Keeping Current—Probate

Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409, gwb@ ProfessorBeyer.com. Contributors: Claire G. Hargrove, Paula Moore, Kerri G. Nipp, Prof. William P. LaPiana, and Jake W. Villanueva.

Keeping Current—Probate 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.

CASES

DIVORCE:

Statute revokes only gifts to ex-spouse, not other ex-relatives. The testator devised the residue of the estate to the testator’s spouse and, if the spouse did not survive the testator, one-half to the testator’s heirs and one-half to the heirs of the spouse. The testator divorced 24 years after the execution of the will and died two years after the divorce never having made a new will. Minnesota’s revocation on divorce statute, Minn. Stat. § 524.2804, automatically revokes gifts to the ex-spouse but not those to the ex-spouse’s relatives. At the time of the testator’s death, the ex-spouse’s parents were the ex-spouse’s heirs, and they objected to the probate petition the nominated executor filed that did not mention them. The district court granted the executor’s motion for summary judgment and on appeal, the intermediate appellate court reversed in Matter of Estate of Tomczik, 976 N.W.2d 143 (Minn. Ct. App. 2022), review granted. The court found that the statute requires that the will be given effect as if the exspouse had predeceased the testator and, in that situation, one-half the residue is unambiguously devised to the ex-spouse’s heirs. The Chief Judge dissented on the grounds that, because the ex-spouse is still alive, the heirs are not known.

DOWER: Gift of more than one-half of estate is fraud on spouse’s dower rights. Kentucky law entitles a surviving spouse to one-half of the decedent’s personal property under Ky. Rev. Stat. § 392.020. Simpson v. Wethington, 641 S.W.3d 124 (Ky. 2022), involved a blank check the spouse gave to the spouse’s child with directions to “wait until anything ever happened” to the spouse and then use the check to “take every dime [the spouse] had” because it was “the only way” the spouse’s children would receive anything. The child completed the check for the amount in the account, equal to 52 percent of the spouse’s estate, and deposited it into the child’s account two days before the spouse’s death. The spouse was intestate. The surviving spouse claimed dower rights in the closed account, and both the trial court and intermediate appellate court agreed that the check was a valid inter vivos gift and not subject to the surviving spouse’s dower right. The Kentucky Supreme Court reversed, holding that the legislature has not abolished the common law rule against fraudulent deprivation of dower and that the size of the gift in relation to the total estate raised the presumption that the gift was fraudulent, a presumption the child failed to rebut.

FIDUCIARY DUTY: Authority to make non-pro rata distributions allows self- dealing. In Culliss v. Culliss as Trustee of Julia A. Culliss Trust, 514 P.3d 376 (Kan. Ct. App. 2022), a trustee and the trustee’s sibling were the beneficiaries of their parent’s trust. After the parent died, the trustee decided to distribute the trust real property to the trustee as beneficiary and to distribute cash equal in value to the real property to the sibling. In Bennett v. Estate of King, 875 S.E.2d 46 (S.C. 2022), the coexecutors of the parent’s will and another child were the residuary beneficiaries. The co-executors decided to distribute improved real property to themselves and unimproved real property to themselves and the other beneficiary so that all received equal value. In both cases, the non-fiduciaries objected, and, in both cases, they were unsuccessful because each instrument included terms giving the fiduciary authority to make distributions in cash or in kind and, if in kind, with no requirement to make pro-rata distributions.

INTENTIONAL INTERFERENCE WITH INHERITANCE RIGHTS: Idaho refuses to recognize tort of intentional interference with inheritance rights. In an opinion thoroughly discussing the law of other states, the Supreme Court of Idaho in Nelsen v. Nelsen, 508 P.3d 301 (Idaho 2022), refused to recognize the tort of intentional interference with inheritance rights as part of the law of the state because to do so would undermine freedom of testation. In addition, an alternative remedy, the constructive trust, is readily available to those who wish to pursue assets allegedly obtained through undue influence.

LAPSE: Express omission of relatives not mentioned in the will does not prevent the application of the anti-lapse statute. The testator devised the residuary estate to the testator’s two children “share and share alike.” The terms of the will expressly stated that the omission of any gift to any relative other than those mentioned in the will was “purposely made.” One of the testator’s children predeceased the testator and was survived by a child who survived the testator. The Alabama anti-lapse statute, Ala. Code § 43-8-224, applies to a gift to the testator’s grandparent or a lineal descendant of a grandparent unless a “contrary intention is indicated by the will as provided in Ala. Code § 43-8-222. In Shirley v. Dawkins, No. 1200706, 2022 WL 2286416 (Ala. June 24, 2022), the Supreme Court of

Alabama reversed the probate court and held that the express omission of those relatives not mentioned in the will did not prevent the application of the anti-lapse statute.

TRUST AMENDMENT: Settlor’s exchange of emails with attorney can be amendment of trust. N.H. Rev. Stat. § 564-B:6-602 allows the amendment of a revocable trust by any method that manifests clear and convincing evidence of the settlor’s intent as long as the terms of the trust do not set forth an exclusive amendment method. In In re Omega Trust, No. 2021-0138, 2022 WL 1498499 (N.H. May 12, 2022), the New Hampshire Supreme Court held that in the absence of language making a stated method of amendment exclusive, an email exchange between the settlor and the settlor’s attorney can amend the trust and create the possibility of using clear and convincing evidence of intent to provide a basis for relief.

TRUST REVOCATION: All the settlors must consent to revocation of irrevocable trust. Iowa Code § 633A.2202 allows the modification of an irrevocable trust by consent of the settlor and all of the beneficiaries. After the death of one of the settlors of an irrevocable trust created by spouses, the surviving spouse sought and obtained the consent of the beneficiaries, the surviving spouse’s children, to a modification authorizing the surviving spouse to amend or revoke the trust. The surviving spouse then did so, changing the equal distribution to the children on termination to a distribution favoring two of them. One of the disfavored children successfully sought to disallow the amendment. In Little v. Davis, 974 N.W.2d 70 (Iowa 2022), the Supreme Court of Iowa explained that because the statute requires the consent of all settlors to modify the trust, modification is impossible after the death of one of the multiple settlors.

TRUST TERMINATION: Liquidation of trust on termination violates duties. A parent created a testamentary trust for the benefit of a child funded by a bequest of shares of stock in a single company. At the child’s death, the trust terminates, and “said shares of stock” are to be distributed to the child’s estate. After the child’s death, disagreements between the trustee and the executor of the child’s will led to a court order to liquidate the trust assets, which had been diversified, and distribute the proceeds to the estate. On appeal, the Supreme Court of Kentucky in Estate of Worrall by Worrall v. J. P. Morgan Bank, N.A., 645 S.W.3d 441 (Ky. 2022), reversed, holding that the trustee’s demand that the executor sign a release and indemnification before distribution violated the statutory rules for trust termination requiring delivery to the beneficiary of an accounting for the proceeding five years and that liquidation directly violated the trust terms requiring distribution of the shares of stock to the child’s estate. On remand, the court is to consider remedies for breach of the trustee’s duties, including the required accounting, reimbursement of capital gains tax paid because of the liquidation, the trustee’s and attorney’s fees for the period after the appointment of the executor, reimbursement of commissions on the liquidation, and payment of the executor’s attorney’s fees, as well as any difference in value between what was realized on liquidation and the value of those assets on the date of the Supreme Court’s opinion.

TRUSTS: Arbitration not required because a trust is not a contract. A trust beneficiary brought an action against the trustee alleging breach of fiduciary duties. The trust terms required settlement of disputes by arbitration. The trial court denied the trustee’s motion to require arbitration and the Supreme Court of Virginia affirmed in Boyle v. Anderson, 871 S.E.2d 226 (Va. 2022). The court held that the relevant state (Va. Code § 8.01- 581.01) and federal (9 U.S.C.§ 2) statutes requiring the enforcement of contractual agreements to arbitrate do not apply to trusts because trusts are not contracts and the beneficiaries are not parties to any agreement.

TAX CASES, RULINGS, AND REGULATIONS

GIFTS: Checks written but not paid by the decedent’s bank before decedent’s death were not completed gifts. The decedent executed a power of attorney appointing his son as his agent with the authority to make gifts. For many years, the agent made annual gifts under the power of attorney. Shortly before the decedent died, the agent wrote 11 checks from the decedent’s investment account totaling $464,000. The decedent’s bank paid only one of the 11 checks before his death. The bank paid the other ten checks after his death. The executor excluded the value of all 11 checks from the decedent’s gross estate. The IRS took the position that the checks not paid until after the decedent’s death should have been included in the gross estate and issued a notice of deficiency. The Tax Court in Estate of Demuth v. Commissioner, T.C. Memo 2022-72, looked to whether the decedent had parted with dominion and control over the checks and could change his mind concerning the payment. Pennsylvania state law holds that the gift of a check is not complete until the point the drawer can no longer make a stop payment order. Because the drawer’s bank had not accepted, certified, or made final payment on any of the ten checks until after the decedent’s death, none of the ten checks represented completed gifts. However, the Tax Court determined that three of the checks would not be included in the gross estate because the IRS had previously conceded with regard to checks the payees deposited but had not yet been paid. The Tax Court stressed that both parties had misconstrued the term drawee bank to mean depository bank. The court explained that the drawee bank is the entity ordered by the drawer to make the payment and the depository bank is the entity that a payee uses to deposit a check.

INCOME TAX: Both the taxpayer and IRS failed to meet substantiation requirements. The Tax Court held in Wolpert v. Commissioner, T.C. Memo 2022-7, that the estate and the decedent’s husband could not deduct certain business expenses for 2016 and 2017 on their income tax returns because they failed to properly substantiate the expenses. Car and truck expenses deducted through Section 274 have especially strict substantiation requirements, and the taxpayers did not have the appropriate mileage log or calendar to document the trips.

LITERATURE

CRIMINAL TRUST BENEFICIA- RIES: In Trustee Quandary: Criminal Activity by a Beneficiary with or on Trust Property, 14 Est. Plan. & Comm. Prop. L.J. 479 (2022), David F. Johnson analyzes the troubling issues trustees face when beneficiaries act contrary to criminal law.

CRYPTOCURRENCY: In her Comment, In the Crypt: The Importance of Planning for Distribution of Cryptocurrency Assets After Death, 14 Est. Plan. & Comm. Prop. L.J. 621 (2022), Mariah Paulger provides estate planners with guidance for handling their clients’ virtual currency.

FLORIDA—TRUST AND PROBATE LITIGATION: In Increase Your Toolbox: Lesser-Known Sanctions in Probate and Trust Litigation, 35 Quinnipiac Prob. L.J. 116 (2022), Jani Maurer explores when attorney’s fees and costs are likely to be awarded under Florida law in trust and estate administration and litigation, what actions counsel might take in handling estate disputes to protect both counsel and the client from liability, and actions recommended or required if sanctions are sought to be imposed under that statute or common law.

GEORGIA—ELECTRONIC WILLS: Jacob C. Wilson presents an assessment of the changes in Georgia’s laws regarding the formalities of wills and how acceptance of an electronic will in Georgia would be an acceptable response to the changing times in his Comment, Electronic Wills: Why Would Georgia Choose to Delay the Inevitable?, 73 Mercer L. Rev. 337 (2021).

GEORGIA—RECENT DEVELOP- MENTS: In Trusts, Guardianships, and Fiduciary Administration, 73 Mercer L. Rev. 281 (2021), Mary F. Radford discusses significant cases decided by the Georgia Court of Appeals during the period of June 1, 2020, through May 31, 2021, on Georgia fiduciary law, guardianship, and estate planning. She also describes the highlights of legislation contained in a comprehensive bill that revised and clarified the laws relating to wills, trusts, and the administration of estates which became effective January 1, 2021.

GIFT TAX RETURNS: In Filing Gift Tax Returns with 2020 Vision, 14 Est. Plan. & Comm. Prop. L.J. 377 (2022), Kristin L. Brown revisits “the fundamentals of gift tax return preparation and the reporting requirements necessary to achieve adequate disclosure.”

GREEN BURIAL: The thesis of Victoria J. Haneman’s article, Tax Incentives for Green Burial, 21 Nev. L.J. 491 (2021), is equal parts positive, normative, descriptive, and prescriptive—plumbing the depths of our modern disconnection from death, the need to transition human remains in an environmentally friendly manner, the importance of pre-need or pre-death planning and prepayment to protect the grieving consumer, and the power of advancing important social policy through a green tax credit.

INEQUALITY REMEDY: Felix B. Chang argues in his article, How Should Inheritance Law Remediate Inequality?, 97 Wash. L. Rev. 61 (2022), that trusts and estates law should prioritize intergenerational economic mobility—the ability of children to move beyond the economic stations of their parents—above all other goals.

MARITAL AGREEMENTS: The preparation of marital agreements requires skills from two disparate areas of the law, family law and estate planning. Christine Wakeman, Natalie Webb, and Lacey Stevenson provide sage advice in Marital Property Agreements: Family Law Attorneys’ and Estate Planning Attorneys’ Top Tips for Each Other, 14 Est. Plan. & Comm. Prop. L.J. 525 (2022).

POSTMORTEM CONCEPTION: Kristine S. Knaplund’s article, Reimagining Postmortem Conception, 37 Ga. St. U. L. Rev. 905 (2021), is the first time that the laws of all 50 states are examined to provide a comprehensive look at whether a postmortem child inherits and determine how wildly disparate the legal standards are from public sentiment. The article details the precise ways the law fails the problem and proposes four concrete solutions for states to adopt.

POWERS OF ATTORNEY: In How Some Agents use a Power of Attorney to Commit the Crime of Financial Exploitation, 30 Elder L.J. 1 (2022), Kevin Hansen, Rebecca C. Morgan, Pamela B. Teaster, and Randolph Thomas examine criminal appellate cases where it was clear that a power of attorney was used to commit financial exploitation. They use these cases to support examples of the misuse of powers of attorney and offer their insights into the common factors of these cases. The authors also provide their views about the scope of the problem and the way the legal system has addressed these crimes and offer opinions about options going forward.

PRE-NEED PLANNING: In Prepaid Death, 59 Harv. J. on Legis. 329 (2022), Victoria J. Haneman borrows from nudge theory to shape an intervention (in this case, an incentive or carrot) that will correct unfairness and inefficiency in an imperfect market, in a way that deftly sidesteps an all-out attack on the industry itself. The proposed paradigm shapes an incentive that allows the consumer to pay for pre-need death care service with pre-tax earnings through IRC § 125 and flexible spending account principles.

RELATION BACK THEORY: In Conflict of Laws and the Transitivity of the “Relation Back” of Special Powers of Appointment, 56 Real Prop. Tr. & Est. L.J. 333 (2021), James P. Spica analyzes Restatement (Second) of Conflict of Laws § 274(a) which “describes a choice-of-law deployment of the socalled ‘relation back theory’ of powers of appointment. The Restatement suggests that analogies to local-law exemplifications of the relation back theory in cases concerning remoteness of vesting and resulting trusts will allow a judge to derive—or at least assist a judge in deriving—the rule of section 274(a) in a conflicts case of first impression. This Article explores that suggestion by noting that, in the perpetuities and resulting trusts contexts, the relation back is transitive over successively generated special powers of appointment and then examining a suite of hypothetical conflicts cases in which that transitivity, if recognized for choice of law purposes, would be decisive.”

SOUTH DAKOTA—FIDUCIARY LAW: In Restraining the Unsupervised Fiduciary, 66 S.D. L. Rev. 208 (2021), Thomas E. Simmons and Andrew J. Knutson analyze South Dakota Codified Laws Chapter 59-12 and describe the new statutory framework for agent-fiduciaries acting under power of attorney instruments.

TESTAMENTARY CAPACITY: In The Future of Testamentary Capacity, 79 Wash. & Lee L. Rev. 609 (2022), Reid Kress Weisbord and David Horton argue that the legal system’s treatment of individuals with cognitive, intellectual, or developmental disabilities remains rooted in the past. Since the sixteenth century, judges have voided wills executed by testators who lacked testamentary capacity. Their article reveals that this notoriously problematic rule has resisted the progressive forces that have swept through guardianship law. They offer fresh insight into how parties litigate testamentary capacity claims and analyze several unsettled doctrinal issues, such as whether testators have due process rights to participate in adjudications of their competence, the relationship between supported decision-making and will-making, and the appropriate capacity test for nonprobate transfers.

TEXAS—PROBATE JURISDICTION AND VENUE: Lauren Davis Hunt explains the confusing and complex Texas rules in Jurisdiction and Venue in Probate Proceedings, 14 Est. Plan. & Comm. Prop. L.J. 433 (2022).

TEXAS—RULE AGAINST PERPE- TUITIES: In his Comment, ‘R.A.P.’ It Up: Keeping Texas’s Amendment to the Rule Against Perpetuities But Calling For a More Clearcut Definition, 14 Est. Plan. & Comm. Prop. L.J. 671 (2022), Grant K. Underwood evaluates the effect and constitutionality of recent Texas legislation expanding the vesting period to 300 years from the date of the trust’s irrevocability.

TEXAS—WIND RIGHTS: In her Comment, Pecos Bill’s Turbines in the Tumbleweeds: Extending the Texas Property Code to Permit Severance of Wind Rights Through Testate and Intestate Succession, 14 Est. Plan. & Comm. Prop. L.J. 579 (2022), Rachel Givens explains how Texas law needs to evolve to provide comprehensive coverage of wind rights.

WILL REVOCATION: In Revoking Wills, 97 Notre Dame L. Rev. 563 (2022), David Horton reveals that revocation formalities defeat testamentary intent far more often than is commonly believed. He then demonstrates that the benefits of these merciless rules are minimal and critiques potential solutions to these problems by proposing a novel path forward, that is, importing the revocation formalities from trust law.

LEGISLATION

CALIFORNIA allows advance health care directives to include instructions relating to mental health conditions. 2022 Cal. Legis. Serv. Ch. 21.

CALIFORNIA enacts the Partition of Real Property Act which expands the Uniform Partition of Heirs Property Act to apply to any real property held in tenancy in common where there is no binding agreement governing the partition of the property. 2022 Cal. Legis. Serv. Ch. 82.

CALIFORNIA prevents a settlor from being considered a beneficiary of a trust solely because the trustee has been given the discretion to reimburse the settlor for federal or state income tax on trust income or principal that is payable by the settlor. 2022 Cal. Legis. Serv. Ch. 32.

COLORADO provides for confirmatory adoptions to be used where a person did not give birth to a child conceived as a result of assisted reproduction. 2022 Colo. Legis. Serv. Ch. 210.

FLORIDA allows for virtual representation by a parent of an unborn child and the unborn descendants of an unborn child provided there is no conflict of interest. 2022 Fla. Sess. Law Serv. Ch. 2022-96.

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

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

HAWAII allows for the use of alkaline hydrolysis as a method of disposing of human remains. 2022 Haw. Laws Act. 294.

LOUISIANA prohibits discrimination against living organ donors for disability, life, or long-term care insurance coverage. 2022 La. Sess. Law Serv. Act 146.

LOUISIANA provides that “unless the trust instrument provides otherwise, the duties of the trustee are owed exclusively to the settlor while the trust is revocable.” 2022 La. Sess. Law Serv. Act 37.

MARYLAND allows for remote notarizing of wills using communication technology under certain conditions. 2022 Md. Laws Ch. 714.

NEW HAMPSHIRE modernizes its pretermitted heir statute. 2022 N.H. Laws Ch. 261.

NEW HAMPSHIRE protects vulnerable adults from financial exploitation. 2022 N.H. Laws Ch. 317.

RHODE ISLAND allows the remote notarization of documents. 2022 R.I. Laws Ch. 22.

TENNESSEE enacts the Uniform Partition of Heirs Property Act. 2022 Tenn. Laws Pub. Ch. 1109.

UNIFORM LAW COMMISSION approves Uniform Electronic Estate Planning Documents Act.

VERMONT allows for the disposition of human remains through the process of natural organic reduction. 2022 Vt. Laws No. 169.

VERMONT enacts the Uniform Real Property Electronic Recording Act. 2022 Vt. Laws No. 171.

Published in Probate & Property, Volume 36, No 6 © 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.

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