BBA Trusts & Estates Section Program Recap – June through October 2012

Over the summer and in September and October 2012, the Boston Bar Association’s Trusts & Estates Section offered several educational programs on timely topics and developments in trusts and estates law. In addition, the Family Law Section together with the Association’s Trusts & Estates Section sponsored two programs discussing the proposed Elective Share Statute. Below is a summary of the programs.

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Proposed Massachusetts Spousal Elective Share

October 19, 2012

The program reviewed the workings of the proposed Massachusetts Spousal Elective Share statute and provided a forum for discussion. The proposed Massachusetts Spousal Elective Share statute is being considered by Boston Bar Association and this Brown Bag program provided an opportunity for members of the bar to learn more about the proposed statute and provide feedback.

Sponsoring Section/Committee: Family Law Section, Estate Planning Committee

The program materials can be found here.

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CLE - When the Rubber Meets the Road: How the MUTC and MUPC Will Work in Practice

October 3, 2012

This cutting edge program addressed the many issues that may arise in drafting and administering trusts under the new MUPC and MUTC. Specifically, the panel of experienced practitioners discussed salient provisions in the new laws, explained practical implications of the new laws for practitioners and trustees, and explored aspects of the law that remain unclear or which may represent traps for the unwary.

Sponsoring Section: Trusts & Estates Section

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First Wednesday Fundamentals: Estate, Gift and GST Tax Basics for the New Estate Planner

October 3, 2012

This is the first part in a year-long series of monthly discussions designed to provide new and transitioning practitioners a core set of tools necessary to practice in the areas of estate planning and probate administration.  The series will cover substantive legal aspects of the practice, as well as practice tools, management and marketing concepts necessary to build a successful Trusts and Estates practice.

This first session provided a basic overview of the estate, gift and GST taxes.  Speaker Geoffrey Mason of Ropes & Gray explained the scope of the taxes and how they drive certain aspects of the estate planning process.  The session provided attendees with a framework for the second session on drafting basic estate planning documents.

Sponsoring Committees: Practice Fundamentals Committee, New Lawyers Practical Skills Committee

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Drafting Considerations Under the Massachusetts Uniform Trust Code

September 28, 2012

With the implementation of the Massachusetts Trust Code, estate planning professionals once again need to consider the impact of a substantive piece of legislation on not only their standard forms, but also on the tools now available under the statute to assist clients in structuring estate plans.  This brown bag lunch highlighted how and when you might wish to update your estate planning forms, as well as addressed new concepts such as pet trusts, purpose trusts and directed trustees.

Sponsoring Committee: Estate Planning Committee

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MUPC: Practical Issues & Tips

September 20, 2012

The Elder Law & Disability Planning Committee discussed the MUPC, it's implementation in the various probate courts, and valuable information that attorneys should know about the MUPC prior to filing any documents.

Sponsoring committees: Elder Law and Disability Planning Committee

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Proposed Spousal Elective Share Statute

September 19, 2012

A distinguished panel including all the members of the Ad Hoc Committee on the Spousal Elective Share lead a discussion of the proposed statute, explaining how it would work, taking feedback, addressing concerns and answering questions.  The panel discussion was followed by a one-hour informal session, where attendees were able to network and discuss the proposed statute with each other and the panelists.  The proposed statute can be found here.

Sponsoring Sections: Trusts & Estates Section, Family Law Section

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CLE - Trusts & Estates Year in Review 2012

June 13, 2012

An annual hit among estate planning practitioners, this seminar offered the rare opportunity to learn about the past year’s significant developments in Massachusetts and federal laws that affect your estate planning practice. The panelists covered Massachusetts legislative developments, and reviewed significant tax and state law cases and regulations between June 2011 and June 2012.

Sponsoring Section: Trusts & Estates Section

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Life Insurance Basics: From Planning to Purchase

June 6, 2012

This program addressed some of the most basic and fundamental questions relating to life insurance planning including the various types of insurance products in the market and how to understand an in-force illustration.  The panelists outlined some significant estate planning issues including life insurance trusts, Crummey Notices, transfer for value rules, and grantor trust considerations.

Sponsoring Committee: Practice Fundamentals Committee

For a schedule of upcoming programs, visit the Boston Bar Association’s online calendar.

MUPC Amendments as of October 26, 2012: What to take away

Author:
Tamara L. Sturges, Esq., Pathway Law LLC

Chapter 140 of the Acts of 2012 made a number of changes to M. G. L. c 190B, the MUPC. These changes have been outlined below. In addition to the changes in the law a number of forms have been updated and a few new forms have been promulgated. For more information on the changes and to view the new and amended forms please visit the MUPC HUB page (here).

Amendment to Section 1-404 [Guardian ad Litem and Next Friend]: In both informal and formal proceedings a GAL is not mandatory if the petitioner is also the conservator of a spouse, heir at law or devisee who is an incapacitated, protected person or minor.

Amendment to Section 3-108, subsection (4) [Probate, Testacy and Appointment Proceedings; Ultimate Time Limit]: As an exception to the 3 year rule a PR may be informally or formally appointed (if intestate) or formally (if testate) at any time, but the PR will have no authority to possess or distribute property beyond what is necessary to confirm title and pay expenses of administration.

Addition to Section 3-108, NEW subsection (5) [Probate, Testacy and Appointment Proceedings; Ultimate Time Limit]: As an exception to the 3 year rule a formal probate of a will may be opened for the sole purpose of establishing an instrument to direct or control the ownership of property, for example a clause in will exercising a power of appointment granted in a trust.

Amendment to Section 3-301 [Informal Probate or Appointment Proceedings; Petition; Contents.]: The petition to appoint a successor PR must state the priority of the nominee not the petitioner. (Forms MPC 255 and MPC 760 have been revised).

Adoption of Section 3-610 [Resignation by Personal Representative]: A PR may resign by giving 15 days written notice to known interested persons and then by filing a written statement of resignation with the court. However, the resignation shall have no effect unless a successor PR is appointed within the time indicated in the notice AND the resigning PR has delivered estate assets to the appointed successor. (Form MPC 264 has been revised).

Addition to Section 3-617, NEW subsection (c) [Special Personal Representative; Formal Proceedings; Power and Duties.]: Unless otherwise ordered by the court, the authority of a PR is extinguished for the period of time that a special PR has authority.

Addition to Section 3-706, NEW subsection (b) [Duty of Personal Representative; Inventory and Appraisement.]: A successor PR must  prepare an inventory 3 months after his/her appointment with values as of the date of the PR’s appointment (NOT the date of death). There is no filing requirement. If the successor PR chooses to file an inventory (Form MPC 854) with the court he/she should check the “other” box on page 1 to indicate that the inventory is being filed by a successor PR.

Addition to section 3-715, NEW subsection 23 ½ [Transactions Authorized for Personal Representatives; Exceptions.]: A formally or informally appointed PR has authority to sell real estate without a license to sell provided there is a power of sale in the will. Inversely a license is required where there is no will or no power of sale. To date REBA has yet not revised title standards and may still require a license to sell for an informal probate.

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

T&E Litigation Update - Sacchetti v. Sacchetti; Porst v. Deutsche Bank National Trust Company; Rockland Trust Company v. Attorney General

Author:
Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.

The T&E Litigation Update is a recurring column summarizing recent trusts and estates case law. If you have question about this update or about T&E litigation generally, please feel free to e-mail the author by clicking on his name above.

Sacchetti v. Sacchetti

In Sacchetti v. Sacchetti, Case No. 10-P-2200, 2012 Mass. App. Unpub. LEXIS 1000 (Sept. 24, 2012), a decision issued pursuant to Rule 1:28, the Appeals Court addressed cross-appeals from a judgment following the eleven-day trial of a dispute between father and son concerning the father’s assets.

Evo Sacchetti and his wife Lynn relied on their son Kenneth Sacchetti for investment advice. According to that advice, Lynn listed Kenneth’s name as a joint tenant on some of her accounts to avoid probate. Following Lynn’s death in 1989, Kenneth claimed ownership of these joint accounts and promised to transfer them to Evo. Kenneth also assumed control of Evo's finances, who believed he could trust Kenneth in financial matters. When Evo suffered a stroke in 2008, however, Kenneth continued to claim ownership of the joint accounts with Lynn as well as certain accounts he held jointly with Evo, and also claimed a fifty-percent interest in the family home in Milton as a joint tenant with Evo with a right of survivorship. Evo subsequently filed suit in Superior Court against Kenneth for breach of fiduciary duty and other torts arising from Kenneth’s alleged manipulation of Evo's assets over a twenty-year period.

The Superior Court ruled in Evo’s favor, ordering Kenneth to reconvey title to the Milton home to Evo and to convey certain bank and brokerage accounts to Evo. Both parties appealed from the judgment. Evo appealed from the denial of his motion to make additional findings and to amend the judgment, which failed to require Kenneth to account for $1.1 million in withdrawals he had made from an account that was found to belong to Evo. Kenneth appealed from the denial of his motion for a new trial or to alter or amend the judgment, arguing that the statute of limitations had expired on some of Evo's claims and that the judge erred in concluding that Kenneth was not the owner of certain funds.

The Appeals Court affirmed in part (denying Kenneth’s request for a new trial or an amended judgment) and reversed in part (granting Evo’s request for additional relief).

Regarding Kenneth’s statute of limitations defense, the Court recited the well-settled principle that a cause of action for breach of trust or fiduciary duty does not accrue until the trustee repudiates the trust and the beneficiary has actual knowledge of that repudiation. The Court then held that the trial judge was not required to believe Kenneth's naked assertions that Evo “knew” of Kenneth's breach of fiduciary duty and thus that his claims had accrued and expired long ago. It was a question of credibility, and there was no error in the trial judge's conclusion that the statute of limitations did not begin to run until 2008, after Evo had suffered a stroke and his family and financial experts began to review his assets and discovered Kenneth's wrongdoing.

The Court also rejected Kenneth’s argument that the trial judge erred in concluding that Evo was entitled to the proceeds of the sale of "Kenneth's" Florida condominium because Evo’s name was not on the deed. Kenneth had not included the deed in the record, and thus there was no documentary support for Kenneth’s argument that Evo’s name was not on the deed. Moreover, even if it were true that Evo’s name was not on the deed, the Court explained that the evidence permitted the reasonable inference that it was Lynn's and/or Evo’s money that was used to purchase the condominium, and that the trial judge could properly deny Kenneth's contention that his parents intended to make a gift to him.

Regarding Evo’s argument that Kenneth should be liable to account for the $1.1 million he had withdrawn from Evo's account, the record reflected Kenneth’s concession that he had withdrawn the funds and deposited them into other accounts, including $989,000 into his own account with Weymouth Bank. Although the Court acknowledged that not all of the funds in the Weymouth Bank account derived from Evo's funds, the Court found this fact to be irrelevant. Kenneth had failed to demonstrate that the withdrawn funds were provided to or used for Evo's benefit, and so the Court ordered Kenneth to return the funds to Evo. The Court noted that it was not incumbent on Evo to prove that all of the funds in the Weymouth Bank account belonged to him, even though that account is a source from which Kenneth may repay the funds he withdrew..

 

Porst v. Deutsche Bank National Trust Company

In Porst v. Deutsche Bank National Trust Company, No. 11-04137, 2012 Bankr. LEXIS 4680 (Bankr. D. Mass. Oct. 4, 2012), the U.S. Bankruptcy Court for the District of Massachusetts discussed what constitutes valid revocation of a revocable trust and whether the trustee of a revocable trust owes any duties to contingent remainder beneficiaries.

Mother established the revocable trust, naming herself as trustee and reserving to herself a life estate in any real property conveyed to the trust. The trust provided that upon mother’s death, her son would receive a life estate in the family home if it were still held in the trust. The revocation provision provided that mother could revoke or amend the trust by delivering to the trustee a written instrument that she had “signed and acknowledged.” 

Ten years later, mother executed a document purporting to revoke the trust. The document bears the signatures of two witnesses, but was not acknowledged before a notary public. In her capacity as trustee, mother also deeded the family home from the trust to her son for one dollar. The son subsequently obtained a loan secured by the family home, and then filed for bankruptcy protection. The holder of the security interest filed a proof of claim in the bankruptcy proceeding. One of the issues in dispute was whether the security interest was valid, which turned on two questions – whether mother’s revocation of the trust was valid, and if not, whether her conveyance of the family home from the trust to her son was valid.

On the first question, the Court set forth the established principle that “a valid trust, once created, cannot be revoked or altered except by the exercise of a reserved power to do so, which must be exercised in strict conformity to its terms.” Based on this principle, the Court held that mother’s revocation of the trust was not valid because it was not in strict conformity to the trust’s revocation provision, which required the instrument to be signed and acknowledged by her. In reaching this holding, the Court relied on the following rationale from Phelps v. State Street Trust Company, 330 Mass. 511, 512-13 (1953): “We think that the requirement of acknowledgement meant that the settlor must acknowledge the instrument making the alteration before a public officer authorized by law to take acknowledgements of other writings. . . . And we think that the requirement of acknowledgement was not wholly for the benefit of the trustees, and that it could not be waived by them.”  

On the second question, the son argued that even if the trust revocation were invalid, mother could not convey the family home from the trust to him for the inadequate consideration of one dollar, because doing so constituted a breach of her fiduciary duty to the contingent remainder beneficiaries (including himself, ironically). The Court rejected this argument, holding that because mother had the power to revoke the trust, she was free to do whatever she wanted with the family home. The Court reasoned that during the lifetime of a settlor/beneficiary of a revocable trust, a trustee is under no duty to consider the interests of the contingent remainder beneficiaries, because those interests may be divested by the settlor. “To hold otherwise would eviscerate an underlying purpose of the revocable trust and disrupt the expectations of the settlor.”

Accordingly, mother’s conveyance of the family home from the trust to her son was valid, and thus the security interest in the family home that the son subsequently gave to the lender was valid.

 

Rockland Trust Company v. Attorney Genera

In Rockland Trust Company v. Attorney General, Case No. SJC-11257 (Oct. 11, 2012), the Supreme Judicial Court allowed the requested reformation of a trust.

The settlor died in 2006. The trust provides that upon the settlor’s death, the income is to be used to fund one or two scholarships of $10,000 to students at Scituate High School. Any income not distributed as scholarships is to be added to principal.  

The trustee proposed to reform the trust in two ways. First, the trustee sought to include language in the trust evincing the settlor’s general (as opposed to specific) charitable intent, thereby allowing the trust to qualify as a private charitable foundation and thus be exempt from income tax. Otherwise the trust would have to pay income tax at a high marginal rate, thus reducing the income available to distribute as scholarships. Second, the trustee sought to amend the requirement that any income not distributed as one or two scholarships of $10,000 be added to principal, because undistributed income retained by a private foundation is taxed at the rate of 100%. Again, this tax would reduce the amount available for scholarships.

Based on the evidence in the record, which included an affidavit from the drafting attorney and affidavits from two of the settlor’s friends who attested to her charitable donations and volunteer work, the Court found that the trust’s failure to reflect the settlor’s general charitable intent was a scrivener’s error. The Court also found that imposing a tax on the undistributed income retained in the trust would defeat the settlor’s intent to have as much of the trust income as possible used for scholarships.

Accordingly, the Court held that the trust shall be reformed to include the requested language evincing the settlor’s general charitable intent, and to amend the requirement that the scholarships be limited to one or two in the amount of $10,000, with the undistributed income added to principal. The amended language will read as follows: “If the Distributable Funds exceed Ten Thousand Dollars ($10,000), the Distributable Funds shall be divided into a number of scholarships in equal amounts, provided, however, that each scholarship must be at least Ten Thousand Dollars ($10,000).”

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

Practice Tip: Key Features of the MUTC and MUPC

Author:
Katherine M. Sheehan, Esq., Ruberto, Israel & Weiner

It has been a year of change in Massachusetts in trust and estate law, with the enactment of the Massachusetts Uniform Probate Code (“MUPC”) and the Massachusetts Uniform Trust Code (“MUTC”).   Practitioners and fiduciaries alike welcome these changes, hoping that they will streamline both the estate administration and trust administration processes.  However, putting these new laws into practice may present challenges for some time to come as centuries old systems have been overhauled.  Below are some of the key features of these new laws, and how they may impact you.

MUPC

• Laws of intestacy redefined (who will get your property if you die without a will and in what percentages).
• Informal and formal probate administration introduced to streamline probate administration.
• Supervised and unsupervised probate administration introduced to reduce court
  involvement in administering estates.
• Virtual representation introduced to reduce court-appointed Guardians Ad Litem (also present in the MUTC).  Most significantly, parents can now represent their minor children and unborn descendants if no conflict of interest exists.

MUTC

• Non-Judicial Settlement Agreements have been introduced, whereby certain trust terms can be modified without court involvement.
• Pet trusts may now be established for the care and maintenance of pets.
• Purpose trusts may now be established to maintain property such as a cemetery plot, an art collection, etc.
• Courts may modify trust terms (including those governing distributions) if it can be shown that the law or facts and circumstances have changed so that trust terms no longer make sense.
• Trusts may be combined or divided. 
• The presumption that trustees must act unanimously was reversed.  Now trustees act by majority unless the trust states otherwise.
• Trustees have a heightened duty to keep beneficiaries informed about the trust
  administration.

While these new concepts will prove to be very useful in the trust and estate administration process, they can also be quite complex.  If you serve as an executor or trustee, we welcome your questions regarding how these new laws impact you in the exercise of your fiduciary duties.

For additional information please contact Katherine M. Sheehan, Esq. at 617.742.4200 or kms@riw.com .

The Boston Bar Association Trusts & Estates Section Blog provides information as a service to its users and BBA members. Neither the Trusts & Estates Section nor the Boston Bar Association are a law firm and do not represent clients in any way. Although the information on this site is about legal issues and informational services it is not legal advice. Use of this blog does not in any way create a lawyer-client relationship. If you need a lawyer, the Boston Bar Association Lawyer Referral Service can refer you to a qualified attorney. http://www.bostonbarlawyer.org/ or call 617-742-0625.

2013 Inflation-Adjusted Figures

Author:
Nikki Marie Oliveira, Esq., LL.M., Margolis & Bloom, LLP

Rev. Proc. 2012-41 was recently released with the inflation-adjusted items for 2013. 

Gift Tax.  The figure that is arguably most important to those of us in the T&E field is the annual gift exclusion amount under § 2503.  This amount has been increased from $13,000 to $14,000.  Practitioners will now be advising clients that gift-splitting is permitted at a rate of $28,000.  We’ll get used to it.  For gifts to a noncitizen spouse under §§ 2503 and 2523(i)(2), the exclusion has risen from $139,000 to $143,000.  Recipients of gifts from certain foreign persons are required to report gifts under § 6039F if the aggregate value of gifts received in a taxable year exceeds $15,102 (the threshold in 2012 was $14,723).

Estate Tax.  For estates of decedents dying in 2013, if the personal representative elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from the election for purposes of the estate tax cannot exceed $1,070,000 (formerly $1,040,000).  The dollar amount used to determine the "2-percent portion" for calculating interest under § 6601(j) of the estate tax extended as provided in § 6166 is $1,430,000 (up from $1,390,000).

Foreign Earned Income Exclusion.  Under § 911(b)(2)(D)(i), this figure is now $97,600 (previously $95,100).

Please note that Rev. Proc. 2012-41 did not address a number of items, including the following: the tax rate tables under § 1; the adoption credit under § 23; the child tax credit under § 24; the Hope Scholarship and Lifetime Learning Credits under §25A; the earned income credit under § 32; the standard deduction under § 63; the overall limitation on itemized deductions under § 68; the qualified transportation fringe benefit under § 132(f); the adoption assistance exclusion under § 137; the personal exemption under §151; the election to expense certain depreciable assets under § 179; the interest on education loans under § 221; and the unified credit against estate tax for estate of decedents under § 2010(c).  We will keep an eye out for future guidance regarding these items and will update you accordingly.

 

Type of Tax	Code Section	2012	2013
The “Kiddie Tax”	1(g)	$950	$1,000
Rehabilitation Expenditures Treated as Separate New Building	42(e)(3)(A)(ii)(II)	$6,200	$6,400
Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax”	59(j)	The exemption may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $6,950.	The exemption may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $7,150.
Private Activity Bonds Volume Cap	146(d)(1)	The amounts used to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $95 multiplied by the State population, or (2) $284,560,000.	The amounts used to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $95 multiplied by the State population, or (2) $291,875,000.
Eligible Long-Term Care Premiums	213(d)(10)	40 or less … $350 41- 50 … $660 51 – 60 … $1,310 61 - 70 … $3,500 More than 70 … $4,370	40 or less … $360 41- 50 … $680 51 – 60 … $1,360 61 - 70 … $3,640 More than 70 … $4,550
Expatriation to Avoid Tax	877	An individual with “average annual net income tax” of more than $151,000 for the five taxable years ending before the date of the loss of United States citizenship is a covered expatriate.	An individual with “average annual net income tax” of more than $155,000 for the five taxable years ending before the date of the loss of United States citizenship is a covered expatriate.
Tax Responsibilities of Expatriation	877A	The amount that would be includible in the gross income of a covered expatriate is reduced (but not below zero) by $651,000.	The amount that would be includible in the gross income of a covered expatriate is reduced (but not below zero) by $668,000.
Attorney Fee Awards	7430(c)(1)(B)(iii)	$180 per hour.	$190 per hour.
Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain Life Insurance Contracts	7702B(d)(4)	The stated dollar amount of the per diem limitation regarding periodic payments treated as paid by reason of the death of a chronically ill individual is $310.	The stated dollar amount of the per diem limitation regarding periodic payments treated as paid by reason of the death of a chronically ill individual is $320.