K eeping 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.
- ADEMPTION: Use of specific bequest to purchase property causes ademption. A testator's will bequeathed to his wife and son any settlement received as the result of an accident. The testator received a settlement, purchased property and made gifts with the proceeds. In Warman v. Warman, 682 N.E.2d 557 (Ind. Ct. App. 1997), the court found that the bequest was specific and thus adeemed because the property had changed form.
- ADMINISTRATION EXPENSES: Reg. 20.2053-3(a) limiting deductibility of administration expenses to those actually and necessarily incurred held valid. The Sixth Circuit overruled a 1973 case and joined the vast majority of circuits that have upheld the regulation. Estate of Millikin, 125 F.3d 339 (6th Cir. 1997).
- EXECUTORS: Condition on nomination of successor executor strictly construed. The testatrix's will nominated her mother as personal representative and her daughter as successor if her mother predeceased her. At the testatrix's death, her mother was living but incompetent. The court determined that the condition to the daughter's appointment was not met and that an administrator with the will annexed was therefore required. Robbins v. Vanbrackle, 485 S.E.2d 468 (1997).
- FIDUCIARY RESPONSIBILITY: In absence of violation of duty, adequacy of sales price reviewable only for abuse of discretion. A trustee sold real estate for less than the price at which it was originally listed. The beneficiary sued, claiming that the price obtained was inadequate. The court in Matter of Ansell Trust, 1997 WL 428889 (Mich. Ct. App. 1997), held that a lower court's finding that the trustee properly sold the property could be reviewed only for abuse of discretion in the absence of bad faith, unfair dealing or conflict of interest, not merely for the adequacy of the price that the trustee obtained.
- FORCED SHARE: Best interest of surviving spouse not equivalent to highest monetary value. In Foman v. Moss, 681 N.E.2d 1113 (Ind. Ct. App. 1997), the court held that a surviving spouse is competent to elect to take against the deceased spouse's will if the spouse is capable of understanding and protecting the spouse's own interests. In addition, the court held that the standard to be used by a guardian of an incompetent spouse in determining whether to make the election is not monetary value but the best interests of the spouse given the relevant facts and circumstances.
- FORCED SHARE: Failure to elect divests spouse of assets for Medicaid eligibility purposes. A widow failed to make an election against her spouse's estate. An administrative decision terminated her Medicaid benefits because her failure to exercise the election was an action that divested her of property, leading to ineligibility. The court in Tannler v. Wisconsin Dept. of Health, 564 N.W.2d 735 (Wisc. 1997), agreed.
- LAPSE: Devise to "living" brothers and sisters prevented application of anti-lapse statute. A testator's will devised her estate to her "living" brothers and sisters. At the time the will was executed, the testator had five siblings. Only two of them survived her. In Allen v. Talley, 949 S.W.2d 59 (Tex. Ct. App.1997), the court held that the will required a beneficiary to survive. The anti-lapse statute failed to save the gift for the descendants of the predeceased siblings.
- LIFE INSURANCE: Will may change beneficiary if insurance company waives compliance with terms of contract. The testator's will left his estate, including all his insurance benefits, to his father. At the time of the testator's death, however, his ex-wife was still the named beneficiary. The court in McCarthy v. Aetna Life Ins. Co., 661 N.Y.S.2d 625 (N.Y. App. Div. 1997), held that the change of beneficiary was valid because the insurance company waived strict compliance with the policy's terms by depositing the insurance proceeds into the court.
- PRECATORY LANGUAGE: "Desire" does not limit mandatory directive. A testator's will stated his "desire" that certain real property be rented to the current tenant and in a subsequent sentence "direct[ed]" that the lease be made. In Martin v. Martin, 568 N.W.2d 280 (N.D. 1997), the court held that while "desire" often indicates precatory language, it did not limit the mandatory nature of the testator's "direction."
- PRINCIPAL AND INCOME: Accrued E bond interest is principal of testamentary trust. The decedent's Series E savings bonds were used to fund a testamentary trust for the surviving spouse under which he was entitled to all income. The trial court agreed with the spouse's contention that the accrued interest was income and distributable to him. On appeal, the court in Estate of Berger, 696 So. 2d 412 (Fla. Dist. Ct. App. 1997), held that the accrued interest belonged to the decedent and was part of the principal of the trust.
- PROFESSIONAL RESPONSIBILITY: Disappointed relatives cannot bring unfair trade practices action against decedent's lawyers. A decedent's blood relatives filed several claims against the lawyers who prepared the decedent's will, trust and a deed. In Tetrault v. Mahoney, Hawkes & Goldings, 681 N.E.2d 1189 (1997), the court upheld the lower court's dismissal of all claims because claims based on fraudulent business practices may be brought only by the client (decedent) or by someone acting on the client's behalf.
- REFORMATION: Unambiguous trust reformed to accomplish tax and charitable objectives. A settlor created a 10% charitable remainder unitrust funded with nonproductive real estate. The settlor then sought to reform the trust to make it a net income CRUT. In Putnam v. Putnam, 682 N.E.2d 1351 (1997), the court allowed the reformation based on the settlor's goal of making a charitable gift.
- REVOCATION: Presumption of revocation triggered when all originals not located. A testatrix executed two copies of her will, keeping possession of one and leaving the other with her lawyer. After her death, her copy could not be found. The court refused to probate the will because of the presumption that when the testator has possession of the will and it cannot be found after death, the testator has destroyed it with intent to revoke. Estate of Fowler, 681 N.E.2d 739 (Ind. Ct. App. 1997).
- TAX APPORTIONMENT: Ambiguous clause allows use of extrinsic evidence. A decedent's will directed payment of estate taxes from a living trust. The trust directed against both "adjustment" among the residuary beneficiaries and collection from any "beneficiary." Finding the clause ambiguous, the court in Estate of Wathen, 64 Cal. Rptr. 2d 805 (Cal. Dist. Ct. App. 1997), held that extrinsic evidence was admissible to show that decedent intended the taxes to be paid from the residue without apportionment.
- TESTAMENTARY CAPACITY: Insane delusion regarding family members invalidates will. A testatrix executed a will while suffering from a paranoid disorder that caused her to have false beliefs about her family members. In Matter of Estate of Killen, 937 P.2d 1368 (Ariz. Ct. App. 1996), the court held that the delusions prevented the testatrix from having testamentary capacity even though she knew the nature of her will, the extent of her property and the natural objects of her bounty.
RULINGS AND REGULATIONS
- GIFTS: Gifts made by agent under durable power of attorney did not qualify for annual exclusion because the power did not specifically authorize the agent to make gifts. PLR 9736004.
- GROSS ESTATE: Checks a taxpayer wrote to a family limited partnership that were not paid by the taxpayer's bank before the taxpayer's death were treated as cash on hand and thus part of the gross estate. PLR 9735003.
- POWERS OF APPOINTMENT: Granting power to remove and replace trustees did not create general power of appointment. PLR 9735023.
- POWERS OF APPOINTMENT: A limited power of appointment was created in which a trust beneficiary had power to demand distribution to a maximum that the trustee determined the beneficiary needed for specified emergencies, support and maintenance. PLRs 9738016, and 9738019.
- QTIP: An IRA distribution used to fund a trust qualified for QTIP treatment. PLR 9729015.
- SETTLEMENT AGREEMENT: Property passing to the surviving spouse under the terms of a will contest settlement agreement qualified for marital deduction. PLR 9733017.
- "Probate Exception" to federal jurisdiction. John F. Winkler, The Probate Jurisdiction of the Federal Courts, 14 Prob. L.J. 77 (1997), grapples with the amorphous and vague "probate exception" to federal jurisdiction.
- Administration expenses. Farhad Aghdami and David Pratt, The Supreme Court Decides Hubert_ Now What Do We Do?, 86 J. Tax'n 340 (1997), analyzes this important decision.
- Assisted suicide. This controversial topic is discussed in Peter G. Daniels, An Illinois Physician-Assisted Suicide Act: A Merciful End to a Terminally Ill Criminal Tradition, 28 Loy. U. Chi. L.J. 763 (1997); John Newman, Live Through This . . . Physician-Assisted Suicide, 21 Seton Hall Legis. J. 535 (1997); Jonathon R. Rosenn, The Constitutionality of Statutes Prohibiting and Permitting Physician-Assisted Suicide, 51 U. Miami L. Rev. 875 (1997).
- Charitable remainder trusts. Michael K. Moyers et al. consider how Charitable Remainder Trusts Offer Noncharitable Benefits, 26 Tax'n for Law. 32 (1997).
- Community property. Lisa H. Jamieson looks at Marital Property Issues in the Modern Estate Plan, 49 Baylor L. Rev. 391 (1997).
- Death and dying: a Jewish perspective. Stephen J. Werber offers Ancient Answers to Modern Questions: Death, Dying, and Organ Transplants_A Jewish Law Perspective, 11 J.L. & Health (1996-97).
- Disclaimers and will contests. Neil L. Brodsky addres-ses the apparently irreconcilable nature of a beneficiary's ability to contest a will after disclaiming benefits thereunder in Does a Renunciation Bar a Subsequent Will Contest_In Re Croce, 14 Prob. L.J. 59 (1997).
- Drafting dispositive will provisions. Nancy G. Henderson explores Drafting Dispositive Provisions in Wills (Part 2), 43 Prac. Law. 15 (1997).
- Marital deduction. Richard D. Gould offers Options in Selecting a Marital Deduction Formula: A New Twist to an Old Topic, 87 J. Tax'n 98 (1997).
- Negative disinheritance provisions in wills. Frederic S. Schwartz in Models of the Will and Negative Disinheritance, 48 Mercer L. Rev. 1137 (1997), advocates wider recognition of wills that expressly disinherit heirs while providing an alternate dispositive arrangement.
- Offshore trusts. James T. Lorenzetti looks at The Offshore Trust: A Contemporary Asset Protection Scheme, 102 Com. L.J. 138 (1997).
- Organ donation. Joseph N. Harden, in The "Gift" of Life: Should Anencephalic Infants Die to Serve Noble Goals?, 27 Cumb. L. Rev. 1279 (1997), explores the legal, medical and ethical issues that arise when considering the harvesting of organs from anencephalic infants for the benefit of other dying children.
- Prepayment of taxes. Jeffrey N. Pennell and R. Mark Williamson, in The Economics of Prepaying Wealth Transfer Tax, Tr. & Est., July 1997, at 40 (Part 2); Aug. 1997, at 52 (Part 3), illustrate that it may be cost effective to pay gift and estate taxes as early as possible.
- QTIPs and fractional interest discounts. Terry S. Jones explores Estate of Bonner v. United States: QTIPs and Fractional Interest Discounts: Whipsaw Wonderland, 33 Idaho L. Rev. 595 (1997).
- Reciprocal trusts. Elena Marty-Nelson in Taxing Reciprocal Trusts: Charting a Doctrine's Fall from Grace, 75 N.C.L. Rev. 1781 (1997), focuses on the struggle for judicial acceptance of the reciprocal trust doctrine under the Supreme Court's decision in United States v. Estate of Grace, 395 U.S. 316 (1969).
- Same-sex couples. Jane A. Marquardt in A Will_Not a Wish _ Makes It So: Estate Planning Options, 20 Fam. Advoc. 34 (1997), explores estate planning options for same-sex couples.
- Valuation of business interests. Edwin T. Hood et al. consider Valuation of Closely Held Business Interests, 65 UMKC L. Rev. 399 (1997).
- Arkansas enacts Trustee Division of Trusts Act. 1997 Ark. Laws Act 585.
- Missouri revises power of attorney statutes. 1997 Mo. Legis. Serv. ch. 173.
- New Hampshire provides standards for acquisition transactions involving heath care charitable trusts. 1997 N.H. Laws ch. 280.
- Tennessee enacts Charitable Beneficiaries Act designed to provide comprehensive rules for charitable gifts. 1997 Tenn. Pub. Acts ch. 300.
- Texas revamps durable powers of attorney for property management. 1997 Tex. Sess. Law Serv. ch. 455 (West).
Keeping Current_Probate Editor: Gerry W. Beyer, Visiting Professor, Southern Methodist University School of Law, P.O. Box 750116, Dallas, TX 75275.
Contributing editors: Dave L. Cornfeld, David Eaker, William P. LaPiana and Kendra Lashawn McCartney.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.