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 Claire G. Hargrove, Paula Moore, Prof. William P. LaPiana, and Jake W. Villanueva.

CASES

ADEMPTION:

Bequest of interest in corporation adeemed on sale to suc- cessor.

The decedent’s will included a bequest to the decedent’s sibling of all of the decedent’s interest in a familyowned corporation. The corporation was later sold to an LLC in which the decedent held a majority of the membership interests and all of the governance rights. The LLC continued to carry on the business of the corporation using the corporation’s name. The corporation was liquidated and formally dissolved. In a construction action brought by the decedent’s surviving spouse, the probate court determined that the bequest had adeemed. The Tennessee intermediate appellate court affirmed in In re Estate of Cone, No. M2020-01024-COA-R3-CV, 2022 WL 587448 (Tenn. Ct. App. Feb. 28, 2022), because the property that was the subject of the bequest was not part of the probate estate. The sale to the LLC was not a mere change of form because it came about through a sale of all of the corporation’s assets to a new entity.

ANCILLARY PROBATE:

Probate in domiciliary jurisdiction was not necessary predicate to admission in jurisdiction where real property located.

In In re Estate of Huang, No. 2-21-0269, 2022 WL 702626 (Ill. App. Ct. Mar. 9, 2022), the Illinois intermediate appellate court held that under the Probate Code (755 Ill. Comp. Stat. 5/5-1 and 7-1), a will disposing of real property in Illinois properly executed by the domiciliary of another state under the offers a look at selected recent cases, tax rulings and regulations, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers. law of that state may be admitted to original probate in Illinois.

DISCLAIMERS:

Laches not a bar to valid disclaimer of real property received through intestacy.

The intestate’s heirs filed disclaimers of their interests in real property included in the estate less than two months after the administrator recorded the “certificates of transfer” memorializing the passing of title to the heirs and almost four years after the decedent’s death. The Ohio disclaimer statute requires the filing or recording of the disclaimer “at any time” after the latest of the effective date of “the donative instrument” or the date on which the disclaimant’s interest is finally ascertained, under Ohio Rev. Code § 5185.36(D). The lower court upheld the validity of the disclaimer, and the Ohio intermediate appellate court affirmed in Clark v. Beyoglides, 182 N.E.3d 1212 (Ohio Ct. App. 2021), finding that the certificate was a donative instrument for purposes of the disclaimers and that, under the facts, the beneficiaries were not barred by laches.

GUARDIANS:

No authority to bind ward to arbitration.

A child was appointed guardian of the parent and three years later signed a contract with a long-term care facility allowing the parent to reside there. The contract included an arbitration agreement. After the parent’s death, the child brought a medical negligence and wrongful death suit against the facility, which moved to dismiss the claims or in the alternative compel arbitration of the negligence claim. The trial court denied the motion to compel arbitration, and the intermediate appellate court reversed. On appeal by the guardian, the Supreme Court of Kentucky reversed in Jackson v. Legacy Health Services, Inc.¸ 640 S.W.3d 728 (Ky. 2022), holding that because, under Kan. Rev. Stat. § 387.660(4), a guardian may act in a manner that deprives the ward of civil rights and restricts personal freedom “only to the extent necessary to provide needed care and services” to the ward, the guardian did not have the authority to waive the ward’s right to trial by jury by signing an arbitration agreement that was not a prerequisite to the provision of needed care and services.

IRAs:

Inherited IRA is not exempt from garnishment.

In Jones v. McGreevy, 270 A.3d 1 (Pa. Super. Ct. 2021), the Pennsylvania intermediate appellate court reversed the trial court and held that the statute exempting retirement and annuity accounts, including IRAs, from attachment or execution on a judgment, 47 Pa. Cons. Stat. § 8124(b)(1)(ix), does not apply to an inherited IRA, which is therefore subject to attachment to satisfy a judgment.

LIFE INSURANCE:

Failure to return signed beneficiary change form not substantial compliance.

After the insured’s spouse filed for divorce, the insured asked the life insurance company for information on changing the beneficiary of a policy on the decedent’s life from the spouse to the insured’s children. The company faxed the insured a form that the insured returned without signing or dating it. The insurance company sent the insured a letter asking for a signed form, but the insured never replied. After the insured’s death, the insured’s children, the beneficiaries under the incomplete form, brought suit. The company deposited the proceeds with the court, and the trial court decided that the insured had substantially complied with the contractual requirement that the beneficiary be changed by the company’s receipt of a satisfactory written request. In James v. Mounts, 644 S.W.3d 425 (Ark. Ct. App. 2022), the Arkansas appellate court reversed, finding that the form explicitly required a signature and that the insured had sufficient time to comply with the request for a signed form.

NO-CONTEST CLAUSE:

Violation of no-contest clause eliminates the beneficiary’s standing to assert claims against the trustee.

The Supreme Court of Wyoming held in Matter of Phyliss V. McDill Revocable Trust, 506 P.3d 753 (Wyo. 2022), that a trust beneficiary has no standing to assert breach of trust claims against the trustee once the beneficiary has violated the trust’s no-contest clause. The court agreed that the beneficiary had violated the no-contest clause by bringing a proceeding in Texas challenging the validity of the settlor’s amendments even though it was dismissed for lack of personal jurisdiction over the defendants.

QUALIFIED PLANS:

Property settlement agreement constituted a waiver of rights to retirement account.

The Rhode Island Supreme Court held in Morgan v. Bicknell, 268 A.3d 1180 (R.I. 2022), that a property settlement agreement in which Spouse A waived “any and all interest” in Spouse B’s § 401(k) plan was an unambiguous waiver of Spouse A’s rights as the designated beneficiary at Spouse B’s death. Accordingly, the account was payable to Spouse B’s estate where there was no evidence of a modification of the agreement and despite Spouse B’s failure to change the beneficiary designation.

STANDING OF TRUST BENEFICIARY:

Beneficiary of a revocable trust does not have standing as “interested person” to bring action respecting the trust.

The Uniform Trust Code provides that the trustee of a revocable trust owes duties only to the settlor (§ 603) and that any “interested person” may ask the court to intervene in the administration of a trust (§ 201(a)). The Oregon intermediate appellate court in Matter of Virginia Worley Revocable Living Trust, 318 Or. App. 127 (2022), held that the corresponding provisions of the Oregon Uniform Trust Code (Or. Rev. Stat. §§ 130.510 and 130.050(1)) prohibit the beneficiary of a revocable trust who is also the child of the settlor from bringing an action based on an alleged violation of fiduciary duties by the trustee. In addition, the prevailing trustee is entitled to attorney’s fees because, under Or. Rev. Stat. § 20.105(1), there was “no objectively reasonable basis” for the claim.

TRUSTS:

Qualified beneficiary determined when trust property distributed.

The Massachusetts intermediate appellate court held in Matter of Colecchia Family Irrevocable Trust, 180 N.E.3d 988 (Mass. App. Ct. 2021), that under the definition of a qualified beneficiary in the Massachusetts Uniform Trust Code (Mass. Gen. Laws ch. 203E § 103, identical to UTC § 103 (12)(C)), a beneficiary is a qualified beneficiary on the date on which an event occurs that “triggers a beneficiary’s entitlement under the trust” which in the instant case was the date the trust terminated and the beneficiary became entitled to a distribution of trust property.

TAX CASES, RULINGS, AND REGULATIONS

ESTATE AND GIFT TAX:

Proposed regulations provide an exception to the anti-clawback special rule.

IRS proposed regulations (REG-118913-21) would apply when, at the time of the decedent’s death, the exclusion amount differs from the exclusion amount that applied when any gifts were made. This disparity can occur because the Tax Cuts and Jobs Act temporarily increased the exclusion amount for decedents dying and gifts made after December 31, 2017, and before January 1, 2026. Earlier regulations provided a credit that meant that the higher exclusion amount on gifts would not be clawed back from the estate of decedents who died with a lower exclusion amount in the future. The proposed regulations make an exception to the anti-clawback rule for gifts that are includible in a decedent’s gross estate or treated as includible, such as gifts subject to a retained life estate, gifts made by an enforceable promise that are unsatisfied at the date of death, and transfers of certain retained interests in corporations, partnerships, or trusts. Proposed Rule 2022-08865; Internal Revenue Bulletin 2022-20 IRB 1089.

POWER OF APPOINTMENT:

Testamentary power of appointment deemed a limited power.

The settlor created a revocable trust and died before September 25, 1985. Upon her death, Son’s Trust was established. Son’s Trust included a power of appointment that allowed him to appoint by will the trust to one or more of the settlor’s descendants. Son died and exercised his power of appointment by directing the property of Son’s Trust to the trustee of Son’s Revocable Trust. Son’s Revocable Trust provided that property appointed to the trust through his power of appointment was to be administered through New Trust, a separate trust for the benefit of Granddaughter. Son’s Revocable Trust granted Granddaughter a testamentary power of appointment. Granddaughter could appoint trust principal to Granddaughter’s descendants or Settlor’s descendants, excluding (1) Settlor’s children and (2) Settlor’s grandchildren who do not have descendants. PLR 202217005 provided that Granddaughter’s testamentary power of appointment did not include her estate or creditors of her estate and was a limited power of appointment. As a result, New Trust remained GST tax exempt under its grandfathered status, no part of New Trust would be included in Granddaughter’s gross estate for federal estate tax purposes, and Granddaughter did not release a general power of appointment for federal gift tax purposes and did not make a constructive addition to New Trust.

LITERATURE

ATTORNEY-CLIENT PRIVILEGE:

In Traps for the Weary Trustee and the Unwary Attorney: Communications Between Trustees and Attorneys May Not be Privileged, 49 Est. Plan. 04 (Apr. 2022), Patricia L. Davidson and Tatiana Tway provide a warning to attorneys and trustees that their communications may not be covered by attorney-client privilege because the fiduciary exception precludes a trustee who obtains legal advice related to trust duties from asserting such privilege against beneficiaries of the trust. As a result, beneficiaries can discover otherwise sacred communications between a trustee and an attorney.

DIGITAL ASSETS:

In her article, Beyond the Grave: A Fiduciary’s Access to a Decedent’s Digital Assets, 43 Cardozo L. Rev. 745 (2021), Isabelle N. Sehati argues that a too-heavy reliance on privacy concerns overshadows a fiduciary’s responsibility to properly and efficiently administer an estate. She examines several scenarios in which courts should be more willing to grant fiduciaries access to the contents of a decedent’s communications and explores how individuals can escape the confines of the statute through education, creative lawyering, and the execution of various consent documents.

ESTATE TAX:

In their article, Wealth Tax Design: Lessons from Estate Tax Avoidance, 74 Tax L. Rev. 175 (2021), Jason S. Oh and Eric M. Zolt posit that the US experience with designing and implementing a gift and estate tax regime sheds light on the emerging discourse about wealth taxes in two important ways. First, it may help resolve a robust debate about the revenue consequences of potential wealth taxes. Second, a good understanding of the various strategies that taxpayers have used to reduce gift and estate tax liability can inform the design of a wealth tax.

GEORGIA—REMOTE WILL EXECUTION:

In the Note, Socially Distant Signing: Why Georgia Should Adopt Remote Will Execution in the Post-COVID World, 56 Ga. L. Rev. 391 (2021), Jessie Daniel Rankin presents the arguments for permanently adopting remote execution and attestation, explores efforts by other jurisdictions in this area, and presents a suggested set of criteria for the Georgia General Assembly as guidance when considering such legislation.

HEIRS’ PROPERTY:

In Acres of Distrust: Heirs Property, the Law’s Role in Sowing Suspicion among Americans and How Lawyers Can Help Curb Black Land Loss, 28 Geo. J. on Poverty L. & Pol’y 377 (2021), Will Breland contends that past negative interactions with the legal system inhibit the use of estate planning services, perpetuating the cycle of inheritance through intestacy on a massive scale. He proposes solutions for legal professionals to consider when dealing with such legal issues and argues that law schools and continuing legal education programs must emphasize cultural competence.

NEW YORK—VIDEO DOCUMENT EXECUTION:

In New York Executive Order 202.14: A Temporary Fix to a Temporary Problem, or a Framework to Change Estate Planning Document Execution?, 32 Alb. L.J. Sci. & Tech. 99 (2021-2022), Alexander James Anselment discusses the enactment of a New York State executive order that allowed estate planning documents to be executed and witnessed over video conference during the pandemic. He goes on to discuss how that executive order could be turned into legislation that would allow time-honored rules of succession law to be compatible with our society’s ever-growing, technology driven world.

SECURED ACT:

In his article, The SECURE Act: Retirement Plan Distributions after the Death of a Beneficiary, 74 Tax Law. 629 (2021), Vorris J. Blankenship discusses the provisions of the Act, identifies a problem when there are multiple beneficiaries, and proposes a solution.

UTAH—POWERS OF ATTORNEY:

Craig E. Hughes provides an overview of mental incapacity and the practical aspects of defining mental incapacity in a Utah power of attorney in Utah Incapacity Law and Powers of Attorney, 35-APR Utah B.J. 29 (Mar./Apr. 2022).

LEGISLATION

ALABAMA modernizes law relating to the certification of a surrogate designated to make end-of-life decisions for a terminally ill patient. 2022 Ala. Laws Act 2022-434.

ARIZONA prohibits discrimination in determining organ transplant eligibility based on the prospective donee’s disability. 2022 Ariz. Legis. Serv. Ch. 70.

COLORADO updates its intestate succession scheme and the treatment of pretermitted children. 2022 Colo. Legis. Serv. Ch. 60.

DELAWARE prohibits insurance companies from discriminating against an individual due to that individual’s status as a living organ or tissue donor. 2022 Del. Laws Ch. 292.

FLORIDA extends the Rule Against Perpetuities time period to 1,000 years for trusts created on or after July 1, 2022. 2022 Fla. Law Serv. Ch. 2022-96.

FLORIDA prohibits insurance companies from discriminating against an individual due to that individual’s status as a living organ donor. 2022 Fla. Sess. Law Serv. Ch. 2022-59.

GEORGIA enacts the Psychiatric Advance Directive Act. 2022 Ga. Laws Act 836.

IDAHO passes the Digital Assets Act to govern the transfer, sale, control, and perfection of security interests in digital property. 2022 Idaho Laws Ch. 284.

ILLINOIS allows an agent to present an electronic copy of an executed form as proof of the health care agency. 2022 Ill. Legis. Serv. P.A. 102-794.

INDIANA adopts Uniform Trust Decanting Act. 2022 Ind. Legis. Serv. P.L. 161-2022.

INDIANA increases the value of an estate that may be deemed a “small estate” from $50,000 to $100,000. 2022 Ind. Legis. Serv. P.L. 151-2022.

KANSAS adopts the Uniform Directed Trust Act. 2022 Kan. Laws Ch. 16.

MAINE enhances the rights of an adult subject to guardianship. 2022 Me. Legis. Serv. Ch. 500.

MARYLAND enacts special rules for the partition of real property among co-tenants such as co-devisees and coheirs. 2022 Md. Laws Ch. 401.

MISSISSIPPI authorizes beneficiary designations allowing for a transfer of a motor vehicle upon death and permits vehicles to be held jointly with rights of survivorship. 2022 Miss. Laws H.B. 1430.

MISSISSIPPI prohibits discrimination in decisions regarding anatomical gifts or organ transplants solely based on disability. 2022 Miss. Laws H.B. 20.

NEW JERSEY allows motor vehicles to be titled in transfer on death form. 2022 N.J. Sess. Law Serv. Ch. 13.

OHIO prohibits insurers from discriminating against living organ donors. 2022 Ohio Laws File 90.

OKLAHOMA enacts the Uniform Testamentary Additions to Trusts Act. 2022 Okla. Sess. Law Serv. Ch. 186.

OKLAHOMA passes the Oklahoma Health Care Agent Act. 2022 Okla. Sess. Law Serv. Ch. 136. SOUTH CAROLINA enacts the Uniform Transfers to Minors Act. 2022 S.C. Laws Act 128.

SOUTH DAKOTA allows succession to real property by affidavit under specified circumstances. 2022 S.D. Laws Ch. 89.

SOUTH DAKOTA authorizes remote witnessing of non-holographic wills, durable powers of attorney for health care decisions, anatomical gifts, refusals to make anatomical gifts, and pre-need cremation authorizations. 2022 S.D. Laws Ch. 56.

TENNESSEE passes the Small Estate Affidavit Limited Letter of Authority Act providing for the administration of small estates. 2022 Tenn. Laws Pub. Ch. 665.

US VIRGIN ISLANDS adopts the Uniform Electronic Wills Act. 2022 V.I. Laws Act 8556.

US VIRGIN ISLANDS enacts the Uniform Law on Notarial Acts. 2022 V.I. Laws Act 8542. UTAH adopts the Uniform Partition of Heirs’ Property Act. 2022 Utah Laws Ch. 304.

UTAH establishes a framework for the ownership of digital assets. 2022 Utah Laws Ch. 448.

VIRGINIA enacts the Uniform Fiduciary Income and Principal Act. 2022 Va. Laws Ch. 354.

WASHINGTON enacts the Revised Uniform Unclaimed Property Act. 2022 Wash. Legis. Serv. Ch. 225.

WEST VIRGINIA adopts the Uniform Unclaimed Property Act. 2022 W.Va. Laws H.B. 4511.

WISCONSIN provides for nonprobate transfers of farming implements at death. 2021–2022 Wisc. Legis Serv. Act 201.

Published in Probate & Property, Volume 36, No 5 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Probate & Property September/October 2022