Kentucky

Probate jurisdiction dispute betweenc circuit and probate courts over adversary proceeding: HALE V. MOORE (COA 1/4/2008)

By Michael Stevens

HALE V. MOORE
PROBATE:  Adversary proceedings (district vs. circuit court jurisdiction issues); Fees for executrix and attorney (same person)
2005-CA-001895
TO BE PUBLISHED: AFFIRMING IN PART, REVERSING IN PART, AND REMANDING WITH DIRECTION
PANEL: NICKELL PRESIDING; HOWARD, TAYLOR CONCUR
COUNTY: SHELBY
DATE RENDERED: 01/04/2008

This case involves the classic jurisdictional dispute between District and Circuit Courts. The Court of Appeals applied Lee v. Porter, 598 S.W.2d 465 (Ky. App. 1980), and held that once an adversary proceeding (an estate settlement suit) was filed in Circuit Court, that court alone had jurisdiction over the case. With that procedural question out of the way, the Court of Appeals addressed two substantive issues.

The Court first held that where the residuary estate passed to both charitable and non-charitable beneficiaries, the non-charitable beneficiaries were not spared the effect of the estate and inheritance taxes. The Court reached this holding by applying Kentucky law calling for apportionment of the tax burden in the absence of contrary language. However, the Court of Appeals' opinion was misguided in this holding. The Court applied Kentucky law because the Will was that of a Kentucky resident. The Will, however, included a residuary clause that funded a Trust, which was governed by Pennsylvania law. Pennsylvania law would have reached a different result on the apportionment issue, but the Court of Appeals ignored the distinction between the Will and the Trust and merged the two into an Estate, which it governed by Kentucky law.

The Court next held that the executrix's fee was too high. Again, this part of the opinion is troubling because the Court reached this holding by conflating the Will and the Trust. Although the executrix's fee was governed by KRS 395.150, the Trustee fee should not have been. At this point, the case has been remanded to the Circuit Court. But, the law of the case is that the executrix's fee is too high. It seems that it would be more appropriate for the executrix to have an opportunity to effect a clear allocation of the fee between the Will and the Trust (and actually some other entities that are involved) on remand. Hopefully, a Petition for Rehearing or a review by the Court of Appeals will clarify that issue so that the Circuit Court can meaningfully address the issues on remand.

James Worthington

Full post as published by Kentucky Cases on January 27, 2008 (boomark / email).