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.
