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Inter Vivos Trust Dispute Falls Outside Probate Exception

In 1996, Elmer and Nelva Brunsting established the Brunsting Family Living Trust for the benefit of their offspring. At the time of its creation, the Trust was funded with various assets, and both of the Brunstings' wills included pour-over provisions, providing that all property in each estate is devised and bequeathed to the Trust.

After the Brunstings passed, Candace Curtis alleged in a federal complaint that Amy and Anita Brunsting -- her sisters, who were acting as co-trustees of the Trust -- had breached their fiduciary duties to Curtis, a beneficiary of the Trust.

Last week, the Fifth Circuit Court of Appeals held that, under Marshall v. Marshall, Curtis' claims for breach of fiduciary duty do not implicate the probate exception to federal jurisdiction.

Estate of Artall v. Comm'r. of Int'l. Rev., No. 09-60092

In the taxpayer's appeal from the tax court's approval of the IRS Commissioner's disallowance of a "qualified family-owned business interest" estate tax deduction to the taxpayer estate, the tax court's order is affirmed where the "qualified family-owned business interest" deduction of 26 U.S.C. section 2057 is available for an estate's qualifying equity or ownership interests but not for debt interests such as loans receivable.

Read Estate of Artall v. Comm'r. of Int'l. Rev., No. 09-60092

Appellate Information

Filed January 28, 2010

Judges

Opinion by Judge Smith