Technology—Probate

Keeping Current—Probate offers a look at selected recent cases, 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: Julia Koert, Paula Moore, Prof. William P. LaPiana, and Jake W. Villanueva.

Cases

BENEFICIARY LIABILITY: Estate of deceased beneficiary not vicariously liable for the trustee’s malfeasance. The decedent’s lifetime trust was divided into “family” and “marital” shares on the decedent’s death, and eventually the decedent’s stepchild became the trustee. The remainder beneficiaries were the decedent’s children. After the death of the decedent’s spouse, the parent of the trustee petitioned for an accounting. The trial court found that the trustee had violated fiduciary duties by making unauthorized distributions from the trust mainly to the surviving spouse and that the surviving spouse’s estate was jointly and severally liable for the trustee’s actions. On appeal by the trustee and the surviving spouse’s estate, the Utah intermediate appellate court in Matter of A. Dean Harding Marital and Family Trust, 536 P.3d 38 (Utah Ct. App. 2023), affirmed all the findings with respect to the trustee except concerning one portion of the damage award, which was remanded for recalculation and reversed with regard to the liability of the estate because it was procedurally improper and also substantively incorrect. The trustee made improper distributions to the surviving spouse, but the authority to make distributions came from the trust terms, not from the surviving spouse, and there appeared to be no law making those who benefit from unlawful acts liable for those acts. Nor did the trustee act as the beneficiary’s agent. The court noted that recovery might be had from the estate on a constructive trust theory, which should be considered on remand if the trial court concluded it was properly pleaded or tried by consent. charitable gifts and holding that the common law of cy pres has been superseded by the provisions of UPMIFA. The court expressly declined to state whether a breach of contract claim against the donee would be viable.

CHARITABLE GIFTS: Estate of donor and contingent beneficiary lack standing to object to modification of terms of gift. The decedent’s will gave one-half the residuary estate to Dartmouth College for the “upgrading and maintaining” of a golf course belonging to the donee with any excess funds given to the decedent’s foundation. In 2005, three years after the decedent’s death, the executor and the donee entered into a “Statement of Understanding” under which the donee agreed to use the gift to establish a quasi-endowment fund devoted to the upkeep and maintenance of the golf course. In 2020, the donee decided to permanently close the golf course and applied under the New Hampshire enactment of UPMIFA (N.H. Rev. Stat. § 292-B:6) to allow the fund to be used to support the donee’s varsity golf programs and related physical facilities. The estate was re-opened, and the appointed fiduciary and the foundation moved to intervene in the application. The motion was denied, the application was granted, and on appeal the New Hampshire Supreme Court affirmed in In re Keeler Maintenance Fund, No. 20220145, 2023 WL 4497988 (N.H. July 13, 2023), declining to extend the law of special interest standing as it applies to claims against trustees of charitable trusts to disputes over outright

DIVORCE: Ex-spouse’s heirs cannot take because of ex-spouse’s deemed death before the decedent. The Minnesota revocation on divorce statute, Minn. Stat. § 524.2-804, revokes all devises to the ex-spouse and deems the ex-spouse to have died immediately before the dissolution of the marriage but does not address devises to relatives of the exspouse. In Matter of Estate of Tomczik, 992 N.W.2d 691 (Minn. 2023), the Minnesota Supreme Court held that a devise of one-half of the residue to “my wife’s heirs-at-law” does not pass to the parents of the testator’s living ex-spouse. The court first held the testator intended to make a class gift based on a family relationship that does not exist at death and, second, that a statute revoking a devise to a former spouse indicates that the legislature also intended that dissolution of the marriage revoke devises to relatives of the former spouse.

ELECTIVE SHARE: Transfer of property is fraud on the surviving spouse’s elective share. Tenn. Code § 31-1-105 provides that for purposes of calculating a surviving spouse’s elective share, the “net estate” of the deceased spouse includes property transferred with the intent to defeat the surviving spouse’s elective share rights. In In re Estate of Quinn, No. M2022-00532-COA-R3-CV, 2023 WL 5013257 (Tenn. Ct. App. Aug. 7, 2023), the Tennessee intermediate appellate court held that the following circumstances taken together indicate that transfers of real property the decedent made three days before death fall under the statute: the decedent had filed for divorce at the time of the transfers; one of the transfers creating a life estate in the decedent’s home for the decedent’s former spouse, remainder to the decedent’s and former spouse’s children, was illusory because the decedent continued to reside in the home; and the timing of the transfers just days before the decedent’s death.

MARITAL PROPERTY: Increase in value of investments of non-marital property is not marital property. Spouse A received an advanced inheritance from Parent. Spouse A placed the cash in a brokerage account separate from the couple’s other investment accounts. The cash was invested in mutual funds that were held up to the time the couple filed for divorce. The trial court held that the appreciation of the mutual fund shares, which was substantial, was marital property because it resulted from the efforts of one or both of the spouses in selecting the investments. On appeal by Spouse A, the intermediate Florida appellate court in Naranjo v. Ochoa, 366 So. 3d 11 (Fla. Dist. Ct. App. 2023), reversed, holding that the shares grew in value by “passive appreciation” from the efforts of the fund managers, not from the spouses in selecting the funds.

SIGNATURE: The testator’s signature on self-proving affidavit is not a signature on the will. The decedent’s children offered for probate a purported will. The decedent did not sign the document on the signature line in the testimonium clause but did sign the self-proving affidavit attached to the purported will. The witnesses signed both the attestation clause and the affidavit. The court denied probate on the ground that the testator did not sign the will as required by Tenn. Code § 32-1-104(1)(A). The intermediate appellate affirmed in In re Estate of Washington, No. M2022-01326COA-R3-CV, 2023 WL 4886935 (Tenn. Ct. App. Aug. 1, 2023), holding that the self-proving affidavit was not part of the will and that therefore a signature on the affidavit is not a signature on the will.

TANGIBLE PERSONAL PROPERTY: Gift of tangible personal property does not include cash. The decedent’s will gave all tangible personal property to the decedent’s spouse, who survived the decedent. During the surviving spouse’s inspection of the decedent’s home, the decedent’s sister, who was the nominated executor, and the decedent’s niece found $21,000 in cash. The surviving spouse filed a claim against the estate for the cash, arguing that it was tangible personal property. The trial court entered an order finding that the cash was intangible personal property. On appeal, the intermediate appellate court affirmed in In re Estate of Williams, No. E2022-01621-COA-R3-CV, 2023 WL 5274563 (Tenn. Ct. App. Aug. 16, 2023). The court found authority for holding cash money to be intangible personal property in case law from other jurisdictions, as well as definitions in Tenn. Code § 67-5-501(5) defining property for purposes of property taxation.

TRUSTEES: Duty to account requires only keeping of records. In Schwalm v. Schwalm, 213 N.E.3d 618 (Mass. App. Ct. 2023), the Massachusetts intermediate appellate court has held that remainder beneficiaries of a trust who are not “qualified beneficiaries” under the Massachusetts version of the Uniform Trust Code have no right to an accounting under the common law because the common law duty to account only requires a trustee to keep books and records and does not require the trustee to provide that information to non-qualified beneficiaries.

TAX CASES, RULINGS, AND REGULATIONS

TRUST: Trusts must have a purpose other than tax avoidance. The petitioner did not file tax returns for at least 14 years. The petitioner had a warehouse and mini-storage business and created an array of entities that purported to hold assets that he used in business and financial transactions. The IRS investigated the petitioner’s lack of filing compliance and found deficiencies attributable to unreported rental income, gain from the sale of real property, taxable Social Security benefits, and other income. The petitioner denied being a beneficiary of the trusts but enjoyed the assets and their income. No documents such as trust agreements, declarations of trust, or tax returns existed that substantiated the legal existence of the entities or confirmed the identities of their settlors, trustees, or beneficiaries. The petitioner denied being the trustee but did list his name on registrations with the Oregon Secretary of State and a bank. The Tax Court in Saccato v. Comm’r, T.C. Memo 2023-96 (2023), held that the trusts did not exist, and even if they did, they would be shams; the sole purpose of the entities was to obscure the individual’s ownership of the assets they supposedly held. The petitioner always exercised total control over the assets and their income.

LITERATURE

ATTORNEYS’ FEES: In Attorneys’ Fees – Kumble v. Voccola, 253 A.3d 1248 (R.I 2021), 27 Roger Williams U.L. Rev. 580 (2022), Andrew Arayamen analyzes this recent Rhode Island Supreme Court decision, which sets a precedent for predictability in assessing attorneys’ fees in estate planning and affirms a trustees’ right to reasonable compensation.

CALIFORNIA—REVOCABLE TRUSTS: In The Rise of the Revocable Trust in California, 29 Tr. & Est. Q. 9 (2023), Anne Rudolph and Ralph Hughes examine California’s history of failed attempts to reform the state’s probate system and the subsequent rising rates of revocable trusts to avoid the “perceived delay, publicity, and expense of California’s formal probate system.”

COPYRIGHT: In A Portrait of the Artist’s Heirs in Mediation: ADR Techniques to Prevent and Resolve Disputes Following an Author’s Death, 24 Cardozo J. Conflict Resol. 629 (2023), Nicholas Beudert explores how the current Copyright Act guarantees protection for70 years after an author’s death, which often benefits heirs more than the original author and can hinder scholarship use of that material. Alternative dispute resolution methods are a cost-effective way to resolve these conflicts, potentially allowing authors to compel their heirs to engage in mediation.

CORPORATE TRUSTEE FEES: In Busting the Myth About Corporate Trustee Fees, 111 Ill. B.J. 34 (2023), Jay Harker explores the misconception that corporate trustees are excessively expensive, leading many clients to prefer individual trustees. Harker argues that some situations demand the consideration of a corporate trustee, and estate planning clients should consider their specific circumstances rather than solely fixating on potential cost savings.

CORPORATIONS: In Death of a Corporation: How a Seemingly Innocuous Probate Provision Can Fundamentally Undermine the Corporate Form, 14 William & Mary Bus. L. Rev. 413 (2023), Kenya Smith examines the challenges that arise from interpreting a probate provision allowing estate representatives to “continue any business” of deceased shareholders, which can potentially conflict with a director’s ability to manage corporate affairs. The lack of clarity in coordinating probate and corporate laws poses many risks, especially to small businesses. Smith suggests certain remedies, including changes to statutory language to prioritize a respective state’s corporate law over probate provisions.

CRIMES AGAINST PROBATE: In Crimes Against Probate, 75 Fla. L. Rev. 357 (2023), Kevin Bennardo and Mark Glover explore how policymakers have turned to civil and criminal liabilities for misconduct like the forgery of wills. But there are many doctrinal shortcomings with this plan. Instead, Bennardo and Glover suggest a new way of looking at these issues as evidentiary misconduct affecting the functioning of probate courts. They propose a new crime called “Intentional or Willful Interference with Probate” to better address misconduct within the unique context of wills.

CROSS-BORDER ESTATE PLANNING: In From Investment Vehicles to Treaties—What Foreign Investors Need to Know About Cross-Border Estate Planning, 34 J. Int’l Tax’n 35 (2023), Anthony Diosdi explores the challenges many foreign investors face navigating the US estate and gift tax system, which offers lower exemptions for non-US residents. Diosdi provides a comprehensive guide highlighting the differences in tax rates and exemptions for US citizens, residents, and foreign investors while emphasizing the importance of understanding domicile status and international tax planning opportunities.

ELDER LAW ETHICS: In Staying Ethical in Elder Law, 46 Wyo. Law. 12 (2023) Jenna Jordan emphasizes the importance of ethical considerations in the often complex and rewarding practice of elder law.

ESTATE TAX DEFERRAL: In The Exploration of Estate Tax Deferral and Its Application to Real Estate Holdings, 4 Corp. & Bus. L. J. 181 (2023), Robert Dyess explores the significant tax burden and liquidity issues for executors dealing with very large estates. He highlights 26 U.S.C. § 6166, which allows executors to defer payment of estate tax related to closely held trade or business interests. This provision does not mention real estate interests, but the IRS has provided guidance on when real estate interests qualify. Although there may be some restrictions related to real estate deferral, Dyess urges eligible taxpayers to consider taking advantage of the benefit.

GAMBLING AND PROBATE LAW: In Roll The Bones: The Intersection of Gambling Law and Probate Law, 36 Quinnipiac Prob. L.J. 367 (2023), Robert Jarvis offers valuable insight for probate lawyers faced with gambling-related issues like the presence of gambling debts upon the decedent’s death.

GRANTOR TRUST ASSETS AND SECTION 1014: In Grantor Trust Assets and Section 1014: New IRS Ruling Doesn’t Solve the Problem, 139 J. Tax’n 16 (2023), Mitchell Gans and Jonathan Blattmachr argue that the recent IRS Rev. Rul. 2023-2 is not a comprehensive solution to address concerns of basis adjustment for assets remaining in the trust at death because it still preserves the repurchase strategy. To end this strategy, they propose removing the “deemed ownership” principle in Rev. Rul. 85-13 and Example 5.

GRANTOR TRUSTS: In Resolving Unfairness in a Fair Way: How the Grantor Trust Rules Should Be Reformed, 48 B.Y.U. L. Rev. 2311 (2023), Aaron Anderson explains how wealthy taxpayers often use grantor trusts to capitalize on tax advantages from the differences between income and estate tax regulations, enabling them to avoid applicable income tax brackets and minimize their estate’s taxable property. Anderson provides a comprehensive background on grantor trusts, advocates for harmonizing the estate and income tax systems to reform the grantor trust rules, and suggests grandfathering certain provisions to safeguard the taxpayers who relied on the current rules.

GUN TRUSTS: In Estate Planning for Gun Owners: NFA Gun Trusts, 50 Est. Plan. 16 (2023), Ryan Holmes and Thomas Fabbri delve into how gun trusts can provide efficient means of firearm management, allowing authorized individuals to have legal access to firearms in compliance with federal statutes and regulations.

INCARCERATED BENEFICIARY: In her Commentary, Collateral Consequences of an Incarcerated Beneficiary: Preserving Testamentary Intent and Protecting a Testator’s Estate from Falling Victim to a Beneficiary’s Unreasonable Criminal Justice Debt, 52 U. Balt. L. Rev. 147 (2022), Torra Hausmann discusses essential planning considerations for testators with incarcerated beneficiaries, like inmate property rights and the risks of criminal justice debt, to protect testamentary intent. Hausmann highlights the use of a discretionary trust to protect an incarcerated beneficiary’s inheritance but also argues that it may not be the right fit for every client. No solution is perfect, but it is important to understand the options for testators with incarcerated beneficiaries to best tailor their estate plans.

MISSISSIPPI—WILL FORMALITIES: In Matter of Will of Ratcliff and the Not-So-Harmless Error: A Call to Change Mississippi’s Approach to Will Formalities, 41 Miss C. L. Rev. 146 (2023), Kelsi Baldwin advocates for Mississippi to adopt the Uniform Probate Code’s harmless error rule to replace the current state of uncertainty with a more consistent and clear standard for will formalities.

NORTH CAROLINA—POSTMORTEM RIGHT TO PUBLICITY: In You Can Take It with You: An Argument for Establishing a North Carolina Postmortem Right of Publicity, 24 N.C. J.L & Tech. 1 (2023), Weston Barker explores how artificial intelligence’s ability to create lifelike depictions of the deceased can cause legal and ethical dilemmas for North Carolina residents. Barker argues that North Carolina should adopt legislation protecting a postmortem right of publicity similar to that enacted in New York.

REMOTE SIGNING AND WITNESSING: In Putting Trust in Technology: A Pandemic’s Effects on Remote Estate Planning, 40 Cardozo Arts & Ent. L.J. 825, Amy Weiss explores how the COVID-19 pandemic accelerated the adoption of remote witnessing and notarization of legal documents. Though federal legislation is still pending to authorize remote notarization, it will be left to the state’s discretion to allow remote witnessing for wills and estate planning documents. Weiss encourages legal professionals to stay informed about technology and privacy standards when helping clients navigate these new remote processes.

RETIREMENT PLANS: Kurt Winiecki “offers a documents checklist that helps attorneys determine whether a retirement plan sponsor is putting themselves at risk by violating ERISA’s fiduciary requirements or failing to document prudent plan decisions” in A Checklist for Retirement Plan Sponsors, Ill. B.J., July 2023, at 38.

RHODE ISLAND—ELECTRONIC WILLS: In The Future of Electronic Wills in Rhode Island after COVID-19, 27 Roger Williams U. L. Rev. 423 (2022), Crystal Collins discusses how the COVID19 pandemic emphasized the need for Rhode Island to move away from strict compliance with the Wills Act to embracing electronic wills. She advocates for the adoption of electronic wills so that all Rhode Islanders may exercise their testamentary freedom.

RULE AGAINST PERPETUITIES: In Perpetuities in an Unequal Age, 117 Nw. U. L. Rev. 1477 (2023), Jack Whiteley discusses how the elimination of the Rule Against Perpetuities in state legislatures has allowed the creation of “dynasty trusts,” enabling wealthy individuals to control wealth for generations. Whiteley argues that the complexity of inheritance law, like the Rule Against Perpetuities, played a significant role in its demise. This complexity can inadvertently enable dynastic wealth preservation. Thus, it is important for policymakers to strongly consider the effects of rule complexity when writing future inheritance law and wealth distribution reform proposals.

SECURE ACT PLANNING: In SECURE Act Planning Opportunities When Beneficiaries Are in Dissimilar Tax Brackets, 50 Est. Plan. 22 (2023), James Blase discusses planning opportunities under the SECURE Act for beneficiaries in different tax brackets, suggesting strategies like directing IRA distributions to a lowertax bracket beneficiary to minimize the aggregate federal and state income tax liability.

TRUST CREATION THROUGH DELEGATION: In Creating a Trust Through Delegation, 36 Quinnipiac Prob. L.J. 411 (2023), Raymond O’Brien argues for a modification in legislation like the Uniform Power of Attorney Act (UPOAA) that requires an explicit grant of authority for agents to create, amend, revoke, or terminate trusts. Although the UPOAA was designed to protect vulnerable adults from financial exploitation, O’Brien argues that requiring express authorization violates the principal’s best interest. Considering the accelerated use of POAs, inter vivos trusts, and the many protections against financial exploitation, O’Brien advocates that agents should be able to create, amend, and terminate trusts in accordance with their fiduciary obligation.

VIRTUAL CURRENCY TAXATION: In Uncertainty in Virtual Currency Taxation, 86 Alb. L. Rev. 445, (2023), Neha Goel explores how virtual currency has surged in popularity in the United States and worldwide. The IRS introduced initial guidance on virtual currency in 2014, but the guidance has not evolved, leaving taxpayers with many unanswered questions about emerging virtual currencies as well as non-fungible tokens. Goel explores the inadequate guidance for popular virtual currencies, delves into foreign reporting requirements, and proposes solutions to some uncertainties that taxpayers who use emerging virtual currencies face.

LEGISLATION

CALIFORNIA restricts certain healthcare agents from making listed decisions such as abortion, sterilization, and convulsive treatment. 2023 Cal. Legis. Serv. Ch. 171.

CALIFORNIA updates provisions regarding Transfer on Death Deeds. 2023 Cal. Legis. Serv. Ch. 62.

ILLINOIS allows convicted murderers and other felons to serve as executors under specified circumstances. 2023 Ill. Legis. Serv. P.A. 103-280.

ILLINOIS is the first state to enact the Uniform Electronic Estate Planning Documents Act. 2023 Ill. Legis. Serv. P.A. 103-301.

MICHIGAN updates provisions governing the Michigan Statutory Will. 2023 Mich. Legis. Serv. P.A. 72.

NORTH CAROLINA updates the surviving spouse’s elective share. 2023 N.C. Laws S.L. 2023-120.

OREGON modifies the estate tax treatment of certain natural resource property. 2023 Ore. Laws Ch. 286.