Keeping 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.
* ANTI-LAPSE STATUTE: Survivorship requirement avoids statute.
The decedent's will gave her residuary estate to her children "if they survive me." In Rumberg v. Rumberg, 1998 WL 896334 (Ohio Ct. App. 1998), the court held that the requirement of survival was a sufficient indication of the decedent's intent to prevent application of the anti-lapse statute. The share of a predeceased son passed to his two surviving siblings.
* ATTESTATION: Notary may be attesting witness.
The court in Estate of Alfaro, 703 N.E.2d 620 (Ill. Ct. App. 1998), held that a notary who signs a will may be an attesting witness if the notary's signature was meant to attest to all of the requirements of due execution, but the notary's signature cannot serve for both attestation and validation of the notarial certificate.
* ELECTIVE SHARE: Surviving spouse entitled to income interest in pour over trust.
A decedent's will poured his probate estate into his revocable inter vivos trust, which would then pay the trust income to his widow for her life. The widow exercised her right of election against the will. The court in Bravo v. Sauter, 1999 WL 9786 (Fla. Dist. Ct. App. 1999), held that the election did not destroy the widow's income interest in the trust. The election statute requires that the remainder of the estate be distributed as though the electing spouse had predeceased. Because the trust is not part of the probate estate, however, it was not affected.
* ESTATE TAX: Settlement with disinherited heirs not deductible.
In Lindberg v. United States, 1999 WL 11280 (10th Cir. 1999), the court held that the estate could not take a tax deduction for amounts that it paid to settle claims of the heirs that certain beneficiaries had tortiously interfered with their inheritance rights. The court rejected assertions that the settlements were deductible as administration expenses, claims against the estate or charitable gifts.
* FACTS OF INDEPENDENT SIGNIFICANCE: Wife's direction in holographic codicil that her estate be distributed under predeceased husband's will effective.
A husband and wife executed formal wills. The wife's will did not dispose of her estate if her husband predeceased her. She wrote a holographic codicil directing that her estate be distributed in accordance with her husband's will, should he predecease her. In Matter of Tipler, 1998 WL 886603 (Tenn. Ct. App. 1998), the court held that the doctrine of acts of independent significance applied to dispose of the wife's estate according to her husband's will. The holographic codicil was valid and the provisions of the husband's will were not material provisions of the codicil requiring the wife's handwriting.
* FIDUCIARY DUTY: Burden of proof to show negligence does not shift to fiduciary.
In Murphy v. Wakelee, 721 A.2d 1181 (Conn. 1998), the court held that unless an alleged breach of fiduciary duty involves fraud, self-dealing or conflict of interest, the burden to prove fair dealing by clear and convincing evidence does not shift to the fiduciary.
* HOLOGRAPHIC WILLS: Signed list of tangible property that included pecuniary gift may be will.
The decedent's 1986 will disposed of her personal property by reference to a memorandum that she intended to leave at her death, as authorized by state law. After her death, two papers were found, both in her handwriting, one signed but not dated, the other unsigned. The signed paper disposed of personal property and also purported to make a gift of $75,000 to a charity. In Estate of Kleinman, 970 P.2d 1286 (Utah 1998), the court held that the signed memorandum evidenced testamentary intent beyond its function as a memorandum disposing of personal property and, depending on the date of its writing, was either a holographic will subsequently revoked by the 1986 will or a holographic codicil to the 1986 will. The court remanded for findings as to the date of the document.
* HONORARY TRUSTS: Failure of purpose triggers resulting trust.
A decedent's will gave $25,000 to a friend for the care of the decedent's dogs. Shortly after the decedent's death, however, the dogs were killed. In Phillips v. Estate of Holzmann, 1998 WL 889239 (Fla. Dist. Ct. App. 1998), the court followed §§ 124 and 418 of the Restatement (Second) of Trusts, and held that the gift created an honorary trust. If the purpose of the trust cannot be performed, the transferee holds the property as a resulting trust for the decedent's estate. Accordingly, the decedent's friend could not retain the unspent funds.
* JOINT TENANCIES: Valid gift is predicate to survivorship rights if one tenant pays all the consideration.
State law abolished the right of survivorship between joint tenants unless the instrument creating the tenancy manifestly shows that the parties intended to create a
survivorship interest. In Zink v. Stafford, 509 S.E.2d 833 (Va. 1999), the court held that, before examining an instrument to determine if the parties created a survivorship interest, the court must find a joint tenancy, which in turn requires the finding of a gift by a party who provides all of the consideration for the property.
* NON-CLAIM STATUTE: Notice must include time limit.
In Estate of Reynolds, 970 P.2d 537 (Kan. 1998), the court held that the required notice to be sent to a reasonably ascertainable creditor must state the period after which the claim will be barred, unless the creditor has actual knowledge of the statutory period.
* POUR OVER TRUST: Trust may be reformed for unilateral mistake.
In Robinson v. Robinson, 720 So. 2d 540 (Fla. Dist. Ct. App. 1998), the court held that an inter vivos trust that receives property from the settlor's estate may be reformed to remedy a unilateral drafting mistake if the reformation is consistent with the settlor's intent. The court stated that the testamentary aspects of a pour
over trust do not require following the well established rule forbidding the reformation of wills.
* QUALIFIED PLANS: ERISA does not preempt state law remedy.
A decedent's group term life insurance policies, part of a benefit plan governed by ERISA, were payable to his estate. His widow sued his estate seeking a constructive trust of the proceeds on the grounds that the policies were community property. The court in Barnett v. Barnett, 1998 WL 918496 (Tex. App. 1998), held that the wife's suit concerned the actions of the executor, not the administration of the plan, and was not preempted.
* QUALIFIED PLANS: ERISA does not preempt statute revoking designation on divorce.
At the time of the decedent's death, state law revoked the designation of an ex-spouse as the beneficiary of any nonprobate asset, including life insurance policies, IRAs and employee benefit plans. When the decedent died, he had not changed the beneficiary designation of his ex-spouse. In Egelhoff v. Egelhoff, 968 P.2d 924 (Wash. Ct. App. 1998), the court held that the revocation on divorce statute was not preempted by ERISA and that the insurance proceeds and pension benefits belonged to the persons who would take had the ex-spouse predeceased the decedent.
* REVOCABLE TRUSTS: Tort claimant cannot reach trust funds after settlor's death.
State law provides that a settlor's revocable trust is liable for expenses of estate administration and enforceable claims to the extent that the estate is insufficient. In Tobin v. Damian, 723 So. 2d 396 (Fla. Dist. Ct. App. 1999), the court held that enforceable claims include only timely creditor claims to which the personal representative objected and claims objected to and on which a judgment has been entered or a stipulation for payment made. The court therefore dismissed a tort action brought against the trust and based on the settlor's alleged actions.
* SLAYERS: Contingent beneficiary who is closely related to slayer not entitled to receive life insurance proceeds.
A wife named her husband as the primary beneficiary and his mother as the contingent beneficiary of an insurance policy on her life. The husband killed his wife, and under state law the benefits are payable as if the slayer had predeceased the decedent. In Bennett v. Allstate Ins. Co., 722 A.2d 115 (N.J. Super. Ct. App. Div. 1998), the court held that the wife's probable intent, especially given the survival of minor children of the marriage, and the probable intent of the legislature, given the possibility that the slayer would receive benefits through his mother, required that the wife's estate, and through it her children, receive the policy proceeds.
* TRUST REFORMATION: Trusts divided to minimize GSTT.
In BankBoston v. Marlow, 701 N.E.2d 304 (Mass. 1998), the court approved the division of three subtrusts created for each of the grantors' sons and their families under a lifetime trust into six trusts, so that one trust for each family would have a zero GST tax exclusion ratio. The court noted that the change would not affect the dispositive terms of the trust or the interest of any beneficiary.
* VALUATION: Aggregation of stock in QTIP trust and inter vivos trust not necessary for valuation.
In Estate of Mellinger v. Commissioner, 112 T.C. No. 4 (1999), the court held that shares of stock held in a QTIP trust created by the decedent's predeceased spouse with stock that the decedent owned in a revocable trust need not be combined for valuation purposes. As a result, a discount of 25% for lack
of marketability was appropriate. For a similar case and result for partnership interests, see Estate of Nowell v. Commissioner, T.C. Memo. 1999-15.
RULINGS AND REGULATIONS
* GST TAX: Division of grandfathered GSTT trust into four trusts, one for each beneficiary, did not subject new trusts to GST tax. PLR 984843.
* GROSS ESTATE: Stock held by QTIP trust not treated as owned by the beneficiary for purposes of holding beneficiary to be a controlling stockholder in split
dollar life insurance agreement. PLR 9848011.
* QTIP: The IRS refused to recognize post-death reformation that split family trust in attempt to qualify one of the interests for QTIP treatment. TAM 199901031.
* QTIP: Miscalculation of marital deduction amount does not prevent allowance of marital deduction for correct amount when election is of 100% of trust as QTIP. PLR 199902014.
Leigh-Alexandra Basha addresses Stolen Art: What Estate Planners and Trustees Need to Know, in Tr. & Est. 60 (Dec. 1998).
* California statute of limitations.
For a comprehensive review of the California Probate Code statute of limitations, see 27 Sw. U. L. Rev. 1029 (1998).
* Charitable trusts.
Evelyn Brody examines the relationship between the charity and the fiduciary in The Limits of Charity Fiduciary Law, 57 Md. L. Rev. 1400 (1998).
* GST tax.
Carlyn S. McCaffrey discusses how to structure long-term trusts for effective multiple skips in Generating Tax Savings by Multiple Skips, Tr. & Est. 38 (Dec. 1998). Georgiana J. Slade explains how to maximize the use of the exclusions and exemptions from the GSTT in Lifetime Planning Under the GSTT Rules, Tr. & Est. 46 (Dec. 1998).
* Minnesota elective share of surviving spouse.
William Forsberg discusses how Minnesota's revised elective share statute incorporates the 1993 changes to the UPC in Partners in Life and at Death: The New Minnesota Elective Share of a Surviving Spouse Statute, 23 Wm. Mitchell L. Rev. 377 (1997).
* Minnesota prudent investor act.
For an outline of Minnesota's Prudent Investor Act, see Sjur Midness, Minnesota's Prudent Investor Rule: Aligning Law with Practice, 23 Wm. Mitchell L. Rev. 713 (1997).
* Physician assisted suicide.
Gina Patterson analyzes the Supreme Court's view of physician assisted suicide in The Supreme Court Passes the Torch on Physician-Assisted Suicide: Washington v. Glucksberg and Vacco v. Quill, 35 Hous. L. Rev. 851 (1998).
* Preferred limited partnerships.
Milford B. Hatcher Jr. & Gregory E. Kniesel explain how to use a preferred limited partnership as an effective estate planning tool in Preferred Limited Partnerships--Now the FLPs of Choice?, 89 J. Tax'n 325 (1998).
* Reproductive technology.
Kermit Roosevelt III discusses The Newest Property: Reproductive Technologies and the Concept of Parenthood, 39 Santa Clara L. Rev. 79 (1998).
* Trusts. Joel C. Dobris discusses Changes in the Role and the Form of the Trust at the New Millennium, or, We Don't Have to Think of England Anymore, 62 Alb. L. Rev. 543 (1998).
* Viatical settlements.
Dave Luxenberg discusses Why Viatical Settlements Constitute Investment Contracts Within the Meaning of the 1933 and 1934 Securities Act, 24 Willamette L. Rev. 357 (1998).
* Illinois updates law regarding inheritance rights of biological parents of nonmarital child. 1998 Ill. Legis. Serv. P.A. 90-803.
* Massachusetts passes Prudent Investor Act. 1998 Mass. Legis. Serv. ch. 398.
* Ohio increases amount of statutory allowance for surviving spouse and minor children and amount that can be relieved from administration for surviving spouses. 1998 Ohio Laws 204.
* Pennsylvania codifies common law principles of fiduciary and trust law relating to conflicts of interest on the part of trustees. 1998 Pa. Legis. Serv. Act 1998-141.