Official Inflation Adjustments for 2024

Posted on by November 10, 2023

The Internal Revenue Service has released Rev. Proc. 2023-34, 2023-48 IRB ___ (11/24/2023), with inflation adjustments for 2023 and, consistent with earlier predictions (with two exceptions), the changes in the most significant federal estate and trust planning numbers will be as follows:

  • The federal estate tax base applicable exclusion amount (and generation-skipping tax exemption) will be $13,610,000 (was $12,920,000 for 2023).
  • The annual gift tax exclusion will be $18,000 (was $17,000).
  • The annual gift tax exclusion for a non-citizen spouse will be $185,000 (was $175,000).
  • The “2 percent” amount for purposes of section 6166 will be $1,850,000 (was $1,750,000).
  • The limitation on the special use valuation reduction under section 2032A will be $1,390,0001 (was $1,310,000).
  • The top (37%) income tax bracket for estates and trusts will begin at $15,200 (was $14,450), and the maximum rate on capital gains will begin at $15,450 (was $14,650).
  • The alternative minimum tax exemption for estates and trusts will be $29,900 (was $28,400), and the phaseout of the exemption will start at $99,7002 (was $94,600).

Notes:

  1. Earlier prediction had been $1,380,000 for the limit on special use valuation. ↩︎
  2. Earlier prediction had been $99,650 for the phaseout of the alternative minimum tax exemption. ↩︎

New Rules of Construction for Orphans’ Court Rules

Posted on by November 18, 2023

In a series of orders issued November 3, 2023, the Supreme Court has (a) adopted Rules of Judicial Administration that provide principles of construction for all procedural and evidentiary rules and (b) amended Pa.R.O.C.P. 1.2 (and other civil and criminal rules) to incorporate the new Rules of Judicial Administration. The combined report of the various rules committees state that the purpose of these changes is to “provide for uniform rules of construction for all procedural and evidentiary bodies of rules.” “In re: Order Amending Rule 1.2 of the Pennsylvania Rules of Orphans’ Court Procedure, No. 966 Supreme Court Rules Docket,” 53 Pa.B. 7151 (11/18/2023); “In re: Order Adopting Rules 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, and 115 of the Pennsylvania Rules of Judicial Administration, No. 600 Judicial Administration 2023,” 53 Pa.B. 7124 (11/18/2023).

JCP Fees Renewed

Posted on by November 8, 2023

The Pennsylvania legislature has passed, and Governor Shapiro has signed into law, a renewed section 2802-E of the Administrative Code of 1929, Act of April 9, 1929, P.L. 177, No. 175, to reimpose the “JCP” temporary surcharges of $10.00 and $11.25 that had expired on July 31, 2023. See, Act of November 1, 2023, No. 22,

The new section appears to be effective immediately (meaning as of the date of enactment, November 1, 2023), and will expire July 31, 2025. The total JCP fees will therefore return to $40.25, which was the same total that had been in force before the previous surcharges had expired.

See “JCP Fee Expired in Part” for additional information on the history of these fees.

Denial of Disqualification of Counsel Not Appealable

Posted on by November 3, 2023

The denial of disqualification of counsel representing multiple beneficiaries is not an appealable order under the collateral order doctrine even when there is alleged to be a non-waivable conflict of interest among the beneficiaries when the counsel did not previously represent other parties and there is no other allegation of irreparable harm. In re: Shirley Weingberg Revocable Trust, 940 WDA 2022 (Pa. Super. 11/2/2023) (non-precedential). (In a concurring opinion, Justice Bowes concluded that the appeal was frivolous and a proper subject of an award of legal fees.)

Spouse’s Right of Withdrawal Limited by Amendment

Posted on by October 23, 2023

When a trust has given the surviving spouse an unlimited right to withdraw principal and a later amendment gives the spouse the right to withdraw the greater of $5,000 or 5% of the trust principal, the amendment demonstrates the intention of the settlor to limit the right of withdrawal and the original right of unlimited withdrawal is superseded and replaced. O’Sheill Trust, 1 Fid.Rep.4th 99 (Warren O.C. 2022), and O’Sheill Trust (No. 2), 1 Fid.Rep.4th 107 (Warren O.C. 2022), aff’d 555 WDA 2022 (Pa. Super. 1/23/2023).

Executor’s Transfer to Wife Voided as Self-Dealing

Posted on by October 23, 2023

Voiding an act of self-dealing by an executor, and not surcharge, is a proper remedy when the recipient of the transfer of estate property is the executor’s wife and she is complicit, and the transfer cannot be justified as an exchange for a claim against the estate when the claim represents a conflict of interest and was for less than the appraised value of the property. DiMatteo Estate, 1 Fid.Rep.4th 97 (Allegheny O.C. 2022), aff’d 362 WDA 2022 (Pa. Super. 1/27/2023) (non-precedential).

[For a related decision in the same case, see “Conveyance of Real Estate Set Aside for Self-Dealing.”]

Removal of Executor for Failure to Keep Records and Dilatory Performance of Duties

Posted on by October 23, 2023

Executor was removed who failed to probate will for five years and then failed to make any distribution of the estate for nine years, failing to give notices of estate administration, failing to advertise the grant of letters, failing to collect all of the assets of the estate, selling two parcels of real estate without advising the beneficiaries or establishing a separate estate account, and commingling the proceeds of sale with his personal assets. Estate of Karn, 1 Fid.Rep.4th 92 (Allegheny O.C. 2021), aff’d 647 WDA 2021 (Pa. Super. 11/18/2021) (non-precedential).

Attorney Fees of Trustee Reduced

Posted on by October 23, 2023

It was a breach of fiduciary duty for the trustee to fail to ensure legal fees were reasonable and failing to review and question the fees charged, which were excessive in relation to the value of the trust (almost one third of the value of the trust), the hourly rates that were charged exceeded the rates charged by other lawyers with similar skill and experience, the legal services included preparation of a “form template” petition for a “vanilla” adjudication, attorney time was spent at a deposition to which the trustee was not directly related, and the invoices included duplicate billing for different lawyers performing the same tasks in violation of the fee agreement, and so a surcharge of the trustee was warranted. Vaccarello Trust, 1 Fid.Rep.4th 77 (Montgomery O.C. 2022).