Trust Modification Invalid Even with Settlor’s Consent

Following Trust under Agreement of Edward Winslow Taylor, 640 Pa. 629, 164 A.3d 1147 (2017), a trust cannot be modified to allow the beneficiaries to remove and replace trustees even with the consent of the settlor under 20 Pa.C.S. § 7740.1(a). Garrison Trusts, 10 Fid.Rep.3d 189, Nos. 1992-X1509, 1992-X1518, and 1992-X1519 (Montgomery O.C. 6/16/2020), aff’d 1429 EDA 2020 (Pa. Super. 9/27/2021) (non-precedential), rev’d, ___ Pa. ___, ___ A.3d ___, 61 MAP 2022, 62 MAP 2022, and 63 MAP 2022 (1/19/2023).

[DBE Note: This decision is almost certainly wrong. It relies entirely upon the failure of the Taylor court to distinguish between subsections (a) and (b) of § 7740.1, and so reaches a result that the Taylor court never considered.]

[Updated on 1/27/2023 to show that the Supreme Court reversed the Superior Court and Orphans’ Court.]

New Anti-Discrimination Ethics Rule

Posted on by June 19, 2020

The Supreme Court of Pennsylvania has adopted an amendment to Rule of Professional Conduct 8.4 that adds a new paragraph (g) to make it professional misconduct for a lawyer to “in the practice of law, by words or conduct, knowingly manifest bias or prejudice, or engage in harassment or discrimination, as those terms are defined in applicable federal, state or local statutes or ordinances, including but not limited to bias, prejudice, harassment or discrimination based upon race, sex, gender identity or expression, religion, national origin, ethnicity, disability, age, sexual orientation, marital status, or socioeconomic status.”

“Amendment of Rule 8.4 of the Pennsylvania Rules of Professional Conduct; No. 196 Disciplinary Rules Doc.” (6/8/2020), 50 Pa.B. 3011 (6/20/2020).

This is the same amendment published as “Proposed Amendments to the Pennsylvania Rules of Professional Conduct Relating to Misconduct,” 49 Pa.B. 4941 (8/31/2019), as previously reported.

Corrections to “Proposed Regulations on Administration Expenses and Excess Deductions”

Posted on by July 30, 2020

The article “Proposed Regulations on Administration Expenses and Excess Deductions” contained some errors or omissions that have now been corrected.

  • The article originally stated that the calculation of different kinds of excess deductions was not clear, and suggested that the fiduciary should have the same discretion to allocate different kinds of deductions against income in determining the character of excess deductions that the fiduciary has in allocating deductions to different kinds of income in determining the character of distributable net income. The proposed regulations actually allow the same kind of discretion, and the article has been corrected to reflect what the regulations actually provide.
  • The article originally reported that the proposed regulations would be prospective only. The preamble to the proposed regulations state that the regulations may be relied upon for tax years after 2017, so the regulations will be retroactive to that extent, and the article was corrected on 5/12/2020 to reflect that retroactive effect.
  • The article has been updated to include a suggestion as to how excess deductions that are administrative expenses described in § 67(e) (and so adjustments to gross income and not itemized deductions) can be reported by beneficiaries in Part III of Schedule E.

Intervention by Creditor

In a proceeding by the executor to recover assets allegedly taken from the estate, beneficiaries claiming interests in the contested assets have standing to object to intervention by a creditor, and the creditor will not allowed to intervene when the creditor has no interest in the particular assets and has only a general interest in the estate that will be adequately represented by the executor. The court also ruled that a party claiming an interest in an asset was barred from testifying by the Dead Man’s Act, but could testify to authenticate photographs, and that hearsay testimony was inadmissible even if presented in an affidavit. Benson, Jr. Estate, 10 Fid.Rep.3d 99 (Lycoming O.C. 2020).

Proof of Testator’s Signature

Testimony of bank employee that the signature of the witness to the will was her own, and that she would not have signed as witness if she had not seen the testator sign the will and had identified the testator, together with the testimony of the sole beneficiary of the will, who had lived with the testator for 20 years and was familiar with his signature, was sufficient to admit the will to probate, and contradictory evidence was relevant only if forgery was alleged at a later time. Walden Estate, 10 Fid.Rep.3d 95 (Philadelphia O.C. 2020).

[Note: The concluding statement by the court that the heir who testified that the signature was not that the of testator could challenge the will as a forgery “at a later time” is puzzling. The Register of Wills had denied probate, and on appeal the Orphans’ Court was ordering that the will be admitted to probate. At what “later time” could or should the will be challenged?]

Use of Burial Sites

When the will of the decedent did not specifically dispose of mausoleum crypts and burial plots owned by the decedent, the issue of the decedent inherited those burial sites as tenants in common under 20 Pa.C.S. § 2514(14), and have the right to interment in those sites on a first come, first served basis, but their spouses have no right of interment without the consent of all other co-owners. Raab Living Trust, 10 Fid.Rep.3d 91 (Cumberland O.C. 2020).

Date of Distribution Valuation

Real property distributed to one of two beneficiaries before the final division of the estate should be valued at date of distribution, and not date of death, and the net proceeds from the sale of the property by the beneficiary in an arm’s length transaction is evidence of the date of distribution value. Hunsicker Estate, 10 Fid.Rep.3d 83 (Monroe O.C. 2020).

“Physical Presence” Waived for Retirement Plan Consents

Posted on by July 5, 2020

The Internal Revenue Service has announced relief from the “physical presence” requirement for the notarization or witnessing of participant and spousal consents to certain retirement plan elections during 2020 because of the COVID-19 pandemic.

Under I.R.C. §§ 401 and 417, certain elections by a participant in a qualified retirement plan, and certain required consents by the participant’s spouse (such as the designation of a beneficiary other than the surviving spouse), must be notarized or witnessed by a plan administrator. Treas. Reg. § 1.410(a)-21 allows some kinds of electronic notices and consents, but subsection (d)(6)(i) generally requires spousal consents to be signed in the “physical presence” of a notary or plan administrator. However, subsection(d)(6)(iii) provides that “the Commissioner may provide that the use of procedures under an electronic system is deemed to satisfy the physical presence requirement under paragraph (d)(6)(i) of this section, but only if those procedures with respect to the electronic system provide the same safeguards for participant elections as are provided through the physical presence requirement.”

In Notice 2020-42, 2020-26 I.R.B. 986 (6/22/2020), the Internal Revenue Service announced that during 2020, the physical presence requirement of Treas. Reg. § 1.410(a)-21(d)(6) is deemed to be satisfied:

  • By a remote notarization using live audio-video technology that otherwise satisfies that requirements of participant elections under the regulations and is allowed by state law for remote notarizations; and
  • By a remote witnessing by a plan administrator using live audio-video technology if:
    (1) The individual who is signing (the participant or spouse) presents a valid photo ID to the plan representative during the live audio-video conference (transmitting a copy of the photo ID before or after the witnessing is not sufficient);
    (2) The live audio-video conference allows for direct interaction between the individual and the plan representative (a recorded video of the person signing is not sufficient);
    (3) The individual transmits by fax or other electronic means a legible copy of the signed document directly to the plan representative on the same date it was signed; and
    (4) After receiving the signed document, the plan representative acknowledges that the signature has been witnessed by the plan representative in accordance with Notice 2020-42 and transmits the signed document (including the acknowledgement), back to the individual using a system that the individual can effectively access, with notice that the individual is entitled to a free printed copy upon request, as provided by § 1.401(a)-21(c).

Claims for Home Healthcare Denied

Decedent lived with neighbors due to health issues, and they cared for him, but claims for the value of the neighbors’ services were denied as requiring speculation as to the intent of the decedent, the time spent by the neighbors, or what rate of compensation to apply, but claims for moneys spent by the neighbors in cleaning up the decedent’s property were allowed both under the doctrine of unjust enrichment and because there was disinterested testimony that the decedent approved of the expenses. Ackerman Estate, 10 Fid.Rep.3d 137 (Monroe O.C. 2020).

Appeal from Probate Dismissed as Untimely

Appeal from probate filed more than one year after the grant of letters will be dismissed when the petitioner received a notice of estate administration and does not allege fraud upon the court or any other exception to the one year statute of limitations. Mase Estate, 10 Fid.Rep.3d 120 (Lycoming O.C. 2020).