Wills, Trusts & Estates Prof Blog

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

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Thursday, May 7, 2015

Attorney Fees Challenge Required Formal Notice

Gavel2A recent Florida appeals case addressed the issue of a probate court's personal jurisdiction over individuals. The case involved an action for surcharge that challenged the amount of  fees paid to the personal representative and attorney. The probate court found the fees excessive and ordered the fees to be disgorged.

In Simmons v. Estate of Baranowitz, et al., a Florida appeals court reversed the order and found that the probate court did not have personal jurisdiction over the attorney because formal notice on the personal representative's counsel was required.

See Jordan Hammer, Formal Notice Required to Review Attorney Compensation, Clark Skatoff, May 6, 2015.

May 7, 2015 in Estate Administration, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Trust Retains GST Tax-Exempt Status After Conversion

GavelIn IRS Letter Ruling 201516028, an irrevocable trust that was grandfathered into tax-exempt status for the generation-skipping transfer (GST) tax, was ruled to have retained that status after it was converted from an income-only trust to a total return unitrust. The conversion was made pursuant to state law. The compliance with state statutes also avoided income and gift tax consequences for the switch.

See Wolters Kluwer Law & Business, GST-Exempt Status Not Altered by Conversion, Resourcefullaw.com, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

May 7, 2015 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Saturday, May 2, 2015

Removal of Executor Upheld by Court

Gavel2The San Antonio Court of Appeals recently considered a challenge to the probate court’s removal of an independent executor in Estate of Montemayor.  The probate court removed the executor after finding that, after three years, he had not effectively pursued resolution of the estate.  The sole asset of the estate was a house in which the executor had moved into and told one of the beneficiaries that “he was going to keep [it].”  He also changed the locks on the gate leading to the house and failed to pay the estate any rent for living there. 

The court concluded that such conduct supported the probate court’s finding that the executor had a conflict of interest amounting to gross misconduct and mismanagement of the estate.  The executor breached his fiduciary duty to protect the beneficiaries’ interest, allowing his own interests to override his obligations to the beneficiaries. 

See J. Michael Young, Court of Appeals Upholds Removal of Executor, Texas Probate Litigation, Apr. 29, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

May 2, 2015 in Estate Administration, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Builder Wins Inheritance Over Family's Challenge

GavelAs I have previously discussed, Ronald Butcher's will left £500,000 to Danny Sharp who provided the service of cleaning out Butcher's gutters free of charge, which led to a six year friendship according to Sharp. Butcher's family  challenged the will that was signed two months prior to Butcher's death. The judge ruled in favor of Sharp yesterday finding that the will is valid.

See Paul Cheston, Builder Who Cleaned Pensioner's Gutters For Free Wins £500k Legal Battle Over Inheritance, Standard, May 1, 2015.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

May 2, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0) | TrackBack (0)

Thursday, April 30, 2015

Gross Income Includes IRA Distributions

Gavel 4

In a recent Tax Court Memo, the IRS determined that petitioners Elroy and Darlene Morris failed to report taxable distributions in 2011 from an individual retirement account.  Morris v. Commissioner, T.C. Memo. 2015-82 (April 27, 2015). 

Elroy became the sole beneficiary of his father’s IRA, and elected a lump sum option to settle the IRA upon his father’s death.  In accordance with what he believed would be his father’s wishes, Elroy issued checks to both his siblings, totaling $37,000.  The payments came out of the distribution Elroy received in the month prior.  Although a paralegal told him there would be not tax due on the IRA distribution, she meant no state inheritance or federal estate tax would be due. 

Elroy and Darlene filed a timely federal income tax return for 2011, and did not report the IRA distributions as gross income.  Two years later, the IRS sent them a notice of deficiency for $27,037 in addition to a $5,387 penalty.  The couple petitioned the Tax Court, arguing they do not “solely owe this debt” and should not be “solely responsible.”  However, the Tax Court held that Elroy and Darlene failed to include the IRA distribution in their gross income and were in fact liable for the deficiency. 

See Dawn S. Markowitz, IRA Distributions Includible in Gross Income, Wealth Management, Apr. 29, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

April 30, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (1) | TrackBack (0)

Widow Saves Late Husband's Sperm Samples From Destruction

GavelAmelia Roblin and Jerome Stuart Pink met in Canada in 2006 while studying at the University of Toronto. Pink was an exchange student from Australia. The couple continued their relationship and made plans to be married and have children. When Pink was diagnosed with cancer in 2009 he had sperm samples frozen prior to beginning chemotherapy treatments. Roblin moved to be with Pink and they were married. After Pink died of cancer in 2012, Roblin contacted the clinic regarding her late husband's sperm samples and was told they would be destroyed per a form Pink had signed informing him that the samples would be destroyed if he died. Roblin argued that Pink intended for her to get the samples as part of his estate.

In Roblin v The Public Trustee for the Australian Capital Territory & Anor, the Supreme Court of the Australian Capital Territory held that the man's stored sperm was his personal property included in his estate, and as long as storage fees continued to be paid the clinic could not destroy it.

See Elizabeth Byrne, Widow Wins Court Case to Save Dead Husband's Frozen Sperm From Being Destroyed by Fertility Clinic, ABC, Apr. 29, 2015.

April 30, 2015 in Estate Administration, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 29, 2015

Widow of Home Shopping Network Co-Founder Sues Investment Firm

Gavel BWLynnda Speer, the widow of Roy Speer and personal representative of his estate, has brought claims against Morgan Stanley alleging the firm boosted commissions through excessive securities trades, failed to properly supervise its brokers, and did not to act in the best interests of her late husband. Roy Speer co-founded the Home Shopping Network in 1982 and died in 2012. The case has been in arbitration proceedings since January and is expected to continue into July. Lynnda Speer is seeking over $170 million in damages.

See Suzanne Barlyn, Morgan Stanley Fights Claim by Home Shopping Founder's Widow-Filing, Rueters, Apr. 27, 2015.

April 29, 2015 in Estate Administration, New Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 22, 2015

Court Holds Trust May Be Reformed to Insert Beneficiaries

TrustAccording to the recent Florida case, Megiel-Rollo v. Megiel, 2015 Fla. App. LEXIS 5601 (Fla. Dist. Ct. App. 2d Dist. Apr. 17, 2015), a trust can be reformed to add beneficiaries when the trust initially fails to include any beneficiaries. 

In the aforementioned case, the decedent prepared a will naming her three children as equal beneficiaries.  Years later, the decedent created a revocable trust, deeding her real property to the trust.  However, upon the death of the decedent, the trust failed to name any beneficiaries.  A dispute subsequently arose among the three children of the decedent regarding the intended beneficiary. 

The drafting attorney filed an affidavit, stating he had made a mistake and should have prepared the Schedule of Beneficial Interest naming only two of the decedent’s children as the beneficiaries of the trust.  Under Section 736.0415 of the Florida Trust Code, a trust may be reformed to correct a mistake.  The court allowed for the possibility of reformation in order to limit the trust to the two children. 

See Jeffrey Skatoff, Trust Can Be Reformed to Add Beneficiaries, Florida Probate Lawyers, Apr. 22, 2015.

April 22, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Gift Tax Implications of Arbitration and In Terrorem Trusts Provisions

GavelIn a recent Tax Court case, a married couple claimed a gift tax exclusion for up to the annual exclusion amount for gifts they each made to a Crummey trust. The IRS disallowed the exclusions because the beneficiaries lacked a "present interest in the property." The IRS based their position on the beneficiaries' inability to legally enforce the rights due to an arbitration and in terrorem provisions.

In Mikel v. Commissioner, the Tax Court granted partial summary judgment to the Mikels, finding that the trust transfers were a present interest. The court reasoned that the beneficiaries could still enforce their rights through arbitration, and the in terrorem provision did not prevent enforcement of withdrawal rights but only prevented challenges to a trust distribution.

See Steve R. Akers, Impact of Arbitration or “In Terrorem” Provisions in Crummey Trusts—Mikel v. Commissioner, T.C. Memo. 2015-64. (April 6, 2015), Bessemer Trust, Apr. 2015.

April 22, 2015 in Estate Planning - Generally, Gift Tax, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 21, 2015

Section 8 Eligibility Lost Due to Special Needs Trust Payments

Gavel2After receiving a $330,000 settlement for personal injury claims, 59-year-old Kimberly DeCambre became the beneficiary of a court-established special needs trust. DeCambre also received Supplemental Security Income, Medicaid, and a Section 8 housing voucher. Her Section 8 eligibility was revoked by the Brookline Housing Authority (BHA) due to trust disbursements in excess of $60,000 in one year. DeCambre sued the BHA claiming disability discrimination and due process violations. One of her arguments was that the BHA's determination was improper because if her settlement had been in a lump sum instead of in a trust it would not have counted as income.

In DeCambre v. Brookline Housing Authority, the U.S. District Court for the District of Massachusetts affirmed the BHA's denial of benefits finding the determination reasonable, but noted that "until the rules and regulations are clarified, public housing authorities should provide clear guidance and instruction for potential tenants with regard to their financial planning and spending."

See SNT Payments Cause Section 8 Ineligibility, Elder Law Answers, Apr. 13, 2015.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

April 21, 2015 in Elder Law, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)