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.
- ANTE-MORTEM PROBATE: Lack of controversy precludes judgment. In a state without an express ante-mortem statute, the testator requested a declaratory judgment that his will was made while he was of sound mind. The court in Burcham v. Burcham, 1 P.3d 756 (Colo. Ct. App. 2000), affirmed the lower court's dismissal of the action, stating that the possibility of the testator changing the will made any decision merely advisory because there was no actual controversy.
- ASSISTED CONCEPTION: Children born after father's death are his heirs. In Estate of Kolacy, 753 A.2d 1257 (N.J. Super. Ct. Ch. Div. 2000), the court held that two children, conceived by in vitro fertilization using the decedent's stored sperm and his widow's ova and born 18 months after their father's death, qualified as the decedent's heirs under New Jersey law.
- BENEFICIARY DESIGNATIONS: Designation prevails over marital property agreement. Two spouses executed a marital property agreement designating an annuity as the husband's individual property. He named his wife as the beneficiary of the annuity. After the husband's death, his children claimed ownership of the annuity under his will, which gave all his individual property to them. In Estate of Jung, No. 99-1211, 2000 WL 764771 (Wis. Ct. App. 2000), the court determined that the annuity passed to the wife. The beneficiary designation was a valid non-probate transfer at death and could not be changed by the husband's will.
- CREDITORS' CLAIMS: Claim against decedent's estate must precede claim against decedent's revocable trust. A creditor filed a claim against the decedent's revocable trust. The court in Estate of Read v. A.D.K. Properties, No. 2D99-2962, 2000 WL 571397 (Fla. Dist. Ct. App. 2000), held that, under state law making a revocable trust liable for claims of a decedent's creditors if the estate is insufficient, the creditor must first obtain an enforceable claim against the decedent's estate, even if the creditor has to open the estate.
- DISCRETIONARY TRUSTS: Need requirement precludes unqualified support. A testamentary trust authorized the trustee to invade principal for the "education, maintenance, and support" of the beneficiaries "if this becomes necessary in the opinion" of the trustee. In NationsBank, N.A. v. Tegethoff, 18 S.W.3d 22 (Mo. Ct. App. 2000), the court found that the settlor's requirement that the invasion be necessary indicated that the settlor did not intend a gift of unqualified support. Consequently, the trustee must consider the beneficiaries' other income in making a determination.
- DIVORCE SETTLEMENT: Settlement applied to IRA created after divorce. A 1971 separation agreement provided that the husband would leave his estate to the children of the marriage and defined "estate" as the gross estate for federal estate tax purposes under the Code "as amended." His will excluded these children. The will beneficiaries claimed that the separation agreement did not apply to an IRA that was authorized by amendments to the Code in 1974. In Boatmen's Trust Co. v. Long, 16 S.W.3d 662 (Mo. Ct. App. 2000), the court indicated that the separation agreement required that the Code be applied as it existed at the husband's death. Therefore, the IRA was subject to the agreement.
- FEDERAL TAX LIEN: Lien attaches to beneficiary's interest in trust even though trustees could terminate that interest. United States v. Murray, No. 99-2028, 2000 WL 863033 (1st Cir. 2000).
- LAPSE: Survivorship language prevails over anti-lapse statute. A testator gave her residuary estate to five relatives "equally share and share alike, . . . or to the survivors thereof." The court in Polen v. Baker, No. 99 CA 34, 2000 WL 776931 (Ohio Ct. App. 2000), held that the survivorship language was a sufficient manifestation of the decedent's intent to prevent application of the anti-lapse statute.
- MALPRACTICE: Privity between intended beneficiaries and lawyer absent if will never executed. The testator asked his lawyer to draft a new will to make nieces and nephews beneficiaries of his estate. By the time the will was ready, testator was too ill to execute it. The nieces and nephews sued the lawyer, alleging negligence in failing to prepare the new will in a timely manner. In Babcock v. Malone, No. 4D99-3081, 2000 WL 789329 (Fla. Dist. Ct. App. 2000), the court held that the nieces and nephews were barred by lack of privity because the intent to benefit them was not expressed in an executed will.
- PRETERMITTED CHILDREN: Exclusion of "heir" does not preclude forced share. The testatrix's will expressly stated that she made no provisions for "any other heir of mine." Nonetheless, the court in Estate of Robbins, No. 98-697, 2000 WL 873759 (N.H. 2000), held that this language was not a sufficient reference to her children to prevent operation of the pretermitted children statute.
- REFORMATION: Statement by testator not necessary. A decedent's estate plan was designed to eliminate estate tax by creating a unified credit (family) trust and a marital deduction trust. The decedent's taxable estate was less than the applicable exclusion amount, and the marital trust was not created. The family trust did not permit distributions to the surviving spouse. In Estate of Tuthill, 754 A.2d 272 (D.C. 2000), the court held that the requirement of clear and convincing evidence to justify a reformation did not require a statement by the testator but could be met by evidence presented by others.
- REVOCABLE TRUSTS: Undue influence standard same as for will. In Upman v. Clarke, 753 A.2d 4 (Md. 2000), the court held that the rule for will contests involving undue influence applies to challenges to revocable trusts. The contestants have the burden of proving undue influence even if a confidential relationship exists.
- SAFE DEPOSIT BOX: Joint title to box does not extend to property in box. A decedent and his son took title to a safe deposit box jointly and the son placed over $200,000 in cash in the box at the decedent's direction. In Estate of Silver, 1 P.3d 358 (Mont. 2000), the court applied the general rule that the mere act of placing property in a jointly held safe deposit box does not make the property itself jointly held. Therefore, absent any evidence of a gift to the son, the cash was an asset of the decedent's estate.
- VALUATION: Discounts applicable to assigned partnership interest. The decedent's estate was the assignee of a partnership interest. The court in Adams v. United States, No. 99-10497, 2000 WL 890437 (5th Cir. 2000), held that discounts for lack of control and marketability were appropriate because state law did not give the estate a well established right to demand that the partnership be liquidated.
- WILLS: Attempted partial revocation revokes entire will. A testator's will devised his residuary estate to four individuals. After his death, the will was found in his truck with the names of two of the individuals obliterated. In Levell v. Anderson, No. S00A0273, 2000 WL 892839 (Ga. 2000), the court held that the obliteration was of a "material portion" of the will and resulted in the revocation of the entire will. In addition, the court indicated that the location of the will supported the application of the presumption that the testator made the alteration.
Rulings and Regulations
- CHARITABLE DEDUCTION: Gift tax charitable deduction permitted for charitable lead annuity trust in which trustee selects charity to receive annuity and if trustee fails to select, then to charities named in the trust. PLR 200021020.
- CHARITABLE DEDUCTION: Gift to foreign government for rebuilding of a mosque deemed a religious purpose and thus gift qualified for the charitable deduction. PLR 200024016.
- DISCLAIMER: Use of disclaimers permitted by trustees and beneficiaries to reinstate disinherited child. PLR 200028020.
- ELECTIONS: QTIP and reverse QTIP elections deemed effective even though the tax return was filed late. The allocation of the GST tax exemption, how- ever, will not be based on the late filed return. PLR 200028021.
- ESTATE TAX: Estate tax deduction permitted for interest on commercial loan incurred to pay estate tax. PLR 200020011.
- GRANTOR: Final regulations issued that define the term "grantor" for trust purposes. T.D. 8890.
- POWER OF APPOINTMENT: Power to replace trustee not a general power and thus no estate or gift tax consequences. PLR 200028008.
- QUALIFIED PERSONAL RESIDENCE TRUST: QPRT not disqualified by occasional use of property by child with grantor's permission. PLR 200023020.
- SUBSTANTIAL COMPLIANCE: Defective allocation of GST tax exemption on gift tax return deemed effective due to substantial compliance with requirements. PLR 200027009.
- Bequests. In "Specific" and " Pecuniary" Bequests-Why Does (Almost) Everyone Get it Wrong?, 92 J. Tax'n 346 (June 2000), David Keene explains the need to differentiate between the two formulas and their tax ramifications.
- Malpractice. Martin D. Begleiter reviews developments in malpractice liability and discusses the types of damages recoverable in malpractice cases, such as the loss of bequests and the costs to correct the error in First Let's Sue All the Lawyers-What Will We Get: Damages for Estate Planning Malpractice, 51 Hastings L.J. 325 (2000).
- Non-citizen clients. Robin Rose Stiller's International Estate Planning 101: A Basic Guide to Estate Planning for Non-Citizen Clients, 15 Akron Tax J. 121 (2000), provides background, considerations and advice for the estate planner.
- Professional responsibility. Michael Wald examines issues such as joint representation in Of Malpractice, Ethics, and the "Simple Will," 63 Tex. B.J. 534 (2000).
- Self-dealing. Jason L. Smith analyzes the rules governing a trustee's actions when exploring a potential breach of fiduciary duty in Stegemeier v. Magness: An Analysis of a Trustee's Fiduciary Duty in Self-Interested Transactions, 14 Quinnipiac Prob. L.J. 605 (2000).
- Trust administration. Standish H. Smith shares his perspective on Reforming the Corporate Administration of Personal Trusts-The Problem and a Plan, 14 Quinnipiac Prob. L.J. 563 (2000).
- Wealth transfer taxes. Barbara Redman explores the history and economics of progressive tax systems and recommends Rethinking the Progressive Estate and Gift Tax, 15 Akron Tax J. 35 (2000).
- Alaska revises the duty of the trustee to notify and inform beneficiaries and updates statutory provisions relating to trust revocation, modification, termination, reformation and construction. 2000 Alaska. Sess. Laws 104.
- California enhances duty of trustee to provide copy of trust instrument to beneficiaries. 2000 Cal. Legis. Serv. 34.
- Colorado adopts the revised Uniform Principal and Income Act. 2000 Colo. Legis. Serv. 257.
- Colorado enacts the Uniform Guardianship and Protective Proceeding Act. 2000 Colo. Legis. Serv. 368.
- Connecticut revises the definition of the best interest of children in adoption matters. 2000 Conn. Acts 500-228.
- Delaware codifies various aspects of trust law including the statute of frauds and virtual representation. Del. Laws 388 (2000).
- Delaware revises law relating to business trusts. Del. Laws 387 (2000).
- Florida expands Rule Against Perpetuities period to 360 years. 2000 Fla. Sess. Law Serv. 00-245.
- Florida modernizes provisions relating to end of life care. 2000 Fla. Sess. Law Serv. 00-295.
- Hawaii enacts revised Uniform Principal and Income Act. 2000 Haw. Sess. Laws 191.
- Michigan revises distribution of estates provisions. 2000 Mich. Pub. Acts 177.
- Ohio permits the transfer of titled assets of a decedent without fiduciary in certain situations. 2000 Ohio Laws 161.
- Tennessee expands non-claim statute to cover non-tax claims held by the state. 2000 Tenn. Pub. Acts 970.
- Virgin Islands enact the Uniform Anatomical Gift Act. 2000 V.I. Sess. Laws 6354.
Keeping Current-Probate Editor: Prof. Gerry W. Beyer, St. Mary's University School of Law, One Camino Santa Maria, San Antonio, TX 78228-8603, firstname.lastname@example.org. Contributors include: Alexandra F. Caradimitropoulo, Dave L. Cornfeld, William P. LaPiana and Theresa A. Sutton.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.