On Appeal: Trust Modification to Remove Trustee

The Supreme Court has issued an order allowing an appeal from the decision of the Superior Court in Trust under Agreement of Edward Winslow Taylor, 2015 PA Super 199, (9/18/2015), (dissent by Platt, J.).   No. 692 EAL 2015 (4/12/16).  In its order, the Supreme Court restated the issue as follows:

The issue presented by petitioner and rephrased for clarity is whether theSuperior Court erred in holding that trust beneficiaries may circumvent the requirements for removal of a trustee in Section 7766 of the Trust Act, 20 Pa.C.S.A. § 7766, by amending the trust under 20 Pa.C.S.A. § 7740.1.

For additional background and analysis, see Trust Modifications to Remove Trustees.

Basis Reporting Postponed (Again)

Posted on by March 24, 2016

The IRS has announced that the deadline for filing Form 8971, and for providing Schedule A to beneficiaries, previously postponed to February 29 by Notice 2015-57, and then postponed to March 31 by Notice 2016-19, has again been postponed, this time to June 30.  Notice 16-27  (3/23/16).

For background on the new basis reporting rules and Form 8971, see “Consistent Basis Reporting Required,” “New Basis Reporting Form,” and “Basis Reporting Form Released.”

Disclaimers by Agents

Posted on by March 23, 2016

Good news (for disclaimer fans):  S.B. 1104, which contains a number of different amendments to the PEF Code, and which appears to be on track to pass the Senate, has been amended to specify that an agent who is given the power to disclaim has the power to release interests under section 6103.1 (which replaces—and I think improves upon—section 6103).

The new language regarding disclaimers is found in new subsection 5601.4(d.1).

The amendments create some confusion in the purpose or scope of sections 5601.4 and 5603, because section 5601.4 was supposed to identify which powers required specific mention and which didn’t, and section 5603 was supposed to state how powers are “implemented,” and now they are moving provisions relating to implementations of some powers out of section 5603 and into 5601.4.  Hopefully, that won’t cause problems, but you never know.

Adjudication of Incapacity upon Written Medical Opinion

Posted on by March 11, 2016

An adjudication of incapacity based upon the written opinion of a doctor, and without counsel being appointed for the alleged incapacitated person, when the AIP appeared in court and did not appear to contest the proceedings, and the court was able to observe the AIP and test her abilities with questions that revealed no inconsistencies with the doctor’s conclusions.   Propert, Incapacitated, 6 Fid.Rep.3d 92 (O.C. Montgomery 2015) (opinion by Ott, J.), on appeal, No. 3425 EDA 2015 (Pa. Super.)

Order Authorizing Sale of Real Estate Not Appealable

An order authorizing the sale of real estate was not appealable under Pa.R.A.P. 342 because the objecting beneficiaries had no interest in the real estate, and was not an appealable collateral order under Pa.R.A.P. 313 because the objecting beneficiaries had no right in the real estate that would be irreparably lost if review were postponed until final judgment, and so the appeal to the Superior Court should be quashed.  Clinkscale Estate, 6 Fid.Rep.3d 90 (O.C. Montgomery 2015) (opinion by Ott, J.), app. dism’d, No. 3555 EDA 2015 (Pa. Super. 1/6/2017).

Beneficiary’s Creditor Could Not Attach Lapsed Crummey Power

Judgment creditor of beneficiary of spendthrift trust could not attach trust assets and could not require distribution of beneficiary’s right to withdraw contributions to the trust because the right was not a “power of withdrawal” as defined by 20 Pa.C.S.A. § 7703 when it was limited to the federal gift tax annual exclusion (i.e., a “crummey” power) and lapsed at the end of the calendar year within the limits of I.R.C. section 2041(e) (which allows lapses of 5% or $5,000 without gift tax consequences).  The judgment creditor therefore had no standing to raise objections to the account of the trustee.  Clegg Trust, 6 Fid.Rep.3d 69 (O.C. Philadelphia 2015) (opinion by Herron, J.).