The Pa. Supreme Court has held that the voiding of a trust by a settlor alleging fraud in the inducement requires clear and convincing evidence of common law fraud, the elements of which are a knowing or reckless material misrepresentation, an intention to mislead another into reliance, and resulting injury caused by justifiable reliance. Evidence of the failure of the settlor’s husband to disclose the identity of real property held by entities transferred to the trust was insufficient because it was not a material misrepresentation. In re: Passarelli Family Trust, ___ A.3d ___, 71 MAP 2019 (Pa. 12/22/2020), aff’ng 206 A.3d 1188, 2019 PA Super 95 (2019) (en banc), rev’g 7 Fid.Rep.3d 63 (O.C. Chester Co. 2016).
The Internal Revenue Service has extended until June 30, 2021, the waiver of the physical presence requirement for retirement plan consents that was first announced in Notice 2020-42, 2020-26 I.R.B. 986 (6/22/2020). Notice 2021-03, 2021-02 I.R.B. ___ (1/11/2021).
This latest notice includes a request for comments, in particular on whether the waiver of the physical presence requirement should be made permanent.
← Previous Year | Current Year | Following Year →
HTML Version Copyright 2018-2024 Daniel B. Evans. All rights reserved.
— Short Term Rates for 2020 —
| Month | Annual | Semiann. | Quarterly | Monthly |
|---|---|---|---|---|
| Jan. | 1.60% | 1.59% | 1.59% | 1.58% |
| Feb. | 1.59% | 1.58% | 1.58% | 1.57% |
| March | 1.50% | 1.49% | 1.49% | 1.49% |
| April | 0.91% | 0.91% | 0.91% | 0.91% |
| May | 0.25% | 0.25% | 0.25% | 0.25% |
| June | 0.18% | 0.18% | 0.18% | 0.18% |
| July | 0.18% | 0.18% | 0.18% | 0.18% |
| Aug. | 0.17% | 0.17% | 0.17% | 0.17% |
| Sept. | 0.14% | 0.14% | 0.14% | 0.14% |
| Oct. | 0.14% | 0.14% | 0.14% | 0.14% |
| Nov. | 0.13% | 0.13% | 0.13% | 0.13% |
| Dec. | 0.15% | 0.15% | 0.15% | 0.15% |
— Mid Term Rates for 2020 —
| Month | Annual | Semiann. | Quarterly | Monthly |
|---|---|---|---|---|
| Jan. | 1.69% | 1.68% | 1.68% | 1.67% |
| Feb. | 1.75% | 1.74% | 1.74% | 1.73% |
| March | 1.53% | 1.52% | 1.52% | 1.52% |
| April | 0.99% | 0.99% | 0.99% | 0.99% |
| May | 0.58% | 0.58% | 0.58% | 0.58% |
| June | 0.43% | 0.43% | 0.43% | 0.43% |
| July | 0.45% | 0.45% | 0.45% | 0.45% |
| Aug. | 0.41% | 0.41% | 0.41% | 0.41% |
| Sept. | 0.35% | 0.35% | 0.35% | 0.35% |
| Oct. | 0.38% | 0.38% | 0.38% | 0.38% |
| Nov. | 0.39% | 0.39% | 0.39% | 0.39% |
| Dec. | 0.48% | 0.48% | 0.48% | 0.48% |
— Long Term Rates for 2020 —
| Month | Annual | Semiann. | Quarterly | Monthly |
|---|---|---|---|---|
| Jan. | 2.07% | 2.06% | 2.05% | 2.05% |
| Feb. | 2.15% | 2.14% | 2.13% | 2.13% |
| March | 1.93% | 1.92% | 1.92% | 1.91% |
| April | 1.44% | 1.43% | 1.43% | 1.43% |
| May | 1.15% | 1.15% | 1.15% | 1.15% |
| June | 1.01% | 1.01% | 1.01% | 1.01% |
| July | 1.17% | 1.17% | 1.17% | 1.17% |
| Aug. | 1.12% | 1.12% | 1.12% | 1.12% |
| Sept. | 1.00% | 1.00% | 1.00% | 1.00% |
| Oct. | 1.12% | 1.12% | 1.12% | 1.12% |
| Nov. | 1.17% | 1.17% | 1.17% | 1.17% |
| Dec. | 1.31% | 1.31% | 1.31% | 1.31% |
The Supreme Court has allowed an appeal from the Superior Court decision in Trust under Will of Augustus T. Ashton, 203 EAL 2020 (12/2/2020). The order states the issue to be:
Did the Superior Court err when it held that the equitable property interest in the trust res of a current vested beneficiary does not establish the beneficiary’s automatic standing to raise issues with the Trustees’ breach of fiduciary duties to the Trust, but instead a court must evaluate each and every beneficiary’s individualized financial loss to determine if it meets some unknown threshold sufficient to meet the “substantial, direct and immediate” test?
Going forward, the docket number in the Supreme Court will be 36 EAP 2020.
As previously reported, the beneficiary in question is entitled to an annuity of $2,400 each year for life from the trust. The Superior Court held that the beneficiary did not have have a “direct, immediate and substantial” interest in transactions reported in the trustee’s account covering a period during which the trust fund increased from about $5.56 million to about $73 million and so did not have standing to object to those transactions or to petition for the appointment of a co-trustee, but did have standing to object to the division of the trust into separate trusts, only one of which would be used to pay the annuity. Trust under Will of Augustus T. Ashton, Deceased, Dated January 20, 1950, 2020 PA Super 130 (6/3/2020), rev’g No. 1039 ST of 1952 (Philadelphia O.C. 2/25/2019).
Update: On 10/4/2021, the Supreme Court issued an opinion reversing the Superior Court in part. Trust under Will of Augustus T. Ashton, Deceased, Dated January 20, 1950, ___ Pa. ___, ___ A.3d ___, 36 EAP 2020 (Pa. 10/4/2021), (with concurrence by Wecht, J.).
Luzerne County has published a new fee schedule for the Register of Wills and Clerk of the Orphans’ Court, to be effective January 1, 2021. “Request to Increase Fees of that Section of the Division of Judicial Services and Records, Formerly Referred to as the Office of the Register of Wills/Clerk of Orphans Court; No. 10345 of 2020” (11/10/2020), 50 Pa.B. 7018 (12/12/2020).
One trustee of a trust lacks standing to sue a lessee for possession of real property titled in name of trust when the other trustee objects to the action and the Orphans’ Court has empowered the other trustee to sell the property. Nowicki Trust v. Righter, 10 Fid.Rep.3d 315 (C.P. Bucks 2020), aff’d 1117 EDA 2020 (Pa. Super. 3/19/2021) (non-precedential).
A 1954 letter from the corporate trustee established an agreement for trustee compensation of 5% of income, and the trustee did not produce evidence of extraordinary services to merit additional compensation or that the resulting fee was unreasonable. However, neither the letter nor the conduct of the trustee waived any right to interim principal commissions, and an interim principal commission was awarded in the reasonable amount requested, which was not an unconstitutional impairment of the original fee contract. The legal fees of the corporate trustee in defending the third account and its fees were not an expense of administration and were payable by the trustee and not the trust, while the reasonable fees of the objectors (who were also co-trustees) benefited all beneficiaries and should be paid from the trust. Wallace Ott Inter Vivos Trust, 10 Fid.Rep.3d 281 (Philadelphia O.C. 2020), aff’d 2021 PA Super 203 (10/12/2021). (The same opinion was republished at 11 Fid.Rep.3d 329.)
A lawyer representing the beneficiary of an estate is entitled to a “charging lien” against the beneficiary’s share of the estate for work performed before being discharged by the beneficiary, based on an oral agreement that the lawyer’s billings could be paid out of the beneficiary’s share. Fischer Estate, 10 Fid.Rep.3d 277 (Monroe O.C. 2020).
The Internal Revenue Service has released Rev. Proc. 2020-45 with inflation adjustments for 2021 and, consistent with earlier predictions, the changes in the most significant federal estate and trust planning numbers will be as follows:
- The base applicable exclusion amount (and generation-skipping tax exemption) will be $11,700,000 (was $11,580,000 for 2020).
- The annual gift tax exclusion will be $15,000 (unchanged).
- The annual gift tax exclusion for a non-citizen spouse will be $159,000 (was $157,000).
- The “2 percent” amount for purposes of section 6166 will be $1,590,000 (was $1,570,000).
- The limitation on the special use valuation reduction under section 2032A will be $1,190,000 (was $1,180,000).
- The top (37%) income tax bracket for estates and trusts will begin at $13,050 (was $12,950).
- The alternative minimum tax exemption for estates and trusts will be $25,700 (was $25,400), and the phaseout of the exemption will start at $85,650 (was $84,800).
The latest (10/21/2020) draft of instructions to the Schedule K-1 for Form 1041 provides guidance for reporting excess 67(e) deductions by beneficiaries of terminating estates and trusts that is similar to the guidance that was previously reported from the IRS website. The instructions now say:
“Box 11, Code A–Excess Deductions on Termination – Section 67(e) Expenses
“If this is the final return of the estate or trust, and there are excess deductions on termination that are section 67(e) expenses reported to you as a beneficiary, you may deduct the excess deductions shown in box 11, code A, as an adjustment to income. Report this amount as a write-in on Schedule 1 (Form 1040), Part II, line 22. On the dotted line next to line 22, enter the amount of the expense using the code ‘ED67(e)’. Include the expense in the total amount reported on line 22.”
Excess deductions that are not 67(e) deductions and are not miscellaneous itemized deductions are reported by individuals on Schedule A of Form 1040 on the appropriate line for the type of deduction. (The draft instructions state that “The fiduciary will provide you with a statement of allowable deductions.”)
What is not addressed by the draft instructions is how a testamentary trust would report excess 67(e) deductions on the termination of an estate, and that question has been submitted to the IRS as a comment on the draft.
For an explanation of the new regulations on the treatment of excess deductions on termination of estates and trusts, see “Final Regulations on Administration Expenses and Excess Deductions.”