Trust Amendment and the Omitted Spouse

The court in In re Estate of Prestie, 122 Nev. 70, 138 P.3d 520 (Nev. 2006), dealt with the
issue of whether an amendment to an inter vivos trust could rebut the presumption that a will is
revoked as to an unintentionally omitted spouse.

Maria and W.R. Prestie were married in Las Vegas in 1987, but they were divorced two years
later. Over the years, they maintained a good relationship, and in 2000, when W.R. became ill,
Maria moved into his home to take care of him.

In 2001, W.R. amended an inter vivos trust he had established in 1994 to provide for a life
estate for Maria in his condominium.

Shortly thereafter, the couple was married. W.R. passed away nine months later. W.R.'s son,
the trustee and beneficiary of the trust, said that W.R.'s amendment to the inter vivos trust
rebutted the presumption of revocation of W.R.'s will as to Maria.

The pertinent Nevada statute provided for surviving spouses unintentionally omitted from their
spouse's will:

If a person marries after making a will and the spouse survives the maker, the will is revoked as
to the spouse, unless provision has been made for the spouse by marriage contract, or unless
the spouse is provided for in the will, or in such a way mentioned therein as to show an intention
not to make such provision; and no other evidence to rebut the presumption of revocation shall
be received.

The court concluded that "that an amendment to an inter vivos trust cannot serve to rebut the
presumption that a will is revoked as to an unintentionally omitted spouse." "[T]he only
evidence admissible to rebut the presumption of revocation for the purposes of NRS 133.110 is
a marriage contract, a provision providing for the spouse in the will, or a provision in the will
expressing an intent to not provide for the spouse." [citation omitted]. Since there was not a
marriage contract, and there was nothing in the will providing for the spouse or expressing an
intent not to do so, the will was revoked as to Maria.

Lambeff v. Farmers Co-operative Executors & Trustees Ltd (56 S.A.S.R. 323)

Brief Fact Summary. George Lambeff executed a will that did not include a provision for the
plaintiff, his daughter from a previous marriage. The plaintiff seeks a provision from Lambeff’s
estate under a statute that distributes a deceased’s estate to certain family members who were
are financially supported by their relative in his or her will or through intestacy.

Synopsis of Rule of Law. Under statutory law, a person domiciled in the State or owning real
or personal property in the State and by reason of his testamentary dispositions or the operation
of the laws of intestacy or both, a person entitled to claim the benefit of the Act is left without
adequate provision for his proper maintenance, education or advancement in life, the Court may
in its discretion, allow that person to receive such provision as the Court deems fit for the
maintenance, education or advancement of the person entitled. That individual may also be
precluded from receiving from the estate if their character or conduct is such as to disentitle him
from the benefit of the Act. The phrase, “advancement in life” under the statute may apply to an
earlier period in life in the members of the family. The words “proper” means all of the proper
circumstances of a case including the size of the estate, needs of the applicants, nearness in
kinship to the decease.

Facts. George Lambeff executed a will that disposed property to the defendants, Nicholas and
Christopher Lambeff, his two sons from his de facto second marriage to Barbara Lambeff. He
did not make any testamentary dispositions to the plaintiff. The deceased abandoned the
plaintiff at ten years old and did not support her financially. The plaintiff sought provision from
her father’s estate under the Inheritance (Family Provision) Act of 1972. Under the act, a person
domiciled in State that would be entitled to a claim of benefit under the act and receive a
provision from a deceased’s estate the Court thinks fit for the maintenance, education or
advancement of the person entitled if that person was left without adequate provision for his
proper maintenance, education or advancement in life. The Court had the power to refuse to
make the order in favor of any person such a person’s character or conduct way such as to
disentitled him from the benefit of the Act. At the time of the deceased’s death, the defendants
had little assets and families to support. The deceased’s estate was not large. The plaintiff
attempted to make re-establish contact with her father seven years after he abandoned her, but
he never responded to her letters that were written at about five yearly intervals. The plaintiff
suspected the lack of response was due to the animosity he harbored towards her mother and
the influence his current wife had over him.

Issue. Whether the plaintiff was left without proper advancement under a statute that entitled
her to a provision from her father’s estate if he did not provide for her in his will and she would
not inherit through intestacy.

Held. Yes. The plaintiff was left without proper advancement and should receive $20,000 from
her father’s estate, even though she had done rather well in life. It is significant that the plaintiff
would have done better in life if she would have had the proper support. She was abandoned at
the age of 10 without any support from her father after that time. The plaintiff did not commit any
acts to disinherit herself. In determining whether to grant an award under the statute, the court
must also place itself in the position of the testator and consider that the deceased was wise
and just instead of foolish and fond.

Discussion. Because the evidence showed that the deceased did not provide for his daughter
for half of her childhood, the court believed that she was entitled to support, even though she
did not necessarily need the support. It is enough that her life would have been better and a
father is responsible for helping his child to succeed in life.

Gift to pretermitted child’s other parent prevents child’s claim notwithstanding divorce
The decedent made a will giving all his estate to his spouse, omitting children from a prior
marriage. The decedent and his spouse had a child, then divorced. The decedent died without
changing his will. Under Alabama law, all provisions for the ex-spouse are revoked. The child
claimed an intestate share of the decedent’s estate under the pretermitted child statute. The
statute creates an exception if, when the will was executed, the decedent had one or more
children and substantially all of the estate is given to the parent of the omitted child. In Gray v.
Gray, 947 So. 2d 1045 ( Ala. 2006) , the court held that the exception applied to the instant
situation, even though the children living at the time of execution of the will were the not the
children of the decedent’s then spouse.

Pretermitted heir statute does not apply to revocable lifetime trust

In Kidwell v. Rhew, 268 S.W.3d 309 (Ark. 2007), the court held that the Arkansas pretermitted
heir statute does not apply to a revocable lifetime trust, expressly rejecting Restatement
(Second) of Property, Donative Transfers § 34.2 which states that a pretermitted heir statute
should apply to a will substitute.

Shapira v. Union National Bank (39 Ohio Misc. 28, 315 N.E.2d 825)

Status: Ohio Court of Common Pleas, Mahoning County, 1974

Facts: David Shapira’s will provide that his three children Ruth, Daniel, and Mark would inherit
his estate. Both of his sons had conditions on their inheritance. The will provided that if Daniel
was married to Jewish girl whom both parents are Jewish, Daniel would receive his inheritance.
If however, he was not married to an eligible Jewish girl then his inheritance would be held in
trust by the executor of the will for 7 years. If Daniel married an eligible Jewish girl within 7 years
he would receive his inheritance. If after 7 years he was unmarried, or married to an ineligible
Jewish girl, Daniel’s portion of the estate would go to the State of Israel. Daniel a 21 year old
college student sought a declaratory judgment the Shapira’s will was unconstitutional. He
alleged that the condition upon his inheritance is unconstitutional restriction on his right to
marry, and that its contrary to public policy and unenforceable because of its unreasonableness,
and that he should be given his bequest free of the restriction.

Procedural History: None

Issues: Whether a will that conditions the receipt of one’s inheritance upon marrying within a
particular religious group unconstitutional as violating on one’s right to marry?

Analysis:

Constitutionality: Plaintiff contends, that the right to marry is constitutionally protected from
restrictive state legislative action. Plaintiff submits, then, that under the doctrine of Shelley v.
Kraemer, the constitutional protection of the 14th Amendment is extended from direct state
legislative action to the enforcement by state judicial proceedings of private provisions
restricting the right to marry. Plaintiff contends that a judgment of this court upholding the
condition restricting marriage would, under Shelley v. Kraemer, constitute state action prohibited
by the Fourteenth Amendment as much as a state statute.

In Shelley v. Kraemer the United States Supreme Court held that the action of the states to
which the Fourteenth Amendment has reference includes action of state courts and state
judicial officials. Prior to this decision the court had invalidated city ordinances which denied
blacks the right to live in white neighborhoods. In Shelley v. Kraemer owners of neighboring
properties sought to enjoin blacks from occupying properties which they had bought, but which
were subjected to privately executed restrictions against use or occupation by any persons
except those of the Caucasian race. ‘These are cases in which the purposes of the agreements
were secured only by judicial enforcement by state courts of the restrictive terms of the
agreements.’

In the case at bar, this court is not being asked to enforce any restriction upon Daniel Jacob
Shapira's constitutional right to marry. Rather, this court is being asked to enforce the testator's
restriction upon his son's inheritance. If the facts and circumstances of this case were such that
the aid of this court were sought to enjoin Daniel's marrying a non-Jewish girl, then the doctrine
of Shelley v. Kraemer would be applicable, but not, it is believed, upon the facts as they are.

It is a fundamental rule of law in Ohio that a testator may legally entirely disinherit his children.
This would seem to demonstrate that, from a constitutional standpoint, a testator may restrict a
child's inheritance. The court concludes, therefore, that the upholding and enforcement of the
provisions of Dr. Shapira's will conditioning the bequests to his sons upon their marrying Jewish
girls does not offend the Constitution of Ohio or of the United States.

Public Policy

A partial restraint of marriage which imposes only reasonable restrictions is valid, and not
contrary to public policy: The great weight of authority in the United States is that gifts
conditioned upon the beneficiary's marrying within a particular religious class or faith are
reasonable.

It is the duty of this court to honor the testator's intention within the limitations of law and of
public policy. The prerogative granted to a testator by the laws of this state to dispose of his
estate according to his conscience is entitled to as much judicial protection and enforcement as
the prerogative of a beneficiary to receive an inheritance.

Holding: No

Judgment: The conditions in the will are reasonable restrictions upon marriage, and valid.

Rule: A will may contain a provision that the one must marry within a particular religious group
as a condition of receiving their inheritance.

Dissent or Concurrence: None

Estate of Rapp v. Commissioner (140 F.3d 1211,1998 U.S. App.98-1 U.S. Tax Cas. (CCH)
P60,304; 81 A.F.T.R.2d (RIA) 1151)

Brief Fact Summary. Mr. Bet Rapp died in February 1988 survived by his wife Laura Rapp,
and two children, Richard and David Rapp. Laura Rapp petitioned the probate court to reform
the trust in her husband’s will so that it would qualify as a “qualified terminable interest
property,” (hereinafter “QTIP”) trust. The probate court reformed the will and the tax court held
the reformation was improper and that the trust property is a part of the decedent’s estate.

Synopsis of Rule of Law. The value of property passed directly from a testator to a surviving
spouse is deducted before computing federal estate taxes. If the interest passing to the spouse
consists only of a life estate or other terminable interest, the value of that interest is not
deducted when determining the tax owed. If the terminable interest qualifies as a QTIP, the
surviving spouse can elect the marital deduction as if the interest passed directly and without
restraint to him or her. A probate court decision may be ignored when determining federal tax
consequences if the decision is contrary to state law, even when that order is final.

Facts. Rapp’s will included a trust that gave the trustees power to use the funds for the proper
health, education, and support of his wife Laura B. Rapp, if in the absolute discretion of the
trustee such funds were needed. Mrs. Rapp asked the probate court to modify this portion of her
husband’s will so that the trust created by the will would qualify for the marital deduction as a
QTIP trust. Rapp alleged that it was her husband’s intent to create the trust to qualify for the
deduction and that he believed that the trustees would pay all of the income of the trust at least
annually to or for the benefit of the petitioner during her lifetime. She claimed that the trust was
a part of the marital deduction gift as defined by section 21520(b) of the California Probate
Code. At oral argument, no witnesses were called and no documents were admitted into
evidence. The IRS did not receive notice of the petition and did not appear. The petition relied
upon the probate’s power to modify or terminate a trust upon consent of all parties, or its power
to modify or terminate the trust due to changed circumstances under the California Probate
Code. The executor attempted to claim the trust as a QTIP exemption. The IRS rejected the
exemption and the executor appealed. The tax court held that the probate court erred in
reforming the will because it was not ambiguous and there was little or no evidence that Mr.
Rapp intended to create a QTIP trust.

Issue. Whether the California probate court’s reformation of the will is binding on a tax court for
the purpose of determining the amount of federal estate taxes if the California Supreme Court
did not decide the matter nor affirm the result?

Held. No. The California probate court’s reformation is not binding because the issue before the
state court is a federal issue. The state court proceedings were brought for the purpose of
directly affecting federal estate tax liability. Mrs. Rapp sought to modify the testamentary trust so
that it would qualify as a QTIP trust under federal estate tax laws. Without a decision by the
California Supreme Court, the probate court’s reformation was not binding on the tax court. The
tax court was not bound by the California probate court’s reformation of Mr. Rapp’s will.
Discussion. The reformation of the probate court was not binding because the petitioner
attempted to have the trust qualify as a QTIP trust for a federal estate tax exemption. Also, the
IRS was not given proper notice to appear for trial.

Pond v. Pond (424 Mass. 894,678 N.E.2d 1321,1997 Mass.)

Brief Fact Summary. Sidney M. Pond created a trust with his wife that provided income to him
and his wife for their lives. However, the trust failed to make a provision for his wife if he
predeceased her. The wife petitioned the court to reform the trust to conform to her husband’s
intent to provide for her and have the trust qualify for a surviving spouse marital deduction under
federal estate tax laws.

Synopsis of Rule of Law. A trust instrument may be reformed where the instrument fails to
embody the settlor’s intent because of scrivener’s error. There must be clear and decisive proof
of the error.

Facts. Pond created a revocable trust naming himself and his wife as trustees. During the
settlor’s lifetime, all of the annual income and such principal as the trustees deemed necessary
were to be paid to the settlor and his wife. If one of the children predeceased the parents, the
trust provided that the deceased child’s share shall pass “equally and in equal shares to his/her
issue by right of representation,” when the issue reach the age of thirty. The couple transferred
all of their assets except their marital home into the trust. In his will, the settlor bequeathed all of
his tangible personal property to his wife and the residue of hi estate, both real and personal, to
the trust. The tax clause in the will authorized his wife, as executrix, “in her sole, exclusive and
unrestricted discretion, to determine whether to elect under Section 2056(b) (7) of the Internal
Revenue Code of 1954 to qualify all or a specific portion of the Sidney M. Pond Revocable Trust
dated January 17, 1991 for the federal estate marital deduction and any marital deduction
available under the law of the state in which I am domiciled at the time of my death.” The trust
made no provision for the wife in the event of the settlor’s death. To qualify under Section 2056,
the trust must provide the surviving spouse with a qualifying income interest for life. The settlor’s
estate would have had to pay $70,000 in otherwise avoidable taxes without the deduction. The
plaintiff requested that the court reform trust to give effect to the settlor’s intent to provide for her
in the event of her death and to have the estate qualify under the martial deduction for federal
estate tax purposes.

Issue. Whether there is clear and decisive proof of mistake due to scrivener’s error in a trust
that does not include a provision for the settlor’s wife upon her death?

Held. There is clear and decisive proof of a scrivener’s error because the trust terms suggest
the settlor intended to provide for his wife through his trust in the event of his death. The settlor
and his wife had transferred almost all of their assets into the trust. During their lifetime, the trust
was payable to the settlor and his wife. The settlor most likely intended for the same
arrangement to exist if he died before his wife. In addition, because the trust grants the wife the
power to elect to take the marital deduction, the trust may also be reformed to correct the
ambiguity in the termination provisions so that the trust may qualify for the marital deduction.

Discussion. There was clear and decisive proof that the writer made a mistake in making the
will because the settlor stated his intention that the trust qualify for a marital deduction.