Late Filed Claim Refused

A petition to refuse a notice of claim that was filed under 20 Pa.C.S. § 3532 more than one year after the first advertisement of the grant of letters was granted and the notice of claim was refused. Martin Estate, 11 Fid.Rep.3d 179 (Adams O.C. 2021).

[DBE Commient: It is not clear whether this decision is based on a misreading of § 3532(b)(1) or if the description of the factual circumstances is incomplete, because § 3532(b)(1) does not bar the filing of a claim more than one year after the first advertisement of the grant of letters but only bars claims against the personal representative or beneficiaries for personal property that has been distributed. The decision does not say whether the estate was already distributed, and the court’s descriptions of § 3532 seem to be inaccurate.]

Unofficial Inflation Adjustments for 2022

Posted on by September 14, 2021

With the release of the Chained Consumer Price Index (C-CPI-U) for August 2021, it’s possible to calculate various inflation adjustments for 2022. The following are the significant federal estate planning numbers, with the numbers for 2021 shown in parentheses:

  • The base applicable exclusion amount (and generation-skipping tax exemption) will be $12,060,000 (was $11,700,000 for 2021).
  • The annual gift tax exclusion will be $16,000 (had been $15,000 since 2018).
  • The annual gift tax exclusion for a non-citizen spouse will be $164,000 (was $159,000).
  • The “2 percent” amount for purposes of section 6166 will be $1,640,000 (was $1,590,000).
  • The limitation on the special use valuation reduction under section 2032A will be $1,230,000 (was $1,190,000).
  • The top (37%) income tax bracket for estates and trusts will begin at $13,450 (was $13,050).
  • The alternative minimum tax exemption for estates and trusts will be 26,500 (was $25,700), and the phaseout of the exemption will start at $88,300 (was $85,650).

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

Warren and Forest Counties New Local Orphans’ Court Rules

Warren and Forest Counties have adopted new local Orphans’ Court rules, to be effective 30 days after publication in the Pennsylvania Bulletin. “Local Orphans’ Court Rules; Misc. No. 48 of 2021,” (Warren and Forest Cos. 8/25/2021), 51 Pa.B. 5823 (8/11/2021).

[Note: There is nothing in the adopting order to indicate whether the rules were submitted to the Oprhans’ Court Procedural Rules Committee for review prior to adoption, as required by Pa.R.J.A. 103(d)(4).]

Letter Directing Beneficiary Change Was Substantial Compliance with Policy

Letter and other documents signed by decedent showed his intent to change the ownership and beneficiary designation of a life insurance policy owned by his insurance trust and was “substantial compliance” with policy requirement that changes be made on insurance company forms. Rothstein Trust (No. 1), 11 Fid.Rep.3d 162 (Bucks O.C. 2021); Rothstein Trust (No. 2), 11 Fid.Rep.3d 169 (Bucks O.C. 2021), aff’d, 763 EDA 2021 (Pa. Super. 1/12/2022) (non-precedential).

No Jurisdiction over Nonqualified Employee Benefit Plan

The Orphans’ Court did not have mandatory jurisdiction in a dispute over the beneficiary designation of a decedent’s interest in a nonqualified employee benefit plan, and the court declined to exercise permissive jurisdiction when the plan provided for jurisdiction in Illinois. Swain Estate, 11 Fid.Rep.3d 160 (Allegheny O.C. 2021), aff’d, 465 WDA 2020 (Pa. Super. 6/22/2021) (non-precedential).

Codicil Was Result of Undue Influence, but Will Was Not.

Daughter who lived with decedent and cared for her received substantial benefits under a 2006 will and 2014 codicil. Despite medical evidence to the contrary, the court determined that the decedent did not suffer from a weakened intellect in 2006, but did suffer from a weakened intellect when the codicil was executed, so the will was held to be valid but the codicil was not. Kefalos Estate, 11 Fid.Rep.3d 154 (Allegheny O.C. 2020).

Prenuptial Agreement Valid

Surviving spouse did not meet her burden of proving that full and fair disclosure of assets was not made in the schedules included in the prenuptial agreement, and her testimony that she did not see the entire agreement before signing it was contradicted by other testimony and not considered credible. The failure of the decedent to fund an individual retirement account (IRA), as required by the agreement, can be remedied by a claim against the estate and does not invalidate the agreement. Renwick Estate, 11 Fid.Rep.3d 152 (Allegheny O.C. 2020).

Revocable Trust Was for Sole Use of Surviving Spouse

On an appeal from an order of the Department of Revenue Board of Appeals, the court reversed the decision of the board and found that the funds in the revocable trust of the decedent were for the “sole use” of the spouse who was the sole trustee and sole beneficiary and could use or remove any of the funds, so no inheritance tax was owed. Potocar Estate, 11 Fid.Rep.3d 150 (Allegheny O.C. 2021), aff’d,  283 A. 3d 936, 662 C.D. 2020 (Pa. Cmwlth. Ct. 9/30/2022).

Allocating Income and Fees for Settlement

In allocating a settlement for improper distributions from a trust between income and principal, the court determined the amount of income that would have been earned by the trust by looking at the income earned by a similar trust created by the same grantor. The court also allowed legal fees to one of the beneficiaries for creating the settlement fund under the “common fund” doctrine. Scaife Trust, 11 Fid.Rep.3d 143 (Allegheny O.C. 2021).

Fees for Appointment of Guardian not Reimbursable

Daughter’s request for reimbursement for legal fees and costs incurred in guardianship proceedings for her incapacitated father was denied because the daughter did not create new funds for her father or “provide a similar special service,” and an incapacitated person’s estate must be used exclusively for that person’s care and management. Clark, an Incapacitated Person, 11 Fid.Rep.3d 142 (Chester O.C. 2021).

[DBE Comment: This conclusion is almost surely wrong. The costs of the administration of an incapacitated person’s estate is normally paid from the estate, and there can’t be any administration or management until a guardian is appointed, so the reasonable costs of the appointment of the guardian should be considered administrative costs of the estate, just as the costs of probating a will or obtaining letters of administration are normally paid from the estate. For examples of legal fees that are not reimbursable from an estate, see “Non-Reimbursable Legal Fees of Fiduciaries.”]