Keeping Current—Probate

Keeping Current—Probate offers a look at selected recent cases, tax rulings and regulations, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409. Contributing Authors: Claire G. Hargrove, Paula Moore, Prof. William P. LaPiana, and Jake W. Villanueva.

CASES

POWER OF ATTORNEY:

Agent was authorized to sign arbitration agree- ment. A durable power of attorney authorized the agent to make “personal care decisions” including entering contracts and committing the principal’s resources for the provision of residential care. The document expressly stated that it did not authorize “anyone” to make the principal’s “medical and other health care decisions.” The principal moved to a residential care facility, and the agent signed an agreement to arbitrate disputes with the facility on the principal’s behalf. After allegedly falling and sustaining a broken hip, the principal sued the facility for negligence. The facility filed a petition to compel arbitration, which the trial court denied, concluding that the agent was not authorized to sign the arbitration agreement. The California intermediate appellate court reversed in Gordon v. Atria Management Co., LLC, 285 Cal. Rptr. 3d 787 (Cal. Ct. App. 2021). The court held that, in the absence of evidence that the principal was admitted to the facility to obtain medical care, the arbitration agreement was binding on the principal because the power of attorney granted authority to arbitrate disputes and to arrange for residential care.

POWERS OF APPOINTMENT:

Testamentary exercise of power may be challenged after time to challenge pro- bate has expired. The testator’s will exercised a broad non-general power of appointment over a family trust by appointing the trustee of the testator’s revocable trust. The trustee of the family trust refused to transfer the trust assets to the testator’s trust, and the testator’s personal representatives filed a petition for instruction. The taker in default moved for summary judgment, asserting that the exercise was invalid because, under the terms of the testator’s trust, some of the appointive property could be used to pay creditors of the testator’s estate. The trial court granted the personal representatives’ counter-motion for summary judgment because the taker in default had not challenged the will within the statutory time limit. In Tendler v. Johnson, 332 So. 3d 521 (Fla. Dist. Ct. App. 2021), the Florida intermediate appellate court reversed and remanded because the taker in default was not challenging the validity of the will but rather the purported exercise of the power.

TRUST AMENDMENT:

Option signed by settlor and trustee of a revo- cable trust is a trust amendment. The settlor reserved the right to revoke or amend the trust by a writing signed by the settlor and accepted by the trustee. While serving as trustee, the settlor executed a document granting an option to buy real property held in the trust for the second of the settlor and the settlor’s spouse to die. The settlor signed as trustee, the optionees signed, and the settlor recorded the option. The original trust terms directed the sale of the real property on termination of the trust and the distribution of the proceeds to the settlor’s children. The optionees are descendants of the settlor’s spouse. After the settlor’s death, the optionees, the surviving spouse, and remainder beneficiaries litigated the validity of the option. In Borough v. Caldwell, 497 P.3d 1260 (Or. Ct. App. 2021), the intermediate Oregon appellate court held that by executing and recording the option document, the settlor had substantially complied with the method of trust amendment in the trust terms.

TRUST BENEFICIARIES: Designation of beneficiaries as “others” too

indefinite to create valid trust. The testator’s will gave the residuary estate to the nominated executor “as trustee” in trust to be distributed to the testator’s family “and others” according to the testator’s instructions to the trustee. In Wilson v. Wilson, 181 N.E 3d 417 (Ind. Ct. App. 2021), the Indiana intermediate appellate court held that the trust failed because the identity of the beneficiaries cannot be determined “with reasonable certainty” as required by Ind. Code § 30-4-2.1(c). The use of the word “others” means “different or additional” and includes everyone on earth. In addition, though the statute says that a power of a trustee to select a beneficiary from an indefinite class is valid, the word “others” means that the provision is not applicable.

TRUST FUNDING:

Testator may exercise testamentary powers of appointment to validly fund an unfunded charitable trust. The testator created a charitable trust but did not fund it during his lifetime. The testator’s will exercised powers of appointment over three separate trusts (one governed by the law of Connecticut, two by the law of Illinois) in favor of the unfunded trust. A default taker challenged the exercise of the powers. In Benjamin v. Corasanti, 267 A.3d 108 (Conn. 2021), the Supreme Court of Connecticut held the exercise to be valid under the common law of both states. The court found that a trust can be funded after the execution of the document creating the trust and that the initial funding of a trust can be accomplished by the proper exercise of a power of appointment in favor of the trustee.

TRUST REVOCATION:

Interest given to beneficiary related by affinity ends on divorce. In In re Joseph and Sally Grablick Trust, Nos. 353951 & 353955, 2021 WL 5976582 (Mich. Ct. App. Dec. 16, 2021), the Michigan intermediate appellate court held that provisions of a revocable trust benefiting the settlor’s stepchild were revoked by the settlor’s divorce from the child’s parent. The court held this even though the evidence established the existence of a parental relationship between the settlor and the child both before and after the divorce. Mich. Comp. Laws § 700.2807 (identical to U.P.C. § 2-804) prevents revocation by divorce of gifts to the relatives of the ex-spouse who after the divorce are still related to the divorced person “by blood, adoption or affinity.” Despite this statute, the court held that relationships by affinity that arise solely because of the marriage end when the marriage ends by divorce.

TRUST SITUS:

The settlor’s designation of governing law does not designate trust situs. The settlors of a revocable trust designated the law of Illinois, the state of their residence, as the governing law but did not designate the trust situs. After the death of the surviving settlor, a resident of Colorado became the trustee in accord with the trust terms. One of the two remainder beneficiaries resided in Florida and the other in the state of Washington. The Florida resident sued the successor trustee for breach of duty in the Illinois courts. The trial court dismissed for lack of personal jurisdiction and the intermediate appellate court affirmed in Silver v. Horneck, No. 1-20-1044, 2021 WL 4931871 (Ill. App. Ct. Oct. 22, 2021). The court found that the successor trustee’s retention of the family’s Illinois lawyer as an advisor and the Illinois-based family accountant to complete Illinois tax returns for the trust did not mean that administration of the trust was carried on in the state. Furthermore, interests in an Illinois corporation and a Delaware LLC with offices in Illinois could not sustain jurisdiction because they were distributed before the start of the litigation, and both beneficiaries were non-residents of the state.

TRUSTS:

Beneficiary is “qualified” only at distribution date. In Matter of Colecchia Family Irrevocable Trust, 180 N.E.3d 988 (Mass. App. Ct. 2021), the Massachusetts intermediate appellate court addressed a multi-faceted summary judgment motion in a case involving an irrevocable trust. The court held that the definition of “qualified beneficiary” in Mass. Gen. Laws ch. 203E, § 103 (identical to U.T.C. § 103(13) (C)), for a beneficiary who would be a distributee or permissible distributee of income or principal if the trust terminated on the date the beneficiary’s status as qualified is determined, means that qualification is determined by the date “on which an event occurs to trigger” entitlement under the trust. In the instant case, that date was the death of the surviving income beneficiary, which triggered the termination of the trust of which the party was a remainder beneficiary.

TAX CASES, RULINGS, AND REGULATIONS

PORTABILITY ELECTIONS:

Multiple decedents’ estates were granted a 120-day extension to elect portability under I.R.C. § 2010 to allow the surviving spouse to take the decedents’ deceased spousal unused exclusion amount. Although the estate tax returns were not timely filed in any of the cases, the estates met the requirements in the regulations for acting reasonably and in good faith. PLR 202202003, 202202005, and 202202008.

QUALIFIED DOMESTIC TRUST:

Trustee has an extension of time to file the notice and certification with the IRS that the surviving spouse had become a citizen of the United States. The decedent was survived by a spouse who was not a United States citizen at the time of the decedent’s death. The trustee, a United States citizen, established and funded a qualified domestic trust for the benefit of a spouse under I.R.C. § 2056A. The spouse became a citizen before her death but did not inform the trustee or file a final Form 706-QDT. From the decedent’s death until the time the spouse became a citizen, the spouse lived in the United States. The trustee distributed only income from the trust. Once the notice is filed under the extension, the distributions from the trust would no longer be subject to the estate tax under I.R.C. § 2056A(b). PLR 109793-21.

SHAM TRUST:

Sham trust cannot be used to shelter income in a life insurance policy. Noting a pattern of suspicious documents and transactions, the Seventh Circuit in Wegbreit v. Comm’r, 21 F.4th 959 (7th Cir. 2021), affirmed the Tax Court’s finding of civil fraud. The appellate court further ordered the appellants to show cause why Rule 38 sanctions should not be imposed. The court noted that the brief was lengthy and incoherent. Of the rambling arguments, only two issues met the minimum requirement of Rule 28 to support the argument with citations to authorities and parts of the record, but, even so, those issues had already previously been stipulated away. The court noted that the appellants also accused the IRS attorneys of threatening and intimidating them to settle without any evidence, and the accusation was irresponsible for a lawyer admitted to practice.

LITERATURE

ADVANCEMENTS:

Jackie Elder and Fredrick E. Vars propose updating and modernizing the Uniform Probate Code by presuming that gifts in the exact amount of the annual gift tax exclusion are advancements, thus bringing the distributive effect of these transfers in line with the decedents’ probable intent. In The Ultimate Gift Horse: Modernizing the

UPC on Advancements to Avoid Unintended Redistributions, 47 ACTEC L.J. 31 (2021), they argue that President Biden has proposed taxing thousands more estates, so the time to make this change is now.

ALKALINE HYDROLYSIS:

Victoria J. Haneman contends that it is past time that alkaline hydrolysis (also known as liquid cremation, water cremation, organic cremation, bio cremation, or aquamation) become the body disposition of choice over traditional burial or even cremation because it is a clean, green alternative to fire-based cremation. In her article, Alkaline Hydrolysis, 47 ACTEC L.J. 55 (2021), she identifies how the law is being leveraged to obstruct this innovative death technology from being more broadly available to consumers.

ANTIRACIST ESTATE PLANNING:

In his article, Black Deaths Should Matter, Too! Estate Planning as a Tool for Antiracists, 47 ACTEC L.J. 39 (2021), Terrence M. Franklin argues that Black people should look squarely at what can be done with “estate planning” and then act in antiracist ways to disrupt policies, laws, and practices that have inequitable racist effects.

CANNABIS BUSINESS OWNERS:

In their essay, Estate Planning for Cannabis Business Owners: An Introduction, 47 ACTEC L.J. 11 (2021), Bridget J. Crawford and Jonathan G. Blattmachr seek to assist estate planners in two ways. First, the authors seek to raise general awareness of cannabis business owners’ unique concerns and, second, to provide an overview of some of the fundamental issues about which cannabis business owners are likely to seek estate planning advice: business formation, wealth transfers, the ability of trusts to own cannabis-related businesses, and gift, estate, and income tax considerations.

CLIENT PRIVACY:

In Maintaining Client Privacy in an Increasingly Public World, 47 ACTEC L.J. 65 (2021), Mel M. Justak and Anne-Marie Rhodes explore techniques and best practices families could employ to maintain a balance between transparency to beneficiaries and the protection of family privacy with respect to third parties.

ELDER LAW:

Omri Ben-Shahar’s essay, Personalized Elder Law, 28 Elder L.J. 281 (2021), introduces personalized elder law as a regulatory technique. Personalized age-of-capacity rules would replace uniform ones, and rights and duties that are currently uniform would be personalized according, in part, to age.

ELECTRONIC WILLS:

Naman Anand and Dikshi Arora argue that the COVID-19 crisis has, in all probability, made major common law jurisdictions (with a focus on India, the most populous and judicially overburdened common law nation) move into the uncharted territory of recognizing e-wills as a necessity and addresses how the courts can retain their active role and thus obviate the need for a legislative process to formalize the inclusion of digital methodology in Where There Is a Will, There Is No Way: COVID-19 and a Case for the Recognition of E-Wills in India and Other Common Law Jurisdictions, 27 ILSA J. Int’l & Comp. L. 77 (2020).

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE INVESTING:

In her article, Investing in and for the Future: ESG Investing for Trust Assets Under the Prudent Investor Rule, 47 ACTEC L.J. 23 (2021), Jane Gorham Ditelberg posits the question: Is there legal authority for a trustee to consider ESG factors in investing trust assets? And if so, is there possibly an obligation to consider those factors? A big part of this question has been whether it is the settlor’s values or those of the beneficiaries that should guide the investment decision-making.

KENTUCKY—FUNERAL PLANNING DECLARATION ACT:

Author J. Conner Niceley’s Note, I’d Be Better off in a Pine Box: Analyzing Kentucky’s Funeral Planning Declaration Act as a Model for Uniform Legislation, 109 Ky. L.J. 185 (2020-2021), analyzes funeral planning declaration statutes, with Kentucky’s version serving as a model for widespread acceptance and usage, detailing why these statutes exist and how they are an effective tool for estate and funeral planning and for protecting the freedom of disposition.

MARRIAGE PLANNING:

Allison Tait’s article, Trusts and Marriage Planning in High-Wealth Families, 34 J. Am. Acad. Matrim. Law. 219 (2021), takes up the question of asset protection trusts being used as substitutes for prenuptial—or in some cases, postnuptial—contracts and presses on questions concerning how they work, how trust companies market the new generation of trusts, the judicial treatment of these trusts in court, and how to think about the purported benefits when weighed against harm to spouses, the idea of marital partnership, and equality values.

PURPOSE TRUSTS:

Alexander A. Bove, Jr. and Melissa Langa explain how a purpose trust differs from all other trusts and make suggestions on how to best implement them in The Perpetual Business Purpose Trust: The Business Planning Vehicle for the Future, Starting Now, 47 ACTEC L.J. 3 (2021).

RACIAL INEQUITY:

In The Intersection of Racial Inequities and Estate Planning, 47 ACTEC L.J. 87 (2021), Reetu Pepoff examines racial inequities in the trusts and estates field and, in particular, the lack of estate planning by Black, Indigenous, and people of color and its corresponding impact on the racial wealth gap.

REMOTE WITNESSING:

Bridget J. Crawford, Kelly Purser, and Tina Cockburn employ a dual Australian-United States perspective to investigate the purposes of traditional will-making requirements and to suggest their continued vitality in the context of remotely witnessed wills in Wills Formalities in a Post-Pandemic World: A Research Agenda, 2021 U. Chi. Legal F. 93 (2021).

SOUTH DAKOTA—POWER OF ATTORNEY:

In his article, Restraining the Unsupervised Fiduciary, 66 S.D. L. Rev. 208 (2021), Thomas E. Simmons reviews some of the most important powers of attorney opinions issued by the South Dakota Supreme Court in the last 25 years and considers which aspects of that jurisprudence may have been displaced or supplemented with the new power of attorney statutes.

STEP-UP-IN-BASIS:

In his article, When the Stepped-Up Basis of Inherited Property Is No More, 47 ACTEC L.J. 77 (2021), Richard L. Kaplan explains that the tax code provision that excludes gifts from a recipient’s gross income applies as well to a “bequest, devise, or inheritance.” The same carryover basis rule should apply, therefore, to testamentary transfers with equal force as it does to lifetime transfers. Accordingly, the step-up-in-basis rule is anomalous and discordant with the general framework of the Internal Revenue Code.

TEXAS—ESTATE PLANNING

ETHICS: In this transcript of a speech given at an annual ethics symposium, speaker Helen Jenkins discusses various ethical issues faced by estate attorneys and goes into detail about exceptions to the privity defense that Texas Courts have allowed in Thoughts on Ethics of an Estate Planner, 61 S. Tex. L. Rev. 83 (2020).

TRUST TAX STRATEGY:

The Supreme Court recently applied the Due Process Clause to prevent the states from closing a tax strategy that employs outof-state trusts. Many had hoped that the case would serve as a vehicle for the Court to overrule taxpayer-friendly precedents that make the strategy possible. But it failed. After examining the decision, Mitchell M. Gans considers the options available to the states in Kaestner Fails: The Way Forward, 11 Wm. & Mary Bus. L. Rev. 651 (2020).

TRUSTEE FAMILY MEMBERS:

In his article, Keeping it in the Family: The Pitfalls of Naming a Family Member as a Trustee, 34 J. Am. Acad. Matrim. Law. 1 (2021), Richard Ausness warns that a settlor should think twice about appointing a family member as trustee because it can cause strife in the family. In particular, a settlor should avoid naming a surviving spouse as sole trustee if some of the beneficiaries are adult children from a prior relationship.

LEGISLATION

WISCONSIN prohibits discrimination in organ transplantation based on disability. 2021-2022 Wis. Legis. Serv. Act 113.

WISCONSIN updates its version of the Revised Uniform Unclaimed Property Act. 2021-2022 Wis. Legis. Serv. Act 87.

Published in Probate & Property, Volume 36, No 3 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.