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Estate Planning, Trust and Probate Section

To the Council of Delegates: 

The OSBA Estate Planning, Trust and Probate Section respectfully requests your favorable consideration of four legislative proposals, marked as Exhibits A, B, C and D. 

The proposals would: 

A.   Provide for the payment of interest on accidental death policies. 

B.   Conform ORC §2107.27 with ORC §2107.26 pertaining to lost, spoliated and destroyed wills. 

C.   Create a statute of limitations with regard to contesting the validity of revocable trusts.

D.   Revoke a power of attorney upon divorce. 

Respectfully submitted,
David F. Allen, Marysville
Chair

Exhibit A

Payment of interest on accidental death policies.

In 1992, an amendment to ORC §3915.052 was enacted providing for the payment of interest on life insurance policies.  This change was sponsored by the Ohio State Bar Association and was enacted to ensure that (i) life insurance proceeds were promptly paid and (ii) that the beneficiaries of these policies were compensated for any delay in payment.

This amendment did not include payment on accidental death policies, and some insurance companies currently do not pay interest on those policies.  The OSBA Estate Planning, Trust and Probate Section Board of Governors has recommended that the following statute be considered by the Council of Delegates for submission to the legislature in order to remedy this situation.

ORC §3923.061. Interest Payments on Proceeds as a Result of Death.

(A) On or after January 1, 2002, any insurance company authorized to do business in this state shall pay interest, in accordance with division (B) of this section and subject to division (C) of this section, on any proceeds that become due pursuant to the terms of a sickness and accident insurance policy due to the death of the insured by sickness or accident.

(B) The interest payable pursuant to division (A) or (B) of this section shall be computed from the date of the death of the insured to the date of the payment of the proceeds and shall be at whichever of the following rates is greater:

(1)  The annual short-term applicable federal rate for purposes of Section 1274(d) of the Internal Revenue Code, as defined in Section 5747.01 of the Revised Code, in effect for the month in which the insured died;

(2)  The current rate of interest on proceeds left on deposit with the company under an interest settlement option contained in the sickness and accident policy.

(C) Division (A) or (B) of this section does not require, and shall not be construed as requiring, the payment of interest unless the insured was a resident of this state on the date of this death and unless the beneficiary under the sickness and accident policy elects in writing to receive, or a written election has been made for the beneficiary to receive, the proceeds of the policy by means of a “lump sum payment.”

Exhibit B

Proposed amendment to revise ORC §2107.27 to conform to ORC §2107.26 pertaining to lost, spoliated and destroyed wills.

In 1999, ORC §2107.26 was adopted, which reversed the presumption that a will that cannot be found after a testator’s death has been destroyed by the testator with the intent to revoke it.  The reversal of this presumption produced a result more likely to carry out the intention of most testators in the modern-day world that a will previously known to exist that cannot be found on the death of the testator, is more likely to have been misplaced, misfiled or put away for “safekeeping” in a place where it cannot now be found rather than to have been destroyed by the testator “with the intent to revoke it.” 

When ORC §2107.26 was amended, ORC §2107.27 should have been amended.

Adoption of the attached proposal will bring the two statutes in conformity with each other. In addition, the new statute requires that when an application is made to probate a lost, spoliated or destroyed will that notice also be given to all legatees and devisees named in the most recent prior will known to the applicant.  The OSBA Estate Planning, Trust and Probate Law Section Board of Governors felt that since the probate of a lost, spoliated or destroyed will is a unique situation that notice should be given to the legatees and devisees named in the most recent prior will as they may be the individuals or institutions most directly affected by the probate of a lost, spoliated or destroyed will.  In addition, the section board felt that it was not necessary to have the testimony reduced to writing and filed in the probate records and has deleted references to those provisions. 

ORC §2107.27. Notice of application; testimony; probate.

When application is made to the probate court to admit to probate a will that has been lost, spoliated, or destroyed, the party seeking to prove the will shall give a written notice by certified mail to the surviving spouse OF THE TESTATOR, TO ALL PERSONS WHO WOULD BE ENTITLED TO INHERIT FROM THE TESTATOR UNDER CHAPTER 2105 OF THE REVISED CODE IF HE HAD DIED INTESTATE, AND TO ALL LEGATEES AND DEVISEES NAMED IN THE WILL AND TO ALL LEGATEES AND DEVISEES NAMED IN THE MOST RECENT PRIOR WILL KNOWN TO APPLICANT.  to the next of kin of the testator, and to all persons whose interest it may be to resist the probate.

In such cases, the PROPONENTS AND OPPONENTS OF THE WILL court shall cause the witnesses to the will, and any other witnesses that a person interested in having the will admitted to probate desires HAVING RELEVANT AND MATERIAL KNOWLEDGE to have appear, to come before the court TO TESTIFY.  The witnesses shall be examined by the probate judge, and their testimony shall be reduced to writing and then filed in the records of the probate court pertaining to the testator’s estate.  When witnesses reside out of its jurisdiction, or reside within its jurisdiction but are infirm or unable to attend, the probate court may order their testimony to be taken and reduced to writing by some competent person, which testimony shall be filed in such records.

If upon such proof, the court FINDS THAT THE REQUIREMENTS OF SECTION 2107.26 OF THE REVISED CODE HAVE BEEN MET, THEN is satisfied that the will was executed in the manner provided by the law in force at the time of its execution, that its contents are substantially proved, that it was unrevoked at the death of the testator, and has been lost, spoliated, or destroyed since his death, since he became incapable of making a will by reason of insanity, or before the death of the testator if his lack of knowledge of the loss, spoliation, or destruction can be proved by clear and convincing testimony, the probate court shall find and establish the contents of the will as near as can be ascertained. and cause them and the testimony taken in the case to be recorded in the probate court.

The contents of the will shall be as effectual for all purposes as if the original will had been admitted to probate and record.

Exhibit C

Summary of proposed legislation creating a statute of limitations for contesting the validity of revocable trusts.

Many Ohio residents create revocable inter vivos trusts and fund them during their lifetimes in order to obtain the advantages of privacy and cost savings by avoiding probate at death.  Currently, under Ohio law, it is not clear what the time period is within which the validity of such a revocable, amendable inter vivos trust that becomes irrevocable at the grantor’s death may be contested.  For example, the limitations period for contesting a trust may vary depending on the legal theory that is used to challenge the trust.   A challenge to the validity of an inter vivos trust based on fraud, undue influence or duress appears to be governed by ORC §2305.09, which provides a four-year statute of limitations.  However, a challenge to the validity of such a trust based on mistake may be governed by ORC §2305.14, which provides a 10-year statute of limitations.  The OSBA Estate Planning, Trust and Probate Law Section Board of Governors believes that it is desirable that the statute of limitations for contesting such trusts be uniform, regardless of the legal theory underlying the challenge to the trust.  Further, the board believes the time period for such challenges should be less than four or 10 years so that there is more certainty on the part of trustees and trust beneficiaries regarding the finality of distributions made pursuant to the trust terms after the death of the grantor.

Under the proposed legislation, the following actions shall be commenced within two years after the grantor’s death:  (1) actions to contest the validity of a revocable trust that is made irrevocable by the death of the grantor of such trust; (2) actions to contest amendments to such trust, which are made during the grantor’s lifetime; (3) actions to contest the revocation of such trust during the grantor’s lifetime; or (4) actions to contest the validity of transfers made to such trust during the grantor’s lifetime.  The trustee, without liability, may proceed to distribute the trust property in accordance with the terms of the trust unless (1) the trustee has actual knowledge of a pending action to contest either (a) the validity of the trust, (b) any amendment to the trust, (c) the revocation of the trust, or (d) any transfer made to the trust during the grantor’s lifetime; or (2) the trustee receives written notification of a potential action to contest either (a) the validity of the trust, (b) any amendment to the trust, (c) the revocation of the trust, or (d) any transfer made to the trust during the grantor’s lifetime and such action is actually filed within 90 days after such written notification is given to the trustee.  A beneficiary of what later is determined to be an invalid trust, amendment to the trust or transfer to such trust must return any distribution received by the beneficiary to the extent that it exceeds the distribution to which such beneficiary is entitled.

The section board of governors recommends that the proposed statute be applicable to the trusts of decedents who die on or after the effective date of the statute.

LIMITATION ON ACTION CONTESTING VALIDITY OF REVOCABLE TRUST (ORC section to be determined).

(A) An action to contest the validity of a revocable trust that is made irrevocable by the death of the grantor of such trust, to contest amendments to such trust, which are made during the grantor’s lifetime, to contest the revocation of such trust during the grantor’s lifetime, or to contest the validity of transfers made to such trust shall be commenced within two years after the grantor’s death.

(B)  Upon the death of the grantor of a revocable trust that was made irrevocable by the death of the grantor, the trustee, without liability, may proceed to distribute the trust property in accordance with the terms of the trust, absent actual knowledge of a pending action or written notification by a potential contestant of an action to contest the validity of the trust, any amendment to the trust, the revocation of the trust, or any transfer made to the trust during the grantor’s lifetime, followed by the actual filing of such action within ninety days after such written notification was given to the trustee.

(C) A beneficiary of what later is determined to be an invalid trust, amendment to the trust, or transfer to such trust shall return any distribution received by the beneficiary to the extent it exceeds the distribution to which such beneficiary is entitled.

Exhibit D

Revocation of power of attorney upon divorce.

When a married couple divorces, obtains a dissolution of marriage, has their marriage annulled or enters into a legal separation, the ex-spouse is prevented by law from taking under the deceased ex-spouse’s trust (ORC §1339.62) or will (ORC §2107.33).  A surviving ex-spouse is also prohibited from exercising a general or special power of appointment (ORC §1339.62), prohibited from acting as successor trustee (ORC §1339.62) and is prohibited from acting as executor (ORC §2107.33).  In addition, Ohio law terminates an ex-spouse’s survivorship interest in property owned as joint tenants with rights of survivorship (ORC §1339.64).  Notably missing is a law that terminates an ex-spouse’s ability to act under a power of attorney.

On review of the above cited laws, it is clear that the legislature seeks to protect individuals who divorce, yet fail to change their estate planning documents.  The logical extension of this policy is to have a law that revokes or terminates an ex-spouse’s ability to act under a power of attorney.  Proposed ORC §1339.621 will terminate an ex-spouse’s right to act under a power of attorney after a divorce if the principal and the attorney-in-fact were married to each other.

Also proposed is a revision to existing ORC §1337.091(B) extending the protection currently provided to third parties when dealing with an attorney-in-fact regarding non-revocation of the power of attorney, to include termination of the power of attorney due to divorce.  Currently, ORC §1337.091(B) provides that execution of an affidavit by an attorney-in-fact stating that the power of attorney is not revoked is, in the absence of fraud, conclusive proof of the non-revocation of the power at that time.  The proposed version extends current law to provide that the use of an affidavit is also conclusive proof of the non-termination of the power due to divorce, dissolution or legal separation.

REVOCATION OF POA UPON DIVORCE; ENACT NEW ORC §1339.621 TO READ AS FOLLOWS:

ORC §1339.621. Spouse Granted Power of Attorney; Termination of Marriage as Revocation.

Unless the power of attorney provides otherwise, if, after executing a power of attorney, a principal is divorced, obtains a dissolution of marriage, has the marriage annulled, or enters into a separation agreement pursuant to which the parties intend to fully and finally settle their prospective property rights in the property of the other, the designation of the spouse or former spouse to act as attorney-in-fact is revoked.  The subsequent remarriage of a principal to his or her former spouse, or the termination of a separation agreement, does not revive a power of attorney revoked under this Section.

REWRITE  ORC §1337.091(B) TO READ AS FOLLOWS (DELETE EXISTING PARAGRAPH (B) AND REPLACE WITH THE FOLLOWING LANGUAGE):

ORC §1337.091.

An affidavit, executed by the attorney in fact stating that he did not have, at the time of doing an act pursuant to the power of attorney, actual knowledge of the revocation of the power of attorney by the principal, or the revocation of the power of attorney by the death or adjudged incompetency of the principal is, in the absence of fraud, conclusive proof of the nonrevocation of the power at that time.  If the exercise of the power requires the execution and delivery of any instrument that is recordable, the affidavit when witnessed and acknowledged before a notary public in the same manner as a deed, is likewise recordable.

(B)  An affidavit, executed by the attorney in fact at the time of doing an act pursuant to the power of attorney, stating that the attorney in fact:

(1)  has no actual knowledge of the revocation of the power of attorney by the principal;

(2)  has no actual knowledge of the revocation of the power of attorney by the death or adjudged incompetency of the principal; and

(3)  if the attorney in fact was never married to the principal, a statement to that fact, or, if the principal is or was married to the attorney in fact, additional statements that the power of attorney is not revoked by:

(a)  reason of law due to termination of the marriage between the principal and the attorney-in-fact; and

(b)  reason of law due to the existence of a separation agreement entered into between the principal and the attorney-in-fact wherein they intend to fully and finally settle their prospective property rights in the property of the other, is, in the absence of fraud, conclusive proof of the nonrevocation of the power at that time.  If the exercise of the power requires the execution and delivery of any instrument that is recordable, the affidavit when witnessed and acknowledged before a notary public in the same manner as a deed, is likewise recordable.

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