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2015 PA Super 10
IN RE: BETTY J. FIEDLER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
:
APPEAL OF: E. O’REAN FIEDLER : No. 2264 MDA 2013
Appeal from the Order Entered December 4, 2013,
In the Court of Common Pleas of Lancaster County,
Orphans’ Court Division, at No. 36-2010-1237.
IN RE: BETTY J. FIEDLER : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
:
APPEAL OF: LATISHA BITTS : No. 35 MDA 2014
Appeal from the Order Entered December 4, 2013,
In the Court of Common Pleas of Lancaster County,
Orphans’ Court Division, at No. 36-2010-1237.
BEFORE: PANELLA, SHOGAN and FITZGERALD*, JJ.
OPINION BY SHOGAN, J.: FILED JANUARY 16, 2015
This is an appeal from the Adjudication of Account (“Account”) by E.
O’Rean Fiedler (“O’Rean”) and a cross-appeal by Latisha Bitts (“Latisha”).
We affirm in part and reverse in part.
Betty Fiedler (“Decedent”) had two daughters, O’Rean, the objector to
the Account, and Latisha, who were sole, equal beneficiaries under
Decedent’s will. O’Rean has no children; Latisha has a biological son, Adam
Buckius (“Adam”) and a step-son, Sean Bitts (“Sean”), and two
grandchildren.
__________________
*Former Justice specially assigned to the Superior Court.
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Decedent resided at St. Anne’s Retirement Community from July 2005
until her death on September 10, 2009. N.T., 1/7/13, at 65, 128. All of
Decedent’s assets were contained in an Ameriprise account (“Ameriprise
Account”), which was established prior to 2006, with an original principal
balance of $709,953.00. The Ameriprise Account was titled to Decedent as
a “TOD” or “transfer on death” account; both O’Rean and Latisha were
named as beneficiaries of the Ameriprise Account. N.T., 1/7/13, at 56. On
February 17, 2004, Decedent had designated both of her daughters as her
agents pursuant to a power of attorney (“POA”). Id. at 57–58. Both Latisha
and O’Rean testified that under the POA, O’Rean paid all of Decedent’s bills,
managed her affairs, and “was more involved” with Decedent than Latisha.
Id. at 86–87, 94, 132. O’Rean signed checks that paid Decedent’s bills.
She did not sign gift checks to Latisha or herself, testifying that it was
inappropriate to gift herself or her sister money from her mother. Id. at 86;
N.T., 1/9/13, at 243.
O’Rean testified that in July 2006, Decedent told her that Latisha
wanted Decedent to gift Latisha and O’Rean $10,000. N.T., 1/9/13, at 245.
O’Rean was opposed to the action because Decedent had already gifted
them over $12,000 each in personal property when Decedent sold her house
that year. Nevertheless, O’Rean wrote a check to herself dated July 5,
2006, in the amount of $10,000, which was signed by Decedent, and an
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identical check to Latisha, also signed by Decedent, at Decedent’s direction.
Id. at 88–89. Similarly, O’Rean wrote a $10,000 check to Adam at
Decedent’s direction, which O’Rean signed. Id. at 96. On the memo line of
the check was the word, “Final.” Id. at 146. Latisha testified that her son
telephoned O’Rean for an explanation of the memo line, and her response
was that Decedent had told her “this would be the last check.” Id. at 146.
Upon hearing that, Latisha visited Decedent and inquired about O’Rean’s
response to Adam; Decedent allegedly denied saying the check was to be
Adam’s last check. Id. Less than two months later, Latisha asked Gregory
Nauman, Decedent’s financial advisor, to change the mailing address of
Decedent’s Ameriprise Account statements from O’Rean to Latisha. Id. at
17, 146–147. O’Rean visited her mother on September 29, 2006, and asked
why the Ameriprise Account statements had been changed to Latisha’s
address. Decedent refused to discuss the change, and asked O’Rean to
leave her room. Id. at 82–83. That was the last time O’Rean and Decedent
spoke. Id. at 82. One month later, on October 11, 2006, Decedent revoked
the POA naming both daughters as agents and executed a new POA
designating Latisha as her sole agent. Id. at 44, 146.
Latisha agreed that “as soon as [she] became the agent under the
subsequent power of attorney signed in 2006, gifts started to be made.” Id.
at 151–152. During the period in which Latisha was named as sole agent
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under the POA, she signed and wrote checks made payable to herself, her
sons, and their wives, including Appellees Adam, Adam’s then-wife, Kimberly
Buckius, Sean, and Sean’s wife, Christy Bitts (collectively, Additional
Respondents) that totaled $480,515.00.1 N.T., 1/7/13, at 113–123; N.T.,
1/9/13, at 181–182, 186–189, 191–196. Decedent’s expenses at St. Anne’s
Retirement Community totaled $239,758.86. Account, 6/15/10, Summary
at unnumbered page 2. The Account listed the “combined balance on hand”
as $0.00 Id.
Included in the checks that Latisha signed as POA was a check to her
son, Adam, in the amount of $330,000.00. Both Latisha and Mr. Nauman
testified that Latisha contacted him about the “large gift to Adam.” N.T.,
1/9/13, at 245; N.T., 1/7/13, at 46. Indeed, Mr. Nauman testified, “My
understanding was that Latisha Bitts wanted to make a gift to Adam. That is
what I was told.” N.T., 1/7/13, at 47.
Latisha maintained that she did not exercise discretionary power in
making any gifts as POA and that the checks she wrote were at Decedent’s
direction. N.T., 1/7/13, at 112–128. Conversely, O’Rean characterized the
checks as gifts of money made by Latisha pursuant to the POA. Petition to
Show Cause, 4/9/10, at 2.
1
Latisha also wrote checks to Adam’s daughters, Lydia and Emma Buckius.
Account, 6/15/10, at 3, Addendum to ¶ 6.
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Procedurally, the instant matter began on April 9, 2010, when O’Rean
filed a petition directing Latisha to show cause why she should not file an
Account with respect to the POA.2 Latisha filed an answer on May 13, 2010,
in which she objected to filing the Account. Following oral argument on the
issue, the orphans’ court ordered the Account to be filed. Latisha filed a
petition for reconsideration on May 26, 2010. Latisha ultimately filed the
Account on June 15, 2010, for the period from October 11, 2006, through
November 27, 2009, identifying the category of “gifts”3 that totaled
$480,515.00. Account, 6/15/10, Summary at unnumbered 2. As noted, the
Account listed the balance on hand as $0.00. Id.
O’Rean filed objections to the Account on June 23, 2010, and the
Account was called for audit on July 6, 2010. On August 4, 2010, O’Rean
filed a petition to show cause why Latisha and Additional Respondents
should not be required to return the gifts they received from Decedent. That
day, the orphans’ court issued a citation to show cause why Adam and Kim
2
Latisha had offered the last will and testament of Decedent into probate
and, as executrix of the estate, averred that there were no probate assets.
Petition to Show Cause, 4/9/10, at 1; Petition for Reconsideration, 5/26/10,
at ¶ B.
3
As the orphans’ court noted, the Account filed by Latisha grouped the
monetary transfers together into one category entitled “gifts.” Orphans’
Court Opinion, 12/4/13, at 2 n.1. While we adopt this nomenclature to
describe the checks in question for ease of reference, their categorization as
“gifts” was at issue below. As the orphans’ court stated, “It is apparent that
the real question in the instant action is who gave these ‘gifts’ and whether
they were indeed valid gifts.” Id.
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Buckius and Sean and Christy Bitts should not be deemed additional
respondents. Latisha and Additional Respondents filed an answer and new
matter to the petition to show cause on September 9, 2010. On September
29, 2010, O’Rean filed preliminary objections to the answer, and Latisha
filed an amended answer on October 19, 2010. O’Rean then filed
preliminary objections to the amended answer, which the orphans’ court
denied on January 27, 2011.
Thereafter, O’Rean filed a motion for partial judgment on the pleadings
on March 16, 2011, seeking the return to the estate of $360,000 in gifts to
Latisha and Adam. The orphans’ court denied the motion on August 31,
2011. By separate order that same date, the orphans’ court ruled upon
O’Rean’s August 4, 2010 citation to show cause why Adam and Kim Buckius
and Sean and Christy Bitts should not be deemed additional respondents,
and added them to the lawsuit.
On June 22, 2012, O’Rean filed a motion in limine seeking to preclude
any testimony, on relevance grounds, regarding Decedent’s verbalized intent
prior to her death. The orphans’ court denied the motion in limine on
September 12, 2012.
A two-day hearing was held on January 7 and 9, 2013. At the start of
the January 7, 2013 hearing, all counsel entered a stipulation, which in part,
set forth the name of each recipient of the funds in dispute, the amount of
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funds transferred to each recipient, and whether the amount transferred was
in excess of the amount that could be excluded from taxable gifts under the
Internal Revenue Code. N.T., 1/7/13, at 7–10. In pertinent part, that
stipulation provided:
AND NOW THIS 7th day of January, 2013, counsel of record
hereby stipulate[] and agree[] to the following:
* * *
2. The transfer of $12,000 to Christy Bitts on December 23,
2006 was not in excess of the amount which could be excluded
from taxable gifts by Sections 2503(b) or 2503(e) of the Internal
Revenue Code, including exclusions available through the use of
Section 2513 of the [I]nternal Revenue Code (“annual exclusion
amount”).
3. The transfer of $12,000 to Christy Bitts on December 16,
2007 was not in excess of the annual exclusion amount.
4. The transfer of $12,000 to Latisha Bitts during 2007 was not
in excess of the annual exclusion amount.
5. The transfer of $100 to Latisha Bitts on December 30, 2008
was not in excess of the annual exclusion amount.
6. The transfer of $12,000 to Sean Bitts on December 23, 2006
was not in excess of the annual exclusion amount.
7. The transfer of $12,000 to Sean Bitts on December 16, 2007
was not in excess of the annual exclusion amount.
8. The transfer of $12,000 to Adam Buckius on January 1, 2007
was not in excess of the annual exclusion amount.
9. The transfer of $12,000 to Adam Buckius on January 1, 2008
was not in excess of the annual exclusion amount.
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10. The transfer of $12,000 to Kim Buckius on December 23,
2006 was not in excess of the annual exclusion amount.
11. The transfer of $12,000 to Kim Buckius on August 20, 2007
was not in excess of the annual exclusion amount.
12. The transfer of $12,000 to Kim Buckius on January 1, 2008
was not in excess of the annual exclusion amount.
13. The transfer of $106.50 to Lydia was not in excess of the
annual exclusion amount.
14. The transfer of $108.50 to Emma was not in excess of the
annual exclusion amount.
15. Betty J. Fiedler was a resident of St. Anne’s Retirement
Community from July, 2005 until the time of her death on
October 11, 2009.[4]
16. Latisha Bitts received gifts of $25,200 during 2007 in excess
of the annual gift tax exclusion.
17. Adam Buckius received gifts of $335,000 during 2008 in
excess of the annual gift tax exclusion.
Stipulation, 1/7/13, at unnumbered 1–2.
On December 4, 2013, the orphans’ court entered its adjudication
confirming the Account with the exception of two gifts Latisha made to
herself totaling $25,200.00 and to post-death funeral expenses in the
amount of $7,674.00. The orphans’ court determined that all of the gifts
that were within the annual IRS exclusion amount were valid and
4
Elsewhere in the record, the date of death was described as September
10, 2009. See e.g., N.T., 1/7/13, at 128. The orphans’ court, as well,
utilized September 10, 2009, as the date of death. Orphans’ Court Opinion,
12/4/13, at 1.
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permissible; thus, the gifts to Additional Respondents were deemed valid
gifts pursuant to the POA. The orphans’ court also concluded that gifts of
$335,000.00 to Adam, which were not within the annual exclusion amount,
nevertheless were valid because they were supported by independent
testimony that they were not made pursuant to the POA but were valid inter
vivos gifts from Decedent. The orphans’ court surcharged5 Latisha
$25,200.00 plus $7,674.00, for a total of $32,874.00.
O’Rean filed a notice of appeal on December 23, 2013, and Latisha
filed a cross-appeal on December 31, 2013. All parties and the orphans’
court complied with Pa.R.A.P. 1925. This Court consolidated the appeals on
February 6, 2014.
O’Rean’s appeal docketed at 2264 MDA 2013 raises the following two
issues:
A. Whether the orphans’ court erred in failing to grant all of
O’Rean Fiedler’s objections to the account based on the
documentary evidence she presented and the stipulations of
counsel, and in allowing and considering certain testimonial
evidence?
B. Whether, even assuming arguendo that the orphans’ court
did not err in failing to grant all of O’Rean Fiedler’s objections to
the account based on the documentary evidence she presented
and the stipulations of counsel, and in allowing and considering
5
“Surcharge is the penalty for failure to exercise common prudence,
common skill and common caution in the performance of the fiduciary’s duty
and is imposed to compensate beneficiaries for loss caused by the fiduciary’s
want of due care.” In re Estate of Bechtel, 92 A.3d 833, 839 (Pa. Super.
2014) (citing In re Miller’s Estate, 26 A.2d 320, 321 (Pa. 1942)).
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certain testimonial evidence, the orphans’ court erred in finding
the testimonial evidence supported the [Latisha’s] gift making
activities?
O’Rean’s Brief at 3.
Latisha’s cross-appeal docketed at 35 MDA 2014 raises the following
two issues:
1. Should [O’Rean’s] demand for surcharge of Latisha Bitts for
$7,674.00 for payment of Decedent’s funeral expenses be
denied when [O’Rean] withdrew her objection to payment of the
funeral expenses from Latisha’s account, failed to meet her
burden in proving the payment was improper, and Latisha was a
beneficiary of the account and therefore had authority to write
checks from the account?
2. Should [O’Rean’s] demand for surcharge of Latisha Bitts in
the amount of $25,200.00 for gifts be denied when Adam
Buckius and Latisha Bitts were both competent witnesses whose
testimony proved the validity of the gifts and [O’Rean] offered
no and/or insufficient evidence to invalidate the gifts?
Latisha’s Brief at 3. We will address the issues, in that they all relate to the
validity of the gifts, as a whole.
Our standard of review is as follows:
Our standard of review of the findings of an Orphans’
Court is deferential.
When reviewing a decree entered by the
Orphans’ Court, this Court must
determine whether the record is free
from legal error and the court’s factual
findings are supported by the evidence.
Because the Orphans’ Court sits as the
fact-finder, it determines the credibility
of the witnesses and, on review, we will
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not reverse its credibility determinations
absent an abuse of that discretion.
However, we are not constrained to give the same
deference to any resulting legal conclusions.
In re Estate of Harrison, 745 A.2d 676, 678–79 (Pa. Super.
2000), appeal denied, 563 Pa. 646, 758 A.2d 1200 (2000)
(internal citations and quotation marks omitted). “The Orphans’
Court decision will not be reversed unless there has been an
abuse of discretion or a fundamental error in applying the
correct principles of law.” In re Estate of Luongo, 823 A.2d
942, 951 (Pa. Super. 2003), appeal denied, 577 Pa. 722, 847
A.2d 1287 (2003).
In re Estate of Whitley 50 A.3d 203, 206–207 (Pa. Super. 2012).
This Court’s standard of review of questions of law is de novo and the
scope of review is plenary, as we may review the entire record in making our
determination. Kripp v. Kripp, 849 A.2d 1159, 1164 n.5 (Pa. 2004). When
we review questions of law, our standard of review is limited to determining
whether the trial court committed an error of law. Kmonk-Sullivan v.
State Farm Mutual Automobile Ins. Co., 746 A.2d 1118, 1120 (Pa.
Super. 1999) (en banc).
In its December 4, 2013 decision, the orphans’ court listed and
grouped the checks by payee that Latisha wrote and signed, as follows:
Christy Bitts: $12,000.00 on December 23, 2006.
Christy Bitts: $12,000.00 on December 16, 2007.
Latisha Bitts: $25,100.00 on January 1, 2007.
Latisha Bitts: $100.00 on December 11, 2007.
Latisha Bitts: $12,000.00 on December 17, 2007.
Latisha Bitts: $100.00 on December 30, 2008.
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Sean Bitts: $12,000.00 on December 23, 2006.
Sean Bitts: $12,000.00 on December 16, 2007.
Adam Buckius: $12,000.00 on January 1, 2007.
Adam Buckius: $12,000.00 on January 1, 2008.
Adam Buckius: $5,000.00 on April 29, 2008.
Adam Buckius: $330,000.00 on October 1, 2008.
Kim Buckius: $12,000.00 on December 23, 2006.
Kim Buckius: $12,000.00 on August 20, 2007.
Kim Buckius: $12,000.00 on January 1, 2008.
Lydia Buckius: Birthday gift of $50.00 undated.
Christmas gift of $56.50 undated.
Emma Buckius: Birthday gift of $52.00 undated.
Christmas gift of $56.50 undated.
Orphans’ Court Opinion, 12/4/13, at 3–4.
The Pennsylvania legislature set forth special rules for empowering an
agent to make a gift through a power of attorney in 1999 when it added 20
Pa.C.S. § 5601.2, Special rules for gifts, to the Decedents, Estates and
Fiduciaries Code6 (“Code”); see also 1999 Pa. Laws 39. In relevant part,
section 5601.2 provides as follows:
§ 5601.2. Special rules for gifts
(a) General rule.--A principal may empower an agent to make
a gift in a power of attorney only as provided in this section.
6
Act 1974, Dec. 10, P.L. 816, No. 271, § 5, imd. effective, substituted
“Decedents, Estates and Fiduciaries” for “Probate, Estates and Fiduciaries
Code.”
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(b) Limited gifts.--A principal may authorize an agent to make
a limited gift as defined under section 5603(a)(2) (relating to
implementation of power of attorney) by the inclusion of:
(1) the language quoted in section 5602(a)(1)[7]
(relating to form of power of attorney); or
(2) other language showing a similar intent on the
part of the principal to empower the agent to make a
limited gift.
(c) Unlimited gifts.--A principal may authorize an agent to
make any other gift only by specifically providing for and
defining the agent’s authority in the power of attorney.
* * *
(e) Equity.--An agent and the donee of a gift shall be liable as
equity and justice may require to the extent that, as determined
by the court, a gift made by the agent is inconsistent with
prudent estate planning or financial management for the
principal or with the known or probable intent of the principal
with respect to disposition of the estate.
20 Pa.C.S. § 5601.2 (emphasis added in subpart (a)).8
Section 5603 of the Code, Act of June 30, 1972, P.L. 508, No. 164, § 2
(as amended 20 Pa.C.S. §§ 101–8815), describes, inter alia, an agent’s
power to make limited gifts, in relevant part, as follows:
§ 5603. Implementation of power of attorney
(a) Power to make limited gifts.—
7
20 Pa.C.S. § 5602(a)(1) delineates the power “[t]o make limited gifts.”
8
Pursuant to 2014, July 2, P.L. 855, No. 95, § 220 Pa.C.S., 20 Pa.C.S. §
5601.2 is repealed effective Jan. 1, 2015, and the “amendment, addition or
repeal of 20 Pa.C.S . . . § 5601.2 . . . applies only to powers of attorney
created on or after the effective dates of those provisions.”
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* * *
(2) A power “to make limited gifts” shall mean that
the agent may make only gifts for or on behalf of the
principal which are limited as follows:
(i) The class of permissible donees under this
paragraph shall consist solely of the principal’s
spouse, issue and a spouse of the principal’s
issue (including the agent if a member of any
such class), or any of them.
(ii) During each calendar year, the gifts
made to any permissible donee, pursuant to
such power, shall have an aggregate value not
in excess of, and shall be made in such
manner as to qualify in their entirety for, the
annual exclusion from the Federal gift tax
permitted under section 2503(b) of the
Internal Revenue Code of 1986 (Public Law 99-
514, 26 U.S.C. § 1 et seq.) for the principal
and, if applicable, the principal’s spouse.
20 Pa.C.S. § 5603 (emphasis added to subpart (a)(2)(ii)). 9 Thus, authorized
gifts to qualified individuals cannot exceed that calendar year’s annual gift
tax exclusion amount.
We must examine the relevant language of the instant POA document.
A power of attorney is “an instrument granting someone authority to act as
agent or attorney-in-fact for the grantor.” BLACK’S LAW DICTIONARY at 1209
(8th ed. 2004). An attorney-in-fact is someone “who is designated to
9
Although not relevant here, new legislation encompassing an agent’s
power to make limited gifts will be added effective January 1, 2015. 20
Pa.C.S. § 5603(a.1); 30 Standard Pennsylvania Practice 2d § 143:28
(footnotes omitted).
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transact business for another; a legal agent.” Id. at 138; see also 20
Pa.C.S. § 5601(f) (defining the term “agent” as a “person designated by a
principal in a power of attorney to act on behalf of that principal”). The POA
document signed by Decedent defined the type of limited gifts Latisha was
authorized to make, as follows:
SPECIFIC ADDITIONAL POWERS INCLUDED IN GENERAL
POWER
* * *
3. Power Concerning Gifts.
To make limited gifts, as defined in Chapter 56 of the
Pennsylvania Probate, Estates and Fiduciaries Code. In
addition, to make gifts to, or for the benefit of, any donee who
has been the recipient of gifts from me or whom my attorney
reasonably considers to be the natural object of my bounty. All
gifts made under this Section 3. shall be gifts which can be
excluded from taxable gifts by Sections 2503(b) or 2503(e) of
the Internal Revenue Code, including exclusions available
through the use of Section 2513 of the Internal Revenue Code.
General Power of Attorney, 10/11/06, at 4 (emphasis added to ¶ 3);
O’Rean’s Exhibit 2; Petition to Show Cause, 4/9/10, Exhibit A at 4.
O’Rean assails the orphans’ court decision upholding Latisha’s gifts to
herself and Additional Respondents. Referencing the Code and the POA
document, O’Rean asserts that if the orphans’ court had followed the
applicable statutory language and the clear, unambiguous limited gifting
language in the POA, in conjunction with the stipulations of counsel, it would
have disallowed the two 2008 gifts to Adam totaling $335,000.00 and
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ordered them to be returned to Decedent’s estate because they exceeded
the $12,000.00 IRS annual exclusion amount. We agree.10
Referencing the language of the POA document, O’Rean also argues
that the individual gifts to Kim Buckius, Sean, and Christy Bitts were not
allowable because there was no evidence that these individuals had received
gifts from Decedent prior to the effective date of the POA, and no evidence
that they reasonably could have been considered by Latisha to be the
natural objects of Decedent’s bounty “since [Additional Respondents] were
not directly related to [Decedent] and were not beneficiaries in any capacity
under [Decedent’s] will.” O’Rean’s Brief at 20. We disagree.
10
Due to our disposition, we need not address O’Rean’s argument that the
orphans’ court erred in considering testimonial evidence concerning
Decedent’s donative intent in allowing the gifts to Adam. Peterson v.
Shreiner, 822 A.2d 833, 836 (Pa. Super. 2003) (When reversing lower
court, we need only address reversal issue since we are reversing on that
basis). Moreover, even if we would consider this claim, Gregory Nauman’s
testimony, which is assailed by O’Rean as it related to the gift to Adam,
O’Rean’s Brief at 23, did not support the orphans’ court’s conclusion that
Decedent intended to make an inter vivos gift to Adam. As noted supra, Mr.
Nauman testified, “My understanding was that Latisha Bitts wanted to
make a gift to Adam. That is what I was told.” N.T., 1/7/13, at 47
(emphasis added). Further, O’Rean’s reliance on Estate of Slomski v.
Thermoclad, 956 A.2d 438, 444 (Pa. Super. 2008), reversed on other
grounds, 987 A.2d 141 (Pa. 2009), is misplaced. Slomski did not address
the issue of whether a power of attorney authorized the agent to make gifts
on behalf of the principal or whether the principal ratified an agent’s conduct
in making such gifts. Instead, at issue before this Court was a dispute over
leasehold property and whether a power of attorney gave the agent the
power to grant a right of first refusal in a lease or whether the principal
ratified the agent’s conduct in granting such a right.
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As noted, Chapter 56 of the Code addresses powers of attorney and
was amended in 1999 to include the addition of § 5601.2, Special rules for
gifts. Under the special rules for gifts, a principal may authorize an agent to
make a limited gift as defined under section 5603(a)(2). “A limited gift, by
statutory definition, is one made to a restricted class of permissible
donees for a value limited to the annual exclusion from the federal
gift tax permitted under the Internal Revenue Code.” Metcalf v.
Pesock, 885 A.2d 539, 541 (Pa. Super. 2005) (citing 20 Pa.C.S. §
5603(a)(2)) (emphasis added). Clearly, limited gifts are narrowly defined
regarding class and value within the statute. Here, Latisha—not Decedent
herself—signed each one of the gift checks. Moreover, Latisha signed each
of the gift checks as Decedent’s POA; otherwise, Latisha had no power or
authority to sign them. Under the applicable power of attorney document,
however, Latisha’s power to make such gifts was circumscribed in amount
by the IRS, pursuant to the clear language of the relevant statutory
provisions. Thus, the only question validly before the orphans’ court was
whether the checks Latisha signed were within the authority of the power of
attorney and whether they complied with the applicable statutory provisions.
The scope of authority under a POA is determined by the language of
the document creating the agency and the Code. See generally 20 Pa.C.S.
§§ 5601-5611; In re Weidner, 938 A.2d 354, 357–358 (Pa. 2007)
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(analyzing language of POA in the context of the Code to determine
propriety of agent’s actions). The POA signed by Decedent requires that the
agent “must use due care to act for your benefit and in accordance with this
power of attorney.” General Power of Attorney, 10/11/06, at 1 (Notice);
O’Rean’s Exhibit 2; Petition to Show Cause, 4/9/10, Exhibit A at 1. In the
“Oath of Agent of a Power of Attorney,” Latisha agreed to “exercise
reasonable caution and prudence.” General Power of Attorney, 10/11/06, at
6; O’Rean’s Exhibitibit 2; Petition to Show Cause, 4/9/10, Exhibit A at 6.
Moreover, the POA is the operative document that controls the outcome of
this dispute. As O’Rean asserted, it is axiomatic that in signing the gift
checks, Latisha was acting either as a principal or as an agent. As there is
no evidence in the record suggesting that Latisha was a principal, such as
being a co-owner of Decedent’s Ameriprise account, she had to have been
an agent, thereby subject to the POA and the relevant Pennsylvania
statutes. O’Rean’s Brief at 26.
This Court has construed 20 Pa.C.S. § 5601.2(a) narrowly. Metcalf,
885 A.2d 539; see also Barnett v. U.S., 2009 WL 2426246 (W.D.Pa. 2009)
(not published in F.Supp.2d). The stated purpose underlying section 5601.2
is to address the proper manner in which a principal may authorize an agent
to make a gift under a power of attorney. 20 Pa.C.S. § 5601.2, Comment.
The statute clearly provides that the power of an agent to make a gift as a
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power of attorney can only occur “as provided in this section [e.g., Section
5601.2].” 20 Pa.C.S. § 5601.2(a). Moreover, “powers of attorney are to be
strictly construed.” Estate of Slomski v. Thermoclad, 956 A.2d 438, 444
(Pa. Super. 2008), reversed on other grounds, 987 A.2d 141 (Pa. 2009)
(quoting In re Estate of Cambest, 756 A.2d 45, 52 (Pa. Super. 2000)).
There can be no dispute that Latisha executed each one of the gift
checks. It also is clear that Latisha signed each of the gift checks as
Decedent’s POA. As the orphans’ court concluded, the checks listed in the
stipulation that are within the IRS annual exclusion amount were valid gifts
pursuant to Latisha’s authority as Decedent’s power of attorney.
O’Rean’s argument, that the yearly checks to Decedent’s grandchild,
step-grandchild, their spouses, and the two checks to her great-
grandchildren were not authorized by the gifting language of the POA
document, is not supported in the record. O’Rean’s claim is based on her
contention that because there was no testimony that Decedent had made
gifts to those individuals in the past, and they were not named beneficiaries
in Decedent’s will, “it was completely unreasonable for [Latisha] to have
considered them as natural objects of [Decedent’s] bounty.” O’Rean’s Brief
at 33.
O’Rean fails to provide any statutory or case law in support of such a
claim. The gift recipients’ inclusion in Decedent’s will is not controlling.
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Moreover, even if O’Rean’s “theory” were supportable, it is not based in fact.
Decedent’s will provided that if O’Rean did not survive Decedent, “O’Rean’s
share shall pass to [Latisha], or if she is not then living, to her then living
issue, per stirpes.” Will of Betty J. Fiedler, 10/11/06, at 1, O’Rean’s Exhibit
3; N.T., 1/7/13, at 10. The will further provided that if Latisha did not
survive her mother by thirty days, Latisha’s share would pass to Latisha’s
issue, per stirpes, not to O’Rean, unless Latisha had no living issue Id.
Clearly, Decedent’s inclusion of Latisha’s issue as secondary beneficiaries is
indicative of the value Decedent placed on those relationships. It was not
unreasonable for Latisha to draw an inference that Decedent similarly valued
the relationships with her grandchildren’s parents. Moreover, there was
testimony that there was a course of conduct at Christmas when the family
would receive gift checks from Decedent. N.T., 1/7/13, at 114. Finally,
O’Rean herself testified that she wrote a gift check to Adam in July 2006 at
Decedent’s direction, thus lending support to the implication that Decedent
was interested in passing on her bounty. Id. at 89–90.
We have no hesitation in concluding, as did the orphans’ court, that
Latisha fairly and reasonably could have determined that Additional
Respondents reasonably could be considered “the natural object of
[Decedent’s] bounty.” General Power of Attorney, 10/11/06, at 4; O’Rean’s
Exhibit 2; Petition to Show Cause, 4/9/10, Exhibit A at 4. Following our
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complete review of the record, we agree with the orphans’ court that “Sean
Bitts, Christy Bitts, Adam Buckius, Kim Buckius, Lydia and Emma as well as
[Latisha] herself, were the natural object of Decedent’s bounty and could be
recipients of limited gifts under the power of attorney.” Orphans’ Court
Opinion, 12/4/13, at 7.
Regarding the gifts to Adam that exceeded the annual exclusion
amount, however, the orphans’ court completely ignored the language of the
POA document. The orphans’ court upheld the $5,000.00 check to Adam in
2008 as a valid gift, despite acknowledging that the stipulation of counsel
identified it as in excess of the annual gift tax exclusion. The court’s reliance
on Latisha’s self-serving testimony that “Decedent directed her to write the
check to Adam,” Orphans’ Court Opinion, 12/4/13, at 16, does not elevate
the gift outside of the parameter of the limited gift-giving power of the POA
document, nor eliminate the applicability of the special rules for gifts as set
forth in 20 Pa.C.S. § 5601.2. Because the stipulation and testimony
established that Latisha had gifted Adam $12,000 on January 1, 2008, the
$5,000.00 check was in excess of the annual gift tax exclusion and is subject
to return.
The same is true of the $330,000.00 gift to Adam in 2008. In
upholding the gift, the orphans’ court supported its decision with its
determination that “[s]ince Decedent delivered[, i.e., handed out, this]
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gift[], Latisha was not acting under her authority outlined in the Power of
Attorney.” Orphans’ Court Opinion, 12/4/13, at 17. That reasoning is
unsupported both by the orphans’ court and the record. The consistent
testimony was that Decedent handed out the gift checks to everyone, not
just to Adam. N.T., 1/7/13, at 113–117; N.T., 1/9/13, at 182–183, 186–
189. The decisive point, however, is that it was a check signed by Latisha as
Decedent’s POA, and it did not comply with the gifting authority of the POA
because the gift exceeded the annual IRS exclusion amount. The orphans’
court also concluded, without any support, that the gift was not subject to
analysis under 20 Pa.C.S. § 5601.2. Orphans’ Court Opinion, 12/4/13, at
17. The orphans’ court clearly and properly utilized the POA document and
20 Pa.C.S. § 5601.2 to uphold the gifts within the annual exclusion amount
that related to Additional Respondents, but then erroneously ignored the
very same POA and statutory provisions regarding the 2008 gift to Adam.
Latisha offered testimony that Decedent intended to gift Adam
$330,000 because her mother “wanted to help [Adam] buy a house or buy a
house for [him].” N.T., 1/7/13, at 124. There are several problems with
this testimony. It does not clearly state Decedent’s intent to give a gift to
Adam; rather, it is a self-serving statement by Latisha, and there is other
third-party testimony to the contrary. According to Gregory Nauman, his
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“understanding was that Latisha Bitts wanted to make a gift to Adam.
That is what I was told.” N.T., 1/7/13, at 47 (emphasis added).
Moreover, the method of withdrawing the funds from the Ameriprise
account was unconventional. Mr. Nauman testified that in generating the
Ameriprise form for cash withdrawal for the purpose of making the gift to
Adam, he filled out the form before taking it to Decedent based on
direction from Latisha. N.T., 1/7/13, at 20. Mr. Nauman testified, “I was
told probably by [Latisha] that she wanted to make a withdrawal, make a
gift. So I had the form ready when I went to see [Decedent].” N.T.,
1/7/13, at 48–49. His testimony was consistent: “[Latisha] called [him]
and told [him] that there should be a liquidation done in order to have a
check sent or given to [Adam].” Id. at 54. Moreover, Mr. Nauman testified
that on the Ameriprise Redemption Form, he checked the “No” box in answer
to the question, “[I]s this transaction based on a recommendation by an
Ameriprise Financial advisor.” Id. at 37–38. He opined that the transaction
should have been handled differently. Id. at 52, 59.
There is nothing about the gifts to Adam to differentiate them from
any of the other gift checks written and signed by Latisha. As such, the
$330,000.00 check and the $5,000.00 check were subject to the authority of
the POA and the statutory requirements of the Code. They are beyond the
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annual gift tax exclusion, as evidenced by counsels’ stipulation; thus, they
are not valid.
Next, Latisha assails the orphans’ court surcharge to her of $25,200,
which represented two checks Latisha wrote to herself in 2007, one for
$25,100 and one for $100. The orphans’ court correctly concluded that
since Latisha previously wrote a check to herself for $12,000 in 2007, which
was within “the limited gifting power outlined in Decedent’s Power of
Attorney,” the other gifts were “not valid.” Orphans’ Court Opinion,
12/4/13, at 17. There is nothing in the record that can validly remove these
two checks from the applicable language of the POA document and the
relevant statutes. The same reasoning applicable to the $335,000.00 in gifts
to Adam, applies to the $25,200.00 in checks to Latisha.
Finally, Latisha challenges the orphans’ court’s conclusion that her
payment of $7,674.00 to cover funeral costs should be returned to
Decedent’s estate. Latisha contends that O’Rean had withdrawn her
objection to the payment of funeral expenses. While it is true that O’Rean
initially testified that she did not object to Latisha’s payment of funeral
expenses, she later clarified that she indeed objected to their payment.
N.T., 1/7/13, at 92; N.T., 1/9/13, at 256. The orphans’ court properly relied
upon O’Rean’s clarification. Orphans’ Court Opinion, 12/4/13, at 18.
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Latisha suggests that because the Ameriprise account was titled
“TOD,” and she, along with O’Rean, “split any assets in the account following
death,” Latisha’s Brief at 41, as fifty percent owner of the account, Latisha
had a right to pay Decedent’s funeral expenses. Id. We reject this claim.
The orphans’ court’s conclusion was correct based on the evidentiary record.
We do not agree that the record conclusively established Latisha’s lawful
right to draw checks on the account. As the orphans’ court concluded, when
she paid the funeral expenses, Latisha “was no longer authorized to make
withdrawals after her mother’s death.” Orphans’ Court Opinion, 12/4/13, at
18. Latisha’s authority as agent under the POA expired upon her mother’s
death. General Power of Attorney, 10/11/06, at 1 (NOTICE); O’Rean’s
Exhibit 2; Petition to Show Cause, 4/9/10, Exhibit A at 1. However, also as
noted by the orphans’ court, “[t]he payment of funeral expenses is a
legitimate expense of an Estate[,] and the [c]ourt, in this ruling, in no way
bars [Latisha] from requesting and being reimbursed for this cost from the
Estate.” Orphans’ Court Opinion, 12/4/13, at 18 n.5.
Therefore, for the aforementioned reasons, we affirm the validity of
the gifts that were within the annual gift tax exclusion amount and affirm
the surcharge to Latisha Bitts of gifts of $25,200.00 and funeral costs of
$7,674.00, totaling $32,874.00. In addition, we reverse the orphans’ court’s
decision that the gifts of $330,000 and $5,000.00 to Adam Bitts were not
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subject to return, and order the repayment of $335,000.00 to Decedent’s
estate. We remand to the orphans’ court to direct the return of said gifts
and funeral costs to Decedent’s estate.11 Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 1/16/2015
11
In the absence of any particularized argument regarding interest, we
affirm the orphans’ court’s denial of interest. Orphans’ Court Opinion,
12/4/13, at 19.
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