There is what seems like an unnoticed provision of Chapter 76 of the Probate, Estates and Fiduciaries Code that is inconsistent with other provisions of Chapter 76 and could invalidate what would otherwise appear to be a natural and valid…
As previously reported, the Supreme Court Orphans’ Court Procedural Rules Committee has published a draft of a new Pa.O.C. Rule 5.50 that it intends to propose to the Supreme Court to specify the contents of a petition to settle a small estate in accordance with 20 Pa.C.S. § 3102. “Proposed Adoption of Pa. O.C. Rule 5.50,” 49 Pa.B. 444 (2/2/2019).
What will probably be the most controversial part of the rule is subsection (b)(2), which requires that the petition include a list of all assets of the decedent’s estate, other than real estate, but then states that:
“If it appears that all creditors cannot be paid in full, then include all other assets in which the decedent had an interest as a joint tenant with right of survivorship, together with the value of each such asset and decedent’s fractional interest therein.”
Requiring disclosure of joint tenancies as part of a small estate petition raises a number of questions and concerns.
The proposed rule on disclosures of joint tenancies is presumably meant to cover joint bank accounts, which may be subject to the claims of the decedent’s creditors if the estate is insolvent. See In re Estate of Stevenson, 436 Pa.Super. 576, 648 A. 2d 559 (1994). The same result may also be required by the Pennsylvania Uniform Voidable Transactions Act, 12 Pa.C.S. § 5101 et seq., because the termination of the decedent’s interests in a joint account at the death of the decedent, and the resulting increase in the interests of the surviving joint owners, should be considered a transfer that is voidable if the transfer renders the decedent’s estate insolvent. See “Rights of Creditors in Non-Estate Assets” for a more extended discussion of this issue.
So unpaid creditors may have interests in accounts or other assets of which the decedent was a joint owner, and the proposed rule requires disclosure of those joint accounts. But should that disclosure be required as part of a petition for settlement of a small estate?
According to the publication report of the procedural rules committee, a subcommittee “examined local rules and polled counties on the extent of small estate practice,” so it is likely that the proposed rule for disclosure of joint tenancies came from a county in which one or more judges thought that they could (or should) do something if there are unpaid creditors and joint accounts. But what have those judges been doing with that information, or what did they think they could do?
Under 20 Pa.C.S. § 6304, the surviving parties to a joint account are the owners of the account following the death of a joint owner, and § 6306 provides that transfers the transfers under § 6304 are not “testamentary” and not subject to the rules relating to intestate succession and wills. So a joint account would not be property of the decedent and the account would not be subject to a § 3102 petition.
Even assuming that the Orphans’ Court would have jurisdiction to adjudicate the interests of creditors in property that is not subject to administration by a personal representative, due process (and the jurisdiction of the court) would require that the surviving joint owners of an account receive notice of any proposed disposition of the account and an opportunity to be heard. The surviving joint owners might or might not receive notice of the filing of the small estate petition, but that would not be sufficient to give them notice of the possibility that their rights in the joint account were in dispute.
So a court receiving a small estate petition could not order a disposition of a joint account without further notice to the joint owners, which might require the filing of a new petition with additional information needed to determine the disposition of the joint account. So what is the court going to do with the joint account information in a small estate petition? Will it sua sponte order the petitioners to file a new petition with notice to unpaid creditors and the surviving joint owners in order to recover money from the joint accounts for the benefit of creditors? If so, who will compensate the petitioners (or their counsel) for these additional efforts?
Although the proposed rule does not say so, it appears that the joint account information that is to be included in the small estate petition is merely intended to be (or will necessarily only have the effect of being) a notice to creditors that there are other assets that might be used to pay their claims, but if they want those assets they will have to do something about it.
If the proposed rule is requiring to creditors that non-estate assets exist in which they might have rights, is the proposed rule creating a duty of disclosure that did not previously exist, and a new substantive right for creditors?
Cases in Pennsylvania have held that the personal representative of an estate has standing to set aside voidable transfers in order to pay debts of the estate. See, e.g., West v. Young, 332 Pa. 248 (1938); Chester Co. v. Pugh, 241 Pa. 124, 88 A. 319. In the administration of an estate, a personal representative has fiduciary duties to the creditors of the estate. But does the personal representative have a duty (and not just a power) to attempt to set aside voidable transactions for the benefit of creditors? No known case addresses that issue.
Even if the personal representative does not have a duty to take steps to set aside voidable transfers, does the personal representative have a duty to notify creditors of the existence of voidable transfers? No known case addresses that issue either, and the petitioners to a small estate proceeding under § 3102 are not the same as personal representatives, so if there is no such duty, should a procedural rule create a duty of disclosure (or right to disclosure) where none previously existed?
There is nothing in the rules relating to audits of accounts (Chapter II of Pa. O.C. Rules), and nothing in the required form of petition for adjudication (Form OC-01) that would require disclosure of joint accounts when an estate is insolvent. If the Procedural Rules Committee believes that it is appropriate to create a duty of disclosure to creditors, why is the new duty limited to small estate petitions?
Because the proposed rule only applies to small estate petitions, and would not apply to “regular” audits and petitions for adjudications, it creates an additional disincentive to the use of small estate petitions when an estate is insolvent and there a joint accounts that are potentially subject to the claims of creditors.
One of the problems with a small estate petition is that it requires information about the assets and liabilities of the decedent that may be difficult or impossible for petitioners to get without first obtaining letters of administration or letters testamentary. So in many (perhaps most) cases, it is necessary to file a petition for probate or letters in order to administer the estate, and a small estate petition is not practical.
It may be even more difficult to get information about joint accounts, because the statements may have been going to the account owner(s) other than the decedent, and banks and other financial institutions usually won’t provide information about joint accounts even to the personal representatives of a decedent’s estate.
If the petitioners under § 3102 don’t have complete information about joint accounts, what will they be required to disclose? Old records of bank accounts that might or might not exist any longer? The petitioners’ recollections of statements made by the decedent? Information from Forms 1099-INT that are received after death but for which the petitioners have no other information?
The proposed language is also uncertain in meaning, or perhaps misleading, when it requests the “decedent’s fractional interest therein,” because there is a difference between fractional interests for Pennsylvania inheritance tax purposes and the interests that would be subject to the claims of creditors.
For inheritance tax purposes (which is what estate lawyers are usually most concerned with), the decedent’s taxable interest in a joint account is the “fractional portion” that is the value of the whole account divided by the number of joint tenants. Section 2108(a) of the Inheritance and Estate Tax Act, 72 P.S. § 9108(a).
But that is not what might be subject to the claims of creditors. Under 20 Pa.C.S. § 6303(a), a joint account is owned in proportion to the contributions of the parties during the lifetimes of the parties. 20 Pa.C.S § 6304(a) provides that a decedent’s interest in the account is divided equally among the surviving joint owners and augments their lifetime interests. If the purpose of the proposed rule is to disclose what might be subject to claims of creditors, then it is the lifetime ownership of the decedent that should be disclosed because that is what is being transferred at death.
As a practical matter, the decedent’s lifetime interest in a joint account will usually be either 100% or 0%. For example, if a mother puts her money into a joint account with her son, 100% of that money is owned by the mother during her lifetime, and 0% is owned by the son. Following the death of the mother, the entire account may be subject to her creditors, but none of the account should be subject to the son’s creditors if he predeceases his mother.
If the rule requires disclosure of the number of joint tenants (the fractional interest for inheritance tax purposes), it doesn’t tell creditors anything relevant to their claims. If the proposed rule requires disclosure of the ownership of the account during lifetime (which is based on lifetime contributions to the account), it may require information that the petitioners do not have. (See discussion above about the extent of the duty to investigate.)
What might be useful to creditors is to know the names and addresses of the surviving joint owners, but that is not what the proposed rule requires.
In re Estate of Stevenson, 436 Pa.Super. 576, 648 A. 2d 559 (1994), cited above for the proposition that a joint account may be subject to the claims of the creditors of an insolvent estate, actually dealt with claims for unpaid administration expenses against “in trust for” accounts established by the decedent during his lifetime, but the decision interpreted the 20 Pa.C.S. Ch. 63, which applies to both trust accounts and joint accounts.
The principles of the Pennsylvania Uniform Voidable Transactions Act, 12 Pa.C.S. § 5101 et seq., should generally apply to any account or other property which is considered to be owned by the decedent during lifetime but passes to others at death, and so “transfer on death” registrations under 20 Pa.C.S. Ch. 65 would also be subject to claims of creditors.
If the purpose of the rule is to require disclosure to creditors of assets that my be subject to their claims, there would seem to be no good reason to include joint accounts but exclude trust accounts and other forms of “transfer on death” or “pay on death” registrations.
The inescapable conclusion is that the proposed rule requiring disclosure of joint accounts in small estate petitions has not been well thought out. Either the proposed rule over-reaches, because it requires the disclosure of non-estate assets which are not proper subjects of a § 3102 petition and creates a new duty of disclosure and new rights of creditors where none previously existed, or it is overly restrictive because it provides a rule of disclosure which only applies to small estate petitions and fails to require disclosure all non-estate transfers which could be subject to claims of creditors.
Berks County has amended local Orphans’ Court Rules 2.5A, 2.7A, 14.1A, 14.3A, 14.4A, 14.8A, and 14.8B, and adopted new Rules 2.6A, 2.6B, and 2.6C. “Amendments to Local Rules; No. 19-1 Prothonotary” (Berks Co. 1/17/2019), 49 Pa.B. 616 (2/9/2019).
When the will unambiguously left the testator’s estate to his four children in equal shares, it was error for the court to interpret the will to treat gifts made by the testator’s agent after the execution of the will as “advancements” that reduced the donees’ shares of the estate. It was also error for the court to sua sponte order that a joint account be included in the executor’s account as an asset of the estate when no party had raised the issue. In re: Estate of Alexander T. Tscherneff, 2019 PA Super 25 (2/1/2019).
Bedford County has entered an administrative order designating a “Guardianship Compliance Officer” to be responsible for enforcing the filing of inventories and reports in accordance with Pa. O.C. Rule 14.8(f). “Guardianship Compliance Officer; No. AD 1 for the Year 2019” (Bedford Co. C.P. 1/8/2019), 49 Pa.B. 445 (2/2/2019).
Note: Although the administrative order states that it will be effective 30 days after publication in the Pennsylvania Bulletin, the Pa. O.C. Rule 14.8 that the order is intended to enforce will not be effective until June 1, 2019.
The Supreme Court Orphans’ Court Procedural Rules Committee is planning to propose a new Pa.O.C. Rule 5.50 to specify the contents of a petition to settle a small estate in accordance with 20 Pa.C.S. § 3102.
Any comments on the proposed rule should be submitted by March 4, 2019.
“Proposed Adoption of Pa. O.C. Rule 5.50,” 49 Pa.B. 444 (2/2/2019).
The denial of a petition for an agent to account is a final order which is appealable as of right. Although the petitioner was an intestate heir of the principal, she did not have standing to demand an accounting by the agent when the agent produced a will (not yet probated) by which the principal left his estate to the agent. The remedy of the petitioner was to compel the probate of the will and contest the will in order to obtain standing, and then petition to obtain an accounting by the agent. In re: Allen Nadzam, Deceased, 203 A.3d 215, 2019 PA Super 14 (1/14/2019).
Trust document was interpreted to give grandchildren all of the trust income following their mother’s death, even though document provided for shares of income to other persons who predeceased the mother and directed that upon the death of an income beneficiary a share of principal shall be paid to charity, because the grandchildren were entitled to the “balance of income” not payable to the other named beneficiaries. However, award of legal fees to grandchildren was an abuse of discretion and reversed. In re: Insurance Trust Agreement of Frank P. Sawders, Jr., 2018 PA Super 345 (12/18/2018).
The following chart shows the status of legislation introduced in the 2017-2018 session of the Pennsylvania legislature that might be of interest to estate and trust practitioners. Click on the bill number to see the history or text of the bill.
| Bill | Purpose/Subject | Adds/Amends | Last House Action | Last Senate Action | Act |
|---|---|---|---|---|---|
| HB 30 | Facilitates organ donations | Amends 20 Pa.C.S. § 5471 and Ch. 86 | Referred to Judiciary (5/23/17) | ||
| HB 56 | New provisions for adoption-related counseling | Repeals 23 Pa.C.S. § 2505 and adds 23 Pa.C.S. § 2506 | Third consideration and final passage (3/13/17) | Amended on third consideration (6/20/18) | |
| HB 57 | New notice and consent procedures for termination of parental rights in adoptions | Amends 23 Pa.C.S. §§ 2102, 2503, 2512, and 2711, adds § 2514, and deletes § 2712 | Third consideration and final passage (3/13/17) | Referred to consideration (3/20/17) | |
| HB 58 | New procedures for report of intention to adopt, consents, and notices | Amends 23 Pa.C.S. §§ 2531, 2711, and 2721, adds § 2514, and deletes § 2712 | Third consideration and final passage (3/13/17) | Referred to Judiciary (3/20/17) | |
| HB 59 | Provides for appeals of adoption subsidies | Adds § 774(d) to Humans Services Code (Act of June 13, 1967, No. 21) | Signed in House (10/17/17) | Signed in Senate (10/18/17) | Vetoed by the Governor (10/19/17) |
| HB 60 | Provides for reimbursements to intermediaries in adoptions | Adds 23 Pa.C.S. § 2726 | Referred to Children and Youth (1/24/17) | ||
| HB 61 | Provides for adoptions consents by incarcerated parents | Amends 23 Pa.C.S. § 2711(d) | Third consideration and final passage (3/13/17) | Amended on third consideration (6/20/18) | |
| HB 62 | Amends procedures for parents to consent to adoption | Amends 23 Pa.C.S. § 2504 | Third consideration and final passage (3/13/17) | Referred to Judiciary (3/20/17) | |
| HB 63 | Amends definition of "intermediary" in adoptions to include attorney and licensed social workers | Amends 23 Pa.C.S. § 2102 | Third consideration and final passage (3/13/17) | Reported as committed from Judiciary; first consideration (3/27/18) | |
| HB 102 | Makes audiovisual records of autopsies confidential | New 20 Pa.C.S. Ch. 89 | Referred to Judiciary (1/23/17) | ||
| HB 143 | Exempts transfers of $250,000 or less from inheritance tax | Amends § 2106 of the Tax Reform Code of 1971 | Referred to Finance (1/23/17) | ||
| HB 144 | Exempts certain kinds of printing and mailing activities from "fundraising activities" | Amends § 6(a)(3) of the Solicitation of Funds for Charitable Purposes Act | Third consideration and final passage (4/24/17) | Reported from Finance and first consideration (6/13/17) | |
| HB 152 | Establishes a central database of life insurance policies | Adds 40 Pa.C.S. § 102 | House concurred in Senate amendments; signed in House (6/18/18) | Signed in Senate (6/19/18) | Act 48 (6/28/2018) |
| HB 203 | Increases the amount of wages that may be paid to family from $5,000 to $10,000 | Amends 20 Pa.C.S. § 3101(a) | House concurred in Senate amendments, and signed in House (10/25/17) | Signed in the Senate (10/25/17) | Act 41 (10/30/17) |
| HB 233 | Requires fiduciaries to withhold tax on Pa. source income distributed to nonresident beneficiaries | Amends §§ 324 and 335 of the Tax Reform Code of 1971 | Referred to Finance (1/31/17) | ||
| HB 242 | Allows grandchildren to receive unclaimed property of $5,000 or less | Adds 20 Pa.C.S. § 3101(e)(1.1) | Referred to Judiciary (1/31/17) | ||
| HB 243 | Adds drug and alcohol abuse as grounds for involuntary termination of parental rights | Amends 23 Pa.C.S. §§ 2511 and 6351 | Referred to Judiciary (1/31/17) | ||
| HB 289 | Amends procedures for interim adoption placements, contents of petitions, and permissible payments to birth mothers | Amends 23 Pa.C.S. §§ 2530, 2701, 2702, and 2901, repeals §§ 2533 and 2534, and adds § 2726 | Third consideration and final passage (3/13/17) | Re-reported from Appropriations (10/1/18) | |
| HB 291 | Sets inheritance tax rate of 0% for transfers to children under 21 (See also SB 598) | Amends § 2116 of the Tax Reform Code of 1971 | Re-reported from Appropriations, third consideration and final passage (4/4/17) | Reported as committed from Finance; first consideration (1/31/18) | |
| HB 299 | Provides notices and acknowledgements of possible criminal penalties for agents who abuse the elderly | Amends 20 Pa.C.S. §§ 5601(c) and (d) and 5604(d), | Referred to Judiciary (3/6/17) | ||
| HB 342 | Prohibits purely public charities from entering into restrictive covenants | Amends §§ 3 and 5 of the Institutions of Purely Public Charity Act (No. 55 of 1997) | Referred to Finance (2/6/17) | ||
| HB 383 | Allows for disposition of decedent's remains by majority of persons with equal standing | Amends 20 Pa.C.S. § 305(d)(2) | Re-reported from Rules (9/8/17) | ||
| HB 390 | Increases exemption threshold for registration under Solicitation of Funds for Charitable Purposes Act from $25,000 to $50,000 in gross annual receipts | Amends sections 5(p), 6(a)(8), and 7(a)(3) of Solicitation of Funds for Charitable Purposes Act | Referred to State Government (2/7/17) | ||
| HB 415 | Eliminates inheritance tax for children with disabilities | Amends sections 2012 and 2116 of the Tax Reform Code of 1971 (No. 2 of 1971). | Reported as amended by Finance; first consideration (4/17/18) | ||
| HB 462 | Regarding disqualifications for sales and use tax exemptions for purely public charities | Amends section 11 of the Institutions of Purely Public Charity Act (No. 55 of 1997) | Referred to Finance (2/13/17) | ||
| HB 474 | Eliminates liability of spouses, children, and parents for the support of the indigent | Repeals 23 Pa.C.S. § 4603 | Referred to Judiciary (2/13/17) | ||
| HB 748 | Excludes state universities and other institutions of higher education for real estate tax exemption | Amends the Institutions of Purely Public Charity Act (No. 55 of 1997) | Referred to Finance (3/7/17) | ||
| HB 844 | Prohibits employees of long-term care facilities from becoming guardians, agents, executors, or beneficiaries of long-term care consumers | Enacts the "Long-Term Care Consumer Financial Interest Prohibition Act" | Referred to Aging and Older Adult Services (3/13/17) | ||
| HB 855 | Protects the rights of parents to control the upbringing of their children against infringement by government | Enacts the "Parental Rights Protection Act" | Referred to Children and Youth (3/13/17) | ||
| HB 967 | Amends the inheritance tax exemption for family owned farms | Amends §§ 2002 and 2111(s) and (s.2) of the Tax Reform Code of 1971 | Referred to Finance (3/27/17) | ||
| HB 1019 | Provides for transfer of ownership of cemeteries and for reasonable access to private burial grounds | Amends 9 Pa.C.S. 101 and adds Chs. 5 and 7. | Third consideration and final passage (7/7/17) | Third consideration and final passage (11/15/17) | Act 64 (12/21/17) |
| HB 1164 | Allows grandchildren to close bank accounts of less than $10,000 | Amends 20 Pa.C.S. § 3101(a) | Referred to Judiciary (4/12/17) | ||
| HB 1196 | Enacts new provisions for "Pennsylvania orders for life-sustaining treatment" (POLST) | Amends 20 Pa.C.S. Ch. 54 and adds a new Subchapter F | Re-referred to Health (9/26/17) | ||
| HB 1360 | Adds licensing, disclosures, and prohibitions for third party solicitors, increases requirements, penalties, and fees for annual registrations, and adds disclosures for solicitations for specific disasters or crises. | Amends section 3 of the Solicitation of Funds for Charitable Purposes Act | Referred to Commerce (5/11/17) | ||
| HB 1385 | Limits income tax deduction for contributions to section 529 tuition assistance plans to Pennsylvania's PA 529 College Savings Program. | Amends section 303(a.7) of the Tax Reform Code of 1971, No. 2 of 1971. | Re-reported from Rules (9/8/17) | ||
| HB 1397 | Explands definition of "exploitation" of older adults to include conduct by an individual acting under a power of attorney. | Amends section 103 of the Older Adults Protective Services Act, No. 79 of 1987. | Referred to Aging and Older Adult Services (5/18/17) | ||
| HB 1420 | Aligns audit requirements for charitable organizations with federal law | Amends section 5(f) of the Solicitation of Funds for Charitable Purposes Act | Third consideration and final passage (6/14/17) | Third consideration and final passage (12/13/17) | Act 71 (12/22/17) |
| HB 1421 | Allows timely registrations of charitable organizations if postmarked by renewal date | Amends sections 5, 8, and 9 of the Solicitation of Funds for Charitable Purposes Act | Third consideration and final passage (6/14/17) | Third consideration and final passage (12/13/17) | Act 72 (12/22/17) |
| HB 1445 | Creates an income tax deduction for contributions to ABLE Savings Accounts | New "Pennsylvania ABLE Savings Program Tax Exemption Act" | Referred to Finance (5/24/17) | ||
| HB 1462 | Exempts transfers of $100,000 or less from inheritance tax | Amends § 2106 of the Tax Reform Code of 1971 (Act 2 of 1971) | Referred to Finance (5/31/17) | ||
| HB 1509 | Extends stand-by guardians for minors for "long-term absence" | Amends 23 Pa.C.S. §§ 5602 and 5612 | Referred to Children and Youth (6/12/17) | ||
| HB 1596 | Increases Uniform Transfer to Minors Act limit on transfers by fiduciaries from $25,000 to $50,000 | Amends 20 Pa.C.S. § 5306(c)(3) | Referred to Judiciary( 6/21/17) | ||
| HB 1885 | Allows the Register of Wills to increase the bond required after an inventory or inheritance tax return is filed | Amends 20 Pa.C.S. § 3175 | Third consideration and final passage (4/10/18); House concurred in Senate amendments (10/17/18) | Third consideration and final passage (10/16/18) | Act. No. 113 (10/24/2018) |
| HB 1886 | Requires tracking and review of annual reports of guardians | Adds 20 Pa.C.S. § 5521(c)(3) and (4) | Third consideration and final passage (4/10/18) | Third consideration and final passage (10/17/18) | Act. No. 114 (10/24/2018) |
| HB 1903 | Requires advertisement of grant of letters on the website of the Register of Wills | Amends 20 Pa.C.S. § 3162(a) | Referred to Judiciary( 11/6/17) | ||
| SB 99 | Regulates collection bins for donations of clothing and household items | Adds new section 13.1 to the Solicitation of Funds for Charitable Purposes Act | Reported as amended from State Government; first consideration (10/17/17) | ||
| SB 108 | Protects the right of the disabled to receive organ donations | Adds 20 Pa.C.S. § 8613(g). | Third consideration and final passage (10/10/18) | Third consideration and final passage (5/22/17) | |
| SB 113 | Visitation and communication between incapacitated persons and relatives | Adds a Subchapter G to 20 Pa.C.S. Ch. 55 | Referred to Judiciary (11/17/17) | Third consideration and final passage (11/15/17) | |
| SB 180 | Expands who may make or receive organ donations, how organ donations are made, and other changes | Amends 20 Pa.C.S. Ch. 86 | House concurred in Senate amendments (10/10/18) | Senate concurred in House amendments, as amended by Senate (10/2/18) | Act 90 (10/23/2018) |
| SB 197 | Provides for 50% joint and survivor annuity benefit for state employee retirement plans unless spouse consents | Amends 24 Pa.C.S. §§ 8345, 8347, 8349, 8505, and 8507 and 71 Pa.C.S. §§ 5705, 5707, 5709, 5905, and 5907 | Referred to Finance (1/26/17) | ||
| SB 218 | Creates and registry of living wills for use by doctors | Amends 20 Pa.C.S. Ch. 54 | Referred to Judiciary (1/31/17) | ||
| SB 238 | Allows physician-assisted suicide for terminally ill | Adds 20 Pa.C.S. Ch. 54B | Referred to Judiciary (1/26/17) | ||
| SB 423 | Increases the percentage of inheritance tax collected by the Register of Wills that is kept by the county | Amends Section 21 of the Transfer Inheritance Tax Law, No. 258 of 1919. | Referred to Finance (2/27/17) | ||
| SB 506 | Phases out the inheritance tax for siblings | Amends Section 2216(a)(1.3) of the Tax Reform Code of 1971 | Referred to Finance (3/10/17) | ||
| SB 598 | Sets inheritance tax rate of 0% for transfers to children under 21 (See also HB 291) | Amends Section 2116(a) of the Tax Reform Code of 1971. | Referred to Finance (4/13/17) | ||
| SB 623 | Implements Pa. Orders for LIfe Sustaining Treatment (POLST) | Amends 20 Pa.C.S. Ch. 54 and enacts new Subchapter F | Referred to Health (10/3/18) | Third consideration and final passage (10/1/18) | |
| SB 677 | Provides income tax exemption for ABLE (Achieving a Better Life Experience) accounts (See HB 1445) | New "Pennsylvania ABLE Savings Program Exemption Act" | Referred to Finance (7/11/17) | Third consideration and final passage (7/10/17) | |
| SB 718 | Allows taxation of land (not buildings) owned by charities with total value in excess of $500,000 | Amends the Institutions of Purely Public Charity Act, No. 55 of 1997. | Referred to Finance (5/12/17) | ||
| SB 827 | Enacts the Revised Uniform Fiduciary Access to Digital Assets Act (2015) | Amends 20 Pa.C.S. §§ 711 and 5601.4 and adds new 20 Pa.C.S. Ch. 39 | Referred to Judiciary (1/24/18) | Third consideration and final passage (1/22/18) | |
| SB 861 | Sets inheritance tax rate of 0% for transfers to or in trust for disabled children | Amends Sections 2102 and 2116(a) of the Tax Reform Code of 1971 | Referred to Finance (8/29/17) | ||
| SB 884 | Amendments to guardianship procedures, and powers and duties of guardians, recommended by JSGC Advisory Committee on Decedent's Estates | Amends 20 Pa.C.S. §§ 751 and 752 and Ch. 55 | Re-reported from Appropriations (6/4/18) | ||
| SB 946 | Raises thresholds for requiring audits or reviews of financial statements of charitable organizations soliciting contributions | Amends § 5(f) of the Solicitation of Funds for Charitable Purposes Act | Referred to State Government (11/15/17) | ||
| SB 1207 | Identifies persons with standing to challenge actions of agent under power of attorney | Adds new 20 Pa.C.S. § 5615 | First consideration (10/2/18) |
The Supreme Court has granted certiorari in the appeal of the North Carolina Department of Revenue in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, 814 S.E.2d 43 (N.C. 2018), No. 18-457 (U.S.S.C. 1/11/2018).
The North Carolina Supreme Court had held that the imposition of an income tax on the undistributed income of a New York trust merely because a beneficiary of the trust resided in North Carolina violated the due process clause of the U.S. Constitution. The trust was created by a New York resident under New York law, the trustee resided in Connecticut, the trust assets were marketable securities held by a custodian in Massachusetts, and the beneficiary who had moved to North Carolina after the trust was created had no power to withdraw any income or principal of the trust.
The “questions presented” (taken from the petition for cert.) is as follows:
More than $120 billion of our nation’s income flows through trusts. That income is a vital source of tax revenue for the states. Eleven states, including North Carolina, tax trust income when a trust’s beneficiaries are state residents.
For the last ninety years, however, this Court has been silent on whether these taxes comport with due process. The Court’s last words on the subject come from the Pennoyer era of due-process analysis. Pennoyer v. Neff, 95 U.S. 714 (1878). As a result, lower courts and state taxing authorities have been searching in vain for modern guidance.
There is now a direct split spanning nine states. Four state courts have held that the Due Process Clause allows states to tax trusts based on trust beneficiaries’ in-state residency. Five state courts, including two state supreme courts this year, have concluded that the Due Process Clause forbids these taxes.
The Due Process Clause should not have different meanings in different states particularly when billions of dollars of state-tax revenue hang in the balance. The question presented to this Court is:
Does the Due Process Clause prohibit states from taxing trusts based on trust beneficiaries’ in-state residency?