Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, August 11, 2017

Corpus Christi Court Upholds Undue Influence Verdict

CorpusA Corpus Christi Court of Appeals upheld a lower court’s jury verdict denying probate of a will based on allegations of undue influence. To show undue influence, a plaintiff must prove three elements: “(1) the existence and exertion of an influence; (2) that subverted or overpowered the testator’s mind at the time he executed the instrument; (3) so that the testator executed an instrument he would not otherwise have executed but for that influence.” In Estate of Jose M. Rodriguez, the jury found that the decedent’s daughter was the sole beneficiary of the will, that she wrote checks on his account until they bounced, chose the lawyer that drafted the will, and that the testator disinherited seven of this other children in favor of his daughter; one of the children is confined to a wheelchair. While no piece of evidence, on its own, is usually enough to justify a finding of undue influence, the aggregate of these factors was enough for the jury to find the daughter exercised undue influence over her father.

See J. Michael Young, Corpus Christi Court Upholds Undue Influence Verdict, Texas Probate Litigation, August 1, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 11, 2017 in Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)

Monday, August 7, 2017

Unsigned Will? No problem!

MichiganNearly every jurisdiction in these United States has almost universally held, for a historically significant period of time, that an unsigned will is no good in probate. Whether the will is holographic or attested, the testator must, with some very stringent exceptions, place his John Hancock somewhere on the document. In a recent case out of Michigan, In re Estate of Attia, a Michigan appellate court overturned the probate court’s decision granting summary disposition regarding an unsigned will. The probate court dismissed an original petition holding that an unsigned will was not admissible into probate as a matter of law; so far, pretty unsurprising.

Where the appellate court diverges tangentially from the norm was its reasoning and statutory consideration that led it to hold that Michigan statute MCL 700.2503 worked as an exception to MCL 700.2502. MCL 700.2502 sets out the standard requirements for a will: it must be in writing, signed by the testator, and witnessed and signed by two other individuals.

The appellate court held that the language in MCL 700.2503 was intended by the legislature to be an exception to the general requirement that a will must be signed: “Accordingly, a will does not need to be signed in order to be admitted to probate under MCL 700.2503, as long as the proponent of the document in question establishes by clear and convincing evidence that the decedent intended the document to be a will. To hold otherwise would render MCL 700.2503 inapplicable to the testamentary formalities in MCL 700.2502, which is contrary to the plain language of the statute.”

Although the statutory language seems to allude only to “a document or writing added upon a document,” the court did see this as a barrier to their final holding. So, for now, a will without a signature can be introduced into probate in Michigan.

See Attia v. Hassan (In re Estate of Attia), 2016 Mich. App. LEXIS 2075 (Mich. Ct. App. Nov. 10, 2016).

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 7, 2017 in Current Events, Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0)

Tuesday, July 25, 2017

Another Death Bed Limited Partnership Formation Fails to Accomplish Its Objectives

Snoopy-irs-cartoon[1]Decedent Nancy Powell, after the Tax Court’s holding in Estate of Nancy H. Powell, now represents another taxpayer who failed to achieve estate tax savings through the creation and funding of a limited partnership. Nancy Powell’s son, Jeffrey, acting with a power of attorney, formed a limited partnership—NHP Enterprises, LP—in August of 2008. He then transferred $10 million worth of cash and securities into the limited partnership. Nancy Powell retained a 99% interest as a limited partner with Jeffrey Powell receiving the remaining 1% interest. The partnership agreement allowed Nancy Powell to determine the timing and amount of distributions. The agreement also allowed her to dissolve the partnership with the consent of her son.

After forming the limited partnership, Jeffrey Powell transferred the 99% interest held by his mother into a charitable lead annuity trust (CLAT). The court held that this gift to the CLAT amounted to the relinquishment of the decedent’s power to dissolve the partnership and control asset disposition. Because the transfer occurred within three years of Powell’s death, an application of Internal Revenue Code (IRC) Section 2035(a) pulled the full value of the previously transferred assets back into the gross estate.

The court’s willingness to apply this section to a scenario in which a decedent only holds a partnership interest makes any retention of any held interest a precarious proposition. It is likely this case will be appealed.

See Another Death Bed Limited Partnership Formation Fails to Accomplish Its Objectives, Lexology, July 18, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

July 25, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, New Cases, Trusts | Permalink | Comments (0)

Friday, July 7, 2017

Article on Tomorrow's Inheritance: The Frontiers of Estate Planning Formalism

HortonhearsawhoDavid Horton recently published an Article entitled, Tomorrow's Inheritance: The Frontiers of Estate Planning Formalism, 58 B.C. L. Rev. 539 (2017). Provided below is an abstract of the Article:

The rules that govern the creation of an estate plan are in flux. Courts once demanded strict adherence to the Wills Act. Yet, this legacy of hyper-vigilance is waning, as the Uniform Probate Code, the Restatement (Third) of Property, and ten states have adopted the harmless error rule. Meanwhile, trusts, which need not comply with the Wills Act, have eclipsed wills as the dominant method of posthumous wealth transmission. This Article explores three budding topics that threaten to further complicate this area. First, there are anecdotal accounts of decedents trying to make electronic wills. In both strict compliance and harmless error jurisdictions, e-wills raise thorny issues about the meaning of “signed” and “writing” in the Wills Act, and when, if ever, courts should be able to overlook violations of the statute. Second, despite the received wisdom that trusts are less formal than wills, a rising number of settlors are failing to observe the arcane principles that govern the transfer of property into a trust. Third, most state legislatures have adopted or are currently considering statutes that give fiduciaries access to the contents of a decedent’s email, text messaging, and social media accounts. But the precise steps necessary to convey these cutting-edge forms of property after death is unclear. This Article tries to help courts and policymakers regulate these matters by offering a fresh perspective on the purpose of mechanical, bright-line principles in the realm of estate planning. As conventionally framed, this debate revolves around what the Article calls the “intent paradigm”: the idea that execution doctrines should be gauged primarily by whether they facilitate or frustrate the wishes of individual decedents. Conversely, this Article explores a different virtue of formalism: its ability to prevent decedents from imposing spillover costs. This Article demonstrates how some unyielding principles limit the burden on courts, survivors, trustees, the trustee’s creditors, purchasers of trust property, and other third parties. It then explains how recognizing this anti-externality function can pay dividends in wills law, trust law, and emerging niches such as the inheritability of digital assets.

July 7, 2017 in Articles, Current Events, Estate Planning - Generally, New Cases, New Legislation, Technology, Trusts, Wills | Permalink | Comments (0)

Thursday, June 29, 2017

Thouron Estates

Bad lawyerJudge Mark L. Tunnell, in a 212-page-long opinion, wrestles with the issue of the appropriateness of attorney, accountant, and executor fees. There are two sizable estates considered in the opinion. The Estate of Sir John Rupert Hunt Thouron had a value of $46 million. His son, John Julius Thouron, had an estate valued at $13 million. Regarding the son’s estate, Executor Charles Norris was surcharged $753,000. The firm of Lamb McErlane PC was ordered to disgorge $135,882. In the estate of Sir John Thouron, Executor Charles Norris was surcharged a total $5,672,999. Lamb McErlane was ordered to disgorge $4,351,310 in fees, and Norris and the Lamb firm were jointly surcharged $557,001.

See Patti S. Spencer, Thouron Estates - READ ALL ABOUT IT!, Spencer Law Firm, June 21, 2017.

Special thanks to Patti S. Spencer for bringing this article to my attention.

June 29, 2017 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility | Permalink | Comments (1)

Friday, June 9, 2017

Tax Refunds for Trusts With Minnesota Grantors? Minnesota Trust Income Tax Statute Ruled Unconstitutional

MinnesotaBased on a Minnesota Tax Court ruling, certain irrevocable trusts created by Minnesota residents after 1995 may be able to claim income tax refunds. Under Minnesota law, a resident trust pays taxes to Minnesota on 100% of its intangible assets. Minnesota’s definition of a resident trust is based solely on the settlor having a Minnesota domicile at the time the trust becomes irrevocable. The Minnesota Tax Court held this statute unconstitutional. The court looked at trusts that had beneficiaries located both inside and outside the state and trustees located outside the state. These facts were among a number of factors that influenced the court’s final decision. The tax court held that these trusts were not resident trusts and therefore, the intangible assets of the trusts were not taxable by the state. The Department of Revenue is expected to appeal the decision to the Minnesota Supreme Court.

See Laura S. Carlson & Walter A. Pickhardt, Tax Refunds for Trusts With Minnesota Grantors? Minnesota Trust Income Tax Statute Ruled Unconstitutional, Faegre Baker Daniels, June 7, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 9, 2017 in Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Wednesday, June 7, 2017

Who Controls How Voluntary Payments to IRS Are Applied?

IRSIn Estate of Beckenfeld v. Commissioner, the Tax Court held that a taxpayer can force the IRS to apply voluntary payments according to the taxpayers instructions. In this case, the IRS credited a husband’s estate with a payment clearly intended to apply to the wife’s estate. Part of the issue was that the check provided to the IRS was for the husband’s liabilities and included his social security information. The executor’s representative tried to argue that the husband’s estate was offering payment to satisfy the obligations of the wife’s estate. The instructions indicated that a check from the husband’s estate could only satisfy obligations arising from that estate.

See Kevin A. Diehl, Who Controls How Voluntary Payments to IRS Are Applied?, Wealth Management.com, June 1, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 7, 2017 in Estate Administration, Estate Planning - Generally, Gift Tax, New Cases | Permalink | Comments (0)

Monday, June 5, 2017

Article on Estate of Powell

Tax courtSteve R. Akers recently published an Article entitled, Estate of Powell v. Commissioner, 148 T.C. No. 18 (May 18, 2017), Bessemer Trust (June 2017). Provided below is an abstract of the Article:

This “reviewed” Tax Court decision may be the most important Tax Court case addressing FLPs and LLCs in the context of estate planning since the Bongard case (12 years ago). The Tax Court breaks new ground (1) in extending the application of §2036(a)(2) to decedents owing only limited partnership interests, and (2) in raising the risk of double inclusion of assets under §2036 and a partnership interest under §2033, which may (in the court’s own words) result in “duplicative transfer tax.”

The facts involve “aggressive deathbed tax planning,” and the fact that the taxpayer lost the case is no surprise. But the court’s extension of the application of §2036(a)(2) and the extensive discussion of possible double inclusion for assets contributed to an FLP or LLC are surprising (but whether a majority of the judges would apply the double inclusion analysis is not clear).

Special thanks to Scott M. Deke for bringing this article to my attention.

June 5, 2017 in Articles, Current Events, Estate Planning - Generally, Estate Tax, New Cases, Trusts, Wills | Permalink | Comments (0)

Friday, June 2, 2017

Unanswered Questions in Texas

Texas-State-Supreme-CourtTexas appellate courts have been split on the issue of whether “tortious interference with inheritance rights” is a recognized cause of action in the state. The Texas Supreme Court recently had an opportunity to provide a definitive answer to this question but passed on the opportunity in Kinsel v. Lindsey. Instead, the court held that the imposition of a constructive trust in cases of undue influence or fraud was a sufficient remedy. While no definitive answer was provided as to whether the cause of action exists, the case has a few important takeaways for fiduciaries, financial advisors, and estate planners. First, the court clarified that it had not implicitly recognized intentional interference with inheritance rights as an actionable tort in prior cases. Second, juries may find that a settlor lacked capacity despite an estate planner’s best efforts to insure that capacity was present. And finally, a small break for the estate planner, the courts may hold that the planner was not acting inappropriately even with a jury finding that a settlor did not have capacity.

See Tortious Interference with Inheritance Rights in Texas? Still an Unanswered Question, Lexology, June 1, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 2, 2017 in Current Events, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Thursday, June 1, 2017

Article on a Journey Through the Briar Patch: The Legal Implications of the Supreme Court of Virginia's Holding at Com. ex rel. Bowyer v. Sweet Briar Institute

6e530d1b146046ea561fd88ce83e3f77Joel Francis recently published an Article entitled, A Journey Through the Briar Patch: the Legal Implications of the Supreme Court of Virginia's Holding at Com. Ex Rel. Bowyer V. Sweet Briar Institute, 11 Liberty U. L. Rev. 111 (2016). Provided below is an abstract of the Article:

This Note will advance four arguments to prove that the Court ruled on the legal status of Sweet Briar College. First, it will examine the background and history of Sweet Briar College’s formation and operation. Second, it will analyze the Virginia Uniform Trust Code and the Virginia Nonstock Corporation Act to illustrate the ways in which they are incompatible. Third, this Note will then apply the facts of Sweet Briar College’s formation and operation to the law. After these three steps, this Note will conclude that the Supreme Court of Virginia (1) knew that the two areas of law were incompatible and (2) essentially ruled upon the legal status of Sweet Briar College in its holding that “trust law can apply to a corporation.” Finally, this Note will provide an alternative theory that was not argued by either party to the litigation or considered by the Court, but which potentially solves Sweet Briar College’s legal conflicts.

June 1, 2017 in Articles, Current Events, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)