Conservation Law Foundation Event

Please join Conservation Law Foundation (CLF) at a free event to learn about their new Legal Services Food Hub, a legal services project connecting lawyers with pro bono opportunities to assist low income farmers and food entrepreneurs in Massachusetts. Enjoy a locally-sourced continental breakfast.  Hear about the need for this project from Roger Noonan, a farmer and President of the New England Farmers Union.  Receive training on the most common legal issues faced by these constituents from CLF and Harvard Law School Food Law & Policy Clinic staff attorneys.  Meet and mingle with fellow Massachusetts lawyers interested in using their legal skills to strengthen our local food economy and increase fresh food access.  Leave the event with a hot-off-the-press copy of the Legal Services Food Hub Legal Guide written by Harvard Law School’s Food Law & Policy Clinic.

Click here to register for the event and click here to visit CLF’s website.

Please forward this invite to attorney contacts who may be interested!  All attendees must register by Friday, June 13th.

Brissette v. Ryan

Author: Angie Guarracino, Esq., Nixon Peabody LLP

In Brissette v. Ryan, 2013 Mass. LEXIS 994 (November 29, 2013), the Appeals Court reversed a jury award to the plaintiff for $100,000 for a malpractice claim where the defendant attorney advised the plaintiff and her husband to transfer their home to their children without retaining a life estate in order to avoid healthcare liens, stating that the life estate would subject the property to healthcare liens. The defendant attorney was unaware that the law had changed a few years earlier to permit transferors to retain a life estate without subjecting the property to healthcare liens. When the plaintiff discovered the mistake she hired an attorney to reform the deed in the probate court, although the plaintiff’s son opposed the probate court proceeding and that proceeding was ultimately dismissed, leading the plaintiff to file a malpractice claim against the defendant.

After the jury verdict, the defendant filed a Motion for Judgment Notwithstanding the Verdict and a Motion for New Trial. The defendant challenged the verdict as being against the weight of the evidence and argued that the jury award was improperly grounded in sympathy and speculative damages. The Court agreed finding that the plaintiff did not incur any actual damages.

Despite the plaintiff’s claim that due to the defendant’s advice, she now owns nothing when she could have owned a life estate, the Court held that the loss of rights alone is not sufficient without proof of actual damages. The plaintiff did not testify that she had any plans to mortgage or rent the house and the plaintiff’s children never tried or threatened to evict her.

The Court felt that the jury likely felt sympathy for the plaintiff in awarding her $100,000 because the amount was speculative and there was no basis for that amount in the evidence. The plaintiff had not even presented any evidence for out-of-pocket expenses, such as attorney fees. The Court held that the plaintiff’s unease that her children might someday evict her, despite their testimony that they would never do that, and the fact that she did not show any actual damages, did not amount to an exceptional circumstance to warrant emotional distress damages.

The Court held that there were no set of circumstances which it may be reasonably inferred that the plaintiff suffered or will likely suffer damages due to the defendant’s legal representation.

MUPC Petitions: Common Mistakes and Simple Solutions

Authors:
Tamara Lauterbach Sturges, Esq., Pathway Law, LLC
Kerry L. Spindler, Esq., Goulston & Storrs PC

With the second anniversary of the effective date of estate administration sections of the Massachusetts Uniform Probate Code (the “MUPC”) behind us, the Boston Bar Association’s Trusts & Estate’s Section’s Public Service Committee asked the Massachusetts Probate and Family Courts to comment on frequently made errors in MUPC filings. With the assistance of Chief Justice Angela M. Ordoñez and Case Manager Evelyn J. Patsos, Esq., MUPC Magistrates and court personnel compiled a list of common mistakes and simple solutions.

1. Petition Should be Consistent with Death Certificate: A common error is that the decedent’s name as listed on the petition does not match the name listed on the death certificate. If the will and death certificate refer to the decedent by a different name, the petition should include any alias. For example, if the death certificate identifies the decedent as “John M. Smith” and the will identifies the decedent as “John Smith”, the petition should reference the estate as “John M. Smith, also known as John Smith”.

In addition, the decedent’s address as listed on the petition should match the address listed on the death certificate. If the address of the decedent is not accurately reflected on the death certificate an Affidavit of Domicile (Form MPC 485) must be filed with the petition.

2. Suspicious Deaths: Another common mistake occurs where the death certificate lists the cause of death as “pending” or homicide”. If the cause of death is listed as “pending” or “homicide”, the petitioner must file a Suspicious Death Affidavit (Form MPC 475)[1] with the petition (M.G.L. 190B, Section 2-803).

3. Priority for Appointment: If the person requested to be appointed personal representative does not have the highest statutory priority to serve as personal representative pursuant to M.G.L. 190B, Section 3-203 or has equal statutory priority with others, then the petitioner must list the names of all individuals who have statutory priority to serve or who also have an equal statutory priority to serve. If there are renouncements or nominations accompanying the petition, the petitioner should indicate this by checking the appropriate box and filing the Renunciation and/or Nomination (Form MPC 455) of all such individuals. Instructions for completing the Renunciation and/or Nomination form are available (Form MPC 941).

Renunciation and/or Nomination form(s) shall be required and must be submitted with an informal petition if the petitioner is seeking to appoint a personal representative who does NOT have statutory priority for appointment. Only the court in a formal proceeding may appoint a person without statutory priority.

4. Formal vs. Informal Proceeding: Practitioners are attempting to go forward with informal proceedings where only formal proceedings are available. This most often occurs where there is a minor or otherwise incapacitated heir or devisee. If any devisee or heir is a minor or otherwise incapacitated, a formal proceeding is required unless there is an appointed conservator or guardian who is not one of the petitioners (M.G.L. 190B, Section 3-303(a)(8); Section 1-404 (as amended)). Absent an appointed conservator or guardian, informal proceedings are unavailable and formal proceedings are required.

In a formal proceeding, if there is no conflict of interest and no guardian or conservator has been appointed, a parent may represent a minor child. Likewise, if there is a substantially identical interest, a person who has assented or received notice may represent persons interested in an estate who are unborn or unascertained. In order to exert parental or virtual representation, a motion to waive a guardian ad litem (“GAL”) must be filed with the formal petition and allowed by the court. If the court finds that parental or virtual representation exists, a GAL does not need to be appointed.

5. Confusion About a Deceased Spouse: There is confusion about when to list a deceased spouse on a petition. If a spouse survived the decedent but died prior to filing the petition for probate, he or she must be named on the petition and his or her date of death must be provided. If a spouse predeceased the decedent, the predeceasing spouse should not be listed on the petition.

6. Trustees as Devisees: Petitions and voluntary administration filings frequently omit trustees in the list of devisees. If a trust is to receive any part of a decedent’s estate, the trustee of that trust must be listed on the petition as a devisee.

7. Overuse of Special Personal Representative: Special personal representatives often result in increased legal fees to the estate and create an accounting requirement. Courts will consider appointing a special personal representative only if a need for such is clearly articulated in the formal petition for appointment (Form MPC 160 or Form MPC 350). The convenience of an immediate appointment does not justify the appointment of a special personal representative.

8. Fiduciary Bond: A bond (Form MPC 801) must be filed with every petition for informal or formal probate that is seeking the appointment of a personal representative regardless of whether the will waives a bond and/or sureties. The value of personal and real property must be filled out on a bond even if the petitioner is submitting a bond without sureties.

9. File a Complete Package of Documents: The document most often omitted from a probate filing is the proposed Order or Decree. Fillable forms are provided via the Court Forms webpage. To avoid omitting documents, reference the Informal Checklist or Formal Checklists provided at the MUPC Hub before submitting any filing to the court.

10. Filing Fees: When an incorrect filing fee is submitted, no matter how de minimis the shortage or overage, the registry of probate must request additional funds or issue a refund. A new filing fee schedule went into effect only July 9, 2012 and was updated on October 17, 2012. Check filing fees online at the MUPC Hub prior to submitting a petition. If unsure about which fees apply, contact the registry before submitting your filing.

11. Last But Not Least, Proofread: Errors in petitions and other documents delay the probate process and may also increase costs and fees. The most common and easily correctable mistakes can be caught with proofreading. Before submitting a probate filing make sure to reference the MUPC Estate Administration Procedural Guide and review each document to confirm that it is completed properly, signatures are in the right spot and that all documents are dated.

The Probate and Family Court’s new website is full of helpful information, including the MUPC Estate Administration Procedural Guide, Uniform Fee Schedule, Informal and Formal Checklists, fillable forms for will and estate proceedings and fillable forms for trust proceedings.[2]

[1] It is anticipated that the title of the Suspicious Death Affidavit will soon be changed to “Cause of Death Affidavit”.

[2] If you have trouble opening forms in Google Chrome, try opening them in Explorer.

New E-Discovery Rules Bring Changes, Challenges and Cutting Edge Discovery Issues to Trust and Estate Litigation

Authors:
Mark E. Swirbalus, Esq., Goulston & Storrs, P.C.
Marshall D. Senterfitt, Esq., Goulston & Storrs, P.C.

T&E practitioners may think that the new Massachusetts rules governing electronically stored information (“ESI”) do not apply to their practice, but they would be wrong. The new rules do apply and likely will bring big changes to T&E litigation.

As most counsel are (hopefully) well aware, the Massachusetts Rules of Civil Procedure were amended effective January 1, 2014, bringing the rules concerning electronic discovery more in line with the Federal Rules of Civil Procedure. Among the amendments are provisions that: (1) expressly allow for (and sometimes require) counsel to meet and confer about electronic discovery issues; (2) grant courts authority to manage the scope of electronic discovery; (3) place limits on what ESI must be collected and produced; (4) provide claw-back rights in the event of the inadvertent production of privileged material; and (5) eliminate sanctions for spoliation of evidence in certain circumstances. See Mass. R. Civ. P. 26(f) and 37(f).

Interestingly, the primary purpose of the amended rules – to address the “staggering growth of information in electronic form today” (see Reporter’s Notes to Mass. R. Civ. P. 26(f)) – may not be of great importance to many T&E litigators. T&E disputes often involve fewer documents and less data than most complex civil business cases. In fact, the Supreme Judicial Court’s Standing Advisory Committee on the Rules of Civil Procedure considered making the new electronic discovery rules applicable only to the Superior Court, which regularly handles large complex civil matters. The Committee ultimately determined, however, that electronic discovery impacts nearly all litigants and thus should apply to all trial courts in Massachusetts. See Reporter’s Notes to Mass. R. Civ. P. 26(f).(FN1)

Although the use of predictive coding to search for a digital smoking gun hidden amongst terabytes of data may not concern most T&E litigators, electronic discovery will become a fundamental element of many T&E disputes for at least two reasons. First, Rule 26(f) applies not only to data residing in a multinational company’s enterprise e-mail system and off-site server farm, but also to data found on an individual’s Gmail account and home computer. Second, the burgeoning use of e-mail, text messages and social media has created countless new sources of ESI that T&E litigators will and should pursue in support of their cases.

One example of a relatively new source of evidence that will play a role in T&E disputes is the now ubiquitous smartphone. Once upon a time (i.e. less than 10 years ago), when people used cell phones solely for voice calls and iPods solely to play music, neither device held evidence of much import to most cases. That is no longer true. A recent study by the Pew Research Center’s Internet & American Life Project found that in 2013, 91% of American adults owned a cell phone.(FN2) Of those phone owners, 81% sent or received text messages (including 75% of users aged 50-64 and 35% of users over age 65), 60% accessed the internet from their phones, and 52% used their phones to send and receive e-mail. Id.

A similar study in 2012 found that 82% of cell phone owners took pictures with their phones, 44% recorded videos, and 29% used their phones for online banking.(FN3) The trend is undeniable. In a telling sign of just how reliant people have become on their phones, 25% of married or partnered adults have communicated with each other by text message while they were both home together.(FN4) Given the increased reliance people place on their smartphones for all manner of everyday uses, most of which involve the capture and/or transmission of information, it is conceivable that the contents of a single smartphone could make or break an entire case.

Of course it is not just phones that hold potentially crucial ESI – old fashion desktop computers, laptop computers, tablet devices and ever more popular “wearable” devices all hold and transmit ESI. These devices also utilize a vast array of applications (aka apps) that collect and use personal information and data for everything from accessing and maintaining social media accounts and managing personal finances, to tracking the location of other devices to help people find their friends or avoid their enemies. As new technology and uses of that technology emerge, so too do new forms and formats of electronic evidence.

Although the Probate Court has not historically been a proving ground for cutting edge legal technology, the application of the new e-discovery rules to all trial courts, coupled with the expanding universe of personal digital information available to litigants in discovery, may cast T&E litigators and probate court judges as pioneers. While lawyers trying complex civil matters are at the forefront of some ESI issues, such as computer assisted document review, there are other issues that might arise in Probate Court long before they are addressed in the Business Litigation Session of the Superior Court or federal court. For example, what are the preservation obligations with respect to a minor child’s social media account? Who has possession, custody or control over such information? The child? The parent? Two parents? The social media company? These are but a few of the myriad questions that will have to be addressed in the very near future.

Further, the incredible growth of social media is more likely to impact T&E matters than many other types of cases. In 2013, 73% of all American Adults who used the internet also used at least one social networking site (with 71% of all online adults using Facebook, including 45% of all online adults aged 65 and older) and 42% used multiple social networking sites.(FN5) Although the increased use of social media may occasionally play a role in business disputes, social media content is seemingly tailor-made for many T&E disputes. For example, the video posted online of recently-deceased aunt Edie dancing at a wedding and giving a witty congratulations speech is of little use in a contract dispute, but it may prove crucial in proving that aunt Edie had testamentary capacity when she signed her will that very same afternoon. It appears a foregone conclusion that people will continue to capture and post much of their lives on line for all to see. T&E litigators should do everything possible to adapt to this brave new world of digital evidence.

Despite the fact that the new e-discovery rules are upon us and James Bond’s watch phone is now a reality, T&E litigators do not need to become technophiles overnight (although it probably would not hurt). All counsel should be familiar with the provisions and requirements of the newly amended rules, however, and be prepared to request and produce relevant ESI. Of particular importance is ensuring that clients preserve ESI to avoid any threat of sanctions or other negative consequences. And, to the extent counsel’s idea of e-discovery is scanning paper files into a PDF and then e-mailing them, he or she should make a dedicated effort to learn about the most common forms of ESI, the sources of such information, and the basics of handling ESI in discovery and subsequent phases of litigation. Fortunately, there is no shortage of educational material, both online and in books made of actual paper, that explain the past, present and future of ESI in relatively simple terms.

FN1: It is important to note that although the newly amended rules apply to equity matters pending in the Probate Court (Mass. R. Civ. P. 1) and appear to be incorporated into the Supplemental Rules of the Probate and Family Court (see Supplemental Rule 27A), the Massachusetts Rules of Domestic Relations Procedure have not been similarly amended . Accordingly, although proceedings governed by the Rules of Domestic Relations Procedure often involve e-discovery, it is unclear if, when and how the newly amended Rules of Civil Procedure will be applied to such matters.

FN2: Pew Research Center, September 2013, “Cell Phone Activities 2013,” available at http://www.pewinternet.org/2013/09/19/cell-phone-activities-2013/).

FN3: Pew Research Center, November 2012, “Cell Phone Activities 2012,” available at http://www.pewinternet.org/2012/11/25/cell-phone-activities-2012/

FN4: Pew Research Center, February 2014, “Couples, the Internet, and Social Media,” available at: http://pewinternet.org/Reports/2014/Couples-and-the-internet.aspx.

FN5: Pew Research Center, January 2014, “Social Media Update 2013,” available at: http://pewinternet.org/Reports/2013/Social-Media-Update.aspx.

What’s New In the World of Fiduciary Litigation

The program, What’s New In the World of Fiduciary Litigation, held on Thursday, February 27, 2014 and sponsored by the Fiduciary Litigation Committee of the Trusts and Estates Section provided an overview of recent decisions of note issued by the Massachusetts courts on topics related to fiduciary litigation. Please click here for the event materials.

Favorable Tax Court ruling upholds trustees’ activities as qualifying trust for material participation exception under IRC Section 469 (and the net investment income tax under IRC Section 1411)

Author:  Alison E. Lothes, Esq., Gilmore, Rees & Carlson, P.C.

In Frank Aragona Trust et al. v. Commissioner, 142 T.C. No. 9, the Tax Court ruled in favor of the taxpayer, holding that a trust could and did materially participate in real estate rental activities, qualifying for the exception to the passive activity rules under IRC Section 469.  This case is helpful, as there are currently no regulations and very few rulings on how to apply the “material participation” rules to trusts.  The IRS has been interpreting the exception to be very limited but the Court agreed with the taxpayer that the activities of the trustees, including those in their capacity as employees of an entity owned by the trust, could be considered when determining whether the trust materially participated in the real estate rental business.

A majority of the trust’s business was operated through a wholly owned LLC but the trust also operated some of its real estate business directly and some through other entities.  The trustees were intertwined in the LLC, other entities and the business.  The LLC employed three of the trustees as full time employees (along with other employees, including a controller, maintenance workers, leasing agents and clerks).   Two of the trustees also held minority interests in several of the entities in which the trust was also a member.

The trust filed fiduciary income tax returns claiming losses relating to its rental real estate activities and characterized those activities as non-passive.  The IRS disagreed and determined that the rental real estate activities were passive, and as a result limited certain deductions and net operating loss carrybacks.

Under IRC Section 469, a passive activity is any activity which involves the conduct of a trade or business in which the taxpayer does not materially participate.  Generally, rental activities are considered passive activities unless (1) more than one-half of the personal services provided by the taxpayer during the taxable year are performed in real property trades or businesses in which the taxpayer materially participates and (2) the taxpayer performs more than 750 hours of services during the year in real property trades or businesses in which the taxpayer materially participates.  “Material participation” requires that the taxpayer be involved in the operation of an activity on a “regular, continuous and substantial” basis.

The IRS argued that a trust cannot qualify for the exception because it cannot perform “personal services.”  It claimed that the legislative history indicates that “personal services” can only be performed by an individual.  In the alternative, the IRS argued that even if the trust could perform personal services, when assessing whether the trust materially participates in an activity, only the activities of the trustees (and not the employees) can be considered.  In addition, the IRS sought to exclude the activities of the trustees that were not solely related to their fiduciary duties.  For example, the IRS argued that the activities of the trustees who were employees of the LLC could not be taken into account because those activities should be attributed to them as employees, not fiduciaries.  It also argued that a portion of the activities of the trustees who owned interests in the entities should be attributed to their personal ownership in the entities, rather than to their activities on behalf of the trust.

The Tax Court disagreed.  It noted that the trustees’ fiduciary duties to administer the trust in the interest of the beneficiaries are not put aside when they work for the LLC owning the real estate.  Therefore, their activities as employees of the LLC should be considered when determining whether the trust materially participated in its real estate operations.  It is interesting to note that the Tax Court did not determine whether the activities of the non-trustee employees should be considered because it was not necessary to the decision.  Lastly, the Tax Court held that the trustees’ individual minority interests in entities of which the trust was also a member did not impact the trust’s material participation because the combined minority interests in each entity held by the trustees were less than 50% and in all cases were less than the trust’s interest.

This case is very helpful for taxpayers in that the Tax Court adopted a relatively broad interpretation of whose activities (and in what capacity those activities are undertaken) may be attributed to the trust when determining if the trust materially participates in an activity.  This has recently become even more important because of the new 3.8% tax on net investment income under IRC Section 1411.  Non-passive trade or business income is not considered net investment income and so is not subject to the tax under IRC 1411.  This ruling may make it a little easier for trusts to prove that they are “materially participating” in a trade or business to avoid the 3.8% tax.

Pro Bono Opportunities for Trusts & Estates Attorneys

The Boston Bar Association’s Trusts & Estates Section has partnered with the Volunteer Lawyers Project (VLP) and the Legal Advocacy and Resource Center (LARC) to assist low income and senior clients. Both organizations are currently seeking to expand their rosters of T&E attorneys for the following pro bono initiatives:

• LARC is seeking T&E attorneys to provide limited legal advice over the phone to low income clients. Attorneys will participate in up to 3 phone calls lasting up to 30 minutes each on a select afternoon (generally Wednesday). Attorneys may participate as often as weekly, or as their schedule permits. The purpose of the call is to advise the client on his or her trusts and estates legal matter. If the attorney determines that the client requires further legal assistance, the attorney will recommend to VLP that the case be further staffed by a volunteer attorney. LARC prescreens each client for income eligibility and identifies the interested parties so that the attorney may check for conflicts before speaking with the client.

• VLP is seeking T&E attorneys on cases requiring assistance beyond LARC’s single phone call, such as probating an estate so that a client may retain a house, or a car often essential for employment. Other clients may need wills, health care proxies, powers of attorney or other basic estate planning documents.

• VLP is seeking T&E attorneys to participate in its guardianship practice. VLP represents those persons who are seeking guardianship for minors or incapacitated adults. VLP manages a clinic at Suffolk Probate and Family Court every Tuesday morning where such persons are given assistance filling out the necessary papers. In some cases, attorneys are assigned to represent the individuals throughout the process. On occasion, there is a need for an attorney to represent a client in a contested matter. Anyone interested in volunteering at the guardianship clinic should first attend training at VLP. The calendar for trainings can be found at VLP’s website.

To join the roster of attorneys for any of these important initiatives or to request more information, contact Dan Biagiotti at LARC ([email protected]) or Lynn Girton, Chief Counsel at VLP ([email protected]). Thank you.

T&E Litigation Update – Cheney v. Flood; Johnson v. Kindred Healthcare; Rockingham County Nursing Home v. Harnois

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

Cheney v. Flood

In the recent Rule 1:28 decision Cheney v. Flood, 2014 Mass. App. Unpub. LEXIS 154 (February 7, 2014), the Appeals Court reviewed the dismissal of a malpractice claim brought against an attorney on the grounds that the attorney should have known that the decedent – the attorney’s former client and plaintiff’s stepfather – wanted the plaintiff and her children to be his only beneficiaries.

Although the plaintiff did not properly appeal the dismissal of the malpractice claim, the Appeals Court noted that had she done so, the decision in Miller v. Mooney, 431 Mass. 57, 61 (2000), would have been dispositive of her claim.  In Miller, the Supreme Judicial Court held that the surviving relatives of a decedent could not bring claims against a lawyer based on allegedly erroneous statements the lawyer made to one of the relatives concerning the terms of the decedent’s will because they could not establish that they had an attorney-client relationship with the lawyer.  Miller, 431 Mass. at 61 (holding that the duty of care owed by an attorney arises only from an attorney-client relationship).

The complaint also asserted a claim for quantum meruit seeking payment from the decedent’s estate for services that the plaintiff and her family provided during the last years of his life.  However, the plaintiff could not establish any express agreement with the decedent for such payment and instead only offered evidence that she assumed she would be a beneficiary of the estate because she “always hoped that he would eventually have a little bit to pay [her] back.”

The Appeals Court distinguished the plaintiff’s case from situations in which a decedent had expressly agreed to make someone a beneficiary in exchange for the performance of services prior to the decedent’s death (e.g., a wealthy bachelor who promised to leave a plaintiff one-half of his estate in exchange for services).  In affirming the lower court’s dismissal of the plaintiff’s claim, the Court quoted Congregation Kadimah Toras-Moshe v. DeLeo, 405 Mass. 365, 366-367 (1989) for the proposition that “moral obligation is not legal obligation [and a] hope or expectation, even though well founded, is not equivalent to either legal detriment or reliance.”

Johnson v. Kindred Healthcare

In Johnson v. Kindred Healthcare, Inc., Case No. SJC-11335, 2014 Mass. LEXIS 7 (January 13, 2014), the Supreme Judicial Court answered the question of first impression in Massachusetts of whether a health care agent’s agreement with a health care facility to arbitrate disputes arising from the principal’s stay at the facility constitutes a “health care decision” binding on the principal pursuant to the health care proxy statute, G.L. c. 201D, § 5.

The brief background is that the administrators of the decedent’s estate brought a wrongful death action in Superior Court against a nursing home and related entities and individuals.  In response, the defendants sought to enforce the mandatory arbitration provision in the nursing home agreement.  The decedent’s health care agent (his wife) had signed the agreement on his behalf.

The estate argued that the health care agent’s entering into the agreement, and specifically the mandatory arbitration provision, was not binding because it was not a “health care decision” as that term is defined and used in the health care proxy statute.  The Court agreed, explaining that the Massachusetts Legislature intended to distinguish between a health care proxy, which limits an agent’s decision-making authority on behalf of an incapacitated person to health care decisions, and a durable power of attorney, guardianship or conservatorship, each of which authorizes much broader decision-making power on behalf of an incompetent person.  “Unlike a health care proxy, a durable power of attorney can authorize an agent to make decisions affecting the principal’s business, estate, finances, and legal relationships in a variety of contexts unrelated to health care.”

In support of this conclusion, which comports with the majority view in other jurisdictions that have considered similar issues, the Court pointed to the history of the health care proxy statute, where the Legislature considered but rejected an alternative bill that would have combined the roles of health care agent and attorney-in-fact, and noted that the statutory scheme ultimately enacted by the Legislature maintains a distinction between these fiduciary roles.  The Court also reasoned that if it were to define “health care decisions” more broadly, then many decisions made by a health care agent would override the more expansive powers allocated to an attorney-in-fact, guardian or conservator.

Rockingham County Nursing Home v. Harnois

In Rockingham County Nursing Home v. Harnois, Civil Action No. 11-11057-JGD, 2014 U.S. Dist. LEXIS 3042 (January 10, 2014), the United States District Court for the District of Massachusetts addressed a nursing home’s fraudulent transfer claim against the trustee of an irrevocable trust.  The nursing home alleged that the settlor transferred to the trust her primary residence, which was also her primary asset, with the intent of avoiding her payment obligation to the nursing home, and that she did not receive equivalent value in return.  The nursing home also claimed that the trust would be unjustly enriched if it were permitted to keep the property.

The Court’s decision includes a lengthy discussion of the facts and certain procedural matters arising from the nursing home’s motion for partial summary judgment and the trust’s motion for leave to amend its answer to assert the statute of limitations as an affirmative defense.  Of particular note is the Court’s finding that the nursing home’s fraudulent conveyance claim is barred by the statute of limitations.  The Court explained that the Massachusetts Uniform Fraudulent Transfers Act (G.L. c. 109A, §§ 1, et seq.) provides that a claim must be brought within four years following the transfer or obligation, or within one year after the transfer or obligation was or could have been reasonably discovered by the claimant, and that a claim based on constructive fraud must be brought within four years after the transfer or obligation, regardless of the claimant’s knowledge.  Here, the Court found the nursing home’s claim to be time-barred, because the claim was based on constructive fraud and more than four years had passed.  Accordingly, the Court did not address the substance of the allegedly fraudulent transfer to the trust.

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.

REV. PROC. 2014-18: PORTABILITY

Author: Alison I. Glover, Esq., Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Purpose

The revenue procedure provides a simplified method for estates which were below the estate tax filing threshold and failed to file an estate tax return to elect portability.  This procedure provides relief to executors who may have been unaware of or misunderstood the filing requirement and also to executors of estates of same-sex couples who were recognized as spouses after the filing date.

Estates meeting the specified requirements will avoid having to file for relief under §301.9100-3.

Background

Sections 302(a)(1) and 303(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 allow the estate of a decedent who is survived by a spouse to make a “portability election” – which allows the surviving spouse to apply the decedent’s Deceased Spousal Unused Exclusion Amount (“DSUE”) to the surviving spouse’s own transfers during life and at death. The DSUE amount is defined as the lesser of “(A) the basic exclusion amount, or (B) the excess of the applicable exclusion amount of the last deceased spouse of the surviving spouse over the amount with respect to which the tentative tax is determined under Section 2001(b)(1) on the estate of the deceased spouse.” In order for the surviving spouse to apply the decedent’s DSUE amount to the surviving spouse’s transfers, the surviving spouse must elect portability of the DSUE amount on a timely filed Form 706, which must include a computation of the DSUE amount. The due date of an estate tax return required to elect portability is 9 months after the decedent’s date of death or the last day covered by extensions.

In 2013, United States v. Windsor struck down portions of the Defense of Marriage Act (“DOMA”). Previously, DOMA prevented the Service from recognizing same-sex marriages. According to Rev. Rul 2013-17, the Windsor decision allows, among other benefits, the surviving spouse of a same-sex married couple to make a portability election upon the death of his/her spouse.

The due date for estates required to file an estate tax return is prescribed by statute. However, if an executor is not required to file an estate tax return but may file an estate tax return to elect portability, the due date for electing portability is prescribed by regulation (20.2010-2T(a)).  Accordingly, an executor may seek relief under Section 301.9100-3 for a late filing.  In general, relief will be granted if the taxpayer acted reasonably and in good faith and the grant of relief will not prejudice the government. The Service has issued several letter rulings under Section 301.9100-3 granting an extension of time to elect portability under Section 2010(c)(5)(A) in situations in which the decedent’s estate was not required to file an estate tax return.

Applicability

This revenue procedure applies if:

  • The taxpayer is the executor of the estate of a decedent who:
    • Has a surviving spouse;
    • Died after December 31, 2010 and on or before December 31, 2013; and
    • Was a citizen or resident of the United States on the date of death.
  • The taxpayer was not required to file an estate tax return because decedent’s estate was under the applicable filing threshold;
  • The taxpayer did not file a timely estate tax return;
  • The taxpayer files a complete and properly prepared Form 706 on or before December 31, 2014; and
  • The taxpayer states on the top of the Form 706 that the return is “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER SECTION 2010(c)(5)(A).”

Provided that all of these requirements are met, the taxpayer’s Form 706 will be considered to have been timely filed, unless it is subsequently determined that the taxpayer actually owed estate tax, in which case the relief will not be granted.

Limitations Period for Claim for Credit or Refund by the Surviving Spouse

To obtain a credit or refund of an overpayment of tax by reason of a portability election made under this revenue procedure, the surviving spouse (or the executor of the estate of a deceased surviving spouse) must file a claim for credit or refund of tax before the general limitations period. For example, a predeceasing spouse (“S1”) died on January 1, 2011. The assets included in the gross estate of S1 were under the exclusion. The surviving spouse (“S2”) did not file a Form 706. S2 died on January 14, 2011. S2’s taxable estate was over the exclusion. S2’s executor filed a Form 706 and paid estate tax on October 14, 2011. Under this revenue procedure, S2’s executor should file a claim for refund by October 14, 2014 – even if the estate of S1 has not yet filed a Form 706 under this procedure to make the portability election. Assume that in 2015, the Service determines that (i) S1’s estate has met the requirements for a grant of relief under this revenue procedure and is deemed to have made a valid portability election, (ii) accepts S1’s return with no changes, and (iii) issues an estate closing letter to S1’s estate. The refund claim filed by S2’s executor in anticipation of the filing of Form 706 by S1’s executor will be considered a protective claim for credit or refund of tax.

Effective Date; Pending Requests

This Revenue Procedure is effective on January 27, 2014. With respect to any ruling requests pending on January 27, 2014, the executor may rely on this revenue procedure, withdraw the letter ruling request and receive a refund of its user fee.

Torres v. Torres

Author:  Sandy Christopher, JD, CTFA
Senior Trust & Fiduciary Specialist, Wells Fargo Private Bank

In Torres v. Torres (84 Mass. App. Ct. 1117; 995 N.E.2d 1152; 2013 Mass. App. Unpub. LEXIS 1029) the plaintiff, Jesse E. Torres, III (“Jesse”), appealed the ruling of the Superior Court concluding that Massachusetts law prohibits a claim for anticipatory breach of a contract to make a will.  The Appeals Court vacated the judgment of the lower court and allowed the suit to go forward, but solely as an action in quantum meruit.

Jesse alleged that he and his mother, Sophie Torres (“Sophie”), had, in 2009, reached an agreement requiring Sophie to leave Jesse certain parcels of real property in her will.  The purported contract permitted Sophie to sell or finance the various pieces of property during her life for her own benefit and required any proceeds not used by Sophie to become Jesse’s property upon Sophie’s death.  As consideration for this, Jesse relinquished any claim he might have against Sophie or her estate for services rendered, or funds loaned to her, as long as the terms of the ostensible contract were respected. If the terms of the supposed contract were violated, “any monies and interest will become fully due and payable.” In 2011, subsequent to the execution of the alleged contract, Sophie executed a new will, which Jesse claimed was a breach of her contractual obligation to him under the 2009 agreement.

The Court noted that Jesse’s action “purports to raise several questions of first impression, namely whether we recognize contracts not to revoke a will, and whether an action for beach of such a contract is premature until the death of the testator, as in an action to make a will.” However, the Court, in an act of “judicial prudence” declined to address these questions, as it concluded that they were unnecessary to decide in this case, as Jesse had available to him a viable action in quantum meruit.   The quantum meruit action was available  to Jesse because “the contract specifies that Jesse’s damages will be the very monies and interest he loaned to his parents, whether the litigation is denominated a contract action or an action in quantum meruit, the merits and, if Jesse is successful, the relief, will be identical.”