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 The testator’s heirs at law filed a caveat alleging that the will had been revoked by the testator’s destruction of it.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.
A Missouri Court recently ruled in In the Estate of Betty Jean Collins v. Tina Shoemaker (Mo. App. W.D. #75448, August 6, 2013) that a person who had died was not “incapacitated” for purposes of a Health Care Power of Attorney (HCPOA). The court decided that the right of sepulcher expressly granted by Collins in her HCPOA to her great-niece did not ever become effective so that, on the death of Collins, her great-niece as her health care attorney in fact had no power to carry out Collins’ wishes to have her body cremated.
The right of sepulcher, that is the right to choose and control the burial, cremation or other disposition of a dead body, is governed by statute in Missouri (R.S. Mo. § 194.119), as it is in many states. This statute sets out the order in which various persons have this right, and grants the right of sepulcher first to “[a]n attorney in fact designated in a durable power of attorney wherein the deceased specifically granted the right of sepulcher over his or her body to such attorney in fact.” However, here, since the court ruled that the HCPOA never became effective, the court determined that the “next of kin”, the next in line with the right of sepulcher under the statute, had this power instead of the great-niece. Collins had no surviving spouse, so that her children, appellants in this case, who wanted her buried and not cremated, had the right of sepulcher. (more…)
There is some uncertainty as to whether and under what circumstances a revocable trust created by a decedent prior to death would be subject to the claims of the decedent’s creditors after the decedent settlor’s death. Now the Sixth District Court of Appeals of Ohio has weighed in on this issue in Watterson v. Burnard, 986 N.E. 2d 604 (Ct. App. Ohio, February 1, 2013).
In this case, Brad Watterson was injured in an auto accident caused by Barthel Burnard. Brad then filed suit against Barthel, but while the personal injury case was pending, Barthel died. Prior to her death and actually prior to the accident, Barthel had created and funded a revocable trust. After Barthel’s death, Brad sought declaratory and injunctive relief that Barthel’s trust would be available to satisfy any judgment he might obtain in his personal injury case. Barthel’s Trustee argued that Brad’s right to access Barthel’s revocable trust to collect on a judgment ceased when Barthel died. The trial court agreed, stating that as a matter of law the assets in a revocable trust would cease to be available to a creditor unless the creditor’s claim was reduced to a judgment prior to the settlor’s death. (more…)
With research and drafting assistance from Washington University School of Law student, Kelsey DeLong.
In Estate of Lambur, the Missouri Court of Appeals addressed the issue of whether an attorney-in-fact is permitted to gift the principal’s property to herself when the gift is not expressly authorized in the power of attorney.
In 2005, Verna Irene Lambur (“Irene”) executed a durable power of attorney naming her nephew’s wife, Anna Stidham (“Anna”), and Jackie Johnson (“Jackie”) as her attorneys-in-fact. The power of attorney granted Irene’s attorneys-in-fact the following power:
“To establish, change or revoke survivorship rights in property or accounts, beneficiary designations for life insurance, IRA and other contracts and plans, and registrations in beneficiary form; to establish ownership of property or accounts in my name with others in joint tenancy with rights of survivorship and to exercise any right I have in joint property; to exercise or decline to exercise any power given to me to appoint property [sic]; to disclaim or renounce transfers to me of property; to make inter vivos gifts of my property to my lineal descendants, including my attorneys in fact, in amounts that are equal by line or class and in an amount for any person that does not exceed in any year the annual gift tax exclusion[.]”
Shortly after the execution of the power of attorney, Anna and Jackie transferred assets that Irene owned, individually, into two new accounts, each titled in the names of Irene, Jackie, and Anna, with rights of survivorship. Upon Irene’s death in May, 2005, the combined value the two accounts was $129,134.46. (more…)
Originally posted on bryancavefiduciarylitigation.com.
Effective earlier this month, Delaware once again amended its trust statutes. In what has become an (almost) annual ritual, Delaware has tweaked its trust statutes in an effort to make the state a more appealing jurisdiction for trust administration. A full look at the law is here, but here are some of the highlights:
Children Born Out of Wedlock
Section 1 of the Act amending the trust statutes cross-references the legitimation process elsewhere in the Delaware Code for purposes of intestate succession for persons born out of wedlock.
Definition of “Governing Instrument”
The definition of “governing instrument” now also expressly includes “any instrument that modifies a governing instrument or, in effect, alters the duties and powers of a fiduciary or other terms of a governing instrument.”
No Duty to Inquire to Satisfy Prudent Person Standard
The amendments clarify that a fiduciary has no duty to inquire as to the nature and extent of investments held by the fiduciary in an investment directed trust or an investment directed account within a trust for the fiduciary to satisfy the Code’s prudent person standard.
Governing Instrument May Override Trust Law
The amendments also clarify that a governing instrument may expand, restrict, eliminate, or otherwise vary ”provisions of general application to trusts and trust administration.”
Creditor Claims against Revocable Trusts
This section was tweaked to reflect Delaware’s recognition of same-sex marriages by changing references from “husband and wife” to “spouses.” It also cleaned up some unnecessarily convoluted language regarding creditors’ remedies against spouses who have contributed property held as joint tenants to revocable trusts.
Appointment of Successor Trustee
The new laws provide a procedure for non-judicial appointment of successor trustees in certain situations:
If a trust has no serving trustee because of the death, incapacity or resignation of the last serving trustee of the trust, and if the provisions of the governing instrument do not include any provisions which can be effectively used to appoint a successor trustee, and if the only remaining dispositive provisions of the trust then require distribution of the remaining property of the trust to one or more beneficiaries (whether outright, or to one or more other trusts which do have a serving trustee), then the taking beneficiaries of the trust, by unanimous vote, may name a successor trustee of the trust without the approval of the Court of Chancery. For purposes of the preceding sentence, the person entitled to vote with respect to a beneficiary which is another trust which has a serving trustee is the trustee or trustees of such trust.
Claims Against Revocable Trusts
The following language was added to address claims against revocable trusts:
Following the death of the trustor of a trust that was revocable immediately prior to the trustor’s death, all claims against the trust that, but for any applicable period of limitations, could have been brought against the trustor’s estate, whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort or other legal basis, if not barred earlier by other statute of limitations, are barred against the trust when and to the same extent barred against the trustor’s estate by any applicable statute of limitations or statute of repose on claims against the estate including any such statute of limitations or repose enacted by jurisdictions other than this State.
Failure to Exercise Decanting Power
Absent willful misconduct, no trustee or adviser has a duty to exercise the power to decant.
Virtual representation may be available if there are no “material conflicts of interest” between the person doing the representing and the person being represented. The statute now includes three situations in which a material conflict of interest is presumed:
1. a situation in which the representative would, as a result of the judicial proceeding or nonjudicial matter, be appointed to a fiduciary or nonfiduciary office or role relating to the trust unless the representative presently serves in a fiduciary or nonfiduciary office or role relating to the trust and will not receive greater authority, broader discretion, or increased protection by reason of the new appointment;
2. a situation in which the representative currently holds a fiduciary or nonfiduciary office or role relating to the trust and, as a result of the judicial proceeding or nonjudicial matter, will receive greater authority, broader discretion, or increased protection by reason of the judicial proceeding or nonjudicial matter; and
3. a situation in which the representative has any other actual or potential conflict of interest with the represented beneficiaries with respect to the particular question or dispute, including but not limited to a conflict resulting from a differing investment horizon or an interest in present income over capital growth.
Non-Judicial Settlement Agreements
Delaware has now adopted language similar to the UTC’s non-judicial settlement language:
§ 3338. Non judicial Settlements Agreements.
(a) For purposes of this section, “interested persons” means persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the Court of Chancery.
(b) Except as otherwise provided in subsection (c), interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust (other than a trust described in § 3541 of this title).
(c) A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the Court of Chancery under this title or other applicable law.
(d) Matters that may be resolved by a nonjudicial settlement agreement include:
(1) the interpretation or construction of the terms of the trust;
(2) the approval of a trustee’s report or accounting;
(3) the direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
(4) the resignation or appointment of a trustee and the determination of a trustee’s compensation;
(5) the transfer of a trust’s principal place of administration; and
(6) the liability of a trustee for an action relating to the trust.
(e) Any interested person may bring a proceeding in the Court of Chancery to interpret, apply, enforce, or determine the validity of a nonjudicial settlement agreement adopted under this Section, including but not limited to determining whether the representation as provided in § 3547 of this title was adequate.”
On June 26, the US Supreme Court decided the case of United States v. Windsor, holding (1) that the Court had jurisdiction to consider the merits of the case, and (2) that Section 3 of the Defense of Marriage Act (“DOMA”) is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment. For a description of the previous history of the case, see our prior posts here and here. In a 5-4 opinion, Justice Kennedy delivered the opinion of the Court. Justices Ginsburg, Breyer, Sotomayor and Kagan concurred, while Justices Scalia, Roberts, Alito, and Thomas dissented.
Edith Windsor (“Windsor”) and Thea Spyer (“Spyer”), New York residents, were legally married in Ontario, Canada, in 2007, after being in a relationship since 1963. Prior to their marriage, the two had registered as domestic partners when New York City gave that right to its citizens in 1993. While New York did not legalize same-sex marriage in New York until 2011, in 2008, the State of New York began recognizing marriages of same-sex couples validly performed elsewhere as valid marriages for purposes of New York law; Therefore, starting in 2008, New York recognized Windsor’s and Spyer’s Ontario marriage as a valid marriage. Spyer died in 2009, leaving her entire estate to her wife, Windsor.
As we’ve discussed in a prior post anticipating this decision (see here), the federal government allows an unlimited marital deduction for the federal estate tax for certain gifts on death to the decedent’s spouse. In this case, however, DOMA prevented Windsor from being able to claim the marital deduction on Spyer’s federal estate tax return because theirs was not a marriage between one man and one woman. (more…)
A recent Private Letter Ruling (PLR 201320009) issued by the Internal Revenue Service (IRS) blessed a conversion of a grandfathered Trust to a unitrust determination of income, as not causing any loss of the Trust’s generation-skipping transfer (GST) tax grandfathered protection, and not resulting in a gift or in the recognition of any gain. Here, the trust in question had been held for the benefit of the Settlor’s son, but the son had since died and the trust was now held for the benefit of three grandchildren. No additions had been made after September 25, 1985. However, the trust determined the income to be distributed to the grandchildren under the traditional method, with interest and dividends constituting trust income.
Long after the trust became irrevocable as a result of the death of the Settlor, the state in which the trust was being administered enacted legislation authorizing the conversion to a unitrust determination of income. The trustee determined that such a conversion was in the best interest of the grandchildren and sought to convert the trust to a unitrust. The state statute required that the grandchildren, who were all legally competent to act on their own behalf, to consent to the unitrust conversion. The trustee sought and the IRS ruled that the conversion did not cause a loss of the trust’s grandfathered status as exempt from GST tax, did not cause any beneficiary to be deemed to have made a taxable gift, and did not cause the trust or any beneficiary to realize capital gain so long as the trustee strictly adhered to the requirements of the new state statute in completing the conversion. (more…)
With guest co-blogger, Washington University School of Law student and Bryan Cave summer intern, Mike Gallagher.
As is the case for everyone (and as we previously discussed in our prior post, Rock, Paper, Scissors: Life Insurance Beneficiary Designation Beats Will), based on the United States Supreme Court decision in Hillman v. Maretta, if you are a federal employee, you should carefully consider who is listed as beneficiary of your life insurance policy. In Hillman, the Court favored Warren Hillman’s ex-wife, Judy Maretta, over his widow, Jacqueline Hillman, and not because the former was more deserving or the marriage to the latter was overly capricious. $124,558 of life insurance benefits accrued to the ex-wife because the husband neglected to send the federal government’s Office of Personnel Management the necessary documentation to change his beneficiary designation before his death. (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…)
The Bankruptcy Court for the Western District of Washington has now joined other states in invalidating transfers to a self-settled trust on a variety of grounds in the latest asset protection self settled trust case, In re Huber, 2012 Bankr. LEXIS 2038 (May 17, 2013). The Trustee in this case successfully obtained a summary judgment invalidating Donald Huber’s transfers to the Donald Huber Family Trust made shortly before he filed bankruptcy, on the grounds that: (1) the Trust was invalid under applicable state law, (2) Huber’s transfers were fraudulent under § 548 (e)(1) of the Bankruptcy Code, and (3) Huber’s transfers were fraudulent transfers under the Washington State Fraudulent Transfers Act.
Donald Huber was a real estate developer who had been involved with real estate development in the State of Washington for over 40 years. He resided in Washington, his principal place of business was Washington, and almost all of his assets were located in Washington. In 2008, due to the economic downturn, particularly in the real estate market, Huber sought to raise additional cash for his business, but was unsuccessful in that endeavor. He fell behind in most of his loans and by mid 2008 most of his creditors were threatening foreclosure and litigation. (more…)