Case Summaries
An estate plan was established for the decedent which, upon the death of the decedent's surviving spouse, resulted in one-half of the trust property passing to the children of the surviving spouse and one-half passing to the decedent's brother. Upon the brother's subsequent death, the trust specified that the one-half of the balance in the trust would pass to his child. Had the brother not survived the decedent, one-quarter of the trust property would pass to the brother's child and one-quarter would pass to the child of a predeceased brother. Given the fact that the brother outlived the decedent, the child of the predeceased brother received nothing. However, two of the three trustees and the decedent's financial advisor testified that the trust did not carry out the decedent's desire to treat the children of the brothers equally. The child of the predeceased brother sued to reform the trust, and the matter resulted in a settlement. The child of the predeceased brother also brought a malpractice and breach of contract claim against the drafter of the trust. The trial court dismissed the claim, but the state Supreme Court reversed, recognizing that a third-party beneficiary of an estate plan can sue the drafter in tort and contract when the drafting error "defeats or diminishes the client's intent." Fabian v. Lindsey, No. 2012-213726, 2014 S.C. LEXIS 470 (S.C. Sup. Ct. Oct. 29, 2014).
The petitioner purchased a 410-acre tract and developed a residential community and golf course. Later, the petitioner donated a conservation easement on the golf course and claimed an associated income tax deduction of $10.5 million. The easement agreement allowed the petitioner to swap the land subject to the easement for an equal or greater amount of contiguous land so long as the substitute property met certain conditions. The Tax Court held that swap right violated the perpetuity requirement of I.R.C. Sec. 170(h)(2)(C). On appeal, the court affirmed. The appellate court noted that the restriction on "the real property" as required by statute was not perpetual because it was not tied to a specific tract in perpetuity. By having the ability to substitute property under the easement restriction, the court noted that the petitioner could obliviate the appraisal to serve as the verification of the value of the restricted property and the condition of the property. A "savings clause" in the easement agreement which would void the swapping right if a court found that it violated I.R.C. Sec. 170, was also of no effect because it would have, in essence, rewritten the easement in response to the court's holding. Belk v. Comr., No. 13-2161, 2014 U.S. App. LEXIS 23680 (4th Cir. Dec. 16, 2014), aff'g., 140 T.C. 1 (2013).
The U.S. Supreme Court has declined to review a decision on the U.S. Court of Appeals for the Ninth Circuit which affirmed a Tax Court decision involving a decedent’s estate that claimed valuation discounts and deductions associated with claims against the estate. Under the facts of the case, the decedent and her pre-deceased spouse founded a mail-order horticulture business. They sold their shares to a company ESOP with the company funding the purchase by borrowing $70 million on an unsecured basis with one lender being the trustee of the ESOP. The pre-deceased spouse contributed his sale proceeds ($33 million) to his revocable trust. Upon his death, the trust split into marital trusts, with the ESOP trustee being the trustee of the marital trusts. The company’s earnings declined and the ESOP lenders wanted to restructure the loans so that they would be secured. The company filed bankruptcy after the ESOP beneficiaries sued for breach of fiduciary duty. Pending the outcome of the litigation, the ESOP trustee barred the decedent from receiving trust distributions from one of the marital trusts. The trial court ruled against the beneficiaries, and the decedent then died while the appeal was pending. On the decedent’s estate tax return, a $15 million liability was listed which related to the litigation associated with the three trusts. The Tax Court denied any discount for litigation hazards and lack of marketability. The court reasoned that the lawsuit would not have impacted a buyer’s rights. Also, the bar on the decedent getting distributions had no impact on the value of the assets in the trust. On the estate’s potential liability, no discount was allowed because the estate did not establish it’s liability with reasonable certainty. On appeal, the Ninth Circuit affirmed on the same grounds that the Tax Court ruled against the estate. The U.S. Supreme Court declined to review the case. Estate of Foster v. Comr., 565 Fed. Appx. 654 (9th Cir. 2014), aff’g., T.C. Memo. 2011-95, cert. den., Bradley v. Comr., No. 14-267, 2014 U.S. LEXIS 8142 (U.S. Sup. Ct. Dec. 8, 2014).
The decedent's estate held a 41.128 percent limited partner interest in a partnership that was involved in forestry operations. The Tax Court weighted at 75 percent the partnership value of $52 million as determined by a cash flow method (going concern) and a 25 percent weight a value of $151 million via the asset value method. There was no evidence that any sale or liquidation was anticipated. The result was that the estate's interest was valued at 27.45 million rather than the $13 million amount that the estate valued the interest at or the $33.5 million that the IRS value the interest at. The Tax Court, as to the cash flow value, allowed a lack of marketability discount. The Tax Court did not impose any accuracy-related penalty. On appeal, the appellate court reversed as to the 25 percent valuation weight and remanded the case to the Tax Court for a recalculation of the value of the decedent's interest based on the partnership being valued as a going concern. The appellate court stated that the Tax Court had engaged in "imaginary scenarios." Estate of Giustina v. Comr., No. 12-71747, 2014 U.S. App. LEXIS 22961 (9th Cir. Dec. 5, 2014), rev'g. in part, T.C. Memo. 2011-141
The decedent died in 2002 and the defendant was appointed as executor of the estate that contained primarily real estate and an investment account. However, the estate's return was not filed until 2008. The IRS assessed federal income tax, interest and penalties of over $2 million against the estate. The real estate was sold in 2002 for $379,000 and the proceeds were distributed shortly after the sale, with no proceeds of sale going to pay taxes. From 2002-2005, the defendant distributed over $750,000 to himself and almost $1 million to his sisters. In 2008, the IRS asserted that over $70,000 was owed in federal taxes. The IRS moved for summary judgment to reduce the outstanding liability to judgment. The defendant did not respond to the government's factual position. The court held that the executor was liable for the estate's unpaid tax liability because the executor had distributed the estate's assets which rendered the estate insolvent, and the distribution occurred after the executor had actual or constructive knowledge of the liability for unpaid taxes. The court noted that reliance on bad advice from a lawyer is not a defense to a unambiguous statutory obligation to meet a tax filing deadline. The court granted the government's motion for summary judgment. United States v. Stiles, No. 13-138, 2014 U.S. Dist. LEXIS 167125 (W.D. Pa. Dec. 2, 2014).
In this case, the claimant thought that that decedent was her biological father, but learned after his death that she was not his biological child. The claimant sought a determination that she was the decedent's heir based on the theory of "equitable adoption." The court noted that state (WY) probate law did not allow stepchildren and foster children and their descendants to inherit. Based on that, and because the court determined that the purpose of the probate code was to simplify and clarify the administration of the law, the court held that it would not judicially recognize the doctrine of equitable adoption. In re Estate of Scherer, 336 P.3d 129 (Wyo. 2014).
The petitioner resided in a nursing home and entered into a contract to sell the apartment that she owned and previously lived in. The petitioner than made an application for Medicaid benefits retroactive to a period in time before she entered into the sale contract. The state Medicaid agency counted the value of the apartment as an available resource which resulted in the petitioner being disqualified for Medicaid benefits. The petitioner claimed that the homestead exemption should apply (i.e., the value of the home should not count as an available resource) because the petitioner had the intent to return to the apartment as her home until the date of the execution of the sale contract. The court ruled for the petitioner based on the presumption in favor or recognizing the homestead exemption. In re Inglese, 121 A.D.3d 688, 939 N.Y.S.2d 155 (2014).
The decedent's estate plan included a pour-over will and a trust. The terms of the trust specified that the decedent's assets would be divided equally amongst her children, except that a son had an option to buy the decedent's 95 shares of stock in a closely-held company. At the time of death, the decedent's stock was subject to a shareholder's agreement requiring the company to buy the decedent's stock upon the decedent's death unless the stock passed to the decedent's "immediate family" (defined as children, spouse, parents or siblings of the decedent). By virtue of the decedent's will, the decedent's stock passed to her revocable trust which included a son-in-law of the decedent as a co-trustee. Because a trustee has legal title to trust assets, the court reasoned that the corporate shareholder agreement barred the transfer of stock to the trust due to the son-in-law serving as a co-trustee. The court reached this conclusion even though all beneficiaries of the trust were immediate family members. Thus, the option for the son to buy the corporate stock was ineffective. The court remanded the case to the trial court (which had held that the shareholder agreement did not control the disposition of the stock) to determine if the parties, in accordance with the shareholder agreement, could reach an agreement with respect to the purchase of the shares. If the parties cannot reach such an agreement, the court directed the trial court to order the shares be sold to the corporation. Jimenez v. Corr, 764 S.E.2d 115 (Va. 2014).
While married, the decedent (who was an Arizona resident) engaged in planned sexual relations with a woman who was not his wife for the express purpose of allowing the woman to conceive a child. The woman gave birth to the child in 1994. The decedent maintained infrequent phone contact with the mother of the child throughout the remainder of his life. He died in Arizona in 2011, owning a one-half interest in an Iowa farm. The decedent’s wife (who had also only maintained infrequent phone contact with the decedent from 1996 until his death) filed a petition in the ancillary Iowa action seeking a declaration that the child born in 1994 was not an heir of the decedent. The child filed a motion for summary judgment based upon an Arizona paternity order declaring that the decedent was his father. The district court denied summary judgment to the son, finding that he had to prove both paternity and recognition by his father. After a trial, the district court denied the spouse’s petition and ultimately found the son to be an heir. On appeal, the court affirmed. Iowa Code §633.222 states that a child can inherit from his biological father if (1) the evidence proving paternity is available during the father’s lifetime OR (2) the child has been recognized by the father as his child. Nonetheless, the court ruled that Iowa case law, including a 1989 Iowa Supreme Court case, In re Estate of Evjen, 448 N.W.2d 23 (Iowa 1989), “deviates from the plain language of the statute in interpreting the ‘or’ to mean ‘and’” and that it was “bound by this long-standing supreme court precedent.” As such, the court found that both paternity and recognition had to be established for the son to be an heir. Even so, the court found that the spouse had failed to carry her burden to show that the decedent had not recognized the child to be his son. Mohr v. Mohr, No. 13-1422 (Iowa Ct. App. Oct. 15, 2014).
The decedent died with a will that contained a provision leaving the decedent's "personal property" to her sisters. At issue were Indian baskets of considerable worth. The decedent and her husband lived in a home on a ranch, with the home and ranch owned by an LLC that they controlled. The surviving spouse claimed that the will provision did not control the disposition of the baskets because the baskets were owned by the LLC which owned an insurance policy on household property. The court determined that the insurance policy controlled the issue and that the baskets were not the decedent's personal property subject to the terms of her will. Keland v. Moore, No. 1 CA-CV 13-0605, 2014 Ariz. App. Unpub. LEXIS 1231 (Ariz. Ct. App. Oct. 14, 2014).
The petitioner formed an S corporation for his cabinet business and utilized it for over twenty years until its liquidation. Later, a "pure trust" was formed with the cabinet shop's land, building, equipment and inventory transferred to it. A series of transactions ensued with the ultimate result that petitioner did not report any tax from the transactions. The IRS asserted, and the court agreed, that the trust was a sham and that the petitioner was taxable on lease payments. Wheeler v. Comr., T.C. Memo. 2014-204.
Before 2005, the state did not tax transfers at death. In 2005, however, the legislature enacted a "stand-alone" estate tax on a prospective only basis that mirrored the federal estate tax (where QTIP property is subject to tax in the surviving spouse's estate). The state then adopted a regulation that taxed QTIP assets when the surviving spouse after the legislative change but where the first spouse had died before the effective date of the 2005 legislative change. The Washington Supreme Court later invalidated the regulation by interpreting "transfer" narrowly and holding that the only "transfer" subject to tax occurred at the time the QTIP trusts at issue in the case were created. In re Estate of Bracken, 175 Wash.2d 549, 290 P.3d 99 (2012). The state of Washington amended its Estate and Transfer Tax Act in 2013 to provide that the tax on QTIP trust assets upon the death of the surviving spouse applies prospectively and retroactively to all estates of decedents dying on or after May 17, 2005. In the case at issue, the question was whether the 2013 law's retroactive application was permissible insomuch that retroactive application taxed interests that had previously not been taxable. The court upheld the constitutionality of the law, finding that it did not violate either the separation of powers doctrine, due process clause or the impairment of contracts clause. In re Estate of Hambleton, No. 89419-1, 2014 Wash. LEXIS 773 (Wash. Sup. Ct. Oct. 2, 2014).
A resident of an assisted living facility transferred almost $80,000 to her daughter who then paid over $40,000 to the assisted living facility. The resident then entered a nursing home and made an application for Medicaid benefits. The state (NY) Medicaid agency treated the transfer as an uncompensated transfer resulting in a 6.84-month benefit disqualification penalty. The resident argued that the penalty period should be reduced because the daughter effectively transferred funds back to her mother to the extent she paid for her costs to reside in the assisted nursing facility. However, the court disagreed. The court noted that the funds were used to pay for the mother's residence in the assisted nursing facility rather than for services. In re Weiss, 121 A.D.3d 703, 993 N.Y.S.2d 368 (2014).
In this case, a trust beneficiary claimed that the trustee willfully breached its fiduciary duties by failing to pursue certain development opportunities with respect to real estate contained in the trust. The trustee motioned to dismiss the case on the grounds that the beneficiary's case is time-barred by the applicable statute of limitations. The defendant claimed that the breach of fiduciary duty and gross negligence claims were based on events from 1963-2002 and that a five-year statute of limitations applied to the claims. The court agreed and dismissed the claims on the basis that the claims had to be brought within five years from the time the claims accrued. The narrow exception from the five-year limitation only applied in the context of "an express trust that is both continuing and subsisting" which did not apply in this case. However, the court did not grant the trustee's motion to dismiss the beneficiary's claim of a right to an accounting, and that the trustee's claim for unjust enrichment was not appropriate to rule on when the motion was for dismissal. Watkins v. PNC Bank, N.A., No. 3:13-CV-01113-TBR, 2014 U.S. Dist. LEXIS 132523 (W.D. Ky. Sept. 22, 2014).
The decedent executed a will almost a decade before he died without amending it after executing it. The will provided that the decedent's residuary estate would pass to his first wife with her children named as alternate beneficiaries. The decedent's wife pre-deceased him and he remarried and then died before his second wife. The surviving spouse claimed an intestate share of the estate under the state (AL) omitted-spouse statute (Ala. Code Sec. 43-8-90). While the trial court held that a beneficiary failed to prove that the decedent had provided for the spouse other than under the will, the state Supreme Court reversed. The Supreme Court determined that the evidence showed that the second spouse was provided for outside of the will by virtue of the decedent changing the beneficiary designations on life insurance and retirement accounts to the second spouse. The Supreme Court also noted that the decedent had considered changing his will but did not do so apparently because he believed that the second spouse was sufficiently provided for. Ferguson v. Critopoulos, No. 1130486, 2014 Ala. LEXIS 136 (Ala. Sup. Ct. Sept. 19, 2014).
In this case, the husband murdered his wife and then committed suicide. Neither the wife nor the husband had a will. Under the state (AL) slayer statute (Sec. 43-8-253), the slayer cannot benefit from the murdered person’s estate. Thus, the slayer is treated as having predeceased the decedent and, in this case, the wife’s intestate estate (and a portion of non-probate property) would pass under state law as if the husband had predeceased her. However, the administrator of the wife’s estate also claimed that the slayer statute should be construed such that the pre-deceased wife should inherit from the slayer-husband. The court disagreed, upholding a trial court determination that the plain reading of the slayer statute meant that the husband (as the “slayer”) would be treated as having predeceased the wife, and that his intestate hairs would receive his estate. Willingham v. Matthews, No. 1130890, 2014 Ala. LEXIS 139 (Ala. Sup. Ct. Sept. 19, 2014).
This case involved several homosexual couples living in Louisiana (LA) that were validly married in another state and one homosexual couple seeking to be married in LA. The LA constitution defines marriage as between one man and one woman and statutory law bars recognition of homosexual marriages contracted in other states. The LA Department of Revenue also requires homosexual couples lawfully married in other states to certify on their LA income tax return that they are filing as single persons for state income tax purposes. The plaintiffs claimed that LA law unconstitutionally violated their constitutional rights to equal protection and due process, and that the LA income tax certification violated their free speech. On the equal protection issue, the court determined that the LA constitutional ban on homosexual marriage was to be evaluated under rational basis review because the U.S. Supreme Court opinion in United States v. Windsor, 133 S. Ct. 2675 (2013) did not require heightened scrutiny and the constitutional ban on homosexual marriage was rationally related to the legitimate state interest of achieving marriage's preeminent purpose of linking children to their biological parents. Plaintiffs did not suffer discrimination based on gender because the ban on homosexual marriage applies to both genders equally irrespective of sexual orientation - neither homosexuals nor heterosexuals can marry someone of the same gender. The LA constitutional and statutory provisions also had no hateful animus because the law furthered the state's legitimate purpose of linking children to an intact family formed by their biological parents, and the state's legitimate interest in safeguarding fundamental social change through democratic consensus rather than the courts. On the Due Process claim, the court noted that homosexual marriage is not anchored to history or tradition and that no fundamental right guaranteed to everyone is involved. The court specifically noted that the plaintiffs could not maintain that state law against cousins marrying or polygamy were invalid and admitted that such marriages would have unacceptable "significant societal harms." Thus, rational basis review was invoked because no fundamental constitutional right was involved. Under that analysis the LA constitutional and statutory provisions are constitutional. The LA Department of Revenue requirement did not involve compelled speech, but prescribes conduct necessary to an essential government function of collecting taxes. Robicheaux, et al. v. Caldwell, No. 13-5090, 2014 U.S. Dis. LEXIS 122528 (E.D. La. Sept. 3, 2014).
Two sons (acting as an LLC) entered into a contract with their parents under which the sons agreed to purchase the parents’ farm, including their home, for $100,000. The contract was apparently drafted to protect the family farm from future Medicaid claims in the event the parents had to go to a nursing home. The sons made a $20,000 down payment, and then used the rental income to make the $5,000 yearly payments due under the contract. They also paid the real estate taxes and maintained the property. The parents continued to live in the house. Three years after the contract was signed (and one year after the father began suffering from dementia), the parents sued the sons, asking the court to declare the contract null and void based upon undue influence. The district court granted relief to the parents (the father was not actively involved in the lawsuit because of his health), finding that the sons had a confidential relationship with the parents and that they had placed undue influence on them. On appeal, the court reversed, finding first that no confidential relationship existed between the sons and their parents. Such a relationship, the appellate court said, did not arise simply because of a blood relationship. This finding was in spite of the fact that purpose of the confidential relationship rule (providing a presumption of undue influence) is not so much to afford protection to (in this case) the parents against the consequences of undue influence as it is to afford the parents protection against the consequences of voluntary action on their part induced by the existence of the relationship between the parents and their sons. At the time the contract was signed, the parents were of sound mind and did not rely on their sons for the management of their daily affairs. There was no evidence that the sons had a dominating influence over their parents so as to find a confidential relationship. Because there was no confidential relationship, the court found that the parents did not receive a presumption that their sons had acted with undue influence. The court then found that the parents failed to prove the four elements of undue influence: (1) grantor was susceptible; (2) opportunity to effect wrongful purpose; (3) disposition to influence unduly; and (4) result clearly appears to be the effect of undue influence. The court found that the evidence failed to prove that the sons induced their parents to sign the contract by undue influence. The court did reform the contract to grant the parents a life estate in the house and outbuildings, and to require the sons to provide a suitable house in town for them if they were to both leave the farm. Koehn v. Koehn Bros. Farms, LLC, No. 13-1036, 2014 Iowa App. LEXIS 867 (Iowa Ct. App. Aug. 27, 2014).
The plaintiff, a nursing home resident, transferred assets before applying for Medicaid benefits. The Medicaid agency calculated a penalty period running from November 2007 through September 2011. Subsequently, a part of the transferred assets came back to the plaintiff and the state Medicaid agency counted the value of the returned assets as excess resources and recalculated the penalty period as now running from July 2009 through April of 2013. The plaintiff argued that the original start date for the penalty period should remain in force, even though state regulations said that the penalty period is to be recalculated when transferred assets are returned and runs until those assets are spent down to the required minimum. The court upheld the regulations, noting that federal law was silent on the issue. Aplin v. McCrossen, No. 12-CIV-6312-FPG, 2014 U.S. Dist. LEXIS 119682 (W.D. N.Y. Aug. 25, 2014).
The plaintiff resided in a nursing home and loaned her daughter $98,000 in exchange for a promissory note. The note was not assignable and could not be sold. After making the note and promissory note, the plaintiff applied for Medicaid. The state Medicaid agency determined that the note was an available resource as a "trust-like" device. On appeal, the state administrative agency affirmed on the basis that the note was a "trust-like" device or because it was an uncompensated transfer. On further review, the court reversed on the basis that the note could not be converted into cash. No transfer penalty applied because the court determined that the note was actuarially sound. Frantz v. Lake, No. CIV-14-117-W, 2014 U.S. Dist. LEXIS 116916 (W.D. Okla. Aug. 22, 2014).
Before death and during the applicable Medicaid look-back period, the father deeded his residential real estate to his daughter and retained a life estate in the property. After the transfer, the father applied for Medicaid benefits, and received over $170,000 in benefits by the time of his death. The state (Idaho) Medicaid agency filed an estate recovery claim in his estate pursuant to state law. ID law provides that the state Medicaid agency has a claim against non-probate property that passes to a survivor via life estate and other arrangements. The trial court determined that only the remainder interest was an asset of the estate. That determination was upheld on appeal. The estate appealed, asserting that the decedent didn't have any interest in the life estate at death. On further review the ID Supreme Court held that the retained life estate was also an estate asset for Medicaid estate recovery purposes. In re Estate of Petersen, No. 40615, 2014 Ida. LEXIS 217 (Idaho Sup. Ct. Aug. 13, 2014).
The plaintiff filed an action as her mother’s legal guardian and conservator and the successor trustee of her parents' living trusts, seeking to rescind or reform a deed they executed in 1995 and a contract they signed in 1998. The lower court dismissed the plaintiff’s claims, finding that the statutes of limitations had run before the plaintiff filed her lawsuit in 2005. On appeal, the court found that the statute of limitations did not apply to the equitable claims, but that they would be subject to the defense of laches. Because the lower court did not consider a laches defense, the court vacated the dismissal and remanded for a determination of whether any factual questions would preclude summary judgment on the laches defense. Moffitt v. Moffitt, No. S-14495, 2014 Alas. LEXIS 156 (Alaska Aug. 8, 2014).
Before they were married in 1997, the decedent and his wife entered into an antenuptial agreement. At the time, the decedent owned property valued at almost $1.1 million, including farmland, a residence, and farm machinery. The wife’s assets were valued at approximately $150,000. The antenuptial agreement provided, "The will executed by [decedent] shall provide that he will leave his estate to [his wife], if she survives him." It further prohibited the alteration or revocation of the parties’ wills without consent of the other party. In 2011, the decedent executed a will in which he left 25% of his property to his wife and tp each of his three sisters. The decedent died in 2012. His wife filed a claim against the estate, asserting that the decedent’s will violated the terms of the antenuptial agreement. The trial court agreed and entered summary judgment in the wife’s favor. The sisters appealed, arguing that the antenuptial agreement was ambiguous. The court affirmed, finding that the contract as a whole was not ambiguous. An early recital in the contract stating that each party retained an unhindered right to dispose of their individual property merely made it possible for the later provision to dictate how the decedent would dispose of it. Estate of Kleinlein v. Kauffman, NO. 4-13-1086, 2014 Ill. App. Unpub. LEXIS 1698 (Ill. Ct. App. Aug. 5, 2014).
At the time of the decedent's death, he was the sole owner of a satellite uplink company that provided satellite access to a religious non-profit company operated by the decedent's son. In the year of the decedent's death, his company had $16 million in revenue. The decedent's estate was valued at $9.3 million, but IRS valued it at nearly three times that amount. The court determined that the key to the success of the decedent's corporation was his son and the son's goodwill which had not been transferred to the decedent's corporation. The Tax Court accepted the $9.3 million valuation. Estate of Adell v. Comr., T.C. Memo. 2014-155
A decedent’s will named three equal beneficiaries: her son, her stepdaughter, and her step-granddaughter. The step-granddaughter was the attorney-in-fact for the decedent during her lifetime. She was also listed (with the son) as a 50% beneficiary of a POD bank account owned by the decedent. Shortly before the decedent’s death, the step-granddaughter, acting as her attorney-in-fact, sold the decedent’s home, acreage, and household contents at an auction. She deposited the net proceeds, which totaled $80,240, into the POD account. When the decedent died, the stepdaughter split the POD bank account proceeds with the son, and, acting as the executor of the decedent’s estate, filed a small-estate affidavit stating that the value of the decedent’s estate totaled only $9,800, thereby not requiring the granting of letters testamentary. The stepdaughter petitioned the court to direct the application for letters testamentary, arguing that the value of the estate was in excess of $40,000. The trial court concluded that the step-granddaughter exceeded her authority as attorney in fact in depositing the proceeds from the auction into the POD account. On appeal, the court affirmed, ruling that the step-granddaughter was not authorized to make a gift to herself absent express authorization by the decedent. The power of attorney form authorized the step-granddaughter to make gifts to herself only if she respected the intentions of the will. The step-granddaughter was required to turn over the auction proceeds to the estate. In re Estate of Qualls, No. WD76962, 2014 Mo. App. LEXIS 815 (Mo. Ct. App. Jul. 29, 2014).
In consolidated interlocutory appeals, defendants (financial companies and accountants) challenged the district court's certification of a class of investors in four funds created and managed by the Fairfield Greenwich Group, which sustained billions of dollars in lost value following the collapse of the Madoff Ponzi scheme. In vacating the district court’s order, the court ruled that the order did not indicate how common evidence could show (1) the existence of a duty of care applicable to the class or (2) reliance by the class on alleged misrepresentations. Both were required to show that individual issues did not predominate and that the class should be certified under Fed. R. Civ. P. 23(b)(3). The court noted that Rule 23 did not set forth a pleading standard, but that the "party seeking class certification must affirmatively demonstrate compliance with the Rule.” A district court could only certify a class if it was “satisfied, after a rigorous analysis,'" that the requirements of Rule 23 were met. Stephen's Sch. v. PricewaterhouseCoopers Accountants N.V., Nos. 13-2340-cv(L), 13-2345-cv(Con), 2014 U.S. App. LEXIS 11515 (2d Cir. N.Y. Jun. 19, 2014).
The defendant was the nephew of an elderly man who had been cared for by his longtime partner. After his partner could no longer care for him, the defendant moved in with the uncle and began providing him with care. He immediately obtained a power of attorney. During the year that he lived with his uncle, the defendant transferred a number of assets of the uncle to himself through the power of attorney. Shortly before the uncle’s death, the defendant was charged with knowing and intentional abuse of a vulnerable adult, attempted theft by deception, and attempted knowing and intentional abuse of a vulnerable adult. The defendant was convicted on 39 counts of abuse. On appeal, the court ruled that the evidence was sufficient to show that the uncle was a vulnerable adult and that he had a mental or functional impairment during the time in question. The evidence showed that the uncle could no longer care for himself and that he was consistently confused. A CT scan had revealed that the uncle’s brain had shrunk due to dementia. The evidence established that the defendant used his power of attorney not for the benefit of the uncle, but to assure that he and his siblings would benefit from the uncle’s property.The district court did not give the jury misleading, confusing, or incomplete jury instructions. State v. Rakosnik, 22 Neb. Ct. App. 194 (2014).
Plaintiff was the son of a man who married the decedent shortly after his first wife (the mother of the plaintiff) died from Alzheimer’s disease. The mother had inherited substantial assets from her parents, and those assets were transferred to the father upon her death. Within a month of the marriage, the father and the decedent entered into a contract to make wills, providing that after the death of the survivor, one-half of the survivor’s estate would be divided between the plaintiff and the decedent’s grandchild. The contract provided that in the event of the revocation of such a will, the son would be entitled to bring an action in equity seeking specific performance. The father died in 2008 without having revoked his will. All of his assets passed to the decedent. A year after the father’s death, the decedent informed the plaintiff that she did not wish to hear from him again. In 2010, the decedent revoked her will made pursuant to the contract. She died in 2012. The plaintiff did not know of her death for nine months. He immediately filed an action to enforce the terms of the contract against the estate. The decedent’s two children, who were the sole beneficiaries under who new will, filed a motion for summary judgment contending that the statute of limitations had passed because the will had been admitted to probate eight months earlier. In affirming the lower court’s judgment in favor of the estate, the court found that the plaintiff’s action was governed by the three-month limitations period governing will contests. The plaintiff was not a “reasonably ascertainable creditor” of the estate entitled to actual notice and granted nine months to file a claim. The court also rejected the plaintiff’s argument that the three-month limitations period violated his due process rights. A breach of contract to make a will action could be similarly limited as a will contest action. Sufficient notice of the admission of the will to probate was provided by publication. Markey v. Estate of Markey, No. 89A05-1402, 2014 Ind. App. LEXIS 305 (Ind. Ct. App. July 9, 2014).
The plaintiff and his wife resided in Utah and had been married for 18 years before divorcing in 2006. In 2002, the plaintiff had formed a trust which stated that the "validity, construction and effect of the provisions of this Agreement in all respects shall be governed and regulated according to and by the laws of the State of Nevada. The administration of each trust shall be governed by the laws of the state in which the Trust is being administered." The couple contributed their assets to the trust, including the wife's portion of their primary residence (NV is a community property state). However, the trust did not name the wife as a beneficiary. Rather, the named beneficiaries were the plaintiff "during his lifetime" and "the Settlor's [plaintiff's] spouse," and "the settlor's issue." Thus, once the divorce occurred, the wife (now ex-wife) no longer had any beneficial interest in the trust. Compounding matters, under NV law, the trust would be treated as an irrevocable trust that couldn't be amended. But, on that point, a drafting was critical. The trust stated, "The trust hereby established is irrevocable. Settlor reserves any power whatsoever to alter or amend any of the terms or provisions hereof [emphasis added]. After the parties divorced, the wife sued alleging, among other things, that the plaintiff used the trust to disinherit her out of her share of the marital assets. The trial court ruled for the plaintiff on the trust issue, and the wife appealed. On the choice of law issue, the court noted that because the action was filed in Utah, Utah law would govern whether UT or NV law would apply to the trust. While UT law requires courts to enforce a trust's choice-of-law provision, an exception exists if doing so would violate public policy. On that point, the court determined that utilizing NV law would violate the UT principle of equitable distribution of marital property and that this was a strong public policy to uphold. Thus, the court held that UT law would apply to the trust. On the issue of the irrevocability of the trust, while the trust stated that NV law was to apply, that was a moot point because the court had already determined that UT law would apply to the trust. While the plaintiff argued that he couldn't amend the trust, the court disagreed and construed the unclear drafting of "any" against him when it was supposed to say "no". As such, the plaintiff could amend the trust and the trust was rendered revocable, and the ex-wife could revoke the trust as to the property that she contributed to it because the court deemed her to be a settlor with respect to those assets. A contributor of assets to a trust, the court reasoned, is a settlor of the trust. What property the ex-wife contributed to the trust was to be determined on remand by the trial court. Dahl v. Dahl, Nos. 20100683, 20111077, 2015 Utah LEXIS 51 (Utah Jan. 30, 2015).
The trustee of the irrevocable trust of a decedent defended an action in which the beneficiaries alleged that he wrongfully transferred property from the deceased to himself. He then used trust money to pay for his attorney fees. The beneficiaries filed an action seeking an accounting by the trustee. The trustee initially denied any wrongdoing, stating that there were no funds to distribute and that he had defended the prior action in both his personal and fiduciary capacity. The parties reached a settlement agreement under which the trustee agreed to repay $63,000 to the trust, to immediately distribute the $10,000 currently in the trust fund to the beneficiaries, and to repay the remainder by May 31, 2012. On June 1, 2012, the beneficiaries filed a motion seeking to have the trustee held in contempt because he had made no payments to the beneficiaries and his attorney had ignored all communications. After a hearing, the trial court refused to vacate the settlement order and found the trustee to be in contempt. The court did not, however, issue a sanction, but instead directed the trustee to comply with restated terms or else face a future sanction. On appeal, the court affirmed, finding no abuse of discretion because there was credible evidence that although the trustee suffered from multiple sclerosis, he understood the terms of the settlement agreement and entered into it voluntarily. Because the contempt order did not include a sanction, it was not appealable under Nebraska law. In re Morris, No. A-13-313, 2014 Neb. App. LEXIS 115 (Neb. Ct. App. Jun. 24, 2014).
The decedent's estate filed Form 4768 requesting an extension of time to file the estate tax return. Along with Form 4768, the estate paid $2,494,088 in estimated federal estate tax. Along with the form and payment, the estate advised IRS of its intent to make an I.R.C. Sec. 6166 election to pay the estate tax in installments. Via a Sec. 6166 election, the estate is divided into a deferred and non-deferred portion, and the tax attributable to the non-deferred portion is due with the Form 4768. Later, when the Form 706 was prepared and filed, it was determined that estate had overpaid the non-deferred portion by almost $500,000. The estate sought a refund of the overpayment, which IRS denied. The court denied the refund request but, based on I.R.C. Sec. 6402 and Sec. 6403, held that the excess amount paid could be applied to the taxes that were eligible for deferral as the installments became due. The court rejected the estate's argument that by designating the estimated payment as being for the non-deferred portion of the estate tax liability that IRS was bound to that designation and had to refund the excess. The court also rejected the estate's argument that Sec. 6403 did not apply because the estate had already paid before making the election, and that Sec. 6402 required a refund instead of a credit. Estate of McNeely v. United States, No. 12-cv-1973, 2014 U.S. Dist. LEXIS 80000 (D. Minn. Jun. 12, 2014).
The decedent married his second wife in 2002, five years before his death. He had three children from a prior marriage. During the decedent’s lifetime, he executed a will naming his daughter as his executor. Because he had made contributions to the marital home, he also asked an attorney to prepare a deed under which his second wife would transfer their marital home to the decedent and herself as tenants in common. Less than a month before the decedent’s death, the deed was executed and recorded. On September 26, the decedent entered hospice care after doctors told him there were no further treatments for his kidney cancer. On September 28, he executed two codicils to his will, one stating that he wanted his wife to have all of his personal property and another stating that he wanted his wife to have all personal accounts and items in their home. On September 29, the wife drove the decedent to a bank and asked a bank employee to come to the car in the parking lot to notarize a deed granting the home to the couple as joint tenants with rights of survivorship. The decedent died on October 2. After five years of litigation, the probate court found that the decedent was in a weakened state when he executed the last deed and the two codicils. The judge found suspicious circumstances and held that the wife had fraudulently executed the documents. As such, the judge order her to pay damages, plus $397,309 in attorney fees and costs to the estate. On appeal, the court affirmed, finding that the probate court was to be granted great deference. There was a confidential relationship between the decedent and his wife and the court would not second-guess the probate court’s conclusions that the wife had gained an advantage due to that confidence. The court found that fees were appropriately awarded when a person commits fraud which results in the development or modification of estate documents that create or expand the fiduciary’s beneficial interest in the estate. In re Estate of Folcher, No. A-1790-12T4, 2014 N.J. Super. Unpub. LEXIS 1340 (App. Div. Jun. 10, 2014).
A couple divorced in 2010. Eight years before the divorce, the husband had entered into a farming partnership with his brother. The husband contributed $80,526 in equity and his brother contributed $471,066 in equity. At the divorce trial, the wife’s expert testified that the husband’s 2010 equity interest in the partnership was $946,280 and his brother’s was $1,336,820. The trial court agreed that the husband had a 50 percent ownership in the partnership (after accounting for the differences in initial contributions), and ordered the husband to make a $946,280 equalization payment to the wife. The court also found that the wife was entitled to a $20,000 credit in the division of the marital estate for a gift her mother had given her to remodel the basement of the marital home. The couple rented the home from the husband’s parents, but the wife and her mother testified that the gift was made in reliance upon promises that the husband and wife would eventually own the home. On appeal, the husband claimed that he owned only a 13-percent interest in the partnership and that a minority interest discount should also apply. In affirming the judgment, the appellate court ruled that the district court did not abuse its discretion. The husband and his brother had represented on financial documents, tax returns, and USDA disclosures that they each owned an equal share. Additionally, the partners had equally shared profits, losses, income, expenses, and depreciation. The court also found that the district court was in the best position to weigh the credibility of the parties in determining that the $20,000 was a non-marital gift. Kunnemann v. Kunnemann, No. A-13-276, 2014 Neb. App. LEXIS 105 (Neb. Ct. App. Jun. 10, 2014).
The testator died at the age of fifty-five, leaving three surviving children. She executed a new will and got married one day before her death, while she was living in a hospice facility. In her will she devised all of her property to her new husband and appointed him to be the personal representative. She had been estranged from her children for several years. After being diagnosed with incurable lung cancer two months before her death, the testator spent the majority of her time in the hospital, in pain and on pain medication. By the time she executed the will, the testator was unable to speak, but nodded in affirmation to the will read to her. She signed the will with a “hand-over-hand” method, being unable to sign alone. The only witness to the will was the testator’s new husband’s mother. The testator’s children visited her in hospice the day before she died. One month after the testator’s death, her husband filed an application for informal probate of the will, the will was informally admitted, and the husband was appointed as the personal representative. One daughter filed a petition for a formal adjudication of intestacy and sought appointment as the personal representative. The daughter alleged that the testator lacked testamentary capacity. The probate court denied the daughter’s petition, and the appellate court affirmed, finding that the probate court did not abuse its discretion in excluding the husband’s expert witness on the grounds of an untimely designation. The daughter was not unfairly surprised by his testimony and he did not offer any opinion regarding the testator’s testamentary capacity. The husband presented prima facie evidence of due execution of the will, and the daughter failed to prove the absence of testamentary capacity. Estate of O'Brien-Hamel, No. And-13-440, 2014 Me. LEXIS 83 (Jun. 10, 2014).
The decedent’s will bequeathed to her husband a life-time usufruct (use right) over her community property and separate property. Her will provided that the husband was entitled to sell the property subject to the usufruct. After the decedent’s death, the probate court entered a judgment ruling that the husband was entitled to a one-half interest in the decedent’s community property, as well as a usufruct for his lifetime of the remaining undivided one-half interest, as provided by the decedent’s will. The judgment also provided that an undivided one-eighth interest in the community property (subject to the usufruct) was to vest in each of the decedent’s children, two of which were from a prior marriage. Approximately 14 years after the entry of the judgment of possession, one of the decedent’s children from her first marriage filed a petition in the succession proceeding seeking to terminate the usufruct based upon allegations that the husband had sold property subject to the usufruct without authorization from the owners of the naked title and that he intended to sell more in the future. The trial court granted partial summary judgment for the husband as to the question of whether the judgment of possession incorporated the terms of the will (allowing the husband to sell the property). The trial court also entered judgment for the husband on the remaining claims and found that he was not required to post bond. On appeal, the court found that the trial court correctly ruled that the judgment of possession incorporated the terms of the will. However, the court found that the trial court erred in not requiring the husband to post bond, ruling that under Louisiana law, a surviving spouse who receives a legal usufruct over estate property is required to post security if the owners of naked title are children of a previous marriage of the decedent. The court remanded for a determination of the proper amount of the security (which was to be in the trial court’s discretion). The court found that although the record supported a finding that the husband had acted as a prudent administrator, the posting of security was mandatory under the law. In re the Succession of Beard, No. 2013 CA 1717, 2014 La. App. LEXIS 1514 (La. Ct. App. Jun. 6, 2014).
A testator with no issue left a will granting four nephews and one niece an option to purchase her farm. If more than one option holder wanted the farm, a lottery would determine the buyer. One of the nephews predeceased the decedent with no issue of his own. The executor of the estate took to the position that the option to the deceased nephew lapsed and that the option was to pass to the residuary beneficiaries. One of the other nephews disagreed, arguing that because the gift was a class gift, it was to pass to the other members of the class. The executor sought declaratory relief, and the trial court granted summary judgment for the nephew. On appeal, the court affirmed, finding that the language in Alice's will was a reasonably clear expression of intent for the gifts, including the option, to pass to a class of her relatives. The court found that the decedent initially named the class by name and thereafter referred to them by class. As such, the court found that, KRS 394.410(1), which governed class gifts, controlled. Reynolds v. Reynolds, No. NO. 2013-CA-000865-MR, 2014 Ky. App. LEXIS 85 (Ky. Ct. App. May 23, 2014).
The decedent, an owner of a broadcasting corporation, died with a sizeable estate and the estate elected to pay a portion of the estate tax due in installments via I.R.C. Sec. 6166. Shortly before death, the decedent paid a $6.7 million legal judgment on his son's behalf that had been entered against his son. On the estate tax return, the $6.7 million amount was included in the estate as a loan receivable. Of the $15.3 million in estate tax due, the estate paid $8.1 million that could not be paid in installments, and deferred via I.R.C. Sec. 6166 the balance of the estate tax due. A year later, the estate filed an amended estate tax return reclassifying the $6.7 million as a taxable gift and filed a gift tax return and paid the $2.9 million in gift tax on the gift. Another two years later, the estate again filed an amended estate tax return reporting one of the assets in the estate at zero which had originally been valued at $9.3 million. The IRS assessed $650,000 as a penalty for late filing of the gift tax return, another $606,000 for late filing of the gift tax return and $742,000 of interest. The IRS also issued notices of deficiency for estate tax for almost $40 million and almost $3 million of gift tax. The estate sought to have the $8.1 million of estate tax paid applied against the gift tax liability. The estate also claimed that it had made an overpayment of estate tax and that I.R.C. Sec. 6402 allowed the estate to have the overpayment credited against the gift tax. Based on what the parties had already agreed to, the court noted that there was no available overpayment of estate tax to credit against the gift tax liability and that IRS could proceed to collection. Estate of Adell v. Comr., T.C. Memo. 2014-89.
When the wife sought divorce, the couple owned two pieces of real estate that made up the bulk of their marital estate: the marital home, worth approximately $150,000, and 158 acres of farmland worth approximately $885,000. The husband owned the marital home before the 25-year marriage, and during the marriage he inherited the farmland, which had been in his family for more than 100 years. Because the wife had no involvement in the acquisition of these assets, the trial court determined that a 70-30 unequal distribution as appropriate. He awarded the home and the farm to the husband and ordered him to make a cash-equalization payment of $309,885 to the wife. Both parties appealed, the wife arguing for an equal distribution and the husband contending that he would have to sell the farm to make the payment to the wife. In affirming, the court ruled that neither party had overcome the strong presumption that the trial court acted in accordance with the law in setting the distribution. The trial court did not act unjustly or unfairly. Powell v. Powell, No. 03A04-1308-DR-399, 2014 Ind. App. Unpub. LEXIS 673 (Ind. Ct. App. May 22, 2014).
In this case, the decedent died in 2006 with a taxable estate that included an investment account valued at the time of death at $4.8 million. The estate paid federal estate tax of $1.9 million attributable to the account and sought a refund on the basis that the account was part of a Ponzi scheme established by Bernie Madoff and should have been valued at zero. The court denied summary judgment for the IRS on the issue that the taxable asset was the account itself rather than the underlying assets. The court also denied summary judgment to the IRS on the issue that the application of the willing-buyer/willing-seller test of Treas. Reg. Sec. 20.2031-1(b) would not result in an account value of zero as of the time of the decedent's death. The court noted that the account value was established via an appraisal, but said that the estate raised a disputed issue of material fact that if the estate had used a more rigorous fair market value standard a hypothetical buyer might have, through due diligence, discovered that the account was fraudulent and had no value as of the date of the decedent's death. The case will proceed to trial on the refund issue. However, the withdrawals from the decedent's account during life far exceeded the amount deposited into the account which makes the account subject to clawback by the Madoff bankruptcy trustee which is seeking $2.9 million from the estate. Estate of Kessel v. Comr., T.C. Memo. 2014-97.
A farm couple’s marriage ended in divorce. After the wife moved out, but before the husband filed for divorce, he planted wheat and triticale. The couple stipulated that the marital estate was to be valued as of the date of the divorce filing. However, they could not agree as to the value of the growing crops. The district court valued the crops “somewhere above the actual input price and somewhere below the gross return.” The wife alleged on appeal that the district court erred in its valuation, as well as in failing to properly account, with its method, for the value of the crop insurance and subsidy payments. In affirming, the court ruled that a district court has broad discretion when dividing the property of a marital estate and that its decision will not be disturbed absent a clear showing of abuse. The court found that the district court reasonably valued the growing crops in a manner consistent with Kansas law. The district court heard the evidence and weighed the potential economic value of a mature crop against the potential risk associated with an immature crop to arrive at a value "somewhere above the actual input price and somewhere below the gross return." The district court's valuation of $152,500 was supported by the evidence and was well within the wide discretion a trial court must exercise when dividing marital property. The court also ruled that the district court did not abuse its discretion accounting for the tractor repair expenses or in refusing to award post-judgment interest on the equalization payments the husband paid to the wife. In re Marriage of Stevenson, 2 No. 109,497, 014 Kan. App. Unpub. LEXIS 384 (Kan. Ct. App. May 16, 2014)
The decedent died with a large estate and with two grandchildren as his only heirs. By the filing deadline for the estate tax return, the estate filed a request for an extension of time to file and paid $6.5 million in federal estate tax, a portion of the estate tax due. The estate only made partial payment of estate tax due to legal advice that the estate might be able to elect installment payment under I.R.C. Sec. 6166. The estate did receive a six-month extension to file. The estate filed by the extended due date, but did not elect installment payment treatment. The estate also requested an extension of time to pay. The IRS denied an extension of time to pay and imposed a failure-to-pay penalty. The estate then paid the estate tax due and a penalty of nearly $1 million, plus interest. The estate then sued for a refund of the penalty and interest. The trial court granted summary judgment for IRS. On appeal, the court vacated the trial court's decision and remanded the case. The court noted that the estate relied on the faulty advice of a tax "expert" and that could constitute reasonable cause for failure to pay by the deadline if the taxpayer can show either an inability to pay or undue hardship from paying at the deadline. Estate of Thouron v. United States, No. 13-1603, 2014 U.S. App. LEXIS 8890 (3d Cir. May 13, 2014).
In this IRS administrative ruling, the decedent died in 2010, the year that a decedent's estate could elect out of the federal estate tax in return for having the modified carryover basis rules apply to the decedent's property. IRS Form 8939 was to be filed to elect out of the estate tax and allocate basis to the decedent's assets. The decedent owned 100 percent of the assets in a closely held company, but the executor reported on Form 8939 that the decedent owned only a portion of the company's assets. Also, on Form 8939, the executor reported unrealized losses of the decedent from the decedent's interests in the company and allocated a pro-rata portion of the losses as additional basis to other property reported on Form 8939. After filing Form 8939, the executor discovered the error and wanted to file a supplemental Form 8939 to fully allocate the losses to the other assets and increase their basis. IRS said that relief would not be granted because improper reporting on Form 8939 did not qualify for relief in accordance with IRS Notice 2011-66. Relief is only granted in accordance with Notice 2011-66 if the executor discovers additional property to which remaining basis could be allocated. Priv. Ltr. Rul. 201418002 (Dec. 23, 2013).
A son of the decedent challenged the circuit court’s interpretation of the decedent’s will, arguing that the court incorrectly considered extrinsic evidence, resulting in a lesser share distributed to his children. The appellate court agreed, ruling that the circuit court should not have relied on extrinsic evidence of intent where the will’s terms unambiguously provided the distribution scheme. Each child of the decedent (or their kin) was to receive 25 percent of the property remaining after payment of expenses. That amount, however, was to be reduced by the stated sum for each bequest, and the residue was to pass, in trust, to the son’s children. On remand, the circuit court was to direct the personal representative to distribute the property accordingly. In re Estate of Christiansen, No. 2013AP1134, 2014 Wisc. App. LEXIS 348 (Wisc. Ct. App. Apr. 29, 2014).
The petitioners were three of the four sons (and equal beneficiaries) of a decedent’s estate. The estate, which was poured into trusts, comprised a large operating ranch and mineral interests. The trusts provided that one of the decedent’s sons and the decedent’s nephew were to be the co-trustees. The trusts also provided that none of the remaining sons or their descendants was to ever serve as trustees. The petitioners sought to remove the co-trustees on the grounds of breach of fiduciary duty stemming from the allegation that the co-trustee brother acted with a conflict of interest in serving as both co-trustee and as president of the ranch corporation (the stock of which was held by the trust). In affirming the district court’s denial of the petition, the court found that the petitioners had failed to show that the district court abused its discretion. The record revealed that the co-trustees followed the instructions of the decedent, the brother co-trustee was a CPA who carefully maintained all records, and the trust property was productive. At the heart of the matter, stated the court, was a family farm passed down to beneficiaries who disagreed with the decedent’s decisions. Kavon v. Kavon, No. 13-0576, 2014 MT 100N, 2014 Mont. LEXIS 154 (Mont. Sup. Ct. Apr. 15, 2014).
A decedent left his property, in trust, for his wife and nephews. He also named his wife as the trustee of the trust. A dispute arose between the wife and the nephews regarding her administration of the trust. They filed an action against the wife, arguing that she had an impermissible conflict of interest as both the trustee and the beneficiary. They also argued that the wife breached her fiduciary duties to them in the way she valued the units of a partnership in which the nephews had an interest and in acting hostilely toward them. The trial court dismissed the nephews’ claims and granted relief to the wife as to her counterclaim that the nephews acted in bad faith toward the trust in their administration of the partnership. On appeal, the court affirmed. The decedent created the trust knowing that the wife would be both beneficiary and trustee. Therefore, he condoned this conflict. The trial court’s finding that the wife acted in good faith in her administration of the trust and did not engage in self-dealing was supported by the evidence. Even if the trial court was required to strictly scrutinize the wife’s actions, the nephew’s did not show that the trial court failed to do so. The record also supported the trial court’s conclusion that the nephews operated the partnership as though they owned it outright. They intentionally and improperly kept financial records from the wife. Fanetti v. Donald A. & Marilyn J. Fanetti 2004 Rev. Tr., No. 2013AP1870, 2014 Wisc. App. LEXIS 330 (Wisc. Ct. App. Apr. 22, 2014).
I.R.C. Sec. 6166(d) specifies that the election is to be made on a timely-filed (including extensions) return in accordance with the regulations. The regulations are detailed, and require that the appropriate box on Form 706 be checked and a notice of election be attached to the return. The notice of election must also contain certain information. In this case, however, the estate filed for an extension of time to file and included in that filing a letter that expressed the estate's intent to make an installment payment election and estimated that approximately $10,000,000 in tax would be paid in installments. A subsequent request for an additional extension was made along with another letter containing some of the required information for an I.R.C. Sec. 6166 election. IRS denied the second extension and informed the estate to file by the previously extended due date. The estate ultimately filed its estate tax return late and attached a proper notice of election to pay the tax in installments. IRS rejected the election for lack of timely filing, but estate claimed that it substantially complied. The court determined that the estate's letters did not contain all of the information required by the regulations to make the election, particularly valuation information to allow IRS to determine if the percentage qualification tests had been satisfied. Thus, the estate did not substantially comply with the regulations and the election was disallowed. Estate of Woodbury v. Comr., T.C. Memo. 2014-66.
In this case, the decedent was a 53-year-old mother of two who died of brain cancer. Four days before her death, her friends and family held a benefit auction for the purpose of raising money to assist the decedent with medical expenses. The auction raised $5,174, but none of the money was placed in the decedent’s control before she died. The companies in charge of the auction thus donated the money to charity as a memorial to the decedent. In his final report to the court, the decedent’s executor (her brother) did not include the benefit money as part of the estate’s assets. Her sons objected to the final report on that basis, but the district court overruled their objections. The sons filed their notice of appeal one day late, and the court ruled that it did not have jurisdiction to hear the appeal. Nonetheless, the court stated that the claims would have failed on the merits. There was insufficient evidence presented by the sons, the court said, to show that the donors intended their donations to be present “gifts” to the decedent. In re Estate of Braner, No. 13-1014, 2014 Iowa App. LEXIS 417 (Iowa Ct. App. Apr. 16, 2014).
Here, an irrevocable trust with a South Dakota situs was created for the settlor's three children. A trust protector was designated that had "the power to represent the Trust with respect to any litigation brought by or against the Trust if an Trustee is a party to such litigation" and "to prosecute or defend such litigation for the protection of Trust assets." Ultimately, the children who were the beneficiaries and trustees liquidated the trust and distributed the proceeds outright to themselves. The trust protector sued on the grounds that the liquidation and termination was wrongful and frustrated the trust's intent. The children filed a motion to dismiss and argued that the trust protector was not a party in interest and couldn't sue on the trust's behalf. The court granted the motion to dismiss because, under South Dakota law, trust protectors are not a real party in interest with respect to trust litigation matters and personally didn't suffer any harm from the termination of the trust. Schwartz v. Wellin, No. 2:13-cv-3595-DCN, 2014 U.S. Dist. LEXIS 53083 (D. S.C. Apr. 17, 2014).
In 1995, the decedents created a revocable living trust in which they specified that their property was to be distributed equally among their three children. In 2000, they amended paragraph 3.4 to provide that the farm assets were to be distributed to the daughter. In 2006, they again amended the trust, replacing paragraph 3.4 with a paragraph again distributing all assets equally among their children. After the death of the second decedent, the trustee (a bank) sought to reach a family agreement as to asset distribution. The daughter contended, however, that she was still entitled to all of the farm assets. The district court ruled that the amendment unambiguously stated that the property, including the farmland, was to be distributed equally among the three children. The daughter appealed, arguing that she was entitled to discovery to show that her parents intended for her to receive the farm property. On appeal, the court affirmed, ruling that the district court did not err in ruling that the property should be distributed in equal shares. Because the amendment was unambiguous, no evidentiary hearing was required. In re H & A Neumann Revocable Trust, A13-1150, 2014 Minn. App. Unpub. LEXIS 313 (Minn. Ct. App. Apr. 14, 2014).
The testator had four natural children and six step-children from his second wife to whom he was married for 28 years until her death. Several step-children had daily contact with the testator, and one sharecropped his land. His natural children lived out of state. About a year before his death, the testator moved in with the sharecropping stepson. During the last several years of his life, the testator (with the help of his stepson’s wife who was writing out his checks) wrote several checks to his stepson and his wife. Another stepson took the testator to an attorney in the last year of his life, and the testator transferred one farm to the accompanying stepson and one farm to the sharecropping stepson for one-half of the farms’ respective fair market values. A stepdaughter took the testator to an attorney’s office where he executed a will three months before he died. Due to the testator’s declining mental health, the testator’s natural son was appointed to be his guardian two months before his death. At his father’s death, the son sought to have the district court invalidate the pre-death transfers and the testator’s will. The district court granted relief to the son, finding that the stepchildren had exerted undue influence and that the testator lacked testamentary capacity. In affirming the judgment, the court ruled that the district court’s findings were not clearly erroneous and would not be disturbed. They would therefore be left undisturbed. Erickson v. Olsen, No. No. 20130217, 2014 ND 66, 2014 N.D. LEXIS 59 (N.D. Sup. Ct. April 3, 2014).