The Lawletter Vol 47 No 4

Brad Pettit—Senior Attorney, National Legal Research Group

            In a very recent Chief Counsel Advisory, the Internal Revenue Service (“IRS”) clarified prior advisories and rulings regarding both the federal income and employment tax implications of payments made to and received by individuals for foster-home or difficulty-of-care services. In IRS Chief Counsel Advisory 202243009, 2022 WL 16551520 (Oct. 28, 2022), the IRS made it clear that although qualified payments received by individuals for providing qualified foster-home or difficulty-of-care services are not gross income to the payee, the payor is still responsible for the Federal Insurance Contributions Act (“FICA”) and the Federal Unemployment Tax Act (“FUTA”) employment taxes if there is an employer-employee relationship between the payor and payee, and no statutory exemption from employment tax obligations applies, such as the parent-child exemption.

The Lawletter Vol 47 No 3

Brad Pettit—Senior Attorney, National Legal Research Group

            A recent decision by the District of Columbia Court of Appeals indicates that since a judgment for the debt of only one spouse does not attach to property held by the judgment debtor and his or her spouse as tenants-by-the-entireties, the nondebtor spouse takes the subject property free from a judgment lien against the debtor spouse's property even if the spouses’ divorce and the former couple's divorce decree and property settlement agreement calls for the debtor spouse to transfer to the nondebtor spouse his or her share of the couple's tenancy-by-the-entities property. Blount v. Padgett, 261 A.3d 200 (D.C. 2021). In Blount, the court relied upon the rule that “[a]lthough the characteristics of a tenancy by the entireties include ‘an inability of one spouse to alienate his interest,’ Morrison [v. Potter], 764 A.2d [234,] 236 [(D.C. 2000)], one spouse can voluntarily ‘relinquish [and convey] his or her interest to the other.’ Clark [ v. Clark], 644 A.2d [449,] 452 [(D.C. 1994)]. Id. at 203. The Blount court also cited the District of Columbia rule, which is not followed in all jurisdictions, that "a lien that cannot attach to property held as tenants by the entireties during a debtor's marriage will not necessarily attach to the property upon the debtor's divorce." Id. at 204.

The Lawletter Vol 47 No 2

Brad Pettit—Senior Attorney, National Legal Research Group

            Although most states now have statutes that address the scope of powers of an agent under a durable or general power of attorney, it is safe to say, as a general proposition, that an agent cannot make a gift of his or her principal's property to himself or to a third party unless such a power is given to the designated attorney-in-fact in the power-of-attorney instrument. Dingle v. Prikhdina, 59 So. 3d 326 (Fla. Dist. Ct. App. 2011). Thus, in the absence of specific provision in a power-of-attorney document that authorizes the agent to make gifts of the principal's assets or property, if the attorney-in-fact makes a gift of the principal's money or property to himself, herself, or a third party, a court will presume that the gift was improper or constituted an act of prohibited self-dealing, and the agent carries the heavy burden of proving, with clear evidence, that the principal intended to allow him or her to make the gift in question. In re Estate of Curtis, 83 A.D.3d 1182, 923 N.Y.S.2d 734 (2011).

The Lawletter Vol 46 No 7

Brad Pettit—Senior Attorney, National Legal Research Group

            Although the general rule is that in the absence of an express agreement between a landlord and a tenant to the contrary, the tenant cannot recover from his or her landlord the costs of improvements that he or she made to the leased residential property, recent decisions by Idaho trial and appellate courts in the same case suggest that a tenant can obtain equitable restitution from his or her landlord on the ground of unjust enrichment for improvements to the leased premises that he or she made while the parties were mutually contemplating a future conveyance of the premises to the tenant as long as the landlord was aware of the improvements and never objected to them.

D. Bradley Pettit, Senior Attorney, National Legal Research Group

            According to a treatise on revocable trusts,

[t]he number of individuals who own animals is staggering. As many as 56.7 million households in the United States own dogs and 45.3 million own cats.

2 George M. Turner et al., Revocable Trusts, 5th § 78:1 (Westlaw current through November 2020 update).

            As to pet trusts, the Uniform Probate Code provides as follows:

Subject to this subsection and subsection (c), a trust for the care of a designated domestic or pet animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument must be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor’s intent.

Unif. Prob. Code § 2-907(b) (Westlaw current through 2019 Annual Meeting of the National Conference of Commissioners on Uniform State Laws).

The Lawletter Vol 46 No 2

Brad Pettit—Senior Attorney, National Legal Research Group

            A recent decision by the U.S. Tax Court serves as a reminder that if an individual elects to take funds from his or her tax-favored retirement account before he or she attains the age of 59½, the distribution from the account to him or her is not only subject to federal income tax, as are all distributions from retirement accounts, but is also subject to the 10% additional tax that is imposed upon early withdrawals from retirement accounts, such as individual retirement accounts ("IRAs"). In Lashua v. Commissioner, T.C. Memo. 2020-151, 2020 WL 6559172 (Nov. 9, 2020), the Tax Court reminded us that if we decide to withdraw funds from an otherwise tax-deferred retirement account before we reach the age of 59½, we should be prepared, under 26 U.S.C. § 61(a), to report the distribution as "gross income" on our individual or joint federal income tax return and, pursuant to 26 U.S.C. § 72(t)(1), to pay an "additional tax" equal to 10% of the funds that were withdrawn.

The Lawletter Vol 45 No 6

Brad Pettit—Senior Attorney, National Legal Research Group

            In a very recent ruling that was consistent with prior Virginia state court decisions that favor residential landlords in cases involving personal injury suits by tenants against landlords, a federal district court sitting in Virginia dismissed wrongful death and intentional infliction of emotional distress ("IIED") actions by the plaintiff, a mobile home owner, against a mobile home park lot owner that arose when a decaying tree fell on the plaintiff's mobile home and crushed her son to death. Darlington v. Harbour E. Vill. LLC, No. 3:20cv157-HEH, 2020 WL 3979664 (E.D. Va. July 14, 2020) (slip copy) (only the Westlaw citation is currently available), appeal filed (4th Cir. Aug. 11, 2020). Even though there was evidence that prior residents in the mobile home park had warned the lot owner at least three times about the decaying tree and the dangers that it posed, the Darlington court ruled that, in the absence of a statutory or common-law duty on the part of the mobile home park lot owner/lessor to the mobile homeowner/lot lessee to maintain a safe condition of the lot, the plaintiff could not bring a wrongful death claim against the lot lessor:

Brad Pettit, Senior Attorney, National Legal Research Group

   An unreported mid-level appellate decision by a Pennsylvania Superior Court illustrates that courts take a dim view to a residential landlord's attempt to defend against breach of covenant of quiet enjoyment and constructive conviction claims against him or her by a tenant by asserting that the parties' dispute stemmed from a good-faith mistake or misunderstanding. In Grodin v. Farr, No. 45 WDA 2019, 2020 WL 919200 (Pa. Super. Ct. Feb. 26, 2020) (nonprecedential decision), the court rejected a landlord's claim that he did not breach the covenant of quiet enjoyment or constructively evict his tenants by changing the locks on their unit because he mistakenly assumed that the tenants had received a key to the back door from the previous tenants and could still gain access to the leased premises.

The Lawletter Vol 45 No 2

Brad Pettit—Senior Attorney, National Legal Research Group

     It is not uncommon for trustees of trusts to encounter beneficiaries that pressure them into retaining a particular asset or investment even though the retention thereof might pose an unreasonable risk with respect to the performance of the overall portfolio and subject the trustee to potential liability to the beneficiaries for breach of the fiduciary duty to diversify the trust's investments. P.G. Guthrie, Annotation, Duty of Trustee to Diversify Investments, and Liability for Failure to Do So, 24 A.L.R.3d 730 (1969). In such a situation, the trust instrument itself may contain a provision that expressly or impliedly relieves the trustee from liability for retaining certain assets that might pose a risk to the performance of the overall trust portfolio.

The Lawletter Vol 44 No 4

Brad Pettit—Senior Attorney, National Legal Research Group

            The Uniform Power of Attorney Act ("UPAA") provides that

(b) Unless the power of attorney otherwise provides, language in a power of attorney granting general authority with respect to gifts authorizes the agent only to:

(1) make outright to, or for the benefit of, a person, a gift of any of the principal's property, including by the exercise of a presently exercisable general power of appointment held by the principal, in an amount per donee not to exceed the annual dollar limits of the federal gift tax exclusion under Internal Revenue Code Section 2503(b) . . . and

(2) consent, pursuant to Internal Revenue Code Section 2513, 26 U.S.C. Section 2513, [as amended,] to the splitting of a gift made by the principal's spouse in an amount per donee not to exceed the aggregate annual gift tax exclusions for both spouses.