Wills, Trusts & Estates Prof Blog

More on In re Estate of Feinberg

Helen W. Gunnarsson (attorney, Highland Park, Illinois) has published an article entitled Illinois Supreme Court upholds Jewish-marriage clause in trust provision, 97 Ill. Bar J. 549 (2009).  The article discusses In re Estate of Feinberg, which is also discussed here and here. 

The introduction to the article is below:

A clause from a testamentary trust providing that its assets are to be distributed to the testator's grandchildren, except for any grandchild who might marry a non-Jew or whose non-Jewish spouse did not convert within one year of marriage, does not violate public policy when employed as a condition precedent of a gift of the trust's assets, a unanimous Illinois Supreme Court has held. The case is In re Estate of Feinberg, 2009 WL 3063395 (Ill Sup Ct).

Texas Wills & Trusts Case Law Survey

Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law) has recently posted on SSRN his article entitled Wills & Trusts, 62 SMU L. Rev. 1499 (2009).  Here is the abstract of his article:

This article discusses judicial developments relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters during the Survey period of November 1, 2007, through October 31, 2008. The discussion of most cases includes a moral that is the important lesson to be learned from the case. By recognizing situations that have resulted in time consuming and costly litigation in the past, the reader may be able to reduce the likelihood of the same situations arising with his or her clients.

California: Beneficiary's Challenge of Debts Owed to Parents Violates No-Contest Clause

Despite recent legislation tightening the enforceability of no-contest clauses in California, the court in Cook v. Cook, 99 Cal. App. 3d 913, 2009 Cal. App. LEXIS 1595 (2009), held that a beneficiary’s pleading violated the no-contest clause in his parents’ trust when the pleading (which asserted that debts the beneficiary owed to his parents were unenforceable due to the statute of limitations) indirectly contested the validity of the trust and an amendment in an attempt to receive an increased share of the trust.

 

A writing by the grantors (construed by the court as an amendment as a matter of law) specifically directed that debts be deducted prior to trust distributions and listed the past loans to this beneficiary by the grantors.

 

Special thanks to Martin D. Begleiter (Professor of Law, Drake University) for providing this information.

California Court Refuses to Create New Exception for Testamentary Gifts to Spouse-Caregivers

Richard Pryor, the comedian, became afflicted with multiple sclerosis in the mid 1980’s. Jennifer, his former wife, became his caregiver in 1994.  They remarried in 2001.  Both before and after the marriage, Pryor revised his estate plans to leave substantial assets to Jennifer rather than to his six children (who did not learn of the marriage until after their father’s death).  A California statute makes gifts to caregivers presumptively invalid, but contains an exception for gifts to spouses.

 

The court refused to create a judicial exception to the gift to spouses rule in cases where the marriage was allegedly obtained by fraud and undue influence, ruling that the statute contained no such exception and the court was not going to create one.

 

Estate of Pryor, 99 Cal. Rptr. 895, 2009 Cal. App. LEXIS 1609 (2009).

Special thanks to Martin D. Begleiter (Professor of Law, Drake University) for providing this information.

Judicial Developments Relating to Texas Laws of Probate, Estate Planning, and Estate Administration

Gerry W. Beyer (Professor of Law, Texas Tech University) has published his article entitled Case Law Update, The Advocate, Fall 2009, at 8.  

The introduction of the article is below:

This article discusses judicial developments relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters over the past year.  The reader is warned that not all recent cases are presented and not all aspects of each cited case are analyzed.  You must read and study the full text of each case before relying on it or using it as precedent.  Writ histories were current as of June 11, 2009. 

Connecticut Doctors Challenge Assisted Suicide Statute

Two doctors in Connecticut have filed a lawsuit challenging the state's assisted suicide statute:

The lawsuit seeks the legal answer to whether doctor-aided death constitutes assisted suicide. State law says a person is guilty of second-degree manslaughter if "he intentionally causes or aids another person, other than by force, duress or deception, to commit suicide."

The legal complaint argues that " 'aid in dying' is a recognized term of medical art" and "may, in the professional judgment of a physician, be a medically and ethically appropriate course of treatment.

Kevin O'Reilly, Assisted-suicide state challenged by 2 Connecticut Doctors, American Medical News, Oct. 19, 2009. 

Florida: No Undue Influence Challenge of Inter Vivos Trust Revocation After Settlor's Death

The beneficiary of an inter vivos trust brought suit following the settlor’s death alleging that transfers of property from the trust were the product of undue influence.

Florida’s Third District Court of Appeals affirmed dismissal of the complaint on the authority of Florida Nat’l Band of Palm Beach Co. v. Genova, 460 So. 2d 895 (Fla. 1984), which held that revocation by a settlor cannot be challenged on the basis of undue influence while the settlor is alive.

The court held that the same result is required when the challenge is made after the settlor’s death.

MacIntyre v. Wedell, 12 So. 3d 273 (Fla. Dist. Ct. App. 2009).

Tax Court Rules on LLC Transfer Valuation

Transfers are valued as transfers of interests in a limited liability company so that the LLC is not disregarded under the “check the box” regulations to treat the transfers as transfers of a proportionate share of assets owned by the LLC.

As a result, the transfers are subject to valuation discounts for lack of control and lack of marketability.

Pierre v. Commissioner, 133 T.C. No. 2 (2009).

Washington: Restraint on Alienation Violates Rule Against Perpetuities

The testator devised real property to a hospital with a proviso that the property is never to be transferred and if it is, the property is devised to the county of the testator’s residence or, in default, to the State of Washington.  The hospital brought a quiet title action.

The trial court found that the hospital had a fee simple absolute and the intermediate appellate court affirmed.  The court held that the restraint violated the Rule Against Perpetuities and that consequently the condition is eliminated leaving the hospital with a fee simple absolute.

Kennewick Public Hospital Dist. v. Hawe, 214 P.3d 163 (Wash. Ct. App. 2009).

Ohio: SOL for Breach of Trust Begins When Beneficiaries Learn of Alleged Breach

The successor trustee and a beneficiary brought suit for breach of duty against the prior trustee for alleged self-dealing in indirectly acquiring shares of stock in a closely held company by causing the trust to sell to a company which was effectively controlled by the trustee.  The sales occurred 25 years before the suit was brought.

 

The Ohio Supreme Court affirmed the lower court’s dismissal, holding that the four year statute of limitations began to run at the time of the sale because the beneficiaries knew of the sale and of all of the actions of which they complain.

 

One justice dissented on the grounds that the decision was based on “facts and inferences” not in the complaint.

 

Cundall v. U.S. Bank, 909 N.E.2d 1244 (Ohio 2009).

New Jersey Supreme Court Declines to Allow Widow to Disinter Husband's Body

Marino v. Marino, No. A-18-08 (N.J. S.C. Sep. 24, 2009):  The New Jersey Supreme Court held that the state's disinterment statute does not automatically give a surviving spouse authority to disinter the deceased spouse, even though the surviving spouse has primary authority to determine the interment location absent a contrary written declaration. 

Larry Marino died in 2005.  His wife Joan survived him.  Larry's children, including a son who was a co-executor of Larry's estate, chose to bury Larry near a family plot.  Eight months later, Joan filed suit to have Larry's body disinterred and buried in a place of her choosing.

A Chancery judge held that because Larry's will did not provide burial directions, Joan, as surviving spouse, initially had the right to designate Larry's burial location.  The court held that the real issue, however, was whether Joan had a right to disinter the body after burial.  The court held that she did not, citing to the state's disinterment statute and Larry's desire to buried in the family plot.  The Court of Appeals reversed, stating that the interment and disinterment statutes should be read in pari materia, effectively giving Joan the power to disinter Larry's body.

The Supreme Court reversed the Court of Appeals, holding that the internment and disinterment statutes should not be read in pari materia.  Furthermore, the court held that legislative intent disfavored disinterment and did not give the surviving spouse sole decision making authority on this issue.  Because adult children, along with the surviving spouse, have statutory authority to make disinterment decisions in New Jersey, the court held that Joan's desire to disinter Larry's body was insufficient.

Special thanks to Ken Coughlin (ElderLawAnswers) for bringing this case to my attention.

Texas Court Plans to Grant Divorce in Gay Marriage Case

A state judge in Dallas, Texas, has ruled that two men married in Massachusetts can divorce in Texas, stating that her court can hear a divorce suit filed by a person married in another jurisdiction.  Callahan also ruled that a section of the Texas Family Code prohibiting the recognition of gay marriage or a civil union is unconstitutional.

While an attorney involved in the case hopes for a divorce decree in a few weeks, State Attorney General Greg Abbott plans to appeal the ruling as a violation of the voter approved state constitutional definition of marriage as one woman and one man.

See Roy Appleton, Judge calls Texas' gay-marriage ban into question, Dallas Morning News, Oct. 2, 2009.

Illinois Court Declines to Invalidate Religious Marriage Condition Placed on Inheritance

In re Feinberg, 2009 Ill. Slip Op. 106982 (SC Sept. 24, 2009): The Illinois Supreme Court decided whether to invalidated an inheritance condition based on marrying within the Jewish faith.  Below is the case summary for the case provided by the Supreme Court of Illinois:

Max Feinberg, who died in 1986, left a wife, Erla, two adult children, and five grandchildren. He had executed a will that created trusts from which his widow would receive income during her lifetime. At her death, the trust assets were to be combined, and half of these assets were to be held in trust for the benefit of the grandchildren during their lifetimes, provided they had not married out of the Jewish faith, in which case they were to be “deemed deceased” on the date of such a marriage. Shares of such “deceased” grandchildren would revert to the settlor’s two children. Between 1990 and 2001, all of the five grandchildren married.

Distribution of decedent’s assets did not go according to this original plan, however, because Max also gave his widow a limited lifetime power of appointment as to his descendants which she exercised in 1997. Instead of lifetime trusts, she directed that, at the time of her death, fixed $250,000 sums be given to each of her two children and to each of her five grandchildren. She provided, however, that, as to the latter, her husband’s religious-restriction clause must be complied with. Erla died in 2003. By this time, although all the grandchildren had married, only one had complied with the religious restriction.

This situation resulted in several different proceedings which were consolidated in the circuit court of Cook County. The religious-restriction clause was invalidated there as contrary to public policy, and the appellate court affirmed.

In reaching a different result, the Illinois Supreme Court found that the issue is not Max’s original scheme of lifetime trusts for the grandchildren, but the distribution which was authorized by Erla, giving out fixed sums at the time of her death. The supreme court declined to hold the religious-restriction clause void. The grandchildren had no vested interests and Erla had merely created a condition precedent that operated on the date of her death to determine who was qualified to take. The supreme court said Erla was free to make a distribution in favor of grandchildren whose lifestyles were approved of over other grandchildren who made choices which were disapproved of.

The judgment of the appellate court was reversed, and the cause was remanded to the circuit court for further proceedings.

For a discussion of this case, see Christopher Wills, Ill. high court OK's 'Jews only' inheritance, AP, Sept. 24, 2009.  The article notes that because the will provided for inheritance based on marriage status at the time of Erla's death, the provision did not attempt to control marriage choices or act as an incentive for divorce.  The ruling did not address whether the religious marriage restriction would be valid under other circumstances.

Special thanks to Lynne M. Bahrami (J.D. Candidate, University of North Carolina) and William P. LaPiana(professor, New York Law School) for bringing this case and article to my attention.

Joint Account Holders Need a High Level of Trust, or Risk Losing Everything

Nipp v. Broumley, 285 S.W.3d 552 (Tex. App.—Waco 2009, no pet. h.): Decedent, using her own funds, opened certificates of deposit in the form “Decedent or Son.”  Shortly before Decedent’s death as she was entering hospice, Son cashed three CDs worth approximately $76,000.  Daughter claimed that the CDs were part of their mother’s (Decedent’s) estate.  The trial court held that Son owned the funds in the CD because Son had the right to withdraw the funds.

The appellate court reversed.  The court explained the right to withdraw is very different from ownership rights.  Each party to a joint account has the right to withdraw the funds under Probate Code § 445.  However, ownership of account funds is based on a party’s net contributions under Probate Code § 438(a) unless there is clear and convincing evidence to the contrary.

Son claimed that Decedent had made a gift of the CDs to him during her lifetime.  The court examined the basic elements of an inter vivos gift (present donative intent, delivery, and acceptance) and determined that Decedent did not have the intent to make a gift of the funds even though she allowed Son to use the CDs as collateral for loans.  Decedent retained control over the CDs, keeping them in a lock box in her home until Son took them just days before her death, and never allowed Son to withdraw any of the funds.

Moral:  A person opening a joint account must be very certain to trust the other party because regardless who owns the funds in the account, any party can withdraw all of the funds.

Supreme Court of Montana to Decide Whether Assisted Suicide Is a State Constitutional Right

Today, the Supreme Court of Montana will take up the claim that a doctor violated a man's state constitutional rights by denying the man assisted suicide.  Details are below:

• If the claim is successful, Montana will become the first state to declare a state constitutional right to medical aid in dying.
• The ultimate ruling from the Montana Supreme Court cannot be appealed to the U.S. Supreme Court because this is solely a question of state constitutional interpretation.
• The state's constitution and past supreme court decisions emphasize personal autonomy.
• Lawyers on both sides say the claim stands a good chance of prevailing.

See Kirk Johnson, Montana Court to Rule on Assisted Suicide Case, NY Times, Aug. 31, 2009.

Malpractice Outside of Estate Planning Context

Smith v. O’Donnell, 52 Tex. Sup. Ct. J. 52 (Tex. 2009): Executor sued Decedent’s former Attorneys for malpractice in advising Decedent in his capacity as the executor of his wife’s estate.  The lower court ruled in favor of Attorneys basing its judgment on the fact that Decedent’s executor and the estate lacked privity of contract with Attorneys.  The Supreme Court of Texas granted a petition for review without reference to the merits, vacated the lower court’s judgment, and remanded so the lower court could take into account the holding in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780 (Tex. 2006).

On remand, the Court of Appeals began its analysis by holding that Belt was not limited to estate planning malpractice actions.  Accordingly, the court explained that Executor stepped into Decedent’s shoes and could bring whatever malpractice action Decedent could have brought while alive, even if it did not involve the planning of Decedent’s estate.  The court relied on language in the Belt decision which provided that “legal malpractice claims alleging pure economic loss survive in favor of a deceased client’s estate.”  The court then examined the evidence and concluded that although there was no evidence that Attorneys acted with malice or breached fiduciary duties, there was a triable issue as to what damages were attributable to Attorneys’ acts.  The court remanded the case to the trial court to determine whether Attorneys’ acts amount to malpractice.  O’Donnell v. Smith, 234 S.W.3d 135 (Tex. App.—San Antonio 2007).  Attorneys appealed.

The Texas Supreme Court affirmed.  The court agreed with the Court of Appeals that Executor is in the same position as Decedent.  If Decedent had not died, Decedent could have brought the malpractice action and thus Executor may bring the action on Decedent’s behalf.  The court explained that the concerns about third-party malpractice suits (e.g., by disgruntled beneficiaries) do not apply in this type of case as the estate’s suit is the same as the one the client would have brought; the attorney-client relationship is not jeopardized by the attorney considering the impact on a third party.

Note:  The court does not address whether Attorneys’ actions constituted malpractice.

Dissent:  A two-judge dissent asserted that this case falls under the Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996), rule which precludes a malpractice action by a non-client (e.g., an unhappy beneficiary) against the decedent’s attorney for malpractice because of lack of privity.

Moral:  A decedent’s claim for legal malpractice, regardless of whether it involves the planning of the decedent’s estate or some other legal matter, survives and thus may be brought by the decedent’s personal representative.

Slayers: Verdict of Not Guilty by Reason of Insanity Does Not Prevent Forfeiture

In re Estate of Kissinger, 206 P.3d 665 (Wash. 2009): Charged with first degree murder for the slaying of his mother, step-brother, and his mother’s boyfriend, the defendant in In re Estate of Kissinger was found not guilty by reason of insanity.  The mother’s estate received a wrongful death recovery and began a proceeding to determine statutory beneficiaries and argued that defendant was a “slayer” under Washington’s slayer statute.  In In re Estate of Kissinger, a case of first impression, the Supreme Court of Washington held that the defendant was disqualified under the statute which applies to anyone participating in a “wilful and unlawful” killing.  The standard to be used is civil not criminal; “wilful” therefore is to be taken in its everyday meaning and the verdict of not guilty by reason of insanity did not make an unlawful killing lawful.

Trust Protectors: Trust Agreement May Create the Protector's Duty

Robert T. McLean Irrevocable Trust v. Patrick Davis, P.C., 283 S.W.3d 786 (Mo. Ct. App. 2009): A trustee and the mother of a beneficiary brought suit against the predecessor trustees and the trust protector alleging that the trustees improperly managed the trust and that trust protector violated his duties.  Finding that the Missouri statutes (identical to Uniform Trust Code § 808) does not define the function and duties of a trust protector, the court turned to the trust document which stated that the trust protector is a fiduciary, is not to be liable to actions taken in good faith, and has the power to remove the trustee.  The court held that the trust language created a duty in the trust protector to exercise the power to remove the trustee sufficient and reversed the lower court’s summary judgment for the trust protector. 

Community Property Survivorship Agreements in Texas: Survivorship & Revocation

Community Property Survivorship Agreements: Holmes v. Beatty, 52 Tex. Sup. Ct. J. 967 (Tex. 2009), rehearing filed.

Statement of Survivorship Feature: Husband and Wife held investment accounts with the designation “JT TEN.”  The spouses signed the agreement but did not indicate whether the account had, or did not have, the survivorship feature.  The appellate court held that these accounts did not have the survivorship feature because they did not include an express statement of the survivorship feature as required by Probate Code § 452.

In a significant departure from established Texas law, the court determined that holding community property as joint tenants automatically includes the survivorship feature and that the designation “JT TEN” is an acceptable abbreviation.  In so deciding, the court relied on the common law under which joint tenancies carried with them the survivorship feature.  However, the court disregarded long-established Texas law which requires that the survivorship be expressly stated.  See Probate Code § 46(a) (survivorship in separate or individual property cannot be inferred from the mere fact that the property is held in joint ownership); Probate Code § 452 (requiring community property survivorship agreements to contain an express statement of the survivorship feature); Stauffer v. Henderson, 801 S.W.2d 858 (Tex. 1990) (holding that extrinsic evidence cannot be used to show a right of survivorship for joint bank accounts between non-spouses).

The court bases its conclusion on the allegedly “weaker” language of Probate Code § 452 which does not require the survivorship language to be stated in “substantially” the same manner as provided in the statute as does Probate Code § 439.  The court explains that “[p]recedent, trade usage, and seminal treatises make clear that joint tenancies carry rights of survivorship.” 

Moral:  Community property held as joint tenants automatically has the survivorship feature even if that feature is not expressly stated or intended by the spouses.

Revocation: Husband and Wife owned stocks which clearly stated that the spouses were holding them as joint tenants with rights of survivorship.  However, the spouses did not sign the certificates.  The appellate court held that their failure to sign the certificates resulted in a valid community property survivorship agreement not being created because Probate Code § 452 requires the agreement to be signed by both spouses.

The Texas Supreme Court reversed.  The court explained that the accounts from which the stocks were issued were held as joint tenants and had the survivorship feature.  The only way for the spouses to terminate the survivorship feature was through a subsequent written agreement or to dispose of the assets.  Probate Code § 455.  The mere fact that the stock was issued out of the account in certificate form did not act as a disposition of the property covered by the agreement.

Note that the court rejected the argument that Probate Code § 450 applied to the certificates.  The court pointed to Probate Code § 46(b) which states that survivorship agreements in community property are governed by Part 3 of Chapter XI.  Because § 450 is not in this Part, it is inapplicable to community property survivorship agreements.

Moral:  Merely changing the form in which community property with survivorship rights is held is not sufficient to revoke the survivorship agreement.

Wills: The Benefit of Initialing Each Page

In re Estate of Romancik, 281 S.W.3d 592 (Tex. App.—El Paso 2008, no pet. h.): Testator signed page three of his will but did not sign the prior pages.  The will left his entire estate to Mother.  Wife claimed that Testator’s signature on page three was insufficient to demonstrate that he had testamentary intent with respect to the prior pages.  Both the trial and appellate courts rejected Wife’s claim holding that the document reflected Testator’s testamentary intent.

Moral:  Although not legally required, it may be prudent practice to have the testator initial (sign) each page of the will to demonstrate that the testator intended each page to be a part of his will.