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Uncovering A Buried Problem: Propane Tanks Often Not Conveyed In Home Sales

It is common in Cecil, Kent, and Harford Counties for a home to have a buried propane tank adjacent to its foundation. The 300 to 1,000 gallon propane tanks serve as the source of energy for home heating, hot water, and cooking. When a propane supplier owns a tank, the homeowner is usually forbidden by contract from purchasing propane from any other supplier. The supplier almost always charges a substantial premium for propane when it owns the tank versus when a homeowner owns the tank. Other suppliers are forbidden by law from filling a tank owned and marked by another supplier. See 98 O. A. G. 136, Maryland Attorney General Opinion sent to Cecil County State’s Attorney, November 21, 2013.

If you are considering purchasing a home in Cecil County that uses propane, then you should inquire with the seller about the ownership of the propane tank because it may not come with the property. Many realtors, purchasers and even experienced lawyers assume that propane tanks, as fixtures, come with the sale of the home. Generally, fixtures are included in the sale of real estate, under Maryland law, however, propane tanks are specifically excluded from this assumption when owned by a supplier. See Md. Real Prop. § 8 – 117. Passed in 1978, this law was originally drafted to be included in the Commercial Law addressing the refilling of marked propane containers, therefore, a Court might be persuaded that the legislative intent was to address only tanks in which the supplier took steps to mark the tank that later becomes the subject of a detinue action filed in District Court.

Though no Maryland court appears to have addressed the matter, a supplier’s failure to mark a tank or to record its ownership interest in the land records may warrant a counterclaim for violation of the Maryland Consumer Protection Act. A supplier, however, may assert that it need not mark tanks or file notices in the land records because a new owner could ask neighbors and  such conversations would reveal that a large number of homes are served by the supplier. Such arguments may or may not prove persuasive in court. Regardless, the supplier may appeal given the potential for disruption of its business practices.

Even if a consumer could win at trial or on appeal, an aging propane tank is probably not worth the fight. A supplier will sometimes file a detinue or replevin action against the new homeowner in District Court as a matter of course if the new owner attempts to engage the services of another supplier or denies the supplier access to the tank. In many cases, a tank can be replaced for under $3,000. The cost of legal fees to fight for a tank can easily exceed the value of the tank. Until the legislature changes the 1970s era law or a new home buyer decides to fight a supplier, more detinue actions can be expected and unsuspecting home buyers be subject to additional and unanticipated expenses.

When To Review & Update Your Estate Plan

After signing estate planning documents, clients are always reminded about the need to review the documents periodically and to come in for updates when necessary. There are a variety of circumstances that may implicate a need to review your current estate plan.

Typically, these circumstances include:

• The death or incapacity of an individual named in a document;
• Whenever there is a birth, death, divorce, or marriage in the family or among beneficiaries;
• When you change your state of domicile, which is usually accomplished by changing your primary residence (for example, by changing your voter registration and driver’s license);
• When you acquire or sell any substantial asset, receive an inheritance, or are considering selling or buying real estate;
• When a close relative or beneficiary under your current estate plan has a change in financial, health, or personal circumstances;
• For clients with minor children, the plan should be reviewed when the circumstances change for a guardian nominated under your current documents;
• If you start, acquire, sell, or wind down a business;
• If you begin experiencing health issues; and
• If you have legal issues or foresee them on the horizon.

Even if none of the above issues present themselves, it is often wise to review your documents every three to five years.

Sometimes, the state or federal governments will change the rules that may impact your estate plan. For example, ten years ago it was common in Maryland for estate planners to use so-called bypass trusts for couples in order to avoid or minimize Maryland’s estate tax. With the passage of House Bill 739 (2014), the use of bypass trust planning is not as prevalent as it once was. If your last estate plan included a bypass trust and was drafted before 2014, then it is time for a discussion with your attorney.

Take a look at your current documents and feel free to reach out with any concerns.

Joint Wills: A Litigious Estate Plan

It is not unusual for a married client to declare that they want a “Joint Will” with their spouse. A Joint Will is one Will signed by two individuals, usually a married couple. In a Joint Will, the parties dispose of assets in a pre-set plan. Assuming neither spouse attempted to revoke the Joint Will, it can be offered to the probate court twice. A Joint Will is different from “Mutual Wills” in which there is an agreement to maintain separate Wills disposing of property as agreed by the parties.

The married couple is almost always effectively served by the creation of two separate mirror-image Wills, leaving everything to each other, then to their children. In some situations, such as if the client wants to prevent the surviving spouse from freely disposing of the client’s assets to third-parties or children from prior relationships, then trust planning is often appropriate. Joint Wills and Mutual Wills should be avoided because of the inability to effectively undo the plan after the death of one of the parties. “Concisely stated, of course, it is the contract and not the mutual will which is irrevocable.” Moats v. Schoch, 24 Md. App. 453 (1975).

What potential clients must know is that “joint wills are not regarded with much favor by the courts, and are . . . apt to invite litigation.” Shimp v. Huff, 315 Md. 624 (1989)(quoting George W. Thompson,  The Law of Wills, § 34 at 69 (3rd ed. 1947)).

In the case of Mr. Lester Shimp and his wife Clara, the Will provided everything to the survivor among the two, then, upon the death of the survivor, to specified individuals. Clara died in 1975 and in 1980, Lester sought court approval to change his Will. The Maryland Court of Appeals (Maryland’s highest Court) held that “Lester was ‘entitled to a declaratory decree stating that he may revoke his will but that an enforceable contract was entered into between him and his wife . . . . [and that] [a]t his death it may be specifically enforced in equity or damages may be recovered upon it at law.’” Id. at 629 (quoting Shimp v. Shimp, 287 Md. 387, 388 (1980)). Lester did not attempt to change his Will, but married Lisa Mae in 1985. Lester died in 1986 whereupon Lisa Mae asserted her right to the family allowance and elective share provided by statute. The Court therefore had to confront whether the statute or the Will’s provisions controlled.

After a thorough analysis of cases from across the United States, the Court concluded that in most cases the “superior equities were with the surviving spouse.” Id. at 637. The Court noted that in some court cases, the outcome hinged on the fact that the “right to will property is not absolute, but is a privilege afforded the decedent by the State.” Id. at 641. The Court noted that some courts rely on the public policy that “contracts in restraint of marriage are void as against public policy” but did not stop its analysis there. Id. at 642–644 (quoting Owens v. McNally, 113 Cal. 444, 45 P. at 713 (1896). The Court of Appeals ultimately opted to look at “whether the superior equities lie with the Personal Representatives or with Lisa Mae.” Id. at 644. The Court ultimately held that the rights of the surviving spouse, Lisa Mae, were superior to other parties because the survivor among the Lester and Clara “might remarry and that the subsequent spouse might elect against the will.” Id. at 647.

While a Joint Will may seem like an “easy” estate plan, Joint Wills and Mutual Wills leave the survivor’s hands tied should circumstances change among the intended beneficiaries. As part of a standard discussion, married couples are counseled that the surviving spouse may change the plan the two of them think best in the moment. Should a couple wish to restrict a surviving spouse’s ability to dictate where assets go, then trusts are a more appropriate vehicle than a joint will.

Probate versus Non-Probate Assets: What assets actually pass under your Will?

Barring health, tax, or other special circumstances, most clients truly only need a basic estate plan. A basic plan consists of three main documents: The Last Will & Testament, The Durable Power of Attorney, and the Advance Directive/Living Will. While a Power of Attorney is generally only effective while you are alive, the Advance Directive/Living Will addresses end of life issues and the disposition of your earthly remains. The Last Will and Testament is only effective upon the death of the person who made the Will, known as the testator, and sometimes known as a testatrix for a woman. The Will is a private document but upon death is turned over to the Register of Wills to be probated. After death, the Will is available to the public.

Although there is a lot of discussion and focus on Wills, in the modern era it is common for the vast majority of someone’s assets to pass outside of their Will. This is particularly true when a decedent leaves behind a surviving spouse who is a joint owner listed on real estate deeds and bank accounts. So-called non-probate assets pass to recipient(s) through beneficiary designations or by operation of law based upon how the asset was titled. Common examples of non-probate assets include:

• Bank accounts held jointly or those accounts with “transfer on death” or “TOD” or “pay on death” or “POD” designations;
• Real estate titled as tenants by the entirety or joint tenants with right of survivorship;
• Vehicles with a designated beneficiary on file with the MVA; and,
• Investment or retirement accounts with beneficiary designations.

A Will, therefore, only controls the disposition of property not otherwise disposed of by operation of law or beneficiary designation. A properly drafted Will disposes of all of a testator’s property, both real estate and tangible personal property. It can dispose of bank accounts or other assets when those assets are not owned jointly or when assets owned individually do not have a beneficiary designation.

An improperly drafted or executed Will, however, can create unintended results, such as assets passing through the intestate succession laws. An ill-advised testator can also inadvertently fail to leave assets to those named in their Will in favor of those named as beneficiaries on deeds and financial accounts. Therefore, it is critical that an estate plan coordinate non-probate asset transfers with probate assets to ensure that a person’s actual intentions are carried out after death.

As part of the basic estate planning package, you will be able to ask questions about your beneficiary designations on non-probate assets and receive assistance in filling out the forms if requested. Although a “basic” plan might be all that you need, your estate plan should be given the time and consideration it deserves. You will not leave this attorney’s office with lingering questions or doubts. If you have questions about non-probate transfers, please contact us for a consultation.

Clients periodically ask whether legal fees are tax deductible on their personal income tax returns. As with any tax question, the general rule is that “Uncle Sam nearly always wins.” Different areas of law may have different results, for example, legal expenses for the formation of a business may have different tax status than the legal expenses associated with a personal injury case.

Generally, legal fees associated with drafting a will cannot be deducted. When estate planning is primarily for tax advice and planning on income producing property, the answer may change. See Wong v. Commissioner, Tax Court Memo 1989-683. The burden is on the taxpayer to show what portion of the legal expenses was for tax advice on income producing property. If deductions will be sought, it is vital that the attorney create detailed time and expense records to support the deduction. However, for a typical estate plan, as well as most other personal the legal matters, legal fees are not deductible. See IRS Publication 529 at 16.

Although you may not be able to deduct estate planning expenses from your personal income taxes, the expense of creating even a basic will can result in savings to your estate. Please contact us to learn more.