes. The wife filed a gift tax return and reported only the gift of the shares to the children. The wife later died. The IRS issued a deficiency to the wife’s estate determining that the termination of the marital trusts and sale of the company shares for promissory notes was a disposition of the wife’s qualifying income interest for life and that the estate was liable for gift tax on the value of the QTIP minus the value of her qualifying income interest for life. In Estate of Anenberg v. Comm’r, 162 T.C. No. 9 (2024), the Tax Court held that if there was a transfer of property when the marital trusts were terminated, the estate is not liable for gift tax because the wife received back the interests in property that she was treated as holding and transferring and made no gratuitous transfer. The estate was also not liable for gift tax on the sale of company shares for promissory notes because, after the termination of the marital trusts, her qualifying income interest for life in the QTIP had terminated.

Trusts

Trustee’s tax refund suit rejected because the court previously held that the trust did not own the seized property. Before being convicted of several crimes, an individual purported to transfer property to a trust. The district court concluded that despite the property being held in the name of the trust, the individual had an interest in the property and entered a preliminary forfeiture order. The Tax Court then held that the IRS failed to meet its burden of proof that the trust was a sham trust under federal tax law but did not determine who owned the property under Idaho law. Shortly after the forfeiture order was entered, the trust initiated an ancillary proceeding in district court, claiming that it had an interest in the property. Eleven years later, the court held that the trust did not establish ownership and that under Idaho law, the transfer of the property to the trust was fraudulent because the transferor had the intent to hinder, delay, or defraud creditors. The property was then sold with a portion of the proceeds used to pay off the owner’s tax obligations. The trustee filed suit, seeking a refund of the taxes collected from the IRS and stating that the individual did not own the property. The district court held that the previous suit determined the issue of ownership and that the suit was precluded. The Ninth Circuit affirmed in Loomis as Trustee of Lost Creek Trust v. United States Internal Revenue Service, 133 A.F.T.R.2d 2024-1670 (9th Cir. 2024).

Literature

Artists and Estate Planning

In Do Artists Deserve to Retire? Methods to Remedy Disadvantages Artists Face in Saving for Retirement, 32 Elder L. J. 273 (2024), Rebecca Singerman explores how American artists struggle to save for retirement due to unpredictable income streams. Singerman proposes avenues for improving artists’ ability to save for retirement through existing frameworks and reforms to the Internal Revenue Code and ERISA.

Cryonics

In Rest in Freeze: The Need to Regulate the U.S. Cryonics Industry, 32 Elder L.J. 231 (2024), Mehroz Mohammed examines the unregulated cryonics market, highlighting the risks to vulnerable consumers, many of whom are elderly or terminally ill. He proposes a flexible regulatory approach to adapt to future scientific developments.

Florida—Judicial Discretion

In Judicial Discretion Within the Florida Probate Field: Guiding Judges to Find the Proper Balance Between Upholding Attorneys’ Fees and Maintaining the Interests of the Client, 48 Nova L. Rev. 98 (2023), Natalie Owchariw examines the broad discretion probate judges have in determining the reasonableness of attorney’s fees. To address the potential for abuse, Owchariw proposes a two-step balancing test to guide probate judges on ensuring attorneys’ fees are upheld fairly while protecting client interests from the potential abuses of judicial discretion.

Georgia—Legislative and Judicial Update

Mary Radford in Wills, Trusts, Guardianship, and Fiduciary Administration, 75 Mercer L. Rev. 359 (2023), discusses notable Georgia appellate court cases and significant legislation related to probate, trust law, and guardianship from June 1, 2022, through May 31, 2023. She emphasizes the importance of practitioners staying informed about ongoing developments.

Incarceration

In Estate to State: Pay-to-Stay Statutes and the Problematic Seizure of Inherited Property, 95 U. Colo. L. Rev. 839 (2024), Brittany Deitch explains how pay-to-stay statutes allow states to recover incarceration costs from currently or formerly incarcerated individuals, often by seizing their assets, including inherited property. These laws have faced criticism for perpetuating poverty, disproportionately affecting marginalized communities, and discouraging efforts to reduce mass incarceration. Deitch argues for the end or significant limitation of pay-to-stay statutes, particularly the practice of seizing inherited property, as it undermines the decedent’s testamentary freedom.

India—Intermarried Women

In Mergers and Legal Fictions: Coverture and Intermarried Women in India, 41 Law & Hist. Rev. 387 (2023), Leilah Vevaina explores the unstable rights of intermarried women in India. She illustrates this issue through cases like Goolrukh Gupta, where her legal appeals highlight the complexities and challenges many Indian intermarried women face in securing their property rights after marriage.

Louisiana—Digital Assets

In Let’s Get Digital: How Louisiana’s Laws Governing Inter Vivos Donations Are Unequipped to Handle the Growing Popularity of Digital Assets, 84 La. L. Rev. 273 (2023), Zack Crawford explains how the original Louisiana Civil Code used adaptable language, such as “manifest to the sense,” to address unforeseen issues like digital assets. When revisers redefined corporeality to mean only things with a “touchable body,” it caused confusion in the law regarding digital asset donations. Crawford suggests that the Louisiana legislature amend Article 461 to help Louisiana courts consistently assess digital asset donations.

Louisiana—Divorce

In ‘Til Death Do Us Part? Louisiana’s Inconsistent Approach to Divorce Litigation after a Decedent-Spouse’s Death, 84 La. L. Rev. 351 (2023), Elise Diebold explores the uncertainty in handling estates during pending divorces and highlights the need for legislative clarification to honor the decedent’s likely wishes.

Probate Exception

In Federal Questions and the Probate Exception, 137 Harv. L. Rev. 1226 (2024), the Harvard Law Review explores the probate exception, which limits federal courts’ jurisdiction over probate matters, and its implications for federal question cases involving the Racketeer Influenced and Corrupt Organizations Act.

South Dakota—Rule Against Perpetuities

In R.I.P. RAP, 69 S.D. L. Rev. 196 (2024), Thomas Simmons examines how the 1983 legislative repeal of the common law Rule Against Perpetuities (RAP) was the seed from which the state’s trust industry grew. This article is the second installment in a two-part series on South Dakota’s history with RAP, where Simmons’s review of decisional law essentially confirms that the state never fully imposed RAP on its citizens.

Taxation of Unrealized Gains

In Moore v. United States: The Constitutionality of the Taxation of Unrealized Gains, 28 Lewis & Clark L. Rev. 333 (2024), Loren Naldoza explores the constitutional limits of Congress’s taxing power as the Supreme Court considers this fundamental question: what income is and whether realization is a constitutional requirement required by the Sixteenth Amendment. Naldoza examines the implications of this case in the context of the Mandatory Repatriation Tax and what this could mean for future federal income and wealth taxes.

Trust Abuse

In Anti Trusts: Reforming an Excessively Flexible Legal Tool, 47 Vt. L. Rev. 332 (2023), Eric Kades explores the versatile nature of trusts, noting their beneficial uses but also their potential for exploitation, like tax evasion and cheating creditors. He argues that these abuses often outweigh the benefits of private trusts. To address this, Kades proposes a fundamental reform to replace the fully flexible private trusts with a more restricted version designed to prevent abuses called the Restricted Donative Trust.

Legislation

California permits a trustee to terminate a trust if the fair market value of the principal of the trust does not exceed $100,000, an increase from the $50,000 threshold under prior law. 2024 Cal. Legis. Serv. Ch. 76.

Colorado enacts the Uniform Special Deposits Act. 2024 Colo. Legis. Serv. Ch. 200.

Colorado passes the Uniform Non-Testamentary Electronic Estate Planning Documents Act. 2024 Colo. Legis. Serv. Ch. 154.

Connecticut adopts the Uniform Trust Decanting Act. 2024 Conn. Legis. Serv. P.A. 24-104.

Delaware enables individuals to elect “natural organic reduction” as a method for disposing of one’s body at death. 2024 Del. Laws Ch. 261.

Florida modernizes its version of the Uniform Fiduciary Income and Principal Act. 2024 Fla. Sess. Law Serv. Ch. 2024-216.

Florida permits financial institutions to delay distributions to vulnerable adults reasonably believed to be victims of financial exploitation.

2024 Fla. Sess. Law Serv. 2024-200.

Hawaii enables tenants, either through their rental agreement or through another document, to designate an individual to collect or dispose of the tenant’s personal property if the tenant dies during the tenancy. 2024 Haw. Laws Act 33.

Hawaii regulates charitable fundraising platforms. 2024 Haw. Laws Act 205.

Oklahoma adopts the Uniform Electronic Estate Planning Documents Act. 2024 Okla. Sess. Law Serv. Ch. 344.

Pennsylvania provides that individuals convicted of “elder abuse” of a decedent are prevented from inheriting or otherwise acquiring the assets of the decedent to the same extent as a slayer. 2024 Pa. Legis. Serv. Act 2024-40.

Vermont enacts the Uniform Directed Trust Act. 2024 Vt. Laws No. 104.

Vermont passes the Uniform Trust Decanting Act. 2024 Vt. Laws No. 177. n