Trusts & Estates Bulletin

A Compendium of Recent Cases

  Brought to you by LACBA's Trusts & Estates Section  *  Volume V, Number 12  *  November 2010 
An E-Publication of the Los Angeles County Bar Association

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IN THIS ISSUE:


Case Summaries

 

 

Trusts & Estates Bulletin is published monthly by the Trusts & Estates Section, coeditors:

--Amy L. McEvoy, Sheppard Mullin, AMcEvoy@sheppardmullin.com 
--Nelson J. Handy, Fiduciary Law Services, Inc., nelson@fidls.com
--Diane Park, Weinstock Manion Reismon Shore & Neumann, dpark@weinstocklaw.com

 

 

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Top Ten Best Practices

Preparer Tax Identification Numbers Are No Longer Optional

The Internal Revenue Service previously provided an alternative to including the social security number of a person preparing a federal tax return.  Rather than provide the preparer's social security number, the preparer could include a Preparer Tax Identification Number ("PTIN").  Further, if the preparer was an employee of a company, only the company's employer identification number was required and the social security number or PTIN was not required.

Beginning January 1, 2010, any attorney signing a tax return must include a Preparer Tax Identification Number ("PTIN") on the return.  The PTIN must be included on all federal tax returns, including estate and gift tax returns. 

The IRS provides answers to frequently asked questions regarding PTINs at http://www.irs.gov/taxpros/article/0,,id=218611,00.html.

The steps for applying for a PTIN are provided at http://www.irs.gov/taxpros/article/0,,id=210909,00.html

Persons preparing tax returns who are not compensated (such as the VITA program) are not governed by these rules.

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A Compendium of Recent Cases

Cases appear in chronological order, with the oldest case appearing first.

Trusts and Estates
Where commercial real property was owned by a trust, transfer of income beneficiary's interest to his children upon his death constituted a change in ownership under Revenue and Taxation Code Sec. 60, entitling the assessor to reassess the property.
     Phelps v. Orange County Assessment Appeals Board No. 1 - filed August 16, 2010,
Fourth District, Div. Three
     Cite as G040428A
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Trusts and Estates
Based on the usual and ordinary meanings of the words "indicate" and "liquidation," the partial liquidation exception of Probate Code Sec. 16350(d)(1)(A), which requires a trustee to treat a distribution from an entity as principal "to the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation," applies where the entity has made known in some manner that the distribution to the trust was the result of the entity selling an asset or assets to achieve a better cash position, and not to terminate the business.

Substantial evidence supported trial court's factual finding that corporation indicated at or near the time of a distribution to trust that the corporation was making the distribution in partial liquidation where minutes of corporation's board meeting reflected that board wanted to sell a parcel of real property to, in part, provide cash to trust so trust would in turn pay its debt to corporation.
    Manson v. Shepherd - filed September 3, 2010, publication ordered September 30, 2010
Sixth District
    Cite as H034019
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Trusts and Estates
Person who provided limited services to dependent adult, including taking him to medical appointments and preparing meals, and who received no payment for those services, was not a "care custodian" as that term is used in Probate Code Sec. 21350 and thus was not presumptively disqualified from receiving gifts from the dependent adult.
     Estate of Austin - filed September 15, 2010, Fifth District
     Cite as F058119
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Trusts and Estates
Trust provision giving beneficiary the right to request annual distributions of the principal "not exceeding in any calendar year, non-cumulatively, the greater of" $5,000 or 5 percent "of the value of the principal of the trust, determined as of the end of the calendar year" demonstrated testator's intent to prohibit any accumulation of annual distributions of principal and to have beneficiary's right to an annual distribution of principal forfeited if not exercised in a calendar year. Allowing beneficiary to "from time to time request in writing, not exceeding in any calendar year, non-cumulatively, the greater of" $5,000 or 5 percent "of the value of the principal of the trust, determined as of the end of the calendar year" did not limit the number of times beneficiary could make a demand for distribution within a calendar year as long as the total amount demanded did not exceed the annual 5 percent or $5,000 maximum. Directive that the request must be noncumulative refers to the total amount of the permissible distributions in a calendar year, not the date by which the demand must be exercised. Total maximum distribution amount available to beneficiary is calculated as of the end of each calendar year. Trust did not require beneficiary to exercise his right to a principal distribution in a given calendar year to receive the distribution related to that same year; nothing in trust documents required that a demand for a principal distribution for a given calendar year be mentioned in the accounting and report for that year. Possible conflict between beneficiary's interest as a beneficiary and his position as trustee did not require his removal as trustee or the invalidation of an order granting him a partial tenant in common interest in real property co-owned by the trust.
    Estate of Cairns - filed September 15, 2010, publication ordered September 23, 2010, First District, Div. One
    Cite as 2010 S.O.S. 5523
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Trusts and Estates
Tracing is not required for the disgorgement of profits made by a trustee "through the breach of trust" under Probate Code Sec. 16440(a(2). The fact that an act is consistent with or even compelled by the duty of prudent investing does not excuse a trustee from liability for breach of the duty of loyalty, including liability for appreciation damages as lost profits under Sec. 16440(a)(3). The determination as to which of the statutory measures of liability for breach of trust "is appropriate under the circumstances" under Sec. 16440(a) is reviewed for abuse of discretion. An investment loss resulting from a breach of trust should be offset against a profit resulting from a breach of trust only if the breaches were not separate and distinct. Prejudgment interest is mandatory on an award of damages under Sec. 16440(a)(1). The absence of an express provision for prejudgment interest under Sec. 16440(a)(3) does not preclude an award of prejudgment interest under Civil Code Sec. 3287(a) on damages awarded under that provision. A plaintiff is not entitled to the reversal of a punitive damages award for redetermination of the amount of punitive damages solely because the compensatory award is increased on appeal. "Reasonable cause" to oppose a contest of an account, within the meaning of Sec. 17211(b), means an objectively reasonable belief, based on the facts then known to the trustee, either that the claims are legally or factually unfounded or that the petitioner is not entitled to the requested remedies.
    Uzyel v. Kadisha - filed September 22, 2010, Second District, Div. Three
    Cite as 2010 S.O.S. 5529
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Trusts and Estates
Where trust instrument provided that trustee would make certain distributions upon trustor's death, trustor must have contemplated ongoing management until a final distribution, at the trustee's discretion, to a then-living beneficiary. Where trustee/beneficiary died without having fully distributed trust property to herself, remaining property did not pass to her heir, and successor trustee properly distributed it to the contingent beneficiary.
     Weinberger v. Morris - filed September 24, 2010, Second District, Div. Eight
    Cite as 2010 S.O.S. 5573
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Trusts and Estates
Where trustor named defendant as the beneficiary of a saving account opened before trustor's death but later established a living trust that expressly stated her intent that the savings account be given to a different beneficiary, trial court properly relied upon the living trust to find that trustor had intended to change the beneficiary; because the change of beneficiary was made by a living trust rather than by a will, it is not invalidated by Probate Code Sec. 5302(e). Defendant forfeited appellate review of claim that the transfer of the savings account to beneficiary was invalid under Sec. 21350(a)(2) because drafter of the living trust was the son of beneficiary.
    Araiza v. Younkin - filed September 29, 2010, Second District, Div. Six
    Cite as B221815
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Trusts and Estates
Beneficiaries of decedent's trust who had already been paid the amounts they were owed under the trust were not "interested persons" for purposes of pursing an elder abuse action after decedent's death pursuant to Welfare and Institutions Code Sec. 15657.3(d); beneficiaries' status as beneficiaries of decedent's trust never gave them standing to pursue the elder abuse action because the beneficial interest they had in the trust estate was not one that could have been "affected by" the elder abuse action. The only way beneficiaries would have standing would be as decedent's successors in interest under subdivision (d)(1)(B) if the requirements of Probate Code Sec. 259 were met as to the residuary beneficiaries. Since defendants' summary judgment motions were based on the premise that plaintiffs lacked standing to pursue any cause of action that belonged to decedent because they could not show defendants were disinherited under Sec. 259, defendants did not have to separately address plaintiffs' claims or make a prima facie showing as to those causes of action. Even though liability for abuse under Sec. 259 could be premised on aiding and abetting abuse by another or on a conspiracy to commit the act of abuse, it still must be shown that the person who is liable for the abuse  acted in bad faith and was reckless, oppressive, fraudulent, or malicious. Plaintiffs did not demonstrate prejudicial error in the denial of their motion to compel one defendant to respond to discovery since they did not show that defendant's answers would have led to admissible evidence sufficient to raise a triable issue of fact as to whether defendant acted in bad faith and engaged in reckless, malicious, oppressive, or fraudulent conduct.
    Lickter v. Lickter - filed October 27, 2010, Third District
    Cite as C061782
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Los Angeles County Bar Association
2010-11 Trusts and Estates Section Newsletter
TRUSTS & ESTATES SECTION REVIEW
Amy L. McEvoy, Co-Editor,  David C. Nelson, Co-Editor,    Nelson J. Handy, Co-Editor

SECTION OFFICERS
Chair
Nelson J. Handy

Vice-Chair
Stuart D. Zimring

Treasurer
Kira S. Masteller

Secretary
Kira S. Masteller

Immediate Past-Chair
Jonathan L. Rosenbloom

Section Administrator
Erica Leon

EXECUTIVE COMMITTEE MEMBERS

Michael A. Abraham
Ronald Berman
Jackson Chen
Kenneth A. Feinfield
Sibylle Grebe
Susan Jabkowski
Jane E. Kwon
Amy L. McEvoy
Diane Young Park

Nicole M. Pearl
Jacqueline Real-Salas
Myer J. Sankary
Leigh A. Shipp
Gabrielle A. Vidal
Caroline C. Vincent
William Lane Winslow


SUB-SECTION MEMBERS
Liaison Beverly Hills Bar Association, Trudi Sabel Schindler
Liaison Public Interest, Yolande P. Erickson
Ex Officio, Laura Conti
Ex Officio, James R. Birnberg
Ex Officio, Thomas H. Kenney
Ex Officio, Matthew W. McMurtrey
Ex Officio, Gary M. Ruttenberg

Readers are advised that changes in the law may affect the accuracy of this publication or the functionality of links after the publication date.
 
The foregoing practice tips were prepared for information purposes only.  Such practice tips do not constitute tax, legal or other advice and no responsibility is assumed for any reliance upon them or with respect to assessing or advising the reader as to tax, legal, or other consequences arising from a particular situation. The accuracy of the information provided should be independently verified by the reader and should not be treated as authoritative.