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Not long after its 10th anniversary, the Great Lakes Restoration Initiative (GLRI) received a hefty package celebrating its success. Congress passed the Great Lakes Restoration Initiative Act of 2019 last month, not only reauthorizing the GLRI for another five years but also significantly increasing its funding levels. The annual funds for GLRI will grow from $300 to $330 million in 2021, to $375 million in 2022, and up another $25 million per year until reaching $475 million in 2026. The GLRI had been set to expire at the end of 2021 and faced funding threats in recent years. The boost in funding with solid bi-partisan support, however, suggests long term viability for the GLRI.
The GLRI began in 2010 with the goals of making water safe to drink and fish safe to eat, reducing harmful algal blooms, protecting native habitat and species and prohibiting invasive species in the Great Lakes basin. It does so by awarding grants for projects that aim to restore and protect the chemical, physical and biological integrity of the Great Lakes basin. In its ten-year history, GLRI has funneled $2.7 billion into over 5,000 projects in the eight states that comprise the Great Lakes ecosystem.
In Ohio, GLRI has funded projects for the removal of dams, agricultural best management practices, stream restoration, coastal wetlands, management of invasive species, and clean-up of contaminated sediments in Ohio’s four targeted “areas of concern,” which include the Ashtabula, Black, Cuyahoga, and Maumee Rivers. Ohioans can expect to see more of these and other projects in the coming years.
For more on the GLRI, visit this link.
In our final part of our blog series analyzing the Ohio Supreme Court's recent decisions on mineral rights, we analyze the Court's decision in West v. Bode regarding the relationship between the Dormant Mineral Act and Ohio’s Marketable Title Act.
West v. Bode
Timeline of Events:
1902: George and Charlotte Parks sold 1/2 of the royalty interest in the oil and gas under their 66 acres of land located in Monroe County (the “severed royalty interest”) to C.J. Bode and George Nally; the transfer was recorded.
1916: Bode and Nally transferred the severed royalty interest to E.J. Wichterman, Clara Thompson, and M.M. Mann; the transfer was recorded.
1929: Parks transferred to Lettie West the 66 acres, but retained their 1/2 royalty interest in the oil and gas under the property and mentioned the severed royalty interest; the transfer was recorded.
1959: The surface land was transferred to George West; the transfer was recorded but did not mention the severed royalty interest (the “root title”).
1996: George West transferred property to Wayne West; the transfer was recorded but did not mention the severed royalty interest.
2002: Wayne West transferred a portion of the 66 acres to Rusty West; the transfer was recorded but did not mention the severed royalty interest.
Wayne and Rusty West (the “Wests”) filed an action in Monroe County Court of Common Pleas asking for a declaratory judgment that Ohio’s Marketable Title Act extinguished the severed royalty interest, and that the severed royalty interest had vested in the Wests. The remaining interested parties filed a counterclaim arguing they were owners of a portion of the severed royalty interest (the “interested parties”).
The interested parties claimed that the Wests failed to state a valid claim under the Marketable Title Act because the more specific provisions of Ohio’s Dormant Mineral Act displace the general provisions of the Marketable Title Act. The Wests argued that since neither the transfer from Lettie West to George West nor any recorded document since mentioned the severed royalty interest, the severed mineral interest vested back to the Wests under Ohio’s Marketable Title Act.
The Monroe County Court of Common Pleas agreed with the interested parties and declared them owners of the severed royalty interest. The Seventh District Court of Appeals reversed and asked the Common Pleas Court to adjudicate the case under the Marketable Title Act. The interested parties then appealed to the Ohio Supreme Court.
Does the Dormant Mineral Act Supersede the Marketable Title Act?
The Ohio Supreme Court was tasked with determining whether Ohio’s Marketable Title Act applies to severed interests in oil and gas because of the enactment of the newer Dormant Mineral Act.
The Dormant Mineral Act (R.C. §5301.56) is part of a series of laws known as the Ohio Marketable Title Act (§R.C. 5301.47 et seq.) Under Ohio law, courts should interpret potentially conflicting statutes in a way that gives effect to both laws. However, if there is an irreconcilable conflict between two laws, a more specific law will prevail over a more general one. Therefore, the Ohio Supreme Court determined that the issue in this case was whether there existed an irreconcilable conflict between the Marketable Title Act and the Dormant Mineral Act.
First, the Court looked at the intent of each act. The Court found that the Ohio General Assembly enacted the Marketable Title Act to extinguish interests and claims in land that existed prior to the root title so as to simplify and facilitate land transactions by allowing individuals to rely on a record chain of title. Similarly, the Ohio Supreme Court found that the Ohio Legislature enacted the Dormant Mineral Act to provide a method to terminate dormant mineral interests and reunify the abandoned mineral interest with the surface interests in order to promote the use of the minerals under the land.
But how do the two operate together? The Ohio Supreme Court analyzed that under the 1961 Marketable Title Act, property interests are extinguished after 40 years from the effective date of the “root title” unless some saving event has occurred. Once an interest has been extinguished under the Marketable Title act, it cannot be revived. An event that would save an interest from being extinguished under the Marketable Title Act include: (1) the interest being identified in the documents that form the record chain of title; (2) the interest holder recording a notice claiming the interest; or (3) the interest arose out of a transaction that was recorded subsequent to the effective date of the root title.
The Court also explained that the Dormant Mineral Act was enacted in 1989 (and amended in 2006) to supplement the Marketable Title Act. In order for mineral interests to be deemed abandoned the surface landowner must either send notice to holders of the mineral interest or publish the notice if the holders cannot be located. If a holder does not respond, a surface landowner can file with the county recorder an affidavit showing that notice was sent and published, and no saving event occurred within the 20 years prior to the notice. A saving event under the Dormant Minerals Act include: (1) existence of title transactions; (2) use of the minerals; (3) use of the interest for underground gas storage; (4) issuance of a permit to use the interest; (5) claims of preservation; and (6) issuance of separate tax parcel number for the interest.
The Ohio Supreme Court held that the Dormant Mineral Act operates differently than the Marketable Title Act thus no irreconcilable conflict exists. The Marketable Title Act extinguishes interests by operation of law, whereas the Dormant Mineral Act deems interests abandoned and vested in the owner of the surface. Essentially, the Court found that the two acts work in conjunction with one another, not against each other. The Court reasoned that the Dormant Mineral Act is not self-executing like the Marketable Title Act, but rather provides evidence that a surface owner may use in a quiet-title action to eliminate the abandoned mineral interest.
The Court stated that a surface owner may use the Dormant Mineral Act to reunify the surface and mineral interests prior to the 40-year time limit prescribed in the Marketable Title Act, thus making the Dormant Mineral Act a more abrupt way to reunify the two interest. This, the Court rationalized is why the Dormant Mineral Act works in parallel to the Marketable Title Act rather than against it. The Court found that the Dormant Mineral Act provides an additional mechanism to surface owners to reunify surface and mineral interests.
The Court ultimately held that a mineral interest holder’s interest may be extinguished by the Marketable Title Act or deemed abandoned by the Dormant Mineral Act, depending on the surrounding circumstances.
Takeaways from Part I and Part II
Make sure your interests are recorded! With any transaction, recording transfer of title (or mineral interests) can be crucial to protecting your assets. If you have any questions about whether your interests have been recorded, please contact a local attorney, it could be what saves your legacy.
Do the terms “abandoned mineral rights” mean anything to you? Do you currently own land that you don’t have the mineral rights to? Do you own mineral rights, but haven’t really done anything to make sure your rights are still protected?
Mineral rights are valuable asset in our personal portfolios that can allow us to build our legacy and provide for future generations. However, sometimes what we once thought as part of our legacy, is in fact now the legacy of another. The Ohio Supreme Court recently decided two cases dealing with abandoned mineral rights and the procedure in which a surface landowner can reunify the mineral rights with the surface rights.
This two-part blog series will first analyze the Ohio Supreme Court’s opinion regarding the notice requirements under Ohio’s Dormant Mineral Act and the second part will analyze how the Dormant Mineral Act and Ohio's Marketable Title Act work together.
Gerrity v. Chervenak
The Ohio Supreme Court addressed and clarified the notice requirements under the Ohio Dormant Mineral Act, Ohio Revised Code §5301.56.
John Chervenak is a trustee of the Chervenak Family Trust (“Chervenak”) which owns approximately 108 acres in Guernsey County. The rights to the minerals under the Chervenak property were retained by T.D. Farwell, the individual who transferred the 108 acres to the Chervenak family.
In 2012, a title search for the Chervenak property identified Jane Richards, daughter of T.D. Farwell, as the owner of the mineral rights under the property. The records listed a Cleveland address for Ms. Richards. Unfortunately, Ms. Richards passed away in 1997. At the time of her passing, Ms. Richards was a resident of Florida and had one son, Timothy Gerrity.
In 2012, Chervenak sought to reunite the severed mineral interest with the surface estate interest pursuant to Ohio’s Dormant Mineral Act. Chervenak recorded with the Guernsey County Recorder an affidavit of abandonment of the severed mineral interest. The affidavit stated that Chervenak sent notice by certified mail to Ms. Richards at her last known address – the Cleveland address – but the notice had been returned and marked undeliverable. The affidavit also stated that Ms. Richards’ heirs, devisees, executors, administrators, next of kin, and assigns had been served notice of the abandonment by publication in a Guernsey County newspaper.
In 2017, Gerrity filed an action in the Guernsey County Court of Common Pleas seeking to quiet title to the mineral rights under the Chervenak property and for a declaratory judgment that Gerrity was the exclusive owner of the mineral rights. Gerrity claimed that he was the rightful owner to the mineral rights under the Chervenak property as a result of the probate of his mother’s estate in Florida. The Guernsey county records, however, revealed no evidence of Ms. Richard’s death or of Gerrity’s inheritance of the mineral interest.
Further, Gerrity claimed that Chervenak did not comply with Ohio’s Dormant Mineral Act in two ways: (1) Gerrity argued that under the Dormant Mineral Act Chervenak must identify all holders of the mineral interest and notify them by certified mail; and (2) Chervenak did not employ reasonable search methods to locate all holders of the mineral interest before serving notice by publication.
Both the Guernsey County Court of Common Pleas and the Fifth District Court of Appeals declared Chervenak the owner of the mineral rights under the Dormant Mineral Act. Gerrity then sought the Ohio Supreme Court’s review.
The Dormant Mineral Act
Under current Ohio law, unless a severed mineral interest is in coal or is coal related, held by a political body, or a savings event has occurred within the 20 preceding years, a mineral interest will be considered abandoned and vested in the owner of the surface lands, so long as the surface landowner complies with Ohio Revised Code §5301.56(E).
R.C. §5301.56(E) states:
Before a mineral interest becomes vested in the surface landowner, the landowner shall do both of the following:
- Serve notice by certified mail to each holder or each holder’s successors or assignees, at the last known address of each, of the landowner’s intent to declare the mineral interest abandoned. If service of the notice cannot be completed, then the landowner shall publish notice of the landowner’s intent to declare the mineral interest abandoned in a newspaper of general circulation in each county in which the land is located.
- 30 days after serving notice, the landowner must file an affidavit of abandonment in the County Recorder’s office in each county that the land is located in.
Gerrity claimed that under the Dormant Mineral Act, his mineral interest cannot be deemed abandoned and vested in Chervenak because under R.C. §5301.56(E)(1) Chervenak is required to identify Gerrity and serve him Chervenak’s notice of intent to declare the mineral rights abandoned. The Ohio Supreme Court disagreed. While the Ohio Supreme Court agreed that Gerrity was considered a “holder” under the Dormant Mineral Act, Chervenak was not required to identify every possible holder and serve them notice, especially holders that do not appear on public record.
The Ohio Supreme Court found that such a stringent requirement would undo the intent behind the Dormant Mineral Act. The Court analyzed the text of the Dormant Mineral Act and found that because the Ohio General Assembly allows for a surface landowner to publish its notice of intent to declare the mineral rights abandoned in §5301.56(E)(1), the surface landowner is not required to identify and serve notice to each and every potential mineral interest holder.
The Court reasoned that no surface owner, no matter how much effort put forth, will ever really be certain that he or she has identified every successor or assignee of every mineral interest owner who appears on public record. This is why, the Court articulated, that the General Assembly allows for publication of a landowner’s intent to declare the mineral rights abandoned, because there will be instances when a holder may be unidentifiable or unlocatable.
Second, Gerrity argued that Chervenak must employ reasonable search methods to identify and locate all mineral interest holders – which include not only searching public records but also internet searches and searches of genealogy databases before publishing the notice in a newspaper. The Court agreed that a surface landowner must use reasonable diligence to try and identify mineral interest holders but disagreed with Gerrity to the extent in which a surface owner must go in order to have exercised reasonable diligence. The Ohio Supreme Court found that determining whether or not a surface landowner has exercised reasonable diligence to identify mineral interest holders will have to be determined on a case-by-case basis.
In this case, the Ohio Supreme Court found that Chervenak did exercise due diligence in trying to locate all holders. The Court determined that by searching through Guernsey County records and Cuyahoga County records (the county in which Cleveland is located), Chervenak fulfilled their due diligence requirement. The Court declined to impose a requirement that every surface landowner search the internet, especially due to the inconsistent reliability of such searches, or consult with any subscription-based service to identify a potential mineral interest holder. The Court held that a search of county property records and county court records will usually establish a baseline of due diligence by the surface landowner.
Ohio State Extension will host a virtual three part "Planning for the Future of your Farm" webinar series. The webinar series will span over three Monday evenings from 6:30 to 8:30 p.m. starting on February 15, 2021 and concluding on March 1, 2021. This workshop is designed to help farm families learn strategies and tools to successfully create a succession and estate plan that helps transfer the farm's ownership, management, and assets to the next generation.
Topics discussed during this series include:
- Developing Goals for Estate and Succession;
- Planning for the Transition of Control;
- Planning for the Unexpected;
- Communication and Conflict Management During Farm Transfer;
- Legal Tools and Strategies;
- Developing Your Team;
- Getting Your Affairs in Order; and
- Selecting an Attorney
This workshop will be taught by members of the OSU Farm Office Team featuring Peggy Hall & Jeffrey Lewis, Attorneys from the OSU Agricultural & Resource Law Program and David Marrison, Extension Educator for Coshocton County.
Because the workshop is online, you can invite your parents, children, and/or grandchildren to join you as you develop a plan for the future of your family farm, regardless of where they live in Ohio or across the United States.
Pre-registration is required. One hard-copy of program materials will be mailed to participating farm families. Electronic copies of the program materials will also be available to all participants. The registration fee is $40 per farm family. The deadline to register for the webinar series is February 10, 2021. You can register online at the "Planning for the Future of Your Farm" webinar registration page.
A three part "Planning for the Future of Your Farm" webinar series.
Monday, February 15, 2021 from 6:30 to 8:30 p.m.
Monday, February 22, 2021 from 6:30 to 8:30 p.m.
Monday, March 1, 2021 from 6:30 to 8:30 p.m.
$40 per farm family.
Registration deadline is February 10, 2021.
You can find more information about the webinar series by visiting the "Planning for the Future of Your Farm" webinar registration page. If you have any questions or concerns, please contact David Marrison by phone at (740) 622-2265 or email at email@example.com.
We look forward to seeing you there!
Ohio’s “petition ditch laws” are at last receiving a major revision. The Ohio General Assembly has passed H.B. 340, updating the laws that address the installation and maintenance of drainage works of improvement through the petition process. Some of Ohio’s oldest laws, the drainage laws play a critical role in maintaining surface water drainage on Ohio lands but were in serious need of updating.
An updating process began over seven years ago with the Ohio Drainage Law Task Force convened by the County Commissioners Association of Ohio (CCAO). CCAO charged the Task Force with the goals of clarifying ambiguous provisions in the law and embracing new technology and processes that would result in greater efficiencies, fewer misunderstandings and reduced legal costs for taxpayers. Task Force members included county commissioners, county engineers and staff, county auditors, Soil and Water Conservation District professionals, Ohio Farm Bureau staff, and Ohio State University's Agricultural & Resource Law Program and other OSU faculty. Rep. Bob Cupp sponsored the resulting H.B. 340, which received unanimous approval from both the House of Representatives and Senate.
Here are a few highlights of the legislation:
- Mirroring the timeframes, deadlines, notices, and hearings and appeals procedures for petitions filed with the county engineer and with the county soil and water conservation district.
- The use of technology may substitute for a physical view of a proposed drainage improvement site.
- The minimum width of sod or seeded strips will be ten feet rather than four feet; maximum width remains at fifteen feet.
- The entire amount of sod or seeded strips will be removed from the taxable valuation of property, rather than the current provision removing only land in excess of four feet.
- Factors to consider for petition approval are the same for SWCD board of supervisors and county engineers, and include costs versus benefits of the improvement, whether improvement is necessary, conducive to public welfare, will improve water management and development and will aid lands in the area by promoting economic, industrial, environmental or social development.
- Clarification that the lead county in a multi-county petition is the county in which a majority of the initial length of the proposed improvement would exist, and assignment of responsibilities to officials in the lead county.
- The bond amount for county engineer petitions increases to $1,500 plus $5 for each parcel of land in excess of 200 parcels.
- Additional guidance for factors to be considered when determining estimated assessments.
- Current law allows county commissioners to repair an existing drainage improvement upon complaint of an assessed owner if the cost doesn’t exceed $4,000. The new law increases that amount to $24,000 and allows payment of repair assessments in 10 semiannual installments rather than four.
We’re working with other Task Force members to prepare detailed explanations of the bill’s provisions and a guideline of the new procedures. County engineers and SWCD offices will begin following the revised law on the bill’s effective date of March 18, 2021, just in time for Spring rains and drainage needs.
Barry Ward, Leader, Production Business Management/Director, OSU Income Tax Schools
Congress passed the Consolidated Appropriations Act (CAA), 2021 on Monday, December 21, 2020 which was signed by the President on December 27th. The CAA funds the government through September 30, 2021, implements COVID-19 relief provisions, and extends a number of expiring tax provisions. The $2.3 trillion bill provides $900 billion in COVID-19 relief. This article highlights key provisions for farm related issues from several Acts within the CAA’s 5,593 pages.
Additional 2020 Recovery Rebates
“Economic Impact Payments”
The Act provides for “additional 2020 recovery rebates for individuals.” The additional recovery rebate credit is $600 for “eligible individuals” or $1,200 for “eligible individuals” filing a joint return. “Eligible individuals” are entitled to a $600 credit for each “qualifying child”. (Generally includes dependent children under the age of 17.) Phaseouts apply for higher income taxpayers.
Paycheck Protection Program Loans – Covered Expenses Now Deductible
Previously, the IRS and Treasury indicated that the expenses covered by PPP loans that were forgiven (or would be forgiven) would not be deductible. This new legislation now allows for these expenses to be deducted. This provision overrides IRS Notice 2020-32 and Rev. Rul. 2020-27. The CARES Act indicated that the loan proceeds from PPP loans are not to be included as taxable income. This tax treatment would apply to original PPP loans, as well as any subsequent loans made possible by the Act.
Paycheck Protection Program – Other New Guidelines
Qualified self-employed farmers who did not have employees and had less than $100,000 of net income in 2019 were not originally eligible for the maximum forgivable PPP loan. The new legislation now allows for the PPP loan forgiveness based on gross income rather than net income. Farmers are now able to receive a PPP loan of up to $20,833 (reduced by any loan already received) based on gross receipts of at least $100,000.
The legislation amends the Paycheck Protection Program (PPP) to extend the covered period from December 31, 2020, through March 31, 2021. An allocation of $284 billion is included to provide first and second PPP loans to small businesses. Details of the expanded program will not be known until SBA releases required guidance.
The PPP allows borrowers to spend proceeds on payroll costs and non-payroll costs of business mortgage interest, business rent payments, and business utility payments. This new legislation expands the allowable use of PPP loan proceeds.
The legislation allows borrowers to choose a covered period anywhere between an eight-week and 24-week covered period for purposes of loan forgiveness. The covered period must begin on the date the proceeds are disbursed.
The legislation provides a simplified forgiveness procedure for PPP loans up to $150,000. The new procedure provides that such loans “shall be forgiven” if the borrower signs a certification that shall not be more than one page in length and shall require minimal supporting information.
The legislation repeals the provision in the CARES Act requiring the SBA to reduce a borrower’s PPP forgiveness by the amount of an EIDL advance.
PPP Second Draw Loans
The new legislation establishes a PPP Second Draw Loan program that generally applies to businesses with 300 or fewer employees if the business had gross receipts during any quarter in 2020 that were reduced by at least 25 percent from the gross receipts of the business during the same quarter in 2019.
To be eligible for a second draw loan, the borrower must have received a PPP loan in 2020 and used all of the proceeds of that loan for permitted purposes.
The Act allows borrowers who have not yet received forgiveness to request an increase in their loan amount if they returned all or part of a PPP loan or did not take the full amount of a PPP loan to which they were entitled. This provision allows borrowers who received loans before more favorable regulations were enacted to take advantage of those new provisions.
Employee Retention Credit (ERC)
The legislation extends and expands the employee retention credit, allowing employers to remain eligible up until July 1, 2021. Previously, employers who received a PPP loan were ineligible to claim the ERC. The new legislation retroactively allows employers who receive PPP loans to claim the ERC and to treat payroll costs paid during the loan-covered period as qualified wages to the extent the wages are not paid for with forgiven PPP loan proceeds.
For the period from January 1, 2021 and prior to July 1, 2021 the ERC percentage increases from 50 percent of qualified wages to 70 percent. Employers can count qualified wages up to $10,000 per employee per quarter (instead of for all quarters) in calculating the credit. Employers qualify for the credit if their gross receipts for a calendar quarter are less than 80 percent of the gross receipts of the corresponding calendar quarter in calendar year 2019.
Economic Injury Disaster Assistance (EIDL) Loans and Advances
The Act allows Economic Injury Disaster Assistance (EIDL) Advances provided as emergency grants under the CARES Act to be excluded from gross income while the corresponding expenses would remain deductible. Additionally, loan forgiveness granted to an EIDL loan recipient under discretionary powers provided by the CARES Act does not result in gross income or a denial of deductions for allocable expenses.
New Net Operating Loss (NOL) Options
The new legislation provides farmers new net operating loss options not otherwise available in the wake of the CARES Act. Farmers have the option to temporarily carry back Net Operating Losses 2 or 5 years with some caveats.
Extension of Credits for Paid Sick and Family Leave
The Act extends the tax credits made available to employers by the Families First Coronavirus Response Act through March 31, 2021 (They were set to expire on December 31, 2020). This includes the sick and family leave credits for self-employed individuals. The new legislation does not provide additional credits for employees but allows for a larger window to utilize them if the employer chooses.
Emergency EIDL Grants
The Act appropriates an additional $20 billion for emergency EIDL grants. The Act extends the covered period for this program through December 31, 2021, and extends the period to approve the applications from three days to 21 days.
Temporary Allowance of 100% Deduction for Business Meals
The new legislation allows for a 100 percent deduction for business meals where food or beverages is provided by a restaurant, for the 2021 and 2022 tax years.
Charitable Contributions Deduction by Non-Itemizers
For tax years beginning in 2021, the Act extends and increases the above-the-line deduction for cash contributions by non-itemizers to $300 for individuals and $600 for married filers.
Extension of Deferred Employee Portion of Payroll Taxes
The Act delays the repayment requirement for the employee portion of the payroll taxes that were deferred in response to the President’s August 8 Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster. Instead of requiring full repayment of these deferred taxes by April 30, 2021, the new legislation delays this deadline to December 31, 2021.
Tidgren, Kristine A. “What COVID Relief Provisions are in the Spending Bill?” Ag Docket Perspective on Agricultural Law & Taxation, Center for Agricultural Law and Taxation, December 23, 2020
Neiffer, Paul “Deeper Dive into PPP” Agribusiness Blog Farm CPA Today, CliftonLarsenAllen Wealth Advisors, December 22, 2020
H.R. 133 Consolidated Appropriations Act, 2021 https://www.congress.gov/116/bills/hr133/BILLS-116hr133enr.pdf December 27, 2020
Ernst & Young LLP, Consolidated Appropriations Act, 2021 extends many credits and other COVID-19 relief, Tax News Update, December 23, 2020
Do you have a will? Was your will executed formally? Do your parents have a will? Was their will executed in accordance with Ohio’s laws? What happens if your parent’s friend claims they are entitled to a portion of your parent’s estate because they have a handwritten note saying as much? Recently, the Ohio Supreme Court decided a case to help clarify Ohio’s laws regarding will execution.
In re Estate of Shaffer
Dr. Joseph Shaffer – a psychologist and part owner of successful sleep clinics – executed a formal will in 1967. Dr. Shaffer’s formal will instructed that if his wife were to pass away before him, his estate would pass through trust to his two sons. Dr. Shaffer’s wife, unfortunately, did pass away before him. On July 20, 2015, Dr. Shaffer also passed away. Dr. Shaffer’s formally executed will was admitted into probate in 2015.
In January 2016, Juley Norman – a friend and caretaker of Dr. Shaffer – filed a creditor’s claim against Dr. Shaffer’s estate claiming that she was entitled to a portion of his estate because of the care and services she provided to Dr. Shaffer before the end of his life. Ms. Norman attached a copy of a handwritten 3x5 notecard signed by Dr. Shaffer in 2006. No signatures other than Dr. Shaffer’s were present on the notecard, which read:
|Dec 22, 2006|
|My estate is not|
|all of my sleep network|
|stock is to go to|
|Juley Norman for|
|her care of me is to|
|receive 1/4 of my estate|
|Terry is to be the|
|This is my will.|
|[signed by Dr. Shaffer]|
Zachary Norman, Juley’s son, filed an application asking the probate court to treat the notecard as a will and recognize his mother as a will beneficiary. At an evidentiary hearing to determine whether the notecard should be admitted as Shaffer’s will, Norman testified about her close relationship with Shaffer and the circumstances surrounding the notecard. She stated that only she and her son witnessed Shaffer write and sign the notecard and that Shaffer directed her son to keep it in a safe place. The probate court held, however, that there was not clear and convincing evidence that the notecard was intended to be Shaffer’s will.
Ohio's Sixth District Court of Appeals disagreed, overruling the probate court and allowing Juley to be added to the list of beneficiaries of Dr. Shaffer’s Estate. Dr. Shaffer’s son sought the Ohio Supreme Court’s discretionary review of the matter after the appellate court’s reversal.
In reaching its unanimous decision to reverse the court of appeals, the Ohio Supreme Court analyzed the relationships between three Ohio laws, as follows:
ORC § 2107.03 – Formal Will Making Requirements
Ohio law states that a document admitted to probate as a formal will must meet be:
- In writing;
- Signed at the end by the testator (or in some circumstances someone else at the testator’s direction); and
- Attested to and subscribed to by two or more competent witnesses who saw the testator sign the will.
The Ohio Supreme Court confirmed both lower courts’ decisions that Dr. Shaffer’s notecard cannot be considered a formal will. No witness signatures were present on the notecard and thus the only way to admit Dr. Shaffer’s will is through an exception in Ohio’s laws regarding will making formalities.
ORC § 2107.24 – Exception to the Formal Will Making Requirements
R.C. § 2107.24 provides a narrow exception to the formalities required in R.C. § 2107.03 and recognizes a will even though no witness has signed the purported will. A probate court must hold a hearing to examine whether an advocate of the nonconforming document establishes by clear and convincing evidence that:
- The decedent prepared the document or caused the document to be prepared;
- The decedent signed the document and intended the document to constitute the decedent’s will; and
- The decedent signed the document in the conscious presence of two or more witnesses.
This statute is central to the issue between the Normans and the Shaffers. The Ohio Supreme Court found that under this law, the court’s role is to determine whether a document should be admitted to probate, not to determine the validity of the will’s contents. Therefore, the Ohio Supreme Court found that the probate court should have admitted the will into probate based on the above requirements. Even though the specific bequests contained within the will may be stricken once the will is admitted, the 2107.24 evidentiary hearing is not the proper mechanism to determine the validity of the contents of the will.
However, the Ohio Supreme Court also analyzed Ohio’s “Voiding Statute” which eliminates any specific bequests to an interested witness to the will.
ORC § 2107.15 the “Voiding Statute”
Ohio’s “voiding statute” states that if a devise or bequest is made to a person who is one of only two witnesses to a will, the devise or bequest is void automatically. The witness, however, will be able to testify to the execution of the will, as if the specific devise or bequest to that witness had not been made.
Essentially, if a witness stands to take a portion of a testator’s estate under a will and if the validity of that will hinges on that witness acting as one of the two essential witnesses necessary to create a valid will, then that person’s interest under the will is void as a matter of law. This law does not control whether someone is competent to be a witness in order to establish a valid will, it only governs whether a devise or bequest in an already admitted will is valid. Therefore, this law comes into effect only after a will is determined to be valid and is admitted to probate.
The Ohio Supreme Court found that the voiding statute applies to witnesses under both R.C. § 2107.03 and § 2107.24. The Court held that Juley Norman could not take ¼ of Dr. Shaffer’s estate because she is one of the two witnesses required to establish a valid will, and thus Dr. Shaffer’s devise to her is void.
Sadly, Dr. Shaffer is no longer with us to tell the Ohio Supreme Court what his wishes were. The only people who can testify to the validity of the notecard stand to gain something from that notecard being admitted to probate. Dr. Shaffer may have intended to provide Juley with 1/4 of his estate, but he did not take the legal steps necessary to ensure that Juley would be a beneficiary of the will. Historically, others in Juley’s position have not been honest when it comes to claiming an interest in someone’s estate, which is why the law prohibits witnesses from also being beneficiaries of the will.
The Shaffer case illustrates why it is important to consult with an attorney to ensure that your wishes will be carried out as you intend and your estate plan is in order. If you want to change your will, an attorney will ensure that the new provisions are in accordance with Ohio law. Doing so can keep your family and friends out of court.
Useful links: The Ohio Supreme Court's slip opinion In re Estate of Shaffer.
Written by Jeffrey Lewis, Attorney and Research Specialist, OSU Agricultural & Resource Law Program
Ohio is thirsty for some quality H2O, but the legislature has recently struggled with how to get it. After debating two separate water quality bills for over a year, the Ohio House of Representatives and the Ohio Senate finally passed H.B. 7 in December. The bi-partisan bill aims to improve water quality in Ohio’s lakes and rivers but doesn’t establish a permanent H2Ohio Trust Fund as the House had first proposed.
Even so, H.B. 7 will help fund and implement Governor Mike DeWine’s H2Ohio program. DeWine unveiled his water quality plan in 2019 to help reduce phosphorus runoff, prevent algal blooms, and prevent lead contamination in Ohio’s waterways. In July 2019, the Ohio General Assembly invested $172 million to fund the H2Ohio initiative. H.B. 7 continues those efforts by creating a statewide Watershed Planning and Management Program and directing the Ohio Department of Agriculture to implement a pilot program to assist farmers and others in phosphorus reduction efforts.
Here’s a summary of the specifics included in H.B. 7, delivered to Governor DeWine on December 30 and awaiting his signature.
Watershed planning and management program
The new Watershed Planning and Management Program established by the bill aims to improve and protect Ohio’s lakes and rivers. The Director of Agriculture will be responsible for appointing watershed planning and management coordinators throughout the seven watershed districts in Ohio. The coordinators will be responsible for identifying sources and areas of water with quality impairment, engaging in watershed planning, restoration, protection, and management activities, collaborating with other state agencies involved in water quality activities, and providing an annual report to the Director of Agriculture regarding their region’s watershed planning and management.
Certification program for farmers
A certification program for farmers in northwestern Ohio is already up and running at ODA. Even so, H.B. 7 confirms that the legislature intends to collaborate with organizations representing agriculture, conservation, and the environment and institutions of higher education engaged in water quality research to establish a certification program for farmers who utilize practices designed to minimize impacts to water quality. H.B. 7 requires the Director of Agriculture to undertake all necessary actions to ensure that assistance and funding are provided to farmers who participate in the certification program.
Watershed pilot program to reduce phosphorus in Ohio’s water
H.B. 7 authorizes but does not require the Department of Agriculture, in conjunction with the Lake Erie Commission, the Ohio Soil and Water Conservation Commission, and the Ohio State University Extension, to establish a pilot program that assists farmers, agricultural retailers, and soil and water conservation districts in reducing phosphorous and dissolved reactive phosphorous in a watershed. The program, if established, would be funded from the Ohio Department of Agriculture’s budget for water quality initiatives. Funding must be used for purchases of equipment, soil testing, implementation of variable rate technology, tributary monitoring, drainage management strategies, and implementation of nutrient best management practices.
Public record exemption for voluntary Nutrient Management Plans
Currently, a person who owns or operates agricultural land may develop and implement a voluntary nutrient management plan. A voluntary nutrient management plan provides for the proper application of fertilizer. An individual that implements a proper voluntary nutrient management plan receives an affirmative defense in any civil lawsuit involving the application of the fertilizer. In addition to the affirmative defense offered by using a voluntary nutrient management plan, H.B. 7 specifies that the information, data, and associated records used in the development and execution of a voluntary nutrient management plan is not a public record and is not subject to Ohio’s laws governing public records.
Regional water and sewer districts expanded authority
In addition to political subdivisions, regional water and sewer districts will have the authority to make loans, grants, and enter into cooperative agreements with any person, which includes a natural person, a firm, a partnership, an association, or a corporation, for water resource projects.
Also, regional water and sewer districts will be able to expand to whom they can offer discounts to for water and sewer services. Currently, districts can only offer discounts to persons who are 65 or older and who are of low or moderate income or qualify for the homestead exemption. H.B. 7 allows those discounts to be offered to any person who is considered of low or moderate income or that qualifies for the homestead exemption.
CAUV eligibility of land used for biofuel production
Unrelated to water quality, H.B. 7 also modifies the requirements that land used in biofuel production must meet in order to be valued for property taxes at its current agricultural use value (CAUV). Currently, land used for biofuel production qualifies for the CAUV program if:
- The production facility is located on, or on property adjoining, farmland under common ownership; and
- At least 50% of the feedstock used in the production comes from land under common ownership or leasehold.
H.B. 7 makes three changes:
- Instead of the 50% feedstock requirement, House Bill 7 requires that, of the feedstock used in biofuel production, at least 50% must be “agricultural feedstock” (manure or food waste) and at least 20% of the “agricultural feedstock” must come from land under common ownership or leasehold.
- None of the feedstock used in biofuel production can include human waste.
- The biofuel production facility may be part of, or adjacent to, farmland that is under common leasehold or common ownership.
Useful links: Ohio General Assembly web page for H.B. 7.
The 2020 elections will likely be historically significant for U.S. agriculture, but what can we expect? Our partner, the National Agricultural Law Center, will try to answer that question with a webinar on January 13 at noon. The webinar will feature Hunt Shipman, principal and director at Cornerstone Government Affairs in Washington, DC. Mr. Shipman will share his predictions on what's in store for agriculture, including:
- Key appointments at USDA
- Congressional committees positions
- Implications for the next Farm Bill
- International trade impacts
- Changes in the federal and state regulatory environments
With nearly three decades of experience in Washington, Hunt Shipman has held a variety of positions in government and the private sector. Prior to joining Cornerstone, Hunt was a senior executive for the largest trade association serving the food and beverage industry, where he led the association’s government affairs and communications programs. From 2001 to 2003, Hunt was Deputy Under Secretary for Farm and Foreign Agricultural Services and served as the acting Deputy Under Secretary for Marketing and Regulatory Programs at the United States Department of Agriculture. In this capacity, he led three agencies with over 18,000 employees stationed around the world, and administered over $31 billion in programs. Hunt was the Department of Agriculture’s principal negotiator with the Congress for the 2002 Farm Bill. Hunt also served as the staff director of the Senate Agriculture Committee, Professional Staff Member at the Senate Appropriations Committee, and on the personal staff of Senator Thad Cochran.
The webinar is free, but limited to the first 500 registrants. To register, visit here.