Originally posted on bryancavefiduciarylitigation.com
Testators may want to keep careful track of who has copies of their will and where those copies are. If only a copy of a will – and not the original – is found, it may raise a question about whether the testator destroyed the original in an attempt to revoke it. Such was the argument made by the caveators in Johnson v. Fitzgerald. Let’s see why the Georgia Supreme Court felt like a copy was good enough to admit to probate in solemn form.
The executor of an estate offered a copy of a will for probate in solemn form, requesting that it be admitted to probate upon proper proof. The original could not be found. The testator’s heirs at law filed a caveat alleging that the will had been revoked by the testator’s destruction of it.
Under Georgia law, if the original of a will cannot be found for probate, there is a presumption that the testator intended to revoke the will. But this presumption can be overcome if a copy is established by a preponderance of the evidence to be a true copy of the original and if it is established by a preponderance of the evidence that the testator did not intend to revoke the will. Here, there was “ample evidence” that the testator intended for provisions in his will to continue in force.
Under the propounded will, $50,000 was bequeathed to a church for the use of its cemetery fund, $50,000 was bequeathed to an individual, and the will named a trust which benefited a foundation as the residuary beneficiary. The Georgia Supreme Court highlighted the following evidence that supported a conclusion that the testator did not intend to revoke the will:
- The testator executed a document guiding the trust referenced in the will, and he later amended the trust;
- In discussions with his attorney about the trust amendment, the testator understood that his assets had grown to a point that the church named as the primary beneficiary of the trust might not have need for the full amount, and he wanted to give the trustees of the trust the flexibility to fund charitable contributions from the money that would pour over from the estate to the trust;
- The testator told the pastor of the church that he was leaving money for the cemetery fund in his will;
- The testator expressed disdain for what he considered his relatives’ greed, stating that he did not wish for them to have his money; and
- Prior wills were consistent with the propounded will insofar as they left money for the cemetery fund and excluded the caveators.
Originally posted on bryancavefiduciarylitigation.com
Individual trustees who must administer real property often attempt to save the trust money by personally making certain improvements, repairs, or maintenance to the property. They then charge the trust for the work they performed. As the Nebraska Court of Appeals points out in In re Estate of Robb, however, these acts – however well-intentioned – may be self-dealing and can put the trustee in a position of a conflict of interest, which can warrant removal from that fiduciary position.
When Mason D. Robb died, his son, Theodore, became the personal representative of his estate and the trustee of the inter vivos Mason D. Robb Revocable Living Trust. The trust contained three pieces of real estate.
Under the terms of the trust, the trustee was to hold and use the trust property to pay administrative costs and the debts of the settlor and for the benefit of the Mason D. Robb QTIP Family Trust. The trust directed the trustee to separate the funds in the family trust into two equal shares: one for Theodore’s benefit and one for the benefit of his sister, Linda. Theodore’s share was to be delivered to him outright while Linda’s share was to be held in trust. Linda was also entitled to income distributions from her share of the family trust. (more…)
The terms of James Gandolfini’s December 2012 Last Will and Testament were made public last week when it was filed in New York County Surrogate’s Court. There are a series of specific bequests to his teenage son by his first marriage and some friends and relatives, but the bulk of his probate assets is disposed of as his “residuary estate” and is divided among his sisters, his wife and his baby daughter.
The tax clause of his Will directs that all estate taxes are to be paid from his residuary estate. What does that mean to his beneficiaries? And what does that mean to the IRS and to the NYS Department of Taxation and Finance? Only the 20% of the estate that passes to James Gandolfini’s widow will qualify for the Federal and NYS estate tax marital deduction. (For a more detailed discussion of the federal marital deduction, see our prior post in anticipation of a ruling in the recently decided Windsor case, Will SCOTUS Eviscerate DOMA? What Effects Could That Have on Tax Planning?) As a result, his estate could be subject to taxes at a combined rate of about 50% over his unused lifetime exemption, which is $1M for NYS and $5.25M for the IRS.
It is rumored that Mr. Gandolfini’s estate is worth approximately $70M. The total estate tax due is likely be over $25M and will be due a mere nine months after Mr. Gandolfini’s untimely death. In all likelihood, assets will need to be sold to generate liquidity to meet this estate tax bill. (more…)
Almost invariably, settlors give their trustees broad powers regarding trust property. Often these broad powers include the power to convey and encumber trust property and the power to loan trust property. But, sometimes, the settlor also gives the trustee specific instructions with respect to specific trust property. In Hamel v. Hamel, the Kansas Supreme Court interpreted a trust instrument that gave the trustee broad general powers, but also specific directions regarding a specific piece of real property, and examined the interplay between the two provisions.
Arthur L. Hamel’s trust instrument gave the trustee broad authorization to control and administer trust property, including “the power to do all acts that might legally be done by an individual in absolute ownership and control of the property” and provided the trustee with “the power to lend money to . . . any beneficiary under [the] Trust . . . as may be agreed upon between my Trustee and such parties, provided, however, that any such loan shall be adequately secured and shall bear a reasonable rate of interest.” The trust also granted to the trustee “any power my Trustee needs to administer my Trust Estate, which is not hereinafter listed.” This same paragraph provided the trustee with “the power respecting property in [the] Trust Estate that an absolute owner of such property would have.”
Time to get into the weeds on the scope of a trustee‘s powers. There are basically two sources of power for a trustee – the trust instrument and state law. Where those two intersect, overlap, conflict, or diverge is where you will likely find the bulk of fiduciary litigation about trustee powers. (more…)
When someone passes away, usually their next of kin, agent or fiduciary will begin to compile a list of the decedent’s assets. Rarely will such a list include the decedent’s frequent flyer miles. However, depending upon how many miles have been accrued during the decedent’s life, frequent flyer miles can be worth hundreds, maybe even thousands, of dollars. In such cases, heirs or beneficiaries of the decedent’s estate may wish to benefit from the value the decedent has amassed in frequent flyer miles.
Most airlines allow for mileage transfer among the living, but it is usually an expensive task to accomplish, often accompanied by fees and yearly limits. The transferability of frequent flyer miles upon death is no more simple. Susan Stellin, the author of a New York Times article entitled “The Afterlife of Your Frequent Flyer Miles,” stated “I asked six airlines if they allow transfers of frequent flyer miles after a member’s death and got a straight answer from only four.”
Most airline loyalty program policies claim that points accumulated are the property of the issuing company, giving them complete discretion as to how they are handled in the case of death. For example, United’s Mileage Plus policy states: “[a]ccrued mileage and certificates do not constitute property of the member. Neither accrued mileage nor certificates are transferable (i) upon death, (ii) as part of a domestic relations matter, or (iii) otherwise by operation of law.” Southwest Airlines has a strict policy that they do not transfer RapidRewards points once a member dies.
Such policy provisions, therefore, appear to provide that miles cannot be bequeathed to, or inherited from, another person. Nevertheless, the formal policy found in an airline’s terms and conditions can vary considerably from what the airline’s customer service center will offer. Policies differ from practices, so begin by calling the program’s service center to determine whether the miles can in fact be transferred or inherited.
For example, the terms and conditions of American’s Aadvantage program and Delta’s SkyMiles program provide that accrued mileage and award certificates are not transferrable at death. Both airlines’ customer service departments, however, provide exception procedures. According to its website, American Airlines has the discretion to credit accrued mileage to persons specifically identified in court-approved wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees. Delta also allows for the Administrator or Executor of the Member’s Estate to request, via affidavit accompanied by a death certificate, to reinstate and transfer the Miles from the deceased Member’s account to one or more members’ accounts.
Getting Around Transferring Miles
In most cases, it is not the miles, but the award tickets the miles can purchase, that are important. Fortunately, it is not difficult to have an award ticket issued in the name of a friend or family member. Susan Stellin also suggests that “[o]ne way you can make things easier on your heirs is to leave a list of your frequent flier account numbers and passwords.” Doing this allows your loved ones to use your miles to issue tickets to themselves without having the hassle of fees and paperwork.
Updating Your Will
Last, do not leave it to the airlines’ “sole discretion” to honor your wishes. People who have significant frequent flier miles should consider designating who gets their miles in a Will. Questions have been raised concerning the taxability of frequent flyer miles, but according to Announcement 2002-18, the IRS has not pursued a tax enforcement program with respect to promotional benefits such a frequent flyer miles. Therefore, there is likely no negative consequence to adding frequent flyer miles to your estate plan.
The Illinois Appellate Court in In re Estate of Doman issued a ruling on October 11, 2012 that once more clarifies why it is important to have a Will and, depending on circumstances, potentially a revocable trust. (See our prior posts on Why Do I Need a Will? (Part 1 and Part 2) and Why Do I Need a Trust?)
Trial Court Proceedings:
In the Doman case, Sara and Mark Doman were in the home stretch of their divorce when Mark died on July 4, 2011. On June 10, the trial court had issued a written dissolution judgment and reserved ruling on the ancillary issues, with a status hearing set for July 11. Sara’s attorney called the court on July 5 to inform the trial court of Mark’s death and the trial court entered a docket entry that stated, “Cause set for 7/11/11 is vacated. Cause is dismissed.”
Probate Court Proceedings:
On September 28, 2011, Sara filed a petition in the probate court stating that their divorce proceedings were dismissed and that she was Mark’s surviving spouse and seeking appointment as administrator of Mark’s estate. Sara’s daughter, Aimee (who was a child of Sara’s from a prior marriage whom Mark had legally adopted), filed a counter argument on October 13, arguing that the trial court’s June dissolution judgment on grounds only was a final judgment.
The probate court found the July 5 order only dismissed the ancillary issues, not the dissolution itself, and therefore, Sara was not Mark’s heir, appointing Aimee and her sister Bethany (also adopted by Mark) as co-administrators of Mark’s estate. Sara appealed. (more…)
Section 408(d)(3) of the Code specifically deals with when a distribution from an individual retirement plan to an individual does not need to be included in the gross income of the individual recipient but rather may be paid into another IRA for the benefit of such individual. This recontribution of an IRA distribution is referred to in this provision as a “Rollover Contribution” and must be completed within 60 days of the receipt of the distribution from the distributing IRA. Section 408(d)(3)(C), however, denies rollover treatment for inherited IRAs, and specifically states that any amount received by an individual from an IRA account inherited on the death of another individual cannot be contributed to another IRA for his or her benefit unless the individual was the surviving spouse of the decedent.
The taxpayer in Beech v. Commissioner, T.C. Summary Opinion 2012-74 (Docket No. 1948-11S, 7/26/2012, however, attempted to complete a Rollover Contribution from the IRA she received from her mother to an inherited IRA in her mother’s name for her benefit. In this case, Citi issued the check directly to the petitioner from her mother’s IRA, which she then deposited into an American Funds IRA. The taxpayer argued that it was her intent to effect a trustee-to-trustee transfer, but what was actually done was a distribution from her mother’s IRA to her and an attempted Rollover Contribution to a new IRA. (more…)
PLR 201228017 provides a good reminder of the requirements for disclaiming an interest in a trust that was created prior to January 1, 1977. This PLR involves a disclaimer by a beneficiary within 9 months of attaining age 18.
In order for a disclaimer of a pre January 1, 1977 transfer not to be considered a transfer subject to gift tax, the disclaimer must be “unequivocal, effective under prior law, and prior to accepting any benefits. In addition, the disclaimer must be timely. In order to be timely, Reg. § 25.2511-1(c)(2) provides that the refusal must have been made “within a reasonable time after knowledge of the existence of the transfer.”
After reciting these general rules applicable to pre-January 1977 transfers, the PLR then relied on the Regulations under § 2518 applicable to post December 31, 1976 transfers. In respect of the timeliness of the disclaimer, the PLR states that the time period for determining the reasonableness of the lapse of time prior to the disclaimer, “the time limitation for making the disclaimer does not begin to run until the disclaimant has attained the age of majority and is no longer under a legal disability to disclaim,” citing Reg. § 25.2518-2(c). (more…)