Wills, Trusts & Estates Prof Blog

North Dakota Supreme Court Applies Uniform Probate Code to Clarify Scope of Probate Court's Subject Matter Jurisdiction

In situations where one party involved in a loan, contract, or exchange passes away before fulfilling their obligation, there is a common legal process to address this when the deceased owes something (obligor). Typically, a creditor claim is filed in the decedent's estate. However, when the deceased is the one owed something (obligee) and passes away before receiving payment, there is no universal procedure.

This issue recently came up in a North Dakota case, Matter of Estate of Froemke, 2023 ND 154, where the personal representative of the deceased sought to have one of the deceased's children repay the estate for real estate taxes paid by the deceased on the child's property. Since the child had not reimbursed the estate for these taxes, the probate court ruled in favor of the estate, ordering the child to pay the owed amount...

For more information see Daniel McGowan “North Dakota Supreme Court Applies Uniform Probate Code to Clarify Scope of Probate Court’s Subject Matter Jurisdiction” Probate Stars, August 29, 2023.

Special thanks to Jeffrey Skatoff(Attorney, Palm Beach Gardens, Florida) for bringing this article to my attention.  

FDIC Changes Insurance Coverage of Trust Bank Accounts

Almost every funded trust has one or more bank accounts, most of which are insured by the FDIC. The FDIC has issued new regulations effective April 1, 2024, changing how bank accounts held in the name of a trust will be insured. It will treat both revocable and irrevocable trusts the same for determining the limits on insurance. Such accounts may be insured up to $1.25 million rather than the current $250,000 limit on many individual accounts.

For more information see Matthew F. Erskine “FDIC Changes Insurance Coverage of Trust Bank Accounts” WealthManagement.com, August 21, 2023.

Special thanks to Deborah Matthews (Virginia Estate Planning Attorney) for bringing this article to my attention.

‘Incapacitated’ People’s Homes Are Being Sold by Their Guardians With Little Scrutiny

Over the past six years, VICE News has identified over a dozen cases in Florida public records where guardianship wards’ homes are being sold for cheap in potentially shady deals. Jan Garwood is one of them.

After suffering a major car accident, the loss of one of her sons, and a fall that caused neck and head injuries, Garwood was put under a conservatorship by professional guardian Rebecca Fierle. 

Fierle put Garwood into an assisted living memory ward and sold her home to an employee. It took years for Garwood to find a way out of the guardianship.

Advocates claim that a lack of regulation at all levels leaves the guardianship system prone to exploitation for those looking to make a profit. For example, in Florida, anyone can submit a petition to determine another person's incapacity.

Due to this lack of data, in May of this year, Sen. Bob Casey (D-Penn.) and Sen. Mike Braun (R-Ind.) of the Senate Special Committee on Aging sent a letter to the U.S. Government Accountability Office (GAO) asking the office to examine guardianship laws and reform efforts across the country. 

For more information see Rebecca Gibian “‘Incapacitated’ People’s Homes Are Being Sold By Their Guardians With Little Scrutiny” Vice, August 8, 2023.

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) for bringing this article to my attention.  

Article: Explaining ESSA: A Proposal to Protect the Surviving Spouses of New York

Albert Feuer (Law Offices of Albert Feuer) and Anna Masilela (Independent) recently published an Article titled, Explaining ESSA: A Proposal to Protect the Surviving Spouses of New York, 56 NYSBA Trusts and Estates J. No. 2 (2023, v.  56 No. 2) August 2023. Provided below is the Abstract:

New York surviving spouses are protected by the right of election and the Retirement Equity Act of 1984 (REACT). Although both cover retirement plan benefits, there is an unjust gap in these protections for the surviving spouses of retired New York public employees. These surviving spouses often learn of this unjust flaw soon after burying their spouses, when they are abruptly informed that they would receive no plan survivor benefits. The right of election is of no help, as there is nothing to elect against. REACT is of no help, because it does not apply to public employee plans. As a result, some of these surviving spouses are impoverished.

This article explains how the proposed Equity for Surviving Spouses Act (ESSA) would bridge this unjust gap by incorporating into New York law the tried-and-true REACT approach that now protects the spouses of 100 million private employees. ESSA would entitle surviving spouses of New York public employees to a survivor retirement benefit at least equal to that of a joint and 50% survivor benefit form of the retiree’s benefit, unless the spouse has waived such benefit on a plan form.

Texas Estate Planning Judicial Update -- Summer 2023 Edition

Gerry W. Beyer (Texas Tech University) recently published an Article, Texas Estate Planning Judicial Update — Summer 2023 Edition. Provided below is an abstract to the Article:

This article discusses recent judicial developments (first half of 2023) relating to the Texas law of intestacy, wills, estate administration, trusts, and other estate planning matters. The discussion of each case concludes with a moral, i.e., the important lesson to be learned from the case. By recognizing situations that have led to time consuming and costly litigation in the past, estate planners can reduce the likelihood of the same situations arising with their clients.

Article: A Brief Introduction to the Equity for Surviving Spouses Act

Albert Feuer (Law Offices of Albert Feuer) and Anna Masilela (Independent)  recently published an Article, A Brief Introduction to the Equity for Surviving Spouse Act, NYSBA Labor and Employment Law Journal, 2023. Provided below is an abstract for the Article:

In New York, surviving spouses are protected by the right of election. But there is an unjust and avoidable flaw in those protections for the surviving spouses of New York public sector retirees: they may be left with no survivor benefits whatsoever, because the default benefit is an annuity during the life of the retiree. The Retirement Equity Act of 1984 (REACT) provides a tried-and-true approach that corrects this flaw. This approach has been in place for forty years and now protects the spouses of 100 million active private sector employees from such tragedies. Under REACT, the surviving spouse is entitled to a survivor benefit at least equal to that of a joint and 50% survivor benefit form of the retiree’s benefit. This article describes the proposed Equity for Surviving Spouses Act (ESSA) which would remedy this flaw by following the REACT approach.

Formal Opinion 506, Responsibilities Regarding Nonlawyer Assistants

The American Bar Association Standing Committee on Ethics and Professional Responsibility recently published Formal Opinion 506, Responsibilities Regarding Nonlawyer Assistants on June 7, 2023.  Provided below is an introduction the opinion:

Nonlawyers provide tremendous client and lawyer support for law firms. This Formal Opinion addresses a lawyer’s ethical obligations when the lawyer delegates to a nonlawyer specific prospective client-intake tasks. Lawyers may train and supervise nonlawyers to assist with initial client intake tasks if the lawyers have met their obligations for management and supervision of the nonlawyers pursuant to ABA Model Rule of Professional Conduct 5.3 and prospective clients are given the opportunity to consult with the lawyers to discuss the matter.

Taxing Wealthy Dynasties Seen Backfiring In States Like New York

The American Economic Journal: Economic Policy published a study in May that suggests estate taxes don’t pay off in every state. Enrico Moretti, an economics professor at the University of California, Berkeley, conducted research with Daniel Wilson of the Federal Reserve Bank of San Francisco.

The pair analyzed the behavior of hundreds of prominent billionaires starting in 2001 when the US made state-imposed estate taxes more costly. The study found that estate taxes do not pay off in states with above-average income-tax rates. However, in states with low or non-existent income taxes on the wealthy, there is virtually no downside to adopting the estate tax.

Looking at the state of New York, for example, the estate tax used to bring in more revenue than it lost. However, this ended in 2017 when the state’s top rate jumped to 10.9%.

“What we’re saying is you can either be progressive on income tax or be progressive on adopting an estate tax, but if you do both it’s going to backfire,” said Moretti.

For more information see Ben Steverman “Taxing Wealthy Dynasties Seen Backfiring in States like New York” Financial Advisor Online, May 3, 2023.

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

Vermont allows out-of-staters to use assisted suicide law

Last week, Vermont became the first state in the United States to change its residency requirements for the medically assisted suicide law to allow people out of state to utilize it and receive lethal medication. 

Last year, Oregon agreed to stop enforcing residency requirements and agreed to ask the Legislature to remove the residency requirement from the law in a court settlement. However, Vermont became the first to do so after settling with a Connecticut woman with terminal cancer. 

Proponents of medically assisted suicide applaud Vermont for the move. “We are grateful to Vermont lawmakers for recognizing that a state border should not determine if you die peacefully or in agony,” said Kim Callinan, president, and CEO of Compassion & Choices. However, critics worry that this puts states at risk of becoming suicide tourism destinations.

Anyone wishing to utilize medically assisted suicide must adhere to the safeguards in place, including the requirement to communicate their healthcare decision to a physician in two requests: orally and written, which must be signed in the presence of two or more witnesses who are not interested parties. 

For more information see Lisa Rathke “Vermont allows out-of-staters to use assisted suicide law” AP News, May 2, 2023.

Special thanks to Deborah Matthews (Virginia Estate Planning Attorney) for bringing this article to my attention.

IRS Rules Against A Tax Tactic For Irrevocable Grantor Trusts

The IRS recently ruled that a long-used basis adjustment under Section 1014 generally does not apply to assets of an irrevocable grantor trust that are not included in the grantor’s gross estate. 

Some tax practitioners have sought to exclude trust assets from a client’s estate for years while adjusting for the step-up basis upon death. Revenue Ruling 2023-02 is the first effort by the IRS to clarify basis adjustment formally. Although Revenue Rulings are not binding on any federal court, they represent the argument the IRS will take. Taxpayers will likely litigate the issue in the future, but for now, experts recommend following the IRS ruling as a safe course of action.

For more information see Jeff Stimpson “IRS Rules Against A Tax Tactic For Irrevocable Grantor Trusts” Financial Advisor Magazine, May 1, 2023.

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