Checks Uncashed at Death Were Incomplete Gifts and Invalid

Posted on by September 17, 2024

Checks written at the request of the decedent three days before his death and delivered by the decedent were inter vivos gifts and not testamentary, but were incomplete and invalid because the account upon which the checks were drawn had insufficient funds and none of the payees attempted to cash the checks before the decedent’s death, so the decedent was never divested of control over the funds. Summary judgment was not appropriate for other checks written by the decedent from his revocable trust before his death because there were genuine issues of material facts, and so the “interim trustee” appointed by the court was directed to evaluate the claims with respect to those checks, and the trustee appointed by the decedent would be restored once the litigation was resolved. Bartosh Trust, 2 Fid.Rep.4th 35 (Beaver O.C. 2023).

[DBE Comment: The appointment of a “temporary independent trustee” of the decedent’s revocable trust seems most unusual, because it was apparently done without any determination that the trustee appointed by the decedent had committed any breach of trust, and only done because the trustee had a conflict of interest in the dispute over the validity of the lifetime gifts. IT was not explained why the trustee appointed by the decedent could not be trusted to hold the funds of the trust during the litigation, but could be trusted with the funds following the litigation, and the direction to the “interim trustee” to “evaluate” claims of the parties makes the interim trustee more like a master than a trustee.]

Petition for Guardianship Dismissed for Lack of Jurisdiction

Posted on by September 17, 2024

A petition for the appointment of a guardian for an alleged incapacitated person (AIP) was dismissed without prejudice under the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act, 20 Pa.C.S. 5901 et. seq., even though the AIP had recently voted in Pennsylvania and had filed for divorce in Pennsylvania, when the AIP had not been physically present in Pennsylvania for at least six consecutive months before the petition was filed, so that Pennsylvania was not her “home state,” and Pennsylvania was also not a “significant connection state” because substantial evidence relevant to the allegations of incapacity and the AIP’s well being was not in Pennsylvania, but in California, which was her home state. It was not a violation of the uniform act to request a California court to conduct a wellness assessment of the AIP, and the AIP did not need to appear or testify in the hearing on jurisdiction. Estate of L.S.C., an Alleged Incapacitated Person, 2 Fid.Rep.4th 47 (Philadelphia O.C. 2023), app. discontinued, 1553 EDA 2023 (Pa. Super.)

No Inheritance Tax Deduction for Indemnifications

Posted on by September 17, 2024

Inheritance tax deductions were not allowed to the estate of the beneficiary of a trust for amounts paid as reimbursements for excessive trust distributions and for legal fees paid in accordance with indemnification agreements that were signed by the beneficiary in connection with the distributions. The distributions were made without court approval and the court found that the indemnification agreements were not “bona fide and for an adequate and full consideration.” Estate of Scaife v. Commonwealth of Pennsylvania, 2 Fid.Rep.4th 61 (Westmoreland O.C. 2023).

[DBE Comment: The denial of the deduction for the legal fees seems correct because the fees were incurred in what amounted to a dispute between beneficiaries of a trust over distributions from the trust. See 72 P.S. § 9230(3) and “Non-Reimbursable Legal Fees of Fiduciaries.” The denial for a deduction for the amounts repaid to the trustees is less certain, because that would seem to be a debt of the beneficiary’s estate if the distributions from the trust were improper and the trustees could have recovered those funds without any indemnification agreement, but that issue was apparently not raised by the parties and not addressed by the court.]

Unofficial Inflation Adjustments for 2025

Posted on by September 11, 2024

The Bureau of Labor Statistics has published the Chained Consumer Price Index (C-CPI-U) for August 2024, and so it’s possible to calculate various inflation adjustments for 2025. The following are the significant federal estate planning numbers calculated for 2025, with the numbers for 2024 shown in parentheses:

  • The federal estate tax base applicable exclusion amount (and generation-skipping tax exemption) will be $13,990,000 (was $13,610,000 for 2024).
  • The annual gift tax exclusion will be $19,000 (was $18,000).
  • The annual gift tax exclusion for a non-citizen spouse will be $190,000 (was $185,000).
  • The “2 percent” amount for purposes of section 6166 will be $1,900,000 (was $1,850,000).
  • The limitation on the special use valuation reduction under section 2032A will be $1,420,000 (was $1,390,000).
  • The top (37%) income tax bracket for estates and trusts will begin at $15,650 (was $15,200).
  • The alternative minimum tax exemption for estates and trusts will be $30,700 (was $29,900), and the phaseout of the exemption will start at $102,450 (was $99,700).

The Internal Revenue Service will publish the official inflation adjustments in a Revenue Procedure that will probably appear in 4-8 weeks.

Cotrustee’s Petition to Partition Denied

Posted on by August 19, 2024

The current beneficiary and individual cotrustee of a trust holding a partial interest in a family farm, had petitioned the Orphans’ Court to allow him to file a partition action without the consent or joinder of the institutional cotrustee. The court had denied the petition without prejudice and the Superior Court affirmed, concluding that the beneficiaries of other trusts with interests in the farm had standing to contest the petition both because they would be adversely affected by a partition and because they were vested future beneficiaries of the petitioner’s trust, that the sale of the farm was contrary to the intentions of the settlors, that the farm produced enough income to pay for its maintenance and the partition was not in the long-term best interests of the current and future beneficiaries of the trust (which the court must consider under 20 Pa.C.S.A. 7763(a.1), that the institutional cotrustee serving as a trustee of other trusts holding interests in the farm was not a conflict of interest, that the current beneficiary did not have an unqualified right to force a partition as a co-tenant, and that the denial without prejudice was not error because it was speculative to assert that circumstances were not likely to change in the future. In re: That Portion of the Ward Family Trust for the Benefit of Michael Edward Ward, 1241 WDA 2023 (Pa. Super. 7/30/2024).

Extension of Involuntary Commitment Reversed

Posted on by August 18, 2024

An extension of an involuntary commitment under section 303 of the Mental Health Procedures Act, 50 Pa.C.S. 7303, requires clear and convincing evidence that the person is a danger to herself and others. The commitment order is not moot and is appealable even though the patient is no longer in custody because the sufficiency of evidence for a temporary commitment is a legal question that is “capable of repetition and yet apt to evade review.” In this case, the testimony of the doctor showed only “the mere presence of mental illness” and insufficient facts to prove a danger of self-harm. In re: J.G., ___ A.3d ____, 2024 PA Super 173 (8/8/2024).

Decree Invalidating Power of Attorney is Appealable

Posted on by August 18, 2024

A judgment declaring a power of attorney to be invalid and ordering the purported agent to return property to the estate of the decedent is a final appealable order, but the appeal will be dismissed when the record on appeal fails to include a transcript of the hearing which produced the testimony which is the subject of the appeal. David Paul Washinsky, Executor of the Estate of Paul Washinsky v. Thomas Nicholas Washinsky, 468 WDA 2023 (Pa. Super. 8/6/2024) (non-precedential).

Guardian Properly Represented Divorcing Spouse

Posted on by August 12, 2024

Husband filed for divorce and died after grounds for divorce were established, so equitable division of marital property was determined in accordance with the Divorce Code. The husband had initiated the divorce proceedings and participated in the proceedings for nearly three years without any question raised about his mental competency, which was only questioned after grounds for divorce were established. A guardian for the husband was appointed, and his guardian represented the husband’s interests even though she was never a named party to the proceedings, so the divorce proceedings did not need to be dismissed and the equitable distribution award will not be set aside. Other issues raised on appeal were deemed to have been waived. DiLucente v. DiLucente, 1138 WDA 2023 and 1139 WDA 2023 (Pa. Super. 7/30/2024) (non-precedential).

Credibility Determinations Affirmed

Posted on by August 11, 2024

The Orphans’ Court denied the objections to the executor’s account based upon the testimony of the executor which the court found to be credible, and the court did not find the testimony of the objectant and the objectant’s son to be credible. The court’s factual findings and credibility determinations were supported by the record and will not be disturbed on appeal. The objectant argued that account statements were “missing” that were needed to determine “where the missing money went” while the executor served as the decedent’s agent, but the objectant failed to raise any discovery issues and so failed to meet her burden of proof. In re: Estate of Aileen Minnock, Deceased, 1386 WDA 2023 (7/30/2024) (non-precedential).

Decedent Did Not Substantially Comply with Beneficiary Designation Requirements

Posted on by August 11, 2024

The Orphans’ Court properly entered a judgment on the pleadings denying a petition to change the beneficiaries of the decedent’s individual retirement account (IRA) when the decedent did not comply with the change of beneficiary procedures required by the custodian of the IRA and the petition relied instead upon a note found after the decedent’s death that was written on the back of an envelope, which the court found was inconsistent with her prior emails to the custodian and was too ambiguous to support a finding that the decedent had done all she reasonably could to comply with the custodian’s procedures to change the beneficiaries. Estate of Carol D. Stanley, 1424 WDA 2023 (8/5/2024) (non-precedential).