Case Summaries
(case involved question of whether gross estate of surviving spouse had to include value of assets contained in credit shelter trust established under pre-deceased spouse's will; under the trust terms as stated in pre-deceased spouse's will, during surviving spouse's lifetime the co-trustees were authorized to apportion trust income among surviving spouse, the pre-deceased spouse's children and grandchildren “in accordance with their respective needs"; co-trustees also given right and power to invade trust corpus and to use such part thereof and if necessary, all of it, for the necessary maintenance, education, health care, sustenance, welfare or other appropriate expenditures needed by surviving spouse and the other trust beneficiaries taking into consideration the standard of living to which they are accustomed and any income available to them from other sources; surviving spouse never received any distributions from trust and question was whether term "welfare" caused trust to not be limited by ascertainable standard with result that surviving spouse held a general power of appointment over trust property at time of death which would cause the value of the trust assets to be included in the surviving spouse's estate; legal property rights that surviving spouse held at death determined under state law and court determined that Mississippi Supreme Court would construe "welfare" to further clarity "maintenance and support" in accordance with surviving spouse's standard of living; phrase "other appropriate expenditures" related to support-related purposes as necessary to maintain surviving spouse's accustomed standard of living; power limited by ascertainable standard and trust assets not included in decedent's gross estate).
(claim based on interference which resulted in execution of will that disinherited plaintiffs accrues upon death of testator; case involved family dispute and ownership of farm; no damages until decedent's death, so claim did not accrue until that time).
(estate could not deduct $1.24 million in caregiver expenses paid to son on behalf of decedent due to lack of substantiation; administrator fee deductible along with attorney fees incurred in lawsuit challenging IRS claim of deficiency).
(four years before death, decedent executed quitclaim deed to 160 acres and home to petitioner, but retained life estate; will did not mention deed; deed never delivered, but stored with decedent’s will in decedent’s safe; petitioner did not know about deed; deed did not fail for lack of delivery because decedent had intent to make sure petitioner had farm and home).
(decedent’s wife filed petition for declaratory judgment to determine whether bequests to deceased children passed as residue of estate or to lineal descendants; trial court held Texas’ anti-lapse statute applied so bequest made to pre-deceased children of decedent passed to grandchildren; appellate court found intention of decedent that anti-lapse statute should not apply due to language indicating lapsed gifts should be treated as residuary and other provisions expressly providing for specific gifts to be given to lineal descendants; trial court reversed).
(valuation of decedent's 15 percent interest in LLC at issue; estate valued interest at $34,936,000 and, on audit, IRS valued interest at $49,500,000; court determined that proper value wasless than what estate valued interest at - $32,601,640; estate entitled to refund of $861,422).
(family dispute concerning sale and distribution of proceeds from two family farms; use of FSA data to determine tillable acreage proper; trial court's disposition of tractor, attachments and skid loader that were not sold at auction not erroneous; trial court's computation of cash rent not erroneous).
(case invovles dispute between beneficiaries of trust and trustees; trust assets of $6.5 million included in life beneficiary's gross estate; holders of remainder interests sought distribution of $2 million and trustees only wanted to distribute $1 million due to concern that estate could be liable for additional $2 million in federal estate tax; following litigation on matter, trial court ordered $1.5 million be distributed and that trustees had breached fiduciary duty under state (IN) law because they knew that trust corpus was ripe for distribution; portion ripe for distribution still needed to be distributed even though beneficiaries were in dispute over amount to be distributed; appellate court affirmed on fiduciary duty/distribution issue, but reversed on damages issues holding that beneficiaries entitled to interest only on cash portion of court-ordered distribution for period beginning with demand to time of actual payment (less interest or income accrued during timespan); case remanded for determination of compensatory damages plus $150,000 in attorney fees to beneficiaries).
(value of decedent's 41.128% limited partner interest in Oregon limited partnership engaged in landholding and timber activities valued at $27.45 million rather than $13 million that estate valued interest at or the $33.5 million that IRS valued interest at; no accuracy-related penalty imposed).
(son, as legatee under mother’s will not entitled to order authorizing sale of real property in mother’s estate; will set forth time for option to be exercised; son failed to show that performance of option impossible).
(value of annuities and value of life insurance policies included in decedent's taxable estate; decedent retained incidents of ownership; estate properly included policies in estate at death (except for overvaluing one) but then later excluded them from estate; however, evidence showed that decedent retained right to change beneficiaries on policies until time of death which causes inclusion in gross estate under I.R.C. Sec. 2042; value of annuities included in estate by virtue of I.R.C. Sec. 2039(a)).
(court reversed trial court determination that settler of revocable trust lacked contractual capacity which invalidated settler's amendments to trust; amendments were simple and related to property distribution post-death and, as such, were "indistinguishable from a will or codicil"; settler had testamentary capacity).
(court determined that state (Vermont) law required that POA created before effective date of statute barring agent from making gifts of principal's property to himself under POA had to conform to entire statute or execution was invalid; power to make gifts after effective date of statute did not give agent explicit power to make gifts and was unenforceable).
(decedent was domiciled in Georgia and devised condominium in Florida to mistress; decedent had entered into contract pre-death to sell condominium, but died before closing; condominium ultimately sold and mistress sued to recover sale proceeds; executor, trustee of marital trust under will and beneficiary under will claimed devise had adeemed; trial court held that devise had adeemed; on appeal, court held that specific devisee (mistress) entitled to remaining balance of purchase price attributable to specifically devised property that has not been paid as of date of decedent's death; dissent would have applied doctrine of equitable conversion which would have made the condominium personal property as of date of decedent's death and ademption under GA law would have applied).
(son of decedent who moved back to decedent's farm and operated it after decedent declared dead made claim in probate estate for farm management fees and reimbursement for farm expenses; doctrines of quantum meruit and unjust enrichment not properly before court and son not entitled to any management fee; son received all crop income, cash rent, FSA payments and proceeds of cattle sales and sale of pickup, used home rent-free and used truck and equipment without charge for five years; son entitled to reimbursement for principal payments on mortgage - which benefited estate).
(decedent's will left everything to niece, but if she didn't survive, then equally to niece's two children in trust; niece died in 1995 and decedent hospitalized in 2007; niece's husband procured new will from decedent within two months of decedent's death that gave niece's husband and children money outright and named husband as personal representative and an interest as a contingent residuary beneficiary; trial court applied doctrine of partial invalidity to eliminate husband of niece as administrator and residuary beneficiary; on appeal, court affirmed with result that one-half of residuary devise passed under intestacy law and that residuary devisees were tenants in common in residuary estate).
(mother denied Medicaid benefits on account of transferring assets to daughter in the form of taking second mortgage on home and loaning proceeds to daughter so she could consolidate her debts; loan agreement not in writing, but daughter current on all payments; mother fell ill and entered nursing home; mother entitled to temporary restraining order (TRO) so that Medicaid benefits can be received during pendency of case because asset transfer not made with intent to qualify applicant for Medicaid benefits; ALJ determined that intent of transfer immaterial (and that asset transfer occurred rather than a loan); court granted TRO because of likelihood of prevailing on merits - federal Medicaid law specifies that assets that are transferred for purpose other than to qualify for Medicaid are not counted as eligible assets for Medicaid eligibility purposes).
(extension of interim guidance on deductibility under I.R.C. §67 of costs paid to investment advisor by non-grantor trust or estate; extension is until IRS publishes final regulations on the issue (i.e., extension is for tax years beginning before date that final regulations are issued); initially, IRS provided in Notice 2008-32 that taxpayers do not have to determine the part of a bundled fiduciary fee that is subject to the 2 percent floor for any tax year beginning before 1/1/08 and later guidance specified a later cut-off date; regulations are necessary in light of U.S. Supreme Court decision in Knight v. Comr., 552 U.S. 181 (2008)).
(decedent's 1987 will split estate equally between son and daughter; decedent's 2008 will appointed son personal representative and trustee of trust that gave son's two children $100,000 and $10,000 respectively once age 30 attained; under 2008 will, daughter would inherit $350,000 with son receiving balance of estate; decedent's estate valued at $3 million at death; daughter challenged will and trust as product of son's undue influence and that decedent suffered from insane delusion and lacked testamentary capacity; trial court determined that son did not exert undue influence over will and trust and that decedent had testamentary capacity; appellate court affirmed and held that trial court did not err in finding no presumption of undue influence in execution of will and trust; daughter failed to carry burden of showing lack of testamentary capacity; court reversed and remanded on issue of insane delusion because decedent claimed that she had not seen daughter in many years when facts established that daughter actually visited decedent frequently including 15 months before 2008 will executed).
(pre-deceased spouse's will created two trusts that gave surviving spouse special powers of appointment that could only be exercised by specific reference; surviving spouse's will left all "property over which I may have a power of appointment" under a residue clause which left property to a daughter; court held that residuary clause referenced only decedent's estate and property in estate, and did not include property subject to the power of appointment).
(estate included assets transferred to family limited partnership; no bona fide sale and decedent retained control over assets; decedent retained economic benefits and control over property and transfers did not involve bona fide sale for full consideration; FLP paid over $200,000 of decedent's estate taxes from FLP funds which indicated implicit agreement that transferor would retain enjoyment of transferred property; however, estate entitled to equitable recoupment for income taxes that children and grandchildren overpaid on sale of the assets).
(case involves heir and personal representative of decedent seeking declaratory judgment with respect to calculation of surviving spouse's elective share of decedent's estate).
(decedent's estate not entitled to lack of marketability or lack of control discount; no I.R.C. Sec. 2053 deduction allowed in connection with lawsuit against attorney).
(estate not entitled to $30 million deduction for claim against estate from pending malpractice litigation - value uncertain at time of decedent's death; estate entitled to deduct amount actually paid during administration of estate).
(real estate included in decedent's estate, including 4,056-acre ranch, properly valued via income capitalization approach as were two valuable paintings decedent owned).
(case involves defendant's motion in limine to exclude testimony concerning valuation methods and evidence that IRS used to determine discounts for minority interest and lack of marketability; motion granted; IRS not required to use same methodology in subsequent refund proceeding as was used in initial assessment determination).
(plaintiffs, homosexual males, cannot be named on birth certificate of child they adopted in New York; state (LA) law bars all unmarried couples (whether adopting in-state or out-of-state) from adopting children in Louisiana - child was born in LA and plaintiffs living in CT at time emergency adoption decree obtained in NY state court; defendant, LA registrar, offered to list one plaintiff on birth certificate, but plaintiffs refused alleging violation of constitutional rights; no violation of either Full Faith and Credit Clause or Equal Protection Clause; state law does not necessarily operate as that state's law when it is attempted to be applied by another state - the manner in which LA enforces out-of-state adoptions does not deny plaintiffs' full faith and credit of other state's law; LA's treatment of adoptive children of unmarried persons differently from adoptive children of married persons does not violate equal protection, but serves a legitimate governmental interest and the state's rational preference for stable adoptive families - the state can rationally conclude that having parenthood focused on a married couple or single individual rather than the freely severable relationship of unmarried persons furthers the interests of adopted children).
(proposed transfer of farmland by non-corporate family farming operation held in trust for qualified heir to an LLC is eligible for special use valuation election under I.R.C. Sec. 2032A; later lease of elected land by LLC to partnership will not trigger recapture under I.R.C. Sec. 2032A(c)(1)(B); partnership's sole right to decide to pay either fixed cash rent or rent based on percentage of crops grown substantially similar to facts of Estate of Gavin v. Comr., 113 F.3d 802 (8th Cir. 1997) where court ruled that qualified heir's option to pay cash rent or crop share resulted in the qualified heirs being at production risk on their return from their land ownership; IRS points out that such leases are not disqualified per se as cash leases and reminds readers on page eight of the rulings that post-death leases must be "substantially dependent on production"; IRS, in no way, leaves impression in rulings that straightforward post-death cash leasing is permissible; in addition, while not mentioned in rulings, facts of rulings not within scope of I.R.C. 2032A(c)(7)(E) which specifies that rental of elected land on "net cash basis" by a lineal descendant of the decedent to a member of the family of the lineal descendant not a recapture triggering event because some lessees, while family members, not technically "members of the family" under I.R.C. Sec. 2032A and, therefore, not lineal descendant of decedent; result of rulings is very favorable to the spirit of the law and the intent of the Congress, but where IRS could, technically, disqualify the estate from I.R.C. Sec. 2032A).
(value of residence transferred to QPRT that terminated six months before transferor's death excluded from transferor's gross estate; agreement present for transferor to pay fair market rent; deductions for administrative expenses, investment management fees and unpaid rent denied).
(case involves revocable trust funded with family farm; grantor's wife was income beneficiary of trust with children to be beneficiaries on wife's death; grantor's son given two-year option to buy farm from trust which son attempted to exercise within 2-year timeframe, but sisters claimed that option had expired because two-year period began upon father's death in 1986 (mother died in 2004); court construed option clause to be triggered on father's 1986 death).
(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).
(children of deceased parents named beneficiaries of parents' trusts; daughters claimed that son was indebted to parents at time of parents' deaths and that trustee should be required to retain amount of debt from trust assets to be distributed to son; son farmed with his parents in informal relationship, but parents maintained notebook containing handwritten financial records of farm including every expense paid and personal expenses of son that parents paid and denoted certain amounts as "loans" to son; court concludes that evidence insufficient to establish that son indebted to trusts either for payments designated by parents as "farm expenses" or for payments parents made to third parties on son's behalf; however, son indebted to trusts for payments parents made to him for which record shows a canceled check bearing designation as "loan").
(precatory language in will stating "it is my desire" determined to be mandatory language with result that equity interests are passed to decedent's children as specific bequests; marital deduction reduced).
(palimony case involving claim for federal estate tax deduction; couple lived together (never married) for 22 years before splitting up; she files for palimony under implied contract that couple agreed to pool assets; before trial, he died and trial court ultimately determined no such implied contract existed; his estate paid estate tax exceeding $10 million and filed refund claim for about $5 million on basis that estate was worth less due to palimony suit; trial court awards government summary judgment on basis that what she gave (love and support) was inadequate consideration to support enforceable contract and that there was no contract to begin with, and that estate was estopped on basis that estate claimed at trial that there was no enforceable contract; reversed on appeal - her love and support were valid consideration under state (Nevada) law and issues of genuine fact remained about value of her claim; thus, estate may be entitled to refund; dissent claims that state law immaterial - I.R.C. provides no deductions for palimony claims based solely on love and support).
(accountant who prepared estate's Form 706 attempted to file Form 4768 to extend filing deadline, but failed to enter appropriate extension period in space provided on Form and did not indicate on Form that payment extension necessary; taxes didn't get paid on time (because accountant thought extension had been filed), but IRS assessed penalty and interest; trial court's determination that substantial compliance doctrine inapplicable upheld; executor's reliance on accountant was not reasonable cause for failure to timely pay estate tax; actual tax due was more than 12 times size of estimated tax included on extension form).
(trial court did not err in ordering defendant to pay $65,721.29, plus interest, as defendant's share of federal estate tax owed by decedent's estate; subject real estate titled in joint tenancy between decedent and defendant; defendant could not prove that joint tenancy created due to decedent's obligation to provide decedent with retirement program and that value of retirement program equaled joint tenancy interest; face of deed creating joint tenancy stated, "This is a bona fide gift and the grantor received nothing in return"; decedent required to pay pro-rated estate tax).
(estate must file inheritance tax because two checks issued by insurance company to decedent's brother represented death claim proceeds from on annuity contract held by the decedent at the time of death; amounts subject to state inheritance tax).
(1,100 acre tract included in decedent's gross estate not entitled to fractional interest discounts; during life, decedent had transferred one-fifth remainder interest to each of his five children, but retained a life estate in the property; decedent failed to sell the remainder interests for their actuarial fair market value; full FMV of property included in decedent's estate at death - $6,390,000).
(Florida resident acquired home used as primary residence as joint tenant with right of survivorship with his mother, and at time of acquisition had minor child; state constitution provides that the "homestead shall not be subject to devise if the owner is survived by spouse or minor child"; resident died and court held that residence was not decedent's homestead with result that it passed at decedent's death to mother as surviving joint tenant; residence not homestead property at time of purchase, thus constitutional provision inapplicable).
(decedent retained beneficial interest in home as of time of death and sufficient possession or enjoyment via I.R.C. Sec. 2036 for home value to be included in decedent's estate for tax purposes; decedent took title to home in 1989 and lived in home until her death in 2000; title conveyed from decedent to decedent and two grandchildren in 1989 and then reconveyed back to decedent in 1994, and then to decedent as trustee in 1997 and then to decedent's daughter and three granddaughters in 1999 (with decedent remaining on the title) - all as gratuitous transfers; provision of purchase funds in 1989 provided by family members was a gift to decedent resulting in decedent taking a beneficial interest in home - no resulting trust created; the fact that decedent lived in home as of date of death was evidence of retained possession and enjoyment of home).
(trial court's award of summary judgment to government reversed in case involving utilization of step-transaction doctrine to eliminate discounts of gifted LLC interests; question remained as to when gifts to taxpayers' children were effective under state law).
(trust transfers subject to GSTT; grandfathering exemption for trusts that are irrevocable at time GSTT enacted is ambiguous as applied to exercise of a general power of appointment, and regulation which interprets exemption is reasonable and denies exemption for transfer at issue).
(under Sec. 416(e) of Social Security Act, posthumously-conceived twins were biological children of deceased wage earner for Social Security survivor benefit purposes; case remanded for determination of whether, as of date of decedent's death, children were dependent on decedent).
(married couple's antenuptial agreement upheld as valid).
(court lacks subject matter jurisdiction to hear homosexual divorce case; TX Constitutional provision and related statutory provision defining marriage as between persons of opposite sex did not violate Equal Protection Clause of U.S. Constitution (14th Amend.); rational relationship to legitimate state interest present - the promotion of well-being of children; the general welfare does not require extending marriage option to same-sex couples who are merely members of social units and are not part of a suspect class).
(certain farm-related expenses incurred during administration of decedent's estate deductible for inheritance tax purposes because they were incurred to maintain, preserve and repair the farming assets; other expenditures were incurred while operating the farming business and are not deductible by the estate).
(case involves allegations of fraud and determination of ownership of farm land, property and bank accounts transferred via power of attorney).
(durable POA cloaking agent with blanket authority to do whatever principal could do authorized agent to close principal's trust bank account and open a different account with different beneficiary; while state law bars agent from changing disposition of principal's assets at time of death of principal, statute inapplicable to withdrawing funds from principal's account).
(decedent's will authorized personal representative to distribute tenancy-in-common interests in family farms to personal representative's sister and another sibling; sister's ability to bring partition action not determinative of whether parents intended that personal representative should make the division of farmland without needing the partition action).
(son's (as decedent) disclaimer of father's residuary estate not qualified; son's estate (and wife's estate) liable for gift tax and related interest).