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.
ADEMPTION: Extrinsic evidence inadmissible to construe unambiguous will. A testatrix's will included a specific bequest of several bank accounts and certificates of deposit to her niece. Shortly before her death, the aunt transferred funds from one of the accounts to a new certificate of deposit to obtain a higher interest rate. The court in Church v. Morgan, 685 N.E.2d 809 (Ohio Ct. App. 1996), found the bequest adeemed to the extent of the transferred funds and thus the niece was entitled only to the funds remaining in the account when her aunt died.
CHARITABLE PURPOSE: Preservation of building exteriors sufficient. A decedent left historically significant buildings to a testamentary trust. Directed to use the net income to restore and maintain the properties, the trustees renovated, created apartments and rented the properties to private individuals. The court held that the preservation of the properties was a sufficient public purpose to qualify the trust as charitable, even though private renters received benefits from the trust. Evangelical Lutheran Charities v. South Carolina Nat'l Bank, 1997 WL 800160 (S.C. 1997).
DISCLAIMERS: Disqualifying consideration must be a part of the bargain. The beneficiaries of a testator's will disclaimed their bequests, resulting in substantial tax savings to the estate. The testator's surviving spouse then made payments to the disclaimants. The Tax Court, in Monroe v. Commissioner, 104 T.C. 352 (1995), previously held that all but one of the 29 disclaimers were not qualified disclaimers for tax purposes under Code § 2518 because the disclaimants received consideration for making the disclaimers. In Monroe v. Commissioner, 124 F.3d 699 (5th Cir. 1997), the appellate court reversed on 22 of the disclaimers and remanded the rest, holding that disclaimers are unqualified only if the disclaimants received bargained-for consideration.
FORCED SHARE: Divorce judgment caused equitable conversion. Pursuant to a divorce decree, a decedent made a will leaving his estate to his former spouse and their children. The decedent remarried and at his death his new spouse claimed her elective share. In Hudson v. Hudson, 701 So. 2d 13 (Ala. Civ. Ct. App. 1997), the court held that the divorce judgment worked an equitable conversion, leaving the decedent with bare legal title that he held in trust for the former spouse and their children until his death. This operated to preclude the new spouse's elective share rights in the property.
HOLOGRAPHIC WILL: Writing on photocopy of will deemed valid codicil. On a photocopy of her validly executed will, a testatrix crossed out her deceased daughter's name and wrote words indicating that the daughter's share was to be divided among the testatrix's other daughters. The testatrix then initialed and dated the alteration. The court in Foxley v. Hogan, 568 N.W.2d 912 (Neb. Ct. App. 1997), held that the photocopy was a holographic codicil to the will because it manifested testamentary intent and the material provisions were in the testatrix's handwriting.
INSURANCE BENEFICIARIES: Retroactive application of statute revoking designation of former spouse unconstitutional. In 1992 Pennsylvania adopted a statute providing that divorce revokes the designation of a spouse as a life insurance beneficiary absent contrary indications. In Paronese v. Midland Nat'l Ins. Co., 1998 WL 15821 (Penn. 1998), the court held that statute unconstitutional as applied to beneficiary designations in effect before its effective date because the statute impermissibly impaired contract obligations.
I NTER VIVOS TRUST: Ineffective trust operated as codicil. A settlor wanted her house to pass to her sister at her death. She completed a preprinted inter vivos trust form naming her sister as the beneficiary and successor trustee but reserving to herself the power to revoke the trust and to pay income to herself. She signed the trust agreement in the presence of two friends who signed as witnesses. Although the document was ineffective to transfer the property to her sister because it gave the sister no immediate interest, the court in Matter of Catanio, 1997 WL 800151 (N.J. Super. Ct. App. Div. 1997), held that the document evidenced testamentary intent and was entitled to probate as a codicil to the settlor's will.
INTER VIVOS TRUSTS: Surviving spouse, who is also the trustee, may revoke trust. A husband and wife created a revocable inter vivos trust, reserving
the right to revoke or amend "during our lifetime" and providing that sale or disposition of the trust property would operate as a revocation. After his wife's death, the husband remarried and conveyed the family home from the trust to himself and his new spouse as joint tenants. After his death, his children by his first marriage (the remainder beneficiaries- of the trust) challenged the disposition of the house. The court held that the husband as the sole surviving trustee had the power to revoke the trust by disposition and that the action was not a breach of fiduciary duty because the husband was the only present beneficiary of the trust. West v. West, 948 P.2d 351 (Utah 1997).
INTESTATE SUCCESSION: California's legal barrier statute regarding stepchildren applied past majority. California law provides that a stepchild is a stepparent's heir if there is a continuing family relationship and there was a legal barrier to adoption. In Barnum-Smith v. Joseph, 70 Cal. Rptr. 2d 619 (1998), the court interpreted this statute as requiring that the barrier to adoption begin during the stepchild's minority and continue throughout the joint lifetimes of stepparent
PROFESSIONAL RESPONSIBILITY: Trustee's attorney-client privilege cannot be asserted against successor trustee. A successor trustee demanded certain trust files from the predecessor trustee. The demand was resisted on the grounds of attorney-client privilege. In Moeller v. Superior Court, 947 P.2d 279 (Cal. 1997), the court held that the predecessor trustee cannot assert the attorney-client privilege against a successor trustee for communications related to performance of the office of trustee.
PUTATIVE SPOUSE: Entitled to bequest but not elective share. A testator's will gave his wife a life estate in his home. The personal representative brought an action to bar her from enjoying the life estate on the ground that at least two of her prior marriages had not ended legally. In Lovett v. Lovett, 1997 WL 698026 (S.C. Ct. App. 1997), the court held that the testator's use of the term "wife" followed by her name was merely descriptive and did not limit the validity of the gift. She was not, however, entitled to an elective share because she did not argue at trial for the application of the putative spouse doctrine.
REVOCATION: Property subject to ineffective physical act revocation passed by intestacy. Hansel v. Head, 1997 WL 694702 (Ala. 1997), involved a joint will on which the testators had obliterated a name with correction fluid. They also added provisions. The court held that the additions were ineffective as an unwitnessed codicil. Local law did not recognize partial revocation by physical act and thus the entire will was admitted to probate. Because the obliterated provision could not be restored, the subject of the attempted partial revocation passed by intestacy.
SPECIFIC BEQUEST: Gift of tangible personal property did not encompass certificate of deposit. The testator's will left a small safe together with "its tangible personal property contents" to the beneficiary. In May v. Walter, 956 S.W.2d 138 (Tex. Ct. App. 1997), rev. denied (Tex. 1998), the court held that a certificate of deposit found in the safe did not pass to the beneficiary because the certificate represented a chose in action (the depositor's claim against the bank) and was therefore intangible property.
TORTIOUS INTERFERENCE: No cause of action before testator's death. A sister accused her brother of causing their mother to transfer the mother's home to him, thus preventing it from passing to the sister under the mother's existing will. In Labonte v. Giordano, 687 N.E.2d 1253 (1997), the court refused to recognize a cause of action for tortious interference with an expectancy under a will while the testator is still alive.
TRUST: Trust not alter ego of delinquent taxpayers; IRS levy and seizure improper. Two taxpayers established an irrevocable trust, unaware that the IRS was auditing their tax returns at the same time. Later the IRS levied and seized property belonging to the irrevocable trust. In Dean v. United States, 1997 W.L. 795731 (W.D. Mo. 1997), the court held that the taxpayers had legitimate reasons for creating the trust and that the trust was not their alter ego. The court ordered the IRS to return the property to the trust.
RULINGS AND REGULATIONS
ESTATE TAX DEFERRAL: Procedures to elect a reduced interest rate on deferred estate taxes under the Taxpayer Relief Act of 1997 established. Rev. Rul. 98-15.
ESTATE TAX: Procedures to elect to have certain revocable trusts treated and taxed as part of the decedent's estate under the Taxpayer Relief Act of 1997 established. Rev. Rul. 98-13.
GST TAX: Partitioning of grandfathered GST trust will not deprive the resulting separate trusts of their exemption. PLR 9801014.
LIFE INSURANCE: Beneficiary's resignation as trustee before the trust purchases a life insurance policy will prevent the proceeds from being includable in the beneficiary's gross estate. PLR 9748020.
QTIP TRUST: Alleged purchase by surviving spouse of remainder interest deemed gift. In Rev. Rul. 98-8, the IRS determined that if a surviving spouse acquires the remainder interest in a QTIP trust in connection a property transfer or cash to the holder of the remainder interest, the surviving spouse makes a gift. The value of the gift is the greater of (1) the value of the remainder interest or (2) the value of the property or cash transferred to the holder of the remainder interest.
Alternative reproduction technologies. Helene S. Sharpo, Masters of Life and Death: Inheritance Consequences of Reproductive Technologies, 25 Hofstra L. Rev. 1091 (1997), analyzes the inheritance consequences to children born as a result of artificial reproductive technologies, particularly if one of the participating individuals dies intestate.
Assisted suicide. A Model State Act to Authorize and Regulate Physician-Assisted Suicide, 13 Issues L. & Med. 219 (1997), proposes enabling legislation. Kevin P. Quinn, S.J., Assisted Suicide and Equal Protection: In Defense of the Distinction Between Killing and Letting Die, 13 Issues L. & Med. 145 (1997), concludes that individuals who ask their doctors for suicide assistance and those who forego treatment are not similarly situated for purposes of the equal protection clause.
Beneficiaries' rights. Robert Whitman, Commentary: A Law professor's Suggestions for Estate and Trust Reform, 12 Quinnipiac Prob. L.J. 57 (1997), advocates reforms regarding beneficiarie's rights, including control of the choice of executor and the appropriate level of beneficiary involvement in trustee investment decisions.
Crummey trusts. Michael J Savinelli, Three Strikes and the IRS is Out!!: Crummey, Cristofani, and Kohlsaat Firmly Entrench Crummey Powers, 12 Quinnipiac Prob. L.J. 67 (1997), discusses the current favorable status of Crummey powers and the reaction of the IRS.
Endowments. Evelyn Brody, Charitable Endowments and the Democratization of Dynasty, 39 Ariz. L. Rev. 873 (1997), discusses the usefulness of charitable endowments to the community at large.
Estate planning. John J. Scroggin, Planning Issues You Might Have Missed in Recent Legislation, Tr. & Est., Jan. 1998, at 54, reviews recent legislation.
Fiduciary liability. Basil Zirinis III and David Samuels, in Fulfilling Obligations as an Estate Fiduciary, Tr. & Est., Dec. 1997, at 35, review factors courts consider to determine if a fiduciary has invested prudently.
Internet. Joseph G. Hodges Jr., There is More Out There Than You Think: A Guide to the Internet, Tr. & Est., Dec. 1997, at 39, explains the available tools for trust and estate lawyers on the Internet.
Medicaid planning. Cynthia L. Barrett, Advising the Elder Client: Trusts and Medicaid Eligibility, Prac. Law., Oct. 1997, at 57, delineates techniques to preserve the client's access to public benefits while preserving the client's assets and control over them.
Taxpayer relief act. Pam H. Scheneider and Lloyd Leva Plaine, in TRA '97 and the Generation-Skipping Transfer Tax, 87 J. Tax'n 341 (1997), focus on GST tax ramifications. William E. Sholtes provides an overview of changes in Estate and Gift Tax Provisions, 12 Prac. Tax Law. 51 (1997).
Alabama enacts Uniform Multiple-Persons Accounts Act. 1997 Ala. Acts 97-644.
Nevada eliminates certain fees charged by courts in the administration of small estates. 1997 Nev. Laws ch. 61.
New Hampshire updates waiver of administration provisions. 1997 N.H. Laws ch. 45.
Keeping Current-Probate Editor: Gerry W. Beyer,
Professor, St. Mary's University School of Law, One Camino Santa Maria, San Antonio, TX 78228. Contributing editors: Dave L. Cornfeld, Vionette Douglas, William P. LaPiana and Kendra Lashawn McCartney.
Probate & Property Magazine is published six times annually and is included in section members' annual dues.