Fraud in the Inducement Appeal Allowed

The Supreme Court has allowed an appeal from the decision of the Superior Court in Passarelli Family Trust, 2019 PA Super 95 (3/28/2019) (en banc), rev’g 7 Fid.Rep.3d 63 (O.C. Chester Co. 2016). The issues listed in the court’s order are:

(1) Whether the Superior Court’s reversal of the orphans’ court’s termination of an irrevocable inter vivos trust pursuant to 20 Pa.C.S. § 7736, which explicitly allows for the voidability of a trust induced by fraud, conflicts with another appellate court’s opinion?

(2) Whether the Superior Court’s reversal of the orphans’ court’s termination of an irrevocable trust pursuant to 20 Pa.C.S. § 7736, and implicit overruling of Estate of Glover, is at odds with this Court’s holding in Paul’s Estate regarding the factors by which a trust may be terminated?

(3) Whether the Superior Court’s reversal of the orphans’ court’s termination of an irrevocable inter vivos trust pursuant to 20 Pa.C.S. § 7736 presents an issue of first impression, especially where the Superior Court has held that a stricter standard should apply when a party seeks to rescind an irrevocable trust that was induced by fraud?

(4) Whether the Superior Court’s imposition of a stricter standard to terminate an irrevocable inter vivos trust on the basis of fraud in the inducement presents an issue of such substantial public importance as to require the prompt and definitive resolution by the Pennsylvania Supreme Court?

 In re: Passarelli Family Trust, 235 MAL 2019 (9/11/2019), now 71 MAP 2019.

The Supreme Court has affirmed the Superior Court, ___ A.3d ___, 71 MAP 2019 (Pa. 12/22/2020).

Unofficial Inflation Adjustments for 2020

Posted on by November 6, 2019

With the release of the Chained Consumer Price Index (C-CPI-U) for August 2019, it’s possible to calculate various inflation adjustments for 2020. The following are the significant federal estate planning numbers, with the numbers for 2019 shown in parentheses:

  • The base applicable exclusion amount (and generation-skipping tax exemption) will be $11,580,000 (was $11,400,000 for 2019).
  • The annual gift tax exclusion will be $15,000 (unchanged).
  • The annual gift tax exclusion for a non-citizen spouse will be $157,000 (was $155,000).
  • The “2 percent” amount for purposes of section 6166 will be $1,570,000 (was $1,550,000).
  • The limitation on the special use valuation reduction under section 2032A will be $1,180,000 (was $1,160,000).
  • The top (37%) income tax bracket for estates and trusts will begin at $12,950 (was $12,750).
  • The alternative minimum tax exemption for estates and trusts will be $25,400 (was $25,000), and the phaseout of the exemption will start at $84,800 (was $83,500).

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

Update (11/6/2019): The Internal Revenue Service has published Rev. Proc. 2019-44 with the official inflation adjustments for 2020, and the official adjustments match the unofficial adjustments shown above.

Webcalculators Released

Posted on by September 2, 2019

As of September 1, 2019, Webcalculators (wcalcs.com), my on-line service that works in any browser and provides authoritative analyses of estate and trust, tax, and financial planning techniques and options, has moved out of testing and has been released on a subscription basis.

The new subscription price is $198 to use all 23 of the current estate and trust, tax, and financial planning calculator services of Webcalculators for one year.  For those who registered to use the beta version of Webcalculators before September 1, Webcalculators services will continue to be free for three months, until December 1, 2019.

For overviews of some of the Webcalculators, click on “Resource Types” in the menu bar, and select “Overview.”

For users who have registered (or will register) for Webcalculators and do not pay the subscription price, the following calculators will be available:

  • Life estate, remainder, annuity, and unitrust factors that are found in (or can be derived from) actuarial tables published by the Internal Revenue Service.
  • Interest calculations for federal (and Pennsylvania) underpayments (or overpayments) of tax.
  • Calculations of weighted average maturities for purposes of IRC § 1274.

More than 40 additional calculators are already under development for either paid subscribers or free registrants, and my goal is to add all of those new calculators within the next 12 months.

New Confidentiality Exception

The Supreme Court has amended Rule of Professional Conduct 1.6 to allow lawyers to reveal confidential information to the extent that the lawyer reasonably believes necessary “to comply with other law or court order.” The amendment is effective in 30 days. “Amendment of Rule 1.6 of the Pennsylvania Rules of Professional Conduct; No. 182 Disciplinary Rules Doc.” (8/15/2019), 49 Pa.B. 4940 (8/31/2019).

Proposed Anti-Discrimination Ethics Rule

The Disciplinary Board of the Supreme Court of Pennsylvania has proposed an amendment to Rule of Professional Conduct 8.4 that would add 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.”

Comments should be submitted on or before September 30, 2019.

“Proposed Amendments to the Pennsylvania Rules of Professional Conduct Relating to Misconduct,” 49 Pa.B. 4941 (8/31/2019).

[6/19/2020 Update: The proposed rule was adopted by order titled “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).]

Proposed Changes in Rules Terminology

Posted on by August 23, 2019

The Supreme Court is considering changes to several procedural rules, including Pa.R.J.A. 103 (the procedures for adopting, filing, and publishing rules) and Pa. O.C. Rule 1.1 (short title and citation to the Orphans’ Court Rules).

The stated purpose of the proposed rules is to provide greater uniformity and consistency in the styles and terminology applicable to rules.

The title of Orphans’ Court rules would be changed from “Pennsylvania Orphans’ Court Rules” to “Pennsylvania Rules of Orphans’ Court Procedure,” and the citation changed from “Pa.O.C. Rule” to “Pa.R.O.C.P.” in order to be more consistent with the titles and citations to the Rules of Civil Procedure and Rules of Criminal Procedure.

Comments, suggestions, or objections should be submitted to the Supreme Court Rules Committee by November 15, 2019.

“Proposed Amendments of Pa.R.J.A. Nos. 101 and 103, Pa.R.C.P. Nos. 51 and 129, Pa.R.C.P.M.D.J. No. 201, and Pa. O.C. Rule 1.1,” 49 Pa.B. 4809 (8/24/2019).

Testimony of Contingent Fee Witness Excluded

The Orphans’ Court improperly excluded documentary evidence of the birth records of claimants to the estate, and could not exclude the testimony of a genealogical witness to be paid on a contingent fee for a violation of the Rules of Professional Conduct, but could properly exclude the testimony on common law grounds as an improper fee agreement with a fact witness, and could properly conclude that the testimony deserved little or no weight. Estate of Albert Mikeska, 2019 PA Super 249 (8/20/2019).

Proposed Amendments for Client Security Fund

The Pennsylvania Lawyers Fund for Client Security has proposed amendments to the Rules of Disciplinary Enforcement relating to the Fund. It is stated that the majority of the amendments are “administrative in nature, or memorialize the existing practice.” “Proposed Amendments to the Pennsylvania Rules of Disciplinary Enforcement,” 49 Pa.B. 4542 (8/17/2019).

Public Access Policy Applicable Authorities

The Administrative Office of Pennsylvania Courts has revised and republished the list of applicable authorities that restrict public access to court records. “Case Records Public Access Policy of the Unified Judicial System of Pennsylvania,” 49 Pa.B. 4544 (8/17/19).

The revisions do not affect the provisions for the Orphans’ Court that can be found in “Public Access Policy Compliance for Orphans’ Court Filings.”