A person’s standing to interpose objections to probate is governed by SCPA §1410, which provides that,

 any person whose interest in property or in the estate of the testator would be adversely affected by the admission of the will to probate may file objections to the probate of the will or of any portion thereof except that one whose only financial interest would be in the commission to which he would have been entitled if his appointed as fiduciary were not revoked by a later instrument shall not be entitled to file objections to the probate of such instrument unless authorized by the court for good cause shown.

The case law has firmly established that the interest that would be adversely affected must be pecuniary in nature (see, e.g., In re Hall, 12 AD3d 511 [2d Dept 2004]). An interest based on sympathy, sentiment, or anything other than the gain or loss of money is insufficient to confer standing.

Recently, the Kings County Surrogate’s Court rejected two different standing arguments in Estate of Saunders, a contested probate proceeding. First, in a January 2017 decision, the Court rejected the petitioner’s argument that sons of the decedent lacked standing to file objections (see Estate of Saunders, NYLJ, Jan. 27, 2017, p.35). Under the will, each of the sons was bequeathed $100, and the residuary was to be divided equally among three charities. Following the decedent’s death, the sons, as “sole heirs of the estate,” transferred all of their purported interest in real property owned by the decedent, which had become part of the residuary estate, to a limited liability company (id.). The petitioner claimed that as a result of that transfer, the respondents had no pecuniary interest in the estate that would be adversely affected by the admission of the will to probate. In opposition, the respondents argued that the cash bequests gave them an additional interest in the estate. They further argued that the estate indeed had cash. The petitioner conceded both of those facts, but asserted that the cash had been depleted through the administration of the estate. The court was not persuaded that the executor’s proper use of the cash assets for administration purposes determined whether the respondents had standing under the statute. It concluded that because the respondents assigned away only their purported interest in the real property, and not their interests as distributees of the decedent, they indeed had standing to interpose objections to probate.

The Surrogate addressed standing again in a later decision, when the LLC moved to intervene and file objections on the grounds that it was a good faith purchaser of the real property, and would be adversely affected by the admission of the will to probate (see Estate of Saunders, NYLJ, Mar. 1, 2017, p.25, col. 6 [Sur Ct, Kings County]). In an unpublished decision and order, the Surrogate found that the LLC lacked standing. Although we don’t know the court’s precise reasoning, its decision is not that surprising, as the LLC was not a beneficiary of the real estate under the will or prior will, and certainly was not a distributee or legatee of the decedent.

Not content to sit on the sidelines and rely on the sons’ objections to preserve its purported interest in the property, the LLC subsequently moved to renew its motion on the grounds that it had commenced a proceeding to quiet title to the property, which the Supreme Court stayed pending the outcome of the contested probate proceeding. According to the LLC, it would have no recourse to protect its interest if it could not intervene. The Surrogate was not persuaded. First, it noted that a motion to renew, pursuant to CPLR §2221(e) must be based on new facts that existed at the time the original motion was made, but were not presented at that time. The LLC’s motion was grounded on the Supreme Court’s stay order which occurred years after the original motion to intervene was made. The Surrogate sua sponte also considered the motion as one for reargument, pursuant to CPLR §2221(d), but again, found that it failed because the LLC did not claim that the Surrogate misapprehended the facts or law, but rather, advanced an entirely new argument, which is not a proper basis for such a motion.

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.

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.

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.

A recent decision of the Richmond County Surrogate’s Court addressed a frequently litigated issue in Surrogate’s Court litigation – – whether the proposed or nominated fiduciary should be disqualified from serving in a fiduciary capacity on the grounds of “dishonesty” or “improvidence.” In the Estate of George Mathai a familiar dynamic was in play – – there was a dispute between the decedent’s children from a prior marriage and the decedent’s surviving spouse. The decedent’s two children from a prior marriage objected to the appointment of their step-mother as Administrator of the decedent’s estate. They claimed that she was unfit to serve as fiduciary on the grounds of dishonesty, hostility, and improvidence.

At the outset, the court noted that the decedent’s surviving spouse was first in the order of statutory priority to serve as Administrator under SCPA §1001(a). However, the statute gives parties interested in a decedent’s estate the opportunity to object to the appointment of a fiduciary, where the fiduciary “does not possess the qualifications required of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or…is otherwise unfit for the execution of the office.”

With the decedent’s children objecting to the appointment of their step-mother, the question became what, in this context, do the statutory terms “dishonesty,” and “improvidence” mean?

Addressing “dishonesty,” the Surrogate explained that in order to prove that a potential fiduciary is dishonest “it must be shown that the person has a tendency or ‘habit of mind’ toward wrongful action.”   An act of isolated wrongdoing is not enough to disqualify a fiduciary from serving on the basis of “dishonesty.” It must be shown that there was dishonesty in money matters to such an extent that it would lead to a reasonable apprehension that the estate would not be safe.

Addressing “improvidence” the court quoted earlier decisions where it was observed that “the quality of being improvident does not necessarily involve moral turpitude,” and that defined improvident acts as those that “would be likely to render the estate unsafe and liable to be lost or diminished.” The court further explained that misappropriation or mishandling of the decedent’s property falls within the meaning of improvidence.

In the Estate of George Mathai, the decedent’s children could not meet their burden of showing dishonesty or improvidence to disqualify their step-mother. Additionally, while they claimed that their step-mother should not be appointed on the grounds of hostility, the court dismissed their objection, repeating the rule that mere hostility between the fiduciary and the beneficiaries is not grounds for disqualification; hostility will only serve as a basis for disqualification where it jeopardizes the proper administration of the estate.

In this regard, it is worth noting that courts are mindful of beneficiaries or distributees seeking to impose their preference of fiduciary contrary to the testator’s choice of fiduciary (or contrary to the statutory order of priority) through their own misconduct. In this regard, beneficiaries are not permitted to bootstrap their own unreasonableness, hostility, and misconduct into a claim for disqualification or removal on the grounds of friction and hostility. As the New York County Surrogate’s Court has pointed out:

Courts are also loathe to indulge a beneficiary’s wish to dictate, at will or at whim, who the fiduciary should or will be. After all, where there is a clash between beneficiary and fiduciary, it is the latter who faces the potential for liability; it may be presumed therefore that the prospect of a surcharge will chasten the fiduciary to try to do right on an issue as to which the beneficiary him/herself is free to be wrong. As a corollary, a beneficiary should not be allowed to bootstrap his or her way to a new fiduciary by intentionally antagonizing the current fiduciary.

In a decision that could well cause even the most casual trusts and estates practitioners to scratch their proverbial heads in wonder, the Appellate Division, Third Department, in Matter of Buchting, 111 AD3d 1114, 975 NYS2d 794 (3d Dept 2013), recently affirmed the determination of the Surrogate’s Court, Greene County, dismissing a “due execution” objection to probate, notwithstanding that both attesting witnesses invoked their Fifth Amendment rights against self-incrimination and refused to testify at their SCPA 1404 examination concerning the execution of the will, and notwithstanding that the Surrogate determined that summary judgment was improper because of “conflicts in the evidence.”

The petitioner in Buchting was the surviving spouse of decedent, who offered his will for probate shortly after his death.  The respondents were the decedent’s surviving children from a previous marriage. The attorney draftsman of the will (also the attorney who supervised its execution) testified at his SCPA 1404 examination in detail concerning the due execution of the will.  The two attesting witnesses were also called, but upon taking the stand, refused to testify, invoking their Fifth Amendment rights against self-incrimination.

The respondents objected to probate on the grounds of lack of due execution, lack of testamentary capacity, and undue influence.  They moved to dismiss the petition based upon the petitioner’s failure to establish due execution.  The petitioner cross-moved for summary judgment admitting the will to probate.  It appears from the Appellate Division’s decision that the Surrogate denied both motions, determining that summary judgment was improper because of “conflicts in the evidence,” but nevertheless dismissed the respondents’ objections and admitted the will to probate.

On appeal, the Appellate Division first concluded that the Surrogate properly denied the respondents’ motion to dismiss the petition because the petitioner complied with the requirement, imposed by SCPA 1404(1), that she produce the attesting witnesses for examination.  The court rejected the respondents’ argument that an attesting witness who invokes the privilege against self-incrimination and refuses to testify has not been “examined” within the meaning of section 1404.  It relied upon its prior decision in Matter of Hutchinson, 13 AD3d 704 (3d Dept 2004), in which it held that an attesting witness’ invocation of the Fifth Amendment “is akin to a failure to recall the events surrounding a will’s execution” (see id.).  It further noted that a will may be admitted to probate even where no attesting witness recalls it execution.  While the law requires the examination of at least one attesting witness, it imposes no requirements upon the substance of the testimony.

The issue, according to the court, “thus distills to whether there was sufficient other evidence to establish a prima facie case of due execution, and we find that there was.”  In this regard, the court relied exclusively on the testimony of the attorney draftsman and the presumption of due execution that resulted from the attorney’s supervision of the will’s execution.  The court determined that, in light of this presumption, the respondents had the burden to come forward with evidence contradicting the testimony of the supervising attorney.  It further determined that the respondents failed to meet their burden, notwithstanding that they “challenge[d] the veracity of the supervising attorney and argue[d], based upon various minor irregularities in the documents that she drafted, that she was unfamiliar with the necessary procedure. . . .”  Thus, according to the Appellate Division, the Surrogate properly denied the respondent’s motion to dismiss the petition and dismissed the due execution objection. 

Notably, the court stated that “to preclude the probate of a will as a matter of law because both attesting witnesses refuse to testify on constitutional grounds would come perilously close to drawing a prohibited inference from the invocation of the privilege by nonparties” (id.).

The court held that the Surrogate erred, however, in dismissing the remaining objections, grounded in testamentary capacity and undue influence, particularly prior to discovery.

A few thoughts on the Buchting decision. 

First, it seems fundamentally unfair to saddle an objectant with the burden to come forward with evidence to rebut a supervising attorney’s testimony concerning the due execution of a will in order to survive summary judgment where both attesting witnesses — likely the only other persons in the room with the decedent – refuse to testify for fear of self-incrimination.  It is difficult to imagine how an objectant could ever meet that burden.  Forgive me for stating the obvious, but it seems plain that the mere fact that both attesting witnesses have invoked the Fifth Amendment in order to avoid testifying concerning a will’s execution should itself be sufficient to justify further proceedings before admitting the will to probate.  The decision in Buchting essentially ignores that a court is obligated by statute to “inquire particularly into all the facts” in order to satisfy itself “with the genuineness of the will and the validity of its execution” (SCPA 1408).

Second, the court’s decision is grounded in its determination that a witness who has refused to testify concerning the execution of a will for fear of self-incrimination is “akin” to a witness who fails to recall the execution.  However, the decision reveals no substantial authority for that comparison.  The Buchting court cites only Hutchinson as authority — but this is a chain without an anchor, as the Hutchinson court cites no authority (see 13 AD3d at 707 [“In our view, the submission of conflicting affidavits followed by a refusal to testify falls more closely in line with a witness who has ‘forgotten the occurrence’”]).  Another statement of the obvious — failing to recall a will’s execution and refusing to testify concerning the execution for fear of self-incrimination are very different things. 

Third, in order to conclude that the petitioner satisfied SCPA 1405(3) – which requires, as a condition for probate, the “examination” of at least one attesting witness – the court essentially determined that a witness who invokes the privilege against self-incrimination and refuses to testify has nevertheless been “examined.”  However, this seems to be in conflict with the Court of Appeals’ statement in Matter of Collins that, historically, the requirement that a witness be “examined” was “fulfilled when the witnesses took the stand and related what they knew of the circumstances” (60 NY2d 466, 471 n.3 [1983]).  Collins provides no authority for the proposition that a witness who refuses to testify altogether has nevertheless been “examined.”   

Fourth, even assuming a non-testifying witness could be deemed to be “examined” within the ambit of section 1405(3), that section requires actual testimony before a will may be admitted to probate.  It provides that where an attesting witness “has forgotten the occurrence or testifies against the execution of the will” the will may nevertheless be admitted to probate “on the testimony of the other witness and such other facts as would be sufficient to prove the will.”  But where the “other witness” invokes the Fifth Amendment, there is no testimony upon which to admit the will to probate.

Fifth, the court’s determination could well put a petitioner whose witnesses refuse to testify for fear of self-incrimination in a better position that a petitioner whose witnesses actually testify against the will.  A grant of summary judgment admitting a will to probate may be inappropriate where one attesting witness testifies against the will, even where the other witness and the supervising attorney testify favorably (see generally Matter of Jacinto, 172 AD2d 664 [2d Dept 1991]).  Why should the result be different where a witness – indeed, where both witnesses – refuses to testify concerning the execution of the will for fear of self-incrimination? 

Sixth, the presumption of regularity should not permit a court to turn a blind eye to facts calling into question a will’s validity.  A court should not employ a presumption where to do so would “elevate a legal construct above common sense” (People v Giordano, 87 NY2d 441 [1995]).  Even the presumption of legitimacy, “one of the strongest and most persuasive known to the law,” will fail if, in the words of Judge Cardozo, “common sense and reason are outraged by a holding that it abides” (Matter of Findlay, 253 NY 1 [1930]).  Depriving an objectant of a trial on the basis of the presumption of regularity, where both attesting witnesses refuse to testify concerning the execution of the will for fear of self-incrimination, offends both common sense and reason.

Of course, courts should resist the “temptation to overlook or ignore fixed legal principles when they are opposed to persuasive equities” because, as the ancient legal proverb teaches, “hard cases make bad law” (Dodd v Anderson, 197 NY 466, 469 [1910]).  However, “it might also be safely said that the occasional easy case makes law that is even worse” (People v Ramos, 40 NY2d 610, 628 [1976] [Jasen, dissenting]).  By placing undue reliance upon the presumption of regularity in order to deprive an objectant of a trial, in the face of facts calling into question the validity of the will, the court in Buchting made the case too easy, and established a troubling precedent.

Although summary judgment in a contested probate proceeding historically has been rare, the recent trend has been for Surrogate’s Courts to grant such relief with increasing frequency.  Consistent with that recent trend, Surrogate’s Courts have granted summary judgment dismissing probate objections alleging that a testator lacked testamentary capacity, notwithstanding the testator’s diagnosis of dementia before executing the propounded will.  This post discusses several cases in which a testator’s diagnosis of dementia prior to executing the propounded will was insufficient to raise a triable issue of fact to withstand summary judgment dismissing a capacity objection.

The threshold for establishing testamentary capacity is extraordinarily low (see Matter of Rabbit, 21 Misc 3d 1118[A] [Sur Ct, Kings County 2008]).  This is because the capacity that is necessary to execute a valid will is less than that which is required for any other legal transaction (see id.).  All that is necessary is that a testator: (a) understand the nature and consequences of making a will; (b) know the nature and extent of his or her property; and (c) know the natural objects of his or her bounty and relations with them (see Matter of Kumstar, 66 NY2d 691 [1985]). 

Additionally, as a testator’s mental capacity must be assessed at the precise time of the instrument’s execution (see Matter of Schure, 2012 NY Misc LEXIS 5755 [Sur Ct, Nassau County Dec. 17, 2012]), a testator need only have a “lucid interval” of capacity to execute a valid will (see Matter of Minasian, 149 AD2d 511 [2d Dept 1989]).  Indeed, courts have found that testators had testamentary capacity, even though the testators were afflicted with ongoing mental illness (see Matter of Esberg, 215 AD2d 655 [2d Dept 1995]), progressive dementia (see Matter of Friedman, 26 AD3d 723 [3d Dept 2006]), and physical weakness (see Matter of Swain, 125 AD2d 574 [2d Dept 1986]).  As a result, it should come as no surprise that Surrogate’s Courts have granted summary judgment dismissing capacity objections, despite that the subject testators were diagnosed with dementia before they executed testamentary instruments. 

Case in point, in Matter of Schure (a case in which Farrell Fritz, P.C. represented the proponent of the testator’s will), the testator’s children opposed the proponent’s motion for summary judgment, alleging that a trial was necessary on the issue of capacity because the testator had been diagnosed with dementia several years before he executed the propounded instrument (see Schure, supra).  Nassau County Surrogate Edward W. McCarty, III, did not credit the objectants’ argument and, instead, granted summary judgment dismissing the capacity objection, among all of the other objections (see id.) In admitting the testator’s will, dated December 21, 2005, to probate, Surrogate McCarty cited the following evidence: (a) in July 2005, the testator called the propounded instrument’s attorney-draftsperson and made an appointment to discuss his estate planning; (b) in July 2005, the testator met with the attorney-draftsperson and his associate to discuss his estate planning and family; (c) in late-November 2005, the testator once again met with the attorney-draftsperson, his associate, and another colleague from their firm to discuss the terms of the testator’s will; (c) in early-December 2005, the testator met with one of his treating physicians, who made no notes in his file of the testator having psychological difficulties during their meeting and signed an affidavit stating that he would have noted such difficulties had he observed any; (d) on December 21, 2005, the testator executed the propounded will in the presence of the attorney-draftsperson, his associate, and another experienced trusts and estates practitioner; and (e) the attorneys attested to the fact that the testator was of sound mind at the time that he executed the will (see id.).     

Monroe County Surrogate Edmund A. Calvaruso’s decision in Matter of Petix is also instructive (see Matter of Petix, 15 Misc 3d 1140[A] [Sur Ct, Monroe County 2007]).  There, the testator died on April 29, 2005, just six months after executing his last will and testament on November 2, 2004 (see id.).  Inasmuch as the testator’s son was the nominated executor and sole beneficiary under the propounded will, the testator’s granddaughter, the daughter of his predeceased daughter, filed probate objections, alleging that the testator lacked testamentary capacity, among other things (see id.).  The bases for the capacity objection were the following: “a medical note by a Dr. Blackburn, dated 12/19/02, which stated that [the testator] was demented to the point where his driving was impaired;” and “two police reports, one where [the testator] had lost his car, and one where [the testator] had lost his wallet” (see id.). 

Notwithstanding the granddaughter’s proof that the testator had been diagnosed with dementia, Surrogate Calvaruso granted summary judgment dismissing the testamentary capacity objection (see id.).  In doing so, the court found that the granddaughter failed to offer proof to suggest that at any time on November 2, 2004, the date upon which the will was executed, the testator lacked capacity to make a will (see id.).  The court also noted that “a dementia diagnosis and lack of testamentary capacity are not one in the same” (see id.).  Accordingly, summary judgment dismissing the testamentary capacity objection was warranted (see id.).

To withstand a motion for summary judgment dismissing a capacity objection, a probate objectant generally will need to do more than show that a testator was diagnosed with dementia prior to executing the propounded will.  In light of Schure and Petix, among other decisions, a diagnosis of dementia may not be sufficient to raise a triable issue of fact to survive a motion for summary judgment on the issue of capacity.

 

 

Continuing the discussion of tax considerations in settling probate contests, the following additonal issues should be considered.

Marital Deduction

In determining the taxable estate, a deduction is allowed for the value of property which “passes” from the decedent to his surviving spouse.

If, as a result of a controversy involving the decedent’s will, or involving any bequest or devise thereunder, the surviving spouse assigns or surrenders a property interest in settlement of the controversy, the interest so assigned or surrendered will not be considered to have passed from the decedent to the surviving spouse and, so, will not qualify for the marital deduction.

Conversely, if a property interest is assigned or surrendered to the surviving spouse, the interest will be considered as having passed from the decedent to the spouse and, so, may qualify for the marital deduction, but only if the assignment or surrender was a bona fide recognition of the rights of the surviving spouse in the decedent’s estate that are enforceable under state law, and it meets the other requirements for the marital deduction (for example, the QTIP requirements for a transfer in trust). Thus, a transfer to a surviving spouse may qualify if it is made in settlement of her claim arising under an alleged failure by the estate to fulfill the decedent’s obligations under a prenuptial agreement; in that case, the transfer represents a bona fide settlement of enforceable rights. Such a bona fide recognition is presumed where the transfer is pursuant to a decision of a local court rendered upon the merits in an adversarial proceeding following a genuine contest. 

Charitable Deduction

 

In general, a deduction is permitted for federal estate tax purposes for bequests or other transfers to or for a charitable purpose. In determining whether an interest in property has passed from a decedent to a charity, the rules relating to marital bequests, described above, are applicable.

 

Thus, an amount distributed from an estate to a charity pursuant to a settlement agreement following a bona fide will contest is deemed to have passed directly to the charity from the decedent, and is eligible for a charitable deduction where the charity had a recognizable and enforceable right to a portion of the estate. However, the amount of the deduction cannot be greater than the value of what the charity would have received under the original will if it had litigated its claim to conclusion.

 

If a charitable organization assigns or surrenders a part of a transfer to it pursuant to a compromise agreement in settlement of a controversy, the amount so given up is not deductible as a transfer to that charitable organization. Thus, an estate which settles a will contest from funds in a residuary charitable bequest is required to pay tax on the settlement amount.

 

Gift and Income Taxes

 

The settlement of a will contest may involve several transfers of property, either between the estate and a beneficiary or claimant, on the one hand, or between beneficiaries or claimants, on the other. While each of these transfers may have certain estate tax consequences, as described above, the various parties must also consider the possible gift tax and income tax consequences.

 

In general, it is unlikely that a transfer made pursuant to the settlement of a will contest will be treated as a taxable gift if it is the product of a bona fide, arm’s-length transaction that is free of donative intent. Where that is not the case – as where two beneficiaries agree to “revise” the decedent’s will as it concerns dispositions of properties to themselves ‑ the readjustment of their property interests may be deemed a taxable gift.

 

In light of the facts and circumstances, a payment by the estate to a claimant may be treated, under the terms of a settlement, as taxable compensation for services rendered to the decedent, rather than as a non-taxable bequest.

 

Alternatively, the payment (or distribution) to a beneficiary may result in taxable income to the beneficiary if the estate has distributable net income.

 

It is also possible that beneficiaries who transfer or exchange property, as part of a settlement, will be treated as having sold such property, thereby realizing taxable gain (some of which may be treated as ordinary income, depending upon the asset).

 

If the property is an interest in a pass-through entity, such as an S corporation or a partnership, the transfer of such an interest will effect a change in its ownership (presumably effective from the date of the decedent’s death) which may necessitate the amendment of the returns of both the entity and the owners. This, in turn, may require additional economic outlays among the parties in order to restore any benefits lost (including distributions), or to indemnify any losses incurred by any of the parties.

 

Finally, where the estate holds items of income in respect of a decedent (“IRD”), such as retirement funds, it may behoove the estate to consider distributing such items to a charitable organization in settlement of the organization’s claim to a share of the decedent’s assets; in this way, the estate and its non-charitable beneficiaries may avoid the income tax thereon. 

 

Conclusion

 

The foregoing discussion highlights some of the tax considerations that are attendant to the settlement of a will contest. The manner in which each of these is addressed can have a significant impact on the net economic results realized by the parties to the settlement. It is imperative that the parties and their advisors be aware of the tax implications of their actions throughout the will contest, and especially during the negotiation of the settlement. In this way, the parties may better understand their true economic goals and costs, and their advisors may better manage their client’s expectations.

The period following someone’s death can be an emotional time. Unfortunately, the period of administration of the decedent’s estate can be just as emotional, though for different reasons. As the intended disposition of the decedent’s assets becomes “public,” the estate’s beneficiaries, and others, may challenge such disposition. The manner in which these challenges are resolved can have significant tax and economic consequences for the decedent’s estate.

Estate Tax

The estate tax is imposed upon the transfer of the assets comprising a decedent’s estate. The taxable estate is determined by subtracting from the value of the gross estate certain deductions authorized by the Internal Revenue Code. Under various conditions and limitations, deductions are allowable for administration expenses, charitable transfers, and transfers to a surviving spouse. Once the taxable estate has been ascertained, the estate tax rates are applied to arrive at the gross estate tax (before authorized credits).

 

In theory, the process of compiling the necessary information for determining the tax is straightforward. In practice, however, it can become challenging. The fiduciary must: identify and “collect” the decedent’s assets; determine the decedent’s outstanding liabilities; and dispose of the decedent’s estate.

 

The starting point for directing the disposition of the decedent’s assets, including the identification of deductible transfers, is the decedent’s last will or revocable trust. These instruments may provide for an outright transfer of property to the decedent’s spouse or a charity. In some cases, they will grant the fiduciary authority to select a charitable recipient. Rather than an outright transfer, the instrument may create a split-interest trust for the benefit of the spouse or a charity, and certain non-marital and non-charitable beneficiaries (usually from the decedent’s family).

 

The Contest

What happens, however, when the validity of the will or trust, or of the dispositions of property provided therein, are challenged? The fiduciary will certainly incur additional legal, accounting and other fees and expenses in defending the instrument. As a result of the legal proceedings, the disposition of the decedent’s assets may change – either by court decision or through a settlement by the parties – and, consequently, the value of the taxable estate. For example, it may be determined that an asset does not belong to the estate, or that a disposition under the will should not have been made to a specific charity. 

 

These determinations have estate tax and other tax consequences of which the fiduciary should be aware because they impact the economic result of the settlement. Frequently, however, not enough attention is paid to the tax treatment of the settlement and, consequently, the economic cost may become more expensive than it otherwise could have been.

 

Estate Tax Return and Payment

The timing of the will contest raises a number of tax considerations. In general, the estate tax return must be filed, and the estate tax paid, within nine months after the decedent’s date of death. If a timely extension application is made, the estate will have an additional six months to file the return. Extensions of time to pay the tax are granted less frequently, and require a showing of good cause.

 

In the event the will contest cannot be resolved before the due date for the return, the fiduciary should disclose the nature of the dispute on the return, since the resolution thereof will likely affect the amount of estate tax owed by the estate. Similarly, the fiduciary will have to determine how much estate tax to remit while the contest is pending. This necessitates consideration of the merits of the claims and of the expected litigation costs. In the case of an “overpayment,” the fiduciary must be mindful of the possibility of claiming a refund. If it appears that the litigation will continue beyond the limitation period for a refund, the fiduciary should consider filing timely a protective refund claim.  

 

Will the IRS respect the Settlement?

Whether the IRS will respect the settlement is an issue characterized by the intersection of state property law and federal tax law.

 

The determination of the federal estate tax is based upon the respective property rights of the decedent (what assets did he own at his death), of his creditors (what liabilities do the decedent and/or his estate owe), and of the beneficiaries of his estate (to whom do the decedent’s assets pass after the satisfaction of these liabilities). These various property rights arise under state law. In the case of a will contest, the adversarial nature of the proceeding is an important factor in determining the federal tax consequences of the settlement, though it may not be determinative; the IRS is generally free to review the applicable state law for the purpose of determining whether the terms of the settlement are, in fact, consistent with the property rights of the parties under such state law. It is important to bear in mind that the IRS may not be bound by a settlement agreement.

 

Litigation-Related Expenses

Administration expenses are those that are actually and necessarily incurred in the administration of the decedent’s estate; for example, for the collection of assets, payment of debts, and distribution of property. These may include legal fees incurred by the fiduciary, which are usually deductible for estate tax purposes. However, expenditures that are not essential to the settlement of the estate, but that are incurred for the individual benefit of the decedent’s heirs, may not be taken as deductions. For the expenditure to be allowable as an administration expense, it must have benefited the estate as a whole, as contrasted with the personal benefit of a beneficiary. This distinction is often difficult to make.

 

A settlement may establish the amount of a claim or expense for tax purposes, provided that the expenditure is allowable under local law, the settlement resolves a bona fide issue in a genuine contest, and it is the product of arm’s-length negotiations by parties having adverse interests with respect to the claim or expense. No deduction will be allowed for amounts paid in settlement of an unenforceable claim. A consent decree should be accepted as fixing a claim when the consent was a bona fide recognition of the validity of the claim – not a mere “cloak” for a gift to a family member – and was accepted by the court as satisfactory evidence upon the merits. However, if a local court does not adjudicate the merits of a claim, its decision as to its deductibility will not necessarily be accepted by the IRS.

 

The foregoing assumes that the settlement payment represents an expense. A review of the underlying claim may indicate otherwise. For example, if a payment is made by the estate to someone claiming a share of the estate as a beneficiary, it is likely that the payment will not be deductible as an expense for estate tax purposes (though it may qualify for the marital or charitable deduction).