IRS Announces 2012 Inflation Adjustments

The IRS recently announced inflation adjustments for several tax provisions related to income and estate planning.
  • Personal and dependent exemption.  The value of each personal and dependent exemption is $3,800, up $100 from 2011.
  • Standard deduction.  The new standard deduction is $11,900 for married couples filing a joint return, $5,950 for singles and married individuals filing separately, and $8,700 for heads of household.
  • Tax-bracket thresholds.  Tax-bracket thresholds increase for each filing status.  For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.
  • Estate tax exclusion.  For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011.
  • Special use valuation for real estate.  If the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.
  • Annual Exclusion for Gifts.  The gift tax annual exclusion remains at $13,000.
See Rev. Proc. 2011-52 (Nov. 7, 2011).

Double Taxed – Massachusetts Cost Basis for Assets Passing At Death

Author:
Brad Bedingfield, Esq., Wilmer Cutler Pickering Hale and Dorr LLP

As we have reported in the past (here and here), because of an apparently accidental disconnect between various federal and Massachusetts statutes, it appears that assets passing from Massachusetts decedents in 2010 and thereafter may no longer receive a full step-up in cost basis for purposes of Massachusetts capital gains tax. The Boston Bar Association has promulgated and promoted Bill # H2559, which in essence would provide for a continuation of prior Massachusetts law in this regard, under which property passing upon death will receive a full step-up in cost basis for decedents regardless of the year in which they have died. Such a result avoids an unfair double tax (estate tax and capital gains tax) on the heirs of decedents who die in 2010 or thereafter.

On Tuesday, October 11, 2011, the Massachusetts Department of Revenue issued, for practitioner comment, a two-part draft Directive addressing this issue. In Directive 2, the DOR has interpreted the law as providing that the Massachusetts cost basis of property acquired from decedents who die in 2011 or thereafter is “stepped-up” basis. Although a legislative solution would be preferable to provide certainty regarding the law in this regard, Directive 2 would be a welcome relief to taxpayers facing possible double taxation with regard to property passing at death in 2011 and beyond.

Directive 1, however, addressing 2010 decedents, comes up short. Instead of providing for a full step-up in cost basis for Massachusetts purposes, in Directive 1 the DOR has interpreted the law as providing for the “modified carryover” basis regime applicable under IRC Section 1022 to estates of 2010 decedents whose executors elect out of application of estate tax (as discussed in more detail here and here).

Under federal law, this modified carryover basis regime was intended to be a “trade-off” for repeal of the estate tax. Current federal law provides the executor of a 2010 decedent’s estate with a choice – (1) no estate tax, but a potential capital gains tax burden on assets passing from the decedent (after application of certain cost basis allocations allowed under IRC Section 1022), or (2) application of estate tax, but full step-up in cost basis. Under no circumstances does federal law impose both estate tax and capital gains liability resulting from denial of step-up in cost basis at death.

Massachusetts law does not allow an election out of estate tax for 2010 decedents. Therefore, avoidance of double taxation requires a full step-up in cost basis for Massachusetts purposes in all cases. Although Directive 1, if put into effect, would potentially mitigate the effects of double taxation in some situations, many estates would still be subject to double taxation in Massachusetts.

The Boston Bar Association continues to support H2559, which would alleviate the need for the aforementioned Directives, would provide certainty regarding cost basis of assets received from a decedent after 2009 for Massachusetts purposes, and would conform Massachusetts practice in this regard with the federal policy, and with the historic Massachusetts practice, of subjecting assets passing at death to either estate tax or capital gains tax, but not both.

H2559 is currently before the Joint Committee on Revenue. Please consider contacting your representatives and asking them (1) to urge the members of the Joint Committee to report H2559 favorably out of the committee and (2) to vote for it. The phone numbers and email addresses of the members of the Joint Committee on Revenue may be found here.

To identify your representatives, and for contact information, please click here.

A template letter for your consideration may be found here.

Thank you for your support.

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Update as of October 24, 2011: The Massachusetts Department of Revenue has extended the deadline for comments on the draft Directive from October 28, 2011 to November 11, 2011.

Probate Bills Move Forward

The Boston Bar Association’s Issue Spot recently published the following announcement.

Probate Bills Move Forward

On October 12th, in hearing room A-1 of the State House, the Judiciary Committee heard public testimony on 164 bills related to the broadly defined category of “crimes.”  Spanning the better part of the afternoon, the testimony addressed issues ranging from Governor Patrick’s high-profile gun crime bill to reinstating the death penalty to strengthening animal abuse laws. 

Meanwhile, upstairs on the floor of the House, the details of a supplemental budget appropriation, which included $12 million in direct funds and $8 million in retained revenue fee collections for the Trial Court, was taken up and passed with a vote of 149-1. 

While the supplemental budget and the crime bills captured the headlines the next day, the Judiciary Committee polled its members on the Massachusetts Uniform Probate Code (MUPC) technical corrections bill and the Massachusetts Uniform Trust Code (MUTC).  Both bills were ultimately reported out of committee favorably today.  These two pieces of legislation have been at the forefront of the BBA’s public policy agenda for years and represent the culmination of the efforts of task forces and a significant number of stakeholders.  We are encouraged that both bills have begun to move, particularly during such a busy and pressure-filled week for the legislature. 

As of today, just 80 days remain until the estates portion of the MUPC takes effect; the guardianship portion became effective on July 1, 2009.  A delay in passing both the MUPC technical corrections and the MUTC legislation will result in unnecessary compliance costs, while also putting greater strain on an already overburdened Probate & Family Court.  The Court has been working around the clock to prepare for the implementation of the MUPC and any delays will only undermine their efforts to achieve a smooth transition. 

Both bills address some of the shortcomings of the Commonwealth’s current trusts and estates statutes.  Although the two pieces of legislation are neither flashy nor easy to explain to non-lawyers, both are much-needed, commonsense measures seeking to ensure that soundness and equity prevail in Massachusetts law.  It is critically important to the bench, bar and the public that the legislature acts soon.

Kathleen Joyce, Government Relations Director, Boston Bar Association

IRS Releases Notice 2011-82, Guidance on Electing Portability of Deceased Spouse’s Unused Exclusion Amount

Author:
Joshua Caswell, J.D. Candidate, Suffolk University Law School

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 amended Internal Revenue Code § 2010(c) to create, for the first time ever, “portability” of the federal estate tax exemption amount between spouses, such that a surviving spouse’s federal estate tax exemption amount may be increased by the amount unused by the deceased spouse. Portability is currently effective with respect to deaths in 2011 and 2012.

On September 29, 2011, the IRS released Notice 2011-82, providing instruction for making (and avoiding) the portability election. Pursuant to the Notice, executors and administrators should consider filing a Form 706, United States Estate (and Generation Skipping Transfer) Tax Return to take advantage of portability for the surviving spouse, even if an estate is otherwise not required to file. The Notice provides as follows:

Making the Election

The IRS’s intention is to the election as uncomplicated as possible, to minimize inadvertently missed elections:

  • The executor or administrator of the estate of a decedent dying in 2011 or 2012 must timely file Form 706 to elect portability and preserve the decedent’s “unused exclusion amount”, even if the estate is not otherwise required to file.
  • The decedent’s unused exclusion amount is defined in § 2010(c)(4) as “[t]he lesser of (A) the basic exclusion amount, or (B) the excess of (i) the basic exclusion amount of the last such deceased spouse of such surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under § 2001(b)(1) on the estate of the deceased spouse”.
  • A timely filed Form 706 is one filed within the time prescribed by law (including extensions).
  • Once a portability election is made, it is irrevocable.
  • A portability election will be presumed to be made on any properly filed Form 706. Besides filing the Form 706, no other affirmative action is needed. Any Form 706 filed after the time prescribed by law will not be presumed to have made the portability election.

Avoiding the Election

The IRS anticipates that most, if not all, executors or administrators of estates of decedents dying in 2011 or 2012 will want to make the portability election. However, if the election is not desired, it can be avoided as follows:

  • If a Form 706 is not required and an executor or administrator does not want to make the portability election, simply not filing Form 706 will prevent the portability election from being made.
  • If a Form 706 is required and an executor or administrator does not want to make the portability election, he or she must affirmatively opt out by timely filing Form 706 and attaching a statement indicating that the estate is not making the election under § 2010(c)(5), or by writing “no election under Section 2010(c)(5)” across the top of the first page of Form 706, as provided in the Instructions for Form 706.

Forthcoming Regulations

  • The IRS intends to issue regulations under § 2010(c) consistent with this Notice, and to address further issues arising from the portability election.

Probate Court Seeks Input on Amendments

Massachusetts Lawyers Weekly recently published the following announcement, available to its subscribers.

Probate Court Seeks Input on Amendments

The Massachusetts Uniform Probate Code Implementation Committee is inviting comments on proposed amendments to Rule 72 of the Massachusetts Rules of Civil Procedure and Rule 72 of the court’s proposed Supplemental Rules.

The proposed amendment to Rule 72 would repeal the rule on probate accounts and add a new rule, for the allowance of accounts filed in the Probate & Family Court, to the proposed Supplemental Rules, retaining the same number.

The proposed amendments reflect procedural changes as a result of the enactment of the MUPC, G.L.c. 190B. The remaining articles of the MUPC, as it relates to estate and administration matters, will go into effect on Jan. 2, 2012.

Comments should be directed no later than Friday, Oct. 21, to the MUPC Implementation Committee, Estate Working Group, c/o Evelyn J. Patsos, Probate & Family Court, John Adams Courthouse, One Pemberton Square, Boston, MA, 02108, or by email at [email protected].

After reviewing submitted comments, the Estate Working Group of the MUPC Implementation Committee, along with Chief Justice Paula M. Carey, will make recommendations to the Supreme Judicial Court’s Standing Advisory Committee.

The full text of the proposed rule changes can be found by clicking here.

T&E Litigation Update – Harootian v. Douvadjian, Rose v. Rose

Author:
Mark E. Swirbalus, Esq., Day Pitney LLP

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.

Harootian v. Douvadjian

In Harootian v. Douvadjian, Case No. 10-P-1798 (Oct. 4, 2011), the Appeals Court addressed the question of whether certain distributions of principal from a trustee to herself, as the lifetime beneficiary of the trust, were in breach of her fiduciary duties to the remainder beneficiaries.

Beatrice Ansbigian, whose late husband was the settlor of the trust, was the trustee and lifetime beneficiary of the trust. The plaintiff claimed that Beatrice breached her fiduciary duties to him, as a remainder beneficiary, by distributing approximately $214,000 in trust principal to herself to pay her expenses after the settlor’s death. The plaintiff argued that Beatrice had assets of her own to pay her bills, and thus there was no need for her to invade the trust principal. The superior court rejected this argument, entering summary judgment against the plaintiff, and the Appeals Court affirmed.

The trust provided that Beatrice, as trustee, had the power to invade trust principal for her “support in reasonable comfort and maintenance.” The Court held that this language did not require her to exhaust her own assets before invading principal because her discretionary power to pay her expenses was not qualified by words such as “when in need” or “if necessary.” The Court also noted that the plaintiff cited no authority for the proposition that the word “reasonable,” which appeared before the words “comfort and maintenance,” meant that Beatrice should have used her own assets first so as to preserve the trust principal for the remainder beneficiaries.

Rose v. Rose

In Rose v. Rose, Case No. 10-P-1889 (Sept. 26, 2011), the Appeals Court addressed whether a specific bequest of real property was adeemed.

The testator owned two abutting lots in Wellesley, shown as Lot 7 and Lot 8. In her will dated September 22, 1962, the testator bequeathed Lot 8 to her son. After executing her will, however, the testator recorded a new plan with the town planning board to subdivide her two lots. Under the new plan, Lot 7 was designated as Lot A, and Lot 8 was effectively split in two and designated as Lots 1 and 2. Thereafter, Lot A and Lot 2 were assessed as one lot for tax purposes and the testator sold Lot 1 to third parties.

The testator died in 1983 without having changed her will.

The heirs of the testator’s son, who had been bequeathed Lot 8, filed a petition for partition in the probate court, claiming ownership of the portion of Lot 8 that still remained under the new plan. The probate court held on a motion for summary judgment that the specific bequest to the son was adeemed because Lot 8 no longer existed.  

The Appeals Court affirmed the probate court judgment. The Court recognized the general rule that where only part of real property owned by a testator is conveyed during the testator’s life, a partial ademption results and the bequest is not adeemed as to the remaining part. Nevertheless, the Court held that the specific bequest of Lot 8 was adeemed because the merger of Lot 8 with Lot 7 arose from the “affirmative acts” of the testator. This merger was not the product of the common-law doctrine of merger or a local bylaw that caused the lots to merge.

IRS Releases Final Form 8939, to Make a § 1022 Election for 2010 Decedents

Author:
Kerry L. Spindler, Esq., Goulston & Storrs, PC

On October 6, 2011, the IRS released Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent.

The executor or administrator of an estate of a 2010 decedent will use Form 8939 if he or she wishes to elect out of the estate tax/step-up basis rules of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and into the zero estate tax/modified carry-over basis rules of the Economic Growth and Tax Relief Reconciliation Act of 2001. Notice 2011-76 extended the filing due date of this form from November 15, 2011 to January 17, 2012. Notice 2011-66 provides guidance with respect to making the election.

The IRS has not yet released instructions to accompany Form 8939.

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Update as of October 7, 2011:  The Instructions to Form 8939 are now available.

Time to Modernize Massachusetts Trust Law

Author:
Brad Bedingfield, Esq., Wilmer Cutler Pickering Hale and Dorr LLP

Since the Uniform Law Commission first promulgated the Uniform Trust Code in 2000, Massachusetts has watched as a growing number of states, including neighbors Maine, Connecticut, New Hampshire and Vermont, adopted versions of the UTC. The flexibility and uniformity provided by the UTC has proven to be a great selling point in pitching settlors to establish trusts in UTC states, and trustees to migrate trusts to those states.

Now, it’s our turn.

Two bills currently before the Massachusetts legislature, the Massachusetts Uniform Trust Code (H. 2261 and S. 688) (“MUTC”) and a bill making certain important technical corrections to the Massachusetts Uniform Probate Code (“MUPC”) (S. 704), will go far towards modernizing trust law in Massachusetts. These bills, which have been endorsed by the Boston Bar Association, the Massachusetts Bar Association, and the Massachusetts Bankers Association, are important to ensure that Massachusetts remains competitive as a forum for trusts. They will streamline certain aspects of trust administration and probate court proceedings, reducing costs, inefficiency and uncertainty for trustees and for beneficiaries, and will ease the burden on the probate courts.

Some of the key benefits of the MUTC are that it:

  • Codifies much of the existing law of trusts (now spread between statutes and court decisions), thereby making the law of trusts more accessible;
  • Provides statutory guidelines regarding powers, duties and liabilities of trustees;
  • Provides more flexible rules regarding representation in court proceedings, in many cases eliminating the need for appointment of a guardian ad litem;
  • Eliminates the distinction between inter vivos and testamentary trusts, reducing the need for continued court oversight over testamentary trusts in many cases;
  • Gives standing to donors of charitable trusts to bring a proceeding to enforce the trust’s terms;
  • Provides courts with greater flexibility to modify or reform a trust instrument;
  • Provides statutory support for non-judicial settlement agreements, allowing many trust matters to be resolved outside of court;
  • Gives trustees the power to divide and combine trusts for tax or other purposes, and to terminate uneconomic trusts;
  • Allows for the creation of trusts with no specific beneficiaries, established for specific non-charitable purposes (so-called “purpose trusts”); and
  • Allows for directed trusts, in which certain powers may be granted to persons other than the trustees, with protection of trustees who act as directed.

The BBA’s statement to the Joint Committee on the Judiciary in support of the MUTC may be found here.

The provisions of the MUPC pertaining to trusts are scheduled to come into effect on January 2, 2012. This would also be the effective date of the MUTC, as filed. If passed, the MUTC will effectively replace the trust law provisions of the MUPC. However, if passage of the MUTC is delayed, courts, practitioners, trustees and beneficiaries will have to grapple with multiple disparate bodies of trust law in succession, unnecessarily increasing compliance costs and putting additional pressure on the courts.

In order to avoid this scenario, and to provide as much time as possible to prepare for the new law, both bills should be passed promptly.

At present, both bills are before the Joint Committee on the Judiciary. Therefore, please consider contacting your representatives and asking them (1) to urge the members of the Judiciary Committee to report these bills favorably out of the committee and (2) to vote for these bills, when they come to a full vote.

The phone numbers and email addresses of the members of the Judiciary Committee may be found here.

To identify your representatives, and for contact information, please click here.

A template letter for your consideration may be found here.

Thank you for helping to move Massachusetts trust law into the 21st century.

Passage of Probate Laws Needed ASAP

Author:
Kathleen Joyce, Government Relations Director, Boston Bar Association

The Massachusetts Uniform Probate Code (UPC) will be effective for estates on January 2, 2012; it became effective for guardianship on July 1, 2009. This landmark piece of legislation is something the BBA has worked on and supported for over 20 years. Not only does the UPC improve what was a deplorable situation concerning the appointment and conduct of guardians, but it will simplify the probate process for families and our courts while expediting the process for administering estates. The UPC facilitates the appointments of executors and also provides options for choosing informal or formal procedures to open and close probate matters. All in all, lawyers and the courts are pleased with it.

The Probate and Family Court has been educating its staff on the new law and working diligently to promulgate new forms that will be used when the rest of the UPC is rolled out in January. To supplement their efforts, the BBA will offer a continuing legal education seminar introducing the new estate rules in November to help practitioners navigate the changes.

Now what? The Legislature needs to pass two more bills quickly. The first, S733, contains technical corrections to the UPC. These corrective changes address issues that came to light during the initial implementation and take into account things like missed cross references, typos and other oversights. The second bill, the Massachusetts Uniform Trust Code (MUTC), is a companion piece to the UPC. Since the MUTC repeals most of Article VII of the UPC and replaces it with more current language, it would be advantageous to have all the statutory trust law provisions in the same place in the new MUTC and take effect as scheduled on January 2, 2012.

Like the UPC, the MUTC is a substantial bill that has been well-vetted. It was produced by the Uniform Laws Commission after a five-year drafting period. Then in 2005, an ad hoc committee of lawyers, including members of the BBA, was convened to review the bill in detail. They debated each section of the MUTC and, as a result, what we have is a statute that will simplify and make the trusts laws in Massachusetts more accessible.

Here are just a few reasons that the MUTC should be passed:

  • The laws concerning trust will be uniform, comprehensive and easy to find.
  • It will make the administration of trusts more uniform among the states.
  • It will reduce uncertainty and costly and needless litigation.
  • It provides guidance and protection for trustees who, by the terms of the trust, are to take direction from a non trustee.
  • It simplifies judicial proceeding regarding non judicial settlement agreements and modification and termination of trusts.

January is less than five months away and, realistically, we are looking at a legislative schedule that at best might enact the bills by late September – not a lot of time to conduct the education and training necessary for a smooth implementation next January. Whatever can be done to facilitate the prompt passage of the MUTC legislation should be done. Adopting the MUTC will move Massachusetts into the 21st century in trust law.

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This article was first published on Issue Spot.

T&E Litigation Update – Furman v. Gossels, Sherman v. Shub, Cherubini v. Goodsell, Austin v. Austin, Paine v. Sullivan, McGeoghean v. McGeoghean

Author:
Mark E. Swirbalus, Esq., Day Pitney LLP

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.

Furman v. Gossels

In Furman v. Gossels, Case No. 10-1603-BLS1, 2011 Mass. Super. LEXIS 84 (Super. Ct. May 24, 2011), the Superior Court addressed a business dispute that turned on the nature of the rights held by a beneficiary of a trust.

Siblings Elaine, Jerome and Walter were the members of a limited liability company, with each owning a one-third interest. The operating agreement of the LLC provides that only descendants of the siblings’ parents shall be members. The operating agreement also contains a restriction on the transfer of a membership interest, providing in part that a membership interest can be transferred only (1) to a descendant of the siblings’ parents or (2) to a trust in which all of the beneficial interests are owned by another member or a descendant and the trustee of which is a member. If a membership interest is transferred to an impermissible transferee, then the operating agreement gives the LLC the right to purchase that interest at a discounted price.

When Walter died in 2010, his membership interest passed through his estate to a family trust. Under the terms of the trust, his widow Miriam disclaimed her interest in the LLC and declined to act as trustee. The result of these actions was that Walter’s children, who (unlike Miriam) are descendants of the siblings’ parents, became the beneficiaries of Walter’s membership interest through the trust and Walter’s daughter Rebecca became the trustee.

The question presented in the litigation was whether Rebecca holds an ownership interest in the LLC and thus is a member, fulfilling the requirement that a membership interest can be transferred only to a trust of which a member is the trustee.

Elaine and Jerome argued that the trust is an impermissible transferee of Walter’s membership interest because Rebecca is not a member of the LLC. The Court disagreed, ruling that Rebecca and her siblings, as the beneficiaries of the trust, hold equitable interests in Walter’s membership interest and thus are the “real owners”. Accordingly, the trust is a permissible transferee because Rebecca, the trustee, is a member of the LLC.

The Court based its ruling on the following trust-law principles: “A trustee of a trust holds the legal title to trust property with the power to administer it for the benefit of the beneficiaries, in accordance with the terms of the trust instrument…. A beneficiary, on the other hand, is the owner of the trust res, has an equitable interest in the trust property, and is considered the real owner.”

Sherman v. Shub

In Sherman v. Shub, Case No. SUCV2007-BLS1, 2011 Mass. Super. LEXIS 146 (Suffolk Super. Ct. June 16, 2011), the Court entered summary judgment against the plaintiffs on their Chapter 93A claim against the defendant insurance advisers and attorneys relating to allegedly defective estate plans.

The plaintiffs purchased two life insurance policies that were to become assets of two irrevocable life insurance trusts. Some time later, the plaintiffs discovered defects in the trust instruments and related documents that could result in increased estate and gift tax liability in the future. The plaintiffs brought the Chapter 93A claim against the defendants for this potential liability.

The Court granted the defendant’s motion for summary judgment, holding that the plaintiffs’ alleged damages are too speculative to be actionable. The Court adopted the defendants’ argument that estate and gift taxes are subject to calculation only at the time of death, and that this calculation is subject to a number of variables (e.g., the value of the decedent’s estate; the nature and amount of any deductions, credits and exemptions that may be available in the estate; the state or jurisdiction in which the estate is located; the applicable federal and state estate tax laws in force at the time; the decedent’s marital status; and the identity of the beneficiaries of the estate). As the Court explained,

Here, even assuming that there are no changes in the [plaintiffs’] personal circumstances and the size of their estates at the time of their future deaths, the court can make no such assumptions with respect to the federal and state tax statutes that may be in effect. . . . [T]he court is not in a position to divine the future intent and/or actions of Congress or to make such a prognostication.

Cherubini v. Goodsell

In Cherubini v. Goodsell, Case No. 10-P-1245, 2011 Mass. App. Unpub. LEXIS 827 (June 24, 2011), a decision issued pursuant to Rule 1:28, the Appeals Court addressed the anti-lapse statute, G.L. c. 191, § 22, and its effect on purported assignments of interests in an estate.

Donald Goodsell predeceased Dominic Cherubini. One of Donald’s children, Edward Goodsell, argued that the portion of Dominic’s estate that would have passed to Donald should go directly to Edward rather than to all of Donald’s children by right of representation, because Donald’s other children had assigned their interests in Donald’s estate to Edward. The probate court disagreed, instructing the executor of Dominic’s estate to make distributions to all of Donald’s children by right of representation.

The Appeals Court affirmed, explaining that the anti-lapse statute operates to require the distribution of Donald’s share of Dominic’s estate directly to Donald’s surviving issue. In other words, Donald’s share would not pass through his estate, meaning that any assignment of interest in Donald’s estate would have no effect. The Appeals Court also rejected Edward’s argument that the assignment agreements were intended to include Donald’s share in Dominic’s estate, because Edward did not meet his high burden of proving mutual mistake, and found that the assignment agreements unambiguously pertained to Donald’s estate exclusively.

Austin v. Austin

In Austin v. Austin, Case No. 10-P-1342, Mass. App. Unpub. LEXIS 870 (July 7, 2011), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed summary judgment for the defendant on the plaintiff’s reformation claim and the defendant’s claim to enforce the in terrorem clause in the settlor’s will.

First, the plaintiff contended that the probate court had erred as a matter of law in granting summary judgment for the defendant on the plaintiff’s reformation claim because there was a genuine issue of material fact as to whether the settlor, who was the parties’ mother, intended that her assets be equally distributed between them. Because a parcel of land transferred to the plaintiff through a QPRT resulted in the plaintiff paying more taxes than the defendant, the plaintiff claimed that the settlor’s intent was frustrated. The Appeals Court disagreed, holding there was no evidence that the settlor intended to treat her sons “equally”, and so reformation of the trust to conform with this alleged intent would have been inappropriate.

Second, the plaintiff contended that the in terrorem clause in the settlor’s will should not be enforced against his reformation claim because the claim did not challenge the will or the settlor’s revocable trust. He claimed that he only sought to revise the provisions of the QPRT, which was not covered by the in terrorem clause. Again, the Appeals Court disagreed, explaining that if the plaintiff’s QPRT taxes had been paid out of the settlor’s residuary estate, then reformation would have prevented Article Sixteenth of the will (the tax allocation provision) from being carried out in accordance with its terms, because that provision explicitly prohibits the residuary estate from paying the taxes of any trust other than the settlor’s revocable trust. Therefore, the Court held that the probate court had properly enforced the in terrorem clause against the plaintiff.

Paine v. Sullivan

In Paine v. Sullivan, Case No. 10-P-289, 2011 Mass. App. LEXIS 1042 (July 22, 2011), the probate court had ruled that the testator possessed testamentary capacity when he executed his last will and testament and that his will was not the product of undue influence. The Appeals Court reversed the probate court’s ruling on the testamentary capacity claim.

The Court explained that where there is evidence of lack of capacity, the presumption of sanity loses effect and the burden falls upon the proponent of the will to prove by a fair preponderance of the evidence that the testator was of sound mind when the instrument was executed. Here, the objector had offered evidence of lack of capacity, and thus the burden shifted to the proponent to prove capacity. The Court held that the proponent failed to meet this burden. The testimony of a medical expert was insufficient because, according to the Court, it was not clear that the medical expert’s opinion was supported by careful review of the testator’s medical records. The expert “cherry picked” portions of the medical records that could suggest the testator’s dementia was mild and ignored contrary medical records. Moreover, although the Court acknowledged that the testimony of a drafting attorney can be relevant, the drafting attorney was unable to offer any relevant evidence as to the testator’s capacity. He had not seen the testator in years, had spoken with him only by telephone, and was not aware that he had been diagnosed with dementia. Finally, the witnesses to the will, who were employees of the bank where the will was executed, could not recall the specifics of the execution.

McGeoghean v. McGeoghean

In McGeoghean v. McGeoghean, Case No. 10-P-407, 2011 Mass. App. Unpub. LEXIS 936 (Aug. 3, 2011), a decision issued pursuant to Rule 1:28, the Appeals Court affirmed the superior court’s judgment in all respects. The complicated facts of this case are not fully apparent from the decision, but the Court held that the superior court’s findings of fact and conclusions of law were not clearly erroneous. Two issues in particular bear noting.

First, the Appeals Court affirmed the superior court’s finding that the plaintiff John McGeoghean was entitled to quantum meruit damages in compensation for his actions in reliance on the oral promise of his mother, the decedent, to give him certain property and her interest in a business. The superior court did not specify whether the oral promise was one to make an inter vivos gift or a bequest in her will. Consequently, the Court held that the superior court, in awarding quantum meruit damages, had not impermissibly remade the dispositions in the will. Although a promise to include a bequest in a will is not enforceable under the Statute of Frauds, quantum meruit is an available remedy under these circumstances, and the superior court properly found that the plaintiff had rendered valuable services in reliance on his mother’s oral promise.

Second, the defendant argued that the plaintiff is judicially estopped from arguing promissory estoppel (i.e., reliance on the mother’s oral promise) because of a “Vaughan” affidavit filed by the mother in the plaintiff’s divorce action. In that affidavit, the mother had not mentioned a bequest of the property and her interest in the business to the plaintiff. Because the superior court had not found that the mother’s oral promise was one to make a bequest, however, judicial estoppel was not implicated. Moreover, even if the superior court had found that the oral promise was one to make a bequest, the Court held that the superior court would have been within its discretion in not applying judicial estoppel.