Uncleared Checks Were Not Completed Gifts

Posted on by July 20, 2023

Checks that were signed by the decedent’s agent and delivered before the death of the decedent but were not paid from the decedent’s account before death were not completed gifts under Pennsylvania law and so the amounts of the checks were still part of the federal taxable estate. The checks were also not gifts causa mortis because there was insufficient evidence that the decedent (and not the agent) believed he was about to die and had made the gifts in contemplation of his expected death. Estate of Demuth v. Commissioner, 2023 U.S.App. LEXIS 17613, No. 22-3032 (3rd Cir. 7/12/2023) (non-precedential).

[DBE Note: Although the decision was a federal estate tax dispute, the same principles would presumably apply for Pennsylvania inheritance tax purposes.]

Independent Basis Was Sufficient to Overcome Presumption of Undue Influence

Posted on by July 20, 2023

Although the decedent’s business advisor received no direct benefit from the decedent’s will (which named him as the executor and testamentary trustee), he received a collateral benefit from being named the trustee of a discretionary charitable trust, and so a presumption of undue influence would arise except that the decedent’s estrangement from, and hostility towards, his wife and her sons provided an independent basis for his will. It was error for the Orphans’ Court not to remove the business advisor as executor because of his conflict of interest in filing a notice of claim, complaint, and confession of judgment against the estate. In re: Estate of Robert J. Rosemeier, 1502 MDA 2021 (Pa. Super. 7/18/2023) (non-precedential).

[DBE Comment: How did the surviving spouse have standing to continue to seek the removal of the executor when she was not a beneficiary of the will and had waived her right to elect against the will, and so was not a beneficiary of the estate? Should the issue of removal have become moot when the probate of the will was upheld, or did the court still have the power and duty to act to protect the interests of the charitable beneficiaries?]

Grantor Trust Assets Do Not Get New Basis at Death of Grantor

Posted on by July 9, 2023

The Internal Revenue Service has confirmed that the assets of a trust that is a grantor trust for federal income tax purposes do not get a new income tax basis at the death of the grantor merely because the trust is a grantor trust, but will get a new basis if the grantor has a power over the trust that causes the trust assets to be included in the grantor’s gross estate for federal estate tax purposes. Rev. Rul. 2023-2, 2023-16 I.R.B. 658 (4/17/2023).

Orphans’ Court Has Jurisdiction over Ejectment Action

Posted on by July 9, 2023

The Orphans’ Court has nonmandatory jurisdiction over an ejectment action when there are “entangled” counterclaims that are within the mandatory jurisdiction of the Orphans’ Court, but the proper remedy is not the dismissal of the ejectment action brought in the Civil Division but the transfer of the action to the Orphans’ Court. Estate of Ricky E. Hull v. Melissa S. Showman, 1277 WDA 2022 (Pa. Super. 7/6/2023) (non-precedential).

[DBE Note: A possible problem with this decision is the suggestion that the Orphans’ Court had jurisdiction over the ejectment action only because the defendant asserted counterclaims that were within the mandatory jurisdiction of the Orphans’ Court, so the court had nonmandatory jurisdiction under 20 Pa.C.S. § 712(3) because there were “substantial questions” that were within the mandatory jurisdiction of the court and also matters not within that jurisdiction. However, under 20 Pa.C.S. § 711(a), the mandatory jurisdiction of the court includes “the administration and distribution of the real and personal property of decedents’ estates” and obtaining possession of a decedent’s real property would seem to be necessary in most–if not all–cases if the real property is to be sold.]

Divorce Did Not Disinherit Step-Grandchildren

Posted on by June 26, 2023

Testamentary gifts to step-grandchildren that were conditioned upon their grandmother (the decedent’s wife) not electing against his will and not recovering assets “in our divorce after my death” did not disinherit the step-grandchildren when a final decree of divorce (and equitable division of marital assets) was entered before death because the scrivener of the will testified that it was what the testator intended. In re: Estate of Thomas P. Cassidy, Deceased, 2023 PA Super 101, ___ A.3d. ___ (6/9/2023), rev’g 12 Fid.Rep.3d 423 (Bucks O.C. 2022).

Trustee Fees and Commissions Properly Reduced

Posted on by June 19, 2023

The executor of a deceased trustee had standing to object to the account filed by the surviving trustee when other beneficiaries joined in the objections and the objection to standing was waived by not raising it until after two and a half years of litigation. Claims for legal fees were properly denied when the trustee was surcharged and the fees were incurred after all pleadings were filed, because a trustee is not entitled to fees for asserting a claim to fees. Cassalia Trusts (No. 2), 1 Fid.Rep.4th 63 (Montgomery O.C. 2023), on appeal, 666 EDA 2023 (Pa. Super.) (consolidated with 667-672 EDA 2023). (The adjudication to which this Pa.R.A.P. 1925(a) opinion relates was Cassalia Trusts, 12 Fid.Rep.3d 562 (Montgomery O.C. 2022).)

Trustee Not Removed for Failing to Make Discretionary Distributions

Posted on by June 19, 2023

Preliminary objections to a petition for the removal of a corporate trustee were sustained, and the petition dismissed, when the corporate trustee refused to make distributions which it “shall deem advisable” for health, maintenance, support, and education without first receiving financial information from the beneficiaries. The petitioners also failed to join the remainder beneficiaries, who were necessary and indispensible parties. Holdship Trust, 1 Fid.Rep.4th 59 (Allegheny O.C. 2022), aff’d, 288 A.3d 919, 2023 PA Super 11 (1/19/2023) (allegations of petition were not grounds for removal).