Case Summaries
(court recognized recovery of attorney fees for extraordinary services rendered because of litigation concerning attorney fee request under Iowa Code § 633.19; attorneys’ request must comply with Iowa Rule of Probate7.2(3) and include itemized bill, written statement regarding necessity of expenses or services, responsibilities assumed, extra work involve and importance of matter to estate).
(IRS has acquiesced in result only in Alan Baer Revocable Trust Dated February 9, 1996 v. United States, No. 8:06CV774, 2010 WL 1233917 (D. Neb. Mar. 23, 2010) where the court allowed a marital deduction for stock that was subject to a contingent bequest; the decedent, owner of stock in a private, closely held, telecommunications company, died in 2002 leaving his shares to 23 beneficiaries through a trust; bequests contingent on trustee selling stock at profit (in excess of decedent's cost basis); balance of shares passed to qualified residual interest trust (QTIP trust) for surviving spouse; marital deduction claimed for QTIP and for which the estate claimed a marital deduction; IRS moved for summary judgment, but court denied motion allowing estate to show that contingency would never occur in accordance with I.R.C. Sec. 2056(b)(7)(b)(ii)(II) and assuming that taxpayer properly elected QTIP treatment on estate's return; IRS acquiesced in result only because the stock was of negligible value and the court’s decision was, thus, irrelevant; but, IRS position remains that test for QTIP treatment is a bright-line test and not the "so remote as to be negligible standard" of the court).
(plaintiff established irrevocable discretionary trust and funded it with tangible personal property; plaintiff applied for Medicaid benefits and was denied on basis that trust assets were available resources which caused plaintiff to exceed $1,500 resource eligibility limitation; court agreed that trust resources were available for Medicaid eligibility purposes on basis that trust was self-settled trust that was not fully discretionary).
(married couple established joint revocable trust; trust terms specified that income to be distributed to grantors during their lives for their support and then upon the last of them to die, trustee to make specified distributions to children and grandchildren; wife became incapacitated and husband amended trust on numerous occasions, but trust terms required changes to be in writing with both grantors signing and then providing changes to trustee; such procedure not followed, but trustee attempted to carry out changes upon discovering them; amendments significantly reduced amount ultimately received by children and grandchildren; court determined that amendments invalid – trust terms control).
(estate entitled to $11.7 million charitable deduction for amount paid to charitable trust in settlement of dispute with decedent's son concerning residuary estate; court concluded that decedent wanted residuary estate to pass to charitable trust, but failed to do so do solely to scrivener's error (all other testamentary instruments had provided for a charitable residuary bequest, but 1999 will failed to include it due to scrivener's error); I.R.C. Sec. 2056 has been narrowly construed to curtail marital deduction abuses, but I.R.C Sec. 2055 is designed to encourage charitable gifts; bona fide dispute existed as to whether charity had legal right to residuary estate; case distinguishable from Bach v. McGinnes, 333 F.2d 979 (3d Cir. 1964) on basis that no bona fide dispute concerning charity's legal entitlement to bequest existed in Bach; estate denied fees and costs because charitable trust not a "prevailing party" for purposes of fee recover - trust did not pay any costs, estate did).
(decedent, president of lumber company who had invested heavily in bank and stock appreciated highly in value, transferred assets to FLP; transfer not bona fide sale, but done primarily for tax reasons and no legitimate non-tax reason existed for transfers, thus, included in gross estate under I.R.C. Sec. 2036(a); decedent retained possession and enjoyment of assets transferred to partnership via implied agreement; commingling of personal and partnership assets present; payment of premiums on life insurance policies for benefit of children and grandchildren via Crummey-style trusts were gifts of present interests eligible for annual exclusion even though payments were paid directly to the insurance company instead of the grantor transferring the premium payments to the trust and the trust remitting the proceeds to the insurance company with the trustee providing notice to the beneficiaries of their withdrawal rights simultaneous with the contributions of the premium amounts to the trust; to have present interest gift treatment, court noted that key question is whether beneficiary had "legal right to demand" withdrawal; under trust terms, beneficiaries had absolute right and power to demand withdrawals after each direct or indirect transfer to the trust; thus, indirect funding irrelevant to demand right; lack of notice did not affect "legal right to demand" withdrawals, and was not a problem in Crummey case; IRS has not conceded issue, and it remains important to properly contribute premium amounts to trust and notice of withdrawal right be given to beneficiaries; on reconsideration, estate claimed that under decedent's will, assets pulled back into estate via I.R.C. §2036(a) passed to surviving spouse and because surviving spouse had right to pecuniary marital bequest that allowed surviving spouse to receive assets equal to amount necessary to reduce estate tax to zero, marital deduction resulted in no estate tax deficiency; court held that marital deduction not available for FLP interest or FLP assets gifted during decedent's lifetime; Treas. Reg. §20-2056(c)-2(a) specifies that property interest passes to surviving spouse only if it passes to spouse as beneficial owner, but decedent’s assets first transferred to FLP and then decedent gifted FLP interests to persons other than surviving spouse; consequently, property passing to person other than surviving spouse cannot also be considered as passing to surviving spouse for purposes of marital deduction; value of transferred assets in decedent’s estate for tax purposes, but are owned by FLP or non-spousal partners and would not be includible in surviving spouse’s estate).
(case involves estate of J. Howard Marshall, II who was married for the last 14 months of his life to Anna Nicole Smith (Vicki Lynn Marshall); J. Howard had been married to Eleanor Stevens from 1931-1961 and, as part of divorce proceedings, certain shares of stock were transferred to three CRATs and a GRIT with Stevens named income beneficiary of the GRIT; J. Howard later sold the stock back to the corporation at a value less than market value; sale constituted gift to other shareholder and GRIT; GRIT had terminated after 10 years with property passing to E. Pierce Marshall; J. Howard died shortly after sale of stock at less than market value; because GRIT had terminated, trust not in existence to pay resulting gift tax assessed against shareholders; issue involved liability for gift tax; court determined that income beneficiary rather than remainder responsible for payment of tax because income beneficiary treated as donor and benefited from increase in income distributions from trust; at time of gift donor (J. Howard's estate) was not going to pay gift tax, so gift tax liability of trust corpus).
(married couple gifted membership units in LLC to children and grandchildren; transfers made in accordance with dollar value of gifts and were determined by a fraction (numerator was state dollar amount and denominator was value of entire company as determined by IRS or court); IRS claimed gifts were of fixed fractional interests in LLC and, as a result, LLC unit value understated; court determined that defined value clause reallocated LLC membership units among parties in conformance with formula in which unit value as of transfer date was "unknown constant"; Proctor (142 F.2d 824 (4th Cir. 1944) not controlling; McCord (5th Cir.), Christiansen (8th Cir.) andPetter (9th Cir.) controlling, each of which involved use of a defined value clause providing that any amount later determined to exceed the stated gift value passed to charity; case appealable to 10th Cir. and notice of appeal filed in the Tax Court on August 29, 2012).
(parents established irrevocable trust for children; under trust terms, trustee to divide trust into equal shares for each child and trustee had discretion to distribute income to one child (son) and his descendants; son also given power of appointment exercisable during son's lifetime to appoint remainder of trust to any "issue" of parents including himself; to extent power not exercised, remainder remained in trust; son's power did not constitute general power of appointment).
(decedent took out four insurance policies naming wife as beneficiary along with couple’s minor children; marriage dissolved in 2004 and wife received child support and agreement that decedent would maintain insurance policy to cover child support obligation; wife also received spousal maintenance payments and decedent required to maintain $500,000 insurance policy to protect former spouse's interest in spousal maintenance payments; at hearing court ordered decedent to maintain policy with $2.495 million death benefit for former spouse; upon death, former wife received $2.495 million policy proceeds; estate's tax liability (state and federal) was $970,000 and estate did not have sufficient liquid funds to pay tax; Form 706 included $2.495 insurance policy proceeds and then claimed offsetting deduction as debt of estate; court held that policy proceeds includible in estate pursuant to I.R.C. Sec. 2042, but because proceeds payable to wife by court ordered settlement agreement it was paid to spouse for full and adequate consideration under I.R.C. Sec. 2516 and Sec. 2053(c)(1)(A); interest paid on former spouse's loan to estate also deductible).
(even after admission to Alzheimer’s unit of nursing home, decedent possessed valid non-tax reasons for post-admission transfer of family business assets (rock quarry) to family limited partnership (FLP) such that value of transfers not included in decedent’s gross estate via I.R.C. §2036; decedent did not have ability to manage transferred assets and reduced personal liability associated with assets after transfer; decedent received partnership interests of equal value to contributed assets and no retention of interest in transferred partnership interests; decedent retained over $1,100,000 in liquid assets in own name; FLP further decedent’s intent to equally distribute assets to children post-death and provide management; no evidence of implied agreement allowing decedent to continue to enjoy income after transfers; no binding agreement present to provide decedent with support and maintenance).
(before death, taxpayer failed to timely pay assessed taxes; taxpayer and wife owned property as tenants by the entirety; taxpayer and wife conveyed property to wife for $1; IRS filed tax lien against property shortly thereafter; taxpayer died, but formal estate never submitted to probate; one year later, wife passed away; co-executors of wife’s estate brought formal probate proceedings; IRS sent notice of tax lien to co-executors; administrative appeal initiated by estate contesting assessment, IRS prevailed; co-executors conveyed property to son (also co-executor) for $1; son sold property to third party netting proceeds of $313,206.94, which son lost in stock market; IRS brought suit to enforce its lien; competing summary judgments filed; court held first that probate exception argued by co-executors to federal jurisdiction did not apply to federal question raised by IRS and IRS’s collection efforts were timely because instituted within three years of tax filings; court held tax lien continued to encumber one-half of property because tenancy by entirety intentionally terminated by joint conveyance of property to wife; court rejected co-executors argument that wife was bona fide purchaser because payment of $1 not adequate consideration for sale; court found co-executors personally liable as fiduciaries for tax lien because conveyance of property to son rendered estate insolvent after co-executors had knowledge of lien).
(120-day extension of time granted to estate to make special use valuation election under I.R.C. Sec. 2032A).
(case involves estates claim for additional I.R.C. §2053 deduction for fees paid to executor as trustee of marital trust; while fees necessary, amount was excessive and part had already been deducted; additional deduction for attorney fees allowed in part).
(remainder beneficiaries of a trust sought interpretation of trust terms to determine whether trustee breached his duties; trust established by mother to provide for her son who was not good with money so he would not burden his brother; trust included home residence, farm, and one-half of residuary of mother’s estate, remainder of trust went to four grandchildren; son given right to live in residence and income from trust during his life; upon mother’s death, son returned from Community of Damien of Molokoi religious monastery where he had been residing and moved into the residence; trustee discovered the residence needed upkeep and maintenance trust could not continue to provide as it was using principal to pay for costs, so home and farm sold and condo purchased for son; granddaughters objected to using trust principal for upkeep of home and to property sales; court determined trust language ambiguous regarding maintenance of residence; extrinsic evidence showed intent was to provide upkeep and maintenance on home for son; sales of home and farm were for market value and all proceeds went into trust so no breach of fiduciary duty by trustee; lack of evidence that payments made to son “as needed” rather than quarterly exceeded income from trust; attorney fees charged to trust in defending suit appropriate; affirmed on appeal).
(appeal from a chancery court decision regarding the distribution of the proceeds of timber; in a will and codicil, the decedent established a marital trust for support of his widow; upon her death, property known as the “home place” to be distributed to two children with balance of the corpus, including additional land, distributed to charity; all property had significant timber resources; litigation began when daughter, acting as conservator of her mother’s trust and person sought to remove trustee for refusing to provide an accounting and failing to pay wife funds required by trusts; chancery court appointed a guardian ad litem for mother and ordered an appraisal of the timber land; court also found will allowed trustee to serve without bond, inventory, or accounting; appraisal showed timber in both trusts subject to insect infestation and should be sold to the highest bidder, which was more than $3 million; mother died during this time; daughter filed a motion requesting proceeds from timber on the home place be distributed to her and her brother as remainder beneficiaries; trustee argued proceeds should be distributed to charity upon mother’s death as corpus was to pass to the charities; chancery court found proceeds should be distributed to charities and set a figure for reimbursement for the mother’s estate when neither side could agree; daughter appealed; on appeal, the Supreme Court, in reading will and codicil as a whole, held it was decedent’s intent for children to receive home place timber proceeds because they were to given home place after their mother’s death and retained all mineral rights in land, indicating an intention to give more than just house and land; court also held that remainder interests in timber pass to beneficiaries and life tenant has limited circumstances in which she can harvest timber, not applicable here, so proceeds from sale of timber on home place land belong to children; court also held an accounting should have been provided when allegations made of possible irregularities; and remanded to chancery court for a formal accounting to be made of mother’s expenses not paid by the conservator; concurrence found waste was not an issue because life tenant did not make decision to harvest, but intent was for children to receive proceeds; dissent disagreed the court had enough information to determine intent of decedent and plain language of codicil should have controlled giving proceeds to charities).
(before entering nursing home, petitioner added friend to bank account as joint owner and changed title to home from herself to herself and her friend as joint tenants; upon entering nursing home after falling at home, petitioner subjected to 19-month penalty for uncompensated transfers to friend within 60-month “look-back” period; petitioner claimed transfers were made in the context of estate planning rather than to qualify petitioner for Medicaid; trial court upheld penalty; on appeal, court affirmed based on petitioner’s failure to rebut presumption that transfers made to qualify for Medicaid and petitioner’s failure to substantiate claim that petitioner had not intended to enter nursing home – petitioner was elderly and suffering from dementia).
(after diagnosis of inoperable brain tumor, decedent executed self-proved will naming his daughter as sole beneficiary and executrix; will made no provision for estranged wife or decedent’s other children; witnesses testified decedent was mentally competent, knew he was executing his will, and that daughter was only person decedent could rely on to maintain ranch after his death; jury found in favor of daughter that will was valid and decedent had testamentary capacity to execute it; wife appealed; appeal challenged validity of will because witnesses did not read will; court held Texas law does not require publication of will to witnesses to be valid; wife also challenged testamentary capacity of decedent as deficient because decedent did not discuss his children or nature of his property with witnesses at time of execution of will; court held direct evidence of specific details of children, wealth, and disposition of property not required at time decedent signed will; court upheld jury verdict due to evidence of decedent’s mental condition before, during, and after executing his will; court affirmed finding will properly admitted to probate).
(before death, decedent executed amendment to real estate sale contract granting herself, as landlord, a 40 percent interest in crop; upon death decedent's share passed via will to constructive trust under state law; challenge filed to distribution of cropshare amount, CRP payments and earnest money from contract that had been forfeited; at trial, court determined that amounts were personal property subject to terms of decedent's will; on appeal, court affirmed on basis that decedent's will covered post-death receipts and that decedent entitled to profits from land as life tenant; other amounts belonged to representative of estate).
(decedent and spouse established family publishing business and acquired 740 acres of land; family limited partnership established for preservation and potential development purposes; land appraised and transferred to FLP with FLP shares then gifted to kids, their spouses and transferors' grandchildren; gift tax paid with no discounts claimed; upon wife's death, issue was whether wife's partnership interest included in her estate under I.R.C. Sec. 2036(a); bona fide non-tax purpose present for establishing FLP - creation of family asset to be managed by family (sale of homes near lake) with court citing Mirowski v. Comr., T.C. Memo. 2008-74 to bolster its conclusion; two of transferors' children later divorced and deeded their interests in the land back with transferors paying real estate tax from own funds; IRS claimed partnership formalities not followed, but bona fide sale present and transferors not dependent on distributions from FLP, no commingling of personal and partnership funds, no discounting of interests claimed, and transferors in good health at time of transfer; I.R.C. Sec. 2036(a) inapplicable to cause inclusion of wife's FLP interest in her estate with result that over $2.5 million in estate tax saved).
(in contemplation of marriage, decedent and fiancé executed antenuptial agreement; decedent also revised will to transfer property to his soon-to-be spouse and establish testamentary trust for fiancé’s daughter; will identified fiancé by name; decedent died three days before wedding; court held will unambiguously devised property to fiancé and marriage not condition precedent; terms in will such as “wife” and “spouse” merely descriptive; will did not incorporate antenuptial agreement by reference, so could not be used as extrinsic evidence to establish ambiguity or construe meaning of will; all issues affirmed on appeal; additional issue raised on appeal; court held new provision in state probate code not applicable because fiancé’s right in will vested before adoption of statute).
(appeal from denial of petition for formal probate of missing will; appellate court affirmed holding that petitioner failed to rebut presumption of animo revocandi (cancellation of a will) when decedent’s will executed in 1995 could not be located; court concluded testimony of grandson who loved and cared for decedent and witnessed deteriorating relationship between decedent and petitioner following death of decedent’s husband was more credible than testimony of petitioner who stood to inherit under the will).
(dispute between trustee, defendant, and beneficiaries, plaintiffs, regarding gift from bank account specified in decedent’s will but later transferred to trust account; plaintiffs sought relief to receive promised monetary gifts from decedent; defendant argued gift had been adeemed when all assets transferred to trust account, enforcement of in terrorem clause in will also revoked gift, and that defendant entitled to half of trust account as joint tenant of account; trial court granted summary judgment to defendant that ademption could apply to testamentary trust and gift was adeemed; court held in terrorem clause not applicable; both parties appealed; on appeal, court held intent of decedent was for gift to occur despite transfer of account and assets into trust because transfer occurred within short period of time after will drafted; summary judgment overturned and case remanded to trial court for determination of appropriate gift under terms of will; appellate court also held in terrorem clause not applicable and joint tenancy in bank account did not entitle defendant to one-half of account).
(decedent utilized tax avoidance plan with intent to avoid state (CA) tax on $660 million in capital gain income; upon death, decedent's estate deducted $62 million on Form 706 for estimated amount of state income tax that would be due if tax avoidance plan failed; IRS disallowed deduction and trial court agreed that deduction should be disallowed because state tax liability (and, hence, deduction) not ascertainable with reasonable certainty as of the date of the decedent's death and decedent had already entered into a settlement with the state as to the amount of capital gain tax liability at $26 million; estate subsequently paid $11 million and then filed refund claim for the $11 million, claiming that $47 million was correct deduction; estate paid $47 million and filed refund claim; deduction not allowed because claim not reasonably certain).
(case involves disposition of life insurance proceeds; decedent and second wife executed prenuptial agreement before marriage in 2008; agreement specified that both parties waived any rights to each other’s separate property as listed in “Exhibit A which contained; life insurance policy with cash value of $15,000 and face value of $100,000 “now payable” to decedent’s spouse; decedent did not complete beneficiary change process because he did not provide all of the necessary information and it was unknown whether he ever knew the insurance company sent a letter requesting the additional information or not; without a designated beneficiary, the life insurance proceeds were paid to the estate; upon decedent’s death, widow petitioned for spousal support; estate co-executor sought determination of whether estate should pay proceeds to widow; other co-executor (decedent’s sister who would inherit the proceeds) objected to both petitions; court determined that proceeds should be paid to widow based on the decedent’s intent and ambiguous “now payable” language in prenuptial agreement ; the court denied spousal support for widow because of the prenuptial agreement and the anticipated receipt of the insurance proceeds; sister co-executor filed several motions for review; the widow objected to the timeliness of the motions and in the alternative for the court to reconsider the denial of her request for spousal support; shortly thereafter, sister co-executor filed notice of appeal; probate court stated it lacked jurisdiction to decide the motions for review based on the appeal; on review by Iowa Supreme Court, Court remanded issue back to probate court for consideration of sister’s motion for further review; the probate court affirmed its decision to grant the life insurance proceeds to the widow, but granted surviving spouse benefits to the widow for one year due to the delay in receiving the life insurance proceeds; the sister appealed both issues; on appeal, a majority affirmed both issues; one judge also affirmed the grant of spousal support, but disagreed that the widow should receive the life insurance proceeds; dissent pointed out that prenuptial agreement not ambiguous and that the Exhibit A was a list of assets only and not an intent to provide the insurance to the widow; dissent also pointed out that extrinsic evidence was used improperly by the court to find an ambiguity and then further extrinsic evidence used to interpret ambiguity, which is in conflict with contract interpretation principles; dissent also opined that written obligations of the parties (premarital agreement, life insurance policy, and will) did not show the intent to give the insurance proceeds to widow.
(promissory note held by Medicaid applicant’s spouse is countable resource; state law excluding promissory notes from countable resources only applicable to promissory notes that Medicaid applicants hold and has no application to promissory notes that spouses of applicants hold; penalty period imposed because spouse purchased annuity within five-year look-back period).
(I.R.C. §2704 applied to lapsing voting rights of stock held by decedent (founder of Atlanta Falcons NFL franchise) at time of death such that value of estate enhanced from $22 million to $30 million; at time of death, decedent controlled corporation (and decedent’s family controlled corporation both before and after decedent’s death) and owned class A common stock having 11.64 votes per share; class B stock had one vote per share; articles of incorporation specified that upon decedent’s death, or decedent’s sale or transfer of class A shares, class A shares to be converted to class B shares with effect that voting power of class A shares lapsed; I.R.C. §2704 applied such that lapse disregarded; fact that family lacked control to reverse lapse of voting power immaterial; lapse occurred at time of death and not when articles amended to create the lapse conditions; no gift tax return filed when articles amended; restriction on voting rights not bona fide business arrangement because that provision (I.R.C. §2703(b)(1)) only applicable upon sale of shares).
(legal malpractice case based on attorney's failure to take proper legal steps to insure client's land was transferred to intended beneficiaries before client's death; client instructed attorney to sever joint tenancy on two tracts held with spouse, deed client's portion to the client’s daughters; lawyer advised that these steps were unnecessary because the client’s will would “take care of it”; client died with the tracts held in joint tenancy; surviving spouse renounced will, and daughters sued attorney claiming his error caused the spouse to receive the intended tracts of land against their mother’s intentions; district court dismissed case on statute of limitations grounds; the court agreed state statute (735 ILCS 5/13-214.3(d)) applied and established a six-month statute of limitations for malpractice actions when the attorney’s omission occurs upon the death of the client; on appeal, the court determined that the six-month statute of limitations did not apply because the injury alleged in the petition was not caused by the client’s death, but between when she directed the deeds to be changed in March 2007 and her death in May 2007; because the petition was filed within the two year statute of limitations; case reversed and remanded).
(settlor of revocable trust adjudicated as incompetent and brother appointed as limited guardian; settlor then amended trust which changed disposition of estate even though trust specified that settlor could not amend or revoke trust once determined to be incompetent; but, trust also said right to amend or revoke could be restored by court order or if trustee received written opinions from two “licensed physicians” that settlor was competent; two letters obtained, but only one physician “licensed”; settlor died and amendment challenged; trial court determined that amendment invalid and that decision affirmed on appeal).
(court rules in a split opinion that Proposition 8, passed by California voters, which defines "marriage" in the state Constitution as between one man and one woman, is unconstitutional; as result of different court opinion that created right to homosexual "marriage" in 2011 by modifying the interpretation of the state Constitution and how state initiative process works, court holds that state voters could not amend state constitution to disaffect persons who want same sex marriages; court's opinion gives judges ability to create "rights" beyond the voters' ability to amend through initiative process; opinion by Reinhardt, the most overruled Circuit Court judge in the U.S).
(state inheritance tax case; decedent inherited share of publicly traded stock from family member; stock separately valued as of date of death rather than when shares distributed by family member's estate; under state law, transfer occurred as of date of decedent's death).
(decedent died in early 2003 and executor hired plaintiff to handle estate; plaintiff, attorney, suffered from numerous physical and mental ailments and missed filing deadline for Form 706 by more than three years; return ultimately filed approximately four years after death with payment of $138,179.27; estate’s income tax obligations fulfilled in 2006; withholdings sufficient to satisfy estate tax and income tax liability, but estate challenged imposition of interest and penalties; IRS Appeals Office abated Sec. 6651(a)(2) penalty, but nothing else; abatement of Sec. 6651(a)(2) late payment penalty does not estop IRS from assessing late-filing penalty; IRS not required to credit any income tax withholdings to estate tax).
(wife entered nursing home and husband purchased annuity that named state as primary beneficiary, and couple's daughter as secondary beneficiary; pursuant to 42 U.S.C. § 1396p(c)(1)(F)(i), an annuity that names the state as a primary remainder beneficiary “for at least a total amount of medical assistance paid on behalf of the institutionalized individual” is not a transfer of an asset for below-market value that triggers disqualification from Medicaid; upon husband's death, state had paid $23,840.51 for wife's care with $75,000 remaining in the annuity; daughter sought court declaration that state’s ability to recover from annuity limited to amount state had paid up to the point of John's death; trial court granted summary judgment for state; on appeal court affirmed - 2006 statutory amendment to statute referenced above created a right in the states to recover as a remainder beneficiary against a community spouse's annuity for costs of institutionalized spouse's care as of date of death of community spouse).
(individual entered nursing home and Medicaid benefit application made; state Medicaid agency required applicant's wife to buy annuity to bring wife's income up to MMMNA allowance; trial court ruled against state; on appeal, court affirmed, but reversed trial court's award of attorney fees Medicaid case; on further review, court determined that federal law does not bar a state from requiring a community spouse to purchase an annuity; attorney fees not awarded).
(decedent died before finalizing his will; mortgage loans to decedent’s nieces and nephews included in inventory of estate; decedent evidenced intention to forgive indebtedness of family members in correspondence with his attorney before death; debtors brought action to strike mortgages from inventory claiming forgiveness of debts were gifts causa mortis; district court agreed with debtors; appellate court overturned lower court decision holding that intention of the decedent was to forgive the loans, but there was never any delivery of the gift to debtors during decedent's lifetime as required for an effective gift).
(decedent's surviving spouse was foreign national that had just become U.S. citizen; prior to becoming citizen, Qualified Domestic Trust (QDOT) created to receive funds from spouse, but IRS not notified of citizenship change; extension of time granted to provide notice due to lawyer for surviving spouse not mentioning that estate tax wouldn't apply to QDOT; good faith reliance present).
(decedent died testate, but predeceased by named beneficiaries; decedent’s will did not name contingent beneficiaries, so estate administration governed by state (SD) intestacy statute; decedent predeceased by parents and only sibling (an Indian residing in Indian Country); sibling’s biological child contacted decedent five years before decedent’s death about her claim that decedent was her aunt; niece submitted to DNA testing to prove paternity at decedent’s request; sibling’s two children from his marriage named co-personal representatives of decedent’s estate and trial court determined that niece did not have standing to claim that she was an heir; trial court ruled that niece failed to comply with SD bastard child statute (SDCL 29A-2-114) in attempt to establish parentage for purposes of intestate succession; court determines that DNA evidence not statutorily listed method for determining paternity; but, niece had petitioned Department of Interior, Bureau of Indian Affairs (BIA) to reopen father’s probate to include her as an heir; such move, if successful, would cause niece to comply with SD bastard child statute; matter remanded to trial court to wait for BIA decision).
(extension of time granted to divide testamentary QTIP trust and make reverse QTIP election with respect to a portion of the trust and allocate decedent's unused GSTT exemption to that particular portion; decedent's will created pecuniary marital QTIP for surviving spouse and residuary credit shelter trust for children and grandchildren; upon surviving spouse's death, balance in QTIP to be added to residuary trust and upon death of last of decedent's children, remaining amount to be distributed per stirpes to grandchildren and more remote descendants; scrivener failed to divide QTIP trust into GST exempt and non-exempt portions and did not make reverse QTIP election; at time of ruling request (after death of surviving spouse) trustee had made no taxable distributions or terminations).
(court affirms trial court decision that terms of decedent's trust rather than terms of LLC agreement control disposition of farm property; trust specified that, upon decedent's death, trustees to offer to sell or vote to sell to three sons all or any portion of real estate held by LLC; LLC operating agreement specified that LLC to be dissolved upon death of any member unless all other members agree to continue LLC and, if dissolved, LLC assets to be liquidated and distributed to members; LLC formed to reduce estate taxes and trust formed to avoid probate; decedent's land transferred into LLC and personal property to trust and trustee listed as decedent's owner of decedent's interest in LLC; decedent's will specified that, at death, all remaining property in decedent's possession to be transferred to trust; at death, trust held 50.5 percent of interests in LLC with children holding the balance; appraiser hired to determined value of land; issue was whether trust terms or LLC terms governed disposition of real estate; trial court determined that trust owned real estate; decision affirmed and appraisal proper and bad faith not present).
(IRS allowed late allocation of GSTT exemption to lifetime transfer to irrevocable trust; trust created and funded before rule allowing for automatic allocation of any unused GSTT exemption to indirect skips; gift tax return did not allocate any GSTT exemption which wasn't discovered until after transferor's death; at time of ruling request, no taxable distributions or terminations had taken place; IRS proposed regulations in 2008 establishing more rigorous documentation requirements for return preparers and advisors, not yet finalized).
(before death, decedent remarried and name second spouse as income beneficiary of QTIP trust in addition to credit shelter trust; second spouse named co-trustee of both trusts with bank (which had the effect of replacing decedent's children); dispute arose between second spouse and decedent's children concerning trust accounting and decedent's estate plan; pursuant to settlement agreement, estate reimbursed parties for incurred legal fees; court held that administration expenses deductible as incurred by decedent's children, but that second spouse's expenses not deductible and that taxes incurred by estate did not reduce estate's marital deduction).
(at time of decedent's death, decedent owned three life insurance policies with two payable to the decedent's mother and one payable to a brother; estate also included stock and note from corporation for $10,000; estate, on Form 706, reported two policies payable to mother, did not report note and claimed deductions for executor fees; deductions disallowed due to lack of substantiation and proceeds of third policy should have been included in estate value; court upheld determinations of IRS except that, pursuant to I.R.C. Sec. 2053, court held that estate entitled to deduct administration expenses that the estate actually incurred).
(decedent lived in Illinois at time of death, but also owned farmland and personal property in Indiana; with help of friend decedent drafted document termed his “Will” and made four copies; decedent signed all four copies and included his Army Serial Number, but did not notarize any of them; decedent had some of the copies witnessed and mailed the signed copies to named beneficiaries; unwitnessed copy put behind safe in farmhouse in Indiana; decedent died two months after executing document; decedent deemed to have died intestate under Illinois law due to failure to meet requirements for self-proving will and Illinois real and personal property distributed under Illinois intestate succession law; Indiana court not precluded by doctrines of res judicata or full faith and credit from deciding same issue and probating decedent’s will; sufficient proof submitted to permit decedent’s will to be admitted to probate in Indiana; Indiana follows general rule that determination of validity or invalidity of will by court of testator’s domicile not conclusive on same question as it relates to real estate located in another state; disposition of realty, whether by deed, will or otherwise governed by law of situs; Illinois court’s denial of decedent’s will to probate of no effect on admission of will to probate in Indiana as relates to disposition of Indiana real estate).
Annotation(Hawaii - for estates of decedents dying on or after Jan. 25, 2012, state law exemption mirrors federal exemption; Indiana - state inheritance tax repealed for deaths after 2021, and exemption set at $2 million for estates of decedents dying on or after Jan. 1, 2012 (up from $402,000 for deaths in 2011); Illinois - sets state law exemption at $3.5 million, but does not allow for portability of unused exemption at death of first spouse, and eliminates gift tax; Maine - exemption for 2012 set at $1 million, and will be $2 million for decedents dying on or after Jan. 1, 2013; Ohio - state estate tax repealed effective for decedents dying on or after Jan. 1, 2013 (exemption set at $338,333 for deaths in 2012); Oregon - state inheritance tax changed to an estate tax with an exemption of $1 million effective for deaths on or after Jan. 1, 2012; Tennessee - legislation phases out the estate tax over four years and repeals the gift tax retroactive for gifts made on or after Jan. 1, 2012).
(decedent's holographic will left decedent's residuary estate to decedent's sister "with the understanding that she will take care of my mother"; decedent's brother was intestate heir and filed motion to remove sister as co-administrator on grounds of breach of fiduciary duty; court held that will language was precatory and conveyed decedent's residuary estate to sister in fee simple; language did not result in creation of testamentary trust or conditional bequest).
(scrivener mistakenly included power in residuary trust in decedent’s will that gave surviving spouse the ability to appoint principal to any persons, including surviving spouse’s estate; scrivener stated that provision should have stated, “Spouse could appoint the principal in whatever manner she desires, except not to herself, her estate, or the creditors of her estate”; surviving spouse filed court petition to reform residuary trust to correct scrivener’s error and court granted petition for reformation; reformation consistent with state law and did not constitute general power of appointment under I.R.C. §2041(b) and reformation did not constitute exercise or release of general power of appointment under I.R.C. §2514(b) so as to constitute a gift by the decedent).
(township, rather than municipality, was decedent's domicile for state estate tax purposes with respect to decedent's intangible personal property because evidence showed that decedent had intent to abandon domicile in municipality and establish domicile in township; decedent's only activity in municipality related to antique-collecting business).
(for insurance policies held in trust where the grantor has retained a power that can be exercised in a non-fiduciary capacity to acquire the policy by substituting assets of equal value, the exercise of the power will not cause the policy value to be included in the grantor's gross estate under I.R.C. Sec. 2042).
(case involves son lawsuit against parents for constructive trust based on alleged promise by father that farm would be gifted to son upon father’s retirement in return for son’s labor in lieu of regular pay; son worked on farm for 26 years before bringing suit; trial court granted summary judgment for father and dismissed case; on appeal, court reversed; elements of constructive trust are (1) confidential or fiduciary relationship; (2) promise; (3) transfer in reliance on promise; and (4) unjust enrichment; while parents presented sufficient evidence to shift burden to son to establish triable issue of fact on each element of constructive trust (such as son choosing to work on farm after high school graduate of own free will, receipt of several vehicles, rent-free use of farm property for son’s fertilizer spraying business and son’s retention of crop profits), son established that he worked long hours without regular pay, obtained necessary environmental permits and licenses and made substantial financial contributions in furtherance of farm business; confidential relationship present; requirement of transfer satisfied where son has no prior interest in farm, but does contribute funds, time or effort to property in reliance on promise to receive an interest in the subject property; factual questions remain on issue of unjust enrichment of parents).
(IRS issued notice of deficiency of estate tax to person who possessed decedent's property and filed estate tax return; decedent named nieces as beneficiaries of living trust and named one niece as co-trustee; no executor named, but one niece signed estate tax return without being appointed as executor; each niece received more than $3 million from decedent's estate, but estate tax return showed no taxes due; IRS issued deficiency (with accuracy-related penalty) to niece that signed return; court held that notice sent to correct person inasmuch as decedent had actual or constructive possession of estate property and, thus, was statutory executor under I.R.C. Sec. 2203 responsible for filing estate tax return).