While most decisions rendered by the Surrogate’s Court result from an affirmative request for relief, occasionally the court will address an issue on its own motion when justice or the exercise of its inherent or statutory power requires. One of the better known instances in which the Surrogate’s Court undertook this role was Stortecky v. Mazzone, 85 NY2d 518 (1995), a case that addressed the court’s inherent authority to fix and determine legal fees. This post examines two recent opinions wherein the Surrogate’s Court, again, acted on its own initiative to achieve what it considered the proper result.

SCPA 1408 and the Duty to Admit a Valid Will to Probate

In In re Friedman, NYLJ, Mar. 13, 2017, at 22, the Surrogate’s Court, New York County, was confronted with two petitions requesting the admission to probate of a purported will of the decedent, dated April 5, 2011. The initial petition was filed by the nominated executor under the instrument and objections to probate were filed by the decedent’s daughter. Thereafter, the daughter withdrew her objections to probate, and filed a cross-petition for probate requesting that she, and not the nominated executor, be appointed fiduciary.

Despite the absence of objections to probate, the court noted several deficiencies on the face of the instrument, as well as evidence in the record that created “serious” concerns regarding its execution and the decedent’s testamentary capacity. More specifically, the court observed that the instrument arguably failed to dispose of any testamentary property, that the decedent’s name was misspelled, and that while the instrument contained a detailed listing of over 30 stock holdings and accounts, a year before the execution date, the decedent had been found by an examining psychiatrist to have cognitive limitations, and was unaware of his income.

In view thereof, and in accord with the provisions of SCPA 1408(1), the court scheduled a hearing in order to satisfy itself as to the genuineness of the propounded will and the validity of its execution. Petitioner, who was the only witness to testify, stated that the decedent drafted and typed the instrument, and later executed the document, without the supervision of an attorney, in the presence of two of petitioner’s friends. No explanation was given regarding the discrepancies in the instrument, or to mitigate the court’s concerns about the decedent’s mental capacity. Moreover, no explanation was provided as to the reference in the instrument to a date and event that occurred after the date of its execution, and the existence of the pre-typed names and addresses of the witnesses, despite petitioner’s contention that the decedent had never met them prior to the will being signed.

Accordingly, based on the foregoing, and the record as a whole, the court held that it was not satisfied that the will was valid, and denied the petition and cross-petition for its probate.

Surcharge of Fiduciary, Sua Sponte

Because a fiduciary is presumptively entitled to statutory commissions, an objectant in a contested accounting proceeding generally has the burden of demonstrating that fiduciary commissions should be denied. In In re Colt, NYLJ, Apr. 14, 2017, at 22 (Sur. Ct. New York County), the court seemingly deviated from this rule when it exercised its authority to review sua sponte the fiduciary’s commissions as executor and trustee.

Before the court were contested accountings of the fiduciary as executor of the decedent’s estate and successor trustee of a revocable trust created by the decedent in 2006. Following the dismissal of certain objections and the withdrawal of others, the court held a hearing on the remaining issue of the legal fees payable to the fiduciary’s counsel. The record at the hearing revealed that much of the work performed by counsel related to conflicting claims to the assets of the estate and trust. More specifically, it appeared that in 2004, the decedent had executed a pour over will and revocable trust into which he transferred his condominium and brokerage account. Two years later, he executed the subject 2006 trust, as well as a new will, which, again, contained a direction that his residuary estate pour over into the trust. The 2004 trust and 2006 trust essentially had the same legatees, however, the beneficiaries of the decedent’s residuary estate differed.

Significantly, the draftsperson of both wills and trusts was the fiduciary, who was the decedent’s estate planning attorney. Of equal note was the fiduciary’s acknowledgment that the decedent intended his assets to pass pursuant to the 2006 trust, and his admission that he failed to have the decedent revoke the 2004 trust and fund the 2006 trust with the assets with which the 2006 trust had been funded. Although the controversy regarding the rightful owners of these assets was settled, the court found that the decedent’s estate had a claim against the fiduciary for the legal fees incurred to resolve the trust issues that were created from his failure to properly advise the decedent. Indeed, regardless of whether the statute of limitations on any claim for malpractice had expired, or whether fiduciary had been shielded from claims based upon the privity doctrine, the court concluded that the fiduciary’s duty as executor required that he make the estate whole for the legal fees resulting from his negligence. His failure to fulfill this duty was exacerbated by his affirmative approval of the considerable legal fees incurred, which he apparently made no attempts to control.

In view thereof, the court held that the fiduciary had demonstrated a gross neglect of his duty and a substantial disregard of the rights of the beneficiaries warranting a denial of his commissions both as executor and trustee.

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.

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).

Stacey Castor (“Stacey”) made national news in 2007, arising from the 2005 murder of her husband, David Castor, Sr., (“Decedent’) as well as the attempted murder of her own daughter. Stacey was convicted of the murder. Having apparently also murdered a prior husband, Stacey became known as the “Black Widow.”

The Castor case recently moved from the criminal to a civil forum, in the form of a lawsuit brought by the son of the Decedent, David Castor, Jr. (“David” or “Plaintiff”), against Stacey and Lynn and Paul Pulaski ("Pulaskis”). David brought the suit in Supreme Court, Onondaga County, seeking recovery from the Pulaskis and from Stacey for fraud and conspiracy surrounding the probate of the Last Will and Testament of the Decedent. After the death of Decedent, Stacey had convinced the Pulaskis to sign their names as witnesses to a false will, benefiting her. The forged Will left Decedent’s estate to Stacey, and was considered in the criminal prosecution of Stacey as a prime motive for the murder of her husband.

The Supreme Court, Onondaga County handed down its decision on December 14, 2011.

During the course of the trial, the Pulaskis had testified that they had been duped by Stacey, and that their motives were good. Lynn Pulaski testified that Stacey had been her best friend. She had felt terrible because of what she had then thought was the suicide of Stacey’s husband, and she wanted to help Stacey out settling the Decedent’s estate.

The Supreme Court Justice (Paris, J.) was not buying it, concluding that,

[b]ased on the evidence and all the pleadings that make up the record of this particular case, including their testimony, it is obvious that Defendants Pulaski were not innocent pawns. They knew what they were doing was wrong and bore false witness to both the Will and Attestation Clause without any hesitancy or reservation. Thereafter, they executed the Attesting Witness Affidavits that they also knew were false. From the record, it is clear that they kept these falsehoods from the Surrogate’s Court and Plaintiff to his detriment throughout the estate proceedings. Defendants Pulaski only ‘came clean’ when the District Attorney’s investigators came knocking on their door and they were given immunity in return for their cooperation and testimony in the criminal prosecution of Co-Defendant Stacey Castor.

The Court continued:

[w]hile the genesis of this action is the heinous crime committed by Defendant Stacey Castor, Defendants Pulaski compounded the crime through their admitted dishonesty… Plaintiff was contesting the purported Last Will and Testament of his father, David W. Castor, Sr., being offered for probate by Defendant Stacey Castor. He withdrew his objections, as he credibly testified, in the face of Defendant Pulaskis’ subsequent execution of the Attesting Witness Affidavits… Defendants Pulaski admitted that they signed in 2005 as witnesses to Decedent’s Will which was dated 2003. Their reaffirmance of this falsehood by signing the Attesting Witness Affidavits, not only harmed Plaintiff, but also subjected the Surrogate’s Court to needless and unwarranted proceedings, thereby detracting from the orderly administration of that Court’s normal, proper and legitimate proceedings.

The Supreme Court went on to find that all three Defendants, the Pulaskis and Stacey, were jointly and severally liable to Plaintiff. The Court assessed both compensatory and punitive damages against all the Defendants, and not just against Stacey, the murderer. As to the Pulaskis, the Court noted that their actions had “compelled Plaintiff to withdraw his objections to the probate of the Will and hoodwinked and deceived the Surrogate’s Court into probating a fraudulent instrument.” Their conduct “was so repugnant and reprehensible so as to satisfy the threshold of moral culpability necessary to allow the imposition of punitive damages."
 

Finally, in an interesting and significant further holding, the Court determined that the Plaintiff was entitled to the recovery of his attorney fees against the Defendants, including the Pulaskis.

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.

 

 

 

In Matter of Smith, 2010 NY Slip Op 20381 (Sur Ct, Bronx County), Surrogate Holzman recently addressed a proponent’s motion to dispense with the testimony of an attesting witness at the SCPA §1404 stage of a probate proceeding. The subject witness had relocated to Florida since the date of the execution of the propounded instrument, and had been uncooperative with the attorney-draftsman, also the attorney for the proponent, for reasons unbeknownst to him. One of the respondent’s daughters opposed the motion.

Ultimately, after being contacted by an investigator hired by the proponent, the witness agreed to a deposition via video conference, assuming she would remain in Florida. Nonetheless, presumably due to disobliging nature of the witness, the proponent sought to dispense with her testimony. 

In support of her motion, the proponent argued that that a commission to obtain the subject witness’ testimony was unnecessary in view of the fact that the attorney-draftsman and one attesting witness had already been deposed, and the uncooperative witness had signed a self-proving affidavit at the time of the execution. She further asserted that she would consent to a commission to obtain the witness’ testimony in Florida only if the cost were borne by the party opposing the motion. Indeed, the proponent claimed that funding the commission would be a hardship for the estate because its only asset was a parcel of real property. 

In response, the opposing party argued that the cost of the commission could be covered by the sale of the estate’s real property, and that testimony of the second attesting witness was pertinent to clarify the events of the execution ceremony.

SCPA §1405 provides that the testimony of an attesting witness can be dispensed with under limited circumstances. Specifically, pursuant to statute the court must be satisfied that, if living, the witness “cannot with due diligence be found within the state or cannot be examined by reason of his physical or mental condition . . .” (SCPA §1405[1]). Thus, the only scenario in which an out-of-state witness’ testimony may be dispensed with is if his examination cannot be obtained with reasonable diligence; but if the testimony can be obtained, SCPA §1405(2) mandates that it proceed by commission upon the demand of any party. Accordingly, Surrogate Holzman denied the motion, granting the respondent’s daughter’s request that the testimony of the Florida witness proceed by commission.

With respect to the issue of which party would bear the costs of the examinations, the court explained that SCPA §1404(5) provides that the estate is to pay for either, “(1) the first two attesting witnesses within the state or (2) if there is no competent witness within the state, the witness without the state who resides closest to the county in which probate proceedings are pending” (Matter of Smith, 2010 NY Slip Op 20381 , *2 [Sur Ct, Bronx County]). The costs of all other examinations are to be governed by Article 31 of the CPLR (see SCPA §1404[5]). Thus, because one of the witnesses in issue resided within the state, the subject examination fell into the latter category.

According to CPLR 3116(d), “unless the court orders otherwise, the party taking the deposition shall bear the expense thereof”. Consequently, the court opined that because the respondent failed to present good cause to persuade it to deviate from that rule, respondent was to pay for the examination. The court further held that the respondent may proceed with the examination by video conference if she were to find it more cost effective than a commission, and, notably, that the proponent may renew her motion to dispense with the testimony if the examination were not arranged within 90 days of the decision and order. 

It appears that the latter portion of this holding is simply a logical extension of the statute. If the party who demanded the examination neglects to ensure its occurrence, it is arguably deemed abandoned. Interestingly, however, the statute includes no such provision.