President’s Message - ACTEC(North Dakota,South Dakota, Montana,Idaho,W yoming, Colorado and Nebraska) Place: Sylvan Lake Lodge Custer, South Dakota Minnesota Fellows Dinner Place:

Volume 25, No. 4, Spring 2000

Table of ContentsPresident’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .277Calendar of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .278In Memoriam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .278Editor’s Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .285Washington Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .286

John M. Bixler and Ronald D. Aucutt

Foundation News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .288Norman J. Benford

Spotlight on Attorneys’ Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .289Martin A. Heckscher

ACTech Talk: Getting Your Firm on the Web—and Getting Noticed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293

Andrew J. DeMaio and Robert B. Fleming

New Developments in Construction and Instruction Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .296

Arlene Harris

Reformation of Wills: The Implication of Restatement (Third) of Property (Donative Transfers) on Flawed but Unambiguous Testaments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .299

Clifton B. Kruse, Jr.

Post Mortem Trust Administration Checklist . . . . . . . . . . . . . . . . . . . . .331Frayda L. Bruton

What ACTEC Fellows Should Know About Asset Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .367

Duncan E. Osborne and Elizabeth M. Schurig

President’sMessage

After good weather in Montreallast June and outstanding weather inBoston in October, the notoriousACTEC weather curse returned toplague the last three days of our annualmeeting in Scottsdale with rain andchilly temperatures. In fact whenSharon and I landed at Logan Airporton Thursday afternoon, March 9, wediscovered that the temperature inBoston was 20° higher than it waswhen we left Phoenix.

We were fortunate to have sched-uled our three outdoor events before thedeluge came to the Valley of the Sun,and we found that a “good side” to theinclement weather was that there wasrecord attendance at the seminars andthe computer workshops.

Our athletes were frustrated. Onlythe golfers were stalwart enough toactually complete their tournament,while the tennis gurus had to hold a lot-tery in order to discover the winners oftheir match play.

By all measures (including the rain

Hanson S. Reynolds

THE AMERICAN COLLEGE OF TRUST AND ESTATE COUNSEL

3415 S. Sepulveda Boulevard, Suite 330 • Los Angeles, California 90034 • (310) 398-1888 • FAX: (310) 572-7280

Robert M. Kunes, Editor / Joseph J. Hanna, Jr., Assistant Editor / © The American College of Trust and Estate Counsel 2000

(continued on page 283)

PLEASE NOTE

1999-2000 Pocket Tax Tables–A complimentary copy is enclosed along with anorder form and return envelope.

“Death and Taxes,” a 60-minute program on estate planning for PBS–Thisprogram, made possible by an ACTEC Foundation grant, features Fellows CarlynMcCaffrey and Max Gutierrez in a panel discussion with a financial planner, abanker and a financial journalist. The segment stresses to families the importanceof seeking qualified professional estate planning advice.

Fellows are requested in the enclosed advisory from Norman J. Benford, ACTECFoundation president, to contact their local PBS stations in May to encourage thebroadcast of this valuable and timely program in their communities.

25 ACTEC Notes 277 (2000)


Calendar of Events

In Memor iamGordon Gunderson Joseph D. Hartwig James B. Welles

Clear Lake, South Dakota Saint Joseph,Michigan New York, New York

Any gift to the ACTEC Foundation made in the memory of a deceased Fellow will be acknowledged to the family.

2000 Regional and State MeetingsWednesdayMay 3

ThursdayMay 4

Satur day-MondayMay 5-7

Thursday-Satur dayMay 11-13

WednesdayMay 31

New Jersey Fellows MeetingPlace: Naussau Club

Princeton,New Jersey

Dallas Fellows MeetingPlace: Westin Galleria

Dallas,Texas

Five State Regional Meeting(Alabama,Louisiana, Kentucky,Mississippi and Tennessee)Place: Perdido Resort

Perdido Key, Alabama

Regional Meeting(North Dakota, South Dakota,Montana, Idaho, Wyoming, Coloradoand Nebraska)Place: Sylvan Lake Lodge

Custer, South Dakota

Minnesota Fellows DinnerPlace: Minikahda Club

Minneapolis,Minnesota

WednesdayJune 7

ThursdayJune 15

Fr iday-SundaySeptember 22-24

Thursday-SundayOctober 19-22

Texas Fellows DinnerPlace: Worthington Hotel

Fort Worth, Texas

Ar izona Fellows Meeting

Mid-Atlantic Re gional Meeting(Delaware, Mar yland, New Jersey,Pennsylvania and Washington,D.C.)Place: Hershey Lodge

Hershey, Pennsylvania

Southeast Regional Meeting(Georgia, South Carolina, North Carolina,Vir ginia and West Vir ginia)Place: The Ritz-Carlton

Pentagon City, Virginia


2000 Summer Meeting

Dates:

Place:

Tuesday-ThursdayJune 20-22

ThursdayJune 22

Tours:

Fr idayJune 23

Tours:

Evening

Satur dayJune 24

Tours:

Evening

SundayJune 25

Sunday-TuesdayJune 25-27

Thursday, June 22 through Sunday, June 25

Palace Hotel2 New Montgomery StreetSan Francisco,CA 94105-3402

Pre-meeting trip:Napa Valley Wine Country

Committee meetings—as scheduled in late afternoon

Alcatraz Island After Hours Tour with Dinner“Beach Blanket Babylon” with Dinner(the nation’s longest running musical revue)Other tour options to be announced

Morning:Professional Program and Luncheon—to be announced

Committee meetings—as scheduled throughout the day

Muir Woods and Sausalito with LunchAlcatraz Island Morning TourEscape to AlcatrazOther tour options to be announced

President’s Welcome ReceptionFor all Fellows and spouses—as scheduled in the evening


Walking Tour of ChinatownFiloli Estates and Garden Tour with LunchPainted Ladies (Victorian homes tour)Other tour options to be announced

Cocktail Reception and DinnerFor all Fellows and spouses—as scheduled in the evening

Committee meetings—as scheduled in the morning

Post-meeting trip:Napa Valley Wine Country

The 2000 Summer Meeting will be held in San Francisco.Dubbed the United States’most European city, San Fran-cisco is a metropolis of icons—the Golden Gate Bridge,roller coaster streets,clanking cable cars, Alcatraz Island,Chinatown and Fisherman’s Wharf. With new museums andrestaurants constantly revitalizing its vibrant urban core, SanFrancisco packs a cultural and culinary punch that is toughto match among U.S. cities. If you are not careful, the Cityby the Bay just might steal your heart!

San Francisco measures only seven square miles and isvery walkable if you do not mind hills. The city somersaultsover a series of hills—more than 40 by most reckonings,andevery one of them holds a surprise. So whether the journeybegins at Union Square or Fisherman’s Wharf, aboard a cablecar or on foot,somewhere in the avenues or south of Market,in the Mission District or North Beach, there is somethingwonderful just over the hill.

For more information on San Francisco,start with thebasics at the San Francisco Convention and Visitors Bureausite, go to www.sfvisitor.com, then go to www.BayInsider.comfor insider tips.

The committee meetings,professional program andsocial functions will be held at the seven-story Palace Hotel,at the corner of Market and New Montgomery Streets,cen-trally located in downtown San Francisco. In April 1991,

this 121-year-old landmark property completed a majorrestoration. All 550 guest rooms were refurbished and publicareas of historic importance, including the Garden Court,were painstakingly restored. In addition, modern amenities,such as a spacious conference center, health spa and skylitlap pool, were added to meet the needs of their guests.ACTEC has a sizeable block of rooms at the Palace, plus 50additional rooms at The Argent Hotel (the former ANA) justaround the corner at 50 Third Street. Both hotels are only 15miles from San Francisco International Airport and OaklandInternational Airport.

A brochure and registration forms for the summer meet-ing will be sent to you in mid-April.

Beyond San Francisco,discover the beautiful Napa Valleywine country by joining either the pre- or post-meeting trip.With the help of Napa Valley Fellow Frank Collin,dinners andlunches are being arranged at some very special wineries thatare not usually open to the public. A maximum of 80 peoplemay go on each tour because of space limitations.

Your registration and check for either the pre-meetingtour (June 20-22) or the post-meeting tour (June 25-27) mustbe received by May 15. A brochure and registration form weresent to you with the winter issue of ACTEC Notes.If you needanother copy or would like more information about the tours,please call the ACTEC office.

Dates:

Place:

ThursdayNovember 2

Fr idayNovember 3

Evening

Satur dayNovember 4

Evening

SundayNovember 5

After noon

Evening

MondayNovember 6

Thursday, November 2 through Monday, November 6

Southampton Princess Hotel Bermuda


9:00 a.m. to 5:00 p.m.Fall Seminar for Fellows—Topic to be announced

President’s Welcome ReceptionFor all Fellows and spouses


Cocktail reception and dinnerFor all Fellows and spouses


State Chairs Meeting

Cocktails and Dinner for Regents,RegentsEmeriti, State Chairs and their spouses at the Waterlot

8:00 a.m. to 1:00 p.m.Board of Regents Meeting

2000 Fall MeetingThink Bermuda, and images of white-roofed,

pastel-painted cottages, pink-sand beaches andquintessential British traditions such as cricketmatches and afternoon tea spring to mind, plus, ofcourse, those professional gents going about theirbusiness in jackets, ties, knee socks and Bermudashorts. Yet, with golf courses galore, easily accessi-ble boating, fishing and snorkeling, extraordinaryviews and exceptional shopping, Bermuda is a mod-ern day Shangri-la.

The island is situated in the western AtlanticOcean nearly 600 nautical miles off the coast of NorthCarolina. The majority of visitors to Bermuda comefrom North America for short stays,and most considerthe island to be quaintly British; the Brits, on the other

hand, come in much smaller numbers but tend to con-sider the island highly Americanized. It is, of course,uniquely Bermudian—a product of nearly four cen-turies of British colonial history and an equally longreliance on American trade.

Bermuda enjoys a mild, agreeable climate becauseof the warming effects of the Gulf Stream. It is abloomwith colorful flowers like bougainvillea, hibiscus andoleander. The average November high temperature is awarm 75 degrees,while the average November low is68 degrees.

Additional information on the professional pro-gram that will be offered on Friday, November 3,andsome unique tour options will be mailed to all Fellowsin the summer.



2001 Annual Meeting

Dates:

Place:

TuesdayMar ch 6

WednesdayMar ch 7

Evening

ThursdayMar ch 8

Evening

Fr idayMar ch 9

Evening

Satur dayMar ch 10

SundayMar ch 11

After noon

Evening

MondayMar ch 12

Thursday, March 6 through Monday, March 12

Boca Raton Resort and ClubBoca Raton,Florida

Committee meetings—as scheduled in the afternoon

Dinner for 2000-2001 committeemembers and their spouses


Athletic event and tours

President’s Welcome Reception For registered Fellows and registeredspouses

Opening Breakfast

Committee meetings—as scheduled in the afternoon

Seminars,Symposium,athletic eventsand tours

Theme Party

Seminars,Trachtman Lecture,computer workshops,athletic eventsand tours

Open evening

Seminars,symposium,computerworkshops,athletic events and tours

Dinner Dance

Seminars,Hot Topics,athletic eventsand tours

State Chairs Meeting

Dinner for 2000-2001 Regents,State Chairs and Past Presidents and their spouses

Board of Regents Meeting


* Committee members—early arrival

2000

2001

2002

2003

2004

2005

2006

ACTEC National Meeting Schedule

ANNUAL SUMMER FALLFr iday–WednesdayMar ch 3–8Scottsdale PrincessScottsdale, Arizona(March 1*)

Thursday–SundayJune 22–25Palace HotelSan Francisco,California

Wednesday–MondayNovember 1–6Southampton PrincessBermuda

Wednesday–MondayMar ch 7–12Boca Raton Resort and ClubBoca Raton,Florida(March 5*)

Thursday–SundayJune 28–July 1Hotel VancouverVancouver, B.C.,Canada

Wednesday–MondayOctober 17–22Hotel Inter-ContinentalNew Orleans,Louisiana

Wednesday–MondayFebruary 27–March 4La Quinta Resort and ClubLa Quinta,California(February 25*)

Thursday–SundayJune 27–30The Waldorf-AstoriaNew York, New York

Wednesday–MondayOctober 9–14Westin La PalomaTucson,Arizona

Wednesday–MondayMar ch 5–10El Conquistador Resortand Country ClubLas Croabas,Puerto Rico(March 3*)

To be determined To be determined

Wednesday–MondayMar ch 10–15Westin La CanteraSan Antonio,Texas(March 8*)


Wednesday–MondayFebruary 23–28Hyatt Regency Grand Cypress HotelOrlando,Florida(February 21*)


Wednesday–MondayMar ch 8–13Grand Wailea Resort Maui, Hawaii(March 6*)



gauge),the 2000 Annual Meeting was a record breaker.The attendance of Fellows, spouses and guests camevery close to that of the 1995 Annual Meeting whichwas also at the Princess. Rob Durham’s Program Com-mittee assembled a group of speakers that stimulatedthe Fellows throughout the meeting and apparentlyresulted in the largest order of audio tapes in ACTEC’shistory (at one point Ray Caruso ran out of tapes).

Each and every one of the panelists and workshopleaders deserves our special appreciation. Their hardwork and preparation serves both the Fellows of theCollege and the profession as a whole. The ProgramCommittee brought in several outside speakers whowere outstanding and who enlivened their seminars:Dr. John Becker, who spoke on testing the mentallyimpaired client and the client with Alzheimer’s; TaxCourt Judge David Laro and Senior Estate Tax Attor-ney Joseph Stemach, who shared the government’sviews from two different perspectives; and Dr. DavidMagnus, the Graduate Studies Director and facultymember of the Center for Bioethics,University ofPennsylvania,who, with Josh Rubenstein,exploredsome futuristic aspects of estate planning which mayinvolve our clients sooner than we expect.

On Friday morning, Roberta Cooper Ramo,for-mer ABA president and Trachtman lecturer, deliveredthe first Sam Smith Memorial Lecture in tribute toSam,who was a Regent of the College and Chair of theFiduciary Litigation Committee from 1994-1997.Roberta’s talk interwove humor with honor to Sam’spractice of law and his devotion to his family. She fin-ished by citing “Rules of Sam”which we should allobserve in our practice and lives. It was a stirring lec-ture; if you missed it,I recommend that you buy thetape and listen to it with your family.

Sharon Gray discovered an ideal speaker for thespouses/guests program in Lois Sher Dubin,the authorof North American Indian Jewelry and Adornment,who spoke on that subject on Saturday morning as theIndian Fair opened for the weekend at the HeardMuseum. Lois was almost stuck in Phoenix when herride left without her and no taxis were available; how-ever, she bartered a copy of her book for a ride to theScottsdale Princess and arrived with twenty minutes tospare. Sharon’s Books and Bagelsgroup met on Sun-day to discuss several Southwest literary classics,andthe group continued to be a popular intellectual pursuitamong Fellows,spouses and guests.

Rodney Houghton’s Trachtman Lecture lookedback at ACTEC’s first fifty years and ahead to itsfuture. As a past president of the College and an activeFellow for nearly a quarter century, Rodney was ideal-ly suited to sum up our past and to predict our future.Armed with mouse and laser pointer, he showed us

charts which illustrated our growth and increasedactivity over the years. Undaunted by technology ormultidisciplinary practice, Rodney foresaw a challeng-ing but rewarding future for the Fellows of the College.

The delivery of the gavel to our new President,Neill McBryde, at the dinner dance gave me the oppor-tunity to thank the many people who had helped mesurvive the year:the officers of the College, and espe-cially Neill and Peggy, our frequent companions andconstant supporters throughout the year; my law firm,Rackemann,Sawyer & Brewster, which providedencouragement throughout the year, including a recep-tion in Boston and permission for my partner-Fellowsto attend all three of the national meetings; the ACTECstaff: Gerry Vogt, Chris Zeller, Emmy Cresciman,Debbie Jacobovitz, Barbara Ravetti, Jose Baldonadoand Bill Crawford, as well as those who stayed back inL.A. but worked with us throughout the year, and final-ly and most importantly, Sharon Gray, who was at myside on planning trips, five regional meetings andMontreal, Boston and Scottsdale. Her creative ideaswere evident in our letters and in many tours andevents. She was diligent in making sure that I neverlost my ability to laugh,particularly at myself.

Thanks,too, to all the Fellows of ACTEC whosupport this institution with their dues and their dili-gence. The willingness of the Fellows to serve theCollege in a variety of roles is a source of amazementand gratif ication. It is rare that a Fellow turns down arequest to be on a task force or a committee, or to leada seminar at a meeting.

The good health of the College was confirmed atthe meeting of the Board of Regents on Wednesday,March 8. Our treasurer, Carlyn McCaffrey, reportedthat the finances of the College had shown a reason-able increase in assets in 1999,and no increase in duesor reduction in committee reimbursement would berequired in the coming year. Neill McBryde reportedon a small enlargement in the overall membership oncommittees for 2000-2001 and an encouraging amountof interest in first-time membership. He also reportedon a renewed energy and enthusiasm among the statechairs who attended the national meetings in recordnumbers in the past year. Much of the new stimulusmay be credited to the State Chairs Steering Commit-tee, chaired by Frank Reiche. Fifty-two new Fellowswere elected to membership in the College, the highestnumber at an annual meeting since 1995,and this,too,is encouraging for ACTEC’s future.

Two task forces reported at the Board of RegentsMeeting. Henry Gissel,Chair of the MembershipSelection Task Force, spoke of the group’s delibera-tions and efforts to address issues which had arisenduring recent years. He proposed amendments to thebylaws which clarify the earlier rules and enlarge the

President’s Message (continued from page 277)


areas of trust and estate practice in which a lawyer mayconcentrate to qualify for membership in the College.After discussion,the amended bylaws were adoptedunanimously by the Board of Regents.

Bob Kunes,the Chair of the Technology TaskForce, reported its recommendation to the Regentswith respect to putting the roster on the public side ofthe ACTEC Web site. The Board of Regents,afterconsiderable discussion,amended the recommenda-tion and voted to put a limited amount of the roster onthe public side on an “opt out” basis. A detailed letteron the subject has gone out to all Fellows.

Task Force 2000,chaired by Martin Heckscher,

deferred its final report to the Board of Regents untilthe fall meeting in Bermuda. Martin reported that thetask force had an excellent meeting in Scottsdale andthat it needed additional time to deal with the manyissues relevant to its charge.

The Regents’meeting had come to an end. Thesun had come out again in Scottsdale. Sharon and Iadjourned to the Sonoran Room for lunch. We sawNeill. “Mr . President,” I said, “we’re looking forwardto the meeting in San Francisco.” We really are.

[Signature]


Editor’ s Page

I began this year by noting that there are four sea-sons to an ACTEC editor’s term. I am now at the endof my “f ourth season,” and I marvel at how quickly thetime has gone!

One of the benefits of being an editor of ACTECNotesis the enjoyment of working with the marvelouscontributors of articles for consideration for publica-tion in our journal,but I find that, like everything else,one gets more out of an activity the more one puts intoit. My term as editor has been no exception because,in reviewing the articles submitted for ACTEC Notes,Ifeel as if my continuing education horizons have beenbroadened significantly! When submissions range asbroadly as ours do for ACTEC Notes,one is constantlychallenged with the variety of topics!

This issue contains some fabulous reading foryour study! We begin with an extremely scholarlyarticle by Colorado Fellow Clif Kruse entitled “Refor-mation of Wills: the Implication of the Restatement(Third) of Property (Donative Transfers) on Flawedbut Unambiguous Testaments.” In this extraordinarilywell-researched and documented article, Clif tracesthe history of issues traditionally faced by lawyers andclients in will and trust litigation, citing manyinstances of what appear to be rather egregious resultsas a consequence of adherence to formalistic longstanding legal rules in many published decisions. Clifthen notes the developing rules for reformation, modi-fication, and construction of trusts which allow moreflexibility in carrying out the settlor’s intent. Finally,Clif explores the developing Restatement (Third) ofProperty rules which allow for a more realistic inter-pretation in many cases of what the testator was appar-ently attempting to accomplish by permitting manypreviously impermissible modifications.

All of us have learned that good checklists are notonly efficient means of not having to reinvent thewheel every time we get new clients,but they are alsosafeguards to assist us in careful practice. How manytimes have we all gone back to an old file to look forwhether or not an action was taken,all the while hold-ing our breath until we review the file! In this issue,California Fellow Frayda Bruton offers the most com-prehensive checklist I have ever seen with regard to atrust in her article entitled “Post Mortem Trust Admin-istration Checklist.” Having been in the field for overtwenty five years, I thought I had a pretty thoroughsystem in place, but I have to admit that as soon as Iread Frayda’s article, I immediately had it copied fordissemination to all of our associates and paralegals.

Without a doubt,I can guarantee that you will findseveral new IRS forms, elections,or other develop-ments with which you were not familiar before thisarticle. I predict that there will be many copies of thiscirculated among all of our offices.

Texas Fellow Duncan Osborne has long been rec-ognized as a specialist in the field of asset protectionas it relates to estate planning. In this issue, Duncanagreed to craft for us an overview of why each of usshould routinely explore the idea of asset protectionwith our estate planning clients. We all are aware thatplaintiff ’s litigation is rampant and that wealthy indi-viduals inevitably become targets for many such law-suits. Duncan leads us through an analysis of whysuch planning clearly can be implemented while pre-serving due consideration for a state’s FraudulentTransfer Act and concerns about the lawyer’s respon-sibility to third parties if he or she assists a client inwhat turns out to be fraudulent transfer planning. Ithink you will find this article forces you to revisityour “routine” checklist of items you discuss in plan-ning conferences with your clients.

New Jersey Fellow Andy Demaio has authored the“ACTech Talk” article this time in updating us aboutWeb page creation. We all are bombarded daily by theInternet, but I suspect few of us have actually spentmuch time in creating Web pages. Andy has writtenan article updating us on how the developments in thelast few years have made it extraordinarily easy to cre-ate, modify and maintain a Web page for yourself oryour office. Even if you are a non-techie, I think youwill f ind Andy’s thoughts extremely easy to follow.

That does it for this fourth issue of the year! I sus-pect that not every editor can leave with the sense ofcomfort I have in Joe Hanna’s succeeding me as editor.As one who has long been active in the College as awriter, speaker, committee member and past Regent,Joe has a breadth of experience about ACTEC that fewcan match. Yet his enthusiasm for recruiting authorsto write for the upcoming year’s issues of ACTECNoteshas been exciting to see! I am also delightedthat Minnesota’s Steve Brand, another of those bull-dogs in scouring the College for articles,has agreed tobecome the assistant editor for next year. Thanksespecially to Barbara Ravetti of the ACTEC officewho tirelessly coordinates all the College’s publica-tions,and without whom,we would not function!

Thanks again to everyone who submitted articles,and a reminder to all of those who thought about writingbut did not,we certainly would love to read your articles!


Washington Reportby John M. Bixler and Ronald D. Aucutt

Washington,D.C.

This year, although there should be a number ofmodest amendments to those parts of the Internal Rev-enue Code of greatest interest to Fellows, in our judg-ment, there will certainly be no major legislation.Indeed, we think it doubtful that many (if any) of theproposed amendments to the Code (even those uponwhich the Administration and the Republican con-trolled Congress agree) will become law this year. Wesay this because the Republicans find most of theAdministration proposals to be unacceptable and con-gressional legislation of any magnitude is likely to suf-fer from association with provisions which the Presi-dent has threatened to veto. Unfortunately, politicswill more than normally be the name of the game in2000.

The President has announced that he will sign leg-islation that repeals the earnings test for Social Securi-ty benefits for recipients 65 through 69 years of age. IfCongress is able to send a relatively clean bill to theWhite House, that could occur before the Easterrecess. However, Administration proposals to providealternative minimum tax relief for individuals, toallow a deduction for charitable contributions by non-itemizers, and to increase the percentage of adjustedgross income limit with regard to charitable donationsof appreciated property, are, in our judgment,unlikelyto become law this year.

H.R. 3832 (introduced on March 6 by Mr. Archer,Chairman of the House Committee on Ways andMeans),the Small Business Tax Fairness Act of 2000,was joined with a bill to raise the minimum wage and,as H.R. 3081,passed by the House on March 9. It is apotpourri of amendments to the Internal RevenueCode and is illustrative of why we believe few of theamendments to the Code proposed in 2000 (includingthe following) will become law:

1. reduction from 55% to 50%,by 2002,in thetop estate tax bracket and reduction in allbrackets by one percentage point in 2003 andtwo percentage points in 2004;

2. elimination of the 5% bubble for taxableestates in excess of $10,000,000,beginning2001;

3. conversion of the unified credit to an exemption;4. modification of the generation skipping trans-

fer tax—to provide retroactively for allocationof the GST exemption in the case of certainindirect skips to GST trusts; to provide

express authority for allowing trusts to be sev-ered into GST exempt and non-exempt trusts;and to provide for valuing GST transfers attheir finally determined value for estate or gifttax purposes;

5. expansion of the conservation easement rulesapplicable to estates of decedents dying after1999;

6. allowance of a full deduction for the healthcare costs of the self-employed (effective2001); and

7. reinstatement of the provisions of the Codeallowing accrual basis taxpayers (includingsmall business owners) to report gains usingthe installment method of accounting.

Not surprisingly, the Administration’s proposals toamend chapters 11 and 12 (as well as other parts) ofthe Code contrast sharply with the proposals embod-ied in H.R. 3281. Although most of the following pro-posals are likely “dead on arrival,” they are worth not-ing, particularly if Democrats are successful inNovember:

1) phase-out of the unified credit on taxableestates in excess of $17,184,000;

2) consistency in the valuations for federal estateand federal income tax purposes would berequired; donees would be required to use thedonor’s basis and estate beneficiaries wouldbe required to use federal estate tax values;

3) bargain sales would be treated the same astransfers to a charity which are part sale andpart gift (i.e., basis would have to be allocatedwith reference to the fair market value on thedate of transfer and the consideration paid);

4) no basis adjustment would be allowed for asurviving spouse’s share of community proper-ty (leading, at the Annual Meeting, to a spiriteddefense by Fellows practicing in communityproperty law jurisdictions);

5) the full value of QTIP property for which amarital deduction has been allowed will beincluded in a surviving spouse’s gross estateor gift;

6) no discounts would be allowed for non-busi-ness property;

7) the gift tax exemption for personal residencetrusts would be repealed;


8) only a primary beneficiary of a trust possess-ing a Crummey power would be recognized forthe annual gift tax exclusion;

9) for federal income tax purposes transfer typedisclaimers would be treated the same as non-transfer type disclaimers;

10) the declaratory judgment procedure would beextended to all organizations requestingexempt status under 501(a)—not just to thoserequesting 501(c)(3) status;

11) non-itemizers would be allowed to deduct50% of their contributions over $1,000 in 2001and over $500 in 2005;

12) beginning 2001,the excise tax rate imposed onprivate foundation net income would be1.25%,rather than 1% or 2%;

13) the 30% of adjusted gross income limit oncharitable contributions would be increased to50%,beginning in 2001;

14) standards would be established for donor-directed funds (including such funds held bycommunity foundations); in addition, mini-mum distributions of 5% of the value of thefund would be required; and

15) dividends,interest and other passive income ofsection 501(c)(6) trade associations would, tothe extent in excess of $10,000,be unrelatedbusiness income subject to tax.

Notwithstanding concern (if any) regarding theAdministration’s proposals,the following “tax expen-ditures” identified by the Joint Committee on Taxation,in its estimate for the fiscal years 2000-2004,did notgenerate legislative proposals:

Billionsexclusion of investment income on lif e insurance and annuity contracts 128.7

reduced rate of tax on long term 194.6capital gains

exclusion of capital gains at death 136.1

carryover basis of capital gains on gifts 13.8

Having reported what some might consider theextremes,we also note the several proposals of theABA Tax Section,AICPA, and TEI submitted with a

view to simplifying the law. Both Senators Roth andMoynihan (the Chairman and ranking minority mem-ber of the Senate Committee on Finance) commentedfavorably on these proposals:

• repeal the alternative minimum tax;

• provide for a single holding period for purpos-es of determining long term capital gain;

• provide clear guidance in determining whetherindividuals are employees or independent con-tractors;

• synchronize the safe harbors that will avoidthe imposition of penalties with respect to thepayment of estimated tax by self-employedindividuals.

On the regulation front,we commend the Treasuryand Internal Revenue Service for completing all butthree of the projects listed on its 1999 Business Plan.The three are—

• proposed regulations under section 645regarding an election by certain revocabletrusts to be treated as part of the associatedestate;

• final regulations under section 671 regardingreporting requirements for widely held fixedinvestment trusts; and

• proposed regulations under section 2057regarding the estate tax exclusion for certainfamily owned business interests.

Although the 2000 Business Plan was notreleased before our press deadline, we are looking forfinal regulations to be published soon prohibiting theuse by GRATs of notes to make annuity payments.Also, final regulations on grandfathered trusts for GSTtax purposes may be ready by the end of 2000,but wethink that will be a clif f-hanger.

Finally, we congratulate the newly elected ChiefJudge of the United States Tax Court, Thomas B.Wells,a graduate of Emory University Law School andMiami University in Ohio. For many years he was inprivate practice in Atlanta,Georgia.


Foundation Newsby Norman J. Benford

Miami, Florida

I am pleased to report to you on the meeting of theBoard of Directors of the Foundation held in Scotts-dale on March 2.

The Board previewed an unedited version of thetape of a one-hour television program,entitled “Deathand Taxes,” to be broadcast over the PBS network aspart of the Inside the Law series. The program wasproduced as a result of a $100,000 grant by the Foun-dation. It explores,among other things,the pitfallsconsumers face in turning for estate planning advice tomyriad non-lawyer advisors.

A five-person steering committee, consisting oftwo representatives of the ABA Section of RealProperty, Probate and Trust Law (Fellows DonnaBarwick and Dennis Belcher) and three representa-tives of the Foundation and the College (Fellows RonAucutt, Carolyn Clark and Frank Reiche), wereresponsible for monitoring the production and pro-viding editorial input. Three Fellows—CarlynMcCaffrey, Max Gutierrez and Dennis Belcher—were asked to be panelists on the program. The pro-gram is scheduled to be fed live by satellite to sever-al hundred local PBS stations on Sunday evening,May 7, at 8:00 p.m.

The Board is in hopes that the Fellows throughoutthe country will encourage their local public broad-casting stations to air the program in their communi-ties. It was suggested that an offer by the Fellows’ lawfirms to help underwrite the cost of the broadcastwould be an effective way to encourage the broadcastof the program in their communities. A separate infor-mation piece describing the content of the program andhow Fellows can contact their local stations is enclosedwith this mailing of ACTEC Notes.

The Foundation is continuing to ask the substan-tive committees of the College and leading legal acad-emics throughout the country to suggest topics onestate planning, fiduciary administration and related

areas that they believe warrant serious consideration inarticles for law reviews and other legal publications.The Foundation intends to publish a listing of suchtopics to encourage legal scholarship in these areas andmight, under certain circumstances,support the writ-ing of particular articles.

The Board authorized a second printing of theThird Edition of the ACTEC Commentaries on TheModel Rules of Professional Conductand the formsresulting from the College’s Engagement Letter Pro-ject. The Foundation will continue to subsidize thedistribution of copies to state ethics committees andjudiciary, and to law schools,continuing legal educa-tion programs and other educational organizationssuch as the National College of Probate Judges.

In an effort to broaden the exposure of the Com-mentaries in the legal literature, the Board has under-taken a project to encourage the writing, by a judge orother legal scholar, of a law review article on mattersof ethics which would include consideration of theCommentaries.

The Board is also developing a program to pro-mote skills training in estate planning for minoritylawyers in recognition of the changing demographicswith respect to consumers of estate planning services.

The Board reviewed financial reports since Sep-tember 1,1999,the beginning of the Foundation’s cur-rent fiscal year. It was noted that the Foundation hadreceived contributions for the first six months of about$43,000. This nearly matched the record figure forcontributions received during the comparable six-month period of 1999 and represented approximately a25% increase over the contributions received duringthe same period of the two preceding years.

We encourage the committees of the College and theFellows individually to continue to generate worthwhilegrant opportunities for the Foundation. Grant applica-tion forms may be obtained from the ACTEC office.


This report, which is a regular feature of ACTECNotes,focuses on significant recent court decisionsand rules, legislative enactments and IRS develop-ments bearing on attorney compensation in the trustand estate practice. The report is heavily dependenton the willingness of all the Fellows to furnish materi-al that they think would be suitable for inclusion.Please send Spotlight’s compiling editor a brief write-up (as little as one paragraph will do) about a recentcase, rule, statute or ruling which you believe is eitherimportant in the jurisdiction in question or of wide-spread interest.

MICHIGANJames H. LoPrete, Bloomfield Hills

Personal Representative/Attorney Allowed to SetOff Amount of Surcharge Against His Attor ney’sFee; Surcharge Claim Allowed Against PersonalRepresentative for Fees Charged by Attor neys forInter ested Parties in Removal Action

Estate of Laverty, No. 207040 (Mich. Ct. App.June 18,1999),on appeal from Eaton County ProbateCourt, involved the surcharge of a removed personalrepresentative who had served as his own attorney.The probate court had entered an award of $44,000against him as personal representative which he wasallowed to set off against his attorney’s fee. The per-sonal representative/attorney had challenged certainactions of his successor as personal representative, thecosts of which were part of the surcharge awardagainst him ($7,080 fees and $206 costs). In addition,he was surcharged $3,000 for expert witness fees and$17,500 for attorneys’ fees incurred by interested par-ties in the action to remove him. These amounts wereless than the amounts requested by the expert witnessand the interested parties’ attorneys. The Court ofAppeals upheld the surcharge stating that the awardwas within the probate court’s discretion. It furtherheld that the personal representative, who was not abeneficiary, had no standing to challenge the acts ofhis successor, even though he was being surchargedfor the fees paid to his successor. However, the appel-late court reversed the award of his attorney’s fee,holding that because he had been surcharged theamount was not reasonable, and remanded the case todetermine a reasonable attorney’s fee.

This case is the first where a Michigan court hasheld that fees paid to attorneys for interested partiesand to an expert witness in a removal proceeding aresurchargable against a fiduciary/attorney. It is alsothe first Michigan decision holding that when oneperson serves as fiduciary and attorney, he is entitledto set off his fee as attorney against the amount of thesurcharge resulting from his actions as personal rep-resentative. While the outcome is equitable the deci-sion blurs the line between the separate fees payableto one individual who serves in the dual capacities ofattorney/fiduciary.

NEW JERSEYRodney N. Houghton,Newark

Indi viduals Seeking to Establish Status asBeneficiar ies of Trust Denied Counsel Fees;Dissenting Trustee’s Attor neys Awarded Fee fr om Trust

In New Jersey, as in most jurisdictions,the basicrule is that litigants pay their own attorneys’ fees. Onerecognized exception allows litigants to recover feeswhen their individual efforts benefit all who have aninterest in a trust fund before the court. The rationaleis that the benefit to all should “carry with it a propercharge to all.” As a corollary, parties who seek to fur-ther their own interests may not recover counsel feesfrom the fund, unless their activities assist in the prop-er administration of the fund.

In this case the Appellate Division affirmed thetrial court’s denial of counsel fees to four individu-als who claimed status as beneficiaries of a trust val-ued at $350,000,000,finding that they were simplyseeking to establish their beneficial interests in thetrust. Rejecting the claimants’position, the appel-late court stated:

[I]t is difficult to conceive of any casein which a litigant, suing to advancehis or her own interests,would not bedeemed to be furthering, in some wayand to some extent,a proper adminis-tration of the trust. The exception, inshort, would swallow the general rulethat litigants suing to protect theirown interests should normally pay

Spotlight On Attor neys’ Feescompiled by Martin A. Heckscher

Philadelphia,Pennsylvania


their own counsel fees.

Furthermore, any award of fees under the “properadministration” exception could be reversed only formistake or abuse of discretion because the trial courthas broad discretion to decide such a matter based onthe facts presented.

On another issue the Appellate Division approvedthe trial court’s award of $411,000 to the attorneyswho represented a dissenting individual trustee whenthe other trustees were represented by another firm andthe trial court found no duplication of services betweenthe two firms. Because the trustees were given broaddiscretionary authority to retain attorneys, the trialcourt’s inquiry was limited to determining whether thetrustees acted in good faith and for proper motive. Insuch circumstances,the appellate court noted, the trialcourt need not even examine the question of reason-ableness. In the Matter of The John Seward Johnson1961 Charitable Trust,(N.J. Super. Ct. App. Div. Aug.25,1999).

NEW YORKSanford J. Schlesinger, New York City

Fees Awarded to Attor neys for Trust andPartnerships Where No Actual or PotentialConflict Existed; Objectant Had No Standing toChallenge Dual Representation

In proceeding to fix attorneys’ fees pursuant toSurr. Ct. Proc. Act. §2110,the objectant,decedent’sson and co-executor and beneficiary of trusts under hiswill, objected to the payment of attorneys’ fees basedon the alleged breach of disciplinary rules relating toconflicts of interest. The son,as co-executor, hadbrought a discovery proceeding against certain part-nerships for the turnover of the estate’s share of part-nership assets to the trusts. The attorneys appeared forthe trustee and the partnerships,claiming that the part-nerships survived the decedent’s death and that thepartnership interests should be distributed to the trustunder his will. The son claimed that the trustee’s inter-ests in the discovery proceeding were adverse to thepartnerships’interests and that the attorneys’ represen-tation of both violated the disciplinary rules prohibit-ing multiple representation of divergent interests(DR5-105). The Surrogate’s Court stated that, whilerepresentation of clients with conflicting interests is abreach of the fiduciary duty of loyalty, representationof multiple interests is not banned per se. Further, thecourt stated that where adverse interests are notinvolved, counsel may represent multiple clients. Thecourt noted that having the right to choose an attorneyis especially important in the trust and estate field,where clients may be better served by having counsel

represent the family as a unit,including possible fami-ly controlled entities,in the context of estate planning,administration and even litigation, citing ACTEC,Commentaries on the Model Rules of ProfessionalConduct (2d Ed. 1995)and Ross,Guidance on EthicalIssues for the Estates and Trusts Lawyer, ALI-AB A(1999).

The court found that the son had no standing toraise the issue because the attorneys had never repre-sented him and thus could not breach any fiduciaryduty to him. The court then found that even if the sonhad standing, he failed to establish a conflict of inter-est,explaining that there are two types of conflict ofinterest,actual and potential. Where an actual conflictexists, dual representation is prohibited, even if theparties consent and no confidential exchanges arealleged. The court found no actual conflict, becausethe positions of the trustee and the partnerships in thediscovery proceeding were aligned. Nor did the courtfind any potential conflict of interest, in which casedual representation is ordinarily allowed, at least untilthe conflict becomes an actual one, provided full dis-closure is made. Finally, the court found no appear-ance of impropriety in the dual representation. Thecourt then fixed the fees based upon the usual factors(time spent,difficulties involved, nature of the ser-vices,amount involved, professional standing of coun-sel and results obtained) and allocated the amountequally between the trust and the partnerships. Matterof Kenneth Brandman,(Kings Co. Surr. Feinberg)N.Y.L.J. November 15,1999,p. 29,col. 3.

Payment of Brokerage Commission to Estate’sAttor ney Upon Sale of Townhouse DisallowedBecause of Attor ney’s Self-Dealing

The Surrogate’s Court granted summary judgmentin an accounting proceeding by sustaining a beneficia-ry’s objection to the payment of a broker’s commissionto the estate administrator’s attorney who also acted asbroker for the sale of the decedent’s townhouse, theestate’s primary asset. After the administrator listed theproperty with the attorney’s real estate agency, theagency procured a buyer to whom the property was soldfor $2,675,000. The objectant did not claim that theproperty was sold for less than its fair market value orthat the 6% commission exceeded a standard broker’scommission. Instead, the objectant alleged that thecommission should be disallowed because the attorneyengaged in an impermissible conflict of interest whenhe acted as broker for the sale of an estate asset. TheSurrogate’s Court held that, absent the client’s consentwith full knowledge of the circumstances,self-dealingby an attorney is strictly prohibited in New Yorkbecause of the conflict of interest inherent in such con-duct (citing 22 N.Y. Comp. Codes,R.&Regs. §§


1200.20 and 1200.23 and Nassau Bar Ethics Op. 92-18,N.Y.L.J. August 12,1992,p. 2,col. 1). The court stated:

The scope and nature of the duty of afiduciary’s attorney to beneficiaries ofan estate is far from clear in NewYork. The courts have not extended tobeneficiaries the full range of dutiesowed by an attorney to his or her fidu-ciary client, such as the duty of com-petence, the duty of confidentiality,and the duty of loyalty in the broadestsense. Such an extension might raisedifficult questions concerning lack ofprivity and the potential for conflict inthe attorney’s responsibilities asbetween the beneficiaries and thefiduciary client. In those cases involv-ing self-dealing by the attorney, how-ever, there is clear authority in NewYork and in other jurisdictions for theprinciple that a fiduciary’s attorneyhas a duty to the beneficiaries torefrain from such conduct.

The court noted that other jurisdictions haverecognized a duty of undivided loyalty extending froma fiduciary’s attorney to the beneficiaries where self-dealing is involved. Having found that the attorneyengaged in self-dealing without the consent of all ben-eficiaries, the court held that it need not inquirewhether he acted in bad faith or whether the estateincurred damages as a result of his conduct. Accord-ingly, the court directed the attorney to repay the bro-kerage commission to the estate. Matter of Mercy P.Kellogg, (N.Y. Co. Surr. Preminger) N.Y.L.J. Decem-ber 30,1999,p. 25,col. 4.

OHIOJeffry L. Weiler, Cleveland

Probate Court Has Power to Revise PreviouslyApproved Contingent Fee Agreement

The probate court approved a contingent fee agree-ment at the beginning of an attorney’s representationof an estate in a malpractice action against counselwho allegedly erred in handling certain property inter-ests for the decedent. After the lawsuit was settled, theprobate court reduced the fee payable to the attorneyunder the pre-approved agreement. The Court ofAppeals held that a probate court may revise a previ-ously approved contingency agreement after reviewingevidence concerning the reasonableness of the fee. Inthis case the court found that the probate court did notadequately review the facts related to the reasonable-ness of the attorney’s fee and remanded the case for it

to review more thoroughly the time and effort of theestate’s attorney and to enter judgment in light of thefacts and the final resolution of the malpractice suit.Estate of York, Nos. CA98-07-076 and CA98-07-082,1999 WL 138685 (Ohio Ct. App. 12th Dist.,WarrenCounty, Mar. 15,1999),cert. denied, 86 Ohio St. 3D1442 (1999).

Attor neys Not Permitted to Inter vene inHusband’s Probate Proceeding to Recover Fees forRepresenting Wife in Claims Against His Estate

When the husband shot his estranged wife, hercompanion and himself, the wife was the only sur-vivor. After the wife’s attorneys were successful inrecovering damages and asserting other claims againstthe husband’s estate they sought to intervene as partiesin the probate proceeding for the husband’s estate toobtain payment of their fees. The probate court held,and the Court of Appeals affirmed, that the wife’sattorneys could not intervene in the proceedingbecause the attorneys had no interest in the funds heldin the husband’s estate and the probate court had nojurisdiction to consider their claim for fees. The appel-late court noted that the attorneys’ recourse would beto file an attorney’s lien against any final judgmentobtained by the wife against the husband’s estate, filean attorney’s lien against any distributions due the wifefrom the husband’s estate and/or obtain a judgmentlien against the wife for their unpaid fees. Estate ofPiunno,No. 98-G-2153,1999 WL 722646 (Ohio Ct.App. 11th Dist.,Geauga County, Sept. 10,1999).

Attor ney’s Fees Allowed Under Bad FaithException to American Rule

The Court of Appeals affirmed the probate court’sdecision surcharging an estate’s former administratorfor attorney’s fees incurred in a prolonged estateadministration as a result of the former administratorknowingly presenting a fraudulently executed will tothe probate court to deprive lawful heirs of their inher-itance. Generally, attorney’s fees are not recoverableagainst an adverse party under the American Rule.However, in this case fees were awarded under anexception which permits recovery when the losingparty acted in bad faith. Estate of Minella,No. C-980413,1999 WL 354336 (Ohio Ct. App. 1st Dist.,Hamilton County, June 4,1999),cert. denied, 87 OhioSt. 3d 1417 (1999).

Reduction Ordered in Attor ney’s Fee forAttor ney/Executor; Practice of Attor ney Servingin Dual Capacities Discouraged

An attorney executor sought separate executor’sand attorney’s fees with an invoice itemizing his workand valuing his time at $150 per hour. However, the


invoice did not separately itemize whether the variousitems were done as executor or as attorney. After ahearing at which the attorney testified in support of hisclaim, the probate court analyzed the itemization,allocated the services between those provided as attor-ney and executor, awarded a statutory executor’s feeand reduced the attorney’s fee because some of theservices billed in that capacity related to services per-formed as executor. The probate court noted thatalthough an attorney may act as both fiduciary andattorney for an estate, “such practice is discouraged bythe American Bar Association and the Ohio courts dueto concerns about conflicts of interests.” The attorney,who bore the burden of justifying the reasonablenessof the fee he had claimed, failed to meet that burden.

The Court of Appeals affirmed the probate court’sreduction of the attorney’s fee after making one nomi-nal adjustment. In its opinion the court analyzed atsome length the principles which apply in awardingfees to an attorney who also serves as the executor,observing that “it must be determined what work wasperformed as legal services and what work concernednon-legal matters which would not necessarily requirethe expertise of an attorney.” Further, the court provid-ed a list of an executor’s “numerous” duties separatefrom those of an attorney. The court explained thatwhile many of an executor’s duties may require the ser-vices of an attorney, “the practice of an executor alsoacting as the estate’s attorney is discouraged,” except ifthe relationship would provide “ ‘a useful service’,”such as in instances where there is a “f amiliaritybetween the estate and the attorney.” In re Estate ofDaily, No. CA99-03-011,1999 WL 988810 (Ohio Ct.App. 12th Dist.,Madison County, Nov. 1,1999).

PENNSYLVANIAKaren A. Fahrner, Philadelphia

Attor ney/Executor Directed to Refund to EstateUndisclosed Referral Fee Paid by Other CounselBecause Attor ney/Executor’s Acceptance of FeeViolated Rule Against Self-Dealing

In Harrison Estate, 19 Fiduc. Rep. 2d 89 (O.Ct.Montg. Co. 1999); aff ’d en banc, 19 Fiduc. Rep. 2d226 (O.Ct. Montg. Co. 1999); aff ’d Pa. Super, Nos.1414,1579 E.D. Alloc. (Jan. 24,2000),a case of firstimpression, the Orphans’ Court held that it wasimproper for an executor/attorney’s law firm to acceptan “undisclosed”referral fee paid by another law firmwhich handled the estate administration. The courtdirected the executor/attorney to pay the $66,320referral fee to the estate with simple interest at thelegal rate calculated from the date he received the fee.

Although the decision also resolved questionsabout the executor’s commission,the court’s focuswas on what it considered to be the “novel question”of whether an executor/attorney may refer an estate“to outside counsel for administration and allow hisown law firm to be paid a referral fee without disclos-ing the arrangement to the beneficiaries.” The courtacknowledged that the administration of the estate,which exceeded $3,000,000 in value, was long andcomplicated. The executor/attorney did not disclosethe referral fee to the beneficiaries until their attorneystumbled on it by happenstance and started askingquestions. The court deemed the arrangement to be anact of self-dealing, albeit indirect, in violation of theexecutor/attorney’s duty of loyalty. While the courtexpressly found no fraud or bad faith, it stated that thisfactor was immaterial in a case of self-dealing. Final-ly, the court specifically declined to disallow the attor-ney’s commission as executor as an “unduly harsh[remedy] in light of the duration and complicatednature of the administration of the estate,” despite thebeneficiaries’ contention that the executor/attorneywould not be adequately punished for self-dealing.

Although the Orphans’Court noted that it neednot decide whether an executor or his counsel shouldinform the beneficiaries that a fee will be divided withanother attorney, it suggested that the executor/attor-ney would be wise to do so. In this connection,thecourt recognized that it is clear under Pew Trust, 16Fiduc. Rep. 2d 73 (O. Ct. Montg. Co. 1995),that whilethe beneficiaries of a Pennsylvania estate are notclients of the fiduciary’s attorney, counsel for the fidu-ciary “is charged with certain joint, derivative or sec-ondary duties and obligations to the beneficiaries.”

On appeal by the executor, the Superior Courtaffirmed, reasoning that the attorney/executor engagedin prohibited self-dealing, that the rule against self-dealing is inflexible and not dependent on the consid-eration paid and the “honesty of intent”and that afinding of self-dealing need not be premised on ashowing of loss to the estate. The court’s opinionemphasized that because the referral fee accepted bythe executor/attorney was calculated on a percentagebasis,“the greater the amounts charged, the greater thepotential referral fee.” In such an arrangement theconflict of interest “is obvious.” The court also reject-ed the executor’s argument that because the referralfee did not affect the fee rate charged by counsel to theestate, sanctions were not warranted. Lastly, the Supe-rior Court rejected the executor’s contention that sanc-tions should only be entered prospectively because noother Pennsylvania cases had proscribed acceptance ofreferral fees by an attorney/executor.


“Never do anything yourself that others can do foryou.” —Agatha Christie

“T here is no point in paying other people to screwthings up when you can easily screw them up yourselffor far less money.” —Dave Barry

Agatha Christie and Dave Barry notwithstanding,the do-it-yourself approach to Web site developmenthas much to be said for it. Software tools availabletoday make Web development almost as easy as wordprocessing. Doing it yourself allows you to maintainfull control over your firm’s Web site. And being yourown Webmaster can be an enjoyable experience. Thiscolumn offers some pointers intended to make yourWeb publishing journey a productive and pleasant one.

PLANNING YOUR SITENo ACTEC Fellow would dream of sitting down

to draft a will or trust without first having reviewed thefacts and having examined in depth the client’s goalsand objectives. As Covey (Stephen R. Covey, that is,not Richard) would say, you need to “begin with theend in mind.” Thus,your foray into the Web shouldbegin with a series of questions.

Who is the audience?Early in the process,youshould identify your primary target audience. Are youtrying to reach potential clients? Professionals whomight refer clients to your firm? Both?

What is the message? As obvious as it mayseem,you need to give some thought to the image thatyou want to convey. For example:

• Do you want to limit the information to thetrusts & estates field or cover other areas oflaw as well?

• Will y ou put information about fees on thesite?

• How formal or informal will your presenta-tion be?

How much of the content is already written? Ifyour firm currently publishes brochures,newsletters,press releases or similar communications,you have ahead start. These are natural candidates for publica-tion on the Web. Presumably, they reflect decisionsyou have already made about the image of the firm.

How much money? Lack of cash never kept any-one from publishing on the World Wide Web. Assum-ing you already have an Internet connection,the costcan be as little as zero or as much as you want to spendon bells and whistles.

How much time? More important than the cashbudget is the allocation of time to the task of creatingand maintaining the site. Many Web sites appear in ablaze of glory, then die a slow, agonizing death fromneglect. To keep people coming (and coming back), youneed to update the site often,and let people know it.

PUTTING IT TOGETHEROnce you’ve made the basic decisions,the fastest

and easiest way to get up and running is to use one ofthe free template-based hosting services. The best ofthese is Findlaw Office, on the Web at http://office.findlaw.com/firms.html. By filling in a series of forms,you can create a basic law firm Web site containing ahome page, separate pages with biographical informa-tion about each attorney, a list of practice areas,andcontact information for the firm. The contact page con-tains a link enabling Web surfers to view a map show-ing your office location and obtain driving directions.Findlaw hosts your pages on its servers for free. Whilewriting this column,I created a Findlaw site for myfirm, linking to my existing Web site, in about 20 min-utes. You can see the results at http://firms.findlaw.com/demaio.

Another free hosting service is LawGuru.com.LawGuru is similar in concept to Findlaw, but is not asrefined, and lacks the maps,directions and some otherkey features. Each site includes banner advertisingplaced by LawGuru.

Also in the template category, but not free, isSchumacher Publishing’s estateplanning.com. UnlikeFindlaw or LawGuru, Schumacher provides content.Articles, slide shows and an estate tax calculator arepart of the Estate Planning Learning Center that Schu-macher licenses to its customers. If you want your siteto stand out from the crowd, you can supplement theLearning Center with your own material. Schumach-er’s current promotional material offers to waive their$1,900 setup fee and host your site for $90 per month.

If you want to have more control over the look and

ACTech Talk:Getting Your Fir m on the Web—

And Getting NoticedBy Andrew J. DeMaio,Matawan,New Jersey

Robert B. Fleming, Tucson,Arizona


feel of your site without spending money on Web host-ing, your Internet service provider (ISP) may be theanswer. Most ISPs offer modest amounts of Webspace for free or at a nominal cost. You can designyour own pages and modify them at will. One draw-back is that the URL,or Web address,of your site willbear the name of the service provider (e.g.,http://members.aol.com/yourfirm). Thus, if youswitch to a different service provider, the address ofyour Web site changes.

To create a permanent online presence on the Web,you’ll need to obtain a domain name for the firm andarrange to place your pages on the server of a Webhosting service. The domain name (e.g., www.your-firm.com) remains with the firm even if you move to adifferent Web host. Thus you can safely promote it infirm communications. Most Web hosting servicesoffer a greater number of features,more reliable ser-vice and better support than ISPs that provide hostingas a sideline. Good quality Web hosting can be foundfor as little as $15 per month. A recent issue of PCMagazine (http://www.zdnet.com/pcmag/) rates Webhosting services.

ADDING FEATURESHere are a few features you may want to add to

your site.Last update notice. The home page should

advise visitors when the site was last updated. Youmay even want to include a page that describes recentchanges,so that frequent visitors know where to lookfor new material.

Search engine. If you have articles or other sig-nificant content,readers should be given the means tosearch the site for particular words or phrases. Thereare a couple of ways to place a search form on yourpages. The first is to install a script or program on thehost computer. As mentioned above, this feature isautomatically included with a Findlaw site. SomeISPs and most Web hosts include a search engine at noextra charge. Depending on the method used and thelevel of tech support provided, however, the installa-tion and maintenance can be tricky.

An easier alternative is Atomz.com Search. AtAtomz.com (www.atomz.com),you create a searchform on your site by adding a few lines of html codeto one or more pages. The Atomz.com computerthen crawls your site and creates a custom index thatis used whenever a visitor to your site performs asearch. Although the actual search work is done onthe Atomz.com servers, most visitors won’t notice.You can customize the results page to contain yourlogo and to match the look and feel of your site.Atomz.com is fast. And it’s free for sites with up to500 pages.

E-mail notif ication. A visitor who likes what hesees on your site may want to come back for a futurevisit. He may even bookmark the site or add it to hisfavorites list. But,despite the best of intentions,thechances of that person coming back without someprompting are pretty slim. It’s a good idea to offer vis-itors the chance to sign up to receive notice whenmaterial is added to the site in the future. An e-mailnotification list offers a simple and effective means ofpromoting repeat visits.

ATTRACTING VISIT ORSContent. You’ve heard it before: content is king.

The simple fact is that providing information – rele-vant, helpful information – is the best way to attractvisitors to your site and to keep them coming back.

Other fir m communications. The URL of thefirm’s Web site should appear in letterhead, businesscards,brochures,advertisements and other communi-cations from the firm. Some local phone companiespermit the publication of a Web address in a whitepages listing at little or no cost. E-mail signatures onmessages posted to listserv discussions help to pro-mote the site among professionals. And don’t forget tomention the site to clients in conferences and tele-phone calls.

Web directories and link lists. You’ll want to belisted in directories of estate planning links,such asthe Estate Planning Links Web Site (www.estateplan-ninglinks.com) and the Probate Attorney List(http://www.probateattorneylist.com/). Write to theauthors and ask to be added. General directories oflawyers, such as Martindale-Hubbell’s Lawyer Loca-tor (www.lawyers.com) and West Legal Directory(www.lawoffice.com) should also be updated toinclude the Web site URL.

Search engines. You can submit your URL indi-vidually to search engines such as Yahoo,AltaVista,Hotbot,Excite and others, or you can use one of themany site submission utilities offered on the Web.Two examples of free services are Free Submit(http://www.worldmachine.com/freesubmit/) andSpunkyworld Internet (http://www.spunkyworld.com/cgi-bin/submit/submit.cgi).

Being listed in the search engines is only half thebattle. A typical search for a common phrase like“estate planning”will r eturn hundreds if not thousandsof Web sites. You want your site to be as high as possi-ble on the list. Obtaining a favorable search engineranking has become a science (and has spawned a cot-tage industry). Although the mechanics of searchengine placement are beyond the scope of this column,here are some resources on the subject:

• Search Engine Secrets (http://www.netcapital.net/resources/search.htm)


• Submit It Search Engine Tips (http://www.submit-it.com/subopt.htm)

• Bruce Clay URL Ranking Methodology (http://www.bruceclay.com/web_rank.htm)

• Web Page Promotion Secrets (http://www.supersoft-solutions.com/notenuf.html)

JUDGING THE RESULTSMost hosting services provide access to log files

and graphical usage statistics to help you measure thenumber of visits your site is receiving. Another optionis Site Meter (www.sitemeter.com),a free hit countingservice that also provides usage statistics.

After your site has been up and running for awhile, other sites will link to it. You can identify thosesites by looking at the “referring URL” portion of your

usage log, and by searching the Web for your site’sURL, using the major search engines.

However, perhaps the best way to judge the popu-larity of your Web site is by reading your e-mail. Ifyou set up an e-mail notification list as suggested ear-lier in this column,you have an idea how many peopleare impressed enough to sign up. Their e-mail address-es often reveal whether they are lawyers or other pro-fessionals,or home users.

If all goes well, the e-mail link on your site willproduce plenty of inquiries from potential clients. Apopular Web site will produce plenty of junk mailand requests for free legal advice. But with increas-ing frequency, well-heeled clients willing to pay forhigh quality legal services are seeking counsel onthe Web.


The following case summaries are a project of theConstruction and Instruction Subcommittee of theFiduciary Litigation Committee. The project is intend-ed to update Fellows regarding cases in the instructionand construction area. The committee invites all Fel-lows to furnish material that would be suitable forinclusion in the column. The material may be sent toany member of the subcommittee.*

NEW YORKArlene Harris, New York City

Construction—Scrivener’s ErrorThe decedent’s will gave a fee simple in real prop-

erty to one daughter (Catherine) and the next sentenceof the will directed that the decedent’s other daughter(Margaret) have a right to reside in and use the proper-ty, and if she waived such right, directed that the prop-erty be sold with the proceeds distributed one-half todaughter Catherine and one-half to Margaret’s twoinfant children. The court found the provisions of thewill to be ambiguous. The court stated that the onlything that is certain is that the decedent intended togive Margaret a life estate in the premises. What isunclear is what remainder interest was intended forCatherine—the entire fee as indicated by sentence oneor one-half of the net sales proceeds as indicated bysentence three. The court looked to extrinsic evidenceto aid in discovering decedent’s intent which is appro-priate when there is an ambiguity in the language ofthe will. At the hearing, the attorney draftsman waspermitted to testify and testified that the decedentnever told him that he wanted Catherine to receive thefee, but rather that he used a model will from his com-puter and made a mistake in failing to edit the first sen-tence. The court stated that it is well aware that thedisregarding or excision of a portion of a will is a des-perate remedy and should only be used as a last resortwhen all efforts to reconcile the inconsistency by con-struction have failed. The court found, however, an

admission of scrivener’s error. The court thus foundthat after the termination of Margaret’s life estate,Catherine and the infants will share the remainderinterest in the proportions indicated. Matter of RobertFlorio, NYLJ October 12,1999,p. 27,col. 6 (KingsCo. Surr. Feinberg).

Construction—Gift by ImplicationThe decedent’s son died four months before the

decedent. The decedent was survived by his wife, anadult daughter and three infant grandchildren, theissue of his predeceased son. The will provided that ifa child dies after a separate share has been set apartfor him but before the entire share has been distrib-uted to him,the trustees shall,at the death of suchchild, distribute such share as such child shall appointby will or if he fails to so appoint, to such child’sissue. The will did not take into account the situationthat did occur, to wit: the death of the child prior tothe testator. The court noted that while the will doesprovide for an alternate disposition for the son’sbequest in the event that he died after his trust hasbeen established but before attaining age 40,the willdoes not provide for the eventuality which in factoccurred: the son dying before his father. The courtstated that the anti-lapse statute, EPTL 3-3-3,pro-vides that a bequest to issue or sibling will not lapseby virtue of the death of the beneficiary before the tes-tator, but will vest in the beneficiary’s issue, unlessthe will provides otherwise. The court found that thewill does provide otherwise as it provides that theremainder is to be distributed in accordance with thedirection in the beneficiary’s will or as provided in thedecedent’s will. The court stated the issue is whetherthe ineffective bequest to the son is to be distributedas in intestacy or whether the court may imply a giftby implication to his issue. Relying on Matter ofBieley (91 NY2d 520),the court found that this is aproper case for finding of a gift by implication. Thedecedent’s will expresses a clear purpose to treat hischildren equally and the issue of a predeceased childshould succeed to the interest of their deceased par-ent. Matter of Joseph Ambrosio,NYLJ November 2,1999,p. 35,col. 1 (Nassau Col Surr. Radigan).

The will provided for the division of the proceedsof sale of real property, but not for the disposition of

New Developments in Construction and Instruction Case Law

compiled by Arlene HarrisNew York, New York

*Construction and Instruction Subcommittee:Arlene Harris,Chair, Arthur H. Bayern, Clif ford S. Brown, Ann Barry Burns,Genevieve L. Fraiman,John F. Meck, Karen M. Moore, Edward V.Smith,III, Joseph L. Wyatt, Jr., and Peter Matwiczyk.


the remainder at the termination of a life estate by thedeath of the decedent’s sister, which is what occurred.The will contained no residuary clause. The courtheld that where a will bequeaths the proceeds of a saleof real property and no sale takes place, the court mayfind a gift by implication of the real property to thenamed beneficiaries. The court carried the gift byimplication doctrine even further, finding that thedecedent did not intend her sister to share in theremainder upon the termination of the sister’s lifeestate by the sister’s death even though the sisterwould have shared in the sales proceeds if the proper-ty had been sold while she was alive. Matter of JuliePaskalig, NYLJ January 4, 2000,p. 26,col. 6 (NassauCo. Surr. Radigan).

PENNSYLVANIAJohn F. Meck, Pittsburgh

Tax Clauses Continue to Cause ProblemsIn two recent decisions the Orphans’Courts in

Pennsylvania dealt with tax clauses.In Hartzell Estate the Orphans’Court was asked

to interpret a will containing conflicting tax clauses.Following sixteen paragraphs of specific devises thenext paragraph of the will contained a tax clausedirecting that each devisee “shall bear his or her pro-portionate share of the estate, inheritance or otherdeath taxes attributed to his or her distributive shareof my estate.” This tax clause was followed by aresiduary bequest and then a second tax clause direct-ing that all taxes “shall be paid from my residuaryestate.” In a brief opinion,the court resolved the con-flict by refusing to enforce either tax clause. Rather,the court applied the Pennsylvania statutory schemewhich directs payment out of the residuary estate ofall death taxes on probate assets. The court held thatthe statutory provisions apply unless the “testator hasunambiguously expressed a contrary intent in hiswill.” With this as its guide, the court concluded thatthe “will contains two polar ‘pay-tax’ clauses. Con-sequently the manner of apportioning death taxes inthe matter at bar defaults to Pennsylvania’s statutoryscheme.” Hartzell Estate, No. 2 19 Fid. Rep. 2d 470,(Chester County 1999).

In another decision Judge Drayer of the Mont-gomery County Orphans’Court interpreted the follow-ing tax clause:

I hereby direct that all estate, inheri-tance and succession taxes,and inter-est and penalties thereon,as well asfuneral expenses,debts and any otherdeductible administration expenses,with respect to the property forming

my gross estate for tax purposes,whether or not it passes under thiswill, shall be paid out of the principalof my general testamentary estate.

As you might surmise, this tax clause caused a dis-pute between the testamentary beneficiaries and thebeneficiaries of jointly owned assets and designatedunder an IRA as to the source of payment of $67,000of death taxes on the non-probate assets. Not surpris-ingly, the court had little difficulty in holding that thetax clause required the $67,000 of taxes on the non-probate assets to paid out of the probate estate, findinga clear intent to override the statutory scheme thatotherwise generally requires a “transferee” to bearsuch death tax.

The court pointed out that the parties did notseek a decision and therefore the court was notdeciding how “the death taxes to be paid”from thegeneral testamentary estate are “to be apportionedamong the various beneficiaries” under the will.The non-probate beneficiaries, who did not takeanything under the will,argued that because of thelack of clarity of the phrase, general testamentaryestate, the tax clause should not be applied at all.The court discussed the phrase general testamentaryestate and reached the common sense result that thisreferred to probate assets. The court also held thatthere is “no reason why a decedent cannot directthat all taxes on probate and non-probate propertybe paid from the probate estate without directinghow the taxes shall be apportioned among the bene-ficiaries of the probate estate.”

Despite indicating it was not answering thequestion,and the court’s order following the opinionso stated, the court referred to another Pennsylvaniadecision where the phrase general testamentaryestate was held not to be the equivalent to the resid-uary estate. One would think that additional lan-guage, such as directing the taxes to be paid out ofmy general testamentary estate “in the same manneras an administrative espense,” i.e. off the top,wouldovercome this difficulty. The court closed its opin-ion by philosophizing with regard to problemscaused by the unwitting use of tax clauses: “It issuggested that on many, if not most,occasions thatwould not be what the testator intended if seriousconsideration was given to the tax clause. Somepractitioners with some justification suggests thatunless the scrivener is fully aware of the impact of abroad tax clause, or any tax clause for that matter, notax clause should be used,” but rather the scrivenershould rely on the comprehensive Pennsylvaniastatutes. Langendorf Estate, 19 Fid. Rep. 2d, 483(Montgomery County 1999).


TEXASArthur Bayern, San Antonio

Construction of the Words “Real Property and Oiland Gas Properties…”

Decedent’s will left “the real property and oil andgas properties…located in Frio County, Texas andPrue Road in San Antonio, Texas” to her niece andnephew (Langs) and then the residue of her estate tothe San Antonio Area Foundation (SAAF). Therewas an ongoing real estate development on PrueRoad. SAAF requested the court to grant a summaryjudgment that the words real property did not includenotes and profits generated in the course of develop-ing the Prue Road property. The Langs filed affi-davits alleging that the decedent intended by her spe-cific bequest to devise the land, the notes and theprofits generated in the course of developing theproperty called “Prue Road.” The probate court

granted the motion for summary judgment and ruledthat the notes,the collections from those notes,andprofit from the development passed to SAAF as theresiduary beneficiary.

The appellate court held that the probate courterred in granting the summary judgment. In so doing,it ruled that even when all agree that the will is unam-biguous,a court may always receive and consider evi-dence concerning the situation of the testator, the cir-cumstances existing when the will was executed, andother material facts to ascertain the meaning of thewords used in the will. The court stated that the extrin-sic evidence offered by the Langs did not contradictthe language in the will, but supported a reasonableconstruction of the intent of the decedent,and shouldtherefore be considered. Lang v. San Antonio AreaFoundation, 1999 Tex. App. LEXIS 6301,Docket No.04-98-00963-CV (Tex. App. - San Antonio,1999,peti-tion filed).


TABLE OF CONTENTS

I. PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . .303

II. THE PLAIN MEANING R ULE—HIST ORICAPPLICATION . . . . . . . . . . . . . . . . . . . . . . . .305

III. THE PLAIN MEANING R ULE (THEEFFECT OF FORMALISTIC INTERPRET A-TION OF LANGU AGE) . . . . . . . . . . . . . . . .305

IV. CONSEQUENCE OF THE REQUIREMENTTHAT PROVISIONS IN A WILL MUST BEAMBIGUOUS BEFORE EXTRINSIC EVI -DENCE MAY BE ADMITTED EVIDENCINGTHE TESTATOR’S INTENT . . . . . . . . . . . .307

V. EROSION OF THE RULE THAT A WILLMUST BE AMBIGUOUS BEFORE EXTRIN -SIC EVIDENCE RELA TING TO THE WILLMAY BE INTRODUCED—EXCEPTIONS TOTHE NO REFORMATION RULE . . . . . . . .311A. Lack of Testamentary Intent . . . . . . . . . . . .311

* Copyright 2000. Clifton B. Kruse, Jr.. All r ights reserved. The author’s appreciation is extended to Ms. Nancy Smelser,

Legal Assistant,for her work in typing (and retyping) this manu-script and for her helpful suggestions that make this document bet-ter than it otherwise would have been.

Appreciation is further extended to Lawrence W. Waggoner,University of Michigan Law School,Ann Arbor, Michigan,for hissignificant contribution to the literature of our profession,whoserved as Reporter for the American Law Institute, Restatement ofthe Law Third, Property (Wills and Other ... Donative Transfers),toJohn H. Langbein,Yale Law School, New Haven, Connecticut,Associate Reporter. (American Law Institute publishers, St. Paul,Minn., 1999),and to ACTEC Fellow, Edward Halbach, Reporter,Restatement of the Law—Trusts,Tentative Drafts Nos. 1 and 2(1996,1999).

Reformation of Wills: The Implication ofRestatement (Thir d) of Property (Donative

Transfers) on Flawed but Unambiguous Testaments

by Clifton B. Kruse, Jr.*Colorado Springs,Colorado

B. Construction (Reformation) Prior to Probate . . . . . . . . . . . . . . . . . . . . . . . . . . .312

C. Lack of Testator’s Knowledge of Will’ s Contents When Executed . . . . . . . . . . . . .312

D. The Personal Usage Exception . . . . . . . . .313E. Corrections of Punctuation

and Grammar . . . . . . . . . . . . . . . . . . . . . . .314F. Corrections of the Detail

of Identification . . . . . . . . . . . . . . . . . . . . .314G. Corrections of False Descriptions

(Falsa Demonstratic Non Nocet) . . . . . . . .315H. Dependent Relative Revocation . . . . . . . .315I. Presumed Intent . . . . . . . . . . . . . . . . . . . . .315J. Pretermission . . . . . . . . . . . . . . . . . . . . . . .317K. Reformation to Correct a Violation

of the Rule Against Perpetuities . . . . . . . .317L. Correction of Innocent Error . . . . . . . . . . .317M. Correction of Error Under the Uniform

Probate Code (UPC I and II) . . . . . . . . . . .319N. Corrections to Gain Tax Benefits . . . . . . . .320O. Correction of Error by “Construing”

Not Reforming . . . . . . . . . . . . . . . . . . . .321

VI. CORRECTION OF DRAFTING ERR ORS:REFORMATION OF WILLS—THEINTRODUCTION OF RATIONALISM . .321

VII. REFORMATION AS EXPRESSED INRESTATEMENT 3d—PROPERTY (DONATIVE TRANSFERS) . . . . . . . . . . .323

VIII. MODIFICA TION OF WILLS TO ACHIEVETHE TESTATOR’S PROBABLE TAXOBJECTIVES . . . . . . . . . . . . . . . . . . . . . . .326

IX. REFORMATION OF WILLS RELA TINGTO ADMINISTRA TIVE AS OPPOSED TODISPOSITIVE PROVISIONS . . . . . . . . . .329

X. PRIVATE REFORMATION . . . . . . . . . . .330

XI. REFORMATION OF TRUSTS BY CONSOLIDATION AND DIVISION . . . .333


I. PREFACE.

It’ s dangerous work that we do,communicatingclients’ directions relating to the transmission of theirwealth to others. It cost John Goodin,a Tennesseeattorney, his life.

Disputed Will ApparentlyLed Man to Double Killing

Johnson City, Tenn. (AssociatedPress)—A single word apparentlycost 81-year old lawyer John Goodinhis life.

Goodin left out the word “stock”from a woman’s Will, and her ex-hus-band, Walter Shell, believed thatomission cost him up to $100,000.

On Thursday, police say anenraged Shell went to Goodin’s lawoffice and shot him to death alongwith an insurance agent who hap-pened to be there at the time. Shellwas charged with murder and jailedwithout bail.

Shell,71,was known as a strangecharacter around his neighborhood,where he had two surveillance cam-eras around his modest home and wasoften seen muttering to himself. Theshooting was not the first time he hadconfronted Goodin over the Will.

“He’d been in there a number oftimes,acting upset and belligerent,”said Fred Lance, a lawyer who some-times worked with Goodin. Goodin“always tried to calm him down.”

Shell and his ex-wif e, KatieRoselle Shell,had been divorcedabout a decade but remained friendly.They lived close to each other, and hehelped care for her after she wasstricken with cancer.

Five days before Katie Shell diedlast November, Goodin visited her inthe hospital and revised her Will,removing Shell as executor. She

apparently wanted a third party tohandle her estate because of problemsbetween her ex-husband and their twodaughters,Lance said.

Shell and his daughters equallydivided $12,000 from an insurancepolicy. Katie Shell also left him a carand lawn mower.

The revised Will also stipulatedShell was to receive “all monies”afterthe legal costs for the estate werepaid. His daughters challenged theWill, claiming that since the word“stock” was not included, Shell wasnot entitled to any of the $100,000 inshares their mother owned.

A judge agreed and gave thestock to the daughters.1

The formalistic rules imposed by the historicstatute of Wills and the Plain Meaning Rule limit evi-dence of a testator’s2 intent. This rule of evidence andits historic effect is described in Section One of thismanuscript, and, perhaps, illustrated in the death ofJohn Goodin.

What could the attorney have said to the court orwhat could he show the judge from his estate filewhich, no doubt,included the notes he took when theformer Ms. Walter Shell,the testator, the shooter’s ex-wife, consulted him.

Did he leave out the term “stock” or did hisclient, Katie Roselle Shell,not mention it,intendingit to pass to her children under her Will’ s residueclause, with no part of the securities intended to ben-efit her ex-husband? He was limited to a devise of aused car and a lawn mower, presumably used as well,and a portion of a small life insurance policy, andeven that gift was reduced by the Will’ s terms. Theinsurance proceeds were to be divided among herhusband and her daughters,however many daughtersthere might have been.

John Goodin couldn’t introduce his notes into evi-dence whether or not that helped or hurt his adversary.His former wife’s Will as written,with errors or error-less,would be all the judge could see and hear. Extrin-sic evidence3 violates the Plain Meaning Rule; itsealed her lawyer’s lips,and perhaps also his fate.

1 Associated Press article, published in the Gazette, ColoradoSprings,Colorado,March 20,1999,p. A-12.

2 Defined as an individual of either sex (in Uniform ProbateCode states). In Colorado,see§ 15-10-201 (55),C.R.S.

3 Extrinsic evidence is defined as originating from without

(outside the four corners of the Will itself; not intrinsic to the doc-ument; lying outside, not belonging to (the Will itself). See TheOxford Encyclopedic Dictionary, 3d edition,Oxford U. Press,(N.Y. 1996),p. 496.


The aspiration of Restatement of the Law Third,Property (Wills and Other…Donative Transfers)(“Restatement 3d” or “R. 3d—Property”) whenapplied, emphasizes the importance of donors’ intentover plain meaning. It allows extrinsic evidence to beheard in all donative documents,tested by the standardthat the evidence must be clear and convincing to avoidthe terms of the Will as written.

This article suggests that the extrinsic evidencerule, applied historically to Wills because of Will sign-ing formalities, (and nontestamentary documents inmany cases,as well), has frustrated testators’ intent byexcluding evidence altogether, denying remedies evenin cases where the error is demonstrable and obvious.4

Unintended beneficiaries are thereby gratuitouslyrewarded by the application of this evidentiary rule,and unjust enrichment follows because evidence of theintent of the testator can not be voiced, regardless of

how credible it may be.The fateful claim for the traditional exclusionary

rule suggests that “...it is wise to avoid entertainingclaims of disappointed persons [would-be legatees]...who may be able to make very plausible claims of mis-take after the testator is no longer able to refute them.” 5

This,of course, is the risk. R.3d—Property (Dona-tive Transfers), suggests,however, that extrinsic evi-dence must be heard if donors’ intent is not accuratelyreflected in the written instrument. Because clear andconvincing evidence is the standard by which suchevidence is tested, why should it be forbidden? If thepurpose of testators is to transmit their wealth as theyintended, and credible evidence discloses misstate-ment of intent in the document as drawn, the fatefulexpression wrongfully controls and the injury is com-pounded by an evidentiary rule that upholds the mis-statement of the testators’ purpose.

4 For the most part, complete written contracts free of ambi-guity will be enforced as written. In Colorado,see Denver Assn. ofEducation Office Personnel v. School District No. 1 in the City andCounty of Denver, 972 P.2d 1047 (Ct. App. 1998). Scrivener errorresulting in failure to embody the settlor’s intentions may bereformed to express the trust settlor’s intentions upon showing adecisive proof of mistake. See Loeser v. Talbot, 589 N.E.2d 301(Mass. 1992). In Groh v. Ballard, 965 S.W.2d 872 (Mo. App. W.D.1998),a deed containing an erroneous legal description was a uni-lateral mistake by the scrivener. In an action to reform the deed,relief was denied. The Missouri statute, “Chapter 461,” does notauthorize reformation absent fraud The donor’s intent is irrelevant“... even in the face of conclusive evidence of his intent.” Dis-cussed in ACTEC Notes,vol. 24, No. 2 (Fall 1998),p. 124. Forreformation of a trust,see Scott & Fratcher, The Law of Trusts,(4thed.), vol. IV, c. 10, “The Termination and Modification of theTrust,” p. 341 ff; § 333.4. Scott observes that “[t]he mistake maybe such as to justify reformation ....” See alsovol. 2, § 164.1 (4thed. 1987),which states in part: “As to any matter expressly coveredby the instrument,the provisions of the instrument,if unambigu-ous,determine the terms of the trust. In such a case extrinsic evi-dence in the absence of fraud or mistake is not admissible to varyor add to the terms of the instrument.... Not only where the trust iscreated by an instrument inter vivos but also where it is created byWill, evidence of the circumstances at the time of the execution ofthe instrument is admissible to determine the intention of the sett-lor as to matters not expressly and unequivocally covered by thetrust instrument. Among the circumstances existing at the time ofthe execution of the instrument that may be of importance in deter-mining the terms of the trust are the following: the situation of thesettlor, the beneficiaries,and the trustee, such as age, sex, compe-tence, station in life, financial circumstances,and their relations toeach other; the nature and value of the subject matter of the trust;the purposes for which the trust is created; the usages of business;the conditions under which the trust is to be administered; the for-mality or informality, the care or lack of care, [from] which anyinstrument containing the manifestation of the settlor’s intention isapparently drawn.... On the other hand, statements by the settlor as

to his intention are ordinarily not admissible, whether the trust iscreated by will or by an instrument inter vivos.... [but] [w]here thecreation of a trust is not evidenced by a written instrument andwhere the subject matter of the trust is not an interest in land andtherefore the Statute of Frauds requiring a written memorandum isinapplicable, the terms of the trust can be shown by evidence ofwords spoken by the settlor or by the conduct of the settlor, as wellas by the circumstances under which the trust was created. Theterms of the trust can be shown not only by extrinsic evidence relat-ing to the circumstances under which it was created but also by evi-dence of words spoken by the settlor or by the conduct of the sett-lor prior to or contemporaneously with the creation of the trust....The settlor’s words or conduct subsequent to the creation of thetrust,however, may be admissible in order to show what his inten-tion was at the time of the creation of the trust.... Moreover, thirdpersons may testify as to his conduct ... where this throws light onthe question of ... intention.... In many cases the court is ascertain-ing not what the settlor actually intended in regard to a particularmatter but what he would have intended if he had thought about thematter.... [C]ontingencies he did not contemplate, rather thanascertaining what he actually intended; [judges] are determiningwhat he probably would have intended with respect to a matter asto which he not only did not express but did not have any inten-tion.” (pp. 253-261).

In Allen v. Hall, 328 Or. 276 (Or. 1999),a case involving tor-tious interference with prospective inheritance, citing McGanty v.Staudenraus,321 Or. 532,535,901 P.2d 841 (Or. 1995),the courtheld that because a claim of tortious interference is a tort action,the testamentary intent rule which looks within the Will itself forevidence of a testator’s intent,need not be followed in the tort con-text. (Discussed in “New Developments in Construction andInstruction Case Law,” ACTEC Notes,vol. 25, No. 1 (Summer1999,pp. 23,25-26). See also The Law of Trusts and Trustees,§§45-51 (rev. 2nd ed. 1984); and Restatement of the Law - Trusts,Tentative Draft No. 1,(April 5, 1996),Edward Hallbach, reporter,§ 12,pp. 264-269; pp. 49-54,inter alia.

5 In re Gibbs’Est.,111 N.W.2d 413 (Wis. 1961),pp. 417-418.


PART ONE

II. THE PLAIN MEANING R ULE—HIST ORICAPPLICATION .Absent ambiguity, courts have historically not

allowed Wills to be reformed where error is alleged.6

The term “reformation” is used in Restatement—Prop-erty 3d, (Donative Transfers) when the instrumentunder consideration is unambiguous.7

This rule has been applied even in cases ofdemonstrable mistake,8 because courts have tradi-tionally deemed it wise “...to avoid entertainingclaims of disappointed persons who may be able tomake very plausible claims of mistake after the testa-tor is no longer able to refute them.” 9 Such justifica-tion seems senseless in many cases,however. Forexample, if a testator leaves property described as

4708 North 46th Street in his city to a devisee butowns no property at that location, but does own realestate at a nearby address,what harm, based upon thepolicy justification described in this paragraph, willoccur if the actual property description owned by thedecedent can be clearly demonstrated from the city’sland title records?10

III. THE PLAIN MEANING R ULE (THEEFFECT OF FORMALISTICINTERPRETATION OF LANGU AGE).11

A. If it is true that the paramount objective inconstruing a Will is to ascertain the intent of the testa-tor12 and extrinsic evidence is available to demonstratethat intent,what significant injury is avoided by disal-lowing extrinsic evidence of the defect (latent becauseit is not obvious from the Will itself)?13

6 ALI, Restatement of the Law [of] Property Third (DonativeTransfers), Tentative Draft No. 1,(March 28,1995). The text isauthorized and published by the American Law Institute, 4025Chestnut Street,Philadelphia,Pennsylvania 19104-3099,p. 115.Citations to the Restatement in this manuscript are to TentativeDraft No. 1. SeeRichard D. Hofstetter, “... Doctrine of ProbableIntent,” Rutgers L. Rev., infra n.123,discussing the more rigorousformal requirements to which Wills are subject,n.18,p. 575.

7 Id. And seeProf. Ronald C. Link,University of North Car-olina, “Selected Hot Topics I (Non-Tax),” ACTEC 1999 AnnualMeeting (March 4,1999),“The New Trust Law in the Making,” p.RCL 2,9.

8 In re Gibbs’ Est.,111 N.W.2d 413,417 (Wis. 1961). Seealso Knupp v. D.C.,578 A.2d 702 (D.C. Ct. App. 1990); McCauleyv. Alexander, 543 S.W.2d 699 (Civil Ct. App. of Texas,Waco),(1976).

9 Gibbs,id., pp. 417-418.10 Id. In Gibbs, the Wisconsin Supreme Court wrote, “It is

traditional doctrine that Wills must not be reformed even in thecase of demonstrable mistake (case citations omitted). This doc-trine doubtless rests upon policy reasons. The courts deem it wiseto avoid entertaining claims of disappointed persons who may beable to make very plausible claims of mistake after the testator isno longer able to refute them. Although the courts subscribe to aninflexible rule against reformation of a Will, it seems that they haveoften strained a point in matters of identification of property ofbeneficiaries in order to reach a desired result by way of construc-tion. (Case citations omitted.) (Gibbs, pp. 417-418). We con-clude, [the court announced],that details of identification, particu-larly such matters as middle initials,street addresses,and the like,which are highly susceptible to mistake, particularly in metropoli-tan areas,should not be accorded such sanctity as to frustrate anotherwise clearly demonstrable intent. Where such details of iden-tif ication are involved, courts should receive evidence tending toshow that a mistake has been made and should disregard the detailswhen the proof establishes to the highest degree of certainty [clear

and convincing evidence] that a mistake was, in fact, made.”(Gibbs,p. 418). To the same effect,see Stuesse v. Stuesse, Exrx.,377 S.W.2d 389 (Mo. 1964); 16 A.L.R. 3d 379.

11 By formalistic is meant “excessive adherence to prescribedforms [or theories].” Oxford Encyclopedic English Dictionary,(1996),p. 544. “Forma dat esse”(form gives being). Black’s LawDictionary, 6th ed., (1990),p. 652. The issue in Will interpretationis not what the testator intended to write, but what words did he orshe actually use; what did the testator say? See Hagaman v. Mor-gan,886 S.W.2d 398 (Tex. App. - Dallas 1994,error den.).

12 “The real question in each case is whether all the circum-stances so far as shown are such as to lead the court to believe thatin fact the Will does not actually express the voluntary purpose ofthe testator.” Matter of Estate of Robinson,644 P.2d 420,424(Kan. 1982). “[T]he ironic situation is that generally in a Will con-struction lawsuit, the courts [evidenced in] case law [appear] not atall concerned about the actual intent of the testator.... Courts[refer] to [such intent] as ‘presumed, speculative, [hypothetical] orconjecture.’ ” See Perfect Union Lodge No. 10 of San Antonio v.Interfirst Bank of San Antonio,748 S.W.2d 900 (Tex. 1988). Seealso Frost Nat’ l Bank of San Antonio v. Newton,554 S.W.2d 149(Tex. 1977); Wilkins v. Garza,693 S.W.2d 553 (Tex. App., SanAntonio, 1985,no writ); Moore v. Reed, 668 S.W.2d 847 (Tex.App. - El Paso,1986,writ ref’d n.r.e.). SeeDavid C. Bakutis,“General Principles of Will Construction,” Southwestern LegalFoundation Wills & Probate Institute, Dallas,Tex. (May 1999).Conflicting terms in a trust agreement will be construed in harmo-ny with the settlor’s intent. See Aycock Pontiac, Inc. v. Aycock, 355Ark. 456 (Ark. 1998) cited in ACTEC Notes,vol. 25,p. 23,(1999).

13 See Wilson v. First Florida Bank,498 So.2d 1289,1291(Fla. App. 2 Dist. 1986). Numerous cases affirm the rule iterated inWilson that “[t]he paramount objective in construing a Will is toascertain the intent of the testator” whether or not the ambiguity islatent (hidden) or patent (obvious) or whether the ambiguity is inthe execution of the Will or in its expression.


B. The exclusionary rule14—not allowing evi-dence that is extrinsic to the Will to be introduced toreform it results from the plain meaning rule. Thisrule provides that the plain meaning of the words usedin a Will cannot be disturbed.15 The rule is thejanizary, the sultan’s guard, protecting the assumedpurity of the testators’ words. Applied in Carroll v.Cave Hill Cemetery Co.,16 the court wrote: “[T]hewritten language of a Will is the best evidence of itsmeaning and the intention of the testator, and hencethe intentions of the testator must be gathered from thelanguage of the Will itself, (which, of course, includesany codicil or codicils) without the aid of extrinsic evi-dence [so long as the language] is unambiguous.” 17

Further, where the devise is clear and unequivocal,thestated reasons for the testamentary gift do not limit orrestrict it.18

Mahoney v. Grainger illustrates the application ofthe plain meaning rule.19 Helen Sullivan wrote the fol-lowing in the residuary clause of her last Will:

All the rest and residue of my estate...I give, demise (sic) and bequeath tomy heirs at law living at the time ofmy decease [sic],absolutely; to bedivided among them equally....20

“The sole heir at law of the testatrix at the time ofher death was her maternal aunt....She told her attor-

ney [that] she wanted to make a Will....[Regarding theresiduary the attorney asked, to] ‘whom do you wantto leave the rest of your property....Who are your near-est relations?’ [S]he replied, ‘I’ ve got about twenty-five first cousins ... let them share it equally.’ ” 21

Following the rigidity of the plain meaning rule,the court ruled “...that the words ‘heirs at law’ werewords in common use, susceptible of application toone or many; that when applied to the special circum-stances of this case that the testatrix had but one heir,notwithstanding the added words ‘to be dividedamong them equally, share and share alike,’ 22 that wasno latent ambiguity or equivocation in the Will itselfwhich would permit the introduction of the statementsof the testatrix [to the scrivener] to prove her testamen-tary intention....Where no doubt exists as to the prop-erty bequeathed or the identity of the beneficiary, thereis no room for extrinsic evidence; the Will must standas written.” 23

Dukeminier and Johanson in their fourth editionof Wills, Trusts and Estates,24 illustrate adherence tothe rule in Re Herlichka.25 Stanley Herlichka left hiswif e, Audrey, and their two children in 1956. Hethereafter co-habitated with Phyllis McKenna. Thisinformal union produced three children. Nine yearsafter leaving his wife, Audrey, whom he neverdivorced, he executed a Will stating, that ‘[I g ive] tomy wife, Phyllis Herlichka,all of my tangible person-al property.” Without further reference to her by

14 The Parole Evidence Rule also applies,excluding evidence.“This ... rule seeks to preserve integrity of written agreements byrefusing to permit [the alteration of the writing] by using contem-poraneous oral declarations. A final expression [found in the writ-ing itself] may not be varied or contradicted by evidence of anyprior written or oral [declaration] in the absence of fraud [or]duress.... This rule is applicable to Wills and trusts [as well as toother writings and agreements].” See Black’s Law Dictionary, 6thed. (1990),p. 1117.

15 Dukeminier and Johanson,Wills, Trusts & Estates,LittleBrown, 4th ed., (1990),c. 5, “Wills: Construction Problems,” § A,Admission of Extrinsic Evidence: Ambiguity, Mistake & Omis-sion,p. 319. See R.3d—Prop., § 12.1(d),p. 137,“plain meaningrule disapproved.” Extrinsic evidence of a drafter’s mistake, eventhough it is uncontradicted, is inadmissible in both construction ofWill cases and proceedings to admit a will to probate. See Conn.Junior Republic v. Sharon Hosp.,448 A.2d 190 (Conn. 1982). Seealso First Interstate Bank v. Young, 853 P.2d 1324 (Or. App. 1993).

16 Carroll v. Cave Hill Cemetery Co.,189 S.W.2d 186 (Ky.1916),cited in Dukeminier and Johanson,id., p. 320.

17 Id., p. 186; Dukeminier and Johanson,id., p. 320. Shouldthe presumption that the language used in the Will itself is the bestevidence of the testator’s intent go unchallenged? Is it not merelyevidence—but not necessaril y “the best”? Does it mask scrivenererror, testator misunderstanding or lack of comprehension ofterms used, such as “per capita” and not “per stirpes” or “chil-

dren” as opposed to “then living children”? See Re Estate ofChristensen,461 N.W.2d 469 (Iowa App. 1990). “When a testator‘executes’a codicil, the law presumes [that] the testator [hassigned] his or her entire Will ... the ‘whole’Will on the date of thecodicil [as opposed to the date of the original Will]. See Unitari-an Universalist Service v. Lebrecht, 670 S.W.2d 402 (Tex. App. -Corpus Christi, 1984,writ ref’d n.r.e.). See also Welch v. Straach,531 S.W.2d 319 (Tex. 1976). Other documents that are not part ofthe whole Will are not considered, even if they clearly express theintent of the testator, unless and until the court finds that the Willis ambiguous. See Davis v. Shanks,898 S.W.2d 285 (Tex. 1994).SeeBakutis,supra n.12.

18 See Estate of Bolinger, 943 P.2d 981 (Mont. 1981); dis-cussed in ACTEC Notes,vol. 24,No. 2 (Spring 1998),p. 270.

19 Mahoney v. Grainger, 186 N.E. 86 (Mass. 1933),discussedin Mary Louise Fellows,“In Search of Donative Intent,” 73 Iowa L.Rev., 611 (1988),p. 642,and cited in Waggoner et al.,Family Prop-erty Law, (Foundation Press),1997,p. 620.

20 Waggoner, id., p. 620.21 Id. pp. 620-621.22 Use of the plural word “heirs” does not prevent one individ-

ual from taking the entire devise. Id. p. 622. 23 Id. p. 621.24 Dukeminier & Johanson,supra n.15,p. 320.25 In re Herlichka,3 D.L.R. 3d 700,1 Ont. 724 (1969).


name, (his putative wife)26 nor to Audrey, his certif icat-ed wife by ceremony (his lawful wif e), he left theresidue of his estate in trust providing for “...my wifeduring her lifetime and...children until the youngest ofthem reaches 21 [at which time the trust terminatedand paid out to his children].” 27

The factual issue raised by the testator’s language inhis Will was whether or not by “wif e” he meant his law-ful wif e, Audrey, or his putative wife, Phyllis; andwhether by children he meant his legitimate children (byAudrey), or his illegitimate children (by Phyllis), or both.

The plain meaning of the Will evidenced the testa-tor’s intent. One can have but one wife. For Stanley, thatwas Audrey. The reference to Phyllis did not change thatmeaning. And reference to children was read to meanlegitimate issue, not issue born out of wedlock.28

Extrinsic evidence was not heard to determineactual (probable) intent. Circumstances surroundingthe execution of the Will nor its internal reference to“my wife, Phyllis Herlichka” did not in this case over-come the “plain meaning”of the words used, nor wasthe personal usage exception to the plain meaning ruleapplied.29 No ambiguity that would authorize extrinsicevidence to be introduced to determine the testator’sintent was found by this court.

C. The formalities required by the law governingthe execution of Wills has prevented evidence frombeing introduced by affected persons30 (such as omit-ted children, or descendants of deceased relativeswhere anti-lapse does not apply) notwithstanding thatthe terms of the Will could be shown to be contrary tothe intent of the Will’ s maker. Evidence has beenrather consistently excluded historically, absent ambi-guity in the language employed by the scrivener, deny-ing a remedy to affected persons. To the extent thatthe decedent’s Will is not reflective of the decedent’sintent, this posture results in unjust enrichment to theunintended beneficiary.31

IV. CONSEQUENCE OF THE REQUIREMENTTHAT PROVISIONS IN A WILL MUST BEAMBIGUOUS BEFORE EXTRINSICEVIDENCE MA Y BE ADMITTEDEVIDENCING THE TESTATOR’S INTENT.A. Where a Will is ambiguous (an unambiguous

document cannot be reformed to conform to thedonor’s intention),the plain meaning rule does notapply and “...extrinsic evidence may be admitted tosupply or contradict, enlarge or vary the words of aWill and [may] explain the intention of the testator...” 32

26 Putative: “r eputed, supposed; commonly esteemed.”Putative spouse:“one [believed] to be the spouse of another in amarriage in opposition to which there are impediments.” Black’sLaw Dict.,5th ed.,(1979),p. 1113.

27 Dukeminier & Johanson,supra n.15,p. 320.28 Such issues are still described in the Oxford Encyclopedic

English Dictionary, (1996),p. 118,as bastards. Such term is notyet referred to as archaic. The common law tradition defined chil-dren born out of wedlock, variously, including “f illius nullious,”the son of no one, or “f illius populi,” son of the people. Such childwas considered to be a ward of the parish and his or her actual par-ents had no legal relationship to the child, and no obligation to pro-vide support. See1 Blackstone Commentaries, 459; Krause,“Br inging the Bastard into the Great Society,” 44 Tex. L. Rev., 829(1966); Brian Moline, “The Kansas Parentage Act—A Proposal forLegal Equality for Non-Marital Families,” The Jo. of the KansasBar Assn.,(Winter 1983),p. 255. Note the phrase “born out ofwedlock” may refer both to a child born to an unmarried womanand also to one born to a married woman,but having a father otherthan the mother’s husband. Lewis v. Schneider, 890 P.2d 148 (Colo.App. 1994); C.R.S. 15-11-109(1)(b).

29 “Mother” can be a term a husband uses for his wife. “Ileave all to mother,” where this usage is applicable should be heardunder the “no extrinsic evidence” personal usage exception. IfPhyllis was commonly referred to as Stan’s wife by him, as is sug-gested by his Will, such exception should apply. Moseley v. Good-man,195 S.W. 590 (Tenn. 1917),referred to in Dukeminier &Johanson,supra n.15,p. 321. Summarizing the rule, Dukeminier& Johanson write, “If evidence is admissible to show that the testa-tor habitually used words to refer to persons not indicated by theircommon meaning, [it is appropriate] in all cases to show what ...testator[s] [mean] by them.” p. 321.

30 R.3d - Prop.,supra n.6,p. 115. In McMullen v. Block, 165S.W.2d 667 (Tex. Civ. App. - 1943,error refused),the testator left abequest to “mine and her children.” In this situation, the court con-sidered the word “mine” to express an intent to include all childrenof all marriages of the testator. Case cited in Bakutis,supra n.12.

31 “Unambiguous writings, generally: Where the languageused in a written instrument is ambiguous or uncertain, parol orextrinsic evidence is admissible to explain, rather than to vary orcontradict,the meaning of the language used. However, where thelanguage used in a written instrument has ordinary meaning, or isplain and unambiguous when read in connection with the otherprovisions of the instrument,parol evidence is not admissible forthe purpose of showing the meaning of the language. (Numerouscase citations omitted.) The words of an instrument,unambiguousin themselves,cannot be controlled by proof that the parties usedthem with a definite and limited meaning, for the purpose of thatparticular instrument. (Case citations omitted.) Furthermore, if theinstrument,taken as a whole and construing all its provisionstogether, is clear, parol evidence may not be admitted to construe it.(Case citations omitted.) Parol evidence may not be admitted ... tocreate ambiguity where none otherwise exists.” (Case citationsomitted.) Am. Jur. 2d, vol. 29A,§ 1100 (1994),pp. 558-559.

32 In re the Will of Goldstein,363 N.Y.S.2d 147 (Sup. Ct. A.D.4th Dept. 1975). Goldsteinmay overstate the common rule. Therule barred extrinsic evidence to resolve patent ambiguities,but notthose defined as latent. The historic rule barred the addition ofwords, but allowed words to be added. Prof. Ronald Link,supran.7,p. 9. The Supreme Court of New Jersey in 1953 In re Armour,infra n.124,held “that statements by a testator to the scrivener of hisWill were incompetent even to resolve an ambiguity on the face ofthe Will [e.g., the meaning of the phrase ‘other tangible assets.’ ”]See Richard D. Hofstetter, Rutgers L. Rev., infra n.123,p. 576,n.20.


This is a matter of substantive law, not the law of evi-dence.33 “Construction” is the term used by theRestatement34 where the document being consideredby the court is ambiguous. The term is now synony-mous with interpretation.35

B. Ambiguity.“An ambiguity occurring in a donative docu-

ment [such as a Will] is an uncertainty in meaning thatis revealed by the text or by extrinsic evidence otherthan direct evidence36 of intention contradicting theplain meaning of the text.” 37

1. Ambiguities are found in descriptions,mistaken inclusions or omissions,and in cases inwhich the donor’s customary usage of terms differsfrom the ordinary meaning.38

2. Ambiguities may be latent,evidenced byextrinsic evidence (other than direct evidence of inten-tion contradicting the text), or patent, an ambiguityappearing from the text alone.39

3. A patent ambiguity occurs, for example,when two portions of a document are in conflict, whena word is used that is susceptible to more than a singlemeaning,40 such as “I give ‘my money’ to X, my other

property to Y.” 41 A devise to the University of South-ern California, known as “The UCLA” is perhaps amore obvious example.42 Other examples whereextrinsic evidence may be heard because of a patentambiguity include gifts “to my church,” or “to myclose families,” or to the “villa ge of Eaton,” where ithas become a part of a city and is now located in theCity of Eaton.43

4. Finding a distinction between patentand latent ambiguities is,however, an “unprofitablesubtlety.” 44 The Restatement of Property 3d,provides that “...no legal consequences attach to thedistinction between patent [and] latent ambi-guities.” 45

5. A latent ambiguity is one not apparentfrom the text. For example:

T devises property “to my cousinJake.” T has no cousin named Jake,but does have a nephew with thatname. T also has a cousin namedJames. Who receives the property,cousin James or nephew Jake?46

33 R.3d - Prop.,supra n.6,§ 10.2,cmt. (c),p. 8. This Restate-ment,therefore, uses the expression “may be considered” in con-nection with extrinsic evidence, rather than the term “admissible.”

34 Id.; see alsoProf. Ronald C. Link,supra n.7,p.9.35 R.3d - Prop., id., makes no differentiation between “con-

struction and interpretation.” Previous case law sometimes differ-entiated between these terms. SeeRonald C. Link,id., p. 9.

36 Direct evidence of a testator’s intent—testimony about thetestator’s statements explaining what language used by him (or her)was intended to mean is not admissible. SeeWaggoner, supra n.19,p. 627,citing Wigmore on Evidence. The temptation for abusewould be too strong, p. 628,citing Wigmore, unless there is equiv-ocation, i.e., where the words used apply equally to two persons ortwo things. Waggoner, id. See Virginia Nat’ l Bank v. U.S., 443F.2d 1030,1034 (4th Cir. 1971),direct evidence of testator’s taxobjectives were allowed to be heard. See also Breckner v. Prest-wood, 600 S.W.2d 52 (Mo. Ct. App. 1980); Lehr v. Collier, 909S.W.2d 717 (Mo. Ct. App. 1995). Waggoner cites cases showingabandonment of the no direct evidence of a testator’s statementsexplaining intent. See Estate of Smith,580 P.2d 754 (Az. Ct. App.1978),(Waggoner, above, p. 628).

37 R.3d - Prop., supra n.6, § 11.1,p. 27; Black’s Law Dict.,(6th ed. 1990),“ambiguity,” p. 79.

38 R.3d - Prop.,id., § 11.2,p. 31. The omission of a residuaryclause created an ambiguity allowing extrinsic evidence to beheard in Wilson v. First Florida Bank,498 So.2d 1289 (Fla. App. 2Dist. 1986). Meaningless language in a Will may be ignored. “Myestate to X if she survives me, per stirpes,” for example. See Est. ofJohnson,1999 WL 118639 (Minn. Ct. App. 1999) (unpublished),

cited in Probate & Property, (July/Aug. 1999),p. 61.39 Id. § 11.1,p. 28. The use of the term “and/or” in the testa-

tor’s will disposing of property to his niece “and/or” grandniece isambiguous and extrinsic evidence is allowed to be heard to deter-mine the testator’s intent. See Estate of Massey, 721 A.2d 1033(N.J. Super. Ct.,Ch. Div. 1998).

40 Id. § 11.1(d),p. 28.41 See Estate of Smith,580 P.2d 754 (Az. Ct. App. 1978);

4 Page, The Law of Wills, § 33.34 (rev. ed. 1961). The term “prop-erties,” for example, which are not modified by an adjective, suchas “real” or “personal”applying to both,is ambiguous on its face,and a court could, therefore, consider extrinsic evidence to deter-mine the term’s meaning. In re Verdisson,6 Cal. Rptr. 2d 363,(Cal. App. 1 Dist. 1992),p. 367. In Verdisson,the decedent whotook her own life left in her pocket a handwritten, undated docu-ment titled, “This is my Will and Testimony.” (Id. p. 364). Thedocument provided for three gifts, one of “property,” one of“money,” and one of “... my pets ... and $20,000.00 to take care of[the pets] upon my death.” (Id.) The issues involved definingmoney and determining whether or not money included a$550,000.00 mutual fund, (it did not); and a refund of a$100,000.00 premium from a recent deposit made on the purchaseof a single premium life insurance policy, (it did).

42 In re Black’s Estate, 27 Cal. Rptr. 418,(1962). 43 In re Trust of Brooke, 697 N.E.2d 191 (Ohio 1998),dis-

cussed in ACTEC Notes,vol. 24,No. 2 (Winter 1998),p. 203. 44 Waggoner, supra n.19,p. 627.45 R.3d - Prop.,supra n.6,§ 11.1,cmt. a,p. 28. 46 R.3d - Prop.,id., § 11.1(c),p. 29.


Extrinsic evidence may be heard toresolve this latentambiguity.47

6. Novian bequeathed to her two naturalchildren all of the money remaining in her “...savingsaccount and/or savings certif icate...” by an expressdevise in her last Will. Novian’s stepdaughter receivedan equal share of the decedent’s residuary estate(which, of course, excluded the specifically devised“savings account and/or savings certif icate”) with thenatural children of the deceased.

While no “savings account...or savingscertif icate” existed at the time of Novian’s death, shedid own in her sole name checking accounts,moneymarket accounts,certif icates of deposit and I.R.A.s.The natural children of the decedent claimed all theaccounts arguing that they constituted savingsaccounts or saving certif icates,or both.

The issue considered by the TexasAppeals court in Sammons v. Elder 48 was whether ornot the phrase used in the specific devise of the dece-dent’s Will, “savings account and/or savings certif i-cate,” is ambiguous.49

Under the historic rule, extrinsic evidencemay be heard where a latent or patent ambiguity in aWill is f ound. The appeals court confirmed that apatent ambiguity existed in the phrase used by the tes-tatrix because the “term” used by the decedent is capa-ble of more than one meaning. Therefore, evidence ofher actual (probable) intent could be heard.50

Extrinsic evidence showed infrequency of with-drawals from the accounts challenged as “savings” bythe decedent’s stepdaughter.51 I.R.A.s were held bythe court to be unique type of trusts,used to save forretirement and are therefore properly characterized asaccounts for saving.52 The decedent’s certif icates ofdeposit and money market accounts were found to beintended by her as savings, evidenced by infrequentinvasion of their corpus’53 and they, too, thereforequalified under the Will’ s term for them,“savingaccount[s].”

7. In Estate of Russell,54 Thelma Russell lefther worldly goods by a holographic Will wr itten on asmall card. It read, “... I leave everything I own[,] Realand Personal to Chester H. Quinn [a close friend] &Roxy Russell.” 55 Roxy, an Airedale, the decedent’spet, predeceased Thelma, and in any event, as acanine, could not have inherited.

The case arose on an issue raised by thedecedent Thelma Russell’s next of kin, one GeorgiaHembree. She claimed an interest in one-half (1⁄2)of the estate—Roxy’s one-half (1⁄2)—on the groundthat the Will w as clear, the dog’s half passed to herby intestacy rules (whether Roxy predeceased Thel-ma or not). She objected to extrinsic evidenceoffered by Quinn to prove the decedent’s intent—that she did not intend an intestacy—because theWill w as not ambiguous. The court recited theplain meaning rule:

47 See R.3d—Prop., id., § 11.1(c),p. 29. SeeRptrs. notes,R.3d - Prop.,id., § 10.2,notes 3-6,p. 19 ff. The drafting attorney’stestimony may be relevant. The R.3dcites Matter of Estate of Lohr,497 N.W.2d 730,736-737 (Wis. Ct. App. 1993),in this regard. SeeR.3d - Prop.,§ 10.2(5),p. 19. SeeSmith,Scott A., “The Admissi-bility of Extrinsic Evidence in Will Interpretation Cases,” 64 Mass.L. Rev., 123 (1979); Bonner, Robert J., Note, “Wills - Admissibili-ty of Extrinsic Evidence in the Absence of Ambiguity,” 45 Marq. L.Rev., 442 (1961-62); Bruner, Sharon and McNeal,Dan,“Admissi-bility of Extrinsic Evidence in Will Cases:Michigan Case Law,” 7Cooley L. Rev., 19 (1990). Bogard v. Stirm,241 S.W.2d 666 (Tex.Civ. App. - San Antonio, no writ); Norton v. Smith,227 S.W. 542(Tex. Civ. App. - Beaumont 1920 writ dism. w.o.j.). SeeBakutis,supra n.12,p. 13. California courts are credited with being amongthe first to allow extrinsic evidence to be heard to resolve a latentambiguity in a contested Will in order that the dispute could beresolved. SeeProf. Joseph W. deFuria, Jr., in his article, “Mistakesin Wills Resulting from Scriveners’ Errors: The Argument forReformation,” 40 Cath. U. L. Rev. 1 (Fall 1990),p. 18. Prof. deFu-ria cites In re Estate of Dominici,90 Pac. 448 (Cal. 1907); In reEstate of Taff, 63 Cal. App. 3d 319,325 (1976); In re Estate ofDeMoulin, 101 Cal. App. 2d 221,224- 225; 225 P.2d 303,306(1950). Oral declarations of the testator are excluded. SeeCal.Probate Code § 105 (West 1956); cmt. “Extrinsic Evidence and theConstruction of Wills in Calif.” 50 Calif. L. Rev., 283,291 (1962).SeeCalifornia Probate Code § 6111.5. “Extrinsic evidence admis-

sible. Extrinsic evidence is admissible to determine whether a doc-ument constitutes a will pursuant to Section 6110 [witnessed Will]or 6111 [holographic Will], or to determine the meaning of a Willor a portion of a Will if the meaning is unclear. [Enacted by stats.1990,ch. 710,§ 14,operative July 1, 1991,by § 48 of ch. 710.]The commentary cites Calif. cases:Estate of Sargavak,35 Cal.2d93,96; 216 P.2d 850 (1950); Estate of Woodworth,18 Cal. App. 4th936,22 Cal. Rptr.2d 676,678 (5th Dist. 1993); In re Verdisson,4Cal. App. 4th 1127,6 Cal. Rptr.2d 363 (1st Dist. 1992); Estate ofBlack, 211 Cal. App.2d 75,27 Cal. Rptr. 418 (1st Dist. 1962).

48 Sammons v. Elder, 940 S.W.2d 276 (Tex. App. Waco 1997).See also,Estate of Smith,580 P.2d 754 (Az. Ct. App. 1978).

49 Ambiguity is generally a question of law for ruling by thecourt. Sammons,id., p. 280.

50 “Words in general,” said the court, “whether technical orgeneric, are to be taken in their plain and usual sense, unless thetestatrix demonstrated a clear intention to use them in anothersense.” Sammons,id., p. 281.

51 Id., p. 281.52 Id., p. 282.53 Id., p. 282.54 Estate of Russell,69 Cal. 2d 200,444 P.2d 353,70 Cal.

Rptr. 561 (Cal. 1968).55 On the reverse side of the script, a ten dollar gold piece and

diamonds were left to another.


When the language of a Will isambiguous or uncertain, resort maybe had to extrinsic evidence in orderto ascertain the intention of the testa-tor....Extrinsic evidence is admissible‘to explain any ambiguity arising onthe face of a Will, or to resolve alatent ambiguity which does not soappear,’ 56 [such as identifying Roxy asa dog, one, if surviving the testator, isan impermissible legatee].

Continuing, the court in Estate of Russellstated:

A latent ambiguity is one which is notapparent on the face of the Will but isdisclosed by some fact collateral toit....Extrinsic evidence always may beintroduced in order to show that underthe circumstances of a particular casethe seemingly clear language of aWill describing either the subject ofor the object of the gift embodies alatent ambiguity, for it is only by theintroduction of extrinsic evidence thatthe existence of such an ambiguitycan be shown. Once shown, suchambiguity may be resolved by extrin-sic evidence.57

Extrinsic evidence, however, cannot be usedto contradict, rather than clarifying the words con-tained in the Will. 58

Extrinsic evidence to show the latent ambigu-ity—that Roxy was a dog—was admitted. There is nodiscussion in the case to determine the testatrix’s prob-able intent if Roxy were deceased (or if not,whetherQuinn was to hold and use that share for the animal’sbenefit).

In the case of Roxy Russell,the share that was topass to the Airedale lapsed. The gift was not otherwisedisposed of. No contingent beneficiary was named andthe Will does not suggest that Quinn was to receive morethan one-half (1⁄2); nor was testimony received showingby extrinsic evidence what the decedent’s intention wasconcerning Roxy’s share—dead or alive. Undisposed of,the Roxy share, therefore, passed by intestacy.

8. Is the lack of a residuary clause in a Willan ambiguity such that extrinsic evidence can be heardto determine the testator’s intent?

a. Knupp v. District of Columbia,59 a1990 case, predating R.3d—Prop. (Donative Trans-fers), by five years, arose on an issue of whether theresidue of a testator’s estate escheats to the state wherea residuary beneficiary is not named in the instrument.

The appellant argued that extrinsicevidence would prove T’s intention if the court belowwere ordered to hear it. The Court of Appeals,howev-er, affirming historic law in this country, agreed withthe District’s Superior Court that a court may notreform the Will.

The scrivener offered an affidavit andnotes of his conversations with the decedent bearingon the identity of the unintentionally unnamed resid-uary devisee. It was not allowed because there was noambiguity in the Will. Extrinsic evidence, the courtwrote, can only be used to interpret something said inthe Will. It cannot be used to add provisions to theinstrument. There must be something in the Will itself“...that could lead a court to infer that the testatorintended [a proposed devisee] to be the recipient of theresidual estate.”

Because this requirement could not besatisfied, intestacy occurred in the Knupp case andescheat followed.

b. In In Re Estate of Smith,60 two para-graphs,Articles IV and V, were omitted from the testa-tor’s Will. His prior Will included these paragraphnumbers and they included a residuary clause. Couldthe missing provision be supplied by reference to theancestral document in order to avoid what otherwisewould be an intestacy?61 The court held that these pro-visions could not be read into the new Will. “Refor-mation should not be undertaken under the guise ofjudicial interpretation,” the court announced.62

Further, the court wrote in dictum thateven when a Will provides that certain heirs are inten-tionally omitted from the Will’ s benefits, this is notdisinheritance. “Unless the intent to disinherit isclearly expressed or results from necessary implica-tion, there is a presumption that heirs [are] not intend-ed to be disinherited.63 A partial intestacy, therefore,would not result in the intentionally omitted heirsfrom receiving their intestate shares.

56 Estate of Torregano,54 Cal. 2d 234,246; 5 Cal. Rptr. 137,144; 352 P.2d 505,512; 88 A.L.R.2d 597 cited in Dukeminier &Johanson,supra n.15,p. 324.

57 Estate of Russell,supra 54; Dukeminier & Johanson,id., p.324,(emphasis supplied).

58 See Eckman Estate, 18 Fiduc. Rep. 2d (Chester County,1977),discussed in ACTEC Notes,vol. 24,No. 2 (Fall 1998),p. 125.

59 Knupp v. Dist. of Columbia,supra n.8.60 In Re Estate of Smith,599 N.E.2d 184,(Ill. App. 4 Dist.

1992).61 Id., pp. 186,187.62 Id., p. 187.63 Id., p. 187,citing several Illinois cases.


V. EROSION OF THE RULE THAT A WILLMUST BE AMBIGUOUS BEFOREEXTRINSIC EVIDENCE RELA TING TOTHE WILL MA Y BE INTRODUCED—EXCEPTIONS TO THE NOREFORMATION RULE:Exceptions to the “no reformation of Wills” prin-

cipal have been engrafted onto the strictures createdby this doctrine. They have been discussed in Profes-sor deFuria’s excellent manuscript, “Mistakes in WillsResulting From Scriveners’ Errors: The Argument forReformation,” 64 summarized in items D and E,and Gthrough K following in this manuscript (pp. 310-314).Relevant state law may affect the admissibility of testi-mony. In any state, restrictions on the use of extrinsicevidence of direct intent may apply. Statements madelong before or after the Will’ s execution may not berelevant because of remoteness in time, and thereforenot relevant.65

In addition to relevancy, hearsay and the DeadMan’s Rule may prevent extrinsic evidence from beingheard.

Where the value that public policy protects nolonger accurately reflects the community’s sense ofwhat the law ought to be, however, then erosion of thatpolicy, expressed by statute or court opinion,or both,begins. Exceptions to the rule are engrafted on thelaw. We now witness this with regard to the PlainMeaning Rule and the prohibition in the use of extrin-sic evidence that, if admissible, may demonstrate tes-tator intent. The following exceptions reflect dissatis-faction with the historic doctrine.

A. Lack of Testamentary Intent.1. Extrinsic evidence may be introduced to

demonstrate lack of testamentary intent, i.e., to showthat the writing was not intended by the testator to beeffective as a Will. 66

2. In Sargavak’s Estate,67 the following holo-graph was offered as a codicil to the decedent’s Will:

1566 W-29th St.Los Angeles 7,Cal.Sep. 29,1946Sunday Evening

To Whom It May Concern:

I the writer—Mrs. Ruby Sargavak,wants everyone to know that she iswriting these lines of her own freewill—no one is putting her or urgingher to do it. She leaves everything shehas to her Boy Sam Mahdesian & herlayer (sic) J. G. Ohanneson - she givesthem power of attorney to divide whatis left of her belongings to them. Shespecifically advises to give nothingwhat so ever to Mrs. Lillian Shooshan—she is no relation nor friend of hers—Mrs. Sargavak has been more thankind to her, just because she beggedus to help her for a little time—Mrs.Sargavak would rather help her veryown nieces & grandnieces & perfectstrangers, who are truly in need ofhelp. God has been good to us,shedid not appreciate the goodness of theLord to her. All honor & glory untohis High and Holy Name!

Mrs. Ruby Sargavak.

P.S. It is 8 o’clock, I am very tired- Ruby Sargavak

The issue in Sargavak was whether or not thewriting disclosed an intention to be a testamentary dis-position of the drafter’s property.

The Supreme Court of California held thatextrinsic evidence is admissible regardless of theinstrument’s language to show that the writing is notintended by the testator to be effective as a Will. 68 Aninstrument,therefore, may be shown extrinsically tohave been executed in jest,69 as a threat to induceaction by an interested party,70 to have misapprehend-ed the nature of the instrument believing it to be amortgage,71 to induce a beneficiary to engage in illicitrelations with the testator,72 or to relieve the makerfrom the annoyance by a would-be legatee.73

64 Prof. deFuria, supra n.47.65 Bakutis,supra n.12,see Estate of Cohorn, 622 S.W.2d 486

(Tex. App.,Eastland 1981,writ ref’d n.r.e.).66 See In re Sargavak’s Estate, supra n.47. Cal. Prob. Code §

105 is cited. Dictum contra,Re Estate of Pagel,125 P.2d 853 (D.C.App. Cal. 1942).

67 Sargavak’s Est.,id.

68 Id., p. 851.69 Older case citations,id.70 Id.71 In re Williams’ Est.,135 S.W.2d 1078 (Ct. Civ. App. Tex.

Beaumont,1940).72 Fleming v. Morrison,72 N.E. 499 (1904 Mass.).73 In re Estate of Siemers,261 Pac. 298 (1927 Cal.).


3. Extrinsic evidence admissible to demon-strate the absence of testamentary intent does notbecome inadmissible because it does so by showinganother intention,74 and declarations by the testatorhave been found admissible when introduced “...not toexplain an ambiguity but to show the testamentarycharacter [of a document].” 75

In Sargavak, the extrinsic evidenceshowed that “Mr s. Lillian Shooshan [referred to in Sar-gavak’s “codicil”] w as the niece of the testatrix’ sdeceased husband; she had been living with the testa-trix on hostile terms. On the day the instrument waswritten, she had been particularly quarrelsome, insist-ing that she had been wrongfully excluded from theWills of the testatrix and her husband. According tothe testimony of her nurse, Mrs. Sargavak determinedto have Mrs. Shooshan ejected from her house, andcalled respondent Mahdesian for that purpose. Whenshe learned that he could not come that evening, shewrote the instrument in question. A nurse testified indetail concerning the circumstances under which thepurposed codicil was written. The nurse was instructedby Mrs. Sargavak to have Mrs. Shooshan put out of thehouse that night. Mrs. Sargavak called another for thispurpose, as well, the nurse testified, “because [Mrs.Shooshan] had disturbed her [Mrs. Sargavak] all day.” 76

The Respondent,Mahdesian,testified77

that Mrs. Sargavak wanted Mrs. Shooshan out of thehouse immediately. “I can’t stand her anymore,” Mrs.Sargavak reportedly said. “She is always harassingme, nagging me [because I’m not leaving her anythingin my Will and because my husband didn’t. She’supset because we] gave so much money to the church-es....” Mrs. Sargavak wanted her estate protected

against invasion by Mrs. Shooshan,and the “codicil”affirmed this intention. Non-testamentary provisionsincluded with those affirming a testamentary intent,evidenced in the Sargavak writing, did not void theinstrument as a Will. 78

B. Construction (Reformation) Prior to Probate.1. In Matter of Estate of Smelser,79 the court

observed “...that where the language of a Will is clearand unambiguous,a court cannot go beyond the docu-ment to determine testator intent....However, this ruleis applied only where the action is to construe or inter-pret the Will after it has been admitted to probate.” 80

Smelseris an action filed to determine whether or notthe decedent’s Codicil is a valid expression of herintent such that it can be admitted to probate, because“...[t]he validity of a Will or Codicil does partlydepend on whether it accurately expresses the testa-tor’s true testamentary intent.” 81 Arguably, in this caseit did not.

Parts of a Will not intended by the testator insertedbecause of scrivener error, may be eliminated from theWill to satisfy testator’s intent,if , as amended, thescheme of the Will r emains intact.82

C. Lack of Testator’s Knowledge of Will’ s Con-tents When Executed.

1. Lack of the testator’s knowledge of theWill’ s contents at the time of its execution is a legiti -mate ground for avoiding the document’s provisions.This fact, if it can be shown, invalidates the instru-ment.83 In such event,it is not the decedent’s Will. 84

Because execution of the Will creates a rebut-table presumption that the testator is aware of the doc-ument’s contents,clear and convincing evidence maybe required to rebut this presumption.85

74 Sargavak’s Estate, supra n.47,p. 852.75 Id., p. 852. Numerous California cases cited. In particular,

see In re Estate of Smith,191 P.2d 413 (Cal. 1948).76 Sargavak’s Estate, id. p. 853.77 The Dead Man’s Statute was not discussed in this case.78 Sargavak,supra n.47,p. 854. A dissent was published, but

only with regard to whether the extrinsic evidence showed thedecedent’s letter to be a codicil. “... [R]esort may always be had toextrinsic evidence to explain actual intention with which an appar-ently testamentary instrument was executed.” p. 855.

79 Matter of Estate of Smelser, 818 P.2d 822,826 (Kan. App.1991).

80 Theimer v. Crawford, 582 P.2d 1151 (Kan. 1978).81 Smelser, supra n.79,p. 826.82 See Fuller v. Nazal,67 So.2d 806 (Ala. 1953); to the same

effect see In re Estate of Robinson,supra n.12; Smelser, id., p. 828.Evidence of a scrivener’s error is admissible in an action to deter-mine whether a Will or a codicil may be admitted to probate. Theessential question in such action is whether the Will or codicilaccurately reflects the testator’s intent. Smelser, id.

83 Smelser, id. at 826,citing In re Estate of Koellen,176 P.2d544 (Kan. 1947).

84 Smelser, id. at 826,quoting Chandler et al. v. Ferris, 1 Del.(1 Harr.) 454,464 (1834); Millman v. Millman,359 A.2d 158 (Del.1976). “The general rules that parol evidence contradicting theterms of a Will is inadmissible in aid of the construction of theinstrument,and that a suit to reform a Will so as to make it expressthe true intent of the testator does not lie in equity, should not ren-der inadmissible in a proceeding to probate a Will parol evidenceshowing that as a result of a mistake in drafting, the Will is not thesame as the testator believed it to be.” 79 Am. Jur. 2d, § 418,“Mis-take of Draftsman,” (1975). See Re Estate of Christensen,416N.W.2d 469 (Iowa App. 1990). And see80 Am. Jur. 2d, § 973,“Acknowledge of Contents; Mistake” (1975).

85 Smelser, id. at 826. “Other jurisdictions have ruled evi-dence extrinsic to the Will showing scrivener error is admissible ina proceeding either to admit the Will to probate or to challenge theprobate of the Will. Such evidence is admissible to show the entiredocument or a part of it invalid as not reflecting the testator’s trueintent.” See Annot.90 A.L.R. 2d 924,931. Smelser observes thatin some jurisdictions “... a Will containing scrivener error is invaliddespite the testator having been made aware of its contents or hav-ing had the opportunity to become aware of its contents.” Smelserat p. 827. Bradford v. Blossom,105 S.W. 289 (Mo. 1907) is cited.


Deviations from the testator’s instructionswithout the testator’s knowledge, alterations not madeknown to the testator, the Will not read by the (pre-sumed) testator, or not explained to the one signing itare examples of situations where the testator may lackawareness of the document’s contents; the documentmay appear to be a Will but nonetheless,the Will ofanother is not the testator’s Will. 86

2. In Protheroe v. Davies87 an allegation wasmade that an instrument purported to be a valid Will ofthe decedent was not.88 The pleading, notwithstandingthat it was filed after the Will had been admitted toprobate, raised the issue sufficiently so that extrinsicevidence could be heard.89

In two instances,the decedent recited that her“...estate was to be divided fairly among her [four]children.” 90 The actual division provided for in theWill was described by the court as “grossly unfair.”The scrivener testified that the testator “thrice told him[that] ‘she didn’t want [one named child] to have asmuch as the others.’ The lawyer omitted this child.Beside her name in the list of devises,the scrivenerwrote ‘nothing.’ ” 91 The lawyer admitted that he didnot write the Will as he had been directed.92 Heacknowledged that he misread it to his client twice,clear grounds to affirm that the document was thescrivener’s Will, not his client’s.93

3. Similarly, in Cowan v. Shaver,94 an oldcase, the same rule applied. It is not the decedent’sWill where he or she directs the lawyer to write it oneway and the scrivener’s values replace those of theproperty owner, and the scrivener writes the Will as heor she believes it should be written. In Cowan,the tes-

tator is described as “...illiterate, feeble [and] old,” andthe scrivener didn’t like the way the client directed theinstrument to be written. The document therefore wasfound not to be the Will of the testator and probate wasdenied.95

Longhand notes made by the scrivener“...made at his [or her] initial meeting with the testatorare admissible...on the issue of whether or not the pur-ported Will is in fact the Will of the decedent96 [or ofanother, such as the drafter].”

The scrivener’s notes may be admissibleevidence on the issue of whether or not a testator knewthe contents of his or her Will. Where a testatorbelieved that a Will disposed of property other than asit did, that instrument is not the testator’s Will. 97

D. The Personal Usage Exception.98

1. Personal vocabulary and structure in tes-tators’ Wills may be relevant. One’s wife may bereferred to as mom; or a sister-caretaker of a youngersibling may result in the use of this same moniker.The personal use exception allows extrinsic evidenceto clarify the testator’s use of words idiosyncratically.99

2. Prof. deFuria writes with regard to thisexception, “From a functional viewpoint...there is lit-tle difference between permitting the written words tomean something else and correcting an outright errorin a Will. Only the rigid “no reformation for mistake”rule prevents courts from labeling [this exception] forwhat it is—a method of correcting the meaning ofwritten words so that the actual intent of the testator isfollowed. If courts allow the testator’s personal usageof a word or phrase which contradicts the written wordin the Will, then courts should also admit extrinsic evi-

86 Smelser, id. p. 826,citing Chandler, supra n.84.87 Protheroe v. Davies,89 P.2d 890 (Kan. 1939).88 Id. p. 896.89 See1 Page on Wills, 2d ed., §§ 559,565. Seerevised trea-

tise, Page on the Law of Wills, vol. 1,§ 14.5.90 Protheroe, supra n.87.91 Id., pp. 898,897.92 Id., p. 898.93 Id., p. 898,citing the early case, Bradford v. Blossom,

supra n.85,wrote, “A Will that does not dispose of [a testator’s]property as [she] desire[s] and [directs] cannot stand. If the old anddeaf and frail but unusually bright and intelligent testator directedher agent to have her Will drawn in one way and he had it drawn inanother, and she signed it under the belief that it was written as shehad directed, it was not her Will.”

94 Cowan v. Shaver, 95 S.W. 200 (Mo. 1906).95 Protheroe, supra n.87,citing Cowan, id. p. 898.

96 Millman v. Millman,supra n.84,p. 160.97 Smelser, supra n.79,p. 826; Cowan v. Shaver, supra n. 94.

“Kansas joined the jurisdictions which permit the introduction ofextrinsic evidence of scrivener mistake on the issue of whether atestator knew the contents of his or her Will....” See Protheroe v.Davies,supra n.87.

98 deFuria, Prof. Joseph, supra n.47. See also Stewart v.Selder, 473 S.W.2d 3 (Tex. 1971). “If the extrinsic evidence showsthat the testator applied special meaning to the word, then the wordwill be construed with that special meaning.” SeeDavid Bakutis,supra n.12. If the will is drafted by a non-lawyer, technical mean-ings may not apply. It may be read as a lay person would read it.See Anderson v. Dubel,580 S.W.2d 404 (Tex. Civ. App.-San Anto-nio 1979,writ ref’d n.r.e.), id.

99 deFuria, id. p. 22. See In re Estate of Gehl,159 N.W.2d 72,74-75 (Wis. 1968).


dence of scriveners’ errors. These errors are less dan-gerous from an evidentiary perspective.” 100

3. An interesting variation of the personal useexception to the Plain Meaning Rule is illustrated in thecase of In re Verdisson.101 In this case, the questionarose as to whether or not the decedent’s French back-ground influenced the structure and phrasing of herWill. Did the decedent’s document suggest a form ofpersonal use subject to the exception? The court heldthat it did. The handwritten document entitled “...Willand Testimony” provided three bequests as follows:

a. “I leave my properties (first written‘property’ with ‘ies’ written over the ‘y’) to EdwinNowak.”

b. “I leave my money to LawrenceKesselring.”

c. “I leave my pets to Mr.Wardaman...and $20,000.00 to take care of them uponmy death.” 102

The decedent was born and reared inFrance. She married at age 16,and she and her Amer-ican soldier-husband moved to Chicago. She was edu-cated and learned to speak fluent English. Shedivorced and moved to California.103 She had relation-ships with the three individuals mentioned in her Will.

The court observed that “French Willstypically first set forth a ‘universal legatee’—that is, aperson who receives all of the testator’s estate—fol-lowed by specific bequests which the universal legateepasses on to subsidiary heirs.” 104 In this situation,Nowak could be considered to be the “universal lega-tee.” If that is the case, then the term “properties”would include real and personal assets. By using theterm “properties,” (biens in French), she could well

have meant “all [of] her goods.” 105

Use of the term testament means Will inFrench, and thus the decedent’s use of the term “Willand testimony” is not redundant—the document is hertestimony affirming her intention,the court said.106

E. Corrections of Punctuation and Grammar.The correction of English errors is seen as

harmless.107 But, of course, such errors may be crucialto the testator’s intent. Should the conjunction “and”in the sentence, “I give my estate to my daughter andher heirs,” be changed to or her heirs?108 “If thesekinds of mistakes can be reformed, then a scrivener’serror, which is considerably closer to a grammatical orpunctuation error than a substantive error, should alsobe reformed.” 109

F. Corrections of the Detail of Identification.In re Estate of Gibbs,110 the court substituted

one term for another, deleting a mistaken one. TheWill was not ambiguous. But the court carved out anexception to the “no reformation of Wills” rule.

[D]etails of identification...middle ini-tials, street addresses...[things] highlysusceptible to mistake, particularly inmetropolitan areas, should not beaccorded such sanctity as to frustratean otherwise clearly demonstrableintent. Where such details of identifi-cation are involved, courts shouldreceive evidence tending to show that amistake has been made and should dis-regard the details when the proof estab-lishes to the highest degree of certaintythat a mistake was in fact made.111

100 Id. p. 22. What is meant when a testator uses the wordcash: “I devise my cash to X.” May this term include more thandollar bills? Can it include stocks,bonds,c.d.s? Stewart v. Selder,supra n.98,expresses the rule, applying the personal use exception,“[I]f the Will contains language that ... [gives] some indication ofwhat is intended [by the use of the word cash,however subjectiveand idiosyncratic it may be, the court] would have followed such ameaning.” In Stewart, however, the Court of Appeals found none.On appeal,the Supreme Court indicated that the court may alwaysreceive and consider evidence concerning the testator’s personalusage of words. “Under the Stewart rule, all statements on how thetestator had used the word cash would be admissible [to see if itincluded stock]. Evidence that [showed statements made by thetestator, such as,“I want my stock to go to my niece”would not beadmissible unless the Will was otherwise ambiguous. Discussed inBakutis,supra n.12,pp. 14,18.

101 In re Verdisson,supra n.47.102 Id. at p. 364.

103 Id. at pp. 364,365.104 Id. p. 366.105 Id.106 Id.107 Id. citing numerous cases,e.g., Scott v. Powell, 182 F.2d

75, 80 (D.C. Cir. 1950); In re Estate of Lewis, 204 P.2d 898,900(Cal. App. 1949); Mercantile Trust & Sav. Bank v. Rogers, 124N.E.2d 683,687 (Ill. App. 1955); Nolan v. Easley, 58 So.2d 491,493 (Miss. 1952); First Methodist Church v. Pennock, 22 A.2d 889,891 (N.J. Eq. 1941); In re Estate of Potolsky, 169 N.Y.S.2d 327,328 (Sur. Ct. 1957); In re Walker’s Estate, 101 A.2d 652,655 (Pa.1954).

108 See In re Rochester’s Estate, 246 P2d 906 (Colo. 1952).See also infra n.165.

109 Id. p. 21.110 In re Estate of Gibbs,supra n.8.111 Id. p. 418,discussed in Langbein and Waggoner, infra

n.192.


G. Corrections of False Descriptions (FalsaDemonstratic Non Nocet).

A false description in a Will is prevented fromvitiating the document “...provided that the thing or per-son intended has once been sufficiently described.” 112

The false part of the description may be reject-ed if the correct portion describes the person or thingwith reasonable certainty.113

The mistake in description or party is correct-ed by construction of the Will; r eformation, as adescriptive term, is avoided. DeFuria questions whyscriveners’ errors cannot be treated similarly—by theirdeletion if the rest of the Will could stand alone. “Inboth cases,” he writes, “the purpose of the testator isfrustrated unless the deletion is made.” 114

H. Dependent Relative Revocation.This doctrine “...regards as mutually depen-

dent the acts of one destroying a Will and thereuponsubstituting another...which fails to accomplish [thetestator’s] intended purpose...[and this is thereafterdiscovered. The] act of destruction is [deemed]...bereft of intent,and the prior “destroyed” Will is again[deemed to be] an effective instrument.” 115

Extrinsic evidence of the testator’s intent isadmissible to show what the testator would have want-ed had he known the legal effect of his actions.116 Thisdoctrine allows mistaken assumptions to be corrected.Reformation to correct an invalid revocation thereforeoccurs.

I. Presumed Intent.Gifts by a testator may be implied. “For a gift

to be implied, the court must [conclude] that the testatorintended [to make] the gift .... An implied gift is [con-strued] when [the Will and its distribution scheme] leadsthe court to believe that such a gift was intended.” 117

Gifts by implication “...are evidence thatcourts can add provisions to a Will to correct errorseven though they formally reject reformationas...appropriate.” 118

In Matter of Ira Shorin,119 the decedent’s Willcreated a residuary trust for his wife and two daugh-ters. The decedent’s spouse received a lifetime incomebenefit and a limited right to invade principal. Uponher death, the trust balance was to be bifurcated, onepart for each of the decedent’s daughters. If eitherdaughter “predeceased”the decedent,her interestpassed to her issue per stirpes. The Will, however, didnot provide for the contingency of a daughter prede-ceasing the decedent’s spouse.

The New York court construed the Will f indinga gift by implication to satisfy presumed intent of thedecedent,such that the deceased daughter’s share passedto her issue. The New York court will f ind such a gift byimplication in situations,such as this,which result fromobvious error or omission so long as no other reasonableinference can be drawn from the Will. 120

New Jersey, following the Uniform ProbateCode §§ 2-602 and 2-603,121 enacted Title 3B:3-33,“Choice of law as to meaning and effect of Wills; tes-tator’s intention; rules of construction,” that addressesprobable intent. The statute reads:

The meaning and legal effect of a dis-position in a Will shall be determinedby the local law of a particular stateselected by the testator in his [or her]instrument unless the application ofthat law is contrary to the public poli-cy of this State otherwise applicableto the disposition. The intention of a

112 Black’s Law Dict.,supra n.14,p. 600.113 Application of the rule: seedeFuria, supra n.47, n.103,

including Patch v. White, 117 U.S. 210,216-17 (1886); Breck-heimer v. Kraft, 273 N.E.2d 468 (Ill. App. 1971).

114 deFuria, id. p. 23.115 Black’s Law Dict.,supra n.14,p. 437.116 deFuria, supra n.47,p. 24,citing Crosby v. Alton Ochsner

Medical Foundation, 276 So.2d 661 (Miss. 1973).117 deFuria, id. citing numerous cases,including: Brock v.

Hall, 206 P.2d 360,363 (Cal. 1949); Alfau v. Miller, 29 N.E.2d 1,3(Mass. 1940); In re Englis’Will, 2 N.Y.2d 395,402-03,141 N.E.2d556, 559, 161 N.Y.S.2d 39,43-44 (1957); In re Dorson’s Estate,196 N.Y.S.2d 344,346-47 (Sur. Ct. 1959). In Colorado,see Matterof Estate of Sandstead, infra n.161 and Matter of Est. of Palizzi,infra n.158.

118 Id. p. 26. See also In re Estate of Gibbs, supra n.8, inwhich the court said: “[D]etails of identification ... middle ini-tials, street addresses ... [things] highly susceptible to mistake,particularly in metropolitan areas,should not be accorded suchsanctity as to frustrate an otherwise clearly demonstrable intent.Where such details of identification are involved, courts should

receive evidence tending to show that a mistake has been madeand should disregard the details when the proof establishes to thehighest degree of certainty that a mistake was in fact made.”Gibbs, p. 418. A note to decedent’s son received in the mail fol-lowing his father’s suicide read, in part, “The contents belong toyour mother.” The letter contained a check to the decedent’s wifefor $220,000. Decedent’s safe contained cash totaling this sameamount. The appellate court found evidence of donative intentfrom the note indicating that the contents of the safe belonged todecedent’s wife. The court inferred that the decedent intended theterm “contents”to mean the contents of the safe. See Huskins v.Huskins,517 S.E.2d 146 (N.C. App. 1999),discussed in Prob.Pract. Rptr., vol. 11,No. 10 (Oct. 1999),p. 7.

119 Matter of Ira Shorin, N.Y.L.J., Nov. 12,1996,p. 29,col. 5,(N.Y. Co.,Sur. Roth),discussed in ACTEC Notes,Vol. 23, No. 1(Summer 1997),p. 32.

120 See, e.g., In re Inglis’Will, 2 N.Y.2d 395,141 N.E.2d 556,161 N.Y.S. 2d 39 (1957),and Matter of Estate of Kronen,67N.Y.2d 587,496 N.E.2d 678,505 N.Y.S.2d 589 (1986),discussedin ACTEC Notes,Vol. 23,No. 1 (Summer 1997).

121 8 U.L.A. Annot. Master Ed. (1999).


testator as expressed in his [or her]Will controls the legal effect of [the]dispositions,and the rules of con-struction expressed in N.J.S. 3B:3-33through N.J.S. 3B-48 apply, unlessthe probable intention of the testator,as indicated by the Will and [other]relevant circumstances,is contrary.122

The application and impact of the New Jerseystatute is illustrated in the Engle v. Siegel case.123 Inthis controversy, a wife and her husband left Wills pro-viding for each other, alternatively to their children. Inthe event that these family members were all deceased,distribution of the respective estates was to be made inequal shares to each of the party’s mothers, the naturalmother and the mother-in-law of each.

As bad luck would have it, the husband, thewife and the children were all killed in a common dis-aster. Husband’s mother had predeceased her son,soonly one named contingent beneficiary survived.

The issue discussed in this case was whetheror not the surviving mother takes all,or whether hus-band’s siblings take the deceased mother’s share.

The Will is unambiguous. In this case, bothmothers were to share their children’s estates equally.Without anti-lapse doesn’t the survivor take all? Isn’tthis what the Will in “plain” language says?

In overruling precedent,In re Armour,124 theNew Jersey Supreme Court held that under “...the newrule, a court not only examines ‘the entire Will’ butalso studies ‘competent extrinsic evidence’[as well, todetermine the testator’s probable intent].” 125

The New Jersey Court wrote that “it attributesto the testator ‘common human impulses,’ and seeks tofind what he [or she] would subjectively have desiredhad [the testator] in fact actually addressed the contin-gency which [arose].126

“We are no longer limited,” said the jurists,“simply to searching out the probable meaning intend-ed by the words and phrases [used] in the Will....Rele-vant circumstances [include] the testator’s ownexpressions of intent [made outside the Will]....” 127

“[A] court should strive,” the opinion contin-ued, “to construe a testamentary instrument to achievethe result most consonant with the testator’s probableintent ...,[her or his probable wishes,and] direct state-ments made by the testator [are therefore] admissibleto show such intent.” 128

In the Engel case, “[t]he attorney who draftedthe Will...testified [regarding] his conference with [thetestator]....from [both his] memory [and...] by [his]notes [that] he had made at the conference [with hisclient.]”129

The Engle case demonstrates an enlightenedstate Supreme Court judiciary and legislature, at least inthe opinion of those who are critical of the plain mean-ing rule; those who believe it wise to have all credibleevidence heard to determine what the decedent trulyintended, not just what her or his lawyer has written.

There are numerous other similar cases foundin Medicaid eligibility decisions. Trusts created by adecedent’s Will intended to provide supplementarybenefits for disabled or elder beneficiaries,but not forthe beneficiaries’primary support, create a fertile fieldfor challenge by state Medicaid agencies.130 Courtsconstrue the language used by the Will/tr ust drafter.Where the document is carelessly prepared, such thatthe testator’s intent can be construed to allow for dis-tributions for the beneficiaries’ needs that would oth-erwise be provided by the state, the testator’s trueintent to provide alone for supplemental needs,but notbasic support, may be frustrated.

Where, for example, the testamentary trustallows for distribution to a Medicaid eligible benefi-ciary for “support, maintenance and welfare,” it will

122 L. 1981,c. 405,§ 3B:3-33,eff. 5-1-82,citing UPC §§ 2-602and 2-603,ULA Annot. Master Ed., vol. 8,and “Doctrine of Proba-ble Intent,” Rutgers L. Rev., vol. 31,p. 574,(1978).

123 Engle v. Siegel, 377 A.2d 892 (N.J. 1977). See Richard D.Hofstetter, “Survey of Trusts and Estates - Doctrine of ProbableIntent,” Rutgers L. Rev., vol. 31 (1978),p. 574,discussed p. 582.Probable intent was followed in In re Ericson,377 A.2d 898 (N.J.1977),to justify a significant alteration of a decedent’s Will.

124 In re Armour, 94 A.2d 286,292 (N.J. 1953).125 Engel v. Siegel, supra n.123,p. 894,emphasis supplied.

See also Fidelity Union Trust Co. v. Robert, 178 A.2d 185 (N.J.1962),discussed by Richard D. Hofstetter, Rutgers L. Rev., supran.123,which “substantially increased the weight to be given toextrinsic evidence of probable testator intent notwithstanding theliteral terms of a Will.” p. 576.

126 Id., p. 894. 1965).

127 Id., p. 894. “Since [Fidelity Union Trust v.] Robert, supran.125,New Jersey courts have continued to place great reliance onsurrounding facts and circumstances in ascertaining probableintent.” See Richard D. Hofstetter, Rutgers L. Rev., supra n.123,p.577. See also In re Estate of Burke, 222 A.2d 273 (N.J. 1966); anti-lapse notapplied:In re Est. of Cook,206 A.2d 865 (N.J. 1965).

128 Id., pp. 894,895. Wilson v. Flowers, 277 A.2d 199 (N.J.1971),is cited in support, p. 894.

129 See, to the same effect,Matter of Griswold’s Est.,354 A.2d717 (N.J. Sup. 1976),and Matter of Ericson’s Est.,377 A.2d 898(N.J. 1977). In re Ericson,(Matter of Ericson’s Estate),is discussedby Richard D. Hofstetter, Rutgers L. Rev., supra n.123,p. 588.

130 Cases are collected in Clifton B. Kruse, Jr., Third Party andSelf-Created Trusts - Planning for the Elderly and Disabled Client,American Bar Assn.,(1998),pp. 49-59.


be, at best,difficult to resist the state’s insistence thatthe trust is not discretionary—and that its corpus is notavailable for the inartfully described purpose—at leastwithout an opportunity to introduce extrinsic evidencedemonstrating the trust creator’s probable intent. Typ-ically, in this context, the Will/tr ust creator’s actualintent is to provide a fund for supplementary needs ofthe beneficiary alone—benefits that are unrelated tobasic needs,such as health care, food and shelter.131

J. Pretermission.Pretermission statutes are designed to prevent

unintentional disinheritance of children by their par-ent-testators. There are two types: In the Massachu-setts type, an omitted child is entitled to an intestateportion unless the omission is intentional. Extrinsicevidence can be heard to show an intended omission.

The Missouri type statute, the second type,provides that the omitted child receives an intestateshare if the child is not mentioned in the testator-par-ent’s Will. Extrinsic evidence is not usually admissi-ble under this type of statute to show intended disin-heritance. The modern trend is to allow evidence ofintent in both situations.132

K. Reformation to Correct a Violation of the RuleAgainst Perpetuities.

A number of states, 25 as of 1999,requirereformation of a Will provision by a court to cure aperpetuities violation,either by statute or judicial deci-

sion.133 Equitable modification allows a mistake to becorrected whether it has been made by the testator orhis or her attorney resulting in a violation of the perpe-tuities rule. In this area,the courts have spoken can-didly that reformation (rewriting the offensive provi-sion) is appropriate.134

L. Correction of Innocent Error.1. Unambiguous Wills, under both R.2d—

Prop. (Donative Transfers) and R.3d—Prop. (Dona-tive Transfers) where it may be cited as persuasive,135

may be reformed to correct defective expression. “Amistake of expression arises when a [Will] inc ludes aterm that misstates the testator’s intention,e.g., thescrivener writes $1,000.00 in describing a cash giftrather than $10,000.00 which was orally expressed tothe scrivener by the client, evidenced in the lawyer’snotes.” 136 By virtue of this at worst,aspirational recog-nition that searches for error, scrivener mistake shouldnot defeat the testator’s intention.

2. In Re Estate of Nager,137 the courtannounced that it is the duty of the court to subordi-nate language of the Will to testamentary intentionwhere there is obvious error. Where the court is“...sure that [it] knows what the [testator] meant [,thecourt has] a right and...duty to subordinate the lan-guage to the intention. In such a case the court mayreject words and limitations,supply them or transposethem, to get at the correct meaning.” 138 “This rule

131 See, as illustrative, Miller v. Dept. of Mental Health,442N.W.2d 617 (Mich. 1989); Matter of Estate of Ferguson,465N.W.2d 357 (Mich. App. 1990). See also Restatement of the Law3d (Trusts),Tentative Draft No. 2 (March 10,1999),§ 50,p. 311,“Others’ duty of support; public benefits,” and seeReporters’(Edward C. Halbach, Jr.) Notes on § 50,pp. 324,355-364.

132 deFuria, supra n.47,p. 28,citing Smith v. Crook,160 Cal.App. 3d 245,248 (Cal. App. 1984); Crump v. Freeman,614 P.2d1096,1098 (Okla. 1980); Note, “Admissibility of Extrinsic Evi-dence to Show Testator’s Intention as to Omission of Provision forChild,” 88 A.L.R.2d 616 (1963). See alsoU.P.C. 2-302(b) (1983),in Colo. 15-11-302 C.R.S., “Omitted Children.” Uniform ProbateCode (UPC) comment to § 2-302(b) provides that “Extrinsic evi-dence is admissible to determine whether the testator omitted [a]living child solely because he or she believed the child to be dead.”Uniformed Laws Annotated, Estate, Probate and Related Laws,vol. 8,UPC § 2-302,p. 322.

133 deFuria, id. pp. 28-29 cites nine states which address refor-mation to correct violation of the rule against perpetuities as of1990. In Colo. see § 15-11-1104 C.R.S. Twenty-five states haveenacted the ULA,Uniform Statutory Rule Against Perpetuitieswith 1990 Amendments,ULA 8B, Estate, Probate & RelatedLaws,pp. 321,364. Section 3 of the Uniform Act reads,“Refor-mation. Upon the petition of an interested person,a court shallreform a disposition in the manner that most closely approximatesthe transferor’s manifested plan of distribution and is within the 90years allowed by Section 1(a)(2),1(b)(2),or 1(c)(2) if: (1) a non-

vested property interest or a power of appointment becomes invalidunder Section 1 (statutory rule against perpetuities); (2) a class giftis not but might become invalid under Section 1 (statutory ruleagainst perpetuities) and the time has arrived when the share of anyclass member is to take effect in possession or enjoyment; or (3) anonvested property interest that is not validated by Section 1(a)(1)can vest but not within 90 years after its creation.” The ULA Com-ment that follows emphasizes that ”[t]his section requires a court,upon the petition of an interested person,to reform a dispositionwhose validity is governed by the wait-and-see element of Section1(a)(2),1(b)(2),or 1(c)(2)so that the reformed disposition is with-in the limits of the 90-year period allowed by those subsections,inthe manner deemed by the court most closely to approximate thetransferor’s manifested plan of distribution....” p. 365. See1999Pocket Parts, p. 57. See alsoRonald C. Link and Kimberly A.Licata, “Perpetuities Reformation in North Carolina: UniformStatutory Rule Against Perpetuities...,” 74 N. C. Law Rev., 1783(1996),cited id., p. 62,§ 3.

134 SeeLangbein & Waggoner, “Reformation of Wills on theGround of Mistake: Change of Direction in American Law? 130Pa. L. Rev. 521,571-77 (1982).

135 R.2d - Prop. (Donative Transfers), supra n.6,§ 34.7,cmt.d; R.3d - Prop. (Donative Transfers),§ 12.1,p. 116.

136 R.3d, id., illus. 4,p. 121.137 Re Estate of Nager, 258 N.Y.S.2d 760,45 Misc. 2d 1050

(N.Y. Sur. N.Y. Co. 1965).138 Id. quoting Phillips v. Davies,92 C.A.N.Y. 199,204. (1883).


makes it possible for our court to give effect to the tes-tator’s obvious and true intention.” 139

3. Scriveners’ errors cannot,however, be cor-rected when the effect of the change alters beneficialinterests unambiguously described in the testament.140

R.3d—Property (Donative Transfers),e.g., reads:

The general law of mistake underwhich a mistake may be significantenough to justify the conclusion thatthe donative transfer [which includesWills] 141 should be set aside orreformed, is incorporated herein byreference and made applicable to bothWills and other donative documentsof transfer.

4. Innocent error, alleged in Erickson v.Erickson,142 permitting the introduction of extrinsicevidence to demonstrate testator intention. In thiscase, the decedent executed a Will a few days prior tohis marriage. It left the bulk of the testator’s estate tohis fiancée. She was not described as his intendedspouse. Connecticut statutes at that time provided thatmarriage subsequent to the execution of a Will termi-nates the Will, unless the Will contemplates the mar-riage and provides for this expectancy. Because theWill was not ambiguous,the Connecticut trial courtrefused to hear extrinsic evidence concerning the tes-tator’s intent.

The court overruled Connecticut JuniorRepublic v. Sharon Hospital,143 stating that “if thescrivener’s error has misled the testator into executing aWill on the belief that it will be valid notwithstandingthe testator’s subsequent marriage, extrinsic evidenceof that error is admissible to establish the intent of thetestator that his or her Will [will] be v alid notwith-standing the [testator’s] subsequent marriage.” 144

Discussed in ACTEC Notes,145 the courtfound no public policy reason why the testator’s intentcould not be introduced where the expression of thatintent is thwarted by “innocent error,” and further thestatute which sought to prevent “subversion” of thetestator’s intent should not be “...blindly [enforcedresulting in a testamentary disposition which] substan-tially misstates the testator’s true intent.” 146

5. R.3d—Property (Donative Transfers)“disapproves” of the plain meaning rule because itexcludes extrinsic evidence of the testator’s intentionabsent ambiguity in the writing147 and by so doing, per-petuates error. The basis on which the plain meaningrule is disapproved is that extrinsic evidence offered tocontradict “...what appears to be plain meaning”issubjected to the clear and convincing evidence stan-dard.148 A higher degree of probability is requiredunder this standard, less than moral or absolute cer-tainty, however, and proof beyond a reasonable doubt,but more than a preponderance of the evidence.149

Illustration 6, R.3d—Property (DonativeTransfers),§ 12.1,illustrates application of this test:

G’s Will devised $1,000.00 to A.Extrinsic evidence, including the tes-timony and files of the drafting attor-ney, show that there was a mistake intranscription and that G’s intentionwas not to devise any property to A.Although earlier drafts of G’s Willcontained the devise to A, there is evi-dence that G had instructed his attor-ney to delete the devise in the finaldraft and that, by mistake, G’s attor-ney failed to carry out G’s instruc-tions. If this evidence satisfies theclear and convincing evidence stan-dard of proof, the Will is reformed todelete the [unintended] devise to A.

139 Id. p. 766,citing numerous New York cases in accord.Statutes may exist that provide relief from the plain meaning rule.A Georgia statute, for example, O.C.G.A. § 53-12-152(b),providesthat where trusts may be divided into two or more separate trusts(or consolidated into a single trust),such division or consolidationmay not result in a violation of the testator’s intent. Applied inBarnes v. NationsBank,N.A., 476 S.E.2d 563 (Ga. 1996),a testa-mentary trust created for the testator’s son as the primary benefi-ciary as well as other issue could not be bifurcated. If the trust wasdivided among the separate beneficiaries, the testator’s intentwould be violated. Such division would “... materially [impair] theinterest of the primary beneficiary.” Discussed in ACTEC Notes,vol. 24,No. 2 (Winter 1998),p. 199.

140 Scarlett v. Hopper, 823 P.2d 435,437 (Or. App. 1992). Thecourt did not decide other questions relating to the authority of the

court to correct scriveners’ errors. See also,Annot. 90 A.L.R.2d924 (1963); Estate of LaGrand, 613 P.2d 1091 (Or. App. 1980).

141 R.3d, supra n.6,§ 12.1(c),p. 115. “This section brings thelaw of Wills into line with the law relating to other donative docu-ments.”

142 Erickson v. Erickson,246 Conn. 359 (August 1998).143 Connecticut Junior Republic v. Sharon Hospital,188

Conn. 1 (Conn. 1982).144 See ACTEC Notes,vol. 24,No. 2 (Winter 1998),p. 198.145 Id.146 Id.147 R.3d, id., § 12.1(d),p. 117.148 Id.149 Id. See§ 12.1(e),standard of proof [required to reform or

modify documents].


M. Correction of Error Under the Uniform Pro-bate Code (UPC I and II).

1. Defects in the execution of a Will can bestatutorily corrected under the Uniform Probate Code§ 2-503 (1990),found in the Colorado Code at § 15-11-503. “Under the U.P.C., a document or writing ona document that was not executed in compliance withthe statutory formalities is treated as if it had beenproperly executed ‘if the proponent of the document orwriting establishes by clear and convincing evidencethat the decedent intended the document or writing toconstitute...the decedent’s Will....’ ” 150

2. The Colorado statute reads as follows:

§ 15-11-503 Writings Intended asWills. Although a Will was not exe-cuted in compliance with § 15-11-502,the Will is treated as if it had been exe-cuted in compliance with that sectionif the proponent of the Will establishes[in formal proceedings] by clear andconvincing evidence that the decedentintended the Will to constitute thedecedent’s Will. 151

3. In Re Estate of Griffis,152 a case involvingthe destruction of a codicil and the consequent revivalby revocation of a Will (not a codicil) and the execu-tion issue that followed, the court wrote, “If the law issuch as to permit an interpretation and applicationresulting in accomplishing the intent of the testator,surely it is the duty of the courts to so hold. Rhetori-cally, is not justice thereby done both to the spirit andletter of the law and to the parties in the cause?”The

appeals court in Griffis held that the trial court erred inconcluding that a revocation of a codicil did not resultin the revival of the decedent’s Will on the ground thatthe revoked instrument,a codicil,is materially differ-ent from a Will. The decedent’s intent in the codicil’sdestruction is obvious and should be supported.

4. The Uniform Probate Code (U.P.C.) pro-motes the correction of drafting errors made in dece-dents’Wills. U.P.C. § 1-102(b)(2),found in the Col-orado Revised Statutes at § 15-10-102(b) C.R.S.,describes the Code’s purposes and rules of construc-tion and includes an obligation “[t]o disco ver andmake effective the intent of a decedent in distributionof his property.” Applied in Strong Bros. Entrs. v.Estate of Strong, a case involving whether or not rea-sonable notice of a claim had been given, the courtwrote, “...both the [Colorado] General Assembly’srules for statutory construction...and case law...directthat statutes be interpreted to achieve a reasonableresult and to avoid an unjust one...” 153

5. There is no limitation in the statute itselfimposing a threshold such as restricting the use ofextrinsic evidence where Wills are unambiguous.

6. Further, Colorado’s adoption of U.P.C.II 154 (noted in § VII, D, p. 321) suggests an increasedliberality in supporting a donor’s intent by admittingwritings determined by the court upon clear and con-vincing evidence to be intended as Wills, to be treatedas such,155 and “[u]nless displaced by the particularprovisions of [the Colorado Probate Code] the princi-ples of law and equity supplement its provisions.” 156

Fraud and evasion resulting in the circumvention ofthe provisions or purposes of the Code resulting ininjury may be addressed by the court where an action

150 Restatement Third—Property, supra n.6,p. 115.151 15-11-503 C.R.S., effective July 1, 1995. SeeDavid K.

Johns,Probating Flawed Wills: Colorado’s New C.R.S. § 15-11-503,” The Colo. Lawyer, vol. 25,No. 11,1996,p. 85ff. See alsoBruce H. Mann,“Formalities and Formalism in the Uniform Pro-bate Code, 142 U. of Pa. L. Rev., 1033 (1994); Adam J. Hirsch,“Inheritance and Inconsistency,” 57 Ohio St. L. J., 1057 (1996);Lloyd Bonfield, “Reforming the Requirements for Due Executionof Wills: Some Guidance from the Past,” 70 Tul. L. Rev., 1893(1996); seeDouglas Miller, “Will Formality, Judicial Formalism,and Legislative Reform: An Examination of the New Uniform Pro-bate Code,” “Harmless Error” Rule and the Movement TowardAmorphism - Part 2: Uniform Probate Code § 2-503 in a counterproposal,43 Florida L. Rev., 599 (1991),and Part 1, 43 Florida L.Rev., 167 (1991). See alsoJohn H. Langbein,“Substantial Com-pliance With the Wills Act,” Harvard L. Rev., vol. 88,No. 3 (Jan.1975),p. 489.

152 Re Estate of Griffis, 330 So.2d 797 (Fla. App. 1976).153 Strong Bros. Entrs. v. Estate of Strong, 666 P.2d 1109,1112

(Colo. App. 1983). The Uniform Probate Code in § 2-301,vol. 8,

p. 317,provides that “[i]f a testator’s surviving spouse married thetestator after [he or she] executed [his or her] Will, the survivingspouse is entitled to receive as an intestate share no less than thevalue of the share that [he or she] would have received if the testa-tor had died intestate ... if ... it appears from the Will or other evi-dencethat the Will was made in contemplation of the testator’smarriage to the surviving spouse.”

154 Changes made to Colorado’s Uniform Probate Code rec-ommended by the Commissioners of Uniform State Laws, eff. inColo. 7-1-95,discussed in David K. Johns,“Probating FlawedWills: Colorado’s new C.R.S. § 15-11-503,The Colorado Lawyer,Vol. 25,No. 11 (Nov. 1996),p. 85.

155 “15-11-503. Wr itings intended as wills.Although a Willwas not executed in compliance with section 15-11-502,the Will istreated as if it had been executed in compliance with that section ifthe proponent of the Will establishes [in formal probate proceed-ings] by clear and convincing evidence that the decedent intendedthe Will to constitute the decedent’s Will.”

156 Section 15-10-103 C.R.S.; § 1-103 U.P.C.


is brought within five years from the date of discov-ery.157 In addition, fraud practiced on the testator dur-ing his or her lifetime remains actionable.

7. Determining the intent of the testator (asopposed to following the strict meaning of the wordsused by the scrivener) appears to be a priority of theCode.158 Somewhat less clear, however, is whetherunder circumstances where the instrument is unam-biguous on its face, determination of intent can begleaned from sources other than the Will itself.159 PostU.P.C. Code case law suggests that this continues to bea burden where the testator’s intent is not competentlyexpressed in the Will itself.160

8. The harsh rule is,however, not consistent-ly applied, and exceptions to the Plain Meaning Ruleperiodically surface. For example, the doctrine of pre-sumed intent may apply where expressions in the Willallow reasonable inferences to be made.

a. In Matter of Estate of Sandstead,161

for example, the Colorado court held that it could giveeffect to the testator’s intention by implication wherethe Will’ s language suggests it.

b. In Matter of Estate of Palizzi,162 theColorado Supreme Court held that where an unam-biguous Will is silent as to whether water rights areincluded with specifically devised real estate, the courtmay imply a devise of the water rights after examiningall of the surrounding facts and circumstances anddetermining that such rights are necessary for the ben-eficial use of the land. Extrinsic evidence, however,cannot be used to assist the court. The court mustimply their presumption based upon the Will itself and“surrounding facts and circumstances,” whatever thatmay mean.

c. Exceptions in Colorado to the PlainMeaning Rule are further demonstrated in cases where

the testator’s words may be transposed, supplied orrejected. A number of Colorado cases,as well as casesin other jurisdictions,affirm this view.163 In Mulcahy v.Johnson,164 the court wrote, “The words used in a Willmay be changed or rejected if they cannot be other-wise rationally construed.”

d. Words of substitution can be used.“Her heirs ‘or’ assigns forever,” was changed by thecourt in Re Rochester’s Estate.165 The conjunction“and” her heirs was substituted for the presumablymisused “or.”

e. “And where it is evident that a testatorhas not expressed himself as he intended and supposedhe had done, and the defect is produced by the omis-sion of words, and it is certain beyond reasonabledoubt what particular words are omitted, the courtmay supply them by intendment and construe the Willas if such words had been inserted by the testator.” 166

9. Extrinsic evidence may be heard in Col-orado following the Uniform Probate Code, eventhough the testator’s language is clear on its face but issusceptible to more than one meaning, the ambiguitybeing latent.167 In Estate of Jenkins,168 the issue consid-ered by the court related to whether the “stranger tothe adoption”rule in effect in 1944 when the decedentexecuted his Will, applied in 1995 when the ColoradoCourt of Appeals construed the trust created by thedecedent’s testament. The instrument did not refer toadopted children as beneficiaries, only “children.”The ambiguity allowed testimony to be given.169

N. Corrections to Gain Tax Benefits.Still another exception to the doctrine that

there shall be “no reformation of Wills,” described ingreater detail in Part Two (Sections VIII and IX) ofthis manuscript, include reformation of a Will to gaintax benefits.170 The public fisc is an undesired benefi-

157 Section 15-10-106 C.R.S.; U.P.C. § 1-106. The Uniformlaw shortens the period to five years “after the ... commission of thefraud.” See In re Estate of Kubby, 929 P.2d 55 (Colo. App. 1996).Forgery, fraudulent concealment,misrepresentation are illustrative.Extrinsic evidence was allowed to show, by clear and convincingevidence, forged signature, undervaluation of estate by the admin-istrator, and breach of duty to deal fairly. See Matter of Olivas’Estate, 643 P.2d 1031 (Ariz. App. 1982).

158 See, e.g. Matter of Estate of Palizzi, 854 P.2d 1256 (Colo.1993); In re Griffis Est.,330 So.2d 797 (Fla. App. 1976); Gonzalesv. Sup. Ct. Pima Co. Az.,570 P.2d 1077 (Az. 1977).

159 Intent of the testator should [must?] be ascertained fromthe instrument itself and given effect. Mass. Co.,Inc. v. Evans,924P.2d 1119 (Colo. App. 1996) reh. den.,cert. den.

160 Mass. Co.,Inc., id.; Matter of Est. of Holmes,821 P.2d 300(Colo. App. 1991) cert. den.; Matter of Bennett,789 P.2d 446(Colo. App. 1989).

161 Matter of Estate of Sandstead, 897 P.2d 883 (Colo. App.

1995).162 Palizzi,supra n.158.163 See In re Rochester’s Est.,supra n.108; In re Boyle’s Est.,

221 P.2d 357; 36 A.L.R.2d 1106; Brasser v. Hutchison,549 P.2d801 (Colo. App. 1976). See also In re Estate of Beck, 649 N.E.2d1011,1014-1015 (Ill. App. 5 Dist. 1995),in which a word wasstricken. “Lutheran Orphan Home, Paris, Missouri” was changedby the court voiding “Paris” because no such home existed in thatcity, but otherwise did exist in that state in Des Peres.

164 Mulcahy v. Johnson,252 P. 816 (Colo. 1927).165 Rochester’s Estate, supra n.108.166 Bacon v. Nichols,105 P. 1082 (Colo. 1909).167 See Matter of Estate of Jenkins,890 P.2d 188 (Colo. App.

1994) reh. den. cert. granted, aff ’d 904 P.2d 1316 (Colo. 1995).168 Id.169 See Section IV, this manuscript.170 Discussed in Langbein and Waggoner, id., p. 550; R.3d -

Prop.,§ 12.2,pp. 165 ff.


ciary. A constructional preference suggests this recog-nition,171 although no state statutes have been “... foundthat expressly codify a constructional preference for[achieving] favorable tax consequences...the underly-ing rational of a number of state statutes [and caselaw] supports [such] recognition....” 172

In Estate of Mittleman v. Commr.,173 the federalcourt “construed” a testamentary trust which provided“f or the proper support, maintenance, welfare andcomfort of [the testator’s] wife for her lifetime...[to be]a right to all the income for life,” 174 necessary to quali-fy under Q.T.I.P. requirements for the marital deduc-tion.

O. Correction of Error by “Construing” NotReforming.

The Wills Acts’ attestation requirements per-petuate the ‘no reformation of Wills rule,’ but is cir-cumvented, and reformation is accomplished by courtshearing extrinsic evidence anyway, notwithstandingthat no ambiguity in fact exists. Under recognizedexceptions described in Snideand Gibbs175 the courtssubvert the “no reformation of Wills” doctrine by“construing” not “reforming” Wills;176 and “amend”Wills citing public policy where Wills violate perpetu-ity rules,177 and where disfavorable tax consequencesinjurious to beneficiaries otherwise will occur.178

The call of Langbein and Waggoner in theirscholarly “Reformation of Wills...” article, citedthroughout this manuscript, a 1982 treatise, headnotes“[t]he [strongly felt judicial] impulse [by the courts] torelieve against mistake.” 179 R.3d - Prop., (DonativeTransfers),profusely cited throughout this manuscript,codifies this summons.

VI. CORRECTION OF DRAFTING ERR ORS:REFORMATION OF WILLS—THEINTRODUCTION OF RATION ALISM:A. Restatement Third—Property (Donative

Transfers),§ 12.1,reads:

§12.1 Reforming Donative Docu-ments to Correct Mistakes—A dona-tive document,though unambiguous,may be reformed to conform the textto the donor’s intention if the follow-ing are established by clear and con-vincing evidence:

(1) that a mistake of fact or law,whether an expression or inducement,affected specific terms of the docu-ment; and

(2) what the donor’s intention was.

Direct evidence of intention contra-dicting the plain meaning of the textas well as other evidence of intentionmay be considered in determiningwhether elements (1) and (2) havebeen established by clear and con-vincing evidence.

B. Language is Subjective.1. Wigmore, in his analysis of the plain

meaning rule, acknowledges that there is individualand agile meaning in the use of words. “[A] f allacy,”he writes, “consists in assuming that there is or evercan be some one real or absolute meaning [of words].In truth, there can be only some person’s meaning:and that person,whose meaning the law is seeking, isthe writer of the document.” 180

A husband, for example, may refer to his wife as“mother,” and a wife may refer to her husband as“papa” or “dad.” No meaning is plain. And a sup-posed ordinary meaning of words used by a donor isarchaically presumed.181

Words worsen with use, i.e., lose their precision,their original, limited and therefore more precise mean-

171 R.3d—Prop., supra n.6, § 11.3,p. 81; § 11.3(c)(4),“theconstruction that gives more favorable tax consequence ...” p. 82.SeeSteve R. Akers,“Reformation Proceedings in Post-Mortem TaxPlanning,” ACTEC Notes,vol. 17,No. 4 (Spring 1992),p. 254.

172 R.3d - Prop., id., § 11.3,cmt. J, p. 96. And see Putnam v.Putnam,316 N.E.2d 729,737 (Mass. 1974). Other Massachusettscases are set out in R.3d - Prop.,§ 11.3,item 7,cmt. k,p. 105. Inaccord, see Estate of Branigan, 609 A.2d 431,437 (N.J. 1992),“probable intent [of most testators is] to save [paying] taxes.”

173 Estate of Mittleman v. Commr., 522 F.2d 132 (D.C. Cir.1975). Mittleman is discussed in Langbein and Waggoner, infran.192,p. 552. Other tax cases are set out in the Langbein and Wag-goner article, n.140.

174 Mittleman is described with other cases in R.3d - Prop.,supra n.6,§ 11.3,cmt. k,pp. 105-111.

175 Snide, infra n.197,and Gibbs,supra n.5.176 Gibbs, id., n.90. A correct term was inserted by the court

without pretense of “construing” the instrument. Discussed byLangbein and Waggoner, pp. 555 et seq.,infra n.192.

177 Id.178 Id.; and see ACTEC Notes,vol. 17,No. 4 (Spring 1992),

p. 254.179 Langbein and Waggoner, infra n.192.180 9 Wigmore, Evidence, § 2462 at 198 (J. Chadbourn rev.

1981). See alsoArthur L. Corbin,“The Interpretation of Wordsand the Parol Evidence Rule,” 50 Cornell L.Q. 161 (1965).

181 See R.3d - Prop., supra n.6, § 10.2,cmt., p. 7. Fellows,supra n.18,refers to this reality as “[t]he imperfect symbolism oflanguage.” p. 634.


ings. By extension of meaning, the word “as” maybecome a synonym for “because;”the overused term“in depth” is now synonymous with shallow; the adverb“basically,” a hollow term used as an introduction to amonologue which follows demonstrating how little thespeaker in fact knows about the subject,lacking com-prehension about the fundamentals of the subject beingaddressed, evidences a worsening of our language.

2. The law of this era, reflected first inRestatement Second—Property (Donative Transfers),§ 33.1,cmt. g,182 and then in Restatement Third—Prop-erty, (Donative Transfers),183 and in Restatement Third—Property, Trusts,184 looks at both the text of donativeinstruments and extrinsic evidence as well in deter-mining a donor’s intent.185 The Restatementsadopt theposition that “...substantial compliance with the [Will]formalities is sufficient...[to allow equity to reform theinstrument,provided that the evidence of the testator’sintent is shown by clear and convincing evidence].The proposition that the text of a Will can be reformedrepresents a minority but growing view.” 186 Surround-ing circumstances,skill of the drafter, and post execu-tion statements and events may be relevant as theyrelate to probable intent.187

Assume, for example, that T executed a Willdevising his residuary estate to Althea and Henry, twofriends of T. After T’s death, Henry died without

issue. At his funeral, T told a mourner that Altheawould now be the sole beneficiary of his estate. T’sheirs were three nephews. T told several friends thathe did not like his kin,seldom saw them and intendedto leave them nothing.188

The extrinsic evidence of T’s intent under R.3d—Prop. may be considered by the court in establishingT’s intention to give his entire estate to Althea. Intes-tacy and gifts over to T’s kin,whom he did not intendto benefit, is thereby avoided.189

C. Erosion of the “No Reformation of Wills”Rule—Taff, Engleand Snide.

1. Courts have, without consistency, howev-er, inserted language in Wills where omissions haveoccurred and reformation was needed. They haveused the term “construction” in many of these casesrather than the term “reformation,” construing omittedlanguage by implication rather than using extrinsicsources. Waggoner,190 for example, cites Dorson’sEstate191 as illustrative.

2. Courts, in order to “reform” Wills “...areunder pressure [in the modern era where values havechanged but the language of the law has not caught up]to find ambiguity where none exists because the con-cept of ambiguity imports a concept of remedy that ispermissible under traditional thinking about what the[State’s] Wills Act requires.” 192

182 Restatement Second - Property (Donative Transfers),§ 33.1,cmt. g.

183 Restatement Third - Property, (Donative Transfers), supran.6, § 12.1,p. 115.

184 Restatement Third - Property, Trusts,Tentative Draft No. 1,April 5, 1996,§ 13,p. 269.

185 Id., § 10.2,pp. 6,9. The Restatement of the Law - Trusts,Tentative Draft No. 1,(April 5, 1996),p. 269.

186 R.3d - Prop., id., § 12.1,p. 134,cases set out,see Rptrs.cmt., n.1, § 11.2,p. 63. See also Brinker v. Wobaco,610 S.W.2d160 (Tex. Civ. App. 1980),set out in Waggoner, supra n.19,p. 616;Wilson v. First Florida Bank,498 So.2d 1289 (Fla. Ct. App. 1986);Estate of Ikuta,639 P.2d 400 (Haw. 1981); McCauley v. Alexander,543 S.W.2d 699 (Tex. Civ. App. 1976); Est. of Lohr, 497 N.W.2d730 (Wis. Ct. App. 1993). See also R.2d - Prop.,(Donative Trans-fers), § 34.7,cmt. d, supra n.182; and Matter of Provenzano,N.Y.L.J., 12-13-82 (Sur. Ct.). The doctrine that allows reformationof “... donative documents other than Wills is well established.Equity has long recognized that deeds of gift, inter vivos trusts,lif einsurance contracts,and other donative documents can be reformed[where a mistake of fact or law can be shown as well as the donor’sintention,upon satisfactory proof].’ ”

187 Id., § 10.2(d) and (e),pp. 8-9.188 This is a variation of R.3d - Prop. illust. supra n.6,§ 10.2,

p. 11.189 The rule that applies when the Will does not otherwise pro-

vide and extrinsic evidence is not admitted, or no evidence of intentif such evidence is offered, that “[i]f the residuary clause is in favorof more than one person and if that clause does not create a classgift, the conventional view is that the death of one or more, but not

all, of the residuary devisees before the death of the testator causesan intestacy as to the share intended for the deceased devisee.”R.3d - Prop., id., § 10.2,p. 20. Not supporting this view, see interalia, Estate of Jackson,471 P.2d 278 (Az. 1970); Corbett v. Skaggs,207 P. 819 (Kan. 1922); Niemann v. Zacharias, 176 N.W.2d 671(Neb. 1970); UPC § 2-604(b) (1993); UPC § 2-606(b) (1969).Supporting the conventional view, see Estate of Levy, 415 P.2d1006 (Okla. 1966); Swearington v. Giles,565 S.W.2d 574 (Tex.Civ. App. 1978); and Est. of Mory, 139 N.W.2d 623 (Wis. 1966).

190 Waggoner, supra n.19,p. 640.191 In re Dorson’s Estate, 196 N.Y.S.2d 344 (Sur. Ct., N.Y.

Co., 1959). “[C]ourts have ... held that in seeking to determine theintent of the testator, [the court] may ‘inject words and limitations,supply them or interpose them to get at the correct meaning,’ ” (p.346),e.g., courts may reform Wills. Waggoner, id., p. 640,contraIn re Estate of Calabi, 196 N.Y.S.2d 443 (Sur. Ct. 1959); Wag-goner, id., p. 641. See also Brinker v. Wobaco,supra n.186.

192 Langbein and Waggoner, 130 U. Pa. L. Rev., 521, No. 3(Jan. 1982). SeeRobert J. Bonner, “Wills - Admissibility ofExtrinsic Evidence ...,” supra n.47. Development of exceptions tothe Plain Meaning Rule is briefly discussed in this 1961-62 article,pp. 445-446. Exceptions to the general rule may be appliedbecause a result may be desired so that bequests can be made to theperson for whom intended, and strangers not unjustly enriched;ambiguities may be fashioned so extrinsic evidence may be heard,citing Moseley v. Goodman,195 S.W. 590 (Tenn. 1917); Miller’ sEstate, 26 Pa. Super. Ct. 443 (1904); Groves v. Culph,31 N.E. 569(Ind. 1892); Perhaps these early cases are prescient of RestatementThird’s current message, supra n.6.


Estate of Taff193 and Estate of Engle194

illustrate what Langbein and Waggoner195 refer to aslaudable, but nonetheless “doctrinal slight of hand.”Two Wills, “utterly unambiguous,” were construedafter hearing extrinsic evidence of the testator’s intent,and preferred the testator’s probable intent over theWill’ s mistaken language.196

In the New York case, In re Snide,197 hus-band and wife inadvertently executed each other’s Wills.Husband signed the Will intended for his wife, and sheexecuted his. In a four to three decision,following hus-band’s death, his Will was admitted to probate.

“[W]e decline the formalistic view,”the court wrote, “that...intent attach-es irrevocably to the document pre-pared, rather than the testamentaryscheme it reflects....[and] the dispos-itive provisions in both Wills, exceptfor the names,were identical....[W]hat occurred is so obvious, andwhat was intended so clear...[not toallow probate of the Will is inappro-priate]...[W]e decline [such an]

unjust course.” 198 The court express-ly reformed the Will but treated thecase as an exception, not calling the“no reformation of Wills” rule intoquestion. 199

VII. REFORMATION AS EXPRESSED INRESTATEMENT 3d—PROPERTY(DONATIVE TRANSFERS).A. Subjective intent of a testator, determined by

the plain meaning rule, with extrinsic evidenceallowed only where ambiguity in the language used bythe testator’s drafter, has led to the perpetuation oferror,200 is now increasingly recognized.201 The formal-ities required by the English Wills Act202 and its U.S.counterparts have caused this result,singularly apply-ing to testaments. Other revocable transfers,includinglif e insurance, revocable trusts,and joint accounts areviewed as nontestamentary, and therefore not subjectto the same rules notwithstanding that they are func-tional equivalents.203

B. Reformation has long been applied to non-probate transfers in cases where reform is deemedappropriate.204 R.3d—Prop. extends this doctrine to

193 Estate of Taff, 63 Cal. App. 3d 319,133 Cal. Rptr. 737(1976).

194 Estate of Engle, 74 N.J. 287,377 A.2d 892 (1977).195 Langbein and Waggoner, supra n.192,pp. 521-522.196 Id., p. 522.197 In re Snide, 52 N.Y.2d 193,418 N.E.2d 656,437 N.Y.S.2d

63 (1981). Discussed in cmt.,“Mistakenly Signed Reciprocal Wills:A Change in Tradition After In re Snide,” 67 Iowa L. Rev. 180(1981); and in Fellows,supra n.19,p. 611. See also Estate of Porat,N.Y.L.J. 2-18-86,(Sur. Ct.),p. 18,a case similar to In re Snide.

198 Id. 52 N.Y.2d at 196-97,418 N.E.2d at 657-58,437N.Y.S.2d at 64-65. Discussed in Dukeminier and Johanson,supran.15,pp. 214-215. See also contra following the formalistic view,In re Pavlinko’s Estate, 148 A.2d 528 (Pa. 1959); J. Musmanno,dis-senting, wrote that the majority of the court “... does not make aserious effort to effectuate [the testator’s] expressed intent. Themajority [of the court] contents itself [by] saying that ... ‘the result[is] very unfortunate.’ But the results do not need to be unfortunate.[The residuary beneficiary] is being turned out of Court when thereis no need for such a pre-emptor eviction.” Case discussed inDukeminier and Johanson,supra n.15,p. 208,dissent p. 212.

199 Seediscussion in Langbein and Waggoner, supra n.192,p. 522.

200 SeeMary Louise Fellows,supra n.19,p. 611.201 Id., p. 619. Imputed intent is replacing subjective intent.

E.g., courts will impute a donor’s intent to provide for his or herfamily, a spouse over other relatives,blood relatives over others,absent contrary evidence, pp. 621-622. See Brinker v. Wobaco,supra n.186,pp. 163-64. R.3d - Prop., supra n.6,§ 12.1,quotingfrom Brinker, writes: “If , by mistake, an instrument as written failsto express the true intention or agreement of the parties,equity willgrant reformation of the instrument so as to make it correctlyexpress the agreement actually made. The rule applies to express

inter vivos trusts as well as to other written instruments. [Citationsomitted.] The mistake may be shown by parol evidence. [Citationsomitted.] And although a mutual mistake of the parties is requiredin most instances,if a settlor of a trust receives no consideration forthe creation of the trust, a unilateral mistake on his part is suffi-cient. [Citations omitted.] It is immaterial whether the mistake beone of fact or law. Any mistake of the scrivener which could defeatthe true intention may be corrected in equity by reformation,whether the mistake is one of fact or law. [Citations omitted.] Thefact that the written instrument is couched in unambiguous lan-guage, or that the parties knew what words were used and wereaware of their ordinary meaning, or that they were negligent in fail-ing to discover the mistake before signing the instrument,will notpreclude relief by reformation. [Citations omitted.]

202 7 Will. 4 & 1 Vict. ch. 26,“An Act for the Amendment ofthe Laws with Respect to Wills (Wills Act),” 1837.

203 Fellows,supra n.19,p. 615. Fellows observes that the strictformalities originating in the English Wills Act have been modifiedby UPC § 2-502 (publishing of a Will is not required, nor is testa-tor’s request that the attestors sign the document and that it besigned at its end. The attestors no longer need to sign in the pres-ence of the testator or of each other). (SeeULA, vol. 8,1997 Supp.Pamp. § 2-502,pp. 155-156); Fellows, id., p. 615.

204 Langbein and Waggoner, supra n.192,write that “... in non-probate transfers when the clear-and-convincing evidence standardhas been satisfied [that] clauses omitted by mistake have beeninserted, [cases appear in Langbein and Waggoner, n.13,p. 526];mistaken designations of beneficiaries have been corrected [seen.14,p. 526]; the extent of a beneficiary’s interest intended to havebeen given has been determined [see n.16,p. 526]; the subject mat-ter of the gift has been determined where it is otherwise not clear[seen.15,p. 526],all have been corrected by reformation.


Wills as well.205 And a document,including a Will,which is unambiguous,may be reformed under R.3d -Prop. where the evidence is clear and convincing thatit should be.206 A showing may be made that thedonor’s intention differs from the terms of the dona-tive document.207 The R.3d—Prop. doctrine may beapplied both to correct mistakes208 and to achieve adonor’s tax objectives.209

C. Mary Louise Fellows cites Goff v. Goff 210 toillustrate the importance of imputing intent by refer-ence to surrounding circumstances when a questionedWill is executed. In Goff, the testator’s Will left hisestate to his brother and nephews. He wrote, “I am notmarried and have no children....I give...to any personwho might contest this Will the sum of $1.00 only, inlieu of any other share or interest in my estate, eitherunder this Will or through intestate succession.” 211 Fel-lows writes that “....the testator had been married for alittle over a month when his wife instituted a divorceaction....His wife was pregnant [at the date of the mar-riage]. The child was [reared] near the testator’s resi-dence for eight to ten years before the testator’s ex-wife remarried....Testator denied paternity [and wasdisinterested in his son and in his son’s children].” 212

Rather than construing the testator’s languageto intend disinheritance, the court “... used it to sup-port the incredible finding that the testator did notknow that his son’s children existed.” 213

D. The inherent unfairness resulting from theapplication of the plain meaning rule which preventsreformation of a Will except in certain circumstancesevidenced in cases involving ambiguity such as Sammons214 and Russell,215 has given rise to the rule’scircumvention by courts of equity in rather recent

decisions.216

E. Rationalism evidenced in the R.3d—Prop.217

provides that a:

Donors’ [which includes testators/rixs’] intentions control the meaning ofdonative documents [which includes aWill] and [those intentions are to be]given effect to the maximum extentallowed by law.218

F. Matter of Estate of Ikuta219 was prescient inanticipating the R.3d—Prop. rule. Reformation of thedecedent’s Will w as allowed by changing the term“oldest” to “youngest” in the trust that the will created,such term being the date for determining when thetrust would terminate—when the “youngest” childattained age thirty (30).220 The Ikuta Will w as notambiguous. Its plain meaning called for no trust—theoldest child was already age thirty (30). The courtadmitted extrinsic evidence to determine the testator’s“true intent.” 221 The court wrote:

The purpose of the policy against refor-mation of a Will is to prevent distortionof the testator’s intent. Dr. Ikuta’s Willwas reformed to reflect the testator’strue intent.” 222

While the court relied on Hokama v. RelincCorp.,223 as precedent,an ambiguity was found to existin the language of a contract, and for that reason theHokamacase is less than a perfect precedent. Howev-er, the court in this case said:

205 Donative documents include Wills in R.3d - Prop., supran.6,and “the basic theme [in this Restatement] is that the intentionof the donor [of a donative document including a Will] and theobjectives that it appears the donor was endeavoring to achieve -should be the touchstone in interpreting the instrument,or, wherenecessary, modifying or reforming it.” Seeforward, p. IX, and seep. XXI, Fellows,supra n.19,and her discussion of the evolution ofthe reformation doctrine, p. 636.

206 Id., § 10.2,p. 14.207 Id., § 10.2,p. 14,and ch. 12.208 Id., § 12.1,pp. 113 ff.209 Id., § 12.2,pp. 165 ff.210 Goff v. Goff, 179 S.W.2d 707 (1944); Fellows, supra n.19,

pp. 638-640.211 Goff, id. p. 708. This language was not found to demon-

strate an intention to omit heirs. See also Estate of Gardner, 580P.2d 684,685,147 Cal. Rptr. 184,185 (Cal. 1978).

212 Goff v. Goff, id., p. 710.213 Fellows, supra n.19, pp. 638-639; Goff v. Goff, supra

n.210,p. 708.214 Sammons v. Elder, 940 S.W.2d 276 (Tex. App. Waco 1997).215 Estate of Russell,supra n.54.

216 Estate of Taff, supra n.183,Estate of Siegel, 377 A.2d 892(N.J. 1977). Taff and Siegel are discussed in the excellent article byLangbein and Waggoner, supra n.192.

217 Restatement of the Law 3d—Property, supra n.6. Restate-ment of the Law - Trusts,supra n.184,§ 25,p. 511.

218 R.3d - Prop.,id., § 10.1,p. 3. The meaning and effect of aninstrument and donative document,including a Will or trust, is tobe determined by the donor’s intention. The lack of wisdom,fair-ness and reasonableness of a donor’s intent (unless it is contrary topublic policy, id., § 10.1,p. 5),does not empower a court to alter itseffect. (Id., § 10.1,p. 4). Rights of spouses and creditors, unrea-sonable restraints on alienation of property, or marriage; racial orother impermissible restrictions; provisions encouraging illegalactivities; encouragement of separation or divorce, are illustrativeof areas where public policy imposes values that may not be avoid-ed by freedom of testation. See R.3d—Prop.,id., § 10.1(c),p. 5.

219 Matter of Estate of Ikuta,639 P.2d 400 (Haw. 1981).220 Id., p. 405.221 Id., pp. 402,406.222 Id., p. 406.223 Hokama v. Relinc Corp., 559 P.2d 279,283 (1977),Ikuta,

id., p. 406.


[Because] we have found [that] anambiguity exists in these contracts,itsproper means of construction remainsto be determined as a matter of law.We recognize that language at its bestis always a defective and uncertaininstrument,that words do not definethemselves. Therefore, it is invariablynecessary before a court can give anymeaning to the words of a contractand can select one meaning ratherthan other possible ones as the basisfor the determination of rights andother legal effects,that extrinsic evi-dence shall be heard to make the courtaware of the “surrounding circum-stances,” including the persons,objects, and events to which thewords can be applied and whichcaused the words to be used.224

G. R.3d—Prop., (Donative Transfers), has for-mally introduced rationalism into modern law. Thefirst volume of the text has as its basic theme “... thatthe intention of the donor—the objectives that itappears the donor was endeavoring to achieve—should be the touchstone in interpreting the instrumentor, where necessary, modifying or reforming it.” 225

What are we to do when an “...instrument[is] fashioned without skill,or [has] been predicatedon an incomplete understanding...or is disturbed byother surrounding circumstances[?]”226

The historic approach has encouraged“...extreme hesitancy to go beyond the text of aninstrument...,” beyond its literal meaning; a presump-tion has applied “...that a donor who used a lawyer was

completely [and competently] served and thereforemust have intended what the words literally said.” 227

The R.3d—Prop.affirms a conclusion that“...it is irresponsible to defer to literal meaning whenthe circumstances indicate [that] something else [is]meant.” 228 Correctable errors, therefore, both in theexecution of the document,229 or in its expression,230 arenot inappropriately made.

R.3d—Prop. abandons the earlier era’splain meaning rule at least to the extent that applica-tion of the rule excludes extrinsic evidence of thedonor’s intention. The objective of avoiding mistakenor fraudulent evidence—which the plain meaning ruleprovided—is overcome by contradictions of whatappears to be a plain meaning with such extrinsic evi-dence being subjected to a clear and convincing evi-dence standard under the modern view.231

The policies of the R.3d, both Property(Donative Transfers) and Trusts,are “...to treat func-tional equivalents similarly, and not to allow choice ofform either to provide an escape from serious, sub-stantive policies or to cause the loss of properly rele-vant aids in essentially constructional matters.” 232

Wills and revocable trusts,for example, have longbeen similarly treated in this country’s transfer tax andincome tax systems.233

Applying the plain meaning rule and arequirement of ambiguity in language is a threshold tohearing extrinsic evidence which may enlighten thedecision-maker as to the writer’s probable intent to asingle document—a Will—is unrealistic when itsfunctional equivalents require no such barrier. Theavoidance of these barriers evidenced in Restatements3d refresh the law by making possible the probableintent of the decedent to be heard—not secreted byadherence to form that gives death to substance.

224 Hokama,id., p. 283,citing 3 Corbin,Contracts,§ 536,pp.27-28 (emphasis added in Hokama).

225 R.3d - Prop.,supra n.6,Forward, p. IX.226 Id., p. X.227 Id.228 Id., p. X.229 Id., p. 115.230 Id., pp. 115,116.

231 Id., § 12.1(d),p. 117. Clear and convincing evidence isrequired as proof as opposed to the normally used “preponderanceof the evidence”test. These two standards are used in proving evi-dence in civil cases. Id. (e),p. 117.

232 Restatement of the Law 3d - Trusts,supra n.217,p. 511.233 Edward C. Halbach, Jr., Reporter of R.3d - Trusts,supra

n.184,cites I.R.C. §§ 671-677; §§ 2036 and 2038 and § 2511; Treas.Regs. § 25.2511-2(c) and § 2652(a),as illustrative, id., p. 511.


PART TWO

VIII. MODIFICA TION OF WILLS TOACHIEVE THE TESTATOR’SPROBABLE TAX OBJECTIVES .

A. Estate of Bosch v. Commr.234 holds that, forfederal tax purposes,in determining the effect of statelaw on questions of property rights, where there hasbeen no decision by the highest court of the state, theService must determine what it finds to be state lawfrom the viewpoint of the state’s highest court, i.e.,what would the state’s highest court probably find?

Bosch stands for the proposition that a probatecourt decision may be ignored when determining fed-eral tax consequences,even when that order is final, ifthe decision is determined by the Service to be con-trary to state law.235

Where the state’s highest court has citedAmerican Law Institute’s (ALI’s) Restatements asauthority—where state law determined by the state’shighest court does not exist, can one responsibly arguethat the Restatements’expressions are reasonably con-sidered as part of the state’s common law?236 MayR.3d—Property (Donative Transfers), § 12.2,be citedas authority to modify donative documents (including

Wills) to achieve the testator’s tax objectives becausethe state’s highest court history (assuming this decla-ration is demonstrable) suggests that this is the highcourt’s custom?

B. Jonathan G. Blattmachr writes in his manu-script “Failed Estate Planning Arrangements,” “...thatboth [the I.R.S.] and the Federal courts are bound by alocal court determination (even if [the ruling is] con-trary to state law if it [is] rendered before the taxingevent).” In an estate taxing event this would require apre-death ruling. Rev. Rul. 73-142,1973-1 C.B. 405,addresses this. In his manuscript, Blattmachr con-cludes that “[W]here it is [determined] prior to the tax-ing event that the language used in the document maynot achieve the [testator’s] intended tax result,a locallaw construction prior to the [taxable] event shouldbind the I.R.S. so [that] the intended result isachieved.” 237

C. A donative document,including a Will, may,under R.3d—Prop. (Donative Transfers), be modifiedto achieve the donor’s intention concerning taxes. Theterm modification is used in cases where inartful lan-guage used by the testator adversely affects his or herprobable tax objective (such as minimizing estatetaxes),and “...does not necessarily relate back to the

234 Estate of Bosch v. Commr., 387 U.S. 456 (1967); see also71 T.C.M. 1709 (1996). In P.L.R. 9834027,however, a statecourt’s construction of a poorly drafted will fleshed out the reduce-to-zero clause and optimized the estate tax unified credit. TaxManagement,Estates,Gifts & Trust Jo., (vol. 24,No. 1,Jan. 1999,p. 34),summarized the ruling as follows: “D’ s will left his widow,W, a share in trust equal to the amount of the decedent’s unifiedcredit in existence at the time of his death. W had the right to theincome from the trust,and to invade principal for her health,edu-cation, support and maintenance. The residue of D’s estate passedoutright to W. Upon petition by W, the local probate court statedthat D’s gift of “an amount equal to the unified credit” should beconstrued as if it had said:“the largest amount permitted to pass atDecedent’s death that will not result in the imposition of a FederalEstate Tax with respect to his estate, after allowing for transfersmade during his lifetime and any credits and deductions permittedto enable his estate to take full advantage of the maximum value ofassets sheltered by the unified credit provision of the Internal Rev-enue Code.” The IRS agreed, despite the fact that the decision ofthe probate court is not binding for tax purposes. Commr. v. BoschEst.,387 U.S. 456 (1967). The IRS noted that applicable state law(Florida),as construed by the highest court of that state, makes theintent of a decedent,as expressed in his will,the fundamental issuein determining the effect of the language of D’s Will. Therefore,the IRS ruled that the probate court’s construction of the Will wasconsistent with applicable state law, and as such, should be taken inaccount in measuring the amount passing to the trust for W.” Fed-eral law determines what property rights are taxed but state lawgenerally determines what those rights are. Merrill v. Fahs,324U.S. 308,65 S. Ct. 655 (1945). Regarding the right to amend an

irrevocable life insurance trust,see Prob. Pract. Rptr., vol. 11,No.5 (May 1999),which cites PLR 9847025,relying on the Boschcase. See alsoScott & Fratcher, Law of Trusts,§ 338 (4th ed.1989). “Generally an intervivos trust can be revoked or terminatedwith the consent of the grantor, the trustees,and the beneficiaries[where] the parties are all competent adults.” For guidance con-cerning modification of ILIT’s, seePLR 9413045 referred to inProb. Pract. Rptr. above, and PLR 8806004,PLR 9413045,andPLR 9843024,id. p. 3,relating to tax issues.

235 SeeRichard B. Covey, “Recent Developments in Estate,Gift and Income Taxation - 1998,” 33d Annual Philip E. Hecker-ling Institute on Estate Planning, Univ. of Miami School of Law, B.QTIP, 1. Reformation, Bosch, pp. 91-94. Jonathan G. Blattmachr,in a presentation to the American College of Trust & Estate Coun-sel (ACTEC),“Failed Estate Planning Arrangements,” (1999 Sum-mer Seminar, Montreal, Quebec, June 25,1999) included in hismanuscript the following: “[ Bosch] ... is usually read to mean thatneither the IRS nor the Federal Courts are bound by a state courtdecision (except out of the state’s highest court) rendered after thetaxing event (such as an after death construction of a Will as pro-viding for a trust which qualifies for the marital deduction). Statelaw is often crucial in determining how much tax is due:Federallaw determines what property rights are taxed but state law gener-ally determines what those rights are. Merrill v. Fahs,324 U.S.308,65 S. Ct. 655 (1945).” (Emphasis supplied),p. 20JGB.

236 Ted Atlass advises the author of this manuscript that inover thirty cases heard by our state’s highest court, Restatementshave been cited as authority (presumably where no state statute orcommon law exists).

237 Supra n.235.


date of execution...because modification, unlike refor-mation, does not give effect to [the donor’s] original,particularized intention but to probable intention—towhat the donor’s intention would probably have beenhad the donor known that his or her objectives couldnot be achieved under the donative document as for-mulated....A court ordered modification takes effectwhenever necessary to achieve the purpose for whichthe modification is ordered.” 238 Many of the casesinvolve changes in tax laws after the decedent’s Willhad been written (in reliance on law then existing) andafter the testator’s death.239

The standard of evidence in modification casesis the preponderance of the evidence test—not,as isotherwise the case—clear and convincing evidence—where non-tax reformation of language is urged.

The R.3d—Property (Donative Transfers) ruleis set out in § 12.2 of the Restatement:

§ 12.2 Modifying Donative Documentsto Achieve Donor’s Tax Objectives:

A donative document may be modi-fied, in a manner that does not violatethe donor’s probable intention, toachieve the donor’s tax objectives.

The R.3d—Property (Donative Transfers),§ 12.2,allowing for modification of donative docu-

ments,including Wills, to achieve the donor’s taxobjectives is based upon the testator’s probable inten-tion, which courts appear to have no difficulty discern-ing.240 Modification, therefore, will not be authorizedwhere the testator’s intent is not effectuated. In Matterof Abel Burkett,241 for example, “...the Will as drawnimplemented a negotiated premarital agreement,andthe reformation would commit the decedent’s estate toobligations he specifically sought to avoid by theagreement.242

Probable intention is determined by non-taxas well as tax objectives.243 The modification must beconsistent with the donor’s general dispositive plan,244

and the court will not violate the donor’s probableintention if the change will detrimentally affect theWill’ s beneficiaries,at least absent adversely affectedbeneficiaries.245

Expressed in Fidelity Union Trust Co. v.Robert,246 “...courts will give primary emphasis to [thetestator’s] dominant plan and purpose as they appearfrom the entirety of his [or her] Will when read and con-sidered in the light of the surrounding facts and circum-stances....” 247 Courts will ascribe to the testator’s“...impulses which are common to human nature and willconstrue the Will so as to effectuate those impulses.” 248

Probable intent has been found and the doc-trine applied in a number of cases,249 and is sufficientlybroad to accommodate alteration for the “...purpose ofminimizing GST taxes.” 250 In fact, minimizing taxes

238 ALI, Restatement of the Law [of] Property Third, TentativeDraft No. 1 (Donative Transfers),Tentative Draft No. 1,(March 28,1995),§ 12.2,p. 168. Address of the ALI, seen.5,Part One, p. 33.

239 Seee.g., Matter of Estate of Branigan,609 A.2d 431 (N.J.1992).

240 R.3d - Property (Donative Transfers), supra n.6, p. 165.See, e.g., Emmertz v. Cherry, 520 S.E.2d 219 (Ga. 1999). Taxapportionment language was reviewed by the court. Taxes attribut-able to life insurance passing outside the Will was not addressed inthe Will. See UPC § 3-916 (Uniform Law Annotated, vol. 8,part 2,§ 3-916,p. 284) providing for the pro rata allocation to probate andnonprobate transfers. See also“Liability of Non-testamentaryProperty for Inheritance and Estate Taxes,” 56 ALR 5th, 133(1998). “To achieve the Settlor’s tax objectives,a court may modi-fy the terms of the trust as long as the modification does not violatethe Settlor’s probable intention. The court may also give such amodification retroactive effect.” David English,“Is There a Uni-form Trust Act in Your Future?”Probate & Property, Vol. 14,No. 1(Jan/Feb 2000),p. 28.

241 Matter of Abel Burkett, N.Y.L.J. (11-7-97),p. 27,col. 4

(N.Y. Co. Sur. Roth). 242 Id., discussed in ACTEC Notes,vol. 23,p. 271 (1998). See

also Matter of Shirley C. Burden 1984 Trust,N.Y.L.J. (9-23-97),p.27, col. 3 (N.Y. Co. Sur. Roth),which permitted a reformation tocorrect typographical errors to conform to tax law requirements.

243 R.3d - Property (Donative Transfers),supra n.6,p. 167.244 Matter of Estate of Branigan,supra n.239.245 R.3d - Property (Donative Transfers), supra n.6, pp. 167-

168. 246 Fidelity Union Trust Co. v. Robert, 178 A.2d 185 (N.J.

1962).247 Id., quoted favorably In the Matter of the Estate of Brani-

gan,supra n.239 at 436 (N.J. 1992). 248 Id., p. 436.249 See Engle v. Siegel, 377 A.2d 892 (N.J. 1977); In re Estate

of Ericson,377 A.2d 898 (N.J. 1977); Wilson v. Flowers,277 A.2d199 (N.J. 1971); In re Estate of Burke, 222 A.2d 273 (N.J. 1966); Inre Estate of Cook,206 A.2d 865 (N.J. 1965); Fleet Bank,N.A. v.Fleet Bank,N.A.,706 N.E.2d 627 (Mass. 1999).

250 Matter of Estate of Branigan,supra n.239,pp. 436-437.


constitutes one of the primary intentions in Will draft-ing251 and may be presumed.252

In Shriners Hosp. for Crippled Children v.Maryland Nat. Bank,253 the court considered its right toconstrue and modify (interpret and change) a holo-graphic Will, such that its provisions,as altered, wouldresult in an estate tax charitable deduction that wouldnot otherwise be available. The court construed thedocument but refused to modify it,remanding the casefor reconsideration, requesting consents by interestedparties to the modifications necessary to satisfy therequirements of the Tax Reform Act of 1969.

Substantial authority, however, supports themodification of donative documents,including Wills,to achieve the decedent’s tax objective,254 which insome cases essentially amounts to rewriting the testa-tor’s dispository plan.255

In Matter of Will of Lewis,256 for example, thecourt “...held that where it [is] readily apparent that thedecedent’s Will had been carefully crafted to avoid thegeneration-skipping transfer tax [on the] date that theinstrument was drawn,257 the Will would be reformed tobring the transfer within a shelter of exception of gen-eration-skipping tax [which now applied].258 In thiscase, the decedent’s Will created five grandchildrentrusts of $250,000 each, held until each grandchildattained age thirty-five (35) years. The Gallo Amend-ment and its Regulations provided that a special exclu-sion of $2 million dollars259 relating to gifts in trustapplied only if the transfers into the grandchildrentrusts were includable in the grandchildren’s estates.Terms of the trust would otherwise void them for pur-poses of the grandchild exclusion benefit.

The executors and trustees of these trustsrequested that the court modify the trusts so that theircorpus would be taxable in each grandchild’s estatethereby qualifying the trusts for the $2 million tax freeexclusion that would then be allowed.

The requested reformation alters the testator’sdispositive plan since she had provided for a gift overto a deceased grandchild’s issue where the grandchildsurvivors the donor but dies before age thirty-five (35)with issue. This scheme was replaced by giving eachgrandchild a taxable general power of appointmentover the trust principal and accrued interest. Notwith-standing this alteration, “...the interest to principallybenefit the grandchildren remains intact,” the courtwrote, and reformation to accomplish this presumedtax objective was allowed.

A petition to reform a Will by division of aQualified Terminable Interest Property Trust was madein Matter of Estate of Nossiter.260 A proposal was madeto bifurcate a single testamentary QTIP Trust into threeseparate trusts in order to obtain the maximum $1 mil-lion dollar generation-skipping transfer tax exemptionsof the decedent and his surviving spouse.261

Counsel sought to treat the deceased husbandas the transferor of a QTIP Trust, funded with severalmillion dollars, to utilize his exemption by using areverse QTIP election with respect to a portion of theoriginal single QTIP. The single QTIP governed bythe 1982 law was to ultimately pay out to the deceasedson and four grandchildren, untaxable as generation-skipping transfers under the applicable law becausethey were direct skips.

The Tax Reform Act of 1986,amended by the

251 Id., p. 437. See also In re Estate of Rankin,404 A.2d 1200(App. Div. 1979).

252 Matter of Will of Case, 585 N.Y.S.2d 1004 (Sur. N.Y. Co.1992). “Reformation should ... be allowed where it may be pre-sumed that the testator did not intend to waste any deduction orcredit available to his wife’s eventual estate.” (p. 1006). In thiscase, a charitable gift was to be made from the credit shelter trustrather than the QTIP trust where a charitable remainder deductionwould otherwise be available. The Massachusetts court, however,would not “Bosch the Service in [a] federal action.” Kirchick v.Guerry, 706 N.E.2d 702 (Mass. 1999). A taxable general power ofappointment was not modified to a non-taxable special power.This may have resulted from the petitioner’s request for the courtonly to decide when the power was created (in 1931) or later, ratherthan to correct a drafting error. Discussed in Prob. Pract. Rptr.,vol. 11,No. 5 (May 1999),p. 6. Fleet Bank,N.A. v. Fleet Bank,N.A.,supra n.249. See alsoPLR 199936029 wherein ascertainablestandards were not included in a joint revocable trust in which set-tlors were also co-trustees. The surviving trustee thereby held ataxable general power. “The court agreed that the inadvertentlyomitted language should be added to the [trust terms]. The IRS

found the order to be consistent with applicable state law and thatthe trust should be construed as creating a special power ofappointment rather than a [taxable] general power.” Discussed inProb. Pract. Rptr., vol. 11,No. 10 (Oct. 1999),p. 13.

253 Shriners Hosp. for Crippled Children v. Maryland Nat.Bank,312 A.2d 546,Ct. App. Maryland (1973).

254 SeeReporter’s Note to § 12.2,R.3d - Property (DonativeTransfers),supra n.6,pp. 174-202.

255 See Estate of Nossiter, 522 N.Y.S.2d 834,146 Misc.2d 879(Sur. N.Y. Co. 1990); and Matter of Will of Lewis, infra n.256.

256 Matter of Will of Lewis, 544 N.Y.S.2d 719,(Sur. BroomeCo. 1989).

257 The Tax Reform Act of 1976.258 The Tax Reform Act of 1986which retroactively repealed

the former 1976 law.259 Pub. Law 99-514; T.R.A. 1986 § 1433(b)(3).260 Nossiter, supra n.255. See alsoPLR 199939024,discussed

in Prob. Pract. Rptr., vol. 11,No. 11,(Nov. 1999),p. 14.261 To the same effect see Matter of Choate, 141 Misc.2d 489,

533 N.Y.S.2d 272 (Sur. Ct. N.Y. Co. 1988); and Matter of Will ofKaskel, 549 N.Y.S.2d 587 (Sur. Ct. N.Y. Co. 1989).


Technical and Misc. Revenue Act of 1988 (TAMRA),caused these skips to be taxable.262 Significant genera-tion-skipping transfer tax would result. The proposeddivision of the QTIP Trust would eliminate this taxbecause the testator’s GST exemption could, by use ofa reverse election,be allocated to a single trust equalin amount to the decedent’s GST exemption.263

New York courts are “...authorized to construeand reform Wills to effectuate [a] testator’s clear intentto take full advantage of exemptions under Federaland state tax law.” 264 The severance of the testator’ssingle trust in no way altered his dispositive scheme.It merely avoids the unforseen adverse tax conse-quences caused by retroactive revisions of the genera-tion-skipping transfer tax law after the testator’s Willwas executed and after his death.265

The term “residuary estate” was substitutedfor the phrase “adjusted gross estate” in determiningthe value of charitable gifts, avoiding a scrivener errorthat would have reduced the sum which would ulti-mately pass to individual residuary beneficiaries.“The problem arose because a QTIP trust under thedecedent’s predeceased spouse’s Will is includable inthe [QTIP beneficiary’s] estate....[The] computation ofthe charitable bequests based on a [sum] whichincludes the QTIP [value]...significantly [reduced] theamount [that was to pass] to the individual residuarybeneficiaries.” 266

In a similar situation, a decedent died having agross estate value approximating $10 million. Thissum included $3 million,which was the corpus of aQTIP trust created by the decedent’s predeceasedspouse.

Ohio law apportions the estate tax,includingthe tax attributable to a QTIP trust,unless “...the Willprovides otherwise, and...refers to I.R.C. § 2044.“ (SeeOhio Rev. Code § 5731.131 or § 21113.86(I)).

In this case, Vahlteich v. Comm’r.,267 the SixthCircuit Court of Appeals,reversing the Tax Court, foundthat the decedent’s Will did not exonerate the QTIP trustfrom paying its share of the estate tax because it did notcontain a clear reference to either of the Ohio Code Sec-tions referred to above, required by state law.268

Numerous other cases support the Nossiterholding allowing reformation of testamentary instru-ments to achieve a donor’s tax objectives.269 Residuarytestamentary trusts in favor of a testator’s grandchil-dren have been construed to qualify for the grandchildexclusion,270 at least in those situations which do notalter the testator’s dispositive scheme as described inhis or her Will. 271

IX. REFORMATION OF WILLS RELA TING TO ADMINISTRA TIVE AS OPPOSED TODISPOSITIVE PROVISIONS.A. Charitable Remainder Trusts were created by

a decedent’s Will in In re Estate of Burdon-Muller,272

which did not qualify for a charitable deductionbecause they did not provide for a fixed unitrust per-centage. The trustee could make unitrust payments of“not less than 5%”of the trust’s corpus annually. Arequest was made to reform the testamentary trusts tostate a fixed percentage in order to qualify for thecharitable deduction that would then be available.This was held to be an administrative correction.

The court wrote that as a probate court, it hadequitable jurisdiction in all cases relating to theadministration of estates of deceased persons,to Willsas well as to trusts which are created by Will. Thecourt wrote,

It is well settled that a court possess-ing such equitable powers may modi-fy testamentary trust provisions

262 An excellent summary of generation-skipping transferrules under the 1982 Act, amended by the Tax Reform Act of 1986,amended by TAMRA 1988, is set out in Nossiter, supra n.255,pp.834-836.

263 I.R.C. § 2652(a)(3) does not allow the transferor to betreated as such for a portion of the QTIP Trust assets.

264 Nossiter, supra n.255,p. 836.265 See also Matter of Martin, 146 Misc.2d 144,549 N.Y.S.2d

592 (Sur. N.Y. 1989); Matter of Choate, supra n.261.266 See Matter of Lotte Stern, N.Y.L.J., Aug. 7, 1998,p. 23,

col. 4 (Bronx Co. Sur. Holzman) discussed in ACTEC Notes,vol.24,No. 3,(Winter 1998),p. 202.

267 Vahlteich v. Comm’r., 69 F.3d 537 (Ct. App.,6th Cir., 1995).268 Discussed in ACTEC Notes,vol. 24,No. 1 (Summer 1998),

p. 34.269 See, e.g., Matter of Estate of Spear, 553 N.Y.S.2d 985 (Sur.

Ct. N.Y. Co. 1990); and Matter of Will of Kaskel, supra n.261.

DiCarlo v. Mazzarella, 717 N.E.2d 257 (Mass. 1999). 270 See, inter alia, Matter of Estate of Spear, id., p. 987; Mat-

ter of Choate, supra n.261; Matter of Lewis,supra n.256; Matter ofKhadad, 135 Misc.2d 67; 514 N.Y.S.2d 625 (Alb. Co. 1987); Mat-ter of Gordon,134 Misc.2d 247; 510 N.Y.S.2d 815 (Sur. N.Y. Co.1986); Matter of Lepore, 128 Misc.2d 250; 492 N.Y.S.2d 689 (Sur.Kings Co. 1985); Matter of Rappaport, 121 Misc.2d 447; 467N.Y.S.2d 814 (Sur. Nassau 1983); Matter of Kander, 115 Misc.2d386; 454 N.Y.S.2d 229 (Sur. Westchester 1982); Matter of Stalp,79Misc.2d 412; 359 N.Y.S.2d 749 (Sur. Kings Co. 1974). Charitablemotive was frustrated by failure of testator’s Will to comply withthe minimum five percent (5%) requirement for payout to lifetimebeneficiary under 26 U.S.C. §§ 664(d)(1)(A) and 2055(c)(2)(A,B); and Matter of Olson,77 Misc.2d 515; 353 N.Y.S.2d 347 (Sur.Kings Co. 1974).

271 Matter of Will of Choate, supra n.261.272 In re Estate of Burdon-Muller, 456 A.2d 1266 (Me. 1983).


where the modifications (1) relate toadministrative, as opposed to disposi-tive, provisions, (2) are required by“necessitous circumstances,” and (3)are consistent with the settlor’s prima-ry intent.273

B. The Burdon-Muller holding allowing modifi-cation of trust provisions relating to tax issues whichare consistent with the testator’s presumed intent,isillustrated in a number of cases. In Matter of Martin, aNew York case,274 for example, the decedent’s Willauthorized its trust fiduciaries holding assets in a QTIPtrust to sell its corpus,a library valued at $40,000,000,for less than its market value. A QTIP does not autho-rize “...anyone to appoint any part of the property sub-ject to the qualifying income interest to any personother than the surviving spouse...” 275 and the authorityin the trustees to sell the library collection at belowmarket value could be interpreted to be such anappointment,voiding the QTIP interest for purposesof the marital deduction,even though the empower-ment was renounced.276

The careful tax planning evidenced in the Willreflected the testator’s intent to benefit his spouse.The constructional preference that “...a testator is pre-sumed to intend to take full advantage of tax exemp-tions and deductions authorized by federal and statelaw...” 277 supports the court’s ruling. The Will isdeemed ambiguous because the simple provisionthreatening the marital deduction is contrary to theotherwise careful and well-conceived tax planningdemonstrated in the Will itself.278 “Once [a testator’s]intent [is] ascertained, intention controls,and the courtmay add, excise, modifyor transposelanguage or pro-

visions to bring [the Will] into harmony with andeffectuate the testator’s intent.” 279

Further, the court in Martin wrote, “New Yorkcourts have consistently construed and even reformedWills where necessary to avoid unintended adverse taxconsequences.” 280

PART THREE

X. PRIVATE REFORMATION .Reformation of Wills and trusts may be accom-

plished by agreement under two sections of the Uni-form Probate Code § 3-1101 and § 3-1102,whichallow controversies to be compromised; and § 3-912,which allows private agreements among successors tobe entered into that are binding on the estate’s person-al representative. The statutes follow:281

COMPROMISE OF CONTROVERSIES

3-1101. Effect of approval of agree-ments involving tr usts, inalienableinterests,or interests of third per-sons. A compromise of any contro-versy as to admission to probate ofany instrument offered for formal pro-bate as the Will of a decedent,theconstruction,validity, or effect of anyprobated Will, the rights or interestsin the estate of the decedent,of anysuccessor, or the administration of theestate, if approved in a formal pro-ceeding in the court for that purpose,is binding on all the parties thereto

273 See Canal National Bank v. Old Folks Home Association ofBrunswick, 347 A.2d 428,436 (Me. 1975); Cassidy v. Murray, 68A.2d 390,391-92 (1949); Porter v. Porter, 20 A.2d 465,466-68(1941); and Restatement (Second) of Trusts,§§ 167,381 (1959).(The Restatement (Third) of Trusts is expected to be a work con-tained in five volumes. Volumes 1 and 2 have been completed, butreformation of trusts is not addressed in these two texts. See alsoEst. of Douser, 975 P.2d 704 (Az. 1999); Edward C. Halbach, Jr.,“The 1999 Joseph Trachtman Lecture...” ACTEC Notes,vol. 25,No.2 (Fall 1999),pp. 110,111. “Judicial Power: ‘Equitable deviation’ ...a court may authorize deviation from the administrative terms of [a]trust if, by reason of changed circumstances not contemplated by thesettlor, adherence to those terms would prevent or jeopardize fulfill -ment of the trust purposes.” Fratcher, Scott on Trusts,§§ 167-167.2(4th ed. 1987) is cited; §§ 168,335 and 336,id.

“The administrative terms of the trust [at common law] couldbe modified or terminated due to circumstances that the Settlor didnot anticipate, and a court could reformeither the administrative ordispositive terms of a trust to correct for a mistake of law orfact....The act retains but builds on the common law rules. Among

the provisions providing a liberalizing nudge are the follow-ing:....A trust may be reformeddue to the Settlor’s mistake of lawor fact even if the terms of the trust, as originally but mistakenlycreated, are unambiguous”David English,Probate & Property,supra n, 240,pp.25,27,28. (Emphasis supplied.)

274 Matter of Martin, supra n.265.275 Id., p. 594.276 See Matter of Witz, 406 N.Y.S.2d 671 (Sur. Nassau 1978);

Cleaveland v. U.S., 88-1 U.S.T.C.,¶ 13,766,1988 W.L. 123836.277 Id., p. 595.278 Id., p. 594.279 Emphasis supplied; citations omitted, id., p. 595.280 Matter of Choate, supra n.261; Matter of Khadad, 514

N.Y.S.2d 625 (Sur. Nassau 1987); Matter of Lepore, supra n.270;Matter of Avery, 476 N.Y.S.2d 1013 (Sur. Suffolk 1984); Matter ofKander, supra n.270; Matter of Witz, supra n.276; Matter of Stalp,supra n.270.

281 See Uniform Laws Annotated, (Master Ed. 1999),§§ 3-1101,3- 1102 and 3-912.


including those unborn, unascer-tained, or who could not be located.An approved compromise is bindingeven though it may affect a trust or aninalienable interest. A compromisedoes not impair the rights of creditorsor of taxing authorities who are notparties to it.

3-1102. Procedure for securing courtapproval of compromise. (1) Theprocedure for securing court approvalof a compromise is as follows:

(a) The terms of the compromiseshall be set forth in an agreement inwriting which shall be executed by allcompetent persons and parents actingfor any minor child having beneficialinterests or having claims which willor may be affected by the compro-mise. Execution is not required byany person whose identity cannot beascertained or whose whereabouts isunknown and cannot reasonably beascertained.

(b) Any interested person,includ-ing the personal representative or atrustee, then may submit the agree-ment to the court for its approval andfor execution by the personal repre-sentative, the trustee of every affectedtestamentary trust, and other fiducia-ries and representatives.

(c) After notice to all interestedpersons or their representatives,including the personal representativeof the estate and all affected trusteesof trusts,the court, if it f inds that thecontest or controversy is in good faithand that the effect of the agreementupon the interests of persons repre-sented by fiduciaries or other repre-sentatives is just and reasonable, shallmake an order approving the agree-ment and directing all fiduciariesunder its supervision to execute theagreement. A minor child representedonly by his parents may be bound only

if his parents join with other compe-tent persons in execution of the com-promise, and if there is no conflict ofinterest between parent and child.Upon the making of the order and theexecution of the agreement,all furtherdisposition of the estate is in accor-dance with the terms of the agreement.

PRIVATE AGREEMENTS

3-912. Private agreements amongsuccessors to decedent binding onpersonal representative. Subject tothe right of creditors, competent suc-cessors may agree among themselvesto alter the interests, shares, oramounts to which they are entitledunder the will of the decedent orunder the laws of intestacy in any waythat they provide in a written contractexecuted by all who are affected by itsprovisions. The personal representa-tive shall abide by the terms of theagreement subject to his [or her]obligation to administer the estate forthe benefit of creditors, to pay alltaxes and costs of administration, andto carry out the responsibilities of his[or her] office for the benefit of anysuccessors of the decedent who arenot parties. Personal representativesof decedents’estates are not requiredto see to the performance of trusts ifthe trustee thereof is another personwho is willing to accept the trust.Accordingly, trustees of a testamen-tary trust are successors for the pur-poses of this section. Nothing in thissection relieves trustees of any dutiesowed to beneficiaries of trusts.

A. In Matter of Estate of Barnard,282 the Coloradocourt held that execution of the agreement settling aWill contest was binding on the parties where all par-ties agreed to compromise their controversy and theagreement was approved in formal proceedings. Set-tlement by agreement among the affected parties isgenerally favored; interests and amounts may beadjusted as is agreed appropriate.283

1. Robert L. Steenrod, Jr. has analyzed these

282 Matter of Estate of Barnard, 867 P.2d 47 (Colo. A. 1993). 283 See Swan v. Swan,241 N.W.2d 817 (Minn. 1976).


statutes in his quintessential article, “Avoiding Litiga-tion in Probate Estates.” 284 He writes that with regardto 3-912,“[c]ompetent successors may agree amongthemselves to alter the interests,shares,or amounts towhich they are entitled under the Will of the decedentor under the laws of intestacy in any way that they pro-vide in a written contract executed by all [parties] whoare affected by its provisions. The personal represen-tative shall abide by the terms of the agreement subjectto his [or her] obligations to administer the estate forthe benefit of creditors, to pay all taxes and costs ofadministration, and to carry out the responsibilities of[the fiduciary] office for the benefit of any successorswho are not parties [to the agreement].

Competent adults are able to adjust their interestsin a decedent’s estate because of the Code’s provi-sions,subject to the protection applying to minors andincompetent persons,285 and the agreements may ormay not arise out of a controversy.286 Gift tax issuesthat may arise in connection with this statute should beaddressed by tax counsel.

Section 3-912 “...does not contemplate...courtapproval of the private contract...” 287 which the personalrepresentative is directed to follow. Further, with theprivate agreement approval by the court, the personalrepresentative can be indemnified for reliance on thecontract’s terms and the parties direction that the fidu-ciary is to honor.288 The agreement (which must be avalid contract)289 may be in the form of a single formaldocument. The Statute of Frauds imposes a writingrequirement no stricter than that which is requiredunder the applicable Statute of Frauds.290

2. Section 15-12-1101 C.R.S. “...contemplates aformal court hearing...291 and a request for approval of

the agreement....The statutory language is worth care-ful review:”

A compromise of any controversy asto admission to probate of any instru-ment offered for formal probate as theWill of a decedent,the construction,validity, or effect of any probated Will,the rights or interests in the estate ofthe decedent,of any successor, or theadministration of the estate, ifapproved in a formal proceeding in thecourt for that purpose, is binding onall the parties thereto including thoseunborn, unascertained, or who couldnot be located. An approved compro-mise is binding even though it mayaffect a trust or an inalienable interest.A compromise does not impair therights of creditors or of taxing authori-ties who are not parties to it.

Tax counsel should be consulted for gift tax issuesthat may arise in connection with this agreement.

The agreement must be one made in “good faith”and it must be “just and reasonable.” 292 It will be bind-ing even if it is contrary to the testator’s intent as todisposition of the estate under a trust,293 and even if asubsequently found will is submitted to probate,294 oreven if the trustee of a testamentary trust affected bythe agreement did not execute the document,295 andguardian-ad-litems for affected minor children mayapprove compromise agreements where minors’shares are altered.296

284 Robert L. Steenrod, Jr., The Colorado Lawyer, Vol. 18,No.5 (May 1989),p. 875.

285 Steenrod, supra, n.3,pp. 875,876. He writes,“Dependingon the factual circumstances,the IRS may look on the realignmentof the deceased’s dispositive scheme and conclude that there areestate or gift tax consequences [relating] to the events or, worse, thatthere are both estate and gift taxes [that accompany the revisions].The private agreements developed under § 15-12-912 are the mostvulnerable, whereas a true contested controversy resolved under §15-12-1101 C.R.S. would seem more likely to succeed. If tax con-siderations enter into the agreement,the agreement should set forththe consideration of each party and the nature of the controversy inclear detail. This will increase the acceptability of the realignmentof interests should the agreement ever be reviewed by any taxingauthority. The danger that must be avoided is the appearance thatone party received legal possession or control of an asset from thedecedent and then transferred the asset to another party without fulland adequate consideration, thereby creating a taxable event.”

286 Id., p. 876.287 Id., p. 876.288 Id., p. 876. The author suggests that the outline of 15-12-

1101 C.R.S. (UPC 3-1101) be followed when settlement agree-ments are submitted to the court for approval. In this regard, seeMatter of Estate of Malone, 599 P.2d 965,968 (Colo. App. 1979).

289 Swan v. Swan, supra n.283. In this case, the agreementwas not contractual and therefore not enforceable. Mutual promis-es for the sake of family harmony constitute sufficient considera-tion. See Matter of Estate of Grimm, 784 P.2d 1238 (Utah App.1989) cert. den. 795 P.2d 1138.

290 Matter of Estate of Cruse, 710 P.2d 733 (N.M. 1985). 291 Id., p. 876. But such approval is not required to be enforce-

able. See Matter of Estate of Grimm,supra n.289.292 Section 15-12-1102(1)(c),C.R.S. Steenrod, supra n.284,

p. 876. Good faith, an amorphous term, encompasses “honestbelief,” an “honest intention,” a state of mind encompassing hon-esty of purpose. See Black’s Law Dictionary, 6th ed. (1990),p.693. See also In re Estate of Marsh,524 N.W.2d 571 (Neb. 1994).

293 See Matter of Estate of Grimm,supra n.289.294 See Matter of Estate of Chasel,725 P.2d 1345 (Utah 1986).295 See In re Estate of Truhn,394 N.W.2d 864 (Minn. App. 1986).296 Id.


Robert Steenrod reminds his readers that “dueprocess,” i.e. fundamental fairness,applies to courtapproval of a compromise agreement,with, there-fore, notice being given to all interested parties.297

XI. REFORMATION OF TRUSTS BYCONSOLIDATION AND DIVISION .Because of the intimate relationship of trusts with

Wills, and because trusts are frequently testamentaryin character, issues relating to their reformation, par-ticularly with regard to tax issues (see Part Two of thismanuscript), are critical.

Colorado enacted § 15-16-401 C.R.S. (3-401 UPC)in 1993 authorizing authority of interested persons toconsolidate and divide trusts. The statute follows:

CONSOLIDATION AND DIVISION OF TRUSTS

3-401. Author ity to consolidate anddivide trusts. (1) Upon petition by atrustee, beneficiary, or any other inter-ested person,the court may, for goodcause shown, after a hearing and uponnotice pursuant to section 15-10-401C.R.S. to those interested persons asthe court may direct, divide a trustinto two or more separate trusts,ormay consolidate two or more separatetrusts into a single trust, upon suchterms and conditions as it deemsappropriate, if the court finds thatsuch consolidation or division:

(a) Is not inconsistent withthe intent of the settlor or testator with

regard to any trust to be consolidatedor divided;

(b) Would facilitate adminis-tration of each trust; and

(c) Would be in the bestinterest of all the beneficiaries of eachtrust and not materially impair theirrespective interests.

(2) Subsection (1) of this sectionshall apply to all trusts,whenever cre-ated, whether inter vivos or testamen-tary, whether created by the same ordifferent instruments or by the sameor different persons,and regardless ofwhere created or administered.

(3) Subsection (1) of this sectionshall not limit the right of a trusteeacting in accordance with the applica-ble provisions of the governing instru-ments to divide or consolidate trusts.

William H. Wiedemann mentions this statute inhis Colorado Lawyer article, “Premature Trust Ter-minations,” 298 reminding us that where a courtdivides “...a trust into two or more separate trusts,on terms and conditions [that] it deems appropri-ate,” such division cannot be inconsistent with thesettlor’s intent; [but will be authorized if] it willfacilitate trust administration, and [so long as]division is in the best interests of all the bene-ficiaries.299

297 Id., pp. 876,878.298 William H. Wiedemann,The Colorado Lawyer, Vol. 23,

No. 3 (March 1994),pp. 573,575.299 For additional case law regarding the division of trusts for tax

purposes,allowing their modification, see Part Two of this manu-

script. “Not recognized at common law, but recognized in many statestatues and also in the Uniform Trust Act, is the power in a trustee tocombine trusts or to divide a trust without court approval...” DavidEnglish,Probate & Property, supra, note 240,p. 28.


Post Mortem Trust Administr ation Checklistby Frayda L. Bruton*

Sacramento,California

POST MORTEM TRUST ADMINISTRA TIONCHECKLIST

TABLE OF CONTENTS

1 INITIAL STEPS . . . . . . . . . . . . . . . . . . . . .3331.1 Calendar Important Deadlines . . . . . . . . .3331.2 Obtain,Review and Summarize

Estate Planning Documents . . . . . . . . . . .3341.3 Prepare for First Meeting with Client . . .3341.4 Advise Client of Items to Bring

to Initial Meeting . . . . . . . . . . . . . . . . . . .3341.5 Discuss at First Meeting with Client . . . .3341.6 Post-Meeting Actions . . . . . . . . . . . . . . . .3351.7 Limited Estate Planning Considerations . . .336

2 INVENT ORY AND VALUATION OF TRUSTASSETS AND LIABILITIES . . . . . . . . . . .3362.1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3362.2 Real Property . . . . . . . . . . . . . . . . . . . . . .3372.3 Closely Held Businesses:Corporations,

Partnerships,and Other Associations . . . .3392.4 Publicly Traded Securities . . . . . . . . . . . .3432.5 Professional Businesses,Franchises,

and Licenses . . . . . . . . . . . . . . . . . . . . . .3432.6 Mortgages and Notes . . . . . . . . . . . . . . . .3442.7 Liabilities, Claims and Debts . . . . . . . . . .344

3 INVENT ORY AND VALUATION OF NON-TRUST ASSETS . . . . . . . . . . . . . . . . . . . . .3453.1 Lif e Insurance Proceeds and

Other Death Benefits . . . . . . . . . . . . . . . .3453.2 Employee Benefits . . . . . . . . . . . . . . . . . .3463.3 Household and Personal Effects . . . . . . . .3473.4 Annuities,Lif e Estates,Terms for Years,

Remainders,and Reversions . . . . . . . . . .3473.5 Other Assets . . . . . . . . . . . . . . . . . . . . . . .348

4 ADMINISTRA TIVE STEPS AND RELATEDISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . .3484.1 Administrative Trust . . . . . . . . . . . . . . . . .3484.2 Accountings . . . . . . . . . . . . . . . . . . . . . . .3484.3 Personal Income Taxes . . . . . . . . . . . . . . .3494.4 Fiduciary Income Tax Returns . . . . . . . . .3504.5 Court Proceedings . . . . . . . . . . . . . . . . . .3514.6 Disposition of Non-Trust Assets . . . . . . .3514.7 Sale of Trust Assets . . . . . . . . . . . . . . . . .351

5 TRANSFER TAXES . . . . . . . . . . . . . . . . . .3535.1 Estate Taxes . . . . . . . . . . . . . . . . . . . . . . .3535.2 Gift Taxes . . . . . . . . . . . . . . . . . . . . . . . . .3575.3 Generation Skipping Transfer Tax . . . . . .3585.4 Disclaimers . . . . . . . . . . . . . . . . . . . . . . . .362

6 DISTRIB UTION AND SUBTRUST FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . .3636.1 Income Tax Issues . . . . . . . . . . . . . . . . . .3636.2 Contingencies Prior to Distribution . . . . .3636.3 Outright Distributions . . . . . . . . . . . . . . . .3646.4 Subtrust Funding . . . . . . . . . . . . . . . . . . .364

7 FINAL REVIEW . . . . . . . . . . . . . . . . . . . . .366*Copyright 1999. Frayda L. Bruton. All r ights reserved. Originallypublished as “Post Mortem Trust Administration: A Checklist” byCalifornia Continuing Education of the Bar. Reprinted with per-mission from The Estate Planning, Trust and Probate Law Sectionof the State Bar of California and California Continuing Educationof the Bar.


POST MORTEM TRUST ADMINISTRA TIONCHECKLIST

(Cover Sheet)

TRUST NAME: ______________________________ FILE NO: ____

TRUSTEE(S):____

DECEDENT SETTLOR:___________________________ SSN:______________________________________

DOD: ____________ 706 DUE:__________ EXT GRANTED TO: ____________________________________

SPOUSE’S CITIZENSHIP:____________ COUNTY OF RESIDENCE:________________________________

SUBTRUSTS

TRUST NAME: ______________________________ ID #:

TRUST NAME: ______________________________ ID #:

TRUST NAME: ______________________________ ID #:

TRUST NAME: ______________________________ ID #:

RESP. ATTY: _________________ HOURLY RATE: $ ___________ INITIAL EST: $ ___________________

TAX PREPARER: OTHER ADVISOR:(Name, address and phone) (Name, address and phone)

________________________________________________________________________________________________

________________________________________________________________________________________________

________________________________________________________________________________________________

________________________________________________________________________________________________

The following abbreviations are used:

CFR Code of Federal Regulations NPS Non-Participating Spouse Reg. Treasury Regulations

DNI Distributable Net Income QDRO Qualified Domestic Relation Order SEC Securities & Exchange

GST Generation Skipping Transfer QDT Qualified Domestic Trust Commission

Tax QFOBI Qualified Family Owned Business USC United States Code

IRC Internal Revenue Code Interest


✓ DoneN/A Not Applicable

1 INITIAL STEPS1.1 CALENDAR IMPOR TANT DEADLINES DATE:

___ Form 706/ET-1 estate tax returns (due 9 months from DOD;

or file Form 4768 extension to file/pay) ____________

___ Extension date granted per Form 4768 ____________

___ Alternate valuation date (6 months after DOD) (IRC §2032) ____________

___ Disclaimer (9 months from DOD) (IRC §2518) ____________

___ Form 709 gift-GST tax return (4/15 or extension date in year following gift) ____________

___ Form 1040 final personal income tax returns (4/15 or extension date) ____________

___ Form 1041 fiduciary income tax returns (4/15 or extension date)

___ 65-day distribution after 12/31 ____________

___ Review trust income distribution terms ____________

___ Estimated tax payments ____________

___ S Corp. elections (2 yrs. from DOD) (IRC §1361(c)(2)) ____________

___ QSST election filed 16 days and 2 months from transfer ____________

(IRC §1361(d) and Reg. §1.1361-1(j)(6)(iii))

___ Electing Small Business Trust (IRC §1361(e)) ____________

___ Form 1065 partnership IRC §754 election (first partnership return ____________

following year of death; 12/31)

___ Federal/state payroll tax reporting ____________

___ IRC §6501(d) prompt assessment of tax letters ____________

___ Property tax payments due ____________

___ Notice to taxing authority, if required ____________

___ Notice to beneficiaries,if required by state law ____________

___ Surviving spouse IRA rollover ____________

___ Exercise of options (Buy/Sells,Stock options/others ____________

___ Escrow closing dates ____________

___ First trust accounting due ____________

___ Status letters to beneficiaries ____________

___ Periodic client meetings ____________

Statutes of Limitations

___ Tax refund (type):___________________________________ ____________

___ Wrongful death action ____________

___ Causes of action in favor of decedent (describe):

___________________________________________________ ____________

___ Creditor Claims (applicable state statutes) ____________



Other Deadlines(describe):___ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ __________________________________________________________________________

1.2 OBTAIN , REVIEW AND SUMMARIZE EST ATE PLANNING DOCUMENTS (IF FILES AVAILABLE)

___1.2.1 Prepare written or visual explanation of estate plan___1.2.2 Locate originals of documents

1.3 PREPARE FOR FIRST MEETING WITH CLIENT

___1.3.1 Prepare agenda ___1.3.2 Prepare authorizations to obtain records or information___1.3.3 Review known asset data

1.4 ADVISE CLIENT OF ITEMS TO BRING TO INITIAL MEETING

___1.4.1 Original estate planning documents___1.4.2 Death certif icates___1.4.3 Asset and liability inf ormation

1.5 DISCUSS AT FIRST MEETING WITH CLIENT

___1.5.1 Identify and illustrate over-all plan and distribution scheme___1.5.2 Review checklist/questionnaire from client; or give to client to complete___1.5.3 Gather preliminary estimate assets and liabilities ___1.5.4 Discuss income tax basis adjustment of assets___1.5.5 Determine if deceased settlor made taxable gifts after 1976___1.5.6 Discuss adequacy of insurance coverage on real and personal property___1.5.7 Determine title to assets___1.5.8 Identify immediate issues requiring action:

___1.5.8.1 Is there an S corporation? Does trust have QSST or ESBT provisions?___1.5.8.2 Any partnerships for which IRC §754 election to be made?___1.5.8.3 Was decedent a general partner? Election to continue partnership to be made

regarding income and property tax issues?___1.5.8.4 Any potential IRC §2032A special use assets?___1.5.8.5 Any potential IRC §2057 assets?___1.5.8.6 Toxic waste issue with any real property?___1.5.8.7 Any outstanding options or escrow?___1.5.8.8 Any guarantees,foreclosures?___1.5.8.9 Any wasting assets,business,or profession needing immediate attention?___1.5.8.10 Is there an ESOP?___1.5.8.11 Does trustee have any doubt as to the validity of the trust? (See Restatement of

Trusts,Second §226A)



___1.5.8.12 Do gift tax returns need to be timely filed for allocation of GSTT exemption?___1.5.9 Review documents for drafting errors

___1.5.9.1 Can they be cured by disclaimers? (see 5.4)___1.5.9.2 Do they require court petition for reformation or construction of trust instrument?

(See 4.5)___1.5.10 Identify whether the decedent was a trustee, beneficiary, power-holder of any other trust (see

1.5.10,5.1.7),or trustee of a qualified plan (see 3.2,3.3, 3.4); request copies of all relevantdocuments

___1.5.11 Determine whether any probate proceeding is necessary___1.5.12 Review cash requirements

___1.5.12.1 Initial death tax estimate: _______________1.5.12.2 Surviving spouse’s cash requirement___1.5.12.3 Administration expense estimate

___1.5.13 Have client sign authorizations to obtain records or information___1.5.14 Have client locate and inventory contents of all safe deposit boxes___1.5.15 Arrange for safekeeping of any assets at risk (personal property)___1.5.16 Arrange disposition of any depreciating assets; analyze investment portfolio to determine if

any action is needed to protect assets (e.g., stock depreciation) and whether a securities analystis needed to monitor securities

___1.5.17 Determine outstanding liabilities of settlor___1.5.18 Discuss applicable procedure for notice to creditors and relevant statutes of limitations___1.5.19 Discuss client’s fiduciary duties___1.5.20 Discuss client’s compensation and maintenance of time records___1.5.21 Discuss bookkeeping requirements (e.g., one bank account for receipts and disbursements)___1.5.22 Discuss attorney compensation and fee estimates___1.5.23 Calendar next follow-up meeting; date:___________________________________

1.6 POST-MEETING ACTIONS

___1.6.1 Open file___1.6.2 Determine and calendar other reminder dates: Date Due

___ Checklist/questionnaire returned by client _______________ Trust assets determined _______________ Appraisals completed _______________ 706 first draft completed _______________ Other state death tax returns drafts completed _______________ Tax liability _______________ Non-citizen spousal deadlines (see 5.1.36) _______________ Disclaimer plan developed (see 5.4) _______________ Trust funding plan developed ____________

___1.6.3 Communicate with client___1.6.3.1 Fee agreement letter___1.6.3.2 Allocation of responsibilities letter___1.6.3.3 Client’s fiduciary duties letter



___1.6.3.4 Disclaimer letter (see 5.4)

___1.6.4 Communicate with others___1.6.4.1 Non-representation letter to beneficiaries___1.6.4.2 Letter to accountant___1.6.4.3 Letter to special advisors___1.6.4.4 Letter to out-of-state counsel

___1.6.5 Deliver will to appropriate court, if applicable; (mail copy to nominated executor)___1.6.6 Obtain death certif icates as needed___1.6.7 Obtain copies of prior three years’ income tax returns,plus all gift tax returns (Form 709) since

1976,for decedent (use IRS Form 4506 if client cannot provide)___1.6.8 Review title to assets; determine if any change required to estate administration plan,or if

probate now required, due to vesting problems___1.6.9 Prepare trustee affidavits as needed___1.6.10 Send Form 56,Notice Concerning Fiduciary Relationship,to IRS___1.6.11 Determine if any powers of appointment held by decedent; request copies of appropriate

documents___1.6.12 Obtain name, address,phone number, and taxpayer identification number for each trust or

estate beneficiary

1.7 LIMITED EST ATE PLANNING CONSIDERA TIONS

___1.7.1 Review estate plan of surviving spouse; WARNING: watch for conflict of interest___1.7.1.1 Review trust,will, powers of attorney, and other documents for adequacy of estate

planning___1.7.1.2 Determine whether any changes need to be made in the spouse’s estate plan

___1.7.2 Consider limited estate planning issues of trust beneficiaries within the trustee’s control___1.7.2.1 Determine if the trustee (or special trustee) has a power to expand a beneficiary’s

power of appointment over a non-exempt trust to convert it from a limited powerto a general power for generation skipping transfer tax planning purposes; notifytrustee in writing

___1.7.2.2 Determine if a beneficiary has powers of appointment that can or should be exer-cised; determine if beneficiary should be notified in writing

2 INVENT ORY AND VALUATION OF TRUST ASSETS AND LIABILITIES2.1 CASH

___2.1.1 Obtain copies of bank account statements,certif icates, passbooks,etc., for each account(include cash held in brokerage accounts)

___2.1.2 Advise client regarding FDIC rules if more than $100,000 is held in any one institution (insur-ance is per “ownership category,” not per account; accounts by trustee of revocable trust arecombined with single ownership and joint accounts at one institution to aggregate $100,000insurance (12 USC §1821(a)(1)(C)); but accounts for trustee of irrevocable trust are insuredseparately (12 USC §1821(a)(1)(C))



___2.1.3 For accounts paying interest,send letters requesting exact principal balance and accrued inter-est as of DOD if statements are insufficient

___2.1.4 For checking accounts,deduct from the date-of-death balance all checks written but notcleared

___2.1.5 Obtain list of all checks received but not deposited by DOD___2.1.6 Determine amount of cash on decedent’s person; or in car, residence, business,or safe deposit

box, including foreign money or coin collections___2.1.6.1 Obtain DOD exchange rate of foreign monies___2.1.6.2 Obtain appraisal of valuable coins or collections

___2.1.7 Obtain list of any expectancies of cash due at DOD (e.g., income tax refunds,medical insur-ance claims,deposits or refunds due, wages due)

___2.1.8 Follow up three months later by review of account records for cash items due but unpaid atdeath

___2.1.9 Keep inventory list of assets discovered not in trust (e.g., custodial accounts,joint tenancyaccounts) for Form 706 purposes (see 3 and 4.6)

___2.1.10 File Treasury Department Form TD F 90-22.1 by 6/30 each year to report a financial interestin, or signatory authority over, bank accounts,securities accounts,or other financial accountsin foreign countries which total more than $10,000 (30 CFR 103-24)

___2.1.11 Deposit cash found and received in interest bearing trust accounts

NOTE: Surviving spouse’s interest in cash accounts must be separated from decedent’s interest in cashaccounts. Consider establishing separate accounts as soon as possible following death or as subsequentsubtrust funding.

2.2 REAL PROPERTY

Title Issues___2.2.1 Record Affidavit—Death of Trustee to clear title to successor trustee___2.2.2 Record abstract of trust,as needed___2.2.3 Determine any encumbrances of record___2.2.4 Consider ordering report on condition of title___2.2.5 Determine if any chain of title problems to clean up (vesting, gaps in title chain, erroneous

legal descriptions)

Encumbrances and Restrictions___2.2.6 Inventory and determine DOD balance on deeds of trust,mortgages and notes; keep loans cur-

rent; examine documents for any terms triggered by settlor’s death; determine if lenderrequires notice of death

___2.2.7 Inventory and value other encumbrances of record (e.g. judgment liens and tax liens,lis pen-dens,etc.); examine and determine if any action required by settlor’s death

___2.2.8 Identify other transfer or use restrictions (e.g., CC&R’s, cotenancy agreement,options,graz-ing rights,U.S. Forest land restrictions,transfer restrictions,oil and gas (mineral right tenan-cies,land use restrictions) determine action required due to settlor’s death

___2.2.9 Review co-op agreements and restrictions on use and transfer; determine any notices requiredby settlor’s death



___2.2.10 Determine if settlor/cotenant owes or is entitled to contribution from other cotenants___2.2.11 Examine transfer or sale documents for executory contracts and pending escrows and deter-

mine action required; determine contractual escrow deadlines; determine if IRD treatment canbe avoided and basis adjustment claimed (IRC §1014)

___2.2.12 If any pending foreclosures or defaults,determine what immediate and long term steps arerequired to protect equity

___2.2.13 Determine if land is subject to agricultural preserve contract or conservation easement; deter-mine duration of contract; determine if process was begun to terminate or modify contract,orto newly qualify property

Property Operation and Management___2.2.14 Maintain fire and casualty insurance ___2.2.15 Secure improvements and contents ___2.2.16 Arrange for maintenance of structure and landscaping ___2.2.17 Notify and work with any property managers: examine management contract; consider hiring

manager___2.2.18 Determine if notice to tenants is necessary or advisable; determine if need to change rental

payment arrangements___2.2.19 Account for rental and security deposits; pursue any delinquent rent___2.2.20 Determine and maintain payment for all property expenses___2.2.21 Determine requirements for weed and brush abatement program and arrange for compliance___2.2.22 Review leases to determine if settlor’s death requires action; determine if any leases due to end

or be renewed___2.2.23 Initial review for risk of toxic contamination; determine if Phase I environmental report need-

ed; determine exposure to responsibility for clean up___2.2.24 Determine if property will qualify as a closely held business under IRC §6166 for estate tax

deferral___2.2.25 Determine if property will qualify as family owned business under IRC §2057

Leasehold Interest___2.2.26 Examine settlor’s residential lease; terminate obligation; secure contents of residence; collect

security deposit___2.2.27 Review commercial leases; determine if notice to landlord required; determine if recording

Affidavit-Death of Trustee required; determine if settlor’s death requires action___2.2.28 Arrange for payments of required rents___2.2.29 Examine and determine if any action on mineral leases required

Property Taxes___2.2.30 Obtain assessor parcel numbers or other property tax identification numbers___2.2.31 Determine and pay property taxes when due; review assessed value versus appraised value___2.2.32 Determine if any deferred or delinquent property taxes due; check title report for tax liens___2.2.33 File Change in Ownership—Death of Real Property Owner form with assessor’s offices, if

appropriate___2.2.33.1 Note any exclusions to exempt property from reassessment



Appraisal___2.2.34 Interview and retain appraisers: consider hiring directly as attorney’s expert to protect privi-

lege; request oral or draft reports before finalizing___2.2.35 Determine effect of high or low value on basis and estate tax___2.2.36 Determine date of death and alternate valuation (if applicable) values___2.2.37 Determine if farmland or closely held real estate businesses will qualify for special use valua-

tion (IRC §2032A) or as qualified family owned business interest (IRC §2057) (see 5.1.39)___2.2.38 Determine whether any property subject to qualified conservation easement (IRC §2031(c))

and communicate information to appraiser to reference in report___2.2.39 Consider applicable discounts,e.g., fractional interests,toxics; determine if separate appraisal

required to value the discount___2.2.40 Value, and keep inventory of, property discovered not transferred to trust for Form 706 purpos-

es (see 3 and 4.6 )___2.2.41 Send instruction letter and documentation to appraiser; calendar date for completion of

appraisal___2.2.42 Review appraisals for sufficiency

Out-of-State Real Property___2.2.43 Determine if out-of-state counsel needed; confirm responsibility in writing___2.2.44 Determine if any out-of-state proceedings or compliance steps needed___2.2.45 Determine if any out-of-state, county, or local property, transfer, or other real property-related

taxes apply___2.2.46 Determine if any tax lien release documents must be recorded or filed

2.3 CLOSELY HELD B USINESSES: CORPORATIONS, PARTNERSHIPS, AND OTHER ASSOCIATIONS

IRC Chapter 14___2.3.1 Determine if Chapter 14 applies:

___2.3.1.1 Is decedent settlor’s interest in the business “an equity interest” (Reg. §25.2701-1(a)(1))?

___2.3.1.2 Is any owner of the business “a member of the transferor’s family” (IRC§2701(e)(1)); are there any indirect holdings which may influence ownership con-clusions (IRC §2701(e)(3)(A))?

___2.3.1.3 Is there a transfer of the decedent settlor’s equity interest in the business to “amember of his or her family” or for the benefit of the family member?

___2.3.1.4 Does the decedent’s family control the business (IRC §2701(e))?___2.3.2 Analyze impact if Chapter 14 is applicable to the transfer (or previous transfers):

___2.3.2.1 Are there any changes or shifting of voting or liquidation rights (e.g., lapse of gen-eral partner’s liquidation right) on decedent’s death (see IRC §2704(a))?

___2.3.2.2 Are any adjustments required to prevent double taxation of previous transfers sub-ject to Chapter 14 (IRC §2701(e)(6))?

___2.3.2.3 Determine the history of previous “equity” transfers:___2.3.2.3.1 Obtain copies of gift tax returns and determine if the transfer has

been adequately disclosed (IRC §6501(c)(9)); consider whetherthere are any gift tax revaluation problems; see Estate of Smith,94T.C. 872 (1990); obtain copies of previous appraisals



___2.3.2.3.2 Determine if qualified payments have been made (IRC§§2701(a)(3)(A),(c)(3)(A) and (c)(3)(B)); if not made, determineif f our-year grace period applies (IRC §2701(d)(2)(C))

IRC §2057___2.3.3 Determine if IRC §2057 applies:

___2.3.3.1 Determine citizenship/residency of decedent (IRC §2057(b)(1)(A))___2.3.3.2 Did decedent or a member of decedent’s family own “QFOBI” interests for peri-

ods aggregating five years or more? (IRC §2057(b)(2))___2.3.3.3 Determine whether QFOBIs “acquired by or pass to”qualified heir of decedent

(IRC §2057(b)(2)(B))___2.3.3.4 Is the interest in a “trade or business”a “QFOBI” as defined in IRC §2057(e)?___2.3.3.5 Does the interest satisfy the “50% of estate” requirement? (See worksheet on

Schedule T; see also §2.3.2.3.1)___2.3.3.6 Did the decedent or a member of the decedent’s family materially participate?

(See IRC §§2032A(e)(6); 2057(b)(1)(D)(ii))

Appraisal___2.3.4 Select the business appraiser; determine if the appraiser is properly qualified, and whether

appraisal methodology is acceptable for court purposes___2.3.5 Consider whether attorney should contract with the appraiser to preserve valuation options

under the attorney work-product privilege (IRM 4332 directs the IRS to request copies of allprofessional appraisals near the valuation date)

___2.3.6 Obtain accurate and complete financial information and business history to provide to theappraiser

___2.3.7 Request any other appraisals made for the business over the last 10 years___2.3.8 Determine applicability of valuation discounts___2.3.9 Obtain separate appraisal of assets owned by entity (e.g., real property)___2.3.10 Send instruction letter and documentation to business appraiser; calendar date for completion

of appraisal___2.3.11 Review appraisals for sufficiency___2.3.12 Determine if IRC §6166 applies for estate tax appraisal

Property and Business Taxes___2.3.13 Review accuracy of property tax reporting___2.3.14 Review accuracy of business tax reporting, possessory interests,or other taxes on entity assets

Buy-Sell Agreements, Options, Puts, Stock Redemptions___2.3.15 Review any existing agreement or requirement to sell decedent’s interest___2.3.16 Calendar due dates per agreement___2.3.17 Review pertinent estate planning documents for conflicts with buy-sell agreement___2.3.18 Review lif e insurance payable to corporation; consider whether includable for estate tax;

review split-dollar considerations (Rev. Rul. 78-420,1978-2 CB 7; see 3.1)___2.3.19 If installment sale, consider imputation of interest problems (IRC §1274(d)); determine if pro-

ceeds are sufficient for estate tax liability



___2.3.20 If stock redemption,determine if IRC §303 applies; determine if limitations on corporation’sability to repurchase its shares

___2.3.21 Consider whether the purchase price will fix the value for Chapter 14 (IRC §2703)

Corporations___2.3.22 S corporation considerations:

___2.3.22.1 Estate (as a new shareholder) may revoke S election if it owns over 50% stock orcombines with other owners over 50% (IRC §1362(d)(1)(B))

___2.3.22.2 Determine if trust is qualifying shareholder before funding with S corporationstock (see IRC §1361(c)(2)(A) for permissible shareholders)

___2.3.23 Buy-sell agreements,options,puts,stock redemptions (see 2.3.15,et seq.)___2.3.24 Review lif e insurance payable to corporation (see 2.3.18)___2.3.25 Installment sale (see 2.3.19)___2.3.26 Stock redemption (see 2.3.20)

___2.3.26.1 Consider use of disclaimers for qualification if necessary___2.3.26.2 Consider agreement if stock undervalued, automatic upward adjustment of

redemption price___2.3.27 Review compliance of corporate formalities with corporate counsel

___2.3.27.1 Minutes updated___2.3.27.2 Replace decedent director, officer___2.3.27.3 Reapplication of corporate licenses (e.g., real estate broker, contractor, profes-

sional)___2.3.28 Review banking issues with corporate counsel

___2.3.28.1 Corporate loans___2.3.28.2 Guarantees___2.3.28.3 Signature authority

___2.3.29 Determine unusual corporate liabilities and discuss with corporate counsel___2.3.29.1 Potential or actual litigation___2.3.29.2 Workers’ compensation ___2.3.29.3 Major customer bankruptcy

___2.3.30 Consider liquidation of corporation and related tax planning and discuss with corporate counsel___2.3.30.1 To obtain adjustment in basis of depreciable assets___2.3.30.2 To avoid accumulated earnings and personal holding company problems___2.3.30.3 To maximize income distributions to family members not otherwise employees;

consider a partnership for operation of the business

Partnerships___2.3.31 Review the partnership agreement

___2.3.31.1 Determine whether partnership continues in event of partner’s death; or if elec-tion to continue must be made

___2.3.31.2 Advise counsel for partnership of partner’s death___2.3.31.3 Determine existence of any benefits/entitlements resulting from death___2.3.31.4 Determine existence of any obligations resulting from death___2.3.31.5 Determine impact of agreement upon disposition of decedent’s partnership

interest,e.g., does the agreement indicate a beneficiary of the decedent’s inter-est,or a successor in interest to the decedent’s income or capital interests



___2.3.32 Communicate with the general partner regarding the election of IRC §754 to adjust the dece-dent’s “inside basis”of partnership assets___2.3.32.1 Has the election been previously made?___2.3.32.2 Determine the advisability of making election; calendar dates to make election

(election is made on the partnership return (Form 1065) for the taxable year inwhich the death occurs (Reg. §1.754-1(b))

___2.3.32.3 Determine which party will make the adjustment calculation and maintain sepa-rate bookkeeping for adjusted property

___2.3.32.4 Confirm with general partner in writing, and accountant for partnership, if necessary

___2.3.32.5 Advise client that distributees of partnership assets for distributions made with-in two years from date of death may make the basis adjustment on distributee’sincome tax return (Reg. §1.732-1(d))

___2.3.33 Further income tax considerations (perform or assign to other tax return preparer)___2.3.33.1 Calculate increase to basis of partnership interest by partner’s share of partner-

ship liabilities (Reg. §1.742-1)___2.3.33.2 Review suspended passive losses for deductibility on decedent’s final income

tax return (see IRC §469(g))___2.3.33.3 Analyze other states’ income tax impact where partnership involves activity in

other states___2.3.33.4 Review impact of distribution of partnership interest upon income of distributee

(e.g., distribution of partnership interest in satisfaction of pecuniary devise is asale or exchange of partnership interest and may close the partnership tax year asto the interest distributed)

___2.3.33.5 Analyze decedent’s distributive share of partnership income as of date of death,including outstanding accounts receivable to which decedent is entitled; if any, itis income in respect of decedent___2.3.33.5.1 Recognize as asset for Form 706 or advise 706 preparer___2.3.33.5.2 Advise beneficiary or successor in interest of partnership

interest of possible IRC §691(c) deduction___2.3.34 Sale or liquidation of partnership interest

___2.3.34.1 Engage expert counsel if necessary___2.3.34.2 Determine income tax impact of sale/liquidation, or confirm with other tax advi-

sors that they will so determine (see Reg. §1.706-1(c)(2) and (3) regarding tax-able year recognition; IRC §736 regarding payments for deceased partner’sinterest; IRC §735 regarding ordinary income recognition)

___2.3.34.3 If client is a party to the sale, consider court approval___2.3.34.4 Where complete liquidation of partnership is necessary, consider in kind distrib-

ution of partnership assets vs. sale of partnership assets; analyze income taximpact to trust

___2.3.34.5 Consider sale or liquidation where distributive trust could not hold partnershipinterest as a permitted investment

___2.3.34.6 Consider whether sale may trigger state and local property or business tax conse-quences (see 3)



___2.3.35 Consider conversion of general partnership interest to limited partnership interest wheretrustee cannot hold general partnership interest or where trustee is unwilling to assume man-agement or liability (caveat: reduction of partner’s share of partnership liability is cash distri-bution to partner (IRC §742)); and IRC §2704 impact on possible lapse of general partner’s liq-uidation right

___2.3.36 Formation of new partnership___2.3.36.1 Consider formation of new partnership with specific decedent’s assets to facili-

tate distribution and future planning opportunities___2.3.36.2 Analyze IRC §§6166,2032A,2057,property tax,and income tax consequences

to any new formation

Limited Liability Companies___2.3.37 Determine state of formation of LLC___2.3.38 Review limited liability company (LLC) or limited liability partnership (LLP) operating agree-

ment for trustee compliance issues___2.3.38.1 For LLP, review partnership issues (above)___2.3.38.2 Follow up on organizational formalities with LLC or LLP counsel___2.3.38.3 Determine any professional requirements (e.g., notification to state licensing

authority)___2.3.3 Follow-up on any organizational formalities with LLC counsel

2.4 PUBLICL Y TRADED SECURITIES

___2.4.1 Determine title to financial instrument___2.4.1.1 If held directly, obtain copy of actual security___2.4.1.2 If held in nominee form, obtain copy of brokerage statement

___2.4.2 Value security (in general, the mean between the highest and lowest quoted selling priceson the valuation date is the fair market value per share or bond (Reg. §20.2031-2(b))

___2.4.3 Types of securities:___2.4.3.1 Master limited partnerships___2.4.3.2 Common stocks___2.4.3.3 Preferred stocks___2.4.3.4 Corporate bonds (bearer or registered)___2.4.3.5 Municipal bonds (bearer or registered)___2.4.3.6 Treasury bills___2.4.3.7 Treasury notes___2.4.3.8 Mutual funds___2.4.3.9 REIT’s/REMIC’s

___2.4.4 Keep inventory list of securities discovered not in trust for Form 706 purposes (see 4.6)

2.5 PROFESSIONAL BUSINESSES, FRANCHISES, AND LICENSES

___2.5.1 Review agreements regarding management or disposition of professional practice___2.5.1.1 Deadlines calendared___2.5.1.2 Review lease requirements

___2.5.2 Review franchise agreements regarding provisions on death___2.5.2.1 Deadlines calendared___2.5.2.2 Franchise requirements met



___2.5.3 Obtain copies of business,professional,liquor, or other licenses___2.5.3.1 Notify issuing agency ___2.5.3.2 Comply with requirements of issuing agency ___2.5.3.3 Meet statutory requirements,if any

___2.5.4 Notify other professional associations/organizations in which decedent was a member___2.5.5 Review existing professional liability insurance: Can it be extended to cover future or contin-

gent claims? Prudent to purchase additional coverage?___2.5.6 Arrange for disposition of records of professional practice___2.5.7 Keep inventory list of assets discovered held outside trust for Form 706 purposes (see 3 and 4.6)___2.5.8 Arrange for sale of interest if trustee is not qualified owner

2.6 MORTGAGES AND NOTES

___2.6.1 Request copies of all loan and security documents___2.6.2 Determine if security interests have been recorded; record Affidavit-Death of Settlor/Trustee

(as beneficiary of deed of trust or mortgage) and Assignment of Beneficial Interest under Deedof Trust or Mortgage (see 2.2.1)

___2.6.3 Advise trustee to inform payor of trustee’s address for payment of future loan installments___2.6.4 Determine value of mortgages,promissory notes,or contracts to sell land; consider applicable

discounts; if valued at less than FMV of unpaid principal plus interest accrued to DOD, docu-mentation required to support a lower value or worthlessness (Reg. §20.2031-4; see also 2.2.34where real property worth less than indebtedness on mortgage or note)

___2.6.5 Note cancelled at death included in gross estate (Reg. §20.2033-1(b))___2.6.6 SCIN’s (self cancelling installment note) not included in gross estate (Estate of Frane (CA8)

998 F.2d 567) (caveat: treated as disposition for income tax purposes)___2.6.7 Order appraisals and calendar due date ___2.6.8 Review appraisals for sufficiency

2.7 LIABILITIES , CLAIMS AND DEBTS

Inventory and Valuation___2.7.1 Inventory all tax and non-tax,secured and unsecured, matured and contingent debts,claims,

liabilities, guarantees,obligations,liens,etc. of settlor and trust___2.7.2 Review all loan,security and other documents; determine if action can be taken to limit or

eliminate matured or contingent liabilities

Management and Payment of Debts and Claims___2.7.3 Consider notifying secured creditors of settlor’s death to avoid missing notices of delinquency

or default___2.7.4 Determine which debts/claims must be paid; request payment history; set up payment plan;

keep payments current___2.7.5 Determine who is liable for payment; review trust agreement and documents creating liability___2.7.6 Determine cash needs to pay debts and claims; arrange sale or lease of assets to raise necessary

cash (see 4.7 regarding sale of trust assets)___2.7.7 Determine priority of debts and claims if trust is insolvent; plan payment workout arrange-

ments; consider retaining insolvency counsel

Trust Litigation___2.7.8 Coordinate trust administration with litigation counsel if trustee or settlor party to litigation at

death___2.7.9 Retain litigation counsel if trustee becomes defendant in lawsuit during trust administration



3 INVENT ORY AND VALUATION OF NON-TRUST ASSETS3.1 LIFE INSURANCE PROCEEDS AND OTHER DEATH BENEFITS

Lif e Insurance___3.1.1 Obtain all original life insurance policies___3.1.2 Review ownership and beneficiary designations

___3.1.2.1 Determine if proceeds are payable to or for the benefit of decedent’s estate (Reg.§20.2042-1(b))

___3.1.2.1 Determine if decedent possessed incidents of ownership (Reg. §20.2042-1(c))___3.1.2.3 Determine if decedent owned policy on the life of another (Reg. §20.2031-8)

___3.1.3 Determine type of policy, e.g., term, group term, split-dollar, whole life, universal life, acci-dental death, etc.___3.1.3.1 Determine if any steps required under split dollar agreement

___3.1.4 Determine if community funds used to pay premiums (Rev. Rul. 232,1953-2 CB 268)___3.1.5 Determine if any transfers within three years of death (IRC §2035)___3.1.6 Determine if any transfers for value (IRC §101(a)(2))___3.1.7 Determine if decedent applied GST exemption to transfers of life insurance policies or to irrev-

ocable life insurance trusts created by decedent___3.1.8 Request claim forms from life insurance companies,if client has not already done so; advise

client of need for certif ied copies of death certif icate (one for each insurance policy)___3.1.9 Request Form 712 for each insurance policy claimed; determine if additional valuation infor-

mation required, e.g., interpolated terminal reserve for policies on other than decedent’s life

Health and Accident Insurance___3.1.10 Health and accident insurance proceeds to cover the cost of the insured’s last illness are not life

insurance; includable under IRC §2033___3.1.11 Accident or no-fault insurance unconditionally payable to estate solely by reason of death is

lif e insurance (see 2.3.18 and 3.1.1,et seq.)

Social Security___3.1.12 Remind surviving spouse to apply for funeral benefits (Form SSA-8) ___3.1.13 Remind trustee to notify SSA of death of decedent to terminate monthly benefits of decedent

Medicaid___3.1.14 Notify applicable state agency within statutory period of death of Medicaid recipient if:

___3.1.14.1 Decedent received Medicaid benefits; or___3.1.14.2 Decedent was the surviving spouse of a person who received benefits (including

prior spouses)___3.1.15 Notify other state medicaid agencies,if decedent was a recipient of out-of-state medicaid benefits___3.1.16 Determine state’s rights as creditor of the decedent

Veterans Benefits___3.1.17 Apply if applicable



3.2 EMPLOYEE BENEFITS

Inventory Benefit ArrangementsSome of the more common arrangements:___3.2.1 Pension plans

___3.2.1.1 Defined benefit___3.2.1.2 Money purchase

___3.2.2 Profit sharing___3.2.3 Federal, state, or local plan (for employees)___3.2.4 Union or guild plan (for members)___3.2.5 401(k) plan___3.2.6 403(b) plan___3.2.7 Employee stock ownership plan (ESOP) ___3.2.8 IRAs and qualified annuities___3.2.9 SEP-IRA (simplified employee pension plan)___3.2.10 Deferred compensation___3.2.11 Stock options

___3.2.11.1 NQSO (non-qualified for income tax purposes)___3.2.11.2 ISO (incentive stock options which qualify for special income tax treatment,

which may or may not be best for the employer and employee in the aggregate)___3.2.12 Split-dollar life insurance plan

Assess Benefits___3.2.13 Request letter from employer, plan administrator, IRA sponsor or insurance company setting

forth:___3.2.13.1 Designated beneficiaries,including alternates___3.2.13.2 Elections available to beneficiaries,if any___3.2.13.3 Description and amount of benefits___3.2.13.4 Applicable procedures and time limits for obtaining benefits___3.2.13.5 For stock options,request letter from the employer’s general counsel to assist in

analysis of cash necessary to exercise option and pay withholding tax; expirationperiods; party responsible for exercising options; any “insider” restrictions

___3.2.14 Determine whether client needs assistance in analyzing benefit options and making elections

Trustee’s Issues to Watch___3.2.15 Determine whether qualified retirement plan benefits may be excluded from gross estate under

pre-1985 IRC §2039 ($100,000 exclusion) or pre-1983 IRC §2039 (unlimited exclusion):___3.2.15.1 Confirm whether decedent was “in pay status” before 1/1/85 or 1/1/83,respec-

tively___3.2.15.2 Confirm whether decedent irrevocably elected form of benefit from plan before

7/18/84 or 1/1/83,respectively, or, if the election was not irrevocable, whetherdecedent did not change such benefit after such dates

___3.2.16 Determine proper valuation of decedent’s interest in plans for purposes of Form 706___3.2.17 Determine if employer requires a probate court order to allow decedent’s estate to exercise

stock options (stock options are normally not transferable into a living trust)___3.2.18 Determine whether plan benefits pass outside instrument establishing a bypass trust___3.2.19 Determine whether plan benefits will be needed to administer the decedent’s estate and pay

taxes



___3.2.20 Determine whether employer’s stock owned by decedent is subject to a legend restriction, orother restrictions under “insider” securities laws (see SEC Rule 144 (17 CFR §230.144))

Beneficiary’s Issues to Watch___3.2.31 Determine if conflicts of interest exist___3.2.22 Determine income tax consequences to the recipients of such benefits

___3.2.22.1 Death benefits may not be exempt from income tax___3.2.22.2 Determine if incentive stock options cause alternative minimum tax (see 4.3.9)

___3.2.23 Determine whether a disclaimer of benefits should be evaluated and how to keep the clientfrom accepting any interest in the benefits pending evaluation

___3.2.24 Determine what issues,if any, arise due to the interest of a current or former spouse:___3.2.24.1 Confirm the existence of QDRO rights,if any___3.2.24.2 If the death beneficiary designation names someone other than the non-partici-

pant spouse (NPS),review federal and state laws which may establish certaininterests in favor of the NPS

___3.2.24.3 If the NPS predeceased the decedent,determine whether subsequent death ben-eficiary changes by the decedent are effective under federal and California laws

___3.2.25 Determine whether the surviving spouse (or other beneficiaries) may benefit from planning tominimize IRD

___3.2.26 Determine whether the surviving spouse (or other beneficiaries) need to review or revise deathbeneficiary designations or estate planning documents to coordinate plan benefits with theirestate plans

___3.2.27 Determine whether the surviving spouse (or other beneficiaries) need income tax planning tomake adjustments for changes in amount of taxable income, IRA minimum distributionrequirements,and other issues

3.3 HOUSEHOLD AND PERSONAL EFFECTS

___3.3.1 Value household and personal effects (Reg. §20.2031-6)___3.3.2 Appraise items of artistic or intrinsic value (e.g., jewelry, furs,silverware, paintings,antiques,

books,vases,rugs,coins or stamp collections) if value of one item > $3,000,collection ofitems > $10,000 (Reg. §20.2031-6); if large art collections,consider valuation discounts (Est.of D. Smith,57 TC 650; Louisa J. Calder, 85 TC 713; TAM 9235005; Est. of Georgia O’Keeffe,TC Memo 1992- 210); caveat: stolen artwork (TAM 9152005)

___3.3.3 Review riders on homeowner’s insurance policy___3.3.4 Consider safekeeping, security, or storage requirements___3.3.5 Consider videotaping or photographing assets___3.3.6 Order appraisals and calendar anticipated completion date___3.3.7 Review appraisals for sufficiency

3.4 ANNUITIES , LIFE ESTATES, TERMS FOR YEARS, REMAINDERS , AND REVERSIONS

___3.4.1 Request Form 712 for annuities___3.4.2 Determine value of annuities, lif e estates, terms of years, income interests,remainders, or

reversion interests using present value tables (for decedents dying after 4/89,FMV of presentinterest is determined under Reg. §20-2031-7(e)); caveat: where death imminent,tables can-not be used (Reg. §20.7520-3(b)(4),Ex. 1)

___3.4.3 Value commercial annuities or insurance policies on the life of persons other than decedent(Reg. §20.2031-8(a))



3.5 OTHER ASSETS

___3.5.1 Airplanes,boats,automobiles and other automotive equipment___3.5.2 Business interests (see 2.3 and 2.5)___3.5.3 Debts due decedent,other than notes and mortgages___3.5.4 Farm products,growing crops,timber___3.5.5 Income tax refunds (see Reg. §20.2053-6(f))___3.5.6 Intellectual property (e.g., patents,copyrights,trade secrets,trademarks)___3.5.7 Judgments (Est. of Ann Marie Lennon,TC Memo 1991-360)___3.5.8 Leasehold interests___3.5.9 Livestock___3.5.10 Lottery winnings (see IRS Notice 89-60,1989-1 CB 700)___3.5.11 Machinery___3.5.12 Medical insurance reimbursements___3.5.13 Mineral rights (see Est. of F.G. Holl, (1990) 95 TC No. 39,for method of determining in-place

value of mineral; for value of income interest for a term in wasting assets,e.g., oil and gas leas-es,see Charles T. Froh, (1993) 100 TC No. 1)

___3.5.14 Qualified Dividends under IRC §2701___3.5.15 Rights of deceased personality (whose name, voice, signature, photograph, or likeness have

commercial value)___3.5.16 Royalties___3.5.17 Share of trust not included under §§ 2035,2036,2037,2038 (Est. of J. G. Frazer, (CA-3) 47-1,

162 F2d 167; Est. of W. H. Kinney, 127 F2d 291; but see Rev.Rul. 55- 438); attach copy of trustto Form 706

___3.5.18 U.S. Savings Bonds___3.5.19 Keep inventory list of assets discovered not in trust for Form 706 purposes (and see 4.6)

4 ADMINISTRA TIVE STEPS AND RELATED ISSUES 4.1 ADMINISTRA TIVE TRUST

___4.1.1 Determine if formal administrative trust is needed___4.1.2 Obtain taxpayer ID number (IRS Form SS-4)___4.1.3 Consider election under IRC §646 (for decedents dying after 8/5/97)___4.1.4 Calendar fiduciary income tax return deadline(s) (see 4.4.5,4.4.9,and 4.4.11)___4.1.5 Advise clients regarding need to title assets in name of administrative trust and use of new tax-

payer ID number

4.2 ACCOUNTINGS

___4.2.1 Determine if accountings are required (see state statutes and terms of trust instrument)___4.2.1.1 Calendar due date(s) for accounting___4.2.1.2 Note statute of limitations

___4.2.2 Determine if court approval of accountings is desirable (e.g., to protect from later claims ofremainder beneficiaries); calendar next accounting/hearing date

___4.2.3 Send confirming letter to client and accountant regarding responsibility for preparation ofaccountings,form of accounting, and example format

___4.2.4 Advise client of Uniform Principal and Income Act if applicable; check trust instrument forother directions regarding principal and income



___4.2.5 Remind individual trustee to deposit all income and receipts in trust bank account and to writeall trust checks from same bank account to simplify accounting

___4.2.6 Obtain written waivers of accounting if desired (except where trustee is disqualified person)___4.2.7 Consider disbursing funds in lump sum to surviving spouse for cash needs to avoid accounting

for individual items___4.2.8 Make sure accounting records provide clear tracing of assets,income, and disbursements for

later subtrust funding___4.2.9 Consider depreciation reserve for depreciable assets (under state law or as required by trust

instrument)

4.3 PERSONAL INCOME TAXES

Allocate Responsibility___4.3.1 Determine who will prepare and file return; determine if referral to tax preparer is necessary;

confirm in writing planned deduction and elections for 706 purposes with tax preparer___4.3.2 Send confirming letter to client and tax preparer to file return

___4.3.2.1 Ensure Form 4810,Request for Prompt Assessment,is filed to limit assessmentperiod from 3 years to 18 months after filing a return for deceased taxpayer (IRC§6501(d); (the request does not shorten the time for fraud or false returns); sendletter to state taxing authorities, if appropriate, to limit assessment

___4.3.2.2 Ensure Form 5495,Discharge from Personal Liability, is filed with IRS (IRC§6905) after returns are filed

___4.3.2.3 Notify the district director of termination of fiduciary relationship by filingForm 56 with documentation of discharge from responsibility

___4.3.3 Calendar due date (4/15 in year following death)

Planning and Analysis___4.3.4 Determine capital and NOL deduction carryforwards on death (Rev. Rul. 74-175,1974-1 CB 52)___4.3.5 Determine whether any suspended passive losses or credits allowed on the decedent’s final

return (IRC §469(g)(2))___4.3.6 No estimated tax payments due after death for income earned prior to death (Reg.

§1.6153.1(a)(4))___4.3.7 Review AMT implications of final return elections and other decisions (e.g., medical expense

deduction,infra)___4.3.8 Determine accrued but undistributed income distributions to decedent from a simple trust ___4.3.9 Determine income tax treatment of stock options (IRC §422) and stock purchase plans (IRC

§423)___4.3.10 Determine if any cancellation of installment obligations (see 2.6.6)___4.3.11 Has the decedent recovered the investment for any annuity payments being received (IRC

§72(b)(3)(A))? If not,a deduction is available

Elections___4.3.12 Joint return: may elect for decedent and surviving spouse if spouse not remarried before end of

year (IRC §6013(a)(3))___4.3.13 Recognition of savings bond interest: if decedent did not elect to recognize and report interest

income, may do so on final return (IRC §454(a),Rev. Rul. 68-145,1968-1 CB 203) or mayrecognize on fiduciary return or beneficiary’s return (Series E or EE bonds); interest recog-nized will create additional estate tax deduction



___4.3.14 Involuntary conversions (natural disaster, condemnation): determine whether estate or trust mayreplace property to defer taxation on gain (IRC §§1031,1033; see also Rev. Rul. 64-161,1964-1 CB 298)

___4.3.15 Installment sale:estate can elect out of installment reporting if sale occurs in year of death(IRC § 453,Ltr. Rul. 9243005) and thereby generate estate tax deduction

___4.3.16 Partnership income or deduction:includable in final return if partnership interest sold or liqui-dated upon death; otherwise on fiduciary return for estate (IRC §706; Reg. §1.706-1(c)(3)(i));but if passes to successor other than estate (e.g., joint tenancy with spouse or specific bequest),then income or deduction passes to that person (Reg. §1.706-1(c)(3)(iii))

___4.3.17 S corporation income: allocated pro rata to shareholders on daily basis (IRC §1366(a)) andincludable on final return to date of death (IRC §1366(a)(1)); or, if all shareholders agree, taxyear of S corporation may be divided into two short tax years (IRC §1377(a)(2))

___4.3.18 Medical expenses:may elect as income tax deduction (IRC §213(a) and (c)) if paid within oneyear from DOD; or as debt of decedent on 706 return (IRC §2053(b),see also 5.1.22)

4.4 FIDUCIAR Y INCOME TAX RETURNS

Allocate Responsibility___4.4.1 Determine who will prepare and file return; determine if referral to tax preparer needed; con-

firm in writing planned deduction and elections for 706 purposes with tax preparer___4.4.2 Send confirming letter to client and tax preparer to file return

___4.4.2.1 Ensure Form 4810,Request for Prompt Assessment,is filed to limit assessmentperiod from 3 years to 18 months after filing a return for deceased taxpayer (IRC§6501(d)); send request to state taxing authority, if appropriate

___4.4.2.2 Ensure Form 5495,Discharge from Personal Liability, is filed with IRS (IRC§6905) after returns are filed

___4.4.3 Calendar due date (4/15 in year following death)___4.4.4 Consider informing beneficiary of requirement of filing beneficiary’s return consistent with

trust tax return (IRC §6034A(c))

Filing Requirements___4.4.5 Federal: must be filed for nonresident alien beneficiary or when estate has $600 of gross

income or any taxable income (Form 1041 instructions); review state income tax limitations___4.4.6 Determine with tax preparer if return for administrative trust required, or if income treated as

reportable by trust beneficiaries (individuals/trust) commencing at date of death___4.4.7 File Form SS-4 with IRS to obtain taxpayer identification number for all new trusts and for

estate if probate opened___4.4.8 Confirm that Form 56,Notice of Fiduciary Relationship,is filed with IRS for new trustee of

new irrevocable trusts___4.4.9 K-1’s from estate or trust sent each year to beneficiaries (Form 1041 instructions)___4.4.10 If over $600 is paid to third persons from trust,issue Form 1099 to payees by 1/31; file Form 1099

with Form 1096 with IRS and state taxing authority by 2/28 (IRC §6041; Reg. §1.6041-1(a))___4.4.11 Unlike probate estates, irrevocable trusts established after death must file on calendar year

basis (IRC §644)

Tax Payments___4.4.12 Consider whether trust qualifies for 2-year exemption from estimated taxes (IRC

§6654(l)(2)(B))___4.4.13 Estimate tax liability; determine payment source; plan for liquidity for payment



Planning and Elections___4.4.14 Elect to take administration expenses and losses on 706 or 1041; note waiver of double deduc-

tions (IRC §642(g) and §2053)___4.4.15 Determine if trust should pay estimated tax and elect as if beneficiary paid (IRC §643(g))___4.4.16 Determine impact of high income tax brackets of accumulated trust income; consider distribu-

tions to lower bracket beneficiaries___4.4.17 Consider whether distributions within first 65 days of tax year should be treated as made in

prior year (IRC §663(b))___4.4.18 If estate or trust is S corporation shareholder, allocate income pro rata to shareholders on daily

basis to date of termination of estate or trust (IRC §§1366(a)(1),1733(a)(1))

4.5 COURT PROCEEDINGS

Decedent’s Estate___4.5.1 Deliver original will to court clerk, if required, and mail copy to nominated executor (see 1.6.5)

Trust Proceeding___4.5.2 Determine if irrevocable trust should be modified:

___4.5.2.1 Resolve ambiguities___4.5.2.2 Reform to qualify for marital deduction___4.5.2.3 Reform to qualify for charitable deduction___4.5.2.4 Appoint successor trustee___4.5.2.5 Eliminate general powers of appointment___4.5.2.6 Qualify for QDT treatment___4.5.2.7 Divide trust for GSTT purposes

___4.5.3 Determine if other trust petitions appropriate___4.5.3.1 Instructing trustee___4.5.3.2 Trust accounting issues:to commence running of statute of limitations___4.5.3.3 To prevent potential surcharge action

Civil Litig ation___4.5.4 Was decedent or spouse a party in any existing litigation?___4.5.5 Do any claims arise as a result of decedent’s death, e.g., wrongful death, workers’ compensa-

tion:___4.5.5.1Advise client to retain litigation counsel___4.5.5.2Ascertain and calendar statutes of limitation

4.6 DISPOSITION OF NON-TRUST ASSETS

___4.6.1 Joint tenancy: terminate and change vesting of all joint tenancy assets into name of survivingtenant(s)

___4.6.2 POD (payable on death) or TOD (transfer on death) assets:change vesting name to beneficia-ry (e.g., U. S. Savings bonds,mobile homes,annuities)

___4.6.3 Totten trust accounts:change vesting to beneficiary if adult or to custodial account if minor___4.6.4 Remainder beneficiary of life estate: record affidavit or other documentation to remove dece-

dent’s name___4.6.5 Lif e Tenant: record affidavit of death of life tenant

4.7 SALE OF TRUST ASSETS

Determine if Sale Required___4.7.1 Determine need for liquidity (estate tax,cash bequest,claims and debts,administrative costs)



___4.7.2 Determine whether cash distribution preferable to in-kind distributions (beneficiaries do notwant assets; beneficiaries as co-owners may cause conflicts)

___4.7.3 Determine whether sale required by contract (buy-sells or similar agreements; executory con-tracts)

___4.7.4 Analyze tax consequences of sale by trust or beneficiaries after distribution ___4.7.5 Ascertain if asset cannot be held in successor trust (trust language prohibits; trust not qualified

S corporation shareholder)___4.7.6 Analyze effects of property sold on property tax/capital gains planning___4.7.7 Determine if sale necessitated by State Prudent Investor Act and review of trust assets (diversi-

fication, income production)

Review Power to Sell___4.7.8 Power granted in trust agreement___4.7.9 Power in state trust law___4.7.10 Restrictions on sale in documents or in other agreements (e.g., buy-sells,leases,recorded

covenants or restrictions,rights of first refusal)

How to Sell___4.7.11 Controlled by preexisting arrangements (trust agreements,executory contracts,partnership,

LLC, LLP, etc., or corporate agreements,options,rights of first refusal)___4.7.12 If no preexisting arrangements:

___4.7.12.1 Unsolicited buyers___4.7.12.2 Determining listing or sale price___4.7.12.3 Marketing by professional agents (realtors, business brokers, investment

bankers,secondary market makers for limited partnerships)___4.7.12.4 Private marketing by trustee (duty to obtain best price and terms)___4.7.12.5 Determine existence of power to hire agents (trust documents,trust law)

___4.7.13 Purchases by trustee; consider potential conflict of interest issue

Accepting Offer and Closing Sale___4.7.14 Consider obtaining court approval or instructions to protect trustee (see 4.5.3)___4.7.15 Determine whether to notice beneficiaries or seek approval (obtain consents or waivers or give

informal notice)___4.7.16 Determine if in best interest of trust and beneficiaries___4.7.17 Determine need for special advisors (e.g., real estate, corporate, partnership, or tax counsel,

business advisors or consultants) and prepare necessary documentation___4.7.18 Determine whether to escrow sale___4.7.19 Determine effect of subsequent disposition of installment note taken in the sale (IRC §453B)___4.7.20 Determine if property can be sold “as is” without representations and warranties; review state

residential real estate sale disclosures and exceptions

Tax Issues___4.7.21 Estate tax/generation-skipping transfer tax:

___4.7.21.1 Consider effect of sale price on date of death or alternate valuation___4.7.21.2 Consider acceleration of IRC §6166 deferred taxes___4.7.21.3 Consider effect on any IRC §2032A special use valuation___4.7.21.4 Consider effect on any IRC §2057 qualified family owned business interest___4.7.21.5 Consider effect of chapter 14 valuation on sale under buy-sell agreement (see 2.3)

___4.7.22 Income Tax:___ Plan for timing of any gain on sale in best fiscal year



___4.7.22.2 Consider effect of basis adjustment___4.7.22.3 Consider avoidance of IRD treatment if property subject to decedent’s executo-

ry contract___4.7.22.4 Determine income tax impact of partnership sale or liquidation, or confirm with

other tax advisors that they will determine (see Reg. §1.706-1(c)(2) and (3)regarding taxable year recognition; IRC §736 regarding payments for deceasedpartner’s interest; IRC §735 regarding ordinary income recognition)

___4.7.22.5 Consider effect of conservation easement exclusion for decedents dying on orafter 1/1/98 (IRC §2031(c))

___4.7.22.6 Where complete liquidation of partnership is necessary, consider in-kind distrib-ution of partnership assets vs. sale of partnership assets; analyze income taximpact to trust

___4.7.22.7 Determine timing and amount of income flow through on sales of partnerships andS corporations

___4.7.22.8 Determine whether to elect to close books as of time of sale for S corporationsand how to prorate income (IRC §1366(a)(1))

___4.7.22.9 Determine if disposition of IRD item accelerates gain (Reg. §1.661(a)(2)(f)(1),Reg. §1.1014-4(a)(3),and Rev. Rul. 60-87)

___4.7.22.10Involve tax preparer in planning and reporting___4.7.22.11Tax preparer to determine how to deduct sale costs

___4.7.23 Other taxes:___4.7.23.1 Property taxes (proration; change in ownership and exemptions,if applicable)___4.7.23.2 Sales taxes___4.7.23.3 Documentary transfer taxes or stamp taxes

5 TRANSFER TAXES5.1 ESTATE TAXES

Further Information Collection___5.1.1 Check date of death amounts of credits,deductions,exemptions and exclusions; adjustments for

inflation___5.1.1.1 For decedents dying after 1/1/98:

___5.1.1.1.1Applicable credit amount (IRC §2010(c))___5.1.1.1.2IRC §2057 qualified family owned business interest___5.1.1.1.3Aggregate decrease in value of qualified conservation easement

(IRC §2031(c)(3))___5.1.1.1.4GSTT exemption amount (IRC §2631(c))___5.1.1.1.5Amount subject to 2% interest rate under IRC §6166

___5.1.2 Review previously filed 709s ___5.1.2.1 Available exclusions and deductions include:

___5.1.2.1.1Annual exclusion of $3,000 for years 1977-1981,and $10,000 forpost-1981 years

___5.1.2.1.2$100,000 exclusion on post-7/14/88 gifts to non-citizen spouse___5.1.2.1.3Unlimited marital deduction on post-1981 gifts to spouse, except

for gifts to non-citizen spouse after 7/14/88___5.1.2.2 Determine if reduction in adjusted taxable gifts is warranted to prevent double

taxation for a lifetime gift of an interest in a corporation or partnership that isvalued under IRC §2701,or a transfer in trust that was valued under IRC §2702(see Reg. §§25.2701-5,27.2702-6)



___5.1.2.3 Calculate all gift taxes paid or payable on all post-1976 gifts of the decedent toreduce tentative estate tax

___5.1.3 Review for property previously taxed within past 10 years (IRC §2013)___5.1.4 Obtain certif ied copies of will,death certif icate, letters (if applicable)___5.1.5 Prepare certif ication of trust agreement; abstract of trust___5.1.6 Obtain taxpayer ID numbers of beneficiaries___5.1.7 Copies of pertinent documents,e.g., trusts for which decedent was trustee, settlor, beneficiary

or power holder

Review for Transfers, Powers, Etc.___5.1.8 Review for 706 inclusion where not otherwise inventoried as assets (see 5.1.7)___5.1.9 Transfers and releases made within 3 years from date of death (IRC §2035) of the following

interests:___5.1.9.1 Retained interests per IRC §2036___5.1.9.2 Transfers taking effect at death per IRC §2037___5.1.9.3 Revocable transfers per IRC §2038,e.g., transfers made from a revocable trust

directly to a donee___5.1.9.4 Interests transferred in life insurance policies subject to IRC §2042___5.1.9.5 Gift taxes paid on gifts made within 3 years of DOD (IRC §2035(c))

___5.1.10 Transfers with retained interests (IRC §2036),examples:___5.1.10.1 Transfer of remainder interest with retained life estate (other than an IRC §2702

transfer)___5.1.10.2 Retention of beneficial use or enjoyment of transferred property___5.1.10.3 Retention of right to designate persons to possess or enjoy transferred property___5.1.10.4 Gifts made under Uniform Transfers (or Gifts) to Minors Act where donor is

custodian___5.1.11 Transfers taking effect at death (IRC §2037)___5.1.12 Consider life insurance issues (see 2.3.18,3.1.1 and 3.1.2)___5.1.13 Revocable transfers (IRC §2038)___5.1.14 (For community property states) NPS’s community property interest in qualified ERISA plan

benefits and other non-probate transfers___5.1.15 Joint tenancies (IRC §2040)___5.1.16 Powers of appointment (IRC §2041),examples:

___5.1.16.1 “5 and 5”power not exercised at death___5.1.16.2 “Hanging” Crummey withdrawal rights___5.1.16.3 Power to invade trust principal on a non-ascertainable standard___5.1.16.4 Power to use property to discharge obligation of support (custodial account)

___5.1.17 Property for which the marital deduction was previously allowed (IRC §2044)___5.1.18 Unpaid qualified payments on equity interest valued for previous transfers pursuant to IRC

§2701___5.1.19 Lapsing voting rights,liquidation rights and restrictions (IRC §2704)

Inclusion of Assets___5.1.20 Include all trust and non-trust assets previously inventoried or discovered on the appropriate

Form 706 Schedules A through I

Determination of Deductions___5.1.21 Review election to deduct administration expenses for estate taxes vs. income taxes (IRC

§§2053 and 642(g)); determine impact on marital deduction and credit shelter (bypass) trustswhere marital deduction formula exists



___5.1.22 Review election to deduct medical expenses paid within one year of death for estate taxes vs.income taxes on decedent’s final income tax return (IRC §§2053 and 213(c))

___5.1.23 Review election to deduct state and foreign death taxes or claim as credit (IRC §§2053(d),2011(e) and 2014(f))

___5.1.24 Review election to deduct casualty losses for estate taxes (IRS §2054) vs. deduction forincome taxes (IRC §642(g))

___5.1.25 Charitable gifts (IRC §2055); review qualifications of charity, obtain IRS determination letteror review IRS Publication 78; review conditions on gifts, intervening (split) interests,etc.; ifnecessary, seek reformation of document where possible

___5.1.26 Review post-mortem expenditures made by client for deductibility ___5.1.26.1 Funeral expenses___5.1.26.2 Attorney’s fees___5.1.26.3 Trustee/executor fees___5.1.26.4 Accountant’s fees___5.1.26.5 Administration expenses,e.g., appraisal fees,cost to maintain trust property, etc.

___5.1.27 Review all debts of decedent and liens (see 2.7),and outstanding tax liabilities of decedent

Marital Deduction Issues___5.1.28 Determine property passing directly from decedent to U.S. citizen surviving spouse, e.g., spe-

cific devises of tangible personal property, joint tenancy property, lif e insurance payable tospouse, qualified ERISA plan,etc.

___5.1.29 Review and include disclaimer with 706 if property passes to surviving spouse as a result ofdisclaimer

___5.1.30 Determine if pre-9/13/81 formula providing for maximum marital deduction exists to whichtransitional rules of IRC §2056 apply

___5.1.31 Determine that requirements of IRC §2056(b)(5) are met if power of appointment trust for sur-viving spouse

___5.1.32 Determine that requirements of IRC §2056(b)(7) are met for terminable interest property trustfor surviving spouse (QTIP)

___5.1.33 QTIP election made on 706 (see Schedule M) per IRC §2056(b)(7)(B)(v),in total or in part(formula for partial election included on 706)

___5.1.34 Election out of QTIP treatment for a survivor annuity per IRC §2056(b)(7)(C)(ii) (see Schedule M)___5.1.35 Reverse QTIP election for allocation of decedent’s GST exemption (IRC §2652(a)(3); see

5.3.5)___5.1.36 Determine if surviving spouse is not a U.S. citizen

___5.1.36.1 Determine if surviving spouse will become a U.S. citizen prior to filing the 706,and if he/she was a U.S. resident at all times since decedent’s death

___5.1.36.2 Consider election to obtain marital deduction for property passing to QDT perIRC §2056A(d) (see Schedule M); determine if qualifications of IRC §2056A(a)are met; determine if necessary bonding requirements are met (Reg.§§20.2056A-1 - 20.2056A- 13)

___5.1.36.3 If QDT does not meet qualifications,implement reformation proceeding prior todue date of 706,including extensions (Reg. §20.2056A-4(a))

___5.1.36.4 If no QDT exists,surviving spouse may establish QDT and irrevocably assignproperty to trust prior filing of 706 (Reg. §20.2056A-4(b))

___5.1.36.5 Agreement to remit deferred estate tax included with 706 where nonassignableinterests in annuities,qualified plans or other payments exist (Reg. §20.2056A-4(c))

___5.1.36.6 Calendar annual reporting, if applicable (Reg. §20.2056A-2(d)(3))



___5.1.37 Determine value of property qualifying for marital deduction and any offsetting liabilities

Review For Possibility of Other Elections___5.1.38 Election by recipient of lump-sum benefit from qualified plan not to take 10-year averaging

where decedent retired prior to 1985; exclusion from gross estate per IRC §2039(f)(2)___5.1.39 Special use valuation of certain farm and business real property (IRC §2032A)

___5.1.39.1 Determine if qualified use requirements are met___5.1.39.2 Election made on 706 (Schedule A-1) including notice of election and agree-

ment signed by each person with an interest in the property___5.1.39.3 Protective election made on 706

___5.1.40 Determine if alternate valuation is applicable (IRC §2032)___5.1.41 Determine eligibility f or qualified family owned business interest (IRC §2057; see 2.3.3)___5.1.42 Determine eligibility f or qualified conservation easement (IRC §2031(c))___5.1.43 Review application of Reg. §301.9100-1 if time for making a certain election has passed; auto-

matic 12- or 6-month extension to remedy election may apply or request for extension can bemade (Reg. §§ 301.9100-2(a)(2); 301.9100-2(b))

Determine Available Credits___5.1.44 Credit for state death taxes actually paid (IRC §2011); proof of payment attached to 706___5.1.45 Credit for gift tax on certain pre-1977 gifts (IRC §2012)___5.1.46 Determine applicable credit amount___5.1.47 Credit for tax on prior transfers (IRC §2013) received by decedent within 10 years from dece-

dent’s death (see Schedule Q)___5.1.48 Credit for foreign death taxes (IRC §2014) (see Schedule P)

Extension of Time for Filing Return and Payment of Tax___5.1.49 6-month extension of time to file return (extend to 15 months from date of death) upon show-

ing of good cause (IRC §6081); file Form 4768 with IRS office where return is to be filed on orbefore 9 months from date of death (Reg. §20.6081-1(b)); date mailed:________________5.1.49.1 Greater extension period if client is abroad___5.1.49.2 Extension received, copy to client; extension date calendared:_____________

___5.1.50 12-month extension of time to pay tax (21 months from date of death) upon showing of rea-sonable cause (IRC §6161); file Form 4768 with IRS office, where return is to be filed, on orbefore 9 months from date of death (Reg. §20.6161-1(b)); interest on tax liability is notrelieved (Reg. §20.6161-1(c)); date mailed:_________________5.1.50.1 Extension up to 10 years may be granted (IRC §6161)___5.1.50.2 Extension received, copy to client; extension date calendared:_____________

___5.1.51 Extension of time to pay tax on value of remainder or reversionary interest until 6 months aftertermination of the preceding interests (IRC §6163); election made on 706; notice of electionfiled; bond acquired

___5.1.52 Election of installment payment of taxes related to a closely held business per IRC §6166 forperiod not to exceed 10 years; first installment may be deferred for a period of up to 5 years___5.1.52.1 Election made with 706 and notice of election attached to 706 including neces-

sary information___5.1.52.2 Additional election per IRC §6166(b)(7) for family attribution ___5.1.52.3 Protective election filed, if applicable___5.1.52.4 After notification from IRS, complete IRS form Agreement for Consent to

Creation of Lien Pursuant to IRC §6324A



___5.1.52.5 Calendar installment payments___5.1.52.6 Advise client of acceleration of installments for certain dispositions of business___5.1.52.7 For decedents dying on or before 12/31/97,and where special election (IRC

§6166) not made under Pub. L. 105-34,§503(d)(2),amend Form 706 to deductinterest payments and other allowable administrative expenses,if necessary

Filing Return and Payment of Tax___5.1.53 Return filed with appropriate IRS service center; date mailed:____________

___5.1.53.1 Payment of tax included with return___5.1.53.2 Copy of 706 sent to client___5.1.53.3 Postal return receipt (or overnight delivery service receipt) received and filed,

copy to client, if desired___5.1.54 Application made pursuant to IRC §2204 for discharge from personal liability of client for pay-

ment of tax___5.1.55 Determine sufficient reserve to be held by client until favorable closing letter is received___5.1.56 Closing letter received; copy to client with explanation letter

State Returns___5.1.57 Prepare and file as required or confirm preparation by another

Allocation of Tax Liability___5.1.58 Determine if terms of trust allocate payment of tax; follow terms where applicable___5.1.59 Review state proration statutes and allocate tax liability accordingly___5.1.60 Take necessary measures provided under federal and state law to collect reimbursement of

taxes from responsible parties

5.2 GIFT TAXES

___5.2.1 Obtain copies of previously filed gift tax returns of deceased settlor; if unavailable, requestcopies from IRS (Form 4506,“Request for Copy of Tax Form”) beginning with the return for4th quarter of 1976

___5.2.2 Determine total amount of decedent’s adjusted taxable gifts for post-1976 gifts (see 5.1.2 forpurposes of completing 706)

___5.2.3 File gift tax returns for taxable gifts of decedent for which returns have not yet been filed (IRC§6019); determine if filing amended 709 is appropriate; pay any gift tax due, e.g.:___5.2.3.1 Bargain sale between family members___5.2.3.2 Adding names to title on deeds,etc.___5.2.3.3 Settlor’s payment of someone else’s expenses___5.2.3.4 Interest-free or below market rate loans

___5.2.4 Avoid, if possible, incorrect valuation penalties on gift tax returns due after 1989 where valua-tion of substantial asset is uncertain; use a qualified expert (IRC §6664(c)); for gifts made after8/5/97,review IRC §2001(f) disclosure requirements

___5.2.5 Determine whether timely filed gift tax returns are necessary to make most effective allocationof GST exemption (see Reg. §26.2632-1(b))

___5.2.6 Allocate GST exemption between gift and estate tax returns; if applicable to lifetime transfers,must put on gift tax return; send letter to client regarding availability of GST exemption andconfirmation of allocation

___5.2.7 Consider request for prompt assessment (IRC §6501(d))



5.3 GENERATION SKIPPING TRANSFER TAX

Is There a Generation Skipping Transfer (GST)?___5.3.1 To determine whether the death of the settlor causes a GST generating trust—determine:

___5.3.1.1 Whether a donee or trust beneficiary is a skip person (see 5.3.3)___5.3.1.2 The identity of the “transferor” (see 5.3.4),and___5.3.1.3 Whether a trust beneficiary has an “interest in property held in trust” (see 5.3.6),

or the gift was made directly to the skip person

Test 1: Is Trust Beneficiary a Skip Person?___5.3.2 Determine following information for all persons and/or trusts (“transferees”) that may receive

an “interest in property” directly or indirectly as a result of the death of the settlor: requestnames,dates of birth, social security numbers,and trust ID numbers

___5.3.3 Determine if the transferee (including trusts) is a skip person (Reg. § 26.2612-1(d)),also consider:___5.3.3.1 Does pre-deceased parent rule apply for gifts to grandchildren? (IRC

§2612(c)(2)),___5.3.3.2 For terminations,distributions and transfers occurring on or after 1/1/98,does

deceased parent rule apply? (IRC §2651(e)),___5.3.3.3 Does 90-day rule apply? (Reg. §26.2612-1(a)(2)),or___5.3.3.4 Does multiple skip rule apply to transfers from trusts? (Reg. §26.2653-1(a))

Test 2: Who is the Transferor?___5.3.4 Identify the transferor of the interest in the property transferred as a result of the settlor’s death

(Reg. §26.2652-1(a))___5.3.4.1 Generally, the decedent will be the transferor if property would be included in

decedent’s gross estate___5.3.4.2 Determine if any split gifts under IRC §2513 (See IRC §2652(a)(2); Reg.

§§26.2652-1(a)(4),(6), Ex. 2,and 5.3.11.2.1)___5.3.4.3 Determine if there are multiple transferors (Reg. §2654-1(a)(2) and 5.3.11.2.1.4)___5.3.4.4 Determine if decedent-transferor was nonresident alien (Reg. §26.2663-2(a))

___5.3.5 Planning point: Determine if a reverse QTIP election should be made (IRC §2652(a)(3)) tokeep decedent as transferor of a QTIP or allow surviving spouse to be transferor. Consider aprotective reverse QTIP election (Prop. Reg. §26.2652-2(b)) if unsure if QTIP trust will beestablished.

Test 3: Did Transferee have an interest in trust property?___5.3.6 Determine if the transferee will have (had) an “interest in property held in trust” (See Reg.

§26.2612-1(e)) or a recipient of a direct pecuniary gift fr om the decedent-transferor

Taxable Events___5.3.7 If a GST is deemed to have occurred, determine the type of GST event:

___5.3.7.1 Direct Skip (Reg. §26.2612-1(a))___5.3.7.2 Taxable distribution (Reg. §26.2612-1(c)). Consider verifying that Form

706GS(D) is being filed. Exercise special caution when accepting the GSTTinclusion ratio. Note finality of inclusion ratio (Reg. §26.2642-5))

___5.3.7.3 Taxable termination (Reg. §26.2612-1(b)). Consider verifying that Form706GS(T) is being filed.



Exclusions/Exemptions___5.3.8 Determine if any exclusions apply to the GST to exempt it from generation-skipping transfer

tax (GSTT) for lifetime and post-mortem transfers:___5.3.8.1 Special rule for educational and medical expenses (IRC §§2611(b)(2); 2503(e))

for gifts made during life___5.3.8.2 Annual exclusion gifts (IRC §§2642(c)(1); 2503(b) made during life___5.3.8.3 Transfers subject to prior GST tax if the prior transferee was in the same gener-

ation as or lower generation than the current transferee___5.3.8.4 $1,000,000 exemption applicable (see 5.3.9 and 5.3.11)___5.3.8.5 $2,000,000 exclusion (the “Gallo Amendment”) for property transferred out-

right or to a qualified trust prior to 1/1/90 (Temp. Reg. §26.2601-1(d)). Verifythat the trust qualified

___5.3.8.6 Was the GST from a trust that was irrevocable on or before 9/25/85 (Temp. Reg.§26.2601-1(b)(1))? Caveat: Any additions actual or constructive to pre 9/26/85irrevocable trusts? (Temp. Reg. §26.2601-1(b)(1)(iv) and (v)). Review anyreleases,exercises,or lapses of a power of appointment for that trust

___5.3.8.7 WARNING: Determine if the decedent has exercised any power of appointmentthat may postpone or suspend vesting of any irrevocable trust (including pre9/26/85 irrevocable trust) beyond that trust’s perpetuities period (Reg.§§26.2601-1(b)(1)(iv), 26.2601-1(b)(1)(v)(B)(2) and 26.2601-1(b)(1)(v)(D),Ex. 4-7). If the decedent did exercise such a power, the trust will be included indecedent’s estate for death tax purposes

___5.3.8.8 Was the decedent/settlor incompetent on or before 10/22/86? (Reg. §2601-1(b)(3); PLR 9104048). If incompetent,a revocable trust will not be subject toGST (Reg. §26.2601-1(b)(3)(vi))

___5.3.8.9 Was the will or revocable trust written before 10/22/86,and did decedent diebefore 1/1/87? If yes,the trust will be exempt. Caveat: Any amendments to thetrust after 9/25/85 that may have jeopardized the exemption? (Reg. §26.2601-1(b)(4))

___5.3.8.10 For termination, distributions and transfers occurring on or after 1/1/98,does“deceased parent” rule apply? (IRC §2651(e))

___5.3.8.11 Planning point: Consider Disclaimers to skip person where appropriate fromexempt trusts

___5.3.9 Determine the unused “Generation Skipping Transfer Tax Exemption”(GSTE)___5.3.9.1 Did the decedent allocate any GSTE during life

___5.3.9.1.1Obtain copies of all gift tax returns (Form 709) filed since 1985(Reg. §26.2601-1(a)(2))

___5.3.9.1.2Consider confirming in writing what 709’s being relied on by thetax preparer

___5.3.9.1.3Determine the effective date of the GST and consider reviewingthe inclusion ratio of the trust for accuracy as of that date. (See5.3.11) Note: any GSTE allocated to a gift is void to the extentthe amount allocated exceeds the amount necessary to obtain azero inclusion ratio for the trust (Reg. §26-2632-1(b)((2)(i))

___5.3.9.2 Determine if decedent made any lif etime gifts to trusts with skip persons withoutproperly allocating the GSTE:___5.3.9.2.1Obtain copies of all inter vivos trust documents where decedent

(or decedent’s spouse) made gifts where skip persons were actualor potential beneficiaries



___5.3.9.2.2Determine if gifts to the trust are exempt from GST to the extentof gift tax exclusion (IRC §2642(c)(2))

___5.3.9.3 Did decedent make any direct gifts to skip persons in excess of the annual exclu-sion amount without making the correct GSTE allocation (check values)? Ifyes,determine the effect of the automatic GSTE allocation rule (Reg. §26.2632-1(b)(1)(i))

___5.3.9.4 If the decedent-transferor made a gift of property that would have been includedin the gross estate of the decedent or the transferor’s spouse for some periodafter the gift, determine if the estate tax inclusion rules (ETIP) were properlyapplied for the GSTE allocations that were made. (Reg. §26.2632-1(c))

___5.3.9.5 If the decedent was an alien at the time of the taxable event,special rules are applic-able to any GST’s of property situated in the U.S. and to transfers of property to aresident or citizen of the U.S. even if the decedent was a nonresident at the time ofthe transfer. Determine the impact of the special nonresident-automatic allocationrules. (See Reg. §§26.2663-2(a); 26.2632-1(b)(1))

Compliance___5.3.10 On the effective date of transfer for GSTT purposes,determine the value of property trans-

ferred or the value of all trust assets,depending on the appropriate rules for transfer in order tocalculate the denominator of the applicable fraction as follows:___5.3.10.1 For lifetime transfers, the effective date will depend on whether or not a timely

filed and properly completed 709 has been done:___5.3.10.1.1 If the 709 was timely filed, the value date for property trans-

ferred is the date of the transfer (Reg. §§26.2632-1(b)(1)(ii);26.2642-2(a)(1)). The denominator will be the value of theproperty transferred. (Note that the GSTE automatic allocationrules may apply if the transfer was a direct skip,see 5.3.9.3)

___5.3.10.1.2 Except as provided in Reg. §26.2642-2(a)(2),if the 709 was nottimely filed or was improperly completed, the value date for allof the trust assets for the denominator will be the date the 709 isactually received by the IRS (Reg. §26.2632- 1(b)(2)(ii)(A)(1))

___5.3.10.1.3 Verify the reported values on the effective date (checkappraisals) for the GST. Was the GSTE allocation done by for-mula to insure that the transfers had a zero inclusion ratio?(Reg. §26.2632-1(b)(2))

___5.3.10.2 For transfers at death, except as provided below, the effective date and the valueof the gift in order to determine the denominator of the applicable fraction will bethe date of death and the chapter 11 value. (Reg. §26.2642-2(b)(1)) Consider if___5.3.10.2.1 The special rules for pecuniary payments are applicable (Reg.

§26.2642-2(b)(2); see also Reg. §26.2632-1(a))___5.3.10.2.2 The rule for residual transfers after payment of a pecuniary pay-

ment applies (Reg. §§26.2642-2(b)(3); 26.2654-1)___5.3.10.2.3 Caution: If property other than cash is used to satisfy a pecu-

niary payment,the value of the denominator of the applicablefraction will be based on the value of the gift on the date of dis-tribution or another date provided that value follows the fairlyrepresentative formula (Prop. Reg. §26.2642-2(b)(4))



___5.3.11 Allocation of the unused GSTE___5.3.11.1 Decedent’s GSTE may be allocated by the decedent’s executor or trustee, if

applicable (Reg. §26.2652-1(d)),at any time on or before the date prescribed forfiling the 706 including extensions. (Reg. §26.2632-1(d)(1)) Caution:an auto-matic irrevocable allocation rule will apply for failure to timely allocate theentire GSTE. (Reg. §26.2632-1(d)(2))

___5.3.11.2 Consider verifying accuracy of the applicable fraction for all trusts where trans-fers were previously made to determine if any additional GSTE allocationsshould be made to such trusts. Consider:___5.3.11.2.1 If any constructive additions may have occurred that impact the

applicable fraction; Examples:___5.3.11.2.1.1 Review tax clause for IRC §2207A (see Reg.

§26.2652-1(a)(5),Ex. 7, for a review of theeffect of the reverse QTIP election on con-structive additions)

___5.3.11.2.1.2 Exercise of powers of appointment thatextend trust beyond the perpetuities period(See 5.3.8.7)

___5.3.11.2.1.3 Any actual additions to trust___5.3.11.2.1.4 Any trust contributions by the transferor

and/or deemed contributions by others whichmay have changed the transferor from theintended person who allocated the GSTE(Reg. §26.2652-1(a)(5),Ex. 5)

___5.3.11.2.1.5 Incorrect allocation of the GSTE amountsdue to errors in valuing the property trans-ferred (See 5.3.10) or utilization of the wrongeffective valuation dates (Reg. §26.2632-1(b)(2)(ii))

___5.3.11.2.1.6 Incorrect redetermination of the applicablefraction after any additional GSTE is allocat-ed to a trust or when certain changes occur inthe principal of the trust (Reg. §26.2642-4))

___5.3.11.3 Decedent’s unused GSTE may be allocated by decedent’s executor or trustee, ifapplicable (Reg. §26.2652-1(d)),at any time on or before the date prescribed forfiling the 706,706-NA or 709 filed on or before the due date of the transferor’sestate tax return including extensions (Reg. §26.2632-1(d)(1)). Caveat: Auto-matic allocation rule will apply for failure to timely allocate the entire GSTE onForm 706 (Reg. §26.2632-1(d)(2))

___5.3.11.4 Always consider using a formula to allocate the decedent’s GSTE (Reg.§26.2632-1(d)(1))

___5.3.11.5 WARNING: If GSTE is being allocated to decedent’s trust or to a pecuniarypayment to a skip person from decedent’s trust,the allocation of the GSTE mustbe made to the entire trust rather than specific trust assets (i.e., any pecuniarypayments) unless certain rules are complied with by the executor (Reg.§26.2632-1(a)). Therefore, if the trust is not treated as a separate trust for GSTTpurposes,the trust and any specific pecuniary distributions from the trust may infact not have a zero inclusion ratio for GST events (See Reg. §26.2654-1)



___5.3.12 File appropriate return or schedule (Reg. §26.2662-1(b))___5.3.13 Pay the tax when due unless extension to pay requested (PLR 9314050) under IRC §6161

5.4 DISCLAIMERS

___5.4.1 Consider using disclaimers in the following situations:___5.4.1.1 Reduce or eliminate marital deduction gift to fully utilize decedent’s applicable

credit amount:___5.4.1.1.1 Caveat: Use caution in disclaiming income from specific trust

asset while accepting income from remaining trust property (seeReg. §§2518- 3(a)(2),25.2518-2(e)(5),Ex. 4)

___5.4.1.1.2 Do not disclaim specific assets from a trust___5.4.1.1.3 Consider using fractional interest disclaimer stated in terms of a

formula or a percentage disclaimer___5.4.1.1.4 Ok to disclaim specific bequest to surviving spouse

___5.4.1.2 Create a marital deduction:___5.4.1.2.1 Disclaimer by beneficiaries other than spouse to pass property

to spouse___5.4.1.2.2 Formula disclaimer to pass assets to spouse to eliminate estate tax___5.4.1.2.3 To qualify trust for QTIP election

___5.4.1.3 Perfect or increase charitable deduction gift; where non-qualified split interestcharitable trust created, disclaimer may accelerate charitable remainder

___5.4.1.4 Avoid general powers of appointment; e.g., where beneficiary given too broad apower over trust,i.e., beneficiary/trustee disclaims power to invade principal oftrust for “happiness”

___5.4.1.5 Skip a generation and subject property to GSTT to utilize any unused GST exemp-tion, e.g., a financially secure child might disclaim in favor of grandchildren

___5.4.1.6 Avoid a GST, e.g., a grandchild or more remote descendant can disclaim to pre-vent a GST

___5.4.1.7 Correct a GST problem involving powers or interests a beneficiary may have(see Reg. §26.2612-1(e)(3))

___5.4.1.8 Qualify for stock redemption under IRC §303___5.4.1.9 Eliminate nonqualified heirs to qualify for special use valuation under IRC

§2032A or qualified family owned business interest under IRC §2057___5.4.1.10 Avoid multiple administrations and unnecessary death taxes where beneficiary

dies within 9 months___5.4.1.11 Terminate a trust where both the life interest and remainder interest beneficiaries

disclaim___5.4.1.12 Avoid income tax

___5.4.1.12.1 Holder of power to vest income or corpus in powerholder maydisclaim to avoid application of IRC §678(a)

___5.4.1.12.2 An income beneficiary may disclaim an income interest___5.4.1.13 Accelerate estate tax to qualify for PTP credit (IRC §2013)

___5.4.2 Be particularly alert to conflicts of interest in advising different parties regarding disclaimers;obtain written waivers of conflict or refer potential disclaimant to independent counsel

___5.4.3 Review technical requirements (IRC §2518)___5.4.3.1 Irrevocable and unqualified___5.4.3.2 Writing signed by disclaimant



___5.4.3.3 Identify property interest being disclaimed___5.4.3.4 Deliver disclaimer to trustee or other appropriate party not later than 9 months

after death___5.4.3.5 No acceptance of benefits___5.4.3.6 Disclaimant cannot redirect property (disclaim special power of appointment in

disclaimer trust)___5.4.3.7 Review state law and conform disclaimer to both state and federal law

___5.4.4 Determine to whom disclaimed property will pass___5.4.4.1 Review trust instrument for disclaimer directions___5.4.4.2 Review disclaimant’s family circumstances

6 DISTRIB UTION AND SUBTRUST FUNDING

6.1 INCOME TAX ISSUES

___6.1.1 Determine if any distributions should occur before end of calendar year (note IRC §663(b)regarding 65-day election),and calendar same

___6.1.2 Review issues regarding DNI; advise beneficiaries___6.1.3 Determine allocation of depreciation and depletion (IRC §§ 167(d),611(b)(3))___6.1.4 Determine whether any distribution will include income in respect of a decedent (IRD) and

plan for the timing of income realization

6.2 CONTINGENCIES PRIOR TO DISTRIBUTION

___6.2.1 Determine survivorship period___6.2.2 Assure the validity of the trust

___6.2.2.1 Any risk that the trust does not properly reflect the settlor’s intentions?___6.2.2.2 Consider questions of capacity of settlor, undue influence, forgery, missing

amendments,unusual beneficiary___6.2.2.3 Consider liability of the trustee if assets are distributed to the wrong beneficia-

ries (see Restatement of Trusts,2nd §226A; and state statutes)___6.2.2.4 Consider filing court proceeding (if available) to confirm validity of the trust and

proposed pattern of distribution___6.2.3 Consider existence of various liens and debts (see 2.7)___6.2.4 Consider postponing distributions or subtrust funding until expiration of state statute of limita-

tions barring claims against the estate; filing of 706 return; or receipt of IRS closing letter___6.2.5 Check that all tax liens (if any) are cleared or provided for:

___6.2.5.1 Ensure trustee is released from personal liability f or settlor’s estate tax (IRC§2204(b); see IRC §6905(b))

___6.2.5.2 Ensure trustee has made reasonable investigation to determine whether settlorowed income, gift, or other taxes and that such taxes have been paid or providedfor; there is no release for personal liability f or trustee (as opposed to personalrepresentative) to the extent of distributions made (IRC §§6905(b),2204(b))

___6.2.5.3 Other transferee liability issues?___6.2.6 Determine whether income triggered on distribution of assets:

___6.2.6.1 Distribution of IRD items___6.2.6.2 Funding of pecuniary gifts with appreciated assets



___6.2.6.3 Certain distributions of installment obligations___6.2.6.4 Realization of gain resulting from non-pro rata distribution

___6.2.7 Determine if court confirmation of distribution or subtrust funding is desirable (e.g., protectfrom later claims of remainder beneficiaries,intestate heirs; review state statutes and 4.5.3)

___6.2.8 Calculate and set aside sufficient reserves

6.3 OUTRIGHT DISTRIB UTIONS

___6.3.1 Determine whether distribution passes free of or subject to taxes,claims,or contributions foradministrative expenses

___6.3.2 Determine if distribution carries interest one year after DOD or income earned (review statestatutes,if applicable)

___6.3.3 Determine if DNI or depreciation or depletion will pass to beneficiary (note IRC §643(d) elec-tion); advise beneficiary and accountant

___6.3.4 Calendar due date for issuing 1099s for interest paid, if applicable (see 4.4.9)___6.3.5 Review property tax impacts if any resulting from distribution of assets___6.3.6 Determine if IRC §691(c) deduction for estate taxes attributable to IRD applies; advice beneficiary___6.3.7 Obtain valuation of assets to be distributed as of distribution date, if needed___6.3.8 Make outright cash distributions or transfer title to non-cash assets; if distribution is in-kind to

satisfy a pecuniary amount,note Reg. §1.661(a)-2(f)(1) regarding gain or loss___6.3.9 If distributed asset encumbered, have beneficiary formally assume liability; beneficiary may be

entitled to income tax deduction for payment of interest (PLR 8334025,8439008).___6.3.10 Obtain written receipts; include distributees’taxpayer identification numbers

6.4 SUBTRUST FUNDING

___6.4.1 Review trust instrument and 706 values to determine subtrusts and identity of beneficiaries___6.4.1.1 Determine if further division of subtrust to exempt and non-exempt trusts

required for GST purposes___6.4.1.2 For estates of decedents dying after 12/31/97,determine if further division

required of subtrust into qualified and non-qualified family owned businessinterests under IRC §2057

___6.4.1.3 For assets other than in GST exempt trusts,determine if physical segregationinto separate trusts mandated or advisable

___6.4.2 Determine name of each subtrust; communicate to trustee, accountant___6.4.3 If administrative trust was used, determine date of termination of administrative trust (see

6.4.7); communicate to trustee, accountant___6.4.4 Obtain tax ID number for each new trust, except where income is attributable to surviving

spouse and the spouse’s SSN is used (e.g., survivor’s trust)___6.4.5 Determine validity of trust if questionable (see 6.2.2)___6.4.6 Review issues regarding funding the marital deduction gift:

___6.4.6.1 Determine what type of formula in trust instrument to determine required fund-ing method (see Rev. Proc. 64-19,1964-1 CB 1)

___6.4.6.2 Consider distributing appreciating assets which may be sold during survivor’slif etime

___6.4.6.3 Avoid distribution of:___6.4.6.3.1 Unmatured life insurance policies,particularly on the life of the

surviving spouse



___6.4.6.3.2 Property eligible for foreign death tax credit (will be lost)___6.4.6.3.3 Flower bonds (use to pay estate tax)___6.4.6.3.4 Stock eligible for IRC §303 redemption (proceeds of earlier

redemption OK)___6.4.6.3.5 IRC §2032A or §2057 property if lik ely to be a recapture of the

estate tax saved during the survivor’s lifetime___6.4.6.3.6 Appreciated or IRD assets to satisfy pecuniary marital deduc-

tion gifts___6.4.7 Select date for funding subtrusts; allocations to subtrusts will be considered effective as of the

selected date unless instrument provides otherwise (Rev. Proc. 64-19,supra)___6.4.7.1 Obtain revaluation of trust assets as of distribution date___6.4.7.2 Complete allocations and transfers of title within a reasonable time period___6.4.7.3 Note: Distributions that occur more than 15 months after date of death require

interest payments under Reg. §26.2642-2(b)(4)(ii)(A)___6.4.8 Prepare written schedule of assets,with values,allocated to each subtrust

___6.4.8.1 Note if any DNI distributed or depreciation or depletion allocated___6.4.8.2 If multiple beneficiaries,determine if pro rata allocation required or non-pro rata

allocation is permissible to avoid taxable sale or exchange (when not dividing com-munity assets with surviving spouse) (Bixby v. Commissioner, (1972) 58 TC 757)

___6.4.8.3 Determine proper allocation of taxes and expenses to avoid underfunding (seeEstate of Hoffman,(1982) 78 TC 1069)

___6.4.8.4 Review allocation with trustee; consider review by beneficiary, if appropriate___6.4.8.5 Review allocation with trustee and accountant regarding potential income tax

issues___6.4.8.6 Send final draft of funding schedule to trustee and accountant___6.4.8.7 If administrative trust was not used, account for all income, sales,other receipts,

and disbursements from DOD through funding date (or send letter to accountantregarding responsibility to do so)

___6.4.8.8 Consider potential property tax consequences,if applicable___6.4.8.9 Review with accountant or bookkeeper accounting for beneficiary’s interests

which are not segregated into separate subtrusts___6.4.9 Transfer title of all assets to trustee of new subtrusts

___6.4.9.1 Instruct trustee to change bank accounts titles or open new accounts as required___6.4.9.2 Record real property deeds; assume mortgages___6.4.9.3 Closely held corporations: Execute Assignment of stock and issue new certif i-

cates; if Subchapter S Corp., make sure trust is qualified (QSST or ESBT (seeIRC §1361(e)); (see 2.3.22)

___6.4.9.4 Private partnerships: Execute assignments of partnership interests and deliver togeneral partner(s)___6.4.9.4.1 Comply with statutory notice requirements for changes in gen-

eral or limited partners___6.4.9.4.2 LLCs and LLPs: Execute assignments and amend certif icates

as required under state law; comply with notice requirements asapplicable

___6.4.9.5 Publicly traded securities (stock, bonds,mutual funds,partnerships):executeand deliver to transfer agents:___6.4.9.5.1 Stock powers (signature guaranteed)___6.4.9.5.2 Affidavit of domicile (notarized)



___6.4.9.5.3 Letter of instructions (signature guaranteed)___6.4.9.6 Change title of brokerage accounts___6.4.9.7 Transfer treasury notes,U. S. Savings Bonds ___6.4.9.8 Record assignment of beneficial interest of deed of trust, and send recorded

assignment and note secured thereby to maker/trustor___6.4.9.9 Execute assignments of unsecured notes and send copy to maker___6.4.9.10 Execute assignments of assets of sole proprietorships; amend outstanding UCC

financing statements___6.4.9.11 Complete transfer of vehicles (automobiles,boats,airplanes,mobile home)___6.4.9.12 Complete assignments of other personal property___6.4.9.13 Assign pending claims,contracts,or litigation to trustee of subtrust

___6.4.10 If distributed asset is encumbered, have trustee of subtrust formally assume liability

7 FINAL REVIEW

___7.1 Determine when statute of limitation on claims against a decedent expires___7.2 Review cash needs and cash flow of estate or trust again where there is a 706 extension___7.3 Comply with state statutes regarding applicable property tax exclusion___7.4 Review with trustee systems established for trust administration: bookkeeping, accounts and other

records; verify segregation of trust accounts___7.5 Review fiduciary duties with trustee; verify that trustee is attending to accountings; filing fiduciary

income tax returns; reviewing investments; making distributions required or permitted under trustagreement; other duties

___7.6 Review with trustee right to and procedure to claim and report trustee’s fees___7.7 Determine if trustee should submit trust accounting to Court for approval___7.8 Review any bonding requirement and renewal of bond___7.9 Distribute any reserve amount held back from distribution___7.10 Send closing letter, including final instructions to trustee concerning ongoing administration of trusts


* Copyright © 1999 by Duncan E. Osborne and Elizabeth M.Schurig. Mr. Osborne is the senior partner of Osborne, Lowe, Hel-man & Smith,L.L.P. and received his BA from Stanford Universi-ty and his MA and JD from the University of Texas at Austin. Mr.Osborne is the editor and a contributing author of the four-volumetreatise, Asset Protection: Domestic and International Law andTactics,published by Clark Boardman Callaghan in 1995 (updatedquarterly). He is a fellow of the American College of Trust andEstate Counsel,an Academician in the International Academy ofEstate and Trust Law (member, Executive Committee),and is list-ed in Best Lawyers in America. Ms. Schurig is also a partner ofOsborne, Lowe, Helman & Smith,L.L.P. and received her BA fromBaylor University and her JD from the University of Texas atAustin. Ms. Schurig practices in the International Estate PlanningSection of the firm and is board certif ied as a specialist in the areaof estate planning and probate law. She has written numerous arti-cles and has lectured extensively in the areas of domestic and inter-national estate planning, trust and estate administration and pro-bate. She is a member of the Texas Academy of Probate and TrustLawyers,and the College of the State Bar of Texas.

1 Peter Spero, Search and Rescue Missions,A.B.A. J. Oct.

1999 at 70; See alsoSamuel L. Braunstein and Carol F. Burger,Protecting the Wealth,A.B.A. J., Nov. 1999 at 58.

2 All states have laws to protect creditors from fraudulenttransfers. Thirty-five have some version of the Uniform FraudulentTransfer Act, six have a version of the Uniform Fraudulent Con-veyance Act, and nine have some other statutory or common lawderived from the Statute of Elizabeth. See Duncan E. Osborne,Asset Protection: Domestic and International Law and Tactics,§§2:01-2:06 (1999). In this article, fraudulent transfer and fraudu-lent conveyance are used interchangeably.

3 In re B.V. Brooks,217 B.R. 98 (Bankr. E.D. Conn. 1998); Inre Larry Portnoy, 201 B.R. 685 (Bankr. S.D. N.Y. 1996); FederalTrade Commission v. Affordable Media,Inc., 179 F.3d 1228,1999WL 387259 (9th Cir. 1999) (This case is usually referred to as “theAnderson case” in asset protection circles); In re Stephan JayLawrence, Debtor, Bankruptcy No. 97-14687-BRC-AJC (Bankr.S.D. FL. Miami D.V. Sept. 8,1999). See alsoDuncan E. Osborneand Elizabeth M. Schurig, Asset Protection Trusts: Impact ofRecent Case Law, 5 J. Asset Prot. No. 2 at 24 (Nov./Dec. 1999).

4 See, e.g., In re B.V. Brooks,supra note 3; see also,In reLarry Portnoy, supra note 3.

What ACTEC Fellows Should Know About Asset Protection

by Duncan E. Osborne and Elizabeth M. Schurig*Austin,Texas

ACTEC lawyers probably have a duty to engage inasset protection planning for their clients,but if they donot, then to protect themselves from potential malprac-tice liability, they should clearly communicate to theirclients that their representation does not involve anyadvice regarding asset protection. While this hypothe-sis may seem outrageous,in a recent article of the ABAJournal, Peter Spero argues that, at least under Califor-nia law, a lawyer engaged in estate planning may wellhave a duty beyond traditional trust, estate, and taxplanning which would, in fact,extend to asset protec-tion planning.1 Whether or not one agrees with Mr.Spero, the mere fact that he has taken that position andhas identified a possible “duty” should send a warningsignal. The reality of our litigious society is that oncea lawyer argues that a “duty” exists,judges often allowa plaintiff to pursue an argument based on that “duty.”If this plaintiff is successful,juries are often quick toaward generous damages to the injured party. Indeed,this constant identification of new theories of liabilityis the very aspect of our legal system which in largemeasure drives the asset protection industry.

There are certainly ACTEC Fellows who resist thenotion that asset protection planning is a part of the

service owed to clients. Some argue that the potentialfor unwittingly assisting a client in defrauding hiscreditors is enough of a risk that this representationshould not be undertaken. Indeed, some argue that thisrisk may itself serve as the basis for a defense to a mal-practice claim founded on a duty to provide asset pro-tection advice. Some would go further and say thatunder the fraudulent conveyance and fraudulent trans-fer laws,2 all potential creditors are protected, no matterhow removed in time and events from a transfer, so it iswrong under all circumstances to engage in asset pro-tection planning. In support of such a position,thoseFellows might refer to the language of the fraudulenttransfer laws dealing with the rights of present andfuture creditors. They might also cite the recent caseswhich have held against the debtor and have struckdown foreign asset protection trusts and that have, insome cases,subjected the settlors to imprisonment incivil contempt proceedings.3 Finally, they might arguethe long-standing policies of Anglo-Saxon jurispru-dence which generally tend to support creditors’ rightsto access self-settled spendthrift trusts.4

The problem with these arguments is that they aresuperficial and they do not withstand serious analysis


of the statutes and of the case law. Fraudulent transferlaw is extraordinarily complex.5 While it is absolutelytrue that the fraudulent transfer law of any given statemay, on its face, appear to be susceptible to the inter-pretation that future creditors, remote in time and cir-cumstances from the “transfer” are protected, that isnot, and never has been,the way in which the courtshave interpreted those laws.6 Courts have always fixedon the relative proximity of the various creditors to theevents that led to the insolvency or to the financialinjury to the creditors. Indeed, for those who take thetime to study the bankruptcy cases,the creditors’rights cases,and the articles written by the creditors’rights bar, it is almost alarming what the courts do per-mit in relation to the federal fraudulent transfer lawapplied in a bankruptcy context. There is even an areaof the law called pre-bankruptcy planning whichallows asset transfers far beyond what these authorshave ever advocated.7 In short, a serious legal analysisof what can and cannot be done to protect assets fromcreditors under both state and federal law reveals widelatitude for asset protection planning.

One reason that there is such wide latitude for pro-tecting assets is that the law (either common law orfederal or state statutory law) has never required anindividual to preserve his or her assets for the benefitof future creditors. Fraudulent transfer statutes focuson “intent” and one cannot “intend” to defraud a cred-itor who does not exist. If the law did require individ-uals to preserve assets for the benefit of future credi-tors, then gratuitous transfers of all kinds (to familymembers, to charities, etc.) would be prohibited andthe ability to use limited liability entities,e.g., corpo-rations, limited liability partnerships,and limited lia-bility corporations,would not be allowed.8 However,from the earliest times in our history, persons have had

the ability to limit their liability, and creditors havehad fraudulent transfer laws and bankruptcy laws toprotect them.

What has changed, and what has consequentlyfueled the debate about asset protection planning, isthe legislative evolution in jurisdictions in which indi-viduals may legally protect assets from their creditorsby establishing and funding trusts for their own bene-fit, the assets of which are statutorily protected fromthe settlor’s creditors. At least since 1989,when theCook Islands enacted its asset protection legislation,individuals settling trusts in the Cook Islands or otherjurisdictions with similar asset protective legislationhave been able to settle assets in trust and benefit fromthose assets even though such assets were not avail-able to their creditors.9 Some lawyers and legal schol-ars argue that this result is a wrenching departure fromAnglo-Saxon jurisprudence and simply should not beallowed. These authors disagree with those lawyersand scholars. Anglo-Saxon jurisprudence simply doesnot dictate that individuals should not be permitted tosettle assets in trust for their own benefit and therebyprotect those assets from their creditors.

Anglo-Saxon jurisprudence has evolved in muchthe same way that the use of trusts has evolved into alegal institution.10 However, the law governing trustshas historically been governed by the courts of equityrather than the courts of law.11 This is because a trust isnot really a legal entity, it is a “trust” relationship andtherefore defining the relationship and its legal compo-nents historically required the application of consciencerather than strict legal principles that was better accom-plished by ecclesiastics than lawyers.12 Though courtsof equity do not exist in our country, it is important toremember that a trust is a relationship rather than anentity and that in the absence of a compelling reason to

5 Confusion results,in part, from the difficulty in understand-ing the distinction between a fraudulent transfer, which may begrounds for a civil law remedy, and a fraud, which may be a tort orgrounds for a criminal proceeding. In a way it is unfortunate thatthe word “fr aud” is included in both. See also Ronald L. Rudmanand David L. Lockwood, Asset Protection Planning:Why it Worksand Ethical/Liability Considerations for the Practitioner, Financialand Estate Planning, §31,501 at 25,709 (Commerce ClearingHouse, 1994).

6 Osborne, supra note 2,at §20:02. See alsomaterials cited atnote 7,infra.

7 SeePeter Spero, Prebankruptcy Planning, 5 J. Asset Prot.No. 2 at 73 (Nov./Dec. 1999). The following articles and speechesby Neal L. Wolf, a leading bankruptcy and creditors’ rights attor-ney, are also very helpful in this regard: Neal L. Wolf, Understand-ing the Uniform Fraudulent Conveyance Act and Its Application inCreditor Attacks,1 J. Asset Prot. No. 4 at 34 (March/April 1996);Neal L. Wolf, Fraudulent Conveyance Law as Contained in the

U.S. Bankruptcy Code, 1 J. Asset Prot. No. 6 at 25 (July/Aug.1996); Neal L. Wolf, The Right of ‘Future Creditors’ Successfullyto Maintain Actions Under the Fraudulent Conveyance Statutes,2J. Asset Prot. No. 5 (May/June 1997); Neal L. Wolf, FraudulentConveyance Law: The Tool By Which The Aggrieved CreditorAttacks the Asset Protection Plan,Address before the AmericanBar Association 9th Annual Spring CLE and Committee Meeting(May 14,1998).

8 Osborne, supra note 2,at §20:02.9 See, The International Trusts Act (1984),as amended by the

International Trusts Amendment Act (1985), the InternationalTrusts Amendment Act (1989),the International Trusts Amend-ment (No. 2) Act (1989) and the International Trusts AmendmentAct (1991) (Cook Is.).

10 Austin Wakeman Scott and William Franklin Fratcher, TheLaw of Trusts,§ 1 at 12 (4th ed. 1987).

11 Id. at 9-11.12 Id. at 8-11.


disturb this relationship,the relationship should be hon-ored. Indeed, trusts (or “uses” as they were originallytermed) have been used historically to avoid the appli-cation of laws that had become outdated (for example,in the fifteenth century uses were employed to defeatfeudal doctrines).13 While “[t]he use of the trust toevade the claims of creditors has been resorted to forsome six hundred years [and such] purpose is to be con-demned,” the trust has also been an historical “instru-ment of law reform” when the laws required modern-ization.14 While “[t]he trust has often served as a meansof evading the law . . . [t]he evasion that in the long runproves successful is usually a reform.” 15 The evolutionof the asset protection trust and its statutory frameworkis in answer to a shifting legal and economic environ-ment that is demanding change. If the planning is donewith due and careful regard for creditors’ rights,there isnothing inherent in Anglo-Saxon jurisprudence thatnecessarily condemns asset protection trusts. Planningmust be done within the bounds that protect creditorsbut if those creditors worthy of protection are protectedthen the asset protection trust should be able to com-fortably take its place among the other vehicles avail-able to protect one’s assets and limit liability. Forexample, at the core, there is really no distinctionbetween an asset protection trust and an ERISA quali-fied plan,and no one has seriously condemned ERISA’santi-alienation provisions.

In addition to the fact that there is planning flexi-bility under creditors’ rights law, there are some pow-erful forces working in favor of asset protection. Firstand foremost is client demand; the interest in protect-ing assets is not universal, but it is both widespreadand incessant,and it is driven in large measure by aserious lack of faith in our legal system to render fairresults. Many persons of wealth perceive themselvesto be at risk no matter what sort of professional,busi-ness,or personal activities they undertake. They gen-uinely believe that the plaintiff ’s bar can make a caseand generate liability under the most absurd andunlikely set of facts. This concern reaches across thespectrum of those who have wealth: doctors, lawyers,accountants,architects,entrepreneurs, entertainers,professional athletes,heirs to fortunes,etc. Whetherthe perceptions are well-grounded or not,they are real,and they drive the decisions of these individuals. As aresult,most wealthy clients are interested in asset pro-tection advice.

Second is legislative reaction. In response to theseconcerns regarding the inability of the legal system torender fair results,beginning in 1989 in the CookIslands and proceeding apace on a global basis,juris-dictions have enacted laws to compete for and servicethe asset protection work.16 In addition to the so-calledoffshore jurisdictions,no less than four states,Alaska,Delaware, Nevada,and Rhode Island, have now made itpossible to settle asset protection trusts in their respec-tive jurisdictions.17 And finally, while the anti-asset pro-tection advocates have cited with delight the imprison-ment of the settlors in the Anderson case and theLawrencecase, no less an authority than the SupremeCourt of the United States has,at a minimum,expressedunderstanding for and acceptance of, if not actuallysanctioned, asset protection planning.18 All that is to saythat while the legal debate about the appropriateness ofasset protection planning may rage, neither side has aclear winner, and there is substantial statutory and caselaw facilitating asset protection planning.

It may well be true that some of the client’s con-cern is paranoia. It may also be that the paranoia is fedby marketers of asset protection structures,both for-eign and domestic. Indeed, clients may come to anACTEC Fellow with an asset protection plan thatsomeone has sold or is trying to sell. Lawyers may notbe competent to understand, much less evaluate, allthe subjective factors that motivate clients, but if anattorney is engaged to provide counsel regarding assetprotection planning, that attorney must be prepared torespond to the vagaries of the client’s agenda,includ-ing the client’s perceived asset risk. Because so manyclients have asset protection high among their priori-ties, this issue will be even more important in theACTEC Fellow’s practice in the ensuing years.

As a practical matter, what does all this mean forthe ACTEC Fellow? It is submitted that asset protec-tion advice and asset protection trusts do not inherentlyviolate the foundational principles of Anglo-Saxonjurisprudence and that they will eventually find theirplace and their boundaries in our current legal systemeither by virtue of legislative change or judicial recog-nition. Therefore, the “duty” identified by Mr. Spero atthe outset of this article is a concern to be taken veryseriously. The estate planning bar is particularly at riskin terms of a potential duty, because various aspects ofthe estate planning representation inherently involveasset protection activities,i.e., tax planning, creation of

13 Id. at 16.14 Id. at 7.15 Id.16 Osborne, supra note 2,at §§27:01-47:93.17 Alaska Trust Act, Alaska Stat §§ 13.36.105-220 (1997);

Qualified Dispositions in Trust Act, Del. Code Ann. tit. 12,§§3570-3575 (1998); Spendthrift Trust Act, 1999 Nev. Stat 299;Qualified Dispositions in Trust Act, 1999 R.I. Pub. Laws 402.

18 See Grupo Mexicano de Desarrolo S.V. v. Alliance BondFund, Inc., 119 S.Ct. 1961 (1999).


trusts for spendthrift children (or spouses) or other ben-eficiaries who may need assistance with asset manage-ment, retirement plan work (ERISA qualified plansunder federal law enjoy the best of all asset protection,but some states also protect non-qualified plans) andthe inevitable involvement with client’s assets andsolutions to their problems which produce, for exam-ple, limited liability structures such as family limitedpartnerships. What is all this work, if not, at least inpart, the exercise of limiting exposure to liability, i.e.,asset protection planning? It would be easy for a cre-ative plaintiff ’s lawyer to argue that an estate plannerhas a duty to engage in asset protection planning.19

Of course, an ACTEC Fellow may well decide thathe or she does not want to do asset protection work.Prudence suggests that in such a case the lawyer shouldraise the issue with the client and make it clear that thislegal service is not being rendered and should articulatethat position in conferences and confirm it in writing,preferably in an engagement letter that is acknowl-edged by the client. If estate planning representation isunderway, the ACTEC Fellow should consider modify-ing the engagement letter to reflect the understandingthat asset protection advice is not being rendered.

If the ACTEC Fellow does decide to engage inasset protection planning, he or she must be educatedabout the fraudulent transfer laws applicable in thejurisdictions in which that person practices. At a min-imum, the lawyer should have a working knowledgeof the statutes and the cases decided under them.Knowledge of the federal bankruptcy statutes that pro-tect creditors is also necessary, although as a practicalmatter, state statutes are usually more protective ofcreditors’ rights than the bankruptcy laws. If a lawyerplans under the guidance of the state laws, the result-ing plan is generally more conservative than would bethe case under the federal laws. Finally, a lawyer mustknow the so-called shield laws of his or her state, i.e.,those laws that exempt certain assets from the claimsof creditors.

With respect to any given case, the lawyer shoulddo a serious in depth analysis of the client’s solvency.20

This project begins with a listing of all assets,a sub-traction of all debts,liabilities, claims,and contingentliabilities anda subtraction of assets which are alreadyprotected from creditors’ claims under applicable state

and federal law, e.g., homestead, ERISA qualifiedplans,etc. Be aggressive about identifying liabilitiesand contingent liabilities, i.e., list not only debts, butguarantees,contingent claims, pending lawsuits,andeven potential claims. In some cases,it may be appro-priate to engage a CPA to produce an audited financialstatement. Also, inquire about the client’s businessand professional reputation. For example, does thephysician client have a history of malpractice claims?Does the business client have a history of disputeswith creditors, associates,etc.?21 (The information onthe Internet can be tremendously helpful here.) If any-thing untoward arises in the course of the solvencyanalysis, the lawyer should secure the relevant factsand evaluate them. If a serious problem appears, theattorney might either withdraw from the representa-tion or retain as co-counsel an attorney with expertisein creditors’ rights.22

Finally, at the end of the solvency analysis,devisea methodology which is sure to protect creditors.These authors typically implement a plan with a limit-ed percentage of the solvency figure. For example,assume a client with the following:

$ 10,000,000 total assets

- 2,000,000 debts,claims,guarantees,contingent liabilities, threats,etc.

- 3,000,000 protected assets,e.g., ERISAplan,homestead, annuities,lif e insurance23

$ 5,000,000 SOLVENCYx 30%

$ 1,500,000 available for further asset protection planning

There is no magic to the 30% figure shown in theexample; it is a matter of subjective judgment. How-ever, only in very rare cases do these authors exceed50%, and the figure is usually less. The influencingfactors are the size of the assets (i.e., the absolute dol-lars involved), the nature of the client’s business andprofessional activities, the potential source of anyclaims and the additional tools that might be available.But the primary point here is: leave something signif-

19 Braunstein and Burger, supra note 1.20 Duncan E. Osborne, Asset Protection and Jurisdiction

Selection,33 Univ. of Miami Philip E. Heckerling Institute onEstate Planning 14-1,14-4 (1999).

21 As a practical matter, uncovering a serious problem gener-ally occurs within the first client conference and does not take seri-ous digging.

22 These authors have on occasion proceeded with creditors’rights co-counsel and completed planning that permitted the imple-mentation of some asset protection tools and rejected others.

23 States vary in the protection from creditors that is affordedannuities and life insurance, but in many states,the cash surrendervalue is protected. Osborne, supra note 2,at 8:01- 8:53.


icant on the table. Such an approach minimizes,if itdoes not eliminate, the possibility of a fraudulenttransfer argument because there are necessarily ade-quate reserves for all possible claimants.

Not all asset protection planners are as conserv-ative as the foregoing example suggests,and manyattorneys will go much further and employ “in toto”arrangements where virtually all of a client’s wealthis placed in one or more asset protection structures.Such plans bring clients to the very brink of solven-cy and pose risks for the client and his or her attor-ney. The nature and extent of asset protection plan-ning calls for a serious exercise of professionaljudgment.

In summary, what should an ACTEC Fellow knowabout asset protection planning?

• You may well have a duty to deal with it eitherby undertaking it or expressly confirming that you arenot undertaking it.

• Clients want it. More and more clients areinterested in asset protection counsel. There is ademand, and it is being encouraged by marketers ofasset protection plans. Do not be surprised by clientsasking for it.

• If you undertake asset protection planning on

behalf of a client, educate yourself on the applicablestate and federal laws that protect creditors and identi-fy and establish a relationship with a leading creditors’rights attorney in your locale.

• Undertake an in depth solvency analysis of theclient’s assets,liabilities, and creditor protected assets.Make sure you know the extent of your client’s realand likely risks.

• Educate yourself about the asset protectionoptions in your state. Domestic solutions frequentlywork in debtor friendly states like Texas and Florida,buteven in creditor friendly states, you may be able toachieve all that is necessary, for example, with a lifeinsurance plan,a retirement plan,and a family limitedpartnership. Offshore trusts and out-of-state trusts can becomplex and expensive and may not really be necessary.

• Always be aware that you may be at risk forpotentially engaging in a conspiracy to commit afraudulent transfer and plan conservatively.

• Remember, in the context of asset protectionplanning, you are damned if you do (under a potentialconspiracy theory) and damned if you don’t (under atheory that you have a duty to your client to renderasset protection advice). No one ever said the practiceof law was not challenging!

Volume 25,No. 4,Spring 2000

ACTEC NOTES

Published quarterly for the Fellows of The American College of Trust and Estate Counsel as

a professional service.

Members of the College receive a subscription to ACTEC Noteswithout charge. Non-mem-

bers may subscribe to ACTECNotesfor $60 per year. Price for single issue, if available, is $15

per issue.

This publication contains articles that express various opinions. The opinions expressed in

such articles are those of the authors and do not necessarily reflect the opinion of the College.

Correspondence with respect to College business may be addressed to Executive Director,

The American College of Trust and Estate Counsel,3415 S. Sepulveda Boulevard, Suite 330,

Los Angeles,California 90034. Telephone:(310) 398-1888. Fax: (310) 572-7280.