Issues of Undue Influence
Undue influence is an issue commonly associated with Surrogate’s Court proceedings. Indeed, it is often the linchpin to the outcome of a matter, and as such, relevant to its strategy. This is most pointedly revealed by opinions rendered by the Surrogates of New York and Kings County this year, in which the issue of undue influence played a primary role in connection with a contested probate proceeding.
In In re Moles, N.Y.L.J., Apr. 18, 2011, p. 23 (Sur Ct, New York County), the preliminary executors of the estate moved for summary judgment dismissing the objections of the decedent’s nephew, who was the beneficiary of a prior will executed thirty years earlier than the propounded instrument. The objections alleged, inter alia, that the instrument was not duly executed, and that the instrument was procured by the fraud and undue influence of the decedent’s long-time companion, who was the sole beneficiary of the estate, and the named executor along with the attorney-draftsperson.
The undisputed record revealed that the decedent had a history of alcohol abuse for which she was hospitalized and later rehabilitated. Upon completion of her rehabilitation, she returned to New York City where she retained the services of a personal aide whom resided with her until her death twenty years later. Over the course of her employ, there was no dispute that the decedent and her aide became inseparable, spending every day together, and traveling domestically and overseas. Further, there was no dispute that the decedent was capable of making financial and personal decisions regarding her investments and health care.
The decedent’s treating physician testified that she always found the decedent fully responsive and rational. This was substantiated as well by the attorney-draftsperson of the instrument, who stated that he found the decedent alert, coherent and able to convey detailed information regarding her life situation and family.
Notably, the will execution was videotaped and supervised by the draftsperson’s colleague.
In granting the proponents summary relief, the court rejected the notion that the decedent’s early alcoholism impaired her capacity to execute a will, as well as the testimony of the videographer relied upon by the objectant, who testified that the decedent had difficulty identifying the President of the United States. The court held that this evidence paled in light of the reports and testimony of the professionals who treated and worked with the decedent during the period surrounding the execution of the instrument, all of which indicated that she possessed the minimal capacity required to make a valid Will.
As to the issue of undue influence, the court concluded that the objectant had failed to submit any evidence that the decedent’s aide had compelled or constrained the decedent to do anything against her free will. In fact, the objectant admitted that he saw the decedent at most one to two times a year, and that her other family members rarely visited her.
The court found it significant that the attorney-draftsperson of the instrument testified that the provisions of the Will were derived from instructions given to him by the decedent with no involvement of the decedent’s aide. To this extent, the court opined that the lack of involvement by the proponent in a will’s drafting and execution is inconsistent with any inference of undue influence, even where the disinherited party is a close family member. Further, the court held that even assuming the existence of a confidential relationship between the proponent and the decedent, it was counterbalanced by the evidence of the strong affection between the decedent and her aide during their twenty year relationship, the decedent’s expressed desire to leave her aide her entire estate, and her aide’s lack of involvement in the drafting of the Will.
Finally, the court concluded that the objectant had failed to produce a modicum of proof that anyone induced the decedent to execute her Will based upon a false statement.
In comparison to the holding in In re Moles, the court in In re Carter, N.Y.L.J., Apr. 18, 2011, p. 25 (Sur Ct, Kings County), found that the inference of undue influence required that the propounded instrument be denied probate. The facts of the case are in stark contrast to those in Moles and substantiate the differing opinions.
In Carter, the propounded instrument left the decedent’s entire estate, but for 25% percent of any cash due and owing to the decedent’s sole surviving heir, her sister, to a complete stranger (Frazier), who was also named the executor,. The instrument also directed that in the event the decedent’s sister should be admitted to a nursing home, her share should pass instead to Frazier, and that Frazier pay an amount, not to exceed 11 % of the residuary estate, to charities of his choice.
The record revealed that Frazier was 40 years the decedent’s junior, was not related to the decedent, yet, was her self-described caretaker, and that he was an instrumental force behind the execution of the propounded instrument. The court held that, under these circumstances, as well as events described in its own files and through the testimony of Frazier, an inference of undue influence existed requiring a hearing. Notably, the court found that Frazier had been previously appointed as fiduciary in a number of other estates of women significantly older than him, and with whom he had no relationship, that were strikingly similar to the factual situation involving this decedent.
Based on the testimony and evidence adduced at the hearing, the court concluded that Frazier had engaged in a systematic course to take over the personal and financial affairs of the decedent, whom he knew had been diagnosed with dementia, much as he did in the case of countless other elderly and frail women to whom he ingratiated himself. He moved into her home, put his name on her bank accounts, monitored her telephone calls, put her under surveillance and held her health care proxy. Significantly, the record also disclosed that in 2006, when the decedent was overtly suffering mentally, and when no attorney would draft a Will for her, he allegedly acceded to her insistence upon executing a new Will by retyping a prior Will of the decedent, with the decedent’s handwritten changes, and taking the decedent to her doctor’s office to have it signed and witnessed.
At the conclusion of the hearing, the court concluded, inter alia, that Frazier’s testimony gave rise to a strong inference of undue influence, based in particular, upon his complete insinuation into the decedent’s life and financial affairs, the decedent’s dependence upon him for her basic needs, and his involvement in the preparation and execution of the instrument which made him the primary recipient of her estate. The court held that Frazier offered nothing to rebut this proof, but rather buttressed the result that the Will of the decedent was the product of his own decision-making, and control over its preparation and execution.
Accordingly, probate was denied.
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Fiduciary Beware: Contested Accounting in the Face of Exoneration Clause Results in Liability for Inter Vivos Trustee
Although exoneration clauses in a testamentary trust will not, as a matter of public policy, absolve a trustee of liability for failure to exercise reasonable care, diligence and prudence (EPTL §11-1.7(a)(1)), there is no comparable statutory provision with respect to exoneration clauses in lifetime trusts. Nevertheless, the court, in Matter of Accounting of Tydings, NYLJ, July 7, 2011, at p. 26 (Sur Ct, Bronx County), found reason, despite the exoneration clause in the inter vivos trust instrument, to hold the trustee liable.
In Tydings, the court had the opportunity to opine on the effect of the exoneration clause in the subject trust, commissions, and the legal fees incurred by the petitioner and objectant. The objectant in the proceeding was the grantor and income beneficiary of the trust, with a discretionary interest in the principal. The ultimate remainderman of the trust was the grantor’s infant son.
With regard to the issue of the exoneration clause, the trust instrument authorized, inter alia, the trustee to retain an original investment for any length of time without liability for such retention, and to act on behalf of the trust and herself or another entity with regard to any transaction in which the trustee and the trust or the other entity had an interest. The trust also provided that the trustee would not be responsible for any loss to the trust unless such loss resulted from bad faith or fraud on the part of the trustee, and that the trustee would not be disqualified from acting because the trustee held an interest in any property or entity in which the trust also held an interest. The court noted that several of the objections raised in the proceeding hinged, inter alia, on the enforceability of this exoneration clause.
To this extent, the court opined that despite the absence of a statute applicable to exoneration clauses contained in lifetime trusts (cf. EPTL 11-1.7(a)(1)), the enforceability of such clauses were nevertheless subject to certain defined limitations. For instance, the court observed that a trustee of a lifetime trust who is guilty of wrongful negligence, impermissible self-dealing, bad faith or reckless indifference to the interests of the beneficiaries will not be shielded from liability by an exoneration clause. Moreover, when an attorney, named as trustee, is the draftsperson of the instrument containing an exoneration clause, the clause limiting the trustee’s liability to bad faith acts is void as against public policy. Further, the court noted that while improper self-dealing will not come under the umbrella of an exoneration clause, the rule of undivided loyalty due from a trustee may be relaxed by appropriate language in the trust instrument which directly or indirectly recognizes the trustee may be in a position of conflict with the trust.
Within this context, the court held that the petitioner would not be liable with respect to an interest-free loan that pre-existed the creation of the trust and that had been transferred into the trust by the grantor. On the other hand, the court found the petitioner liable for interest-free loans made by the trust subsequent to the inception of her stewardship. To this extent, the court concluded that petitioner’s conduct exhibited a complete indifference to the best interests of the objectant, mandating that she be surcharged for the income lost on the loan transactions.
Additionally, the court found that the exoneration clause in the instrument did not bar the objectant from recovering lost profits from the trustee attributable to her use of trust funds, without consideration, to benefit an entity in which she was personally interested.
As to the balance of the objections, the court concluded that the objectant was either estopped from raising the issues, or did not warrant the imposition of a surcharge.
With respect to the issue of commissions, the court opined that while not every surcharge warrants a denial of commissions, when the fiduciary has engaged in conduct evidencing bad faith, a complete indifference to his/her duties and responsibilities, or some act of malfeasance or misfeasance, commissions will be denied. Based on the record, the court found that the petitioner was lax with regard to managing the financial aspects of the trust. Indeed, although the court concluded that the petitioner had not acted in bad faith, it, nevertheless, held, particularly based on the interest-free loans that had been made, that she had exhibited indifference to her duties, and, accordingly, sufficient misfeasance to warrant a denial of commissions. Further, the court denied the petitioner annual commissions on the grounds that she had failed to establish that she had furnished the objectant with an annual statement pursuant to the provisions of SCPA 2309, that the objectant had waived her right to receive the statement, or that there was sufficient income retained by the trust in any particular year from which she could pay herself income commissions.
Finally, with regard to the issue of legal fees, the court held, in the exercise of discretion, that the petitioner and the objectant should each, individually, bear responsibility for their legal fees and expenses. The court observed that while many of the objections to the petitioner’s account had not been sustained, the petitioner could not seek payment of fees from the trust for defending objections for which she was surcharged. Moreover, the court opined that a strong case could be made for holding the petitioner responsible for the expert witness fees incurred by the objectant in proving petitioner’s liability in connection with the transactions for which she was surcharged. On the other hand, the court noted that the objectant vigorously pursued, and caused the petitioner to defend, numerous objections of which she was aware and had approved prior to their occurrence. Accordingly, under all the circumstances, the court determined it would be most equitable to have the petitioner and the objectant to personally satisfy their own legal fees in connection with the proceeding.
A View from the Appellate Bench
Over the past several months, the Appellate courts have been actively engaged in determining issues pertinent to the field of trusts and estates and providing guidance to the Surrogate’s Court practitioner. The following is a synopsis of but a few of the decisions rendered.
Discovery Proceedings
In Matter of Delgatto, 2011 NY Slip Op 02667, the Appellate Division, Second Department affirmed an order of the Surrogate’s Court, Kings County (Johnson, S.), which denied the petitioner’s motion for summary judgment in a proceeding pursuant to SCPA 2103 to recover real property. The petitioner, who was the administrator cta of the estate, alleged that the decedent transferred the subject property to a revocable trust for the benefit of his caregiver, as a result of undue influence. The Court noted that several of the exhibits submitted by the petitioner were not in admissible form, i.e. unsigned and unattested transcripts, and thus could not be utilized in support of the motion. Further, the Court opined that the admissible evidence submitted by the petitioner failed to establish the petitioner’s prima facie entitlement to judgment as a matter of law.
The Elective Share
On April 26, 2011, the Appellate Division, Second Department, affirmed the order of the Surrogate’s Court, Kings County (Johnson, S.), which granted the petitioner’s motion for summary judgment determining her right to an elective share of the decedent’s estate. In Matter of Atiram, 2011 NY Slip Op 03593, the Court found that the petitioner had established that she married the decedent in 1952 and that they remained legally married until the date of the decedent’s death. The Court concluded that the objectant had failed to raise any triable issue of fact as to whether the petitioner was disqualified on the grounds of abandonment, or equitably estopped from taking an elective share.
Compulsory Accounting
In Matter of Faggen, 2011 NY Slip Op 01413, the Appellate Division, First Department affirmed an order of the Surrogate’s Court, New York Count (Webber, S.), which dismissed a petition for a compulsory accounting by the co-fiduciaries of the estate of the decedent. The record revealed that the decedent was the fiduciary of the estate of her late husband, who was the executor of the estate which was the subject of the proceeding. The Court held that a compulsory proceeding by fiduciaries thrice removed from the subject estate was not authorized by the provisions of SCPA 2207.
Proceeding Against a Fiduciary to Recover Property
Before the Appellate Division, Third Department in Matter of Curtis, 2011 NY Slip Op 027773, was an appeal from an order and decree of the Surrogate’s Court, Rensselaer County (Hummel, S.), which partially granted the petitioner’s application to compel the delivery of property from the fiduciary, and from a decree of that court which judicially settled the fiduciary’s accounting. The parties were the decedent’s daughters and co-executors of her estate. Prior to the decedent’s death, the decedent moved in with one of her daughters, who became her attorney-in-fact. Acting in this capacity, the daughter transferred assets of the decedent into her name.
After the decedent’s death, the decedent’s other daughter compelled her sister to account as attorney-in-fact and as co-executor of the estate. Both accountings were submitted and objections were filed. At the bench trial, the petitioner only pursued objections to the respondent’s accounting as attorney-in-fact, alleging that the transfers of assets by the decedent were the result of self -dealing and breach of fiduciary duty. The Surrogate’s Court disagreed, concluding that the respondent’s actions were undertaken with the express consent of the decedent, who was found competent at the time. The Appellate Division affirmed.
The Court held that while there was a presumption that the services provided by respondent’s husband in connection with the sale of certain realty were gratuitous in nature, that presumption was sufficiently rebutted by the testimony of the respondent and her husband that the decedent agreed to pay for her son-in-law's services. To this extent, the Court deferred to the Surrogate’s assessment of the witnesses’ credibility, and expressly noted that the petitioner put forth no evidence to contradict the evidence presented.
Moreover, the Court found that the transfer of the decedent’s investment account to the respondent, and respondent’s inclusion as a mortgagee upon the sale of the decedent’s home constituted valid gifts, albeit made by the respondent as the decedent’s attorney-in-fact. The Court relied on the language of the power of attorney which authorized the making of the gifts in issue, as well as the testimony of the respondent who stated that the decedent was present when the subject transactions occurred.
Lessons of Constructive Trusts Continued
The recent entry by Jaclene D’Agostino addressed the issue of constructive trusts. From that, we learned that a constructive trust is characterized by four elements: (1) a confidential or fiduciary relationship; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust enrichment. While not an express trust in kind, a constructive trust is an equally useful device created by operation of law in order to promote equity. Although the Court of Appeals in Latham v. Father Devine, 299 NY 22 (1949) and Matter of O’Hara’s Will, 95 NY 403 (1884), cited by Ms. D’Agostino in her article, imposed a constructive trust under the circumstances presented, the Surrogate’s Court, Suffolk County in Dext v. Rorech III, Individually and as Executor of the Estate of William Rorech, Jr., NYLJ, 2/18/11, p.33 (col. 5) rejected that result for reasons explained below.
Before the court in Dext was a motion for summary judgment brought by the fiduciary in an action concerning the parties’ rights with respect to the decedent’s realty. The decedent’s Will was admitted to probate in Florida, and his son was appointed fiduciary of his estate. Thereafter, the fiduciary was appointed ancillary executor of the decedent’s estate in order to pursue an eviction in connection with the decedent’s home in Smithtown. The fiduciary alleged that the resident at the premises had been residing there rent-free for over a year since the decedent’s death.
Subsequently, the resident instituted an action, as plaintiff, in Supreme Court against the fiduciary alleging, inter alia, a cause of action in constructive trust, and requesting that she be given a life estate in the property. An answer was filed, and the fiduciary then moved for summary relief alleging, inter alia, that the decedent was the sole owner of the property, that there was no provision in the Will for plaintiff, that there was no written instrument evidencing the plaintiff’s right to occupy the premises, and that there was no proof of the promise(s) alleged. In opposition to the motion, plaintiff maintained that there were triable issues of fact as to whether the decedent had made an oral promise to plaintiff of a life estate in the premises, and, that there was part performance of same when decedent had plaintiff relocate from her home in Montauk to the Smithtown property. Further, plaintiff submitted her signed affidavit to support her claims, naming a number of witnesses who would testify on her behalf. The fiduciary replied.
In the interim, the action was transferred to the Surrogate’s Court pursuant to a so-ordered stipulation of the parties.
In granting the fiduciary’s motion for summary judgment, the court opined that in order to establish a claim for constructive trust four elements must be proven: 1) a confidential or fiduciary relationship between the parties; 2) a promise; 3) a transfer in reliance on the promise, and 4) unjust enrichment. Although the court noted that plaintiff had a close, confidential relationship with the decedent, it found that plaintiff had failed to prove the other required elements of a constructive trust.
Significantly, the court found that plaintiff would be the primary witness in support of her claim, inasmuch as she failed to oppose the defendant fiduciary’s contention that these witnesses expressed no knowledge of the purported promise to plaintiff by the decedent. Further, the court noted that although plaintiff alleged that she had other witnesses to testify on her behalf, she failed to offer any proof regarding these witnesses other than her own self-serving affidavit. Additionally, the court opined that plaintiff’s contention that she gave up her home in Montauk based upon the decedent’s alleged promise was insufficient to demonstrate a transfer in reliance or unjust enrichment.
Finally, the court held that plaintiff’s theory based upon part performance of an oral contract to give plaintiff a life estate also failed, on the grounds that her move from her Montauk home could not reasonably be viewed as unequivocally referable to the alleged agreement she had with the decedent.
Hence, it can be seen from the foregoing, that while a cause of action based in constructive trust may be a useful tool in obtaining equitable relief, the failure to prove the requisite elements thereof can prove fatal in some circumstances.
Lessons From the Bench: Remedies for Breach of Fiduciary Duty
The role of a fiduciary - an executor, an administrator, a trustee, and even a guardian - brings with it essential duties and responsibilities of loyalty, honesty, and good faith. Through the decision in In re Brissett, 7/26/2010 NYLJ 26 (col 6) (Sur Ct, Bronx County) we learn that a fiduciary who fails to fulfill this role can be removed from office, or worse yet, held in contempt of court and face imprisonment.
In In re Brissett, the Surrogate’s Court, Bronx County, held the executrix of the estate in contempt for failing to timely file an accounting. The record revealed that the decedent died in 2004 survived by her spouse, who post-deceased her. Her Will was admitted to probate several years after her death, and letters testamentary issued to her niece, as the named executrix.
Following the issuance of letters testamentary, a proceeding was instituted to compel the executrix to account. The application was granted, and the executrix was ordered to account within thirty days of service upon her of a certified copy of the court’s order. When no account was filed, a petition was filed requesting that the executrix be held in contempt. The application was granted upon the default of the executrix, and the court authorized the issuance of a warrant of commitment without further notice in the event the executrix failed to account within thirty days of service upon her of the court’s order with notice of entry.
Thereafter, a warrant of commitment issued and the executrix was brought before the court by the Sheriff of the City of New York. At that time, counsel for the executrix stated that the their client’s failure to account was attributable to their law office failure rather than her willful disregard of the court’s order. Based on counsel’s representations, the court temporarily vacated the order of commitment, provided that in the event the executrix failed to account by a date certain, the warrant would once again issue. A warrant of commitment was again issued as a result of the executrix’s failure to account, and yet another stay was granted until a date certain.
However, in lieu of filing her account, the executrix moved for an extension of time to file her account and for another stay of the warrant of commitment pending the outcome of the application.
In opposition to the relief requested by the executrix, the respondents maintained that she transferred to herself all estate assets, contrary to the provisions of the decedent’s Will, and requested that the court, inter alia, issue an order revoking the letters testamentary of the executrix, appointing one of them as the fiduciary of the estate, and imposing sanctions.
The court opined that although a warrant of commitment remained outstanding, the remedies afforded by the provisions of SCPA §2205 were likely to prove more fruitful than the imprisonment of the executrix for failure to comply with the court’s directives. Accordingly, the court denied the request by the executrix for another extension of time to account, suspended the letters testamentary issued to her, directed that a hearing be held on the issue of whether the executrix’s letters testamentary should be revoked and one of the respondents be appointed in her place and stead, and ordered that on the hearing date the parties be prepared to discuss a turnover of the books and records of the estate, and whether a trial date should be fixed for the successor fiduciary to take and state the account of the suspended executrix.
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Practice Tip: Absent grounds for disqualification, a duly nominated executor is entitled to preliminary letters testamentary to provide for the immediate administration and protection of the assets of the estate in instances where there may be a delay in probate. See In re Rullan, 11/15/2010 NYLJ.19 (col 2) (Sur. Ct. Bronx County).
Hot Topics in Trusts and Estates
The summer has seen a multitude of significant decisions impacting practice and procedure in the Surrogate’s Court. Aside from the decisions rendered by the Court of Appeals in Matter of Schneider, 2010 N.Y. Slip. Op. 05281 and Matter of Hyde, 2010 N.Y. Slip. Op. 05676, both of which have been the subject of recent postings on this site, consideration should be given to the following decisions of interest.
Life Tenancy versus Right of Occupancy
The distinction between a life tenancy and a right of occupancy has been the subject of numerous Surrogate’s Court opinions. This past June, the court in In re Saviano, N.Y.L.J., 6/4/10, p. 42 (Sur. Ct., Suffolk County) had occasion to determine whether a beneficiary under the decedent’s Will was devised a life estate or merely a right to occupy the decedent’s former residence. The court opined that a life estate conveys exclusive ownership of the land during the lifetime of the life tenant, subject to certain limitations or duties. By comparison, a right of occupancy is a lesser interest in realty, conveying to the recipient a “personal privilege” in the property without the benefits of a life estate.
In reviewing the terms of the Will, the court noted that the beneficiary was devised “the right, during his lifetime, to reside in” the subject premises. The provisions of the Will were otherwise silent as to the nature of the bequest. Nevertheless, the court found it significant that the decedent did not use the words “life estate”, nor the descriptive words “use and occupancy” in making the subject bequest, phrases which are traditionally used to denote a life tenancy, although not dispositive.
Further, there was no language in the instrument defining the duties or limitations imposed upon the beneficiary.
Accordingly, in view of the foregoing, the court held that the beneficiary’s interest in the subject property consisted solely of a right of occupancy.
The Advocate Witness Rule
The issue of whether counsel for a litigant should be disqualified due to his possible role as a witness at the trial of the matter was recently addressed by the Surrogate’s Court, Westchester County in Matter of Popkin, N.Y.L.J., 6/4/10, p. 42 (Sur. Ct., Westchester County). This was a contested probate proceeding in which the objectant moved to disqualify petitioner’s counsel from representing the estate. The record revealed that the decedent died survived by his spouse, who was the petitioner and primary beneficiary under the propounded instrument, and a son from a prior marriage, who was the recipient of a $25,000 bequest. Objections to probate were filed by the decedent’s son
In support of his motion to disqualify petitioner’s counsel, objectant maintained that counsel would be called as a witness in the Will contest; that he had a unique knowledge as to decedent’s mental capacity and the possible exertion of undue influence at the time he executed the propounded Will, and that as one of the two attesting witnesses to the instrument, he could offer key testimony as to due execution. The petitioner opposed the application claiming that it was premature, that nothing had been shown by the objectant to substantiate that his testimony was necessary, and that the advocate-witness rule did not preclude him from representing petitioner in connection with the administration of the estate.
The court opined that the provisions of Rule 3.7 prohibit, inter alia, an attorney from acting as an advocate before a tribunal in a matter in which the lawyer is likely to be a witness on a significant issue of fact. The burden of proof on the issue of disqualification is on the party requesting it, who must demonstrate that the expected testimony of the attorney is necessary and prejudicial to the attorney’s client. Because disqualification impacts upon a party’s right to counsel of his own choosing, disqualification should not be applied mechanically.
Within the foregoing context, the court acknowledged that it had consistently adhered to the majority view that allowed the attorney draftsman in a contested probate proceeding to serve as counsel for the petitioner up until the time of trial. Finding that the language of the new advocate witness Rule was substantially the same as the provisions of the prior disciplinary rule on the subject, the court concluded that established case law authorizing this pre-trial representation continued to be applicable.
Accordingly, the court denied the motion to the extent that it allowed the attorney draftsman of the propounded Will to represent the petitioner up to the point of trial, and otherwise granted the relief requested.
Appointment of Limited Fiduciary to Resolve a Deadlock
The appointment of a limited fiduciary under the SCPA can prove an effective means of resolving hostility between co-fiduciaries. In In re Cushing, N.Y.L.J. 7/7/10 p.34 (Sur. Ct., New York County) (Webber, S.) the court invoked the provisions of the statute in a contested discovery proceeding in which the petitioner moved for summary judgment on the on the issue of the appointment of a third fiduciary for the limited purpose of resolving disputes between the co-executors with respect to the sale of real property.
The said realty was the principal asset of the decedent’s estate. The executors agreed that the property had to be sold, and actively marketed the premises through several real estate brokers since 2004, successively lowering the asking price, though to no avail. In order to cover the cash deficit of the estate, and more particularly the costs of maintaining the property, the fiduciaries, who were also the sole beneficiaries of the estate, entered into an interim agreement to cover the charges from their own funds.
Thereafter, cooperation between the co-fiduciaries broke down, and they were unable to agree on a broker to list the property, the price at which it was to be offered, or payment of the carrying costs. The court found the deadlock between the co-executors to be detrimental to the estate, most particularly to the sale of the real property. While it noted that it had the authority to require a fiduciary to comply with such directions as it may make whenever fiduciaries disagree with respect to any issue affecting the estate (SCPA 2102(6)), it concluded that the sale of the subject property would require active decision-making that a single order could not necessarily address.
Under such circumstances, the court held that the appointment of a third fiduciary was appropriate to break any deadlock through the rule of the majority.
Accordingly, the application of the petitioner was granted.
Court Examines Beneficiary's Right to Sell Real Property
The issue of ownership of real property has frequently arisen in Surrogate’s Court proceedings, most particularly, in the context of applications by a testamentary beneficiary to sell or dispose of realty devised pursuant to the terms of the decedent’s Will. As discussed in my article in the New York Law Journal several years ago, often-times the outcome of such a application hinges upon a determination of whether the beneficiary holds a life estate in the premises or simply a right of occupancy or other lesser interest (see Ilene Sherwyn Cooper, The Meaning of a Life Estate and Other Decisions of Interest, NYLJ, Nov. 10, 2005, at p.3).
Recently, this issue was again before the court in In re Gullo, 7/6/2009 NYLJ. 37 (col 1) (Sur Ct, Suffolk County). In Gullo, the threshold issue before the court was whether the provisions of the decedent’s will provided the petitioner with a life estate in the decedent’s residence. The petitioner requested leave of court to purchase the premises, and to credit herself with the value of her life estate in the property and improvements she made to the premises subsequent to the decedent’s death. The application was opposed by the trustee under the decedent’s will, on the grounds that the petitioner did not receive a life estate in the realty, but rather a fee on limitation. Petitioner claimed the contrary, maintaining that the language in the decedent’s Will provided her with a life estate, and that a sale of the property was both expedient and in the best interests of the estate.
Pursuant to the pertinent provisions of his Will, the decedent devised and bequeathed the subject property to the petitioner, his daughter, as a “life estate”, and authorized her to reside and remain in the premises for as long as she wished, so long as it remained her principal residence. If for any reason the decedent’s daughter declined the life estate, or decided to vacate the property, the Will directed that the property be sold and the net proceeds be distributed pursuant to the provisions of the residuary clause.
In analyzing the issue as to the nature of the petitioner’s interest in the subject premises, the court held that a life estate in property conveys exclusive ownership of the land during the lifetime of the life tenant, subject only to certain well-defined limitations or duties. Moreover, the holder of a life estate may, under certain circumstances, be able to force the sale of the property and collect the value thereof, assuming it is demonstrated that the sale is expedient. The court opined that in comparison to a life estate, a right of occupancy or a lesser interest to a life tenancy is a personal privilege that does not confer the benefits of a life estate.
Although the language of the decedent’s Will utilized the words “life estate” in referring to the petitioner’s interest, the court did not consider that fact dispositive of the issue raised. Further, the Court found that the conditions expressed in the Will requiring the petitioner to pay taxes and maintenance on the property were inconsequential to the result, and insufficient to elevate petitioner’s ownership from a right of occupancy to a life tenancy. Rather, the Court held that the language employed in the instrument was significant of a “fee on limitation”, as defined in EPTL 6-1.1(a)(3). That being the case, the court concluded that petitioner’s interest did not lend itself to computation or application of a credit for a life estate.
Accordingly, the court determined that the petitioner held a fee on limitation in the property and was not entitled to a credit for a life estate. The court further opined that the expediency of the sale was unclear from the record inasmuch as the circumstances which usually give rise to such a conclusion usually involves sales to third parties, and not necessarily parties in possession of the property.
The Due Execution of Wills
The due execution of a will requires that the elements of EPTL 3-2.1 be complied with before the instrument is admitted to probate. However, only substantial compliance with the provisions of the statute need be shown in order for due execution to be found. The meaning and scope of this provision has been the subject of judicial decision in recent years as evidenced by the following opinions:
Signature at the End of the Document
The provisions of EPTL 3-2.1 require that the decedent sign a will at “the end” thereof. The meaning of this provision was discussed by the court in In re Mobley, N.Y.L.J. Mar. 20, 2009, at 35 (Sur. Ct. New York County), in which the court was presented with the issue of whether the propounded instrument should be denied probate due to the irregular order of the signatures of the testatrix and witnesses.
Specifically, after the dispositive provisions of the Will, and the appointment of the executrix, there appeared preprinted two lines intended for the date and the signature of the testatrix. Those lines, however, were blank. Below these two lines was a pre-printed attestation clause, to which the date and signature of attesting witnesses was appended. Following the attestation clause there appeared a preprinted affidavit of attesting witnesses containing the names, but not the signatures of the attesting witnesses. Rather, on one of the lines for a witness, there appeared the signature of the testatrix.
In finding that the Will had been duly executed, the court opined that a testamentary instrument can be admitted to probate even if the procedure for execution and attestation do not take place in the precise order established by statute. In this regard, the fact that the signatures of the witnesses appear before the testatrix’s signature does not invalidate a will. Further, the court held that although the testatrix did not affix her signature immediately after the dispositive provisions of the instrument, but instead after the attestation clause and the preprinted affidavit of attesting witnesses, the signature of the testatrix nevertheless appeared “at the end” of the instrument as required by the provisions of EPTL 3-2.1. Indeed, the court noted that all dispositive provisions appeared before the testatrix’s signature.
Accordingly, probate of the instrument was granted.
Post-Death Signature of Witnesses Invalidates Will
In re Estate of Lederman, N.Y.L.J., May 22, 2002, p. 19, col. 5 (Sur. Ct., New York County), two of the residuary beneficiaries moved for summary judgment denying probate to a codicil that contained a substantial pre-residuary bequest. A Will and four codicils of the decedent were offered for probate. Under the Will and three of the codicils, the decedent made some minor pre-residuary bequests and bequeathed 90% of her residuary estate to her niece and nephew, and a charitable institution. These instruments were prepared by an attorney who supervised their execution.
The contested codicil was executed approximately 10 weeks before the decedent died, and was a one -page typewritten instrument, labeled “Codicil.” Pursuant to its terms, the sum of $300,000 was left to the decedent’s caretaker. Although the decedent signed the instrument, it was witnessed by only one person, who was designated as the executrix under a provision of the penultimate codicil. The witness stated that she prepared the codicil pursuant to the decedent’s instructions, and that the decedent had informed her that the bequest was to be a bonus to her caretaker.
The individual residuary beneficiaries moved for summary judgment on the ground that the codicil had not been properly executed in accordance with the provisions of EPTL 3-2.1, since only one witness had signed the instrument. The proponent acknowledged the deficiency in the instrument, but nevertheless maintained that it could be cured by her husband, who was present in the room at the time the codicil was executed. The proponent requested that her husband sign the instrument as a witness, albeit after the decedent’s death.
The court denied the application, and granted summary judgment in the movants’ favor, finding that a witness cannot effectively subscribe a Will after the testator has died. This principle is designed to prevent fraud. Furthermore, the court found that the second attestation proposed would be unavailing since it would not occur within the thirty day period prescribed by statute.
Witness/Beneficiaries
The due execution of a Will requires that the testator affix his name or acknowledge his signature to at least two attesting witnesses. The provisions of SCPA 1404 require that at least two of the attesting witnesses to the Will be produced before the court and examined before a Will is admitted to probate. When an attesting witness is also a beneficiary under a propounded Will the question arises as to whether the Will can nevertheless be admitted to probate, given the financial interest of the beneficiary in the instrument. Under such circumstances, the law provides that a Will may be admitted to probate, but the disposition to the witness/beneficiary shall be void, if the witness’ testimony is necessary to admit the Will to probate.
The foregoing principles were recently applied in a case of apparent first impression decided by the Surrogate’s Court, New York County, in In re Estate of Wu, NYLJ, April 27, 2009, p.19. Before the court was an application by the executor of the decedent’s estate for an order directing the decedent’s brother to pay his proportionate share of estate taxes. The brother opposed the application arguing that the tax apportionment clause in the Will exonerated him from liability.
The decedent’s brother was the beneficiary of two life insurance policies on the decedent’s life, but also was one of the two attesting witnesses to the instrument. Under the circumstances, the court found that his testimony was necessary to the probate of the Will, and pursuant to the provisions of EPTL 3-3.2, declared the tax exoneration clause of the Will ineffective as to him. Specifically, the court reasoned that the provision, to the extent that it discharged an obligation of the decedent’s brother, was tantamount to a beneficial disposition to him, within the scope of the statutory dictates pertaining to witness/beneficiaries.
The court opined that while the result of its opinion was ostensibly harsh, it was not so harsh as to deprive the decedent’s brother of his inheritance, i.e. the insurance proceeds, albeit net of estate taxes. Indeed, the court noted that in most instances in which the statute is applied, the witness/beneficiary under the propounded Will is denied his entire bequest. Nevertheless, the court cautioned attorney-draftspersons utilizing a tax exoneration clause to be fully informed of the recipients of the testator’s non-probate assets in order to avoid unintended consequences.
Cases of Attorney-Fiduciaries
Within the past year, several decisions have been rendered that impact upon the appointment of the attorney as fiduciary, and provide cautionary tales to the attorney-draftsman of instruments in which counsel is named to serve in a fiduciary role.
In re Estate of Wrobleski, NYLJ, 6/4/08, p. 41 (Sur. Ct. Kings County)(Sur. Johnson), the court was confronted with the issue of whether the acknowledgement of disclosure submitted by the nominated attorney-fiduciary was in compliance with the dictates of SCPA 2307-a.
The court noted that while the statements contained in the acknowledgment did not comply with the current requirements of SCPA 2307-a, they did appear to comport with those required by the statute at the time the acknowledgment was executed.
Nevertheless, the court noted that an essential element missing from the acknowledgment was the signature of the witness to the instrument. It was held that the petitioner’s attempts to cure the defect after-death were insufficient to rectify the attorney-fiduciary’s failure to comply with a material requirement of the statute. Specifically, in this regard, the court held that inasmuch as both model statements included in the statute contained a line for the witness’ signature, the signature was a substantial component of the statutory requirement that could not be overlooked. Since the statute failed to provide any remedy for failure to include the signature of the witness to the statement, the court found, under the circumstances, that the petitioner’s commissions should be reduced to one-half.
In re Estate of Deener, 2008 N.Y. Slip Op 28470, N.Y. Sur., Nov. 28, 2008 (Sur. Roth), the issue before the court was whether the disclosure requirements of SCPA 2307-a were applicable to the proponent, an out-of-state attorney named as fiduciary.
The decedent’s Will, which had been prepared by proponent, had been executed in New Jersey and named proponent’s New Jersey firm as the executor. Approximately two years after the execution of her Will, the decedent executed a codicil in which she named the proponent as fiduciary of her estate rather than the law firm.
In petitioning for probate of the decedent’s Will, proponent failed to file a disclosure statement pursuant to SCPA 2307-a with the court. Hence, the question arose as to whether she was subject to the provisions of the statute.
In determining that the statute applied to non-domiciliary attorney-fiduciaries, the court examined its legislative history and noted that it was designed to curb the possible abuses that can be part of the drafting of a will. The court determined that there was nothing in the language of the statute which exempted out-of-state attorney/fiduciaries from the scope of its provisions.
Accordingly, the court admitted the decedent’s Will to probate and limited the commissions of the attorney-fiduciary to one-half the amount that would otherwise be allowable under SCPA 2307.
In re Estate of Moss, NYLJ, 9/24/08, p. 40 (Sur. Ct. New York County)(Sur. Roth), the court had occasion to review the disclosure statements provided by the attorney-draftsmen fiduciaries under two propounded Wills.
The facts of the first case (Moss) revealed that the decedent executed a Will in which she named as executors a friend, who predeceased her, and the attorney-draftsman of the instrument. At the time she executed her Will, the decedent signed a disclosure statement under SCPA 2307-a. Two years later the decedent executed a codicil to her Will which did not involve any fiduciary appointments. At the time the codicil was executed, no disclosure statement was again signed. Accordingly, the issue before the court was whether the disclosure statement obtained when the Will was signed was sufficient to shield the attorney-draftsman from a reduction of commissions pursuant to SCPA 2307-a.
Upon review of the circumstances and the legislative history of the statute, the court concluded that the circumstances surrounding the execution of the said instrument did not require that a further disclosure statement be procured from the testator. Therefore, full statutory commissions were allowed to the named executor.
In the second case before the court (Hess), the court reached a different result. There, the record revealed that the decedent executed a Will in which he named one of his children and a lawyer to serve as executors. He also executed two codicils subsequent to the date of the Will. While the first codicil made no changes in the fiduciary appointments, the second codicil changed the original fiduciary designations by naming as executors the draftsman of the instrument and two of the decedent’s children.
At the time he executed his Will, the decedent executed a disclosure statement which conformed to the requirements of SCPA 2307-a as then in effect, which was witnessed by the attorney-draftsman, who was a partner of the named attorney-fiduciary in the propounded instrument and a named fiduciary in the second codicil.
The question before the court was whether the partner was qualified to serve as a witness to the disclosure statement for purposes of the statute. The court opined that in view of the affiliation between the attorney-executor and the draftsman/partner, the disclosure statement was not “witnessed” in accordance with the purpose of the statute, but rather by a nominee of the attorney-fiduciary. Thus, the court held that he was not independent, and could not serve as a witness to the disclosure statement. The commissions of the attorney-fiduciary were therefore limited to one-half, as provided in the statute.
Author’s Note: For a more in-depth discussion of the foregoing decisions, refer to the New York Law Journal, Trusts and Estates Update, by Ilene Sherwyn Cooper, Esq., dated January 12, 2009, p.3, the New York Law Journal, Trusts and Estates Update, dated November 17, 2008, p. 3 and New York Law Journal, Trusts and Estates Update, by Ilene Sherwyn Cooper, Esq., dated July 14, 2008, p.3.
Cases of Fiduciary Removal or Disqualification
This past year has been witness to multiple applications for the disqualification or removal of a fiduciary. While a decedent’s choice of a fiduciary is generally accorded great deference, there are, nevertheless, instances in which a testator’s choice is superseded by the best interests of an estate or trust and its beneficiaries. Judicial discretion in these cases is motivated by various concerns as evidenced by the following decisions:
In In re Brody, NYLJ, 10/17/08, p. 31 (Sur. Ct. Nassau County), the decedent’s son petitioned to remove his mother and sister as co-trustees of a testamentary trust created for his benefit on the grounds of hostility. The co-trustees moved to dismiss the petition for failure to state a cause of action and the court converted it to a motion for summary judgment.
In denying the application, the court opined that while hostility may prove to be a basis for disqualifying a person from being appointed fiduciary, this result will only occur when the friction between such person and the beneficiary interferes with the proper administration of the estate. To this extent, the court held that an evidentiary hearing was required in order to determine whether litigation pending between the parties in the Supreme Court impaired the estate’s administration to such a degree as to warrant the removal of the fiduciaries.
In In re Estate of Lurie, NYLJ, 6/4/08, p. 40 (Sur. Ct. New York County), application was made by the three executors named in the propounded Will for preliminary letters testamentary.
The record revealed that shortly before the execution of the propounded instrument, the decedent, an artist, suffered from one or more strokes. The record further revealed that soon after the propounded instrument was signed, the decedent suffered a massive stroke which left him completely aphasic.
Approximately six months before the decedent’s death on January 7, 2008, an action was commenced in Supreme Court on the testator’s behalf by Ms. Stein, an owner of an art gallery, purportedly in her capacity as decedent’s attorney-in-fact. Ms. Stein alleged that the decedent had revoked a prior power of attorney that had been given to the attorney-draftsman of his Will, on the grounds that he had mishandled the decedent’s assets. The attorney-draftsman disputed the validity of Ms. Stein’s power of attorney, and denied that his own power had been revoked. The Supreme Court litigation was ultimately resolved pursuant to an agreement, which contained numerous and generous financial provisions for the benefit of Ms. Stein and the attorney-draftsman.
The testator died several days after the execution of the agreement, with an estate of approximately $30 million, and only one known distributee. The court noted that although the testator had made it clear to the attorney-draftsman that he wanted his estate to pass free of estate taxes, the propounded instrument as drafted failed to qualify for the charitable deduction contemplated by the decedent.
The record revealed that the estate was in need of the appointment of a preliminary fiduciary. However, based upon the circumstances, the court concluded that none of the named executors in the Will should be appointed to serve in that capacity. In pertinent part, the court questioned the validity of the propounded instrument, and found that the Supreme Court action raised serious questions regarding the qualifications of the attorney-draftsman and Ms. Stein, whom the attorney-draftsman had designated to serve as a third fiduciary. Moreover, while the court noted that the second named fiduciary was not implicated in the preparation of the Will, it court concluded that he was inexperienced in sophisticated business affairs, and any requirement that he post a bond would be too costly to the estate.
Accordingly, based upon the foregoing, the court held that the best interests of the estate required the appointment of a corporate fiduciary as temporary administrator.
In In re Estate of Isaacson, NYLJ, 6/23/08, p. 35 (Sur. Ct. Kings County) each of the named co-executors in the decedent’s Will, a nephew of the decedent, and a distant relative of the decedent through marriage, who was also the attorney-draftsman of the instrument, objected to each others' appointment.
Pursuant to the pertinent provisions of the propounded instrument, the decedent devised and bequeathed his residuary estate in four equal shares. In addition to his Will, the decedent executed a Durable Power of Attorney naming his nephew as his attorney-in-fact.
The record revealed that prior to his death, the decedent’s nephew requested and received from the attorney-draftsman the original power of attorney, and thereupon utilized same to transfer over $500,000 from the decedent’s accounts into joint accounts in his name and the decedent’s, which were thereafter utilized by him for his family’s benefit. The court found that the actions taken by him, as the decedent’s attorney-in-fact, were detrimental to the decedent and his estate, and demonstrated improvidence and a want of understanding.
Insofar as the attorney-draftsman’s eligibility was concerned, the nephew alleged that he was unfit to serve due to alleged misstatements made in the change of address form filed with the Post Office in order to have the decedent’s mail forwarded to the nephew’s law firm. The court held that the misstatements were of no consequence to counsel’s qualification to serve, and that his actions to preserve the decedent’s mail demonstrated that he was acting responsibly.
Based upon the foregoing, the court disqualified the decedent’s nephew from serving as executor of the decedent’s estate pursuant to SCPA Section 707(1)(e), and the objections to the appointment of the attorney-draftsman were dismissed.
Author’s Note: For a more in-depth discussion of the foregoing decisions, refer to the New York Law Journal, Trusts and Estates Update, by Ilene Sherwyn Cooper, Esq., dated November 17, 2008, p. 3 and New York Law Journal, Trusts and Estates Update, by Ilene Sherwyn Cooper, Esq., dated July 14, 2008, p.3.
