The various procedural rules committees have proposed a number of new and amended rules, including Orphans’ Court rules, to establish uniform procedures for the Servicemembers Civil Relief Act (”SCRA”), 50 U.S.C. §§ 3901 et seq., and the Military and Veterans Code (”Code”), 51 Pa.C.S. §§ 101 et seq. “Proposed Amendment of Pa.R.A.P. 1517, 1732, 1781, 3307, and 3309; Adoption of Pa.R.Civ.P. 243 and 1930.10, Rescission of Pa.R.Civ.P. 1920.46, and Amendment of Pa.R.Civ.P. 216, 237.1, 1037, 1303, 1901.6, 1910.11, 1910.12, 1915.4-2, 1915.4-3, 1915.17, 1920.42, 1920.51, 1930.6, 1956, and 2955; Adoption of Pa.R.O.C.P. 2.12, 3.16, and 15.23, and Amendment of Pa.R.O.C.P. 14.1, 15.7, 15.8, 15.9, 15.10, and 15.13; Amendment of Pa.R.Crim.P. 150, 430, 431, and 515; Adoption of Pa.R.J.C.P. 1206, and Amendment of Pa.R.J.C.P. 1122, 1242, and 1406; and Amendment of Pa.R.Civ.P.M.D.J. 209, 304, 308, 403, 405, 410, 503, 506, 515, and 516,” 53 Pa.B. 5709 (9/16/2023).
With the release of the Chained Consumer Price Index (C-CPI-U) for August 2023, it’s possible to calculate various inflation adjustments for 2024. The following are the significant federal estate planning numbers, with the numbers for 2023 shown in parentheses:
- The federal estate tax base applicable exclusion amount (and generation-skipping tax exemption) will be $13,610,000 (was $12,920,000 for 2023).
- The annual gift tax exclusion will be $18,000 (was $17,000).
- The annual gift tax exclusion for a non-citizen spouse will be $185,000 (was $175,000).
- The “2 percent” amount for purposes of section 6166 will be $1,850,000 (was $1,750,000).
- The limitation on the special use valuation reduction under section 2032A will be $1,380,0001 (was $1,310,000).
- The top (37%) income tax bracket for estates and trusts will begin at $15,200 (was $14,450), and the maximum rate on capital gains will begin at $15,450 (was $14,650).
- The alternative minimum tax exemption for estates and trusts will be $29,900 (was $28,400), and the phaseout of the exemption will start at $99,6502 (was $94,600).
The Internal Revenue Service will publish the official inflation adjustments in a Revenue Procedure that will probably appear in 4-8 weeks.
Updates (9/11/2024), per Rev. Proc. 2023-34, 2023-48 IRB ___ (11/24/2023):
- Official result was $1,390,000.
- Official result was $99,700.
An appeal from an order of the Orphans’ Court granting in part and denying in part a motion for reconsideration was quashed even though the issues for which reconsideration was denied were appealable because the motion for reconsideration did not extend the time limit for appeal, while the grant of reconsideration is not appealable because it is not a final order with respect to the issues addressed by that order. In re: Estate of Erich A. Hooper, 1183 MDA 2022 (Pa. Super. 9/8/2023) (non-precedential).
The opinions that were the subjects of the above appeal were published as Hooper Estate (No. 1), 1 Fid.Rep.4th 208 (Susquehanna O.C. 2022), and Hooper Estate (No. 2), 1 Fid.Rep.4th 216 (Susquehanna O.C. 2022). See “Distribution of Royalties under Will after Disclaimer and with Ineffective Residuary Clause.“
The Orphans’ Court properly removed the appellant as a trustee under 20 Pa.C.S. § 7766(b)(3) because he never took any steps to protect or administer the property that was transferred to the trust, and did not pay the mortgage for the property or pay the rent, real estate taxes, or insurance for the business he operated on the property. However, the court did not determine whether a suitable successor trustee was available, and so the removal order was vacated and remanded for consideration of that issue. The modification of the trust under 20 Pa.C.S. § 7740.2(a) was affirmed because the settlors could not have anticipated that the trust property would not generate income or be self-sustaining, and so modification was proper to permit the sale of the property and the reimbursement to the surviving settlor for the mortgage, insurance, property taxes, and other costs paid to preserve the trust property. Martin v. Paul, 944 MDA 2021 (Pa. Super. 8/29/2023) (non-precedential).
The Orphans’ Court had jurisdiction to consider the probate of a lost will after letters of administration had been issued to the decedent’s daughter, and even though the Register of Wills had never acted on a petition to probate the will and revoke the letters previously granted. Proof of the execution and contents of the will was not challenged on appeal, and the presumption of revocation by the testator was effectively rebutted by testimony that the decedent had continued to declare that he was disinheriting his daughter, and that the will could have been destroyed in the same gas explosion that killed the decedent and destroyed his home, presumably destroying the will as well. In re: Estate of Russell R. Felix, 1184 WDA 2022 (Pa. Super. 8/28/2023) (non-precedential).
The tax clause in the will directed that the estate and inheritance taxes payable “with respect to property or interests passing my will” were to be paid from the residue without apportionment, and so under 72 P.S. § 9144(f), the inheritance tax on the individual retirement accounts that were not part of the estate must be paid by the beneficiaries of those accounts and not from the residue of the estate. In re: Estate of J. Vincent Bavol, ___ A.3d ___, 2023 PA Super 138 (7/28/2023).
The PA Supreme Court has allowed an appeal on the following issue (as stated by the petitioner):
“Where a non-party to a partnership agreement is not a signatory to the agreement and is not a third-party beneficiary of it and where a partnership agreement does not permit assignment, whether the Court’s review is necessary to clarify the circumstances where a non-party could be permitted to ‘step into the shoes’ of a party to an agreement and to enforce contractual rights as if that individual were a party to the agreement.”
In re: Estate of Peter J. Caruso, III, 43 WAL 2023 (8/21/2023).
The Superior Court had allowed specific performance of a buy-sell provision in a partnership agreement even though 12 years had elapsed from the death of one of the two partners, because the conduct of the surviving partner and the deceased partner’s widow showed that they intended to continue to operate the partnership under the partnership agreement. In re: Estate of Peter J. Caruso, III, 1406 WDA 2021 (Pa. Super. 11/15/2022) (non-precedential).
Although the case does not involve issues of estate administration, the resolution of the case may be of interest to practitioners who prepare family partnership agreements and buy-sell agreements as part of their estate planning services.
[9/22/2024 Update: The Supreme Court reversed the Superior Court. See “Surviving Spouse Was Not a Partner under Partnership Agreement.”]
The Supreme Court has reversed the Superior Court and ruled that when a trust is created by an agent acting under a power of attorney that is void ab initio, the trust is also void. In re: Joseph L. Koepfinger, ___ Pa. ___, ___ A.3d ___, 20 WAP 2022 (8/22/2023), rev’g 123 WDA 2020 (Pa. Super. 2/4/2021) (non-precedential).
[DBE Comments: In my report of the allowance of the appeal by the Supreme Court, I noted that the Superior Court’s opinion was “largely incoherent.” In its opinion, the Supreme Court stated that “Respectfully, it is not entirely clear what the Superior Court ultimately held, as it did not directly address the issue at the heart of this matter, i.e., whether the judicial determination that the POA was void ab initio rendered the trust invalid.”]
The trustee was properly removed for commingling trust assets with his own, failing to make distributions in accordance with the trust instrument, and making distributions to himself without the approval of a disinterested trustee as required by the trust instrument. The Orphans’ Court properly directed distributions to one beneficiary because the trustee had denied distributions based on criteria outside of the trust instrument, but erred in directing distributions to another beneficiary because there was inadequate evidence as to the financial needs of that beneficiary. The court did not abuse its discretion in ordering the trustee to pay legal fees and costs of the beneficiaries for obdurate and vexatious conduct before and after the petition for removal was filed. Hallowell v. Hallowell, 1157 MDA 2022 (Pa. Super. 8/15/2023) (non-precedential).
A claimant born during the marriage of the decedent and the person’s mother, and “held out” by the decedent as a child of the decedent, was nevertheless not an “issue” entitled to an intestate share of the decedent’s estate when genetic testing initiated by the claimant showed that the decedent was not his father. Estate of John Robert Rose, 1164 WDA 2022 (Pa. Super. 8/17/2023) (non-precedential).