| P R O B A T E & P R O P E R T Y September/October 2007 Vol. 21 No.5 |
| Articles from other issues of Probate and Property |
Keeping Current
Probate
Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409, gwb@ProfessorBeyer.com. Contributors include Dave L. Cornfeld, Claire G. Hargrove, Sean Yan, and Prof. William P. LaPiana.
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.
CASES
ADEMPTION: Sale of specific gift by agent does not cause ademption absent principal’s ratification. The testator’s agent sold specifically devised real property to pay for the principal’s care and support. Although the sale was a proper use of the agent’s authority, the court in In re Estate of Anton, 731 N.W.2d 19 (Iowa 2007), held that the devisee of the real property was entitled to the proceeds remaining at the principal’s death. The court concluded that sale of specifically devised property by an agent should be treated like a sale by a guardian, unless the principal is competent and has approved the sale.
ANTI-LAPSE STATUTE: Survivorship provision prevents the application of the anti-lapse statute. The testatrix made a specific devise of real property and gave her residuary estate to her three sisters, provided: “[I]f any sister should predecease me, the surviving sister(s) shall take the deceased sister’s share.” All three sisters predeceased the testator. In an action to construe the will, the court held that the survivorship requirement referred to surviving the testatrix and that it prevented application of the anti-lapse statute. The specific devise and the residue therefore passed through intestacy. In re Estate of Snapp, No. E2006-00933-COA-R3-CV, 2007 WL 609015 (Tenn. Ct. App. Feb. 28, 2007).
DIVORCE: Constructive death of ex-spouse affects only gifts to ex-spouse. The testator gave his residuary estate to his spouse but, if she did not survive, to her daughter (the testator’s stepdaughter). The testator and his spouse divorced, and he died without changing his will. Texas law provides that all provisions in a will in favor of a former spouse “must be read as if the former spouse failed to survive the testator” and are null and void. In In re Estate of Nash, 220 S.W.3d 914 (Tex. 2007), the court held that the statutory deemed death of the ex-spouse affects only gifts to the ex-spouse. The contingent gift to the testator’s former stepdaughter, therefore, did not take effect, and the testator died intestate.
NO CONTEST CLAUSE: A trust beneficiary is not a “named legatee.” The testator’s will disposed of part of the residue in trust for a daughter and her descendants and gave the rest of his estate outright to his spouse and other named children. The will included a no-contest clause applicable to any “named legatee” who contests the will. In In re Succession of Scott, 950 So. 2d 846 (La. Ct. App. 2006), the court held that the trustee of the testamentary trust takes title to the trust property and therefore is the legatee. The beneficiary of the trust is not a legatee and thus is not subject to the no-contest clause.
PRETERMITTED CHILDREN: Gift to pretermitted child’s other parent prevents child’s claim notwithstanding divorce. The decedent made a will giving all his estate to his spouse, omitting children from a prior marriage. The decedent and his spouse had a child, then divorced. The decedent died without changing his will. Under Alabama law, all provisions for the ex-spouse are revoked. The child claimed an intestate share of the decedent’s estate under the pretermitted child statute. The statute creates an exception if, when the will was executed, the decedent had one or more children and substantially all of the estate is given to the parent of the omitted child. In Gray v. Gray, 947 So. 2d 1045 (Ala. 2006), the court held that the exception applied to the instant situation, even though the children living at the time of execution of the will were not the children of the decedent’s then spouse.
TAX APPORTIONMENT: The decedent’s intent to make specific dispositions prevents apportionment. The decedent’s will poured her entire estate into her lifetime trust, from which large specific gifts were to be made to the nominated successor trustee, and to his descendants if he should not survive; cash legacies were to be given to two charities; and the remainder divided between two other charities. In Shriners Hosp. for Children v. Schaper, 215 S.W.3d 185 (Mo. Ct. App. 2006), the court reversed the lower court’s order equitably apportioning estate taxes among the trust beneficiaries, the default result under Missouri decisional law, and held that the will and trust read as a whole indicated that the decedent intended that the specific bequests not be reduced by estate taxes, thereby putting the burden of payment on the residue.
TAX APPORTIONMENT: The testator’s intent controls the source of tax payment. The testator gave his residuary estate to four persons in equal shares. Three of those persons were relatives and exempt from state inheritance tax; the fourth was not. The will required that all taxes be paid out of the residuary estate “as an expense of the administration of my estate without apportionment.” In Pfeufer v. Cyphers, 919 A.2d 641 (Md. 2007), the court held that the testator’s intent governs the apportionment of inheritance tax and that the language in the will indicated that the inheritance tax be paid from the residue before its division into the required four shares.
TORTIOUS INTERFERENCE WITH INHERITANCE RIGHTS: Undue influence is not an independent tort. The decedent’s son brought a tort action against the decedent’s paramour alleging that she unduly influenced the decedent so that he would not transfer shares in a closely held business to him. The court affirmed the lower court’s dismissal of the complaint, holding that it is well-established that undue influence is grounds for relief only in equity and cannot be the basis for a suit at law for damages. Lavoie v. North East Knitting, Inc., 918 A.2d 225 (R.I. 2007).
TRUST CONSTRUCTION: The settlor’s language deemed to require the trustee to pay the surviving spouse’s statutory allowance. The decedent’s inter vivos trust stated that should his probate estate be insufficient, “there shall be paid” to the estate sums necessary to pay taxes and amounts requested by the executor to pay expenses, specific bequests, and statutory allowances. In Zahn v. Nelson, 866 N.E.2d 58 (Ohio Ct. App. 2007), the court held that the language required the trustee to pay to the estate funds necessary to pay to the decedent’s surviving spouse her statutory support allowance, dismissing objections by the decedent’s children by a prior marriage that the decedent’s intent that the trust benefit them prevented payment of the allowance from trust property.
TRUST REVOCATION: The settlor’s unambiguous right to revoke prevents admission of extrinsic evidence of intent. A husband and his wife created revocable trusts terminating on their respective deaths, at which time each trust was to be distributed in equal shares to their children from prior marriages. After the wife’s death, the husband remarried. He revoked his trust and created a new trust of which only his children were remainder beneficiaries. After the husband’s death, the wife’s children sued, alleging that the trusts were made under an oral agreement not to revoke the trusts and that the husband had defrauded their mother. In Kempton v. Dugan, 224 S.W.3d 83 (Mo. Ct. App. 2007), the court held that the husband’s power to revoke was unambiguous, which prevented the admission of extrinsic evidence. In addition, there was insufficient evidence that the husband made false statements to his wife to induce her to execute her trust, which therefore prevented a finding of fraud.
TRUSTS: The settlor’s express preference for the income beneficiary governs trust administration. A husband’s lifetime trust divided into credit shelter and marital trusts at his death. His wife was the income beneficiary of both trusts. The trustees were not authorized to invade the principal for the wife, but the trust stated that the wife’s interests and desires are to be preferred to those of the remaindermen, the husband’s children. The interests of other potential beneficiaries are discretionary, and the trustees were directed to take into account these beneficiaries’ other resources. The court held that the trust language made the wife’s other resources irrelevant to the administration of the trusts. Howard v. Howard, 156 P.3d 89 (Or. Ct. App. 2007).
WILLS: Language directing the devisees not to sell created life estates. The testatrix’s will gave real estate to her two daughters and stated that the real estate was not to be sold during the daughters’ lives and for 21 years thereafter. In addition, on the daughters’ deaths, title was to vest in “the heirs of their bodies, per stirpes” but not to be sold for 21 years. The trial court held that the daughters held the land in fee simple because of the statutory presumption that all estates in land are presumed to be fee simple estates, that the testatrix’s attempt to create a fee tail was void, and that the purported restriction on sale was void as an unlawful restraint on alienation. The appellate court reversed, holding that the statutory presumption was relevant only to deeds, that the will had to be construed to carry out the testatrix’s intent, and that despite the absence of express language, the testatrix intended to create a life estate in her daughters. Barnett v. Estate of Anderson, Nos. 1051676 & 1051829, 2007 WL 779147 (Ala. Mar. 16, 2007).
RULINGS AND REGULATIONS
ESTATE TAX DEDUCTIONS: IRS issues proposed regulations. The proposed regulations would permit post-death events to be considered when determining the deductible amount. REG-143316-03.
GENERATION-SKIPPING TRANSFER TAX: Division of GST tax-exempt trust and subsequent modification thereof did not shift beneficial interest to lower generation and thus exempt status retained. PLR 200714016.
GENERATION-SKIPPING TRANSFER TAX: Trust modification will not shift beneficial interest to lower generation and thus trust will not lose grandfathered GST tax-exempt status. PLR 200714009.
GRANTOR RETAINED INTEREST TRUSTS: IRS issues proposed regulations. The proposed regulations provide “guidance on the portion of a trust properly includible in a grantor’s gross estate under Internal Revenue Code (Code) sections 2036 and 2039 if the grantor has retained the use of property in a trust or the right to an annuity, unitrust, or other income payment from such trust for life, for any period not ascertainable without reference to the grantor’s death, or for a period that does not in fact end before the grantor’s death.” FR Doc. E7-11062.
LITERATURE
Creditors’ Claims. In Remembering the Creditor at Death: Aligning Probate and Nonprobate Transfers, 41 Real Prop. Prob. & Tr. J. 819 (2007), Elaine H. Gagliardi proposes legislative reforms that would unify the creditor claims procedure for probate and nonprobate transfers when beneficiaries are unwilling to pay claims.
Intestate Succession—Half-bloods. In a world in which the nuclear family is becoming a thing of the past, Ralph Calhoun Brashier explores Half-Bloods, Inheritance, and Family, 37 U. Mem. L. Rev. 215 (2007).
Intestate Succession—Parent–Child. That constitutional inconsistencies and political biases skew the definitions of parent and child in intestacy is the argument posited by Linda Kelly Hill in Equal Protection Misapplied: The Politics of Gender and Legitimacy and the Denial of Inheritance, 13 Wm. & Mary J. Women & L. 129 (2006).
Pennsylvania—Anti-lapse Statute. Sara A. Miller analyzes a recent Pennsylvania Supreme Court case that solidifies the court’s policy against intestacy in Anti-Lapse Statute Must Apply to a Lapsed Residuary Bequest in the Absence of Reasonably Certain Intent of the Testator: In re Estate of Burger, 45 Duq. L. Rev. 111 (2006).
Rule Against Perpetuities. In Ariadne’s Thread: Leading Students Into and Out of the Labyrinth of the Rule Against Perpetuities, 54 Clev. St. L. Rev. 337 (2006), Maureen E. Markey discusses a variety of methods for teaching this arcane rule to first-year law students.
Tennessee—Lapsed Residuary Gifts. Through a case analysis of In re Estate of McFarland, 167 S.W.3d 299 (Tenn. 2005), Julie M. Cochran contrasts the “modern” rule under the UPC with the long-standing Ford rule in Property Law—Wills—Effect of Lapsed Residuary Gifts in the State of Tennessee, 73 Tenn. L. Rev. 711 (2006).
Texas—Electronic Probate. The advantages and disadvantages of implementing a completely electronic probate process in Texas are explored by Mary Wahne Baker in her comment, Where There’s a Will, There’s a Way: The Practicalities and Pitfalls of Instituting Electronic Filing for Probate Procedures in Texas, 39 Tex. Tech L. Rev. 423 (2007).
LEGISLATION
Arkansas adopts the Revised Arkansas Anatomical Gift Act. 2007 Ark. Acts 839.
Arkansas adopts the Uniform Statutory Rule Against Perpetuities Act. 2007 Ark. Acts 240.
Colorado enacts the Revised Uniform Anatomical Gift Act. 2007 Colo. Legis. Serv. 207.
Idaho modernizes law governing trust protectors and spendthrift trusts. 2007 Idaho Sess. Laws 68.
Indiana enacts Revised Uniform Anatomical Gift Act. 2007 Ind. Legis. Serv. 147-2007.
Kansas enacts the Revised Uniform Anatomical Gift Act. 2007 Kan. Sess. Laws 127.
Nevada enacts the Uniform Custodial Trust Act. 2007 Nev. Stat. 103.
Nevada enacts the Uniform Disclaimer of Property Interests Act. 2007 Nev. Stat. 102.
New Mexico enacts the Jonathan Spradling Revised Uniform Anatomical Gift Act. 2007 N.M. Laws 323.
New Mexico enacts the Uniform Power of Attorney Act. 2007 N.M. Laws 135.
North Dakota adopts the Revised Uniform Anatomical Gift Act. 2007 N.D. Laws 2163.
South Dakota adopts the Revised Uniform Anatomical Gift Act. 2007 S.D. Laws 197.
South Dakota adopts the Uniform Principal and Income Act. 2007 S.D. Sess. Laws 282.
Tennessee enacts the Uniform Prudent Management of Institutional Funds Act. 2007 Tenn. Legis. Serv. 186.
Utah enacts the Revised Uniform Anatomical Gift Act. 2007 Utah Laws 60.
Virginia creates presumption of nonexoneration of liens against specifically gifted property. 2007 Va. Legis. Serv. 341.
West Virginia provides one form for a combined medical power of attorney and living will. 2007 W. Va. Acts 125.
