CHAPTER TWOWASHINGTON PROBATE AND TRUST LAW UPDATE

May 2012

By

Mark W. Roberts, Esq.

K&L Gates LLP925 Fourth Avenue, #2900Seattle, Washington 98104

Phone (206) 370-8119Fax (206) 370-6160

mark.roberts@klgates.com

MARK W. ROBERTS is a partner in the Seattle office of the law firm K&L Gates LLP. He is a member of the firm’s Private Clients, Trusts and Estates practice group, and his practice emphasizes all areas of estate planning and the administration of trusts and estates. He graduated from Bucknell University, in Pennsylvania, in 1978 and received his law degree with honors in 1981 from the University of North Carolina School of Law. He is a past chairperson of the Real Property Probate and Trust Section of the Washington State Bar Association and previously served as co-chair of the Washington State Bar Association Probate Law Task Force. He is also a fellow of the American College of Trusts and Estates Counsel. He has served as a member of the executive committee of the Estate Planning Council of Seattle. He is a frequent lecturer at professional continuing legal education programs on topics relating to estate planning and probate and trust law.

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TABLE OF CONTENTS

Page

I. 2012 PROBATE AND TRUST LEGISLATIVE DEVELOPMENTS ...............................3

A. Estate Tax Apportionment.......................................................................................3

B. Civil Marriage and Domestic Partnerships..............................................................3

C. Living Will Registry................................................................................................5

II. 2011 PROBATE AND TRUST LEGISLATIVE DEVELOPMENTS ...............................5

A. Estate Tax Interpretation .........................................................................................5

B. Principal and Income Act. .......................................................................................6

C. Uniform Trust Code ................................................................................................7

D. Guardianship Appointments and Accountings ........................................................9

E. Trust Companies....................................................................................................11

F. Charitable Solicitations Act...................................................................................11

III. CASE LAW UPDATE ......................................................................................................12

A. Breach of Fiduciary Duty; Special Appointees .....................................................12

B. Will Contest; Undue Influence ..............................................................................12

C. Undue Influence ....................................................................................................14

D. Will Contest...........................................................................................................15

E. TEDRA; Standing .................................................................................................15

F. Settlement Agreement; Claim Against Estate. ......................................................16

G. Testamentary Disposition of Non-Probate Assets.................................................18

H. Tangible Personal Property; Extrinsic Evidence ...................................................18

I. Creditor Claims; Personal Guaranty......................................................................21

J. Wrongful Death; Stepchildren...............................................................................23

K. Tax Refund; Final Administration Action.............................................................23

L. Guardianship; Advocacy Fees ...............................................................................24

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WASHINGTON PROBATE AND TRUST LAW UPDATE

By

Mark W. Roberts

I. 2012 PROBATE AND TRUST LEGISLATIVE DEVELOPMENTS

A. Estate Tax Apportionment.

Chapter 83.110A, the Washington Estate Tax Apportionment Act (the “Act”), provides rules for apportioning the estate tax among those interested in a decedent’s estate if the decedent has not provided instructions in the decedent’s will, trust or other governing instrument. Generally, if no provision is made, the estate tax (both federal and state) is apportioned on a pro rata basis among the persons who have an interest in the assets of the decedent’s estate, with some exceptions applicable to property that qualifies for a marital or charitable estate tax deduction.

HB 2224 amends the Act to provide that beneficiaries receiving specific pecuniary gifts or specific gifts of tangible personal property are exonerated from apportionment of the estate tax up to a certain amount.

Beneficiaries receiving specific gifts of tangible personal property are collectively exonerated from apportionment of the estate tax up to the value of property permitted to pass under Washington’s small estate affidavit procedure under RCW Chapter 11.62 (currently $100,000).

As well, beneficiaries receiving general legacies in a pecuniary amount are exonerated from apportionment of the estate tax collectively up to one-half of the property permitted to pass under Washington’s small estate affidavit procedure (currently $50,000).

The tax associated with the exonerated gifts is reapportioned among the beneficiaries receiving non-exonerated gifts. If the aggregate value of the decedent’s gifts of tangible personal property or pecuniary amounts exceeds the exoneration ceiling for that kind of gift, each beneficiary receiving that kind of gift will share the maximum exoneration amount (i.e., either $100,000 or $50,000, as the case may be) on a pro rata basis with the other beneficiaries receiving that kind of gift.

Exoneration only applies to specific gifts, and does not apply to property passing under the residuary clause.

The bill is effective for decedents dying on or after June 7, 2012.

B. Civil Marriage and Domestic Partnerships.

ESSB 6239 provides for civil marriage between same sex couples, and amends provisions relating to Washington’s registered domestic partnership law.

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The bill amends Washington’s Defense of Marriage Act to eliminate the requirement that the civil marriage contract be between a man and a woman, thus allowing same sex couples to marry. The amendments allow a civil contract between two persons who are at least age 18 years old and who are otherwise capable. A person cannot marry if that person has a spouse or registered domestic partner living at the time of such marriage, unless the registered domestic partner is the other party to the marriage.

The Act amends the list of officers and persons who are authorized to solemnize marriages to include imams, rabbis, or similar officials of any religious organization. However, the Act provides protection to religious organizations by stating that no official of any religious organization is required to solemnize or recognize any marriage, provide accommodations or facilities related to the solemnization or celebration of marriage, or be subject to any claim or cause of action based upon its refusal to do so.

Partners in a state-registered domestic partnership may apply and receive a marriage license and have the marriage solemnized, as long as they are otherwise eligible to marry, and their state-registered domestic partnership will be dissolved by operation of law by the marriage to each other.

Any state-registered domestic partnership in which the parties are of the same sex, and neither party is at least age 62 years old, that has not been dissolved or converted into marriage by the parties by June 30, 2014, will automatically be merged into a marriage as of June 30, 2014. In those cases, for purposes of determining legal rights and responsibilities involving individuals who had previously had a state-registered domestic partnership and had been issued a marriage license or are deemed married, the date of the original state-registered domestic partnership will be considered the legal date of the marriage. Effective June 30, 2014, the Act amends the definition of domestic partnership to two persons who share a common residence, both of which are at least age 18, and at least one of which is age 62.

The Secretary of State must send a letter to the address on file for each same sex state-registered domestic partner notifying the person of the changes in the law, as well as a second notice by May 1, 2014.

The Act includes reciprocity provisions, providing that if two persons in Washington have a legal union, other than a marriage, that was validly formed in another state or jurisdiction, and provides substantially the same rights, benefits and responsibilities of a marriage, and does not meet the definition of a domestic partnership, the parties will be treated as having the same rights and responsibilities as married spouses in this state, unless the relationship is otherwise prohibited by law, or the parties become permanent residents of Washington and do not marry within one year after becoming permanent residents. Similarly, if two persons have a legal union other than a marriage that is substantially equivalent to a domestic partnership, it must be recognized as a valid domestic partnership in Washington, regardless of whether it bears the name of a domestic partnership. This reciprocity provision has importance not only for same sex couples coming to Washington from other jurisdictions, but also may enable Washington couples to have their status recognized in states who condition recognition of out of state

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relationships on the existence of reciprocity provisions for their residents under the law of the other state.

This legislation is stated to be effective June 7, 2012. However, immediately after the governor signed ESSB 6239 into law, opponents of same sex marriage filed an application for a voter referendum to set aside the Act. The opponents have until June 6 to collect sufficient valid voter signatures to put the referendum on the November general election ballot. If sufficient signatures are collected by that date, the legislation would not go into effect until after the November general election assuming it is not repealed.

For Washington resident same sex couples who are currently in a registered domestic partnership, estate planning advantages could be obtained by affirmatively converting their relationship to a civil marriage before the June 30, 2014 automatic conversion date. Once married, property passing to a surviving spouse would qualify for the Washington estate tax marital deduction, whereas under current law the marital deduction will not apply to registered domestic partners until January 1, 2014. Similarly, changing the partners’ status to marriage may secure survivorship benefits currently only afforded to a surviving spouse.

C. Living Will Registry.

Washington State’s living will registry, created in 2007, will come to a close after June 2012 due to a lack of funding.

The registry was launched as a statewide online database for Washington residents to store their health own directives. Persons registered prior to a June 20, 2011 cut-off date will maintain a free lifetime registration with U.S. Living Will Registry, a private corporation.

II. 2011 PROBATE AND TRUST LEGISLATIVE DEVELOPMENTS

A. Estate Tax Interpretation.

In 2010, the Legislature enacted SSB 6831 to provide a rule of interpretation for wills and trusts containing estate, gift and generation-skipping transfer tax formula clauses for decedents dying during 2010 when there was no federal estate tax.

The 2010 Bill provided that a will or trust of a decedent who dies during 2010 is deemed to refer to the federal estate and generation-skipping transfer tax laws as they applied with respect to estates of persons dying on December 31, 2009, if the will or trust (i) contains a formula that refers to “Unified Credit,” “Estate Tax Exemption,” “Generation-Skipping Transfer Tax Exemption,” “Marital Deduction” or similar terms specified in the Bill, (ii) measures a share of an estate or trust based upon the amount that can pass free of federal estate tax or generation-skipping transfer tax, or (iii) is otherwise based on a provision of the federal estate or generation-skipping transfer tax laws similar to those set forth above.

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In the absence of this Bill, the one-year suspension of the federal estate tax and generation-skipping transfer tax could render formula clauses in existing documents unclear if not meaningless, and could have unintended results. The statute was intended to create a presumption that the same types of formula provisions would apply in determining the allocation of the assets of an estate or trust as existed last year when a federal estate and generation-skipping transfer tax was in effect. The Bill was codified as a new RCW 11.108.080 and 11.108.090.

On December 17, 2010, Congress retroactively re-enacted the Estate Tax and Generation Skipping Transfer Tax provisions through January 1, 2010. In doing so, Congress increased the exemptions to $5,000,000, also retroactive, to January 1, 2010.

As a result, for decedents dying after December 31, 2009 and before December 18, 2010, it is not clear if formula clauses used in Wills would result in a presumed exemption amount of $3,500,000 or $5,000,000.

Senate Bill 5849 was enacted in Washington’s 2011 legislative session to address this issue. For estates of decedents dying after December 31, 2009 and before December 18, 2010, SB 5849 allows for the introduction of extrinsic evidence in order to determine the testator’s or grantor’s intent regarding the formula clause, even if the Will is not ambiguous. The Bill also removed the prior presumption created by SSB 6831 that the formula amount is $3,500,000, but allows for construction of the formula as meaning $3,500,000 or $5,000,000, based upon the decedent’s intentions.

Further, the time limit under RCW 11.108.090 for bringing a judicial construction action under RCW 11.108.080 has been extended from one year to two years.

Finally, in order to conform to changes in the Internal Revenue Code for decedents dying in 2010, the Bill extends the time to make a qualified disclaimer of property under Washington law from an estate of a decedent dying after December 31, 2009 and prior to December 18, 2010, to the later of nine (9) months following the date of death, or September 17, 2011. See RCW 11.86.031.

The provisions of SB 5849 became effective April 18, 2011.

B. Principal and Income Act.

SB 5057 enacts a rule clarifying the allocation between principal and income of income taxes attributable to pass-through entities held by a trust.

RCW 11.104A.290 generally governs the allocation of income taxes between principal and income. When a trust owns an interest in a pass-through entity for income tax purposes, such as an S-corporation, limited liability company or partnership, it must report its share of the entity’s taxable income regardless of whether or not the trust actually receives all of the income. The trustee must allocate the taxes between the income beneficiary and principal of the trust. Frequently, an issue arises concerning whether the income beneficiary’s entitlement should be reduced by the income taxes the

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trust is required to pay on the phantom taxable income not distributed to the trust from the pass-through entity.

The Bill provides that a tax required to be paid by a trustee on the trust share of the entities’ taxable income must be charged:

• To income, to the extent that the receipts from the entity are allocated only to income;

• To principal when the receipts from the entity are allocated only to principal;

• Proportionally to income and principal when the receipts are allocated to both income or principal; or

• In all other cases, to principal.

Before making this determination, the trustee must adjust income or principal receipts by the distribution to a beneficiary for which the trust receives an income tax deduction.

Notwithstanding the enactment of this statute, an issue may still arise where a trust has insufficient cash assets with which to pay its share of the income taxes. In that event, taxes may still be charged to principal, but the trustee might be forced to borrow a portion of the distribution back from the income beneficiary or create a charge against the principal account in favor of the income beneficiary.

This Bill became effective July 22, 2011.

C. Uniform Trust Code.

SHB 1051 incorporates into the Washington statutes numerous provisions of the Uniform Trust Code (“UTC”) promulgated by the National Conference of Commissioners on Uniform State Laws. The Bill is the product of recommendations by a task force of the Washington State Bar Association’s, Real Property, Probate and Trust Section. The provisions of the Bill become effective January 1, 2012.

The most significant revisions contained in SHB 1051 were summarized by the task force as follows:

1. Revisions to 11.97.010, 11.96A.120 and new section 11.120.030; clarification of trustee’s duty to give notice.

Existing common law on the extent of the trustee’s duty to give notice to beneficiaries is vague. The UTC codified and clarified that duty, and the notice provisions in the Bill also do so, in a manner similar to the UTC provisions. The Bill requires a trustee to give notice of an irrevocable trust’s creation (or in the case of a revocable trust, notice of the trust’s existence once it becomes irrevocable) to all persons who would get notice of a TEDRA action. That class of persons is limited by the expansion of the doctrine of virtual representation in the legislation. New RCW 11.120.030 clarifies that no notice is required

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and no other duties are owed to anyone other than the trustor while a trust is revocable by the trustor. RCW 11.97.010 also requires the trustee to keep the beneficiaries reasonably informed but gives a safe harbor for what type of information would satisfy that duty. The provision therefore clarifies beneficiaries’ rights to notice but protects trustees and limits information that the trustee is required to give because it clarifies the duties and defines a minimum of information that satisfies the duty.

2. Statute of limitations: 11.96A.070.

This section now gives a three year statute of limitations for bringing a claim against a trustee once the trustee has sent a report of trust activity that adequately discloses the existence of a potential claim. “Safe harbor” criteria for the report are spelled out in the statute.

3. New chapter 11.120 on Revocable Living Trusts.

The Task Force adopted the UTC approach of a separate section of rules applicable to revocable living trusts, recognizing their increasing presence as an alternative to Will planning. The new chapter codifies and clarifies several issues regarding revocable living trusts, such as how to amend or revoke, and limitations of actions on the validity of a revocable living trust. In particular, 11.120.040 provides that if a trustee has given notice as required under 11.97.010(2) once the trust has become irrevocable, the beneficiary has four months to contest the validity of the trust. Under pre-existing law there is no provision that gives the trustee of a revocable living trust the option of a shortened time period to contest that is similar to the Will contest provisions.

4. Trust Situs: RCW 11.96A.050 (venue) and 11.98.042, 11.98.045, 11.98.051.

These sections are a major change in pre-existing statutes. Previously, trust situs was defined by the “principal place of business” of a trust, but that designation is no longer useful in light of the business practices of most corporate trustees. The UTC declined to address how trust situs is identified, but the task force examining the UTC thought this was a critical issue that needed to be addressed. The primary addition to the statutory scheme is 11.98.042. It specifies that if a trust agreement designates Washington as the situs or Washington law as the governing law, and the trust has one of several listed connections with Washington, the trust is a Washington trust. If there is no such designation, but the trust has one of the listed connections with Washington, the trustee can register the trust as a Washington trust by filing a certificate of registration with the court and giving notice to the beneficiaries and an opportunity for the beneficiaries to object. Finally, if a trust does not designate Washington in the trust agreement and the trust is not registered, then the statute identifies some circumstances that would qualify a trust as a Washington trust (e.g., a testamentary trust under a Will probated in Washington) and if those circumstances do not apply, the statute provides criteria for a court to use to determine whether it is a Washington trust.

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5. Duty of Loyalty: 11.98.180.

This section codifies and clarifies the trustee’s duty of loyalty. In particular, it clarifies what transactions are subject to the no further inquiry rule, and what transactions can be defended by a trustee on the basis of fairness.

6. UTC section 415. Reformation to correct mistakes.

RCW 11.96A.410 applies to Wills as well as trusts. The reformation can be accomplished by either judicial proceeding or a TEDRA nonjudicial binding agreement. This is a significant departure from pre-existing Washington law, which does not allow reformation for mistakes.

7. UTC section 409. Noncharitable trust without ascertainable beneficiary.

This section authorizes a trust “for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee” as long as the trust does not last more than 150 years. Under pre-existing common law, a trust is not enforceable unless there is an ascertainable beneficiary or there is a purpose that qualifies as charitable.

D. Guardianship Appointments and Accountings.

SHB 1053 enacts amendments to Chapter 11.88 and Chapter 11.92 RCW, Washington’s statutory framework for the creation and administration of guardianships. The amendments are the result of recommendations of a task force formed by the Elder Law Section of the Washington State Bar Association.

The primary provisions of the Bill are as follows:

Guardianship Appointments.

Within 90 days of appointment, guardians or lay guardians who are not certified professional guardians or financial institutions must complete any training made available by the Administrative Office of the Courts or the superior courts in the form of a video or webcast at no cost to guardians or limited guardians. Guardians and limited guardians appointed prior to the effective date of the Bill must complete any requiring training upon filing the next account or report.

An extension for or a good cause waiver of the completion of the training requirement may be granted upon petition by the guardian or limited guardian or by any other method as provided by local court rule. A good cause waiver is limited to guardians who were appointed prior to the Bill’s effective date and who already possess the requisite knowledge to serve as a guardian without completing training. A list of factors is provided for the court to consider when determining whether good cause exists to grant a waiver.

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Letters of Guardianship.

A guardian or limited guardian may not act on behalf of an incapacitated person without valid letters of guardianship. The court may issue letters of guardianship that are valid for a period of up to 5 years from the anniversary date of the appointment. When determining the time period for which the letters will be valid, the court must consider the list of factors provided in the Bill.

Guardianship Filings and Proceedings.

Within 90 days of a guardian’s appointment:

• the superior court may set a hearing for review of the initial personal care plan;

• guardians and limited guardians must designate a standby guardian; and

• guardians and limited guardians are required to notify interested persons of their right to request special notice on the guardianship’s proceedings.

The deadline for the annual account or report must be set within 90 days of the anniversary date of appointment, and the court must review it within 120 days of the anniversary date. The court may review and approve an account or report without conducting a hearing. All court orders approving accounts and reports must contain a guardianship summary, which is set forth in the Bill.

If a guardian or limited guardian fails to file an account and/or report or fails to appear at a hearing, the must enter an order for one or more of the following actions:

• entering an order to show cause and requiring the guardian to appear at a hearing. At the hearing the court may remove the guardian and appoint a successor guardian;

• directing the clerk to extend the letters of guardianship for good cause shown for an additional 90 days in order to permit the guardian to file his or her account or report;

• requiring the completion of training;

• appointing a guardian ad litem; or

• providing other relief as the court deems just and equitable.

Upon the termination of a guardianship, the guardian or limited guardian is required to file the final report or account and the petition for settling the account within 90 days. The deadline for the petition can be extended for good cause.

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Filing Fee.

The Bill as enacted by the Legislature had provided for the assessment of a filing fee against the guardianship estate when the guardian filed a required account with the court, but this provision was vetoed by the Governor prior to signing the Bill into law.

The provisions of the Bill became effective July 22, 2011.

E. Trust Companies.

SB 5375 authorizes trust companies to form as, or convert to, a limited liability company, subject to obtaining approval from the Washington State Department of Financial Institutions. Approval is based upon the same conditions that are set for banks, bank holding companies and savings banks.

The Bill is effective July 22, 2011.

F. Charitable Solicitations Act.

SHB 1485 enacts various changes to Chapter 19.09 RCW, the Charitable Solicitations Act (the “CSA”).

Various sections of the CSA are reorganized for clarity and readability. Certain terms are changed for consistency.

Regarding registration and disclosure of reports, an entity is considered registered 20 days after receipt of the registration form and may commence soliciting contributions from the public. Volunteer-run charitable organizations raising less than $50,000 in any accounting year are exempt from registration requirements.

Charitable organizations that are required to file certain federal tax forms do not have to file a copy of the tax form with the Washington Secretary of State if the form is available for public inspection under federal tax law.

Commercial fundraisers must disclose whether it is using a subcontractor, regardless of whether the subcontractor is expected to receive a certain percentage of the anticipated fundraising costs. It is made explicit that social security numbers and financial account numbers are not public information.

The Secretary of State is given discretion to: (1) send renewal or other notices electronically; (2) set the principal amount of the surety bond required of certain commercial fundraisers; and (3) establish how long registrations are effective. In addition, the Secretary of State or the Attorney General may publish, on the internet or in a press release, notifications that an entity is soliciting without registering.

An entity is prohibited from collecting on contributions in person unless: (1) the contributions are noncash items; (2) the solicitation for the contribution is made in person and the collection of the contribution is made at the same time as the solicitation; or

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(3) the contributor has agreed to purchase goods in connection with the solicitation and the collection is made at the time the goods are delivered.

Certain terms, such as “gross revenue,” are defined.

The Bill is effective July 22, 2011.

III. CASE LAW UPDATE

A. Breach of Fiduciary Duty; Special Appointees.

Estate of Foster, 165 Wash. App. 33 (Div. 1, 2011)

The Court of Appeals affirmed that a trustee had breached his duty to the beneficiaries of an estate and trust by failing to allocate assets properly among the beneficiaries and that he was not entitled to a jury trial.

This case involved efforts by a court-appointed special representative appointed for minor beneficiaries and a court-appointed special administrator to conduct discovery to ensure that the share of the decedent’s living trust and Will allocated to grandchildren and great grandchildren were properly allocated to the beneficiaries. Protracted and contentious disputes arose between the decedent’s sons who received 60% of the estate and the court appointed appointees. In its ruling, the court indicated that the executor and trustee was not entitled to a jury trial. The son and trustee had argued that he was entitled to a jury trial because the alleged breach of fiduciary duty was a tort. The court confirmed that because the purpose of the suit was to protect the interests of the minor beneficiaries in the trust estate, not to obtain damages for them, the court did not abuse its discretion by denying the trustee a jury trial. In its decision, the court also confirmed that actions against the trustee were not barred under the doctrines of estoppel or statute of limitations.

B. Will Contest; Undue Influence.

Estate of Haviland, 255 P.3d 854 (Div. 1, 2011)

The court of appeals affirmed that substantial evidence supported the trial court’s finding that a decedent’s Will was the product of undue influence and should be set aside.

Haviland, age eighty-five, met Mary, age thirty-five, in 1996 when he was recuperating in the hospital from a leg injury. Mary was a hospital nurse assistant. Haviland was a widower with four children by his first marriage. They married one year later and Haviland died in 2007. Beginning shortly after Haviland’s discharge from the hospital and continuing over the course of their marriage, millions of dollars of Haviland’s separate assets were transferred to his living trust, to Mary’s separate account, the couple’s joint checking account or Mary’s separate line of credit. The court found little evidence as to the ultimate purpose of transfers from the living trust account and couple’s joint account. Additional parcels of Haviland’s separate real property were transferred to Mary as her separate property, his retirement accounts were cashed in and

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substantial sums were given to Mary’s children from a previous marriage, but without making any comparable gifts to Haviland’s own children.

Over this period of time, Haviland’s physical health substantially deteriorated, and ultimately Mary quit her job to care full time for Haviland. The last major revision to his estate plan occurred in 2006. Haviland’s attorney had received a phone call from Mary to advise him that Haviland wished to change his Will. After the phone call, Mary typed a letter enclosing a copy of Haviland’s existing Will with requested revisions. The effect of the revisions effectively disinherited Haviland’s children. Haviland signed the new Will in the attorney’s office. By 2007 Haviland’s mental condition had deteriorated following a visit to the emergency room for dehydration, and the consultation report described him as suffering from advanced dementia. He died approximately one week later. Three of Haviland’s children commenced a Will contest after the 2006 Will was submitted to probate, alleging a lack of testamentary capacity at the time he signed his 2006 Will and that the Will was the product of undue influence.

In its holding, the court reviewed the factors that give rise to a rebuttable presumption of undue influence. The most important of these factors include that the beneficiary occupied a fiduciary or confidential relation to the testator, that the beneficiary actively participated in the preparation or procurement of the Will, and that the beneficiary received an unusually or unnaturally large part of the estate. Added to these may be other considerations, such as the age or condition of health and mental vigor of the testator, the nature or degree of relationship between the testator and the beneficiary, the opportunity for exerting an undue influence, and the naturalness or unnaturalness of the Will. Here, the court of appeals found that Mary occupied a fiduciary relationship with respect to Haviland, participated in the creation of his Will and received an unnaturally large share of his estate in comparison to his earlier estate plans. It also found that he was extremely vulnerable to undue influence due to physical disabilities, some cognitive impairment and Mary’s position as his primary caregiver. It also found that Mary depleted his estate through a systematic, persistent and largely unexplained pattern of transferring assets from his estate for her benefit and that of her children and other designees.

Mary argued that these factors should not apply to create a rebuttable presumption of undue influence when a Will contestant asserts undue influence against a spouse, on the grounds that a common trait of marriage is that each spouse occupies a fiduciary relationship with respect to the other and that spouses routinely participate in the preparation and procurement of each other’s Wills.

The court of appeals disagreed, finding that the above factors and presumptions do still apply when assessing the conduct of a spouse in a Will contest. In so holding, the court found that spouses were not at a greater risk than other beneficiaries of having a Will invalidated by applying these features. Because no single factor is determinative, each case is decided upon a combination of the facts shown by the evidence in the particular case to be of such a suspicious nature as to raise a presumption of undue influence. Further, in this case, because Mary had been named a co-trustee of Haviland’s living trust, Mary did occupy a fiduciary relationship with Haviland. Mary also did not merely participate in the procurement of Haviland’s last Will, but she also contacted the lawyer

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by letter, enclosing a copy of the prior Will upon which she interlineated draft changes. The Will revision also came on the heels of a nearly decade long campaign of draining Haviland’s estate.

The court determined that not only had the petitioners raised sufficient evidence to raise a presumption of undue influence, but Mary failed to provide credible evidence sufficient to restore the equilibrium of evidence touching the validity of the Will.

C. Undue Influence.

Estate of Melter, 2012 WL 1085814 (Div. 3, 2012)

The Court of Appeals affirmed that a decedent’s Will that effectively disinherited one of her two sons was not the product of undue influence.

Virginia was a widow who had two surviving sons, John R. and William, and a deceased daughter who left a young child. Following Virginia’s husband’s death, one son, William, traveled to Florida to stay with his mother and help prepare for her move to the Pacific Northwest. During the months he spent with Virginia in Florida, he influenced her, in her weakened state to make a new will, which favored himself, and did not tell his brother about the will. After Virginia and William flew to Spokane, William left Virginia to stay with his other brother, John, temporarily. Thereafter, William suffered a heart attack and his extended recovery delayed his mother’s move to live with William. During this period, Virginia became comfortable living with her other son, John, and his wife, and decided to make her home with them instead.

Virginia was aware that she had made a prior will, but was unsure of or did not acknowledge its contents, and William repeatedly denied John’s request to send him a copy of the documents. Thereafter, John helped arrange for his mother to make a new revocable trust and will which left her estate equally to her sons and appointed John as executor and successor trustee. Thereafter, personal animosity grew between John and William, and John learned of the earlier will favoring William. John thereafter arranged for Virginia to meet with a new attorney, and Virginia indicated her disappointment with William for numerous reasons that were articulated to the lawyer. She then executed a fourth will, specifically disinheriting William and bequeathing almost of her estate to John with the exception of a small amount to her deceased daughter’s child. For the balance of her lifetime, John and his wife took care of Virginia and Virginia became estranged from William during the years she lived with John. During the final years of her life, a substantial amount of assets were transferred by Virginia to John.

Following Virginia’s death, William sued for an accounting of Virginia’s lifetime transfers, and sued to set aside the fourth will and have John and his wife removed as executors and trustees. The trial court concluded that the transfers of virtually all of Virginia’s assets to John and her fourth will were invalid, and indicated that the burden was on John to establish that he did not exercise undue influence in procuring the fourth will.

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The Court of Appeals reversed. Applying the standard analysis to the determination of whether or not there was undue influence, it recognized that the most important facts were (1) that the beneficiary occupied a fiduciary or confidential relation to the testator; (2) that the beneficiary actively participated in the preparation or procurement of the Will; and (3) that the beneficiary received an unusually or unnaturally large part of the estate. Here, although both of the sons presented the court with somewhat unclean hands, the court found that John rebutted the presumption of undue influence, and the burden still rested upon William to determine undue influence by clear, cogent, and convincing evidence. Although the court took an adverse view of John’s credibility, that lack of credibility could not satisfy William’s burden of proof. William did not have any direct evidence that John or his wife misrepresented facts to Virginia or made direct demands on Virginia’s attorneys to prepare a Will in favor of John that were sufficient to evidence undue influence.

The case is illustrative that the contestant to a Will still has the burden to establish undue influence by clear, cogent, and convincing evidence and cannot merely rely upon suspicion or the fact alone of a Will disinheriting the contestant.

D. Will Contest.

Estate of Wood, 2011 WL 5120691 (Div. 1, 2011)

The Court of Appeals affirmed the decision of the trial court denying a son’s petition to revoke his mother’s will and remove her designated personal representative from office.

Jody and Mary were life partners for 30 years prior to Jody’s death in 2007. In her 2004 Will, Jody left the bulk of her estate to Mary and only a nominal bequest to her son who had visited Mary only once in the 20 years preceding his death. Jody’s son brought a petition to revoke probate of the will and remove Mary as personal representative, and in addition, asserted undue influence, lack of capacity, breach of duties, embezzlement, and other misconduct.

In its decision, the Court of Appeals held that none of the son’s claims were supported by the evidence. The Court of Appeals also affirmed the award of attorneys’ fees to Mary that were granted by the trial court and also granted her request for reasonable attorneys’ fees upon appeal.

This case illustrates the potential for a claim to be made by a disappointed beneficiary, regardless of whether or not there is support for the claim.

E. TEDRA; Standing.

Estate of Becker, 2012 WL 763118 (Div. 1, 2012)

The Court of Appeals determined that a surviving spouse’s refusal to execute a settlement agreement relating to an estate that was prepared under RCW Chapter 11.96A, did not render the agreement invalid, because the surviving spouse was not a necessary party to the proceeding pursuant to the Trusts and Estates Dispute Resolution Act.

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This case involved a will contest between the decedent’s three adult daughters from a previous marriage, and a minor child the decedent had through his marriage to his wife Nancy, to whom he was married at his death. The adult daughters had filed a petition challenging the validity of the will, filed creditors’ claims, and sought to remove Nancy as personal representative based upon conflicts of interest. The court appointed a guardian ad litem for the minor child. Thereafter, the guardian ad litem, the adult daughters and the decedent’s former wife participated in a mediation to resolve the disputes, which resulted in a settlement agreement. The agreement granted the adult daughters a percentage interest in the estate, but recognized that the assets in the estate and the characterization and value of those assets were in dispute. Nancy refused to sign the agreement in her role as personal representative, and after a hearing, the court removed Nancy as personal representative due to her irreconcilable conflicts of interest. Thereafter, Nancy appeared personally in the matter, and would not consent to the agreement, and the guardian ad litem filed a motion to determine Nancy’s standing as a necessary party to the agreement for purposes of TEDRA. Nancy was not a beneficiary under the will, but issues existed regarding characterization of the decedent’s assets as his separate property or as the couple’s community property.

In its decision, the Court of Appeals indicated that Nancy was not a “party” pursuant to TEDRA and stated that the persons who constitute parties are those persons who are both listed within RCW 11.96A.030(5) and who have “an interest in the subject of the particular proceeding.” Because Nancy would only be a party with respect to her interest in the decedent’s property, and did not have an interest either in the subject of the settlement agreement nor in the decedent’s estate, she did not have an interest in the settlement agreement. Even if Nancy and the decedent’ owned community property prior to his death, at death, the community was dissolved and the former community property became the separate property of the decedent’s estate and the surviving spouse. Consequently, because she did not have personal interest in the estate, she was not entitled to participate in the settlement agreement proceedings.

This case is illustrative of the fact that an agreement under TEDRA can be made among the parties interested in the estate who have an interest in the matter in dispute, and need not necessarily include all of the individuals who might have received notice of the probate proceedings.

F. Settlement Agreement; Claim Against Estate.

Estate of Howisey, 211 WL 2639324 (Div. I, 2011)

The court of appeals affirmed that when two beneficiaries settled a dispute over the decedent’s Will by accepting a cash payment and a promissory note in satisfaction of their interest in the estate, they became creditors of the estate and the personal representative became personally liable when the personal representative distributed estate assets before satisfying the claim.

The decedent was survived by two daughters and a granddaughter. In one Will, he named a third person as personal representative of the estate and left his estate in equal

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shares to his daughters and granddaughter. One daughter, Carnahan, offered a different, later Will for probate. Under this final Will, Carnahan was appointed as personal representative, she and her sister were equal heirs of the beneficiary estate, and a few individuals received specific bequests. Carnahan’s sister and niece objected to the probate of the final Will. Prior to trial, the court ordered mediation.

The mediation resulted in a settlement and agreement under Ch. 11.96A RCW. Carnahan, her sister and niece, and the executor under the first Will, agreed that the final Will would be admitted to probate and Carnahan would serve as personal representative. With respect to the beneficial share of Carnahan’s sister and niece, they agreed that they would be paid $200,000, which would be paid by issuance of a check of $100,000 from the estate within seven days after the agreement, with the remainder to be paid under a promissory note secured by the decedent’s residence, which would be due and payable on the first to occur of sale of the residence or within one year after the date of the agreement. The agreement also included a general release clause. A notice of filing of a memorandum of the agreement under RCW Ch. 11.96A was sent to the other beneficiaries of the estate, who were not parties to the agreement, and none objected to the agreement.

Thereafter, Carnahan distributed some of the specific bequests under the Will and attempted to sell the residence for its original asking price, which would have accommodated the amount owed on the promissory note. She eventually sold the house for a lesser price, and after paying off the existing mortgage on the property, the net proceeds were insufficient to satisfy the entire note, leaving approximately $28,000 to be paid. Carnahan had not notified her sister and niece in advance of the other distributions from the estate or the payment of fees and expenses.

After Carnahan defaulted on payment of the balance owing, her sister and grandchild petitioned for judgment on the promissory note. After a hearing pursuant to RCW 11.76.050, the trial court held that the sister and granddaughter were creditors of the estate, and the debts of the estate were required to be paid before distribution of any property. The note was issued by the estate, and the amount due became a debt of the estate. Carnahan had paid attorney’s fees and distributed specific bequests without providing notice to the creditors and before she had paid the note balance, she commingled estate assets with her own personal funds and used estate assets to pay personal expenses and was unable to provide an adequate accounting. Although Carnahan’s sister and niece were originally beneficiaries under the contested Will, they agreed to walk away from the Will contest for a sum certain and became creditors of the estate to the extent of the promissory note. Under RCW 11.76.160 whenever a decree is made by the court for the payment of creditors, the personal representative is personally liable to each creditor unless the personal representative’s inability to make the payment from the property of the estate is not due to the personal representative’s fault. Here, based upon the facts the court concluded that the personal representative was personally liable. Further, the general release under the TEDRA agreement only applied to prior claims each of the parties had against each other, and did not bar a suit against Carnahan for breach of the TEDRA agreement itself.

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G. Testamentary Disposition of Non-Probate Assets.

Manary v. Anderson, 2011 WL 5127615 (Div. 1, 2011)

The Court of Appeals held that the testator’s specific bequest of real estate, title to which was held in the name of his revocable living trust, was an effective bequest of the real estate under Chapter 11.11 RCW.

Homer and his late wife held title to their residential real estate in the name of their revocable living trust prior to his wife’s death. Upon her death, Homer’s wife’s share of the living trust assets was allocated to her irrevocable family trust under the trust agreement, and Homer’s share was allocated to his revocable survivor’s trust under the trust agreement. A few years before Homer’s death, Anderson moved onto the residential real property and became Homer’s caretaker. Prior to his death, Homer executed his last will, which bequeathed his interest in the property to Anderson. Following Homer’s death, a dispute arose between the named beneficiary of the property under the language of the revocable living trust, and Anderson as beneficiary of property under the will.

The Court of Appeals determined that the Testamentary Disposition of Non-Probate Act, codified in RCW 11.11 (the “Act”) applied to his interest in the real estate. The court found that Homer was the “owner” of his one-half interest in the residential property for purposes of the Act, because he had beneficial use of the residential real property during his life under the terms of the trust agreement.

Further, RCW 11.02.005(15) specifically defined non-probate assets to include an interest of the owner in a trust of which the owner is grantor and that becomes effective or irrevocable only upon the person’s death. Although Homer’s will did not specifically mention the living trust in his bequest of the property, the court indicated that there was nothing in the statute that required the testator to acknowledge the previously created trust in his will. Further, even though the definition of non-probate assets in the statute includes exceptions for real estate joint tenancies and future interest deeds, Homer’s interest was not a joint tenancy or a future interest deed, but instead an interest in the revocable trust.

H. Tangible Personal Property; Extrinsic Evidence.

Estate of Sowder, 2012 WL 212173 (Div. 2, 2012)

The Court of Appeals held that the provisions of a revocable living trust reducing the inheritance of a daughter who failed to return tangible personal property to the trustor was enforceable, and was not sufficiently ambiguous to require the admission of extrinsic evidence.

The trustor, Rose Sowder, had a substantial collection of gems and jewelry, many of which were stored in the home safe of her daughter, Thompson. She frequently exchanged the items stored in the safe, depending on what she wished to wear. In 1982, Sowder hand wrote and signed nine detailed lists designating which jewelry items she

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wanted to pass to her daughters and granddaughters, some of which were stated “give today” at the top and others showing an intent to make a gift of the listed items but not specifically stating a present gift. The items were not actually delivered to the donee, and in fact, Sowder would switch out items from the safe if she ever wanted to wear them.

In 1998, Sowder executed eight notarized lists entitled “Personal Possessions Bequeaths.” Some of the same items of personal property appeared on both the 1982 and 1998 lists, and in fact, some of the items on the 1998 lists had already been given away as birthday or Christmas gifts. Subsequently, some items on these lists also were distributed by Sowder to other individuals, and she left other items in the safe.

In 2001, Sowder amended her estate plan, and directed her successor trustee at her death to distribute her personal property to the recipients designated on a list in accordance with RCW 11.12.260. The trust amendment also included a provision stating that she had certain items of jewelry, sterling silver and other tangible personal property which she owned but which were currently held by her daughter, Thompson, and she had requested that such items be returned to her. If they were not returned to her, she directed the trustee to deduct $50,0000 from Thompson’s share of the residuary estate and add $25,000 to each of the shares for her other two daughters. Further, Sowder indicated in her trust agreement that in making the determination as to whether or not such items had been returned to her, she directed that any correspondence from her to the trustee or the attorney shall be conclusive evidence that such items had been returned, and in the event of no such confirmation, it shall be determined that such items had not been returned.

Following Sowder’s death, Thompson distributed all of the remaining personal property in the safe in accord with Sowder’s lists. She obtained receipts, which were sent to the trust’s attorney. Nevertheless, the trustee indicated that the penalty provision should still apply, because the items had not been returned to Sowder or the trustee prior to her death. Although Thompson filed a notice of mediation, the trustee objected to the mediation and requested a judicial determination of the issues. The court agreed that the matter warranted judicial determination.

The Court of Appeals affirmed the decision of the trial court that the penalty clause in Sowder’s trust agreement was unambiguous, and therefore, extrinsic evidence may not be admitted to explain the language used. Because the items in Thompson’s home safe had never actually been delivered to the donees during Sowder’s lifetime, the gifts on the list were not considered complete as a matter of law during her lifetime. Sowder’s substitution of items in and out of the safe and use of the items also supported this conclusion that the gifts were not complete during her lifetime. Further, since it was not disputed that Thompson held items belonging to Sowder, and that she distributed the items upon her death, she did not return them to Sowder during her life. Consequently, even though the lists Sowder prepared met the statutory requirement under RCW 11.12.260, and even though Thompson distributed the items pursuant to Sowder’s intent, the penalty provision still applied.

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This case is an illustration of the use of lists to dispose of tangible personal property, as well as their unintended consequences, even though the spirit of trustor’s plan with regard to the distribution of assets was carried out.

I. Creditor Claims; Committed Intimate Relationship.

Witt v. Estate of Young, 2012 WL 1604850 (Div. 2, 2012)

The Court of Appeals held that a cause of action against a decedent’s estate for a division of property based upon the claimant’s committed, intimate relationship with the decedent was not barred by the claimant’s failure to file a timely creditor’s claim against the estate.

Young and Witt lived together and acquired property over a 17-year period, but never married. Following Young’s death without a will, Young’s brother was appointed as personal representative of the estate. Witt filed a creditor’s claim in the probate proceedings, asserting that she had been in a committed, intimate relationship with Young and that she therefore had an equitable claim upon the decedent’s real and personal property. The claim was filed after the statutory period for filing a creditor’s claim under Chapter 11.40 had expired. The estate rejected Witt’s claim on the grounds that it was not timely filed. Thereafter, Witt filed a complaint against the estate for partition of real and personal property against the estate. She argued that by virtue of their relationship, she had an interest in all personal and real property acquired by either or both of them during their relationship, that they were tenants in common in all such property and that she was entitled to an equitable share of all personal and real property acquired by either or both of them during their relationship. The trial court denied the estate’s motion for summary judgment brought on the grounds that the claim was barred by Witt’s failure to file a creditor’s claim against the estate within the period prescribed by Chapter 11.40 RCW, and the estate appealed.

The Court of Appeals affirmed that Witt’s cause of action was not barred by her failure to timely file a creditor’s claim. In reaching its decision, the court held that the determination of the potential property rights that Witt acquired over the course of the relationship was not a claim against the decedent, but instead an issue of how to characterize property. The court determined that the nature of the rights asserted by Witt was not based upon a debt or obligation, but her complaint constituted a proceeding instead to establish the parties’ interests in specific property and to exclude that interest from the estate’s inventory. The court rejected the estate’s argument that allowing such claims would allow claims to be asserted after the probate has been closed. Instead, the court indicated that Witt’s claim was better characterized as challenging the inclusion of her property in the estate’s inventory, and an interested party may challenge an estate’s inventory at any point of the probate proceedings under RCW 11.44.035. Further, the fact that Witt’s claim was a generalized claim against all assets and not any specific assets of the estate, did not mean her claim resembled a general creditor’s claim. Relying on previous precedent, including Olver v. Fowler, 161 Wn.2d, 655 (207), the court determined that the community property-like rights that applied when evaluating the property rights arising out of a committed intimate relationship are not extinguished by the death of one or both of the partners. Further, the fact that Witt originally filed a

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creditor’s claim against the estate does not change the result, because her petition filed subsequent to the rejection of the creditor’s claim was based upon the rights arising out of the relationship.

This case indicates a narrow exception to the creditor’s claim statute, but illustrates the distinction between general claims against an estate and those claims based upon establishing interests in property.

J. Creditor Claims; Personal Guaranty.

Estate of Earls, 262 P.3d 832 (Div. 1, 2011)

The Court of Appeals affirmed that the holder of a personal guaranty made by the decedent prior to death was required to file a statutory creditor’s claim against the estate within the prescribed filing period, even though the liability guaranteed by the decedent was not in default at the decedent’s death.

Mr. Earls had signed a personal guaranty of a real estate lease into which the corporation of which he was president had entered into as tenant. At the time of his death, the corporation was in compliance with the lease. Mr. Earls’ executor published notice to creditors and also sent a copy of the notice to the landlord by certified mail. Approximately six months after the expiration of the creditors’ claim period, the corporation partially defaulted under the lease, and the landlord filed a petition under Chapter 11.96A against the estate seeking to enforce the personal guaranty. The estate argued that the petition was barred, because the landlord had failed to timely file a creditor’s claim against the estate.

The Court of Appeals agreed that the claim was barred due to the failure to file a statutory creditor’s claim within the separation of four months after the date of first publication of the notice to creditors. Even though the obligation under the personal guaranty did not arise until after the filing period expired, the claim was contingent as of the date of death. The personal guaranty was primary and absolute, and permitted the landlord to proceed directly against the Mr. Earls without first proceeding against the corporation for breach of the lease. The landlord’s claims against Earls arose out of contractual obligations Earls incurred during his lifetime, and it was not an obligation incurred by the estate. RCW 11.40.070(1)(e) requires the creditor to include information about whether the claim is secured, unliquidated, contingent, or not yet due. This indicates that the statute does apply to contingent claims such as the personal guaranty in question here.

This case illustrates both the importance of the estate of both publishing and sending notice to creditors to cut off claims, and the importance for creditors in taking action to promptly file a claim upon receipt of the notice to creditors.

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K. Beneficiary Bank Accounts.

Rokkan v. Gesa Credit Union, 2012WL75793 (Div. 3 2012)

The Court of Appeals dismissed claims brought by a beneficiary who was also the personal representative of a decedent’s estate arising out of the decedent’s designation of death beneficiaries on certificates of deposit.

Prior to her death, McHale went to her credit union to purchase three term-share certificates. At the credit union, prior to conducting her business, McHale ran into a long time friend Miller who was an employee of the credit union and who then accompanied McHale to the service representative where she opened the accounts. The credit union’s services representative allegedly told McHale when she was opening the account that it would be “wise” to name beneficiaries for each account, although she was not required to do so. McHale named her brother as beneficiary on one certificate, and her niece and nephew as joint beneficiaries on a second certificate. The third certificate named Miller as the beneficiary. According to another individual who accompanied McHale to the credit union, when McHale was uncertain as to whom to name as beneficiary of the third certificate, she allegedly turned to Miller and asked “how about you”. Miller and the bank service representative both denied that this had occurred. At trial, Miller testified that she did not know that she was a beneficiary on the certificate until McHale’s after later death. Mr. Rokkan, a close friend of McHale, held her power of attorney. He was also named her executor and primary beneficiary under her will. He was aware of the accounts, but was unaware of the beneficiary designations. Following McHale’s death, Rokkan learned of the beneficiary designations and brought suit, in an attempt to recover the assets for himself and the estate.

In its holding, the Court of Appeals affirmed the trial court’s denial of Rokkan’s claim, which had alleged abuse of an elderly person, negligent estate planning, misrepresentation, fraudulent concealment, breach of fiduciary duty, violation of the Washington Consumer Protection Action, negligence, negligent supervision and conversion. The court denied the Consumer Protection Act claim because the action complained of did not affect a public interest. Although the actions occurred in the course of business, there was no evidence of a pattern of conduct, similar prior acts or a real or substantial potential for repetition of the conduct. In fact, the employees testified that as a rule they did not give advice as to whether someone should name a beneficiary. Similarly, there was no evidence of negligence or fraudulent concealment.

This case does illustrate potential for nonprobate assets to disturb the decedent’s estate plan, and is a reminder that practitioners should carefully review with clients the titling of assets to assure that they pass in a manner consistent with the client’s intentions.

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L. Wrongful Death; Stepchildren.

Estate of Blessing, No. 85944-2, 2012 WL 113494 (2012)

The Washington Supreme Court reversed a decision of the Court of Appeals, and held that the children of the decedent’s pre-deceased second husband were her “stepchildren” within the meaning of the Washington statute setting forth the potential beneficiaries of awrongful death action.

Audrey had been married three times at the time of her death as the result of an automobile collision. Audrey had children from her first marriage, and when she married her second husband, her second husband had four children from a prior marriage that Audrey never adopted. After her second husband’s death, Audrey married her third husband, with whom she had no children, and to whom she remained married until his death. Audrey maintained a close relationship with her stepchildren from the second marriage, and included them as beneficiaries of a portion of her residuary estate under her Will. Audrey died in an automobile collision two years after the death of her third husband. After one of Audrey’s children started a wrongful death action on behalf of the estate arising out of the automobile collision, an issue arose regarding whether her second husband’s children remained Audrey’s “stepchildren” for purposes of the wrongful death action after their father died.

RCW 4.20.020 provides that a wrongful death action is “for the benefit of the wife, husband,…child or children, including stepchildren, of the person whose death shall have been so caused.” The statute does not further elaborate upon the definition of the term “stepchildren.” After review of Washington legislation in related areas and other Washington case law, the Supreme Court held that Audrey’s stepchild relationship for purposes of the wrongful death action did not terminate when the children’s father died or when Audrey remarried. They remained stepchildren of Audrey after their father’s death and the marriage ended. Her remarriage did not change this result. According to the court, nothing in the statute required a current valid marriage to the actual parent of thestepchildren in order for the stepchildren to be considered potential beneficiaries.

M. Tax Refund; Final Administration Action.

Wells Fargo Bank, N.A. v. Department of Revenue, 271 P.3d 286 (Div. 2, 2012)

The Court of Appeals dismissed an action against the Department of Revenue for interest on a tax refund on the grounds that the taxpayer did not file its claim within 30 days after the Department of Revenue’s final decision denying the refund claim.

Wells Fargo Bank had filed a series of tax refund requests with the Department of Revenue (“DOR”), which were allowed in part and denied in part. After an administrative hearing on its appeals, Wells Fargo indicated its desire to settle the tax appeals. The taxpayer ultimately reached a settlement with the DOR, which was memorialized in a closing agreement under RCW 82.32.350. After the refund check was issued, the taxpayer contacted the administrative law judge regarding the fact that it had not received interest on its refund amount. After a series of oral and written exchanges,

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the assistant director of the DOR’s appeals division sent a letter to the taxpayer indicating that the closing agreement was a negotiated compromise of the total disputed liability, that the payment made constituted the total settlement amount, and that the closing agreement was final and conclusive of tax liability or immunity. It further indicated that the taxpayer should contact the assistant director if it required additional information.

Over the following five months, the taxpayer and its counsel, the attorney general’s office and the Department of Revenue exchanged a series of communications in an attempt to resolve the dispute over the interest on the refunds, with the assistant director of the DOR’s appeals division specifically stating that it would like to resolve the matter short of litigation and also making a settlement offer. After the parties were unable to reach a settlement, Wells Fargo filed an action against the DOR in Superior Court claiming that the DOR failed to perform its statutory duty to pay interest on the tax refund.

The Court of Appeals affirmed the dismissal of the taxpayer’s action on the grounds that the claim was not filed within the 30-day period to appeal under RCW 34.05.570(4). The court found that the April 15th letter constituted final administrative action, which began the running of the 30-day filing deadline, despite the subsequent negotiations, and despite the fact that the DOR never notified the taxpayer when the 30-day period began to run.

The case is illustrative of the lack of clarity that exists in determining when the limitations period may expire for contesting administrative findings by the Department of Revenue. In the estate planner’s context, this may have particular relevance in estate tax proceedings.

N. Guardianship; Advocacy Fees.

Guardianship of Lamb, 173 Wn.2d 173 (2011)

The Supreme Court denied the allowance of fees sought by professional guardians relating to the advocacy activities on behalf of residents of the habilitation center where the guardians’ wards were residents.

The guardians in this case were professional or court-appointed guardians of more than 20 Department of Social and Health Services clients residing at the Fircrest School, a residential habilitation center for persons with developmental disabilities. The guardians indicated that they devoted 80 to 100 hours per month on advocacy activities. The activities included extensive efforts to lobby officials to oppose legislation that would close Fircrest and land use decisions to sell or develop part of the Fircrest property and included producing a newsletter, documentary and other materials.

In the case of the incapacitated individuals at Fircrest, the Fircrest residents were required to contribute towards their care, and in this case, some of the patients received income from Social Security disability insurance, a railroad retirement pension, and Veterans’ Administration benefits. Deductions from this amount for advocacy costs would therefore increase the amount that the state or federal Medicaid program must contribute to cover the patients’ institutionalized medical needs.

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In reviewing the responsibilities of guardians, the court recognized that the guardians were called upon to manage the wards’ property interests, but also make vital decisions regarding medical care and end-of-life preferences.

The guardians were not able to demonstrate that the advocacy fees were necessary to render the guardian services and they also did not fit within the limited definition of fees that could be charged to Medicaid clients. The guardians had not been able to show that they had acted in the individualized best interest of each ward. Other than their general preference for institutionalized care, the guardians did not proffer evidence that every one of their wards would be best served by remaining at Fircrest. The fees appeared to be calculated by dividing the total hours spent divided among the persons for whom they served as guardians. Since the fees were requested on the basis of time spent rather than whether the work was necessary and provided a benefit to the guardianships, the court could not support the fee requests. Further, the court indicated that their estate already had a designated advocacy group, Disability Rights Washington, which had authority to pursue and ensure the protection of the rights of persons with developmental disabilities who are being considered for a change of living arrangements.

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