The alleged incapacitated person was adjudicated incapacitated in 2024, but was found to have had testamentary capacity in 2018 when she revoked her revocable trust, based mainly on the testimony of her counsel who met with her and prepared the revocation documents, and so the revocation was valid. There was no showing of weakened intellect or a confidential relationship when the trust was revoked, so a claim of undue influence was denied. Because the trust was revoked, the petition to remove the trustee was moot. The sale of the incapacitated person’s residence by her agent to the agent’s son for less than fair market value was a breach of fiduciary duty and the agent was surcharged, but the sale was not voided. N.A.T. Trust, 2 Fid.Rep.4th 105 (Monroe O.C. 2024).
The Court of Common Pleas of Butler County has issued the first general administrative order in Pennsylvania (and one of the first in the U.S.) governing court filings produced using “generative artificial intelligence” (also known as “large language models,” such as ChatGPT). The order requires that filings include an affidavit attesting that generative AI was not used in the perparation of the filing or, if AI was used, that “each and every citation to the law or the record in the filing has been verified by a human being as authentic and accurate.” “Use of Generative Artificial Intelligence; MsD No. 2024-40258” (9/10/2024), 54 Pa.B. 5980 (9/21/2024).
Large language models are known to “hallucinate” or fabricate legal citations when asked to write legal briefs. In one publicized instance, a lawyer used ChatGPT to prepare a brief and was sanctioned when the brief contained citations to non-existent cases. “Here’s What Happens When Your Lawyer Uses ChatGPT,” New York Times (5/27/2023). One study of general-purpose “chatbots” found that they hallucinated between 58% and 82% of the time on legal queries and, in a more recent study, legal AI tools from LexisNexis and Thomson Reuters (Westlaw) still produced incorrect information (or hallucinated”) a significant amount of the time (17% and 34%, respectively). “A New Study Reveals the Need for Benchmarking and Public Evaluation of AI Tools in the Law,” Stanford University Human-Centered Artificial Intelligence (5/23/2024).
So practitioners should use care when using AI tools for legal research or first drafts of pleadings or documents.
In addition to the numbers shown in “Unofficial Inflation Adjustments for 2025,” practitioners may also wish to know that the limit on qualified charitable distributions from individual retirement accounts under I.R.C. § 408(d)(8), which had been $100,000 in 2023 and $105,000 in 2024, should become $108,000 in 2025. (The Internal Revenue Service should publish official inflation adjustments in 4-8 weeks.)
Reversing the Superior Court, the Pennsylvania Supreme Court has held that the spouse of a deceased business partner could not enforce a partnership agreement as a partner when the spouse was neither a party to the agreement nor a third-party beneficiary and the agreement did not permit an assignment of the agreement. The partnership agreement included a provision requiring the remaining partners to pay the personal representative of a deceased partner a value for the deceased partner’s interest based on “net book value,” but neither the surviving partner nor the estate of the deceased partner attempted to enforce that provision, and after more than ten years the widow of the deceased partner began litigation to assert rights in operating the partnership. In re: Estate of Peter J. Caruso III, ___ A.3d ___, ___ Pa. ___, 14 WAP 2023 (9/11/2024), rev’g 1406 WDA 2021 (Pa. Super. 11/15/2022) (non-precedential).
Checks written at the request of the decedent three days before his death and delivered by the decedent were inter vivos gifts and not testamentary, but were incomplete and invalid because the account upon which the checks were drawn had insufficient funds and none of the payees attempted to cash the checks before the decedent’s death, so the decedent was never divested of control over the funds. Summary judgment was not appropriate for other checks written by the decedent from his revocable trust before his death because there were genuine issues of material facts, and so the “interim trustee” appointed by the court was directed to evaluate the claims with respect to those checks, and the trustee appointed by the decedent would be restored once the litigation was resolved. Bartosh Trust, 2 Fid.Rep.4th 35 (Beaver O.C. 2023).
[DBE Comment: The appointment of a “temporary independent trustee” of the decedent’s revocable trust seems most unusual, because it was apparently done without any determination that the trustee appointed by the decedent had committed any breach of trust, and only done because the trustee had a conflict of interest in the dispute over the validity of the lifetime gifts. IT was not explained why the trustee appointed by the decedent could not be trusted to hold the funds of the trust during the litigation, but could be trusted with the funds following the litigation, and the direction to the “interim trustee” to “evaluate” claims of the parties makes the interim trustee more like a master than a trustee.]
A petition for the appointment of a guardian for an alleged incapacitated person (AIP) was dismissed without prejudice under the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act, 20 Pa.C.S. 5901 et. seq., even though the AIP had recently voted in Pennsylvania and had filed for divorce in Pennsylvania, when the AIP had not been physically present in Pennsylvania for at least six consecutive months before the petition was filed, so that Pennsylvania was not her “home state,” and Pennsylvania was also not a “significant connection state” because substantial evidence relevant to the allegations of incapacity and the AIP’s well being was not in Pennsylvania, but in California, which was her home state. It was not a violation of the uniform act to request a California court to conduct a wellness assessment of the AIP, and the AIP did not need to appear or testify in the hearing on jurisdiction. Estate of L.S.C., an Alleged Incapacitated Person, 2 Fid.Rep.4th 47 (Philadelphia O.C. 2023), app. discontinued, 1553 EDA 2023 (Pa. Super.)
Inheritance tax deductions were not allowed to the estate of the beneficiary of a trust for amounts paid as reimbursements for excessive trust distributions and for legal fees paid in accordance with indemnification agreements that were signed by the beneficiary in connection with the distributions. The distributions were made without court approval and the court found that the indemnification agreements were not “bona fide and for an adequate and full consideration.” Estate of Scaife v. Commonwealth of Pennsylvania, 2 Fid.Rep.4th 61 (Westmoreland O.C. 2023).
[DBE Comment: The denial of the deduction for the legal fees seems correct because the fees were incurred in what amounted to a dispute between beneficiaries of a trust over distributions from the trust. See 72 P.S. § 9230(3) and “Non-Reimbursable Legal Fees of Fiduciaries.” The denial for a deduction for the amounts repaid to the trustees is less certain, because that would seem to be a debt of the beneficiary’s estate if the distributions from the trust were improper and the trustees could have recovered those funds without any indemnification agreement, but that issue was apparently not raised by the parties and not addressed by the court.]
The Bureau of Labor Statistics has published the Chained Consumer Price Index (C-CPI-U) for August 2024, and so it’s possible to calculate various inflation adjustments for 2025. The following are the significant federal estate planning numbers calculated for 2025, with the numbers for 2024 shown in parentheses:
- The federal estate tax base applicable exclusion amount (and generation-skipping tax exemption) will be $13,990,000 (was $13,610,000 for 2024).
- The annual gift tax exclusion will be $19,000 (was $18,000).
- The annual gift tax exclusion for a non-citizen spouse will be $190,000 (was $185,000).
- The “2 percent” amount for purposes of section 6166 will be $1,900,000 (was $1,850,000).
- The limitation on the special use valuation reduction under section 2032A will be $1,420,000 (was $1,390,000).
- The top (37%) income tax bracket for estates and trusts will begin at $15,650 (was $15,200).
- The alternative minimum tax exemption for estates and trusts will be $30,700 (was $29,900), and the phaseout of the exemption will start at $102,450 (was $99,700).
The Internal Revenue Service will publish the official inflation adjustments in a Revenue Procedure that will probably appear in 4-8 weeks.
[9/22/2024 Update]: Practitioners may also wish to know that the limit on qualified charitable distributions from individual retirement accounts under I.R.C. § 408(d)(8), which had been $100,000 in 2023 and $105,000 in 2024, should become $108,000 in 2025.
The current beneficiary and individual cotrustee of a trust holding a partial interest in a family farm, had petitioned the Orphans’ Court to allow him to file a partition action without the consent or joinder of the institutional cotrustee. The court had denied the petition without prejudice and the Superior Court affirmed, concluding that the beneficiaries of other trusts with interests in the farm had standing to contest the petition both because they would be adversely affected by a partition and because they were vested future beneficiaries of the petitioner’s trust, that the sale of the farm was contrary to the intentions of the settlors, that the farm produced enough income to pay for its maintenance and the partition was not in the long-term best interests of the current and future beneficiaries of the trust (which the court must consider under 20 Pa.C.S.A. 7763(a.1), that the institutional cotrustee serving as a trustee of other trusts holding interests in the farm was not a conflict of interest, that the current beneficiary did not have an unqualified right to force a partition as a co-tenant, and that the denial without prejudice was not error because it was speculative to assert that circumstances were not likely to change in the future. In re: That Portion of the Ward Family Trust for the Benefit of Michael Edward Ward, 1241 WDA 2023 (Pa. Super. 7/30/2024).
An extension of an involuntary commitment under section 303 of the Mental Health Procedures Act, 50 Pa.C.S. 7303, requires clear and convincing evidence that the person is a danger to herself and others. The commitment order is not moot and is appealable even though the patient is no longer in custody because the sufficiency of evidence for a temporary commitment is a legal question that is “capable of repetition and yet apt to evade review.” In this case, the testimony of the doctor showed only “the mere presence of mental illness” and insufficient facts to prove a danger of self-harm. In re: J.G., ___ A.3d ____, 2024 PA Super 173 (8/8/2024).