Keeping Current—Probate

Cases

Adjustment: Power to adjust properly exercised. In Matter of Will of Kline, 244 N.E.3d 1011 (Mass. 2024), the Massachusetts Supreme Judicial Court held that the terms of a testamentary trust created before the state’s enactment of the Uniform Principal and Income Act that limited principal invasions for the sole income beneficiary to “the most extraordinary circumstances” and expressed the testator’s belief that no such distributions would be required did not prevent the trustee from using the power to adjust where the trustee was investing for total return in accord with the prudent investor rule.

Contractual Wills: Valid contract not to revoke mutual wills cannot be ended by unilateral notice. In an opinion thoroughly discussing the law from several jurisdictions, the Vermont Supreme Court in Inouye v Estate of McHugo, 328 A.3d 1229 (Vt. 2024), held that a valid contract not to revoke mutual wills cannot be rescinded by notice of the intent to revoke given by one testator to the other without evidence of consent by the other testator, which the evidence did not show in the case.

Exoneration: Direction to pay debts and obligations does not require exoneration of mortgage. In a case of first impression, Davis v. Goforth, 909 S.E.2d 15 (Va. Ct. App. 2024), the Virginia intermediate appellate court held first that the “clearly set out” “contrary intent” required by Virginia statute, Va. Code Ann. § 64.2-531(A), to overcome the default rule of non-exoneration need not be expressly stated, and, second, the testator’s direction to pay “just debts” and “all debts and obligations” from the proceeds of sales required by the will does not meet the statutory requirement because they are no more than the “general directive” to pay debts that the statute says is insufficient to override the default rule.

Informing Trust Beneficiaries: Failure to keep beneficiaries informed is serious breach justifying removal of trustee. The trustee failed to keep beneficiaries informed as required by the Ohio version of UTC § 813, Ohio Rev. Code Ann. § 5808.13. In Pollock v. Mullins, 253 N.E.3d 629 (Ohio Ct. App. 2024), the Ohio intermediate appellate court affirmed a judgment removing the trustee, finding that the failure to fulfill the duty to keep beneficiaries informed was a serious breach and rejecting the argument that the required information being known by the beneficiaries’ parent and their attorney was sufficient.

Intestacy: Bar on parental inheritance from child does not bar child’s inheritance from parent. Nebraska law prohibits a parent from inheriting from or through a child if the parent’s parental rights were terminated and not judicially reinstated. Neb. Rev. St. § 30-2312.02. In In re Estate of McCormick, 12 N.W.3d 802 (Neb. 2024), the Nebraska high court held that the statute does not prevent the child from inheriting from a parent whose parental rights were terminated and not restored.

Power of Appointment: A trustee need not inform the beneficiary of the details of a general power of appointment over trust property. Iowa law requires the trustee to keep “qualified beneficiaries of the trust reasonably informed about the administration of the trust” and of the material facts necessary for the beneficiaries to protect their interests. In Kelley v. Savings Bank Primghar, 14 N.W.3d 771 (Iowa Ct. App. 2024), the Iowa intermediate appellate court affirmed the lower court and held that having provided the life beneficiary who was also the donee of a testamentary general power of appointment over the trust property with a copy of the trust, the trustee had fulfilled its duties and was not required to insure that the beneficiary understood the workings of the power of appointment.

Powers of Attorney: Unprobated will is principal’s estate plan. Missouri law imposes on an agent under a durable power of attorney a fiduciary duty to maintain “without modification” “any estate plan which the principal may have in place.” In its opinion in Broy v. Broy, 698 S.W.3d 801 (Mo. Ct. App. 2024), a divided Missouri intermediate appellate court upheld a finding that an agent under a durable power of attorney breached that duty and rejected the argument that the “estate plan” could not be expressed in a will that was not offered for probate until after the principal’s death. One judge dissented on the grounds that the plaintiffs, two of the principal’s three children (the third was the agent), lacked standing.

Reformation: Unambiguous trust reformed. The Supreme Court of Idaho in Terteling v. Terteling, 558 P.3d 705 (Idaho 2024), affirmed a judgment reforming unambiguous trust terms, adopting the rule of Restatement (Third) of Property § 12.1. Created in 1970, the trust terms identified the beneficiaries as the male descendants bearing the family name of two of the settlors who were brothers. In 2022, two of the surviving settlors and three female descendants of the settlors petitioned to reform the trust. The high court affirmed the grant of the petition, finding that an affidavit made in 1978 by the settlors and the original co-trustees stating that the settlors intended to relieve the co-trustees of any obligation to diversify investments and that the trust had been created to benefit “successive generations” of the family was sufficient evidence that the limitation to male descendants was a mistake.

Restraints on Alientation: Restraint on trust property distributed outright is void. California law makes void conditions restraining alienation “when repugnant to the interest created.” Cal. Civ. Code § 711. The decedent’s revocable trust directed the trustee to distribute the decedent’s home to the decedent’s three children as tenants in common. A trust amendment executed the year before the decedent’s death purported to require the children to sell their interests only to each other for a maximum price less than one-third the value of each child’s interest at the time of the decedent’s death. The California intermediate appellate court in Godoy v. Linzer, 327 Cal. Rptr. 3d 323 (Cal. Ct. App. 2024), affirmed the probate court’s judgment voiding the amendment, holding that the statute applies no matter how a fee simple interest is conveyed and agreeing that the limitation of permissible grantees to the siblings and the disparity between the allowed price and the value of the property makes the restraint unreasonable.

Tax Cases, Rulings, and Regulations

Gift and Estate Tax: Regulations finalized concerning gifts from certain expatriates. In TD 10027, the IRS issued final regulations giving guidance concerning taxes on gifts or bequests from individuals who gave up their U.S. citizenship or residency. Section 2801 imposed a tax on taxpayers who receive a gift or bequest from covered expatriates. This provision applies to gifts that would have been included in the covered expatriates’ gross estates if they had been U.S. citizens or residents at their deaths. Section 877A(g)(1) defines a covered expatriate as an individual who expatriates on or after June 17, 2008, and on the expatriation date: (1) has an annual net income tax liability for the previous five tax years greater than $124,000; (2) has a net worth of at least $2 million; and (3) fails to certify compliance with all U.S. tax obligations for the previous five tax years. The final regulations also revised the definition of a covered bequest to further define the categories of covered property and modified the definition of indirect acquisition of property.

Literature

Basis: In Stepping up Basis in Living Taxpayer Assets with Upstream Wealth Transfers Through Intentionally Defective Grantor Trusts, 36 Thomas L. Rev. 80 (2023), Michael Schaum provides background on key tax and estate planning principles in wealth transfer, including taxable gross estate, unified tax credit, basis adjustments, defective grantor trusts, and downstream sale combined with a grantor trust. Schaum argues that the IRS should permit wealth preservation through these mechanisms because the current code allows it.

Caregiver Statutes: In Toward a Generation of Caregiver Statutes, 31 Elder L.J. 239 (2024), Jamie McWilliam explores caregiver statutes, which presume undue influence for gifts to caregivers. When first enacted, these laws were often critiqued for restricting testamentary freedom. Since their enactment, however, they have proven helpful in protecting many care recipients from undue influence. McWilliam explores the history of these statutes and provides a path forward for a new generation of caregiver statutes.

Charitable Planning: In Super-Charging Charitable Estate Tax Planning with a Gift of a Remainder Interest in a Personal Residence or Farm, 52 Real Est. Tax’n (2024), Jennifer Kohlbacher and Arielle Lederman highlight the charitable remainder gift as a powerful estate planning strategy. This strategy allows donors to retain lifetime use of their property while gifting the remainder interest to a charity. The authors recommend estate planners discuss this strategy with suitable clients, emphasizing the importance of a detailed cost-benefit analysis to address professional fees and optimize tax savings.

Child Support: In After Sveen v. Melin, Is There a Contracts Clause Argument Against Laws Retroactively Terminating Child Support Obligations After the Death of the Obligor Parent?, 50 ACTEC L. J. 53 (2024), Diane Kemker analyzes the Supreme Court’s ruling in Sveen v. Melin (2018) and challenges its limited application of the Contracts Clause. She argues that retroactive laws ending child support obligations after a parent’s death are both detrimental to children and unconstitutional.

Conservation Easements: In Judicial Extinguishment of Conservation Easements: An Analysis, 52 Real Est. Tax’n (2024), W. Brian Dowis explains how the IRS closely examines conservation easements because of the significant tax deductions involved and the fact that property ownership doesn’t transfer from donor to donee. This article explains the rules for creating valid easements, how judicial extinguishment works, and key court decisions. Because this area often leads to disputes, it is essential to carefully follow all rules and structure easements properly to avoid IRS challenges.

Constitutional law: In Anna Nicole’s Constitutional Estates Law Legacy, 50 ACTEC L. J. 17 (2024), Dave Fagundes reviews two Supreme Court decisions involving Anna Nicole Smith: Marshall v. Marshall (2006), which clarified that a tortious interference claim fell outside the probate exception to federal jurisdiction, and Stern v. Marshall (2011), which ruled that bankruptcy courts cannot constitutionally exercise jurisdiction over such claims.

Corpses: In Dead Bodies as Quasi-Persons, 77 Vand. L. Rev. 999 (2024), Ela Leshem argues that American law treats dead bodies as “quasi-persons,” granting them a status between property and persons. This article also explores the unequal treatment of unclaimed bodies, particularly those from marginalized communities. Lastly, Leshem highlights a growing area of legal and ethical interest in other in-between entities like animals, fetuses, plants, and AI models.

Estate Planning Importance: In Civilization Depends on Us: The Virtues of Estate Planning and Estate Planners, 50 ACTEC L. J. 95 (2024), Turney Berry explores the importance of estate planners and ACTEC’s essential role in helping individuals and families pass on their legacies while inspiring service to others.

Forced Heirship: In Constitutional Limitations on the Enforcement of Foreign Forced Heirship Laws, 50 ACTEC L. J. 5 (2024), Raquel Begleiter, Austin Bramwell, and Molly Schiff examine whether a foreign probate decree is enforceable in United States courts when it calls for discriminatory gender-based distribution. They highlight the nuanced application of the 14th Amendment’s equal protection clause, noting that although state action might invoke constitutional limitations, courts often prioritize testamentary freedom over constitutional objections.

Oklahoma—Testamentary Freedom: In Testamentary Freedom: A Constitutional Perspective, 50 ACTEC L. J. 39 (2024), Richard J. Goralewicz examines a legislative proposal (not enacted) in Oklahoma that would have invalidated wills executed after an Alzheimer’s diagnosis. He analyzes its implications for testamentary freedom under state law and potential conflicts with federal constitutional protection.

Posthumous Communication: In Don’t Fear the Reaper? How Generative Artificial Intelligence is Changing the Landscape of Posthumous Communication Technology, 73 Am. U. L. Rev. 1271 (2024), Samuel Brown examines the ethical, legal, and societal issues surrounding generative AI technologies that enable posthumous communication with deceased loved ones. He advocates for a policy that gives individuals control over their likenesses, even after death.

Successor Trustees: In Why Do We Ask the Court to Do Something That It Can’t? Constitutional and Practical Issues with Judicial Appointment of Successor Trustees, 50 ACTEC L. J. 85 (2024), R. Ethan Ward and Stephen Crofford, Jr. explore the UTC’s provisions for the appointment of a successor trustee and whether they are consistent with the 13th Amendment’s prohibition against involuntary servitude. Although trustees can resign under Article 7, they must continue their duties until trust property is handed over to a successor. If the court must appoint a successor, trustees are required to serve until the transition, prompting the authors to question whether this enforced service violates the 13th Amendment.

Trust Taxation: In Constitutional Limits on State Power to Tax Trust Income, 50 ACTEC L. J. 69 (2024), Carlyn McCaffrey and John McCaffrey consider the due process constraints on states that seek to impose an income tax on trusts and the nature of contacts with the state that are necessary before a state can constitutionally impose its tax. They focus on the Supreme Court’s most recent decision addressing the issue, North Carolina v. The Kimberley Rice Kaestner 1992 Family Trust, 588 U.S. 262 (2019).

Undue Influence: In Undoing Undue Influence: How the Doctrine Can Avoid Judicial Subjectivity by Omitting the Vulnerability Element, 47 Am. J. Trial Advoc. 23 (2023), Robin Laisure argues that the doctrine of undue influence has lost its effectiveness over the years because it relies on determining the vulnerability of the person being influenced. This article highlights three contexts in which assessing vulnerability is problematic: general contract formation, will disputes, and contracts in high-control groups.