Wills, Trusts & Estates Prof Blog

Ohio Supreme Court Upholds Strict Privity Requirement

The following posting is provide through the courtesy of Prof. Paul Caron's TaxProf Blog:

The Ohio Supreme Court on Wednesday unanimously held that children could not sue their deceased mother's attorney for negligence in the preparation of a deed during her life that resulted in adverse estate tax conseqences under § 2036.  Shoemaker v. Gindlesberger, Slip Op. No. 2008-Ohio-2012 (Ohio 5/7/08).

The appellants’ argument rests on two public policy grounds. They advocate for a change in what some refer to as Ohio’s antiquated rule on privity, arguing that Ohio law should grant beneficiaries standing to sue an attorney who allegedly was negligent in providing services to a decedent. In support of their position, they present a survey of several jurisdictions that allow beneficiaries to bring malpractice claims. It is true that Ohio is in the minority of states retaining a strict privity rule, but Ohio was also in the minority of states when Zipperstein was decided over 20 years ago.

Appellants’ second reason for asking for an exception to the privity rule is the need to have attorney accountability in the area of estate planning and wealth transfer. Because any mistakes that an attorney makes in drafting a will or giving advice about an estate plan generally do not arise until after the death of the client, the harm from an attorney’s errors will most likely befall the intended beneficiaries. The appellants argue that an attorney who drafts a will for a client is aware that his or her professional competence affects not only the client but also those whom the client intends to benefit from the will. They argue, consequently, that they should be permitted to maintain a suit against an attorney who negligently drafts or supervises the preparation of a will, to hold the attorney accountable for negligence.

Public policy justifies adherence to the rule, as stated by courts in jurisdictions that apply the strict privity requirement. ... We decline the appellants’ invitation to relax our strict privity rule. ... While recognizing that public policy reasons exist on both sides of the issue, we conclude that the bright-line rule of privity remains beneficial.

Three of the seven Justices filed a separate concurring opinion stating that "in a case with different facts, there would be compelling reasons for adopting the exception we rejected in Zipperstein."

Exculpatory clause in power of attorney deemed invalid

The principal executed a power of attorney which granted the agent broad powers to make gifts to himself, exonerated the agent from any liability to the principal or anyone else, and purported to relieve the agent from any duty to account.

The agent used his authority to transfer the principal’s property to himself and members of his family.

In a proceeding brought by the administrator of the principal’s intestate estate, the court held that the agent had violated his fiduciary duties to the principal, that the exoneration clause was void as contrary to public policy and the duties of an agent, and that the attempt to relieve the agent from the duty to account was void as against public policy.  In re Mueller, 853 N.Y.S.2d 245 (N.Y. Sur. Ct. 2008).

Prior will admitted to probate through application of dependent relative revocation

The testator’s will gave his estate to his spouse if she survived and, if she did not survive, to two of his three children by a prior marriage.

The testator executed a new will making all three children contingent beneficiaries.

On returning home from his lawyer’s office where he executed the second will, he destroyed the prior will stating that he did not want the third child to know he had been omitted from the prior will.

After the testator’s death, the three children challenged the second will alleging it had not been property executed.

In In re Estate of Oliva, 880 N.E.2d 1223 (Ind. Ct. App. 2008), the court affirmed the dismissal of the children’s action, holding that if the second will were invalid, the prior will would be admitted to probate under the doctrine of dependent relative revocation because the destruction of the prior will was “clearly conditional” on the validity of the new will and intestacy would be contrary to the testator’s intent as shown in both wills.

The settlor must have testamentary capacity to create and amend a revocable trust

In the course of affirming summary judgment against charities challenging the validity of the amendments made by the settlor of a revocable trust shortly before his death, the court in Maimonides School v. Coles, 881 N.E.2d 778 (Mass. App. Ct. 2008), held that because a pour-over will and a “contemporaneously executed revocable inter vivos trust” are related parts of single testamentary scheme, execution of an amendment to the trust requires the level of capacity necessary to make a valid will.

Insurance Beneficiary Murders Insured

Primary Beneficiary was convicted of Insured’s murder in the case of In re Estate of Stafford, 244 S.W.3d 368 (Tex. App.—Beaumont 2008, no pet. h.).

Accordingly, the proceeds of the policy were paid to Contingent Beneficiary under Texas Probate Code § 41(d) and Texas Insurance Code § 1103.151.

Primary Beneficiary appealed claiming that his conviction was not final because an appeal was pending.

The appellate court affirmed.  The court explained that the Code provisions do not require that the conviction be final before forfeiture occurs.

Moral:  A beneficiary accused of murdering the insured should put forth the best case possible at the trial level because forfeiture will occur even if the conviction is subsequently reversed on appeal.

The sale of an asset by a successor trustee does not cause ademption

A father created a self-trusteed revocable trust which made specific gifts of stock in a closely held corporation to his two sons.

After the father was adjudged to be incapacitated, the court appointed a professional conservator who was then appointed as the successor trustee.  The successor trustee sold the assets of the corporation.

The court in Brown v. Labow, 69 Cal. Rptr. 3d 417 (Cal. Ct. App. 2007), held that the gift of the stock was not adeemed by the sale because there was no evidence that the settlor intended an ademption in these circumstances and that the conservator had no authority to revoke the gift of stock without court approval.

Nuncupative will invalid because not made in extremis

The decedent allegedly made an oral will while hospitalized for treatment of complications arising from a chronic condition.  Death came eighteen days after release from the hospital.

The court affirmed a summary judgment for the intestate heirs, holding that the statutory requirement that a nuncupative will be made “in the time of the last sickness of the decedent” had been construed to require the testator be “in extremis.”

The court explained that a testator suffering from a chronic condition is in extremis only in the final stages of the illness.  In re Estate of Alexander, No. 10-06-00360-CV, 2008 WL 256837 (Tex. App. 2008 Jan. 30, 2008).

(Note:  The 2007 Texas Legislature abolished the right of Texans to make oral wills.)

Removal of Executor & Return of Fees

In In re Estate of Miller, 243 S.W.3d 831 (Tex. App.—Dallas 2008, no pet. h.), attorney was named as the independent executor of his great-uncle’s will.

Before being appointed by the court, he entered into a fee agreement with Beneficiary that include provisions for Attorney to receive a contingency fee.

After being appointed, Attorney hired himself as the attorney for the estate.

Attorney was not a beneficiary of the will nor was he entitled to a fee under the terms of the will.

Attorney filed the inventory over one year late.

Later, he sold some of the estate property taking almost $100,000 in “compensation.”  (Note that experts testified that Attorney’s services were worth about $5,000).

Beneficiary filed an ancillary action to have Attorney removed as the executor alleging that Attorney grossly mismanaged the estate.  For example, Attorney lent estate money to one of his other clients and did not pay property taxes causing the property to be scheduled for foreclosure.

The trial court agreed, removed Attorney, and ordered him to reimburse the estate for the fees he received.

Attorney appealed and the appellate court affirmed.

The court reviewed Attorney’s actions and found that they amounted to gross mismanagement of the estate under Texas Probate Code § 149C.  For example, he unnecessarily delayed performing the administration of the estate, he improperly made excessive fee payments to himself, he lent estate property to a client without receiving a promissory note or collateral, and he did not make property tax payments.

Moral:  An attorney serving as a personal representative should not mismanage the estate.  The attorney should not charge excessive fees, make late filings, drag out the administration of the state, lend estate property to others, or otherwise breach fiduciary duties.

A non-resident trustee is subject to the long-arm statute

An out-of-state trustee who performed legal services for a Kentucky resident in connection with the creation of the trust is subject to the jurisdiction of the Kentuckycourts in a suit by a successor beneficiary who is a Kentucky resident.

The court found that the facts alleged by the plaintiff-beneficiary established sufficient minimum contacts to invoke the state’s long arm statute.  Cummings v. Pitman, 239 S.W.3d 77 (Ky. 2007).

Ademption & Equitable Conversion

The testator executed a will devising a home to Beneficiary.  Later, the testator entered into a contract to sell the home to Purchasers.  The testator died before the closing.  The trial court held that the devise adeemed and that Purchasers were entitled to specific performance of the contract.  The appellate court affirmed.

The court explained that once the testator executed the contract to sell the home, equitable conversion occurred.  In other words, in equity, the testator no longer owned real property (the home) but instead owned personal property (the contract right to the proceeds of the sale because the sale contract was specifically enforceable).  At the time of the testator’s death, he no longer owned the home and consequently the devise adeemed.

Moral:  Each testator who makes a specific gift of real property must be warned that the gift is likely to fail if he or she enters into a contract to sell the land even if the sale is not completed at the time of death.

Note:  Many states have anti-ademption statutes which would give the beneficiaries in this type of case the sale proceeds.

Medicaid eligibility rules in effect at time of application determine whether a trust is a countable resource

The Ohio Supreme Court has resolved a conflict among the intermediate appellate courts by holding in Pack v. Osborn, 881 N.E.2d 237 (Ohio 2008), that the rules in effect at the time the beneficiary of a trust applies for Medicaid benefits determine eligibility but that the nature of the beneficiary’s interest in the trust is determined by the law in effect at the time the trust was created.

Canadian same-sex marriage entitled to recognition in New York

A marriage contacted in Canada by a same-sex couple is entitled to recognition in New York because is it neither contrary to New York positive law nor prohibited by natural law as are polygamous or incestuous marriages.

See Martinez v. County of Monroe, 850 N.Y.S.2d 740 (N.Y. App. Div. 2008); accord, Beth R. V. Donna M., 853 N.Y.S.2d 501 (N.Y. Sup. Ct. 2008).

The depositor’s will can be clear and convincing evidence to defeat the joint account survivorship feature

In In re Estate of Novosielski, 937 A.2d 449 (Pa. Super. Ct. 2007), the court held that a U.S. Treasury Direct account entitled “A or B” is a joint account governed by the Pennsylvania Multi-Party Accounts Act.

If the creation of a joint account is not consistent with provisions of the depositor’s will, these provisions may act as clear and convincing evidence of the testator’s intent that the account is not to pass to the other joint holder on the testator’s death but is rather part of the testator’s probate estate.

To hold otherwise, the court explained, would be to sanction revocation of a will in a manner inconsistent with state law.

Gift of brokerage account accomplished by opening account under donee’s name and Social Security number

A father opened a brokerage account in his son’s name and Social Security number.  The son knew nothing of the account until after it was closed by someone other than the father and the property transferred to a joint account in the name of the father and another child.

The son sued the brokerage firm and was awarded the value of the account at the time it was closed plus costs.

The court in Wasniewski v. Quick and Reilly, Inc., 940 A.2d 811 (Conn. 2008), upheld the judgment, holding that the father had made a completed gift of the brokerage account and that the son was the third party beneficiary of the contract between the father and the brokerage firm.

Waiver of homestead exemption in unsecured agreement

A retainer agreement between an attorney and his client purported to waive the client’s homestead exemption if the attorney obtained a lien to secure payment of legal fees and costs.

In an extensive opinion reviewing the law throughout the United States, the Florida Supreme Court held that a waiver of the homestead exemption in favor of other than a secured creditor is invalid.  Chames v. DeMayo, 972 So. 2d 850 (Fla. 2007).

New Jersey Supreme court holds that decoupling of estate tax not retroactive

The court explained in Oberland v. Director, Div. of Taxation, 940 A.2d 1202 (2008), that it would be manifestly unjust to apply a statute which reduced the amount of assets that could pass free of state estate tax retroactively.

The Will Contest--Injunction Interface

In Goldthorn v. Goldthorn, 242 S.W.3d 797 (Tex. App.—San Antonio 2007, no pet. h.), the trial court issued a temporary injunction freezing the testatrix’s assets until a suit to aside the testatrix’s will on the basis of lack of capacity was concluded.

The appellate court reversed holding that there was no evidence that (1) an irreparable injury would occur if the injunction were not granted or (2) that the will contest action had a probable chance of succeeding.

Moral:  To obtain a temporary injunction freezing estate assets, it is essential for the will contestant to show that (1) an irreparable injury would occur if the injunction is not granted, and (2) that the will contest has a probable chance of succeeding.

Removal of Executor; Creation of Trust; Trustee Acceptance

The following is a discussion of In re Estate of Kappus, 242 S.W.3d 182 (Tex. App.—Tyler 2007, pet. denied).

(1) Removal of Executor:  Beneficiaries’ Mother (the testator’s ex-wife) moved to have Independent Executor removed from office because he shared ownership of certain estate property with his deceased brother and allegedly had a conflict of interest with the beneficiaries.  Mother argued that he could not adequately represent the estate while seeking to retain his own share of the property.  The trial court denied the motion and the appellate court reversed.

The court begin its analysis by explaining that great deference is given to the testator’s choice of an independent executor.  However, the named executor may be removed for the reasons specified in Probate Code § 149C.  In this case, the estate and the executor are in conflict regarding a 4.86% interest in the property because both claim ownership to this property.  The court concluded that the existence of this conflict requires the trial court to remove the executor.

Moral:  Naming an executor who co-owns property with the testator is problematic should a dispute over the amount each actually owns arises after the testator’s death.

(2) Creation of Trust: The trial court held that a testamentary trust was not created because no steps had been taken to fund the trust.  The appellate court reversed.  The court explained that the will left the residue of Testator’s estate to a trust, the provisions of which were set forth in the will.  Under Probate Code § 37, title to property devised in a will vests immediately in the beneficiaries upon the testator’s death.  The will contained nothing which would delay this vesting.  Thus, the property vested immediately in the trustee.

Note:  The court went on to explain that although the trial court did not reach the issue of removing the trustee from office under Property Code § 113.082, since the trust was actually created, it was an abuse of discretion for the court not to remove the trustee from office for having a conflict of interest (the trustee was personally claiming ownership to a portion of the property claimed by the trust).

Moral:  Unless the will provides otherwise, a testamentary trust is created as of the date of the testator’s death.

(3) Trustee Acceptance:  The appellate court explained that “[w]hen the same person is named as independent executor and as trustee of a testamentary trust, acceptance of the position of trustee will be presumed from his or her having acted as executor.”  Kappus at 191.  It appears that the court is engrafting this as either an additional method of acceptance or as coming within the acceptance methods specified in Probate Code § 112.009.

Moral:  An executor who is also named as the trustee of a testamentary trust must take clear action to reject the trusteeship if the executor does not wish to serve in that capacity.

Valuation discounts related to FLP may apply for elective share purposes

In In re Estate of Hjersted, 175 P.3d 810 (Kan. 2008), the court held that in valuing partnership interests owned by a deceased spouse for purposes of calculating the surviving spouse’s elective share entitlement, discounts for lack of marketability and lack of control are “not precluded.”

The majority of the court suggested “general contours of guidance” for consideration on remand, including consideration of the balance to be struck between the policy behind the elective share and the legitimate aim of reducing valuation for estate tax purposes.

Three justices concurred, taking strong exception to the detailed nature of the “guidance.”

Spousal Abandonment and the Elective Share

In Purce v. Patterson, 654 S.E.2d 885 (Va. 2008), the court analyzed a state law which disqualifies a surviving spouse from taking the elective share or by intestacy if he or she “willfully deserts or abandons” the other spouse and such desertion or abandonment continues until death.

The court stated that the relevant period for determining abandonment extends to the time of the deceased spouse’s death and that even though the couple agrees to separate, conduct after the separation can amount to abandonment within the meaning of the disqualification statute.

The sale of an asset by a successor trustee does not cause ademption

A father created a self-trusteed revocable trust which made specific gifts of stock in a closely held corporation to his two sons.  After the father was adjudged to be incapacitated, the court appointed a professional conservator who was then appointed as the successor trustee. 

The successor trustee sold the assets of the corporation.  The court in Brown v. Labow, 69 Cal. Rptr. 3d 417 (Cal. Ct. App. 2007), held that the gift of the stock was not adeemed by the sale because there was no evidence that the settlor intended an ademption in these circumstances and that the conservator had no authority to revoke the gift of stock without court approval.

Disclaimer may not defeat worker’s compensation insurer’s subrogation right

The decedent was shot and killed while performing his duties as an employee and his wife received benefits under the decedent’s employer’s worker’s compensation insurance.

The wife then brought a wrongful death proceeding against her husband’s killer and reached a settlement which would be distributed to her and the couple’s children pursuant to the intestacy statute.

Because the employer would be subrogated by statute to her rights in the wrongful death settlement to the extent of the benefit’s she had received, the wife disclaimed her right to the wrongful death proceeds.

In Gillette v. Wurst, 937 A.2d 430 (Pa. 2007), the court held that a disclaimer cannot defeat the statutory subrogation right.

EU Court Holds Surviving Life Partner Should Receive Pension Benefits

The following is from Court rules on gay marriage rights, news.yahoo.com, April 1, 2008:

EU nations that recognize same-sex unions as legal marriages must grant surviving partners the same pension rights as given to those in traditional marriages, the EU Court of Justice ruled Tuesday.***

The EU court said pension plan had discriminated against the man on the grounds of sexual orientation because the men's relationship had been recognized under German law as a legally registered life partnership equivalent to a traditional marriage.

The court did not say, however, that all 27 EU nations must recognize same-sex unions, only that if they did they must grant life partners the same benefits.***

Amicus Brief for Met Life v. Glenn

The following is posted on this blog at the request of Prof. Melanie B. Leslie:

Professors Melanie B. Leslie (visiting Prof., Columbia Law), Stewart E. Sterk (Cardozo), James A. Wooten (Buffalo) and Maria Hylton (University of Boston) have drafted an amicus brief on behalf of trust law and ERISA law professors in support of respondent’s brief in the Supreme Court case Met Life v. Glenn. The case will be argued on April 23.  The amicus brief will be sent to the printers on March 28th.  The bulk of the brief addresses trust law issues. If are a trust or ERISA law academic and would like to consider signing on to the brief, please email Melanie Leslie at mlesli@law.columbia.edu to request a draft.

The specific questions raised in the case are 1) whether an insurance company that both determines eligibility for employee benefits and pays those benefits acts under a conflict of interest, and if so, 2) what weight should a court give that conflict when evaluating an employee’s claim that the plan administrator abused its discretion in denying the employee’s claim?

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, (1989), the Supreme Court, citing trust law, held that beneficiaries of ERISA plans are generally entitled to de novo review of benefit denials by plan administrators. The Court then suggested, however, that a benefit plan might narrow the scope of judicial review by conferring on plan administrators “discretionary authority to determine eligibility for benefits.”   The Court, citing the Restatement (Second) of Trusts, also noted that that “if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion,’” Id. at 115.

Since Firestone, most employee benefit plans expressly grant discretion to the plan administrator to interpret the plan and determine eligibility for the payment of claims.  This is true even when the administrator is the same entity that is responsible for paying the claims. The question that has plagued the circuit courts for nearly 20 years, creating an 11-circuit split of authority, is how a court should evaluate an employee’s claim that an administrator with a conflict of interest abused its discretion in denying the employee’s claim.  In our view, much of the confusion is attributable to federal courts’ misunderstanding trust law, which they purport to apply.

Estate of Christiansen v. Commissioner Analyzed

Steve R. Akers (Bessemer Trust, Dallas, Texas) has recently published his article entitled Estate of Christiansen v. Commissioner, RPPT eREPORT (Feb. 2008).

Here are excerpts from the introduction to his article:

The Tax Court reviewed the validity of a formula disclaimer, that operated much in the same manner as defined values clauses, in Estate of Christiansen v. Commissioner, 130 T.C. No. 1 (2008). The court unanimously approved the formula disclaimer to a foundation and rejected the IRS’s arguments that the clause violated public policy[.]***

The case is especially important because of its implications for defined value transfers, in which a transfer is made and allocated between a “taxable” and “non-taxable” portion based on gift or estate tax values. A redetermination of value by the IRS operates much like with a standard marital deduction formula clause, where an increased value allocates a larger value to the surviving spouse but does not generate additional estate tax.***

Restrictive language creates life estate

The testatrix’s will gave a farm to her two daughters with the restriction that it not be sold during their lives and for 21 years thereafter and on their deaths, title is to vest in “the heirs of their bodies per stirpes.”

The court reversed the trial court judgment that the daughters owned the land in fee simple, holding that the language giving the land to the daughters’ heirs indicated that the testatrix did not intend to give a fee simple but rather a life estate with a remainder in the heirs.  The court remanded the case for consideration of what effect, if any, the restriction on sale has on the remainder interest.  Barnett v. Estate of Anderson, 966 So. 2d 915 (Ala. 2007).

New Jersey Supreme Court Holds Estate Tax Constitutional but Unjust

The following is from Tom Hester, Supreme Court rules estate tax was unjust, NJ.com, Feb. 28, 2008, discussing a New Jersey case Oberhand v. Director, Div. of Taxation, A-106-06 (N.J. Feb. 27, 2008).

The state Supreme Court ruled yesterday an attempt by the state to collect taxes on portions of the estates of two people who died was legal, but unjust.

At a time when the Corzine administration is scraping for every dollar for the state budget, the decision is expected to force the Division of Taxation to refund more than $2 million in taxes and interest in 40 estate tax cases in which the executors have gone to state Tax Court to regain the money.***

In a 5-2 decision, the Supreme Court upheld a state Tax Court decision that the amendment applied to the estates is constitutional. But the justices found the amendment should not be applied to the Ober hand and Seider estates because it would be "manifest injustice" -- a legal doctrine designed to prevent unfair results that do not necessarily violate the Constitution.***

"When the decedents executed their wills and at the time that each died, the trust formulae were framed in such a fashion that no federal or state taxes would be due[.]"***

This case is also discussed by Michael Rispoli, Court partially overturns estate tax law, courierpostonline.com, Feb. 28, 2008.

Special thanks to Neil E. Hendershot, Esq. (Attorney at law, Goldberg Katzman, P.C., Adjunct Professor, Widener University School of Law) for bringing these articles to my attention.

The court may reject both the taxpayer’s and the government’s values

In Estate of Thompson, 499 F.3d 129 (2nd Cir. 2007), the court upheld the Tax Court’s rejection of both the taxpayer’s and the government’s valuation of stock in a closely held corporation. 

The court rejected the taxpayer’s argument that the Tax Court was bound to accept the taxpayer’s value once the court rejected the government’s value.  The Tax Court was thus permitted to conduct its own valuation of the stock.  Nonetheless, the appellate court remanded the case to correct a calculation error.

Extrinsic evidence deemed insufficient to permit the reformation of a document revoking a trust

The settlor sent a letter to the corporate trustee of her revocable lifetime trust stating , “I am revoking my trust.”  The settlor made statements indicating that she intended to revoke the trust but also made statements to a bank officer and an attorney which led them to conclude that she intended only to remove the bank as trustee and the attorney prepared documents to do so.  The settlor died from injuries sustained in an accident before she could execute the papers. 

In In re Trust Created by Isvik, 741 N.W.2d 638 (Neb. 2007), the court held that the Nebraska Uniform Trust Code applied to the question of whether the trust was revoked; that the letter could be subject to reformation because it met the definition of a “term of the trust”; that under Nebraska precedents dealing with the reformation of written instruments, the trial court was correct in hearing extrinsic evidence in determining whether to reform the letter to express an intent to remove the bank as trustee; and that the evidence of the grantor’s intent not to revoke was not clear and convincing.

Joint power to revoke limits the power of the sole surviving settlor to revoke

A husband and his wife created a joint revocable trust reserving to themselves the power to revoke and stating that the sale or other disposition of the trust property “by us” would be a revocation. 

A divided Pennsylvania Supreme Court reversed the appellate court, reported in the March/April 2006 column, and held that the language of the revocation provision unambiguously prevents the surviving settlor from exercising the power to revoke.  Scalfaro v. Rudloff, 934 A.2d 1254 (Pa. 2007).

Presumption that amendments by the settlor were properly delivered applies even though the trustee accepted the amendments after the settlor’s death

An Illinois land trust provided that amendments are valid when made by a written instrument delivered to the trustee but that any amendment changing any “duty, right, power, liability, or responsibility” of the trustee would be effective on acceptance by the trustee.  The settlor executed an amendment changing the beneficiaries on her death, but the grantor’s attorney mailed the amendment to an incorrect address causing the amendment to be cosigned by the trustee the day after the settlor’s death. 

In upholding the amendment, the court held that the amendment did not concern the trustee’s duties, that therefore there exists a presumption that the amendment had been received before the settlor’s death and that the trial court’s holding that the evidence was not sufficient to overcome the presumption was not against the weight of the evidence.  Estate of Bantsolas v. Bantsolas, 878 N.E.2d 1227 (Ill. App. Ct. 2007).

Trust provision prohibiting the exercise of powers reserved to the settlor by anyone other than the settlor includes the settlor’s agent

The decedent created a revocable trust naming her husband as the trustee.  She also executed a durable power of attorney naming her husband as her agent and giving him the power to transfer property to her revocable trust.  Two years later, her husband purportedly acting as her agent executed an amendment to the trust which removed certain property from the trust which he then transferred to one of the couple’s three children. 

After the decedent’s death, the other children sued to set aside the amendment.  The court held that the language of the trust prohibiting a conservator or guardian of the settlor or “any other person” other than the settlor from exercising the rights reserved to the settlor extended to an agent.  Gurfinkel v. Josi, No. 3D06-1616, 2007 WL 4322156 (Fla. Dist. Ct. App. Dec. 12, 2007).

Language giving the beneficiaries present interests does not invalidate trust amendment

A mother created a revocable trust which is to terminate on her death and be distributed equally among her three children.  The trust stated that the interest of the beneficiaries “is a present interest” which continues until the trust is revoked or terminated other than by the settlor’s death.  Similar language has been held to require that changing the beneficiary’s interest requires revocation of the entire trust.  Shortly before her death, the mother amended the trust to change one son’s interest to forgiveness of any debt owed to her at the time of her death. 

The court first disapproved a prior case holding that a trust is invalid unless the beneficiary’s interest vests during the settlor’s lifetime and disavowed the use of the term “vested subject to divestment” to refer to a beneficiary’s interest in a revocable trust.  The court adopted the view of Restatement (Third) of Trusts § 25 that a trust may exist where the beneficiaries’ interests are contingent on surviving the settlor or other events.  The court then held that the amendment was valid because it only amended and did not divest the son’s interest.  Hoggan v. Hoggan, 169 P.3d 750 (Utah 2007).

“Any” supports construction of special power of appointment as exclusive

A mother’s will created trusts for her daughters and gave each daughter a testamentary special power of appointment, directing the trustee to distribute “any amount” of the principal and undistributed income to any of the testatrix’s descendants “and” any charitable organization.  The first daughter to die exercised her power of appointment entirely in favor of charity. 

The surviving sister filed a claim for one-half of the trust property alleging that her sister violated the terms of the power of appointment by appointing all the trust property to charity.  The court affirmed the dismissal of the claim, holding that the testatrix’s use of the word “any” indicated her intent to create an exclusive power of appointment.  In re Estate of Hope, No. 06CA2003, 2007 WL 4336228 (Colo. Ct. App. Dec. 13, 2007).

A child conceived during marriage by in vitro fertilization and implanted in the mother’s womb after the father’s death is not the father’s heir

Ten embryos were produced through IVF using the husband’s sperm and his wife’s ova.  Two embryos were implanted in the wife’s uterus but the pregnancy terminated in a miscarriage.  Approximately one month later, the husband died intestate.  Eleven months after his death, two embryos were implanted in his wife’s uterus resulting in the birth of a child twenty months after the husband’s death.  The mother appealed a denial of her claim for Social Security benefits for herself and for the child to the Federal District Court which certified to the Arkansas Supreme Court the question of whether the child is the father’s heir. 

In Finley v. Astrue, No. 07-627, 2008 WL 95775 (Ark. Jan. 10, 2008), the court said no.  The Arkansas intestacy statute requires that a person be conceived before an intestate’s death to inherit.  Because the statute was enacted in 1969 long before the development of IVF technology, the legislature could not have intended a child created through IVF and implanted after a gamete donor’s death be an heir of the genetic parent.  The court expressly declined to define the term “conceive.”

Parent may inherit from a child whom the parent did not support

A child received a large settlement of a medical malpractice action which was eventually placed in a special needs trust which on the child’s death is to be distributed to her heirs under the law in effect at the time of her death.  After the child’s death, the mother opposed the father’s claim to one-half the trust property on the grounds that he failed to support the child during her lifetime. 

In In re Rogiers, 933 A.2d 971 (N.J. Super. Ct. App. Div. 2007), the court affirmed the trial court’s grant of a summary judgment to the father on his claim to the estate, holding that the New Jersey intestacy statute does not condition the right of a parent to inherit from a child on the provision of support for the child.

Last-minute change in a will is not fraudulent transfer

The testator’s ex-daughter-in-law sued her ex-husband and his sister, alleging that their mother changed her will shortly before her death at her daughter’s insistence to give to her daughter the share of the estate given to her son in a prior will so that he could avoid paying arrears of child and spousal support and that the daughter promised to make sure that her brother ultimately received the funds. 

The court affirmed dismissal of the complaint on the grounds that the mother’s changing her will could not be a fraudulent transfer because the son had no right to his mother’s estate.  However, the court also held that the ex-wife could amend her pleadings to allege a constructive trust based on the daughter’s alleged promise to convey the property to her brother.  Cabral v. Soares, 69 Cal. Rptr. 3d 242 (Cal. Ct. App. 2007).

Charitable gifts reduced by proportional share of state and federal estate taxes

In Hale v. Moore, No. 2005-CA-001895-MR & 2006-CA-000662-DG, 2008 WL 53871 (Ky. Ct. App. Jan. 4, 2008), involving the estate of Claudia Sanders, the widow of Kentucky Fried Chicken founder Colonel Harland Sanders, the court required charitable beneficiaries (two colleges) to have their sha