Wills, Trusts & Estates Prof Blog

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 twenty-one years thereafter. In addition, upon the daughters’ death, title was to vest in “the heirs of their bodies, per stirpes” but not to be sold for twenty-one 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, 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 in spite of 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).

Estate of Erickson v. Commissioner

Steve R. Akers (Bessemer Trust, Dallas, Texas) has written Erickson Extends §2036 to Using Partnership Funds to Pay Decedent’s Estate Taxes for the RPPT, May 2007 issue.

Here is the introduction:

Estate of Erickson v. Commissioner , T.C. Memo 2007-107 is another §2036 victory for the IRS in a “terrible facts” case. The case is particularly interesting in that the retained enjoyment of the partnership was the use of partnership funds to pay estate taxes (albeit through the purchase of an estate asset and a redemption of part of the estate’s interest). However, the case was surrounded with other facts that made readily apparent that the only purpose of the partnership was to try to secure an estate tax discount.

Proposed Regulations for §2053

Steve R. Akers (Bessemer Trust, Dallas, Texas) has written Proposed Regulations Limiting Estate Tax Deductions for Uncertain Claims Against Decedents and Other Administration Expenses Under §2053 for the RPPT, May 2007 issue.

Here is the introduction:

The IRS has issued proposed regulations dealing primarily with the deductibility of claims against a decedent’s estate that are uncertain in amount at the date of death. The general approach for such contingent or uncertain claims is that a deduction is allowed only as payments are actually made by the estate, but there is an exception for estimated amounts that are ascertainable with reasonable certainty.

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 are 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).

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 pursuant to an oral agreement not to revoke the trusts and that the husband had defrauded their mother. In Kempton v. Dugan, WD66368, 2007 WL 813126 (Mo. Ct. App. Mar. 20, 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.

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.

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).

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.

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 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. 2007), 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.

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 the not the children of the decedent’s then spouse.

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.

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 that “if 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-R3CV, 2007 WL 609015 (Tenn. Ct. App. Feb. 28, 2007).