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In the past month, we have seen significant developments in estate planning, business law, elder law, and special needs law. We have highlighted the most noteworthy developments to ensure you and your firm stay informed of any changes. From court decisions imposing transferee liability for unpaid estate tax on an executor-beneficiary and impacting the definition of a limited partner for self-employment tax purposes to new statutes protecting the elderly and other vulnerable individuals and cases reflecting the impact of artificial intelligence on the legal profession, read on to learn how these developments may impact your practice.
Estate Planning
Executor-Beneficiary Liable for Unpaid Estate Tax
Estate of Spenlinhauer v. Comm’r, T.C.M. (RIA) 2025-134 (Dec. 30, 2025)
Georgia Spenlinhauer passed away on February 4, 2005. Her son, Robert Spinlinhauer, was her executor. Robert received an extension to May 4, 2006, to file the estate tax return, but never filed the return. After distributing specific bequests and paying expenses, Robert distributed the residuary of Georgia’s estate to himself as the residuary beneficiary.
In 2013, Robert filed for bankruptcy, revealing that he had never filed an estate tax return for his mother’s estate, and the Internal Revenue Service (IRS) initiated an examination.
In 2017, Robert, as executor, filed an estate tax return, electing an alternate valuation date and reporting a total gross estate of approximately $4.5 million and total allowable deductions of approximately $3.5 million. The IRS determined that Robert, as transferee of the residuary estate, was liable for an estate tax deficiency of $3,984,344, an addition to tax of $996,086, and an accuracy-related penalty of $524,520. Robert petitioned the Tax Court for a redetermination of the tax.
The Tax Court found that the estate did not timely elect to use an alternate valuation date to value Georgia’s gross estate: Rather than making the election no later than one year after the time prescribed by law as required by I.R.C. § 2032, Robert attempted to make the election in 2017, nearly 11 years after the estate tax return was due. Therefore, the court found that the IRS had appropriately determined that several property interests should be valued at the date of Georgia’s death rather than at lower alternate values. The court also agreed with the IRS that, due to Robert’s failure to file the estate tax return by the due date, he was not entitled to elect to exclude a percentage of the value of land subject to an easement from the value of Georgia’s estate.
The court further found that real property that Georgia transferred to Robert during her lifetime, subject to a self-cancelling promissory note, must be included in Georgia’s estate, where the evidence showed that she had not received adequate and full consideration for the property and that the parties did not intend to create a debtor-creditor relationship. The court also determined that the value of another note held by Georgia’s estate must be included in her estate, where Robert failed to produce any evidence that it had been discharged.
The court disallowed several deductions Robert sought for executor’s commissions, attorney’s fees, and an unsecured letter of credit because he failed to provide evidence to support them. Moreover, the court sustained the IRS’s addition to tax for Robert’s failure to file the tax return by the required deadline. In addition, because Robert had transferred Georgia’s residuary estate to himself, rendering the estate insolvent and unable to pay the estate tax, he had violated the Massachusetts Uniform Fraudulent Transfer Act, Mass. Gen. L. ch. 109A, § 8; therefore, the court ruled that the IRS could seek to recover the estate’s tax liability from Robert.
Takeaways: The court’s ruling in Estate of Spenlinhauer showcases not only the risk of substantial additions to tax for failure to file an estate tax return by the required filing date but also transferee liability in situations in which an executor who is also a beneficiary distributes residuary assets to himself before the estate tax is paid.
Disinherited Wife Who Abandoned Husband Not Entitled to Elective Share
Teel v. Teel, 922 S.E.2d 538 (Va. 2025)
Sue and Gene (Bull) Teel married in 1988 but separated in July 2016; they never divorced. Bull died in March 2022. His will expressly declared that Sue had abandoned him and that he made no provision for her. In the will, Bull bequeathed his entire estate to his brother, William Teel. In March 2023, Sue filed a complaint in the circuit court to determine her elective share of the augmented estate. William, who was also the estate’s executor, asserted that Sue had abandoned the marriage and was not entitled to an elective share.
Under Va. Code § 64.2-308.3(A), “[t]he surviving spouse of a decedent who dies domiciled in [Virginia] has a right . . . to take an elective-share amount equal to 50 percent of the value of the marital-property portion of the augmented estate.” However, Va Code § 64.2-308.14(E) provides that “[i]f a spouse willfully deserts or abandons the other spouse . . . until the death of the other spouse,” the abandoning spouse is “barred of all interest in the decedent’s estate.”
The facts indicate that Sue and Bull co-owned two houses; after their separation, Sue lived in one and Bull lived in the other. They also co-owned several cars and split certain bills, and Bull was on Sue’s health insurance. In November 2016, they adopted two dogs and took turns caring for them.
Sue began a romantic relationship with another man several months after their separation, a fact known to Bull and others and which was ongoing at Bull’s death. However, Sue and Bull’s relationship was cordial, and Sue testified that when Bull became ill, she visited him in the hospital almost every day and helped clean his house. However, she admitted that Bull’s family handled most of his caregiving. Bull’s other friends and caregivers testified that they rarely saw Sue and Bull together and that Bull was very hurt by Sue’s extramarital relationship.
The circuit court ruled that Sue had willfully abandoned the marital relationship and was barred from claiming an elective share of Bull’s estate. Sue appealed.
In its decision, the Virginia Supreme Court noted that determining whether a surviving spouse abandoned the deceased spouse is a mixed question of law and fact. In its de novo review of the circuit court’s application of the law to the facts, the court noted that, in the elective share context, abandonment is the “termination of the normal indicia of a marital relationship combined with an intent to abandon the marital relationship.” Teel v. Teel, 922 S.E.2d 538, 541 (Va. 2025) (citation omitted). Virginia precedent also established that an agreed separation is not evidence that defeats a finding of willful abandonment.
Based on the foregoing principles, the court found that there was ample evidence to support the circuit court’s ruling that Sue intended to abandon the normal indicia of her marriage to Bull, including her likely minimal contact with Bull during their separation and role in caring for him during his illness and her long-term and public romantic relationship with another man. As a result, it affirmed the circuit court’s judgment.
Takeaways: Elective share rules and spousal entitlements vary by state, so estate planning attorneys must become familiar with their state’s law. (Community property states generally do not have elective share rules because surviving spouses are instead entitled to their share of the community property.) In addition to Virginia, several other states’ elective share statutes provide that a surviving spouse who abandoned their spouse will not be entitled to an elective share of a deceased spouse’s estate if certain conditions are met, including Connecticut (Conn. Gen. Stat. Ann. § 45a-436(g)); Indiana (Ind. Code Ann. § 29-1-2-15); Michigan (Mich. Comp. Laws Ann. § 700.2801(2)(e); Missouri (Mo. Ann. Stat. § 474.140); New Hampshire (N.H. Rev. Stat. Ann. § 560:18); New York (N.Y. Est. Powers & Trusts Law § 5-1.2(a)); North Carolina (N.C. Gen. Stat. Ann. § 31A-1); and Pennsylvania (20 Pa. Cons. Stat. Ann. § 2106(a)). Massachusetts’ elective share statute (Mass. Gen. L. ch. 191, § 15) refers to Mass. Gen. L. ch. 209, § 36, which addresses abandonment by a spouse. Other states with elective share statutes that do not mention spousal abandonment may acknowledge it in other statutes. For example, Hawaii’s elective share statute, Haw. Rev. Stat. § 560:2-202, does not address abandonment; however, it is mentioned in Haw. Rev. Stat. § 533-9 (“No wife who has for one year or upwards, previous to the death of her husband, willfully and utterly deserted her husband, shall be endowed or be entitled by way of dower to any property owned by him at the date of his death.”).
New York Governor Signs Electronic Will Law
N.Y. Est. Powers & Trusts §§ 3-6.1 to 3-6.9
On December 12, 2025, New York Governor Kathy Hochul signed the New York Electronic Wills Act, N.Y. Est. Powers & Trusts §§ 3-6.1 to 3-6.9. The new law will become effective on June 10, 2027. To be valid, the electronic will must
- be a record that is readable as text when it is signed;
- include required disclosure language in large print;
- be electronically signed by the testator or another individual authorized by them, in the testator’s physical presence and at their direction;
- be physically or electronically signed by at least two witnesses in the physical or electronic presence of the testator within 30 days of witnessing the testator’s signing or acknowledgment; and
- be filed with the New York State Court System within 30 days of its execution.
The electronic will may simultaneously be executed, attested, and made self-proving by the acknowledgement and affidavits of the witnesses. The acknowledgement and affidavits must be made before and in the physical or electronic presence of an officer authorized to administer oaths and evidenced by the officer’s seal.
Takeaways: When the new law becomes effective, New York will join a minority of states that permit electronic wills. Electronic wills statutes enhance convenience and accessibility for home-bound or hospitalized clients, or those who find it difficult to have all parties physically present to execute their will. However, attorneys may wish to caution clients, especially those who are elderly or vulnerable, about the heightened risk of fraud, undue influence, and errors that could invalidate their will.
Before an electronic will is executed, it is important for an attorney to review it to ensure that it achieves their client’s estate planning goals and objectives. In addition, the presence of an attorney at its execution will help ensure it is properly executed, minimize the risk of forgery or the use of deepfake technology to create a fraudulent will, and lessen the risk of disputes or litigation after the testator’s death.
Elder Law and Special Needs Law
Newly Enacted State Statutes Aimed at Protecting Elderly and Vulnerable Adults Take Effect
Cal. Welf. & Inst. Code § 15657.02
On October 7, 2025, California Governor Gavin Newsom approved an amendment to the Elder Abuse and Dependent Adult Civil Protection Act that authorizes courts to apply a preponderance of the evidence standard to claims brought against residential care, adult community care, and skilled nursing care facilities in actions alleging physical abuse or neglect in circumstances in which the defendant has committed spoliation of evidence, defined as the “intentional improper alteration of evidence or the intentional concealment or destruction of records, documents, or other evidence.” The law became effective January 1, 2026.
Kan. Stat. Ann. §§ 59-30,101 to 59-30,212
On March 25, 2025, Kansas Governor Laura Kelly signed the Kansas Uniform Guardianship, Conservatorship and Other Protective Arrangements Act to protect personal rights and promote independence and self-determination for individuals who need assistance in managing their personal and financial affairs by providing the least restrictive support possible. The new law also aims to provide better access to information and more input for interested parties, such as the family members and caregivers of vulnerable individuals. Under the law, to enhance transparency and accountability, guardians and conservators must file a written plan with the court describing the support they will provide. In addition, minors are given more opportunities to provide input into decisions that impact their care. The law became effective on January 1, 2026.
Minn. Stat. § 609.2334
On March 23, 2025, Minnesota Governor Tim Walz signed into law a new statute, Order for Protection Against Financial Exploitation of a Vulnerable Adult, aimed at protecting vulnerable adults and adults over age 65 from financial exploitation and scams by providing immediate injunctive relief to temporarily freeze their financial accounts and lines of credit if they are currently in or are in imminent danger of experiencing exploitation. The court’s order may also prohibit the perpetrator of the exploitation from direct or indirect contact with the vulnerable adult and restrain them from committing acts of financial exploitation against the vulnerable adult. The order may be sought by the vulnerable adult, their guardian or conservator, a person or organization acting on behalf of the vulnerable adult with their consent or the consent of their guardian or conservator, an authorized agent under a power of attorney, or a person who simultaneously files a petition for the appointment of an emergency conservator. The law became effective on January 1, 2026.
Takeaways: Elder law attorneys in these states should familiarize themselves with the new laws, which aim to protect vulnerable individuals from physical and financial harm and enhance their lives by providing the maximum possible independence. Attorneys may also advocate for their clients through involvement in state-level legislation affecting elderly and vulnerable individuals.
Business Law
Fifth Circuit: Limited Partner Exception to Self-Employment Tax Applies to Partners in a Limited Partnership with Limited Liability, Not Just Passive Investors
Sirius Solutions, LLLP v. Comm’r, No. 24-60240, 2026 WL 125600 (5th Cir. Jan. 16, 2026)
Sirius Solutions, LLLP (Sirius) is a limited liability limited partnership (LLLP) formed under Delaware law and owned by a general partner and several limited partners. On its federal tax returns for 2014, 2015, and 2016, Sirius allocated all of its ordinary business income for each of those years to its limited partners and excluded the limited partners’ distributive shares of partnership income or loss from its calculation of net earnings from self-employment. The IRS audited its tax returns. It determined that the distributive share exception in I.R.C. § 1402(a)(13) did not apply because Sirius’s limited partners were not limited partners for the purposes of the exception. The IRS adjusted the net earnings from self-employment upward: from $0 to $5,915,918 for 2014, from $0 to $7,372,756 for 2015, and from $0 to $490,291 for 2016. Sirius petitioned the Tax Court for readjustment of its 2014, 2015, and 2016 returns. However, the Tax Court, relying on its prior decision in Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023), rejected Sirius’s challenges on the basis that under the limited partner exception to self-employment tax, the term limited partner means passive investor and that Sirius’s limited partners were not passive investors. Sirius appealed.
The Fifth Circuit Court of Appeals disagreed with the Tax Court’s interpretation of the meaning of limited partner in I.R.C. § 1402(a)(13), which provides as follows:
The term “net earnings from self-employment” means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business, plus his distributive share (whether or not distributed) of income or loss described in section 702(a)(8) from any trade or business carried on by a partnership of which he is a member; except that in computing such gross income and deductions and such distributive share of partnership ordinary income or loss . . .
. . .
(13) there shall be excluded the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments described in section 707(c) to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services; . . .
(emphasis added). The court first looked to the text of section 1402(a)(13), noting that statutory language should be given its ordinary meaning at the time of its enactment. Dictionaries published during the time period when section 1402 was enacted defined a limited partner as “a partner in a limited partnership that has limited liability.” Sirius Solutions, LLLP v. Comm’r, No. 24-60240, 2026 WL 125600, at *3 (5th Cir. Jan. 16, 2026). The court also noted that contemporaneous and consistently held agency interpretations are also useful in determining the meaning of a statute: Prior to 2022, both the IRS and the Social Security Administration (SSA) consistently interpreted the meaning of “limited partner” as a partner with limited personal liability and had never expressly adopted another interpretation.
The court rejected the arguments of the Tax Court, the IRS, and the dissent, finding that their “newly adopted” interpretation—that a limited partner is a passive investor in a limited partnership—failed for several reasons. Id. at *11. First, their interpretation would render the “guaranteed payments” clause superfluous because the text of the exception contemplates that limited partners will provide actual services to the partnership: The IRS’s argument that some participation, as long as it is not too much—as determined by the IRS—was not supported by the text; Congress could have explicitly written the exception to exclude only passive investors from self-employment tax but did not do so. Moreover, the adoption of a passive investor interpretation would make it much more difficult for the IRS and limited partners to determine their tax liability because of the necessity to “balance an infinite number of factors” in performing the functional analysis test set forth in the Soroban case.
Further, the court rejected the Tax Court’s position adopted in Soroban that Congress’s use of the words “limited partner, as such,” meant that it intended for the limited partner exception to apply only to limited partners who were functioning as limited partners. The court found that because individuals can simultaneously serve as both limited partners and a general partnership, the term “as such” clarifies how individuals who serve as both should be taxed: When an individual serves as a limited partner, their distributive share is excluded from net earnings from self-employment, but when the individual serves as a general partner, their distributive share is included.
In addition, the court found that its view was consistent with the IRS’s position that federal tax law is concerned with economic realities rather than state-law labels. The federal definition of limited partner for the purposes of section 1402(a)(13) applies to limited partnership interests created under state law, regardless of how the state labels them. The court also rejected the IRS’s contention that its position would risk inconsistency in tax law: To the contrary, the IRS’s interpretation would lead to substantial litigation about how much participation in a limited partnership would be too much for a limited partner to fall within the exemption. Moreover, the court disagreed with the Tax Court and the IRS and rejected the dissent’s reliance on legislative history, which it found ambiguous.
As a result, the court vacated the Tax Court’s judgment and remanded for further proceedings.
Takeaways: Commentators have viewed the Fifth Circuit’s decision in Sirius as an important taxpayer win—at least for cases pending in the Fifth Circuit. However, there is the possibility of a split in the circuit courts of appeals. The Tax Court’s decision in Soroban Capital Partners LP v. Comm’r (see our February 2024 monthly recap for further discussion) has been appealed to the US Court of Appeals for the Second Circuit. A similar decision in which the Tax Court relied on Soroban, Denham Capital Management LP v. Comm’r, T.C. Memo 2024-114 (2024), has been appealed to the US Court of Appeals for the First Circuit. If a circuit split occurs, it is possible that the meaning of “limited partner” under section 1402(a)(13) could eventually be determined by the US Supreme Court.
IRS Issues Guidance for Business and Employer-Related OBBBA Provisions
I.R.S. Notice 2025-68 (Dec. 2, 2025)
On December 2, 2025, the IRS issued Notice 2025-68, which provides an overview of Trump accounts—a new type of investment account for individuals under age 18 established under the One Big Beautiful Bill Act (OBBBA)—and describes how they work. The guidance also addresses initial questions about the accounts.
Starting July 4, 2026, employers may make employer contributions for eligible employees or employees’ dependents that are not taxable income to the employees or enable employees to make contributions. The IRS indicated that it intends to issue regulations consistent with the guidance.
I.R.S. Fact Sheet, FS-2055-09 (Dec. 23, 2025)
On December 23, 2025, the IRS released a fact sheet with answers to frequently asked questions about I.R.C. § 163(j) and the business interest limitation, including amendments under OBBBA. The facts sheet covers changes to the deduction under OBBBA, which provides that depreciation, amortization, and depletion deductions can be added to a taxpayer’s adjusted taxable income (ATI) for tax years beginning after December 31, 2024, increasing the amount of business interest expense that can be deducted in a taxable year.
I.R.S. Notice 2026-11 (Jan. 14, 2026)
On January 14, 2026, the IRS issued Notice 2026-11, which provides interim guidance regarding the 100 percent additional first-year depreciation deduction under I.R.C. §168(k), which was reinstated and made permanent by the OBBBA. The deduction applies to qualified property acquired and placed in service after January 19, 2025. The interim guidance, which indicates that a proposed regulation is forthcoming that will be consistent with it, addresses key topics such as how to determine whether property is eligible for the deduction and how to calculate it.
Takeaways: The IRS will continue to issue guidance on OBBBA provisions affecting businesses and employers, as well as proposed regulations to facilitate implementation of the new tax law. Attorneys may wish to refer business-owning clients with OBBBA-related questions to a certified public accountant.
Important AI-Related Legal Developments
Attorneys Sanctioned for Filing Motion to Dismiss Containing Inaccurate AI-Generated Citations and Quotations
Lifetime Well LLC v. IBSpot.com Inc., No. 25-5135, 2026 WL 195644 (E.D. Pa. Jan. 26, 2026)
Lifetime Well LLC sued IBSpot.com (IBSpot) for copyright and trademark violations. A Pennsylvania federal district court entered a default judgment against IBSpot in October 2025. IBSpot hired a New York attorney who was specially admitted to appear before the court in Pennsylvania in response to the motion of a Pennsylvania attorney, who swore to remain responsible for her conduct and filings. IBSpot moved to vacate the default judgment, which was granted. In November 2025, IBSpot filed a motion to dismiss, which was signed by both the New York and Pennsylvania attorneys.
The court identified eight instances of false citations and quotations in the motion to dismiss. In response to the court’s order to show cause why it should not impose sanctions, the New York attorney asserted that she had assigned a new law clerk (whom she later fired) to prepare the motion. The law clerk used artificial intelligence (AI) to prepare the motion, but did not disclose the use of AI to her. The Pennsylvania attorney admitted that he had not caught the false citations before signing the filing.
The court found that both attorneys had violated Federal Rule of Civil Procedure 11, which obligates attorneys to read and confirm the existence and validity of legal authorities they rely upon. The court noted that sanctions are warranted under Rule 11 when an attorney unreasonably fails to investigate whether their legal or factual contentions have support. Attorneys have a nondelegable duty to read a document and conduct a reasonable inquiry into the existing legal authority. The attorneys who sign a motion are the final auditors for all legal and factual claims contained in it, even when other staff (such as law clerks) assist in preparing it.
To reinforce an attorney’s obligation to prevent the unauthorized use of AI, provide training on its use, and supervise and verify all research and court filings—and because the New York attorney had blamed her law clerk instead of accepting full responsibility for failing to verify the legal authorities, the court ordered her to pay from her personal funds a monetary sanction of $5,000 to a local legal organization it designated. Further, it ordered her to share the court’s order and opinion and her new AI policy with the organization and ask that they be shared with its membership.
The court imposed a nonmonetary sanction on the Pennsylvania attorney for accepting and signing another firm’s work product without checking the legal authorities cited: He was required to send the court’s order and opinion and his AI policy to a local legal organization and request that they be shared with its membership.
Takeaways: As the Lifetime Well court noted, many courts and commentators have warned about the risks of relying on artificial intelligence for legal research and court filings. See also McPhaul v. Collegial Hills Opco, LLC, No. 25-2337-JWB (D. Kan. Jan. 6, 2026) (plaintiff’s attorney in negligence and wrongful death case against nursing home ordered to explain false case citations and quotations that may have been generated by AI in his motion and show cause why he should not be sanctioned). The court also emphasized the need for attorneys to be diligent in supervising less experienced attorneys and staff to ensure legal citations and quotations from cases are accurate.
Class Action Lawsuit Alleging Violation of Illinois’s Biometric Information Privacy Act Filed Against Company Providing AI Transcription Tool
Cruz v. Fireflies.AI Corp., No. 3:2025cv03399 (C.D. Ill. Dec. 18, 2026)
In a class action lawsuit recently filed in an Illinois federal district court, the plaintiff and other class members alleged that an AI meeting assistant tool that collects, possesses, and retains biometric data, including voiceprints, violates Illinois’s Biometric Information Privacy Act (BIPA) by failing to provide the notice, written consent, and other safeguards the act requires. The BIPA, enacted in 2008, regulates the collection, use, and storage of biometric data such as fingerprints, iris scans, and voiceprints.
Takeaways: A growing number of law firms—especially virtual law practices—are using AI transcription or note-taking tools to enhance productivity. However, such tools may introduce risks, for example, that privileged conversations could be saved or even disclosed by the company providing the tool. Attorneys who wish to use AI transcription and assistance tools should investigate them carefully prior to implementation, notify clients and other meeting participants of their use, obtain their consent to its use, and provide them with the option to decline its use.
In addition to Illinois, at least two other states currently have statutes specifically protecting the biometric data of individuals against unauthorized collection, use, and disclosure: Washington (Wash. Rev. Code §§ 19.373.005 - 19.373.900) and Texas (Tex. Bus. & Com. Code § 503.001). Illinois’s BIPA and Washington’s My Health My Data Act provide a private right of action, but Texas’s Capture or Use of Biometric Identifier Act may only be enforced by the state’s attorney general. However, states with comprehensive privacy laws may also require businesses to obtain consent or provide consumers with opt-out options before processing sensitive data, including biometric data. See, e.g., California Consumer Privacy Act of 2018, Cal. Civ. Code §§ 1798.100 - 1798.199.100, which includes biometric information in the definition of consumers’ personal information protected by the act.
