Proposed Amendment to Guardianship Reporting

The Orphans’ Court Procedural Rules Committee is considering an amendment to Pa.R.O.C.P. 14.8 to require a court that completes reasonable enforcement procedures to ensure compliance with guardianship reporting to enter an order to explain the actions taken to attempt enforcement, why a guardian cannot be compelled to comply, and directions for delinquent filings by future guardians. “Proposed Amendment of Pa.R.O.C.P. 14.8,” 52 Pa.B. 5119 (8/20/2022).

Comments should be submitted to the committee by October 11, 2022.

Assets of Dissolving Fire Company Distributed to Other Fire Companies

Upon the dissolution of a nonprofit corporation formed to provide firefighting services, application of cy pres doctrine led to distribution of assets to two other firefighting organizations rather than to nonprofit corporations providing training or support services to fire fighters. Lincoln Fire Company, 12 Fid.Rep.3d 312 (Montgomery O.C. 2022), aff’d in part and rev’d in part, ___ A.4th ___, 479 C.D. 2022 (Pa. Cmwlth. 1/16/2024).

Chronic Kidney Disease Was Not End-Stage Medical Condition

Although the incapacitated person was unable to make or communicate medical decisions, and was suffering from stage 5 chronic kidney disease that may ultimately end in death, he did not have an “end-stage medical condition” within the meaning of 20 Pa.C.S. §5422 and so the court was without power to authorize the withholding of life-sustaining treatment by the plenary guardian of the person. Estate of R.C., 12 Fid.Rep.3d 297 (Chester O.C. 2020).

No Undue Influence by Spouse

Although the decedent’s spouse had a confidential relationship with the decedent through her increasing control over the decedent’s business affairs, there was insufficient evidence of a weakened intellect and so the claims of undue influence over two lifetime transactions was denied. Lack of evidence of weakened intellect also led to conclusion that the creation of a joint account by the decedent with his spouse was not the product of undue influence and so the funds in the account passed to the spouse upon the death of the decedent. Perlstein Estate, 12 Fid.Rep.3d 273 (Montgomery O.C. 2022).

Executor and Trustee Surcharged for Dilatory Conduct

Accounts of estate and inter vivos trust (funded by estate) were filed together, and executor and trustee was denied commissions for failure to administer estate and trust in timely fashion, objections to miscellaneous expenses were sustained for failure to substantiate the expenses, and legal fees were reduced based on LaRocca factors, with the executor and trustee being surcharged for half of some of the fees due to the trustee’s dilatory conduct. Tobias Trust, 12 Fid.Rep.3d 251 (Montgomery O.C. 2020); Tobias Estate, 12 FId.Rep.3d 262 (Montgomery O.C. 2020).

[Note: These are the same adjudications for which the court wrote a R.A.P. 1915(a) opinion published at 12 Fid.Rep.3d 143 (Montgomery O.C. 2021), which was affirmed in part, reversed in part, vacated in part, and remanded by the Superior Court, 446 EDA 2021 and 2176 EDA 2020 (Pa. Super. 1/19/2022) (non-precedential).]

Removal of Trustee with History of Litigation with Former Co-Trustee

Following the removal of one co-trustee of a testamentary trust, the other co-trustee was also removed, and an independent trustee appointed, where the two trustees were also the primary beneficiaries of the trust, were currently litigating conflicting claims to trust property, and had a history of litigation and conflicts over the administration of the estate. Butz Estate, 12 FId.Rep.3d 247 (Monroe O.C. 2022)

Late Filing for Portability Extended to Five Years

The Internal Revenue Service has announced that the two-year period for filing an estate tax return merely to elect portability has been extended to five years from date of death. Rev. Proc. 2022-32, IRB 2022-30 IRB ___ (7/25/2022).

In Rev. Proc. 2017-34, 2017-26 IRB 1282 (6/26/2017), the IRS first announced a new simplified procedure for obtaining relief for filing a late estate tax return in order to elect portability. (See “New Late Filing Portability Relief.”)

Under IRC section 2010(c)(5)(A), the federal estate tax exclusion amount for a surviving spouse can be increased by the “deceased spousal unused exclusion amount” of the deceased spouse, but only if the executor elects “portability” by filing an estate tax return for the deceased spouse within the time prescribed by law (including extensions) for filing the return.

The IRS does not have the power to extend the time to make an election with the due date is set by statute, but can extend deadlines when the due date is prescribed by regulation.  When the combined gross estate and adjusted taxable gifts exceeds the base exclusion amount, the due date for the return is prescribed by IRC § 6018(a) and so the IRS does not have the power to allow for a late filed election, but when no estate tax return is required by § 6018(a) and the return is being filed only to make the portability election, the due date is prescribed by Treas. Reg. § 20.2010-2(a) and the IRS can grant an extension of time under Treas. Reg. § 301.9100-3.

Rev. Proc. 2017-34 allowed a late portability election if (1) the estate tax return was not required due to the combined values of the gross estate and total adjusted taxable gifts and (2) the federal estate tax return is filed not later than two years after the decedent’s death or January 2, 2018, whichever is later.  This was intended to avoid the need for requests for letter rulings, but Rev. Proc. 2022-32 reports that the IRS has continued to issue “numerous” letter rulings allowing elections more than two years after the death of the decedent, and that the number of requests “continues to place a significant burden on the available resources of the IRS.” A “significant percentage” of the ruling requests have been from estates of decedents who died within five years of the request, and so the IRS has extended to time for late filing to five years after the decedent’s death.

The new revenue procedure supersedes Rev. Proc. 2017-34, and the requirements for filing a return in accordance with the procedure are found in Section 4.01 of the new Rev. Proc. 2022-32.

[DBE Comment: The federal estate tax basic exclusion amount is currently $12,060,000 (with adjustments for inflation), but will be reduced by one half after 2025. When the combined estates of the deceased spouse and the surviving spouse are likely to be less than the current exclusion amount, but likely to be more than the exclusion amount after 2025, it is not often clear if preparing a federal estate tax return will actually save any tax. The new five year period within which to file a return for a portability election may allow many estates to wait until after 2025, and to see if Congress allows the exclusion amount to be halved, before going to the time and expense of preparing and filing a federal estate tax return for the portability election.]

New Inheritance Tax Exemption for Military Deaths

Section 15.1 of the Act of July 8, 2022, No. 53 (HB 1342), adds a new subsection 2111(u) to the inheritance and Estate Tax Act (72. P.S. §9111(u)) that exempts from inheritance tax the transfer of personal property resulting from the death of a member of the armed forces or National Guard as a result of injury or illness while on active duty, which includes training. The exemption applies to deaths on or after September 7, 2022*.

[* The effective date provisions are a little confusing. Section 24(2.1) of the act says that the new subsection applies to deaths “after the effective date of this section,” but there is no explicit effective date for section 24. Section 26(2) of the act says that the addition of the new subsection “shall take effect in 60 days.” Sixty days after enactment would be September 6, and the word “after” in section 24(2.1) leads to the conclusion that the amendment applies to deaths after the 60th day, or beginning with deaths on September 7.]

Spousal Election is Irrevocable after Six Months

Absent fraud or duress, a spousal election against a will (or an election to take under the will) becomes irrevocable at the end of the six month period allowed by 20 Pa.C.S. § 2210(b) and may not be revoked merely because the surviving spouse had insufficient information about the estate. In re: Estate of Caleem L. Jabbour, Deceased, ___ Pa. ____, 276 A.3d 1180, 13 WAP 2021 (6/22/2022), rev’g 2020 PA Super 299, 244 A.3d 1254 (12/30/2020).