Powers of attorney and trust instruments have each been the subject of many an estate plan. They each have also been the subject of multiple estate litigations. In combination, the two have served as fodder for controversies surrounding the agent’s authority over the trust and its terms. Pursuant to the provisions of Uniform Trust Code §602(c), a settlor’s agent acting under a power of attorney can revoke  or amend a revocable trust, when authorized by the terms of the trust or the terms of a power of attorney.[1]  New York has no comparable statute under the EPTL or the SCPA, or, for that matter, under the General Obligations Law. Stemming from this silence, came two decisions that addressed the issue, albeit with different results; the first, Matter of Goetz, 8 Misc 3d 200 (Sur Ct, Westchester County 2005), in the context of a revocable trust, and the second, Matter of Perosi v. LiGregi, 98 AD3d 230 (2d Dept 2012) in the context of an irrevocable trust. Both decisions provide valuable instruction for drafters and litigators.

In Goetz, the petitioner, a child of the decedent, contended that the decedent’s spouse lacked authority, as his attorney-in-fact,  to amend a revocable trust created by the decedent, in order to confer upon herself a limited power of appointment over the trust remainder. The subject power of attorney was executed in 1995 and provided the agent with the full authority included in the form at the time.

While the terms of the trust instrument, as originally executed, divided the trust principal equally among the grantor’s four children, the amendment in issue provided the grantor’s spouse with a limited power of appointment over the principal exercisable in favor of any one or more of the children as she determined. Several days after the amendment was drafted, it was signed by the decedent’s spouse, as his agent. Shortly thereafter, the decedent, who was ill at the time, passed away. Two years following the decedent’s death, his spouse passed away leaving a last will and testament expressly disinheriting the petitioner, and exercising the power of appointment in favor of her other three children.

The petitioner maintained that the trust amendment was invalid and exceeded the authority granted the decedent’s spouse under the power of appointment. The respondent, the executor of both the decedent’s and his spouse’s estates, claimed that the trust amendment was consistent with the decedent’s expressed wishes and testamentary plan, and was within the scope of the powers conferred upon the decedent’s spouse as his attorney-in-fact.

The court rejected the respondent’s position, and declared the trust amendment invalid, opining that a grantor’s power of revocation is generally a personal right that terminates upon death, unless otherwise provided in the trust instrument. The subject trust contained no such provision. Moreover, recognizing a revocable trust as the lifetime equivalent of a will, the court was troubled by a ruling that would sustain an agent’s authority to essentially alter a principal’s testamentary plan.

Finally, and most importantly, the court held that neither the trust instrument nor the power of attorney at issue explicitly granted the extent of authority sought to be invoked by the agent in amending the trust (see EPTL §7-1.17(b)), concluding “[i]nstruments must be construed as written by their terms, and courts may not add to or alter their provisions in the guise of interpreting them, nor interpolate into them broad grants of authority not included by the parties.”

In Matter of Perosi, the Second Department took a different view from the court in Goetz on the issue of the agent’s authority, and distinguished the opinion in reaching its result. It is questionable whether the distinctions drawn upon the Court are sound, given the rationale of Goetz, and the rules of construction invoked in Goetz in interpreting the subject trust and power of attorney.

As compared to the trust in Goetz, the trust instrument in Perosi was irrevocable, and was established for the benefit of the creator’s three children, one of whom was his attorney-in-fact. The trustee of the trust was the creator’s brother. The power of attorney executed by the creator granted his agent the authority to act with respect to “all matters”, as well as with respect to “estate transactions.” Additionally, the major gifts rider to the power authorized the agent to establish and fund revocable or irrevocable trusts, transfer assets to a trust, make gifts and act as grantor and trustee.

The attorney-in-fact, with the consent of the beneficiaries, executed an amendment to the trust pursuant to EPTL §7-1.9, which removed the named trustee and his successor, and designated two others, including the son of the attorney-in-fact, in their place. Two weeks thereafter, the creator of the trust died.

A petition was then filed by the new trustee and the attorney-in-fact for an accounting by the predecessor trustee, who moved to set aside the trust amendment on the grounds that the trust was irrevocable. The petitioners opposed, relying upon the provisions of EPTL §7-1.9, which permitted the amendment during the creator’s lifetime, with the beneficiaries’ consent.

The Supreme Court granted the trustee’s motion and denied the petition, finding that the power of attorney did not authorize the amendment of estate planning devices created prior to its execution. Further, the court held that the statutory right to revoke or amend an irrevocable trust was a personal right, which was not expanded by the terms of either the trust instrument or the power of attorney. The Second Department reversed.

The Court found that although the trust was irrevocable, the creator nevertheless possessed the authority to amend or revoke the instrument pursuant to EPTL §7-1.9. In view of the beneficiaries’ consent to the amendment, the Court was confronted with the issue of whether the power of attorney empowered the attorney-in-fact to effectuate the amendment on the creator’s behalf. Notably, despite the authority granted to the agent with respect to “estate transactions” and “all other matters”, the Court concluded that neither the power of attorney nor the General Obligations Law specifically authorized the attorney-in-fact to amend the trust. (cf. Goetz).

Nevertheless, as compared to the analysis in Goetz, this did not end the inquiry for the Court, which went on to observe that an attorney-in-fact is an alter ego of the principal, authorized to act with respect to any and all matters, with the exception of those which by their nature, public policy, or otherwise, require personal performance. The Court noted that these matters would include the execution of a principal’s Will, the execution of a principal’s affidavit upon personal knowledge, or the entrance into a principal’s marriage or divorce.

Finding that the amendment of the trust by the attorney-in-fact did not fall into any one of these categories, the Court concluded that since the trust did not prohibit the creator from amending the trust by way of his attorney-in-fact, “the attorney-in-fact, as the alter ego of the creator”, properly did so.

Notably, in reaching this result, the Court distinguished Goetz on two grounds; the first, to the extent that it relied on the principal that the power of revocation was a personal, not delegable right; and the second, that the Goetz trust specifically reserved to the creator the right to amend or revoke the trust. Nevertheless, despite these purported distinctions, it is difficult to reconcile the results in in Perosi and Goetz.

Indeed, both courts were concerned with the fact that neither the language of the trusts or the powers of attorney at issue authorized the agent to amend or revoke the trust instrument. Moreover, the fact, mentioned by the Perosi court, that the creator in Goetz reserved in the instrument a power to revoke or amend its terms, should not be considered a distinguishing factor that would justify a contrary result, since the trust in Perosi was irrevocable, and thus, would not have given the creator that right. Nevertheless, like the instrument in Goetz, the statute, EPTL §7-1.9, relied upon in Perosi, which authorized the trust amendment, also did not confer that right upon an attorney-in-fact.  However, rather than end the inquiry, as the court did in Goetz, that omission served as a basis for the Perosi court to find that the attorney-in-fact could amend the trust, a result antithetical to the principle enunciated in Goetz, which cautioned against “interpolating instruments into broad grants of authority not included by the parties.”

With the foregoing in mind, it would seem that the more critical distinction between the opinions in Goetz and Perosi is the fact that the former involved a revocable trust- – a testamentary substitute — and, as such, the equivalent of a will, which both the courts in Perosi and Goetz, recognized could not be amended or revoked by an attorney-in-fact.

The distinction aside, the lesson to be learned from both Goetz and Perosi is to insure that the language of a trust and/or power of attorney be specific as to the extent of the agent’s authority to amend or revoke the instrument.

[1] Although not yet adopted in New York, a New York Uniform Trust Code has been the subject of significant analysis by the New York State Bar Association and the New York City Bar Association.

Very often, when the proponent of a will (and sometimes even the attorney-draftsperson or witness) is questioned about the decedent’s mental state and the decedent’s instructions, the reflexive response is that the decedent was “as sharp as a tack” and was “as clear as a bell.”  But making a will is not “splitting the atom.”  In fact, testamentary capacity has been described recently by the New York County Surrogate’s Court as “the lowest acceptable level of cognitive ability required by law.”  Overselling a decedent’s capacity and clarity of communication using tired metaphors may result in the trier of fact becoming suspicious of the proponent, perhaps perceiving the proponent as dishonest where other evidence reveals that the decedent likely had diminished capacity.

The Basics

In a will contest, the proponent has the burden of proving that the decedent had the capacity to make a will. This burden is often easily established, as a testator is generally presumed to be of sound mind and to have sufficient mental capacity to execute a valid will.  The proponent must show that the testator understood the nature and extent of her property, knew the natural objects of her bounty, and the contents of her will.  Age, illness, or hospitalization are not determinative – one can suffer from physical weakness and infirmity, a disease of the mind, and failing memory and still possess testamentary capacity at the time of the execution of the will.

A Recent Illustration

A recent decision from Kings County Surrogate’s Court in the Estate of Eleanor Martinico, 2014-3403, NYLJ 1202770885618, at *1 (Sur Ct, Kings County 2016), provides some illustration.  There, the decedent, age 83, executed her will while hospitalized – – she was admitted to the hospital nine days prior to the execution.  A form in her hospital records completed by staff, entitled “Adult Patient Without Capacity With Surrogate for DNR [Do No Resuscitate] Order,” stated, “I have determined that the patient lacks capacity to make this decision,” by reason of “dementia.”  Other medical records stated that the decedent became confused and disoriented during dialysis on the day that she was admitted, and suggested that the decedent had periods of confusion.

However, the attesting witnesses to the decedent’s will were both attorneys who knew the decedent for several years. One knew the decedent for approximately 15 years, had represented her in several matters, and found her demeanor during the propounded instrument’s execution consistent with his prior interactions with her as a person of sound mind acting on her own volition. The witnesses both averred that the decedent, was of “sound and disposing mind, memory and understanding, competent to make a will, free of restraint, and not suffering from any defects which would affect her capacity to make a will.”  Further, decedent’s medical records on the date of the execution of the will contained notes indicating that she was alert and oriented to person, place, and time.

This case did not make it to trial. The court, on a motion for summary judgment, held that the objectants failed to proffer evidence sufficient to raise a triable issue of fact that the testator lacked testamentary capacity at the time of the execution of the propounded instrument.

Another Illustration

In another widely cited case from the Kings County Surrogate’s Court, Estate of Gallagher, NYLJ, Oct. 19, 2007, at 19, 2007 NY Misc LEXIS 7639 (Sur. Ct. Kings County), the testator, in her eighties, made her will two years after suffering from a traumatic debilitating stroke, and only a few months before the Supreme Court adjudicated her an incapacitated person under New York’s Mental Hygiene Law Article 81.  Following the Article 81 hearing, the Supreme Court found that the decedent was suffering from organic brain syndrome and dementia, could not express herself verbally, and was, at times, greatly disoriented. The Supreme Court held that she required one-on-one attention, in a medically assisted supervised home.

The will was offered for probate upon the decedent’s death, and on a motion and cross-motion for summary judgment the Surrogate’s Court held the issue of testamentary capacity should go to a jury. On the motions, the proponent submitted that the testimony of the attorney-draftsperson, a subscribing witness, and affidavits of witnesses who stated that the decedent was able to converse normally, was able to understand her surroundings and act appropriately, and frequently mentioned her trips and interactions with the proponent.  Additionally, the Court Evaluator in the Article 81 proceeding affirmed that the decedent was able to communicate and identified her signature on the will.  The objectants submitted evidence from the Article 81 guardianship proceeding and the testimony of a treating physician that the decedent lacked testamentary capacity.

Sharp as a Tack?

Not everyone is as “sharp as a tack,” or has the gift of making every communication “as clear as a bell” – – even in the prime of their life.  Reflexively insisting that an octogenarian, who suffered from periods of confusion, with a diagnosed illness of the mind, who could not communicate verbally, was “as sharp as a tack,” and “as clear as a bell,” is unnecessary, and could be untruthful and backfire.  Ultimately, if the issue of testamentary capacity is presented to a jury, the learned and ponderous musings of lawyers expressed in law reviews, CLE materials, journals, treatises, and yes, blogs, will yield to the opinions of six citizens, some of whom might be suspicious upon hearing that an elderly person suffering from dementia who executed her will in the hospital was, at the time, “as sharp as a tack.”

Having examined countless witnesses in probate and other contested Surrogate’s Court proceedings, many of us have grown accustomed to learning that critical documents were destroyed by a “flood.”  That flood, almost invariably, occurred “in the basement.”  The flood narrative is met with the usual inquiry into the cause of the flood, the property destroyed in the flood, the insurance claim made in the wake of the flood, the whereabouts of the paperwork associated with the insurance claim resulting from the flood, etc.  Extracting electronic data as part of the e-discovery process has minimized the loss of potentially probative documents as a result of the basement flood.   An article in the latest New York State Bar Journal by David Paul Horowitz discusses how electronic disclosure issues featured prominently in a recent Erie County probate proceeding.

E-discovery issues aside, a recent case decided by the Richmond County Surrogate revisits the law pertaining to probating lost or damaged wills.  In Matter of Larsen, N.Y.L.J., Aug. 5, 2016, p.32 (Sur. Ct., Richmond Co.), the decedent’s will, apparently damaged in a flooded basement to the extent that the signatures thereon were washed clean, was admitted to probate.  While there is nothing extraordinary about the case, it illustrates the approach and analysis employed by the courts when addressing whether a lost or destroyed will ought to be admitted to probate.

The decedent took receipt of his original will from his attorney, and placed it in his  personal safe in the basement of his home along with other important papers.  The floodwaters then enveloped his safe.  According to the proponent, both he and the decedent believed that the safe was waterproof and thus, neither he, nor the decedent, checked the contents of the safe after the flood.  When the decedent died, the proponent opened the safe to retrieve the will and discovered the water damaged will affixed with rusty staples.  The signature pages contained indentations of pen markings where the signatures apparently once appeared but had been washed clean.

The proponent offered a conformed copy of the decedent’s will, which was in the possession of the attorney draftsperson, together with the original water damaged document for probate.  The attesting witnesses provided affidavits as to due execution with the probate petition.

The Court examined SCPA 1407, which provides that a lost or destroyed will may be admitted to probate only if (1) it is established that the will has not been revoked, and (2) execution of the will is proved in the manner required for the probate of an existing will, and (3) all of the provisions of the will are clearly and distinctly proved by each of at least two credible witnesses or by a copy or draft of the will proved to be true and complete.

Under the circumstances presented, the court found that the decedent never intended to revoke his will.  According to the court, the decedent’s act of placing the will in his waterproof safe and never checking on the condition of the contents of the safe even after the flood, pointed to the decedent’s continued desire in maintaining his testamentary plan as set forth in the will.  The court was satisfied by the conformed copy and the affidavits of the attesting witness that the will was duly executed.  The court was further satisfied that the fact that decedent’s will was found in his safe with all of his other important documents clearly established that he did not intend to revoke his will, but rather that the original will was damaged with the decedent’s other personal possessions.  The will was admitted to probate.

Keep in mind here that the proponent in Larsen was the decedent’s sole distributee, and the proceeding appears to have been uncontested.  The decision does not mention the decedent’s testamentary plan as set forth in the damaged will, and does not mention the potential existence of prior testamentary instruments benefiting persons potentially adversely affected by the propounded instrument.  The Dead Man’s Statute and other potential impediments to the propounded will being admitted to probate were not factors in this case.

In two recent decisions, Surrogate Lopez Torres of Kings County denied petitions for guardianship under SCPA Article 17-A, demonstrating the strict circumstances under which guardians are appointed under this particular statute.  SCPA §1750-a applies to persons who are intellectually disabled (as that term has generally been substituted for the archaic term “mental retardation” which appears in the statute) and are permanently or indefinitely incapable of managing his or her own affairs.  The statute requires that the condition be certified by a licensed physician and a licensed psychologist (or two licensed physicians, one of whom is familiar with  or has knowledge of the care and treatment of the disabled person); and that the court is satisfied that appointing a guardian is in the best interests of the disabled person.  Unlike under Article 81 of the Mental Hygiene Law, the court has no discretion or authority to limit or tailor the powers of a guardian under Article 17-A.  Thus, in both proceedings, the court was quite cognizant of the fact that an Article 17-A guardianship is the “most restrictive type of guardianship available” in this State because it “completely removes that individual’s legal right to make decisions over her own affairs and vests the guardian ‘virtually complete power over such individual’” (Proceeding for the Appointment of a Guardian for Michelle M., 2016 NY Slip Op 51114(U) at *3 [Sur Ct., Kings County]).  The potential loss of liberty was the court’s primary concern.

In Proceeding for the Appointment of a Guardian for Michelle M., decided on July 22, 2016, the parents of a 34 year-old diagnosed with Down’s Syndrome petitioned to become their daughter’s guardian, claiming that she was unable to make medical and other decisions regarding her welfare.  The petition contained the requisite certifications, which opined, according to the court, in conclusory fashion, that Michelle was not capable of managing herself or appreciating the nature and consequences of health care decisions.  However, the record revealed that Michelle led an independent life and made her own decisions.  She lived with roommates in an apartment, shopped for and cooked her own food, held a part-time job for six years, managed her own finances, traveled independently, and made and kept her own doctors’ appointments on a regular basis.  In the face of this evidence, the court was particularly concerned with whether appointing a guardian based on the medical certifications “without careful and meaningful inquiry into the individual’s functional capacity, relies on the incorrect assumption that the mere status of intellectual disability provides sufficient basis to wholly remove an individual’s legal right to make decisions for himself” (id. at *4).  The court had no doubt that the petitioners loved and wanted to protect their daughter, but noted that the standard for appointing a guardian was not whether they could make better decisions for Michelle, but rather, whether Michelle had the capacity to make decisions for herself, which was not disputed.

In Estate of Antonio C., NYLJ, July 26, 2016, p. 25, col. 4 (Sur Ct, Kings County), also decided on July 22, 2016, the court’s decision to deny the petition for guardianship over the 66 year-old was seemingly easier.  First, the statutory requirements were not met, as there was no evidence that the respondent’s purported disability was present before he was 22 years old.  Additionally, it appeared to the court that the petitioner had a personal motive for seeking guardianship.  The petitioner was a former boyfriend of the respondent’s sister, and had lived with the respondent for nine months in a New York City Housing Authority apartment.  According to the petitioner, he could not be added to the respondent’s lease unless he became his legal guardian.  Moreover, the evidence adduced at the hearing showed that the respondent could manage his own affairs and possessed essential living skills; he had lived on his own for a period of time before the petitioner moved into his apartment.  Given these factors, the court concluded that a tailored guardianship was more appropriate than the global guardianship under Article 17-A.

On August 19, 2016, Governor Cuomo signed into law an amendment to CPLR §4503(b) which creates another exception to the attorney-client privilege in the case of revocable trusts. The first such exception, initially enacted pursuant to the provisions of CPA 354 (the predecessor to CPLR §4503[b]), provides that the privilege will not apply “in any action involving the probate, validity or construction of a will” (see CPLR §4503[b]).  The 2016 exception expands CPLR §4503(b) to now include actions, after the grantor’s death, involving revocable trusts.

The purpose of the attorney-client privilege is to promote the use of legal representation by assuring clients that they may freely confide in their counsel without concern that such confidences may be divulged to outsiders (see Matter of Colby, 187 Misc 2d 695 [Sur Ct, New York County 2001], citing Priest v Hennessey, 51 NY2d 62, 67-68 [1980]). Nevertheless, to the extent it shields evidence from disclosure, it obstructs the fact-finding process (see Matter of Colby, 187 Misc 2d 695, 697).

With this balanced approach in mind, the recent bill amending CPLR §4503(b) finds its justification in the pre-existing exception to the attorney-client privilege in the case of probate contests, and the fact that revocable trusts serve as the equivalent of wills.  However, it should be noted that the exception only applies after the death of the grantor, in recognition of the fact that a party, other than the grantor, has no standing to challenge a revocable trust during the grantor’s lifetime (see N.Y.S. Assembly Memorandum in Support of Legislation, citing Matter of Davidson, 177 Misc 2d 928, 930 [Sur Ct, New York County 1998]).

In construing an in terrorem provision, or any part of a will, the paramount consideration is identifying and carrying out the testator’s intent.  Although paramount, the testator’s intention will not be given effect if doing so would violate public policy.  For example, an in terrorem provision that purports to prevent a beneficiary from questioning a fiduciary’s conduct is void as contrary to public policy (see Matter of Egerer, 30 Misc 3d 1229[A], at *1-4 [Sur Ct, Suffolk County 2006]).  The recent decision in Matter of Sochurek, NYLJ, July 20, 2016, p. 31 (Sur Ct, Dutchess County June 30, 2016), illustrates the difficulty in reconciling the testator’s intention in respect of an in terrorem condition with the rights of beneficiaries to obtain an accounting or otherwise challenge the actions of their fiduciary.

Sochurek involved a dispute between the decedent’s spouse, who was the executor of his estate, and his two daughters from a prior marriage.  Decedent owned a 50% membership interest in an LLC that owned real property and a business.  The will bequeathed “an estate for life” in the LLC to decedent’s wife, including the right to receive income therefrom.  Upon his wife’s death, “her life interest shall terminate” and the LLC was bequeathed to his two daughters.  The will also contained provisions, likely boilerplate, regarding the executor’s powers to sell estate assets.

After the will had been admitted to probate, the executor/spouse sold the LLC’s real property and business.  The executor and decedent’s daughters entered into a “standstill agreement” providing that any funds the executor received from the sale would be held in a segregated “Life Estate Account” from which no withdrawals would be made for a period while the daughters had an opportunity to appraise the LLC assets and negotiate a reasonable treatment of the proceeds.

Before the standstill agreement expired, the daughters commenced an action against the executor in Supreme Court.  The daughters asserted causes of action for, inter alia, breach of fiduciary duty and an accounting.  An order to show cause enjoined the executor from withdrawing any funds in the “Life Estate Account.”  The ultimate relief sought in the order to show cause was a temporary restraining order and an accounting.  These claims were grounded in the executor’s sale of estate property (assets of the LLC) and actions thereafter as to the proceeds.

The in terrorem provision in the will was directed toward any person who “shall, directly or indirectly, institute or become a party to any proceedings to set aside, interfere with, or make null any provision of this Will, or to offer any objections to the probate thereof . . .” (emphasis added).

The executor commenced a construction proceeding in the Surrogate’s Court contending the daughters’ Supreme Court action interfered with her authority as executor and prevented her from accessing/managing estate assets, thereby triggering the in terrorem clause.  In response, the daughters contended they never contested their father’s will and, to the contrary, conceded its validity.  The daughters asserted that their lawsuit is focused on the executor’s “egregious abuse of her fiduciary duties” and breach of the standstill agreement.

In ascertaining the testator’s intent, the Court reviewed the fiduciary powers article in the Will which gave the executor broad powers to sell, exchange or otherwise dispose of all estate property on such terms as the executor deemed advisable.  Thus, the Court concluded, the executor undoubtedly had the power to dispose of the LLC.  The Surrogate held:

The clear intent of the testator upon a complete reading of the will was to give the executrix of his estate the necessary and broad powers to manage the property as she saw fit.  The Court finds the [daughters] have violated [the in terrorem provision] by commencing an action in the Supreme Court, Westchester County challenging the executrix’s action with regard to the disposition of estate assets, thereby “interfer[ing] with any provision of this Will” [quoting the in terrorem provision]. By interfering with the executrix’s management and ultimate sale of [the LLC], the [daughters] have violated the in terrorem clause of the will and have forfeited their legacies (Matter of Sochurek, NYLJ, July 20, 2016, p. 31 at *8).

The daughters had a beneficial interest in the assets of the LLC which the executor held in a fiduciary capacity.  The relief sought by the daughters in Supreme Court included an accounting and damages for mismanagement of estate assets, including alleged self-dealing.  In Egerer, supra, the Surrogate’s Court held, “any attempt by a testator to preclude a beneficiary from questioning the conduct of the fiduciaries, from demanding an accounting from said fiduciaries or from filing objections thereto will result in a finding that the pertinent language is void as contrary to public policy and the applicable statutes of the State of New York” (Matter of Egerer, 30 Misc 3d 1229[A], *3 [Sur Ct, Suffolk County 2006]).

Thus, following Egerer, had the daughters petitioned the Surrogate’s Court successfully for a compulsory accounting and objected to the executor’s accounting alleging the sale of the LLC assets was self-interested, that the executor misappropriated estate assets and breached an agreement as to the management of estate assets, it does not appear the in terrorem condition would have been triggered.

What about obtaining a provisional remedy, such as a TRO, in the context of the accounting?  It would seem inconsistent to allow beneficiaries the right to pursue objections to an accounting without forfeiting an interest in the estate by triggering an in terrorem condition, but deprive them of the ability to seek a provisional remedy securing their interests in the subject of the proceeding.  While the daughters in Sochurek obtained a TRO that interfered with the executor’s management of estate assets, it was in the context of a plenary action seeking an accounting and otherwise challenging the executor’s conduct (cf. Egerer, supra).

As the Sochurek decision illustrates, the case law on the scope and validity of in terrorem conditions continues to develop, and the outcome of each proceeding depends on the particular provisions of the will and the unique, fact-specific circumstances related to the conduct of the party alleged to have violated the condition.

Estate litigators arguably see more probate contests than any other type of conflict. While the details are always unique, they almost always include allegations that someone unduly influenced the decedent to change his or her will to either disinherit, or favor, a particular person.  These cases also often include an allegation — which is usually contested — that the purported influencer was in a “confidential relationship” with the decedent.  The frequency of such claims beg the questions (1) what exactly is a “confidential relationship,” and (2) what is the practical benefit to an objectant in establishing that one existed?

A confidential relationship is characterized as unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other. Some relationships are considered confidential as a matter of law, i.e., attorney-client, guardian-ward, and physician-patient, to name a few, while others will be deemed confidential as a matter of fact, based upon the details of the relationship, i.e., when one person is dependent on, and subject to the control of, another (see Matter of Satterlee, 281 AD 251 [1st Dept 1953]).

In a probate contest, it always is the burden of the objectant to prove that someone perpetrated undue influence upon the testator by establishing motive, opportunity, and the actual exercise of that undue influence (Matter of Walther, 6 NY2d 49, 55 [1959]; see Matter of Ryan, 34 AD3d 212, 213-14 [1st Dept 2006]).  However, where it is established that the decedent was in a confidential relationship with the alleged influencer, and there were other “suspicious circumstances” present (such as the alleged influencer having retained the attorney-draftsman for the decedent, or having accompanied the decedent to the will execution, for example) an inference of undue influence arises.  That inference requires the person in the confidential relationship to explain the circumstances surrounding the relationship between him and the decedent, and to establish by clear and convincing evidence that the subject bequest was fair and voluntary. (see Matter of Neenan, 35 AD3d 475, 476 [2d Dept 2006]; Matter of Bartel, 214 AD2d 476 [1st Dept 1995]).

As with most aspects of the law, there is an exception. Where the person in the confidential relationship also shared a close family relationship with the decedent, no inference of undue inference arises, and therefore, no explanation of a bequest in favor of that person will be required (see Matter of Walther, 6 NY2d 49 [1959]; Matter of Zirinsky, 10 Misc 3d 1052[A] [Sur Ct, Nassau County 2005]). This is generally because “a sense of family duty is inexplicably intertwined in this relationship” (Matter of Zirinsky, 10 Misc 3d at *8-9).  The exception exists despite the presence of “suspicious circumstances.”  Unsurprisingly, this often leads to questions about what degree of family relationship is close enough to negate the inference.

It must be noted that the inference of undue influence that may arise as a result of a confidential relationship should not be confused with shifting the burden of proof from the objectant (see Matter of Neenan, 35 AD3d 475 [2d Dept 2006]).  The burden of proving undue influence in the context of a will contest never shifts (see Matter of Bach, 133 AD2d 455, 456 [2d Dept 1987] quoting Matter of Collins, 124 AD2d 48, 54 [4th Dept 1987]).  The inference just makes it a little bit easier for an objectant to satisfy that burden, and ultimately succeed in his or her case.

In 2010, the Appellate Division, Second Department, made it clear that principles of equity grounded in rules of forfeiture can adversely impact a surviving spouse’s entitlement to an elective share. In Campbell v. Thomas, 73 AD3d 103 (2d Dept 2010),  the Appellate Division rendered a decision of first impression when it denied the right of election asserted by the decedent’s surviving spouse based on the equitable principle that a party may not profit from his or her own wrongdoing.  In Matter of Berk, 71 AD3d 883 (2d Dept 2010), the Appellate Division adhered to the foregoing principles when it reversed a decree of the Surrogate’s Court, Kings County, which granted the petitioner, the surviving spouse of the decedent, summary judgment determining the validity of her right of election against the decedent’s estate. Following the 2010 opinion in Matter of Berk, the case continued to wind its way through the Surrogate’s Court as it headed towards trial.

Recently, the Appellate Division, Second Department, had the opportunity to readdress the parties in Matter of Berk, and provide practitioners with further instruction on the issues impacting the claimed elective share. Specifically, the Court modified an order of the Surrogate’s Court, Kings County (Johnson, S.) by (1) adding as an issue of fact to be tried the question of whether the petitioner, the decedent’s surviving spouse, exercised undue influence upon the decedent to induce him to marry her for the purpose of obtaining pecuniary benefits from his estate, and (2) replacing so much of the order, as imposed the burden of proof on appellants, the executors of the estate, by clear and convincing evidence, with a provision that placed the burden of proof on appellants by a preponderance of the credible evidence (see Matter of Berk, 133 AD3d 850 [2d Dept 2015]).

As readers may recall, the underlying proceeding involved a petition by the surviving spouse of the decedent for a determination of the validity and effect of her exercise of her right of election against his estate pursuant to EPTL 5-1.1-A.  In their answer, the appellants, the executors of the estate, asserted as an affirmative defense that the decedent was incompetent to enter into a marriage, that the petitioner knew that he was incapable of entering into a marriage, and that the petitioner had exercised undue influence over the decedent to convince him to marry her.

As stated, on a prior appeal, the Appellate Division, Second Department, reversed an order granting summary judgment to the petitioner, finding that there was an issue of fact as to whether the petitioner had forfeited her right of election by her alleged wrongdoing; that is, by marrying the decedent knowing that he was mentally incapable of consenting to a marriage for the purpose of obtaining pecuniary benefits from his estate. The Court further ruled that the appellants’ counterclaims alleging undue influence were improperly dismissed.

On remitter to the Surrogate’s Court, Kings County, the parties submitted proposed statements of the issues to be determined at trial, as well as proposals concerning the burden and quantum of proof on the issues. In the order appealed from, the Surrogate’s Court limited the issues for trial to whether the decedent was mentally incapacitated and incapable of consenting to his marriage to the petitioner, and if so, whether the petitioner took unfair advantage of him by marrying him for the purpose of availing herself, as his surviving spouse, of his estate at death. The Surrogate further ruled that the appellants/executors had the burden of proof on the issues by clear and convincing evidence. The Surrogate did not include the issue of undue influence as a matter to be determined.  The executors appealed.

The Appellate Division opined that the issue of whether the petitioner had forfeited her elective share under the circumstances raised by the proceeding was based on the equitable doctrine that the petitioner should not profit from her own wrongdoing. Where a claim of wrongful conduct is made, the parties asserting same, i.e., the appellants, have the burden of proving the wrongdoing by a preponderance of the evidence.  The Court further held that evidence of a confidential relationship between the petitioner and the decedent, by virtue of their marriage, was not, in itself, proof of the petitioner’s wrongdoing, and, as such, did not shift the burden of proof to the petitioner to prove otherwise.

Additionally, the Court held that an alternative ground for forfeiture of the right of election was whether the petitioner exercised undue influence upon the decedent to induce him to marry her. Again, the Court determined that the appellants had the burden of proof on this issue by a preponderance of the credible evidence.

The Berk matter is now primed for trial. Stay tuned for what is sure to be an instructive outcome.

A recent decision of the Kings County Surrogate’s Court[1] demonstrates the importance of thoroughly analyzing all aspects of a statute of limitations defense prior to making a dismissal motion.  In Matter of Coiro, 5/6/2016 NYLJ p.23, col. 2, the court denied such a motion, determining that an SCPA § 2104 turnover proceeding was timely.  Notably, the parties disputed both the applicable limitations period and the date of the claim’s accrual.  Side-stepping both those issues, the court determined that a statutory toll rendered the claim timely in any event.

Determining whether a claim has been timely asserted requires analysis of at least three factors – the applicable limitations period, the date of the claim’s accrual, and whether any toll applies.  (I say “at least” three factors because, in an appropriate case, a court may determine other matter – such as whether a defendant/respondent is equitably estopped from asserting the statute of limitations, where specific actions by the defendant/respondent “somehow kept [the plaintiff] from timely bringing suit” [see Zumpano v Quinn, 6 NY3d 666, 674 (2006)].) Coiro involved all three factors.

Janet Coiro died on January 16, 2012. Some 19 months later, one of her daughters, the executor nominated in her last will and testament, offered the will for probate, receiving letters testamentary on December 18, 2013.  On June 12, 2015, more than three years after the decedent’s death, the executor brought a turnover proceeding pursuant to SCPA § 2104,[2] alleging that on the day after the decedent died, January 17, 2012, the respondent (the decedent’s son) submitted a power of attorney to the bank at which the decedent maintained several accounts, adding his name to those accounts.  Allegedly, respondent also deposited a matured Treasury bill (of which the executor claimed to be the beneficiary) into one of the accounts, and later withdrew or transferred all the funds from the accounts.  Respondent moved to dismiss the proceeding as time-barred.

The parties disputed the applicable limitations period. Respondent argued that the three-year period applicable to conversion claims governed, while the executor argued that respondent’s action in improperly adding his name to the decedent’s bank accounts after her death warranted application of the six-year limitations period applicable to fraud-based claims.

Petitioner also argued, alternatively, that even if the three-year “conversion” limitations period applied, the claim accrued not on the date on which the respondent added his name to the bank accounts, but on the date he transferred the balances thereof, to wit, May 17, 2013, and thus the proceeding was timely in any event.

While noting that discovery and turnover proceedings are usually subject to the three-year statute of limitations applicable to actions in replevin and conversion, i.e., CPLR 214(3), the court further noted that it was not required to decide whether that period or a six-year period applied.  It also noted that it was not required to decide the date of accrual of the claim.  The court determined that the proceeding was timely in any event, by reason of the toll provided in CPLR § 210(c).

Section 210(c) provides that “[i]n an action by an executor or administrator to recover personal property wrongfully taken after the death [of a decedent] and before the issuance of letters,  . . . the time within which the action must be commenced shall be computed from the time the letters are issued or from three years after the death, whichever event first occurs.”

The court determined that the limitations period applicable to the claim asserted in the proceeding was tolled until December 18, 2013 (the earlier of the date of issuance of letters or three years from the date of death). The executor commenced the proceeding on June 12, 2015, less than three years after the end of the toll.  Thus, even applying the shorter, three-year limitations period, the proceeding was timely.

When performing a statute of limitations analysis, care must be taken to determine whether a toll is applicable. Aside from the toll provided in CPLR 210(c), a practitioner should consider whether any other toll applies.  Such tolls might include the “insanity” toll provided in CPLR § 208, or the “fiduciary toll” applied in cases such as 212 Inv. Corp. v Kaplan, 44 AD3d 332 (1st Dept 2007).  Continuing undue influence or duress can also operate to toll a limitations period (see Pacchiana v Pacchiana, 94 AD2d 721 [2d Dept 1983]).

[1] The version of this decision that appears on lexis.com erroneously refers to this decision as emanating from the New York County Surrogate’s Court.

[2] The Court’s decision states that the proceeding was brought pursuant to section 2104; it was likely brought pursuant to section 2103.

Many estate practitioners are familiar with litigated matters in which a charity interested in the proceeding is cited, as is the Attorney General, and both the Attorney General and private counsel for the charity appear in the proceeding. In such cases, both the Attorney General and the charity’s counsel represent the charity (although as a practical matter, since the charity has private counsel, the Attorney General may take a less pronounced role in the litigation, electing instead to defer to the charity’s chosen counsel).  What happens, however, when the status and identity of the charitable beneficiary is less than certain?  That was precisely the situation facing the New York County Surrogate’s Court in the probate contest involving the much-publicized estate of Huguette Clark.

Huguette Clark died on May 24, 2011, leaving a Last Will and Testament dated April 19, 2005, which disinherited her family.  However, just six weeks earlier, on March 7, 2005, Huguette executed a will naming her family as residuary beneficiaries.

Article FOURTH of the propounded will directed that the nominated executors form a private foundation to be named the Bellosguardo Foundation and “take all necessary steps to organize, operated (sic) and qualify said foundation as an educational organization, as defined by Section 501(c)(3) of the Code, for the primary purpose of fostering and promoting the Arts.”

In June, 2011, a bare two weeks after Huguette died, and notwithstanding that the propounded will had not been admitted to probate, three entities called the Bellosguardo Foundation were formed — one in California, one in Delaware, and one in New York.

Ultimately, members of Huguette Clark’s family, represented by Farrell Fritz, filed objections to probate.  The New York State Attorney General appeared in the now-contested probate proceeding to represent the charitable interests under the will.  In addition, a private law firm filed a Notice of Appearance in the proceeding, purporting to appear on behalf of an entity called the “Bellosguardo Foundation” (there was no indication which foundation — i.e., the California, Delaware, or New York foundations — the law firm purported to represent).

The probate proceeding was scheduled for trial in September 2013.  There were numerous motions submitted by the various parties in the months preceding the trial.  While most of those motions were evidentiary in nature, one, brought by Farrell Fritz on behalf of the Clark family, sought to strike the private law firm’s Notice of Appearance filed on behalf of the so-called “Bellosguardo Foundation.”  The family took the position that the foundation was not the foundation referenced in the will and, therefore, had no standing to participate in the trial.  Farrell Fritz argued on behalf of the family that the propounded will’s direction regarding the formation of a foundation had no legal effect prior to the admission of the will to probate.  Although the propounded will directed that the executors form a foundation, there were no executors prior to the will’s admission to probate, and, thus, the foundation referenced in the propounded will did not, and could not, exist prior to probate.  That a person incorporated an entity with the same name as the foundation to be formed in the event the propounded will were admitted to probate, and then caused that entity to appear in the probate proceeding, did not make the entity the “Bellosguardo Foundation” to be formed under the will.

Nor was it necessary to permit the foundation to participate in the proceeding, as the charitable interest under the propounded will was being adequately represented by the Attorney-General, who “has the statutory power and duty to represent the beneficiaries of any disposition for charitable purposes (EPTL 8-1.1(f); other cites omitted)” (Alco Gravure Inc. et al. v. The Knapp Foundation, 64 NY2d 458, 465 [1985]).  Moreover, while a charitable beneficiary has standing to participate in a litigated proceeding in which it is interested, the Attorney General’s standing to represent a charitable interest is exclusive where the charity’s status is indefinite or uncertain, or, to express it differently, where the charity is “not within a class of potential beneficiaries that is ‘sharply defined and limited in number’ (Alco Gravure, 64 NY2d at 465).”  (Matter of Rosenthal, [Helmsley Charitable Trust], 99 AD3d 573 [1st Dept 2012]).

Both the Public Administrator of New York County and the Attorney General’s office supported the Clark family’s motion. On the eve of the trial, Surrogate Anderson rendered her decision, granting the motion.  The Surrogate noted that, “[t]he Attorney General, who is charged under the Estate’s Powers and Trusts Law § 8-1.4(e)(2) with representing all charitable interests under the subject will, has been demonstratively adequate and diligent in representing the interests of the Bellosguardo Foundation to be formed.  Further, the Attorney General has exclusive standing to represent a beneficiary of a disposition for charitable purposes when such beneficiary is indefinite or uncertain (EPTL §8-1.1(f))” (Estate of Huguette M. Clark, NYLJ 9/27/13, p. 25, col. 1. [Sur Ct, New York County]).

Subsequently, the parties in the litigation were able to settle the contest.  Thereafter, the true Bellosguardo Foundation was formed, as mandated by the Propounded Will as admitted to probate by the Surrogate.