revocable trust

In the late 19th century, Congress enacted a series of land acts that divided communal Indian reservations into individual allotments for Indians and unallotted lands for non-Indian settlement. The Act of March 2, 1889, allotted 320 acres to each male Sioux head of household and 160 acres to most other individuals on the Great Reservation of the Sioux Nation, with the allotted lands held in trust by the United States. Ownership of these allotted lands fragmented over successive generations into numerous undivided interests, with some parcels having hundreds of owners. Because the land was held in trust and often could not be alienated or partitioned, the fractionation problem grew over time. This created administrative difficulties and economic waste. A 1928 report and comprehensive 1960 House and Senate studies indicated that one-half of approximately 12 million acres of allotted trust lands were held in fractionated ownership. In 1983, Congress enacted the Indian Land Consolidation Act. Section 207 provided that no undivided fractional interest in any tract of trust or restricted land within a tribe's reservation shall descend by intestacy or devise but shall escheat to the tribe if such interest represents 2 per centum or less of the total acreage in such tract and has earned to its owner less than $100 in the preceding year before it is due to escheat. The provision was signed into law on January 12, 1983, and became effective immediately, with no compensation provided to owners of escheated interests. Four enrolled members of the Oglala Sioux Tribe died in 1983 while owning fractional interests subject to the escheat provision. Chester Irving died on March 18, Mary Poor Bear-Little Hoop Cross died on March 23, Charles Leroy Pumpkin Seed died on April 2, and Edgar Pumpkin Seed died on June 23. Collectively the four decedents owned 41 such interests whose values included approximately $100 for the two interests lost by the Irving estate, approximately $2,700 for the 26 interests in the Cross estate, and approximately $1,816 for the 13 interests in the Pumpkin Seed estates. The three appellees are enrolled members of the Oglala Sioux Tribe who are or represent heirs or devisees of the decedents. Mary Irving is the daughter of Chester Irving, Eileen Bissonette is the guardian for the five minor children of Mary Poor Bear-Little Hoop Cross, and Patrick Pumpkin Seed is the son of Charles Leroy Pumpkin Seed and nephew of Edgar Pumpkin Seed. But for the escheat provision the fractional interests would have passed to the appellees or those they represent. Appellees filed suit in the United States District Court for the District of South Dakota claiming that the escheat provision resulted in a taking of property without just compensation in violation of the Fifth Amendment. The District Court granted summary judgment for the Government. The Court of Appeals for the Eighth Circuit reversed. The Supreme Court granted certiorari.

In 1930 a New York resident created a revocable trust that was amended in 1931. The trust directed income from the corpus to his wife for life. It also granted her a general power of appointment. In default of appointment half the corpus passed to the decedent's heirs and half to the wife's heirs. In 1951 the wife executed an instrument that purported to release the general power and convert it into a special power. The decedent died in 1957. His estate claimed a marital deduction for the widow's trust on the federal estate tax return. The Commissioner disallowed the deduction under section 2056(b)(5) of the 1954 Code and assessed a deficiency. The estate petitioned the Tax Court for redetermination. While that proceeding was pending the estate obtained a New York Supreme Court decree declaring the 1951 release a nullity. The Tax Court accepted the decree as controlling and allowed the deduction. A divided Second Circuit affirmed. The companion case involved the estate of a Connecticut decedent who died in 1958. His will directed payment of estate taxes without proration and created a residuary trust granting his wife a general testamentary power of appointment. The Commissioner disallowed part of the marital deduction. The executor then obtained a probate court order applying the state proration statute. The District Court refused to treat the probate decree as binding on federal tax questions. The Second Circuit agreed the decree was not conclusive. The two cases reached the Supreme Court after the Second Circuit panels reached differing conclusions on the effect of the state decrees. Certiorari was granted to resolve the conflict among the circuits.

Vickie Lynn Marshall, also known as Anna Nicole Smith, met J. Howard Marshall II in October 1991 and married him on June 27, 1994. J. Howard died on August 4, 1995. Although he had given Vickie substantial gifts and money during their relationship, his will made no provision for her. Vickie maintained that J. Howard had intended to secure her future through a catchall trust. Respondent E. Pierce Marshall, one of J. Howard’s sons, stood as the sole ultimate beneficiary under his father’s estate plan, which consisted of a living trust and a pourover will directing all remaining assets into the trust. In January 1996, while J. Howard’s estate remained subject to probate proceedings in Harris County, Texas, Vickie filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Central District of California. In June 1996 Pierce filed a proof of claim in that bankruptcy case asserting that Vickie had defamed him through statements made to the press shortly after J. Howard’s death. Vickie answered and asserted a counterclaim alleging that Pierce had tortiously interfered with her expected gift by imprisoning J. Howard against his wishes, surrounding him with hired guards, making misrepresentations to him, and transferring property contrary to his expressed intentions. The Bankruptcy Court granted summary judgment to Vickie on Pierce’s defamation claim. After a trial on the merits it entered judgment for Vickie on her tortious interference counterclaim and awarded her more than $449 million in compensatory damages, less any amount recovered in the Texas probate action, plus $25 million in punitive damages. Pierce then moved to dismiss for lack of subject-matter jurisdiction, arguing that the claim belonged exclusively in the Texas probate proceedings. In the Texas Probate Court, Pierce sought a declaration that the living trust and will were valid. Vickie initially challenged the instruments and asserted her own tortious interference claim there but voluntarily dismissed both claims after the Bankruptcy Court’s judgment. Following a jury trial the Probate Court declared the trust and will valid. On review of the Bankruptcy Court’s judgment the District Court rejected the probate-exception argument. The court adopted the Bankruptcy Court’s findings with supplements. It awarded Vickie approximately $44.3 million in compensatory damages together with an equal amount in punitive damages. The Ninth Circuit reversed. It held that the probate exception barred federal jurisdiction because the claim raised questions ordinarily decided by a probate court and because the Texas Probate Court had asserted exclusive jurisdiction over all of Vickie’s claims. The Supreme Court granted certiorari in 2005.