With the spread of COVID-19 in this State, New York’s government has taken unprecedented steps to address many issues that the COVID-19 pandemic has raised. One of those unprecedented steps is the recent issuance of an Executive Order that temporarily authorizes the remote notarization of documents in New York until April 18, 2020.

As effective March 3, 2020, Executive Law § 29-a provides that, subject to the federal constitution, the state constitution, and applicable federal statutes and regulations, the Governor of this State may issue an Executive Order temporarily suspending any New York statute, among other things, “during a state disaster emergency, if compliance with [the subject statute] would prevent, hinder, or delay action necessary to cope with the disaster” (see Executive Law § 29-a[1]). Executive Law § 29-a authorizes the Governor to issue, by Executive Order, “any directive during a state disaster emergency”, such as an epidemic and a disease outbreak (see id.). The powers vested in the Governor, pursuant to Executive Law § 29-a, during a state disaster emergency are quite broad.

On March 19, 2020, Governor Cuomo issued Executive Order No. 202.7, which temporarily authorizes the remote notarization of documents in New York until April 18, 2020 (see N.Y. Governor’s Executive Order No. 202.7 [Mar. 20, 2020]). Executive Order No. 202.7 provides that “[a]ny notarial act that is required under New York State law is authorized to be performed” by “audio-video technology”, provided that certain conditions are met (see id.). The conditions that must be met are as follows:

  • “The person seeking the Notary’s services, if not personally known to the Notary, must present valid photo ID to the Notary during the video conference, not merely transmit it prior to or after”;
  • “The video conference must allow for direct interaction between the person and the Notary (e.g. no pre-recorded videos of the person signing)”;
  • “The person must affirmatively represent that he or she is physically situated in the State of New York”:
  • “The person must transmit by fax or electronic means a legible copy of the signed document directly to the Notary on the same date it was signed”;
  • “The Notary may notarize the transmitted copy of the document and transmit the same back to the person”; and
  • “The Notary may repeat the notarization of the original signed document as of the date of execution provided the Notary receives such original signed document together with the electronically notarized copy within thirty days after the date of execution” (see id.).

As it relates to notarial acts, the practical effect of Executive Order 202.7 appears to be that, subject to the aforementioned conditions and until April 18, 2020, a person located in New York State can now have a notary public notarize his or her signature without having to physically appear before the notary public. A person need not risk exposing himself or herself to COVID-19 by going into a public place – whether it be an attorney’s office, a bank, or a post office – to have his or her signature notarized on a document that requires a notarial act in order to be valid. Likewise, during these unusual times in which nursing homes are largely closed to visitors, a notary public need not visit a nursing home resident in order to notarize the resident’s signature. In the context of the public health crisis in which we presently find ourselves, the possibility for the remote notarization of documents appears to be an appropriate response.

While Governor Cuomo’s authorization for the remote notarization of documents expires on April 18, 2020, it remains to be seen whether the “cat will be out of the bag” when the COVID-19 pandemic subsides. Indeed, it will be interesting to see whether New York’s Legislature follows the lead of several other states by enacting legislation that permanently authorizes the remote notarization of documents.

To Our Readers –

Although this is not an Estate Litigation topic, we thought you might be interested in this very timely article because of its impact on estate planning. Special thanks to our Estate Planning Group for preparing this content.

Be safe.

 

Wealth Transfer Opportunities with Devalued Assets

The COVID-19 pandemic continues to have far-reaching effects which are expected to be felt for months to come, if not longer.  The economy has been hit hard and the stock market has seen a dramatic reduction in value.  Trying to time the market is like trying to catch a falling knife and no one can be sure as to the duration and extent of losses.  Even though gifting may be the last thing on your mind, the current climate presents a unique opportunity for estate planning.

For 2020, a married couple can protect $23.16 million ($11.58 million per individual) in taxable assets from the federal gift and estate tax.  With proper planning, the same amount can often be protected from taxation in the estates of their children as well.  Additionally, the annual gift tax exclusion amount is currently set at $15,000 ($30,000 per couple).

The following are a few techniques to consider: (i) outright gifts, (ii) gifts to dynasty trusts, (iii) gifts to Grantor Retained Annuity Trusts (“GRATs”), (iv) sales to Intentionally Defective Grantor Trusts (“IDGTs”), (v) substitution of trust assets in IDGTs, and (vi) loans to family members.  Each technique is addressed below.

Outright Gifts

Outright gifts are useful.  They are simple and can be completed quickly.  Note, however, such gifts are included in the recipient’s estate for estate tax purposes and do not provide any spousal or creditor protection.

Gifts to Dynasty Trusts

Gifts to dynasty trusts, if structured correctly, have the added effect of removing the gifted property from the beneficiary’s estate.  If proper exemption is allocated to the gift, the future appreciation on the gifted property will not be subject to estate tax on the beneficiary’s death.  Furthermore, the gift will be protected from spouses and creditors.

Example: Jane transfers stock valued at $5 million (assume the stock was valued at $8 million before the crisis) to a trust for the benefit of her son, Bob, and she uses $5 million of her lifetime gift tax exemption.  Five years later, the stock has increased in value to $8 million.  Jane essentially removed $8 million from her estate and only used $5 million of her lifetime exemption.  The trust property (including future appreciation) will be available for Bob’s benefit but will not subject to estate tax on his death and will not be reachable by his creditors or his spouse.

Gifts to GRATs

A GRAT is a trust to which you transfer property and retain the right to receive annual payments for a set period of time.  If the GRAT is “zeroed out,” the remaining property left in the trust at the end of the term will pass to the beneficiaries without using any of your gift tax exemption.  GRATs are perfect when interest rates are low because any appreciation will pass to the beneficiaries tax free.  Starting on April 1, 2020, the interest rate is only 1.2%, which presents a rare opportunity to make transfers while still potentially removing substantial asset appreciation from your estate.

Example: Fred funds a GRAT with $10 million worth of stock and retains the right to receive an annuity payment of approximately $1.318 million annually for 8 years.  Assuming Fred survives for 8 years and the trust principal grows 5% annually, approximately $2.185 million will pass to the trust beneficiaries and Fred will not have used any gift tax exemption.

Sale to an IDGT

With a sale to an IDGT, an asset is sold to a trust in return for a promissory note (after the trust is funded with seed money).  Appreciation on the trust assets in excess of the sale price will pass to the beneficiaries of the trust estate tax free.  As discussed above, effectuating this type of transfer while interest rates are low enables you to pass more assets to your family, as the trust will have to pay less interest on the note.

IDGTs: Substituting of Assets

Oftentimes, the terms of an IDGT provide you with the power to substitute the IDGT’s assets for assets of equivalent value.  Exercising this power can be beneficial if a trust asset is expected to substantially decrease in value.  In that event, you can swap the asset with decreasing value for cash or another asset with increasing value.  As a result, your estate is ultimately reduced (with less property subject to estate tax) and any appreciation on the asset transferred to the IDGT will be removed from your estate for estate tax purposes.

Example: Sally owns real property currently valued at $10 million and expects the property value to increase.  An IDGT created by Sally owns stock also valued at $10 million, but the stock is expected to substantially decline in value.  Sally substitutes her real property for the IDGT’s stock, and dies ten years later when the stock is worth $2 million and the real property is worth $15 million.  Sally’s estate now includes property valued at $2 million while the IDGT, which is not subject to estate tax when Sally dies, has an asset with a value of $15 million.

Note that you should consider the tax basis in the property being substituted, as there could be potential gain or loss when the property is later sold.

In addition to the substitution example discussed above, consider the following scenario: if an IDGT over which you hold a power of substitution owns an asset with a low tax basis, substitute that low basis asset for a high basis asset that you own individually.  Upon your death, your heirs will receive a “step up” in basis in that low basis asset, which will reduce potential capital gain if the asset is later sold.

Transfers to a GRAT, sales to an IDGT, and substitution of IDGT assets remain powerful estate planning techniques, especially where clients no longer have substantial remaining gift tax exemptions to utilize.

Loans to Family Members

Consider making loans to family members or refinancing existing loans to take advantage of the extremely low interest rates (in April, the short term rate will drop to 0.91% and the midterm rate will drop to 0.99%).

As a reminder, on January 1, 2026, the federal estate, gift, and GST tax exemptions are set to revert back to their pre-2018 levels (approximately $5.49 million per individual), as indexed for inflation.  In fact, there is a real possibility that the exemptions will be reduced before 2026 depending on the outcome of the upcoming election.  At this time, we need to assume that the increased exemptions will go back to their previous levels, which means that there is a limited window to take advantage of the increased exemptions.

During this crisis, our main concern is that you and your loved ones remain safe and healthy.  Please feel free to contact us if you would like to discuss any of the above-mentioned techniques with an attorney.  Of course, we remain available to assist you with any other estate planning needs or inquiries, as it may be a prudent time to revisit your current estate plan and make sure that it works for you given the current climate.

Like other government institutions, New York State Surrogate’s Courts are figuring out how to function during the coronavirus pandemic. The first notice came on Friday, March 13, 2020.   Lawrence K. Marks, the Chief Administrative Judge of the State of New York’s Unified Court system released a memorandum addressing the pandemic and outlining the procedures that were being put in place to reduce courthouse traffic. The March 13 memorandum was silent as to the Surrogate’s Courts. Just two days later an updated protocol memorandum was released announcing that effective as of 5:00 p.m. on Monday, March 16, the Courts would be “postponing all non-essential functions of the courts until further notice.”   As the effects of the pandemic continue to materialize, court closures have become more extensive.   Below is some useful information pertaining to the Surrogate’s Courts across the State.

Announcement pertaining to NYC Surrogate’s Courts

In light of recent developments in the coronavirus public health emergency in New York State, ESSENTIAL APPLICATIONS ONLY will be considered by the Court. Please call the phone number or e-mail below before coming to Court:

Bronx County – 718-618-1894; emadera@nycourts.gov
Kings County – 347-404-9720; daquinn@nycourts.gov
New York County – 917-509-7218; dsanabri@nycourts.gov
Queens County – 718-298-0777; jlbecker@nycourts.gov
Richmond County – 718-675-8504; rcerrach@nycourts.gov

New York County Surrogate’s Court –http://ww2.nycourts.gov/courts/1jd/surrogates/index.shtml

IMPORTANT NOTICE

As part of the measures adopted by the NYS Unified Court System to combat the spread of COVID-19, the following actions are being implemented by the New York County Surrogate’s Court:

  • All matters scheduled to be heard at calendars from March 17, 2020 through April 10, 2020 are being adjourned administratively. Parties must not appear in court. Notices of future dates for court appearances will be sent by regular mail.

 

  • No trials or hearings will commence until further notice. This includes 17-A Guardianships and finalizations of adoptions. Trials or hearings that have been adjourned to a date in March or April will be adjourned again.

 

  • Until further notice, all papers must be filed by regular mail. If papers are brought to the courthouse in person, they are to be left in a box outside room 303. Court staff will contact petitioners or their counsel with directions once papers are reviewed.

 

  • Only essential personnel will be at work at the courthouse and delays should be expected in the review, processing and scheduling of matters.

 

  • Effective immediately, the court will no longer issue citations returnable before the court in March, April or May, 2020.

 

  • Parties with urgent matters may contact the Chief Clerk’s Office at (917) 509-7218. Meetings and conferences in urgent matters may be arranged and will take place by conference call or via Skype with the proper court personnel.

 

  • The terms of this notice are subject to modification as the need arises

The Queens County Surrogate’s Court issued a March 16, 2020 memorandum in furtherance of the Chief Administrative Judge’s highlighting specific procedures being taken by the Court. A copy of the memorandum can be found by clicking on the following link on the Court’s website –  COVID-19 New Procedure – March 16, 2020

The Bronx County Surrogate’s Court issued a notice laying out the actions being implemented by the Court to combat the spread of the coronavirus. A copy of the notice can be found by clicking on the following link on the Court’s website – Covid-19 Information, March 17

Nassau County issued an emergency notice postponing all non-essential functions until further notice. A copy of the emergency notice can be found on the Court’s website – http://ww2.nycourts.gov/doc/29321

Although the Nassau County courts previously planned to use the District Court building for filings during the period in which the courts are closed for non-essential functions, the Nassau County courts will be using the County Court building in Mineola (instead of the District Court building). For the Nassau County Surrogate’s Court, there will be one employee who is on premises and will sit at the Surrogate’s Court’s cashier’s window. New filings will not be accepted, except for true emergency applications (i.e., the alleged need for a temporary restraining order when a fiduciary has allegedly acted badly). The courts are attempting to limit traffic to a bare minimum in compliance with the government’s request.

C. Randall Hinrichs, the District Administrative Judge of Suffolk County issued Amended Order No. 22-20 on March 17, 2020. Pursuant to the order, all non-essential matter are administratively adjourned until a date on or after April 30, 2020. A copy of the Order can be found on the Court’s website by clicking on the following link – Administrative Orders, Operational Changes due to Coronavirus Crisis.

Please note that the Chief Judge’s memorandum states that in addressing essential applications, judges will exercise judicial discretion in a manner designed to minimize court appearance and traffic in the courts. The latest news related to the New York State Court System can be found by clicking on the following link – http://www.nycourts.gov/index.shtml

ADDENDUM

On 3/22/20 the Chief Administrative Judge of the Courts, issued an updated directive addressing the New York Court’s ever evolving response to the COVID-19 outbreak.  Per the directive, only “essential matters”, which are more fully described on Exhibit “A” of the Administrative Order may be accepted for filing by the courts.  As previously noted, in addressing these essential applications, judges will exercise judicial discretion in a manner designed to minimize court appearances and traffic in the courts.   The list of essential proceedings is subject to ongoing review and amendment as necessary. 

Section E of the list of essential proceedings includes “any other matter that the court deems essential. Consistent with the goal of the administrative order to limit new filings, this catch-all provision is designed to address the very rare cases where individual facts necessitate an immediate hearing notwithstanding current public health concerns; it will be interpreted restrictively. Persons who believe that a specific pending or new matter should be included in this highly restrictive group should apply to the court for this designation by emergency application, including a detailed explanation of the applicant’s rationale” (www.ny courts.gov/limited-filings.shtml).  Given the ongoing public health concerns, people should use the utmost discretion prior to bringing an emergency application.

 For further guidance on these issues please review the Chief Administrative Judge’s directive, AO/78/20, at www.nycourts.gov/whatsnew/pdf/AO-78-2020.pdf, along with the interpretive guidance at www.nycourts.gov/limited-filings.shtml

Since the last post to this blog on the evolving issue of access to a decedent’s digital assets (Death and Digital Content: Protecting Digital Assets After the Death of a User, March 29, 2019), New York Courts have issued a series of decisions that generally followed the leads of the Serrano and White decisions (as discussed in An Update on a Fiduciary’s Access to the Digital Records of a Decedent, December 19, 2017). This post provides (1) a summary of the legislative intent behind Article 13-A of the EPTL (“Administration of Digital Assets”), (2) a survey of the recent published decisions, (3) tips on applying for disclosure of a decedent’s digital assets, and (4) a discussion of the definition of “electronic communication.”

Legislative Intent

Article 13-A of the EPTL became effective on September 29, 2016. This law serves two primary purposes: (1) to enable a fiduciary to access and administer a decedent’s digital assets while respecting the decedent’s privacy;[1] and (2) to “restore control of the disposition of digital assets back to the individual and [remove] such power from the service provider.”[2] In short, the law is not intended to let a fiduciary simply “step into the shoes” of a deceased user and manage the decedent’s digital assets in the same way as tangibles (e.g., photos, letters). The law requires affirmative direction by an account holder to authorize access to digital assets in the event of death or incapacity.[3] Without express authorization by the user, disclosure is allowed if directed by a court. In the recent cases where a deceased user provided no express authorization for disclosure, to protect a decedent’s privacy by limiting access to non-content information of digital assets has been the established theme.

Recent Published Decisions

In Matter of Coleman (63 Misc 3d 609 [Sur Ct, Westchester County 2019]), the parents of a decedent who died unexpectedly in his sleep at the age of 24 petitioned for a court order directing Apple to disclose data stored in decedent’s iCloud account for the purposes of marshaling decedent’s digital assets, identifying decedent’s medical issues, and determining whether any legal action should be commenced. Apple was cited but defaulted. Finding that the petitioners had not “amply demonstrated” the need to access the content of decedent’s digital assets for estate administration, Surrogate Sall allowed disclosure of non-content digital assets in favor of protecting decedent’s interest in not consenting to disclosure of the content, without prejudice to a new application establishing that disclosure of content information would be necessary.

Similarly, in Matter of Murray (NYLJ, Oct. 21, 2019, at 30 [Sur Ct, Suffolk County]), Surrogate Whelan denied the application for access to content information of electronic communications stored in decedent’s iPhone and associated with decedent’s Apple ID. Petitioner alleged that the information contained in the data was reasonably necessary for the administration of the estate and would particularly “assist in determining the source of drugs obtained by [decedent].” Apple agreed to “transfer ownership of the Apple ID to petitioner” only if a court order specifies, among others, that petitioner is “the ‘agent’ of the decedent and her authorization constitutes ‘lawful consent.’” The Court acknowledged the “delicate balance between a decedent’s right to privacy and a fiduciary’s duty to marshal estate assets,” as emphasized by former Surrogate Cyzgier in Matter of White (NYLJ, Oct, 3, 2017, at 25, col 1 [Sur Ct, Suffolk County]). Finding a lack of proof to substantiate the nexus between the content information sought and administration of the estate, the Court only allowed disclosure of a catalogue of electronic communication (i.e., non-content information).

Most recently, Surrogate Sall has denied an Administrator’s SCPA 2103 petition for access to content information of a decedent’s Google e-mail and directed disclosure of a catalogue only (Matter of Paragon, NYLJ, Dec. 20, 2019, at 21, col 2 [Sur Ct, Westchester County]). Disclosure of e-mail content was sought to ascertain decedent’s intent regarding disposition of certain real property. Even if disclosure of contents of e-mails could be reasonably necessary to estate administration, the Court found that granting unfettered access to decedent’s e-mail (which was also used for decedent’s law practice) “would more likely than not” allow access to communication protected by attorney-client privilege.

Tips on Applying for a Court Order Authorizing Access

The published decisions indicate that courts tend to be sympathetic to a fiduciary seeking access to a decedent’s digital assets, which is often precipitated by an unexpected, tragic loss. Nevertheless, because custodians usually require a court order absent an express authorization by a decedent, New York courts are restrained to allow access only to: (1) non-content information of electronic communications in the form of a catalogue, and (2) digital assets that are not electronic communications, e.g., photos stored in iCloud (Matter of Swezey, NYLJ, Jan. 17, 2019, at 23, col 3 [Sur Ct, NY County]), and information contained in Google Calendar and Contacts (Matter of Serrano, 56 Misc 3d 497 [Sur Ct, NY County 2017]).

The decisions indicate two typical routes to apply for disclosure of digital assets: (1) a small estate proceeding (SCPA Article 13), or (2) an SCPA 2103 proceeding. In a small estate proceeding, the court usually issues a certificate under SCPA 1304(5) directing a non-party custodian to disclose certain digital assets, whereas in a discovery proceeding, process is issued to the custodian. Although it might seem innocuous to dispense with process on custodians who tend to default even when they are served with process, a procedural conundrum might emerge in a small estate proceeding when a non-party custodian later appears to oppose the order.

In applying for a court order directing disclosure of a decedent’s digital assets, a fiduciary must provide sufficient information to assist the court (Matter of Bass, NYLJ, Jun. 25, 2019, at 22, col 4 [Sur Ct, NY County 2019] [dismissing the application without prejudice after petitioner failed to provide the required information]). “Sufficient information” includes the following:

  1. Specific information needed and where it is stored;
  2. The reason why the information sought is reasonably necessary for the administration of decedent’s estate (i.e., the nexus);
  3. Basis for petitioner’s knowledge of the accounts associated with the decedent;
  4. Custodian’s specific requirement for disclosure, e.g., proposed court order; and
  5. Information regarding whether the decedent provided any direction for disclosure or otherwise consented to such, and whether the decedent prohibited disclosure.  (see Matter of Gager, NYLJ, Jun. 28, 2019, at 27, col 1 [Sur Ct, NY County 2019]):

In light of the popularity of digitalized assets and paperless records, the need for a fiduciary’s access to a decedent’s digital assets will only increase. To facilitate a fiduciary’s access, the law should burden neither the custodians nor the courts. Before a standard procedure can be implemented to address the particular needs for ordered disclosure, courts will entertain applications for access on a case-by-case basis. An application that provides the above information tailored to the specific needs will hopefully streamline the process.

Stones Left Unturned—What is “Electronic Communication”?

The stricter requirement for disclosure of content information of electronic communications under Article 13-A of the EPTL can be ascribed to its roots in the federal law. The definition of “electronic communication” derives from the Wiretap Act (18 USC §§ 2510-22) as Title I of the Electronic Communications Privacy Act of 1986 (“ECPA”). Recognizing that “law must advance with the technology to ensure the continued vitality of the fourth amendment” 33 years ago (S Rep 99-541, 99th Congr, 2nd Sess, reprinted in 1986 US Code Cong & Admin News at 3559), Congress enacted the ECPA to amend the federal wiretap law of 1968 by extending to “electronic communications” the privacy protection against unauthorized interception (id. at 3555).

The Stored Communications Act (“SCA”), which is Title II of the ECPA, sets forth internet users’ statutory privacy rights against government surveillance by limiting the government’s ability to compel service providers to disclose users’ information and by restricting service providers from voluntarily disclosing such information to the government (18 USC §§ 2701-12). Specifically, it prohibits custodians from disclosing (1) contents of a communication in their electronic storage to anyone, and (2) non-content information to any governmental entities (18 USC § 2702 [a]). Voluntary disclosure of content information is permissible “with the lawful consent of the originator or an address or intended recipient of such communication” (18 USC § 2702 [a][3]). In the context of disclosing a decedent’s digital assets to a fiduciary, the custodians are concerned about violating the federal law. Rather than acknowledging a fiduciary’s consent as “lawful consent” under the federal statute (id.; see Ajemian v Yahoo!, Inc., 478 Mass. 169 [2017] [finding that fiduciary could “lawfully consent” for disclosure of contents of decedent’s email]), the RUFADAA and New York law require proof of a decedent’s consent or a court order for disclosing content information of electronic communications

Absent congressional intent to preempt probate law in the ECPA (see Ajemian v Yahoo!, Inc., 478 Mass. at 178), the definition of “electronic communication” as adopted from the Wiretap Act could interfere with a fiduciary’s estate administration under Article 13-A of the EPTL. For example, when a decedent shared Google calendar entries or photos stored in iCloud with another individual, was there transfer of information that should prohibit disclosure of such calendar entries and photos under the SCA? The interpretation of a fiduciary’s access to a decedent’s digital assets is truly a work in progress.

 

 

[1] NYSBA memorandum in support of the proposed legislation (the “NYSBA Memo”), page 1.

[2] New York State Assembly Memorandum in Support of Legislation A 9910A (the “Assembly Memo”).

[3] The NY law was modelled after the Uniform Law Commission’s Revised Uniform Fiduciary Access to Digital Assets Act (2015) (the “RUFADAA”) which was endorsed by major service providers like Facebook and Google. As of January 26, 2020, the RUFADAA has been adopted and enacted by 44 states and introduced in four other states and District of Columbia (Uniform Law Commission).

 

New York CPLR 3122(d) provides that the “reasonable production expenses” incurred by a non-party’s compliance with a subpoena shall be defrayed by the party issuing the subpoena. May a non-party’s counsel fees related to responding to a subpoena involving the production of electronically stored information be included as part of the “reasonable production expenses”?

This largely unsettled question was recently answered in the affirmative by Surrogate Peter J. Kelly in Matter of Khagan, 2019 NY Slip Op 29352 [Sur Ct. Queens Co. Sept. 18, 2019], who noted that “there is a dearth of Surrogate’s Court opinions on this issue”. Upon consideration of the limited relevant case law, the policy behind the statute, and the facts giving rise to the document discovery dispute, the Court awarded a non-party $40,000 in counsel fees and $5,571.28 for an e-discovery vendor’s services, pursuant to CPLR 3122(d). The Khagan decision presents an instructive analysis that may guide both attorneys issuing subpoenas duces tecum and those advising clients in receipt of such subpoenas.

Factual Background

Khagan involved a contested trustees’ accounting where the trust owned real property in Manhattan. The trustees retained the non-party as a consultant to assist in the development of that property. The property was never developed and the objections to the trustees’ accounting challenged payments from the trust to the non-party consultant.

In response to subpoenas served by the objectants, the non-party’s counsel inquired about payment of the reasonable costs of production and was informed that the objectants would share those costs equally. None of the communications between counsel about the subpoenas, over a period of months, concerned the non-party seeking counsel fees. There was some discussion between the attorneys about limiting the scope of the subpoenas, but no agreement was reached.

The non-party’s attorney advised the objectants’ counsel that approximately 20,000 electronically stored files had been collected which would need to be reviewed before production. Following the non-party’s attorneys’ review, 11,650 records were deemed responsive and not privileged and then shared with the trustees’ counsel for their own privilege review.

The responsive records were ultimately placed on a flash drive and the non-party’s attorneys conditioned delivery to the objectants on their payment of (i) e-discovery vendor invoices totaling $5,571.28 and (ii) the non-party’s legal fees of $92,076.04. The objectants refused and the non-party moved, pursuant to CPLR 3122(d), to compel the objectants to pay such expenses as “reasonable production expenses” incurred in responding to the objectants’ subpoenas.

NY CPLR 3122(d)

CPLR 3122(d) provides that “[t]he reasonable production expenses of a non-party witness shall be defrayed by the party seeking discovery.” The policy behind the rule is that a non-party should not be burdened with the costs of litigation to which that non-party is not related, especially when those costs may be significant. The statute does not define what constitutes “reasonable production expenses.”

The Non-Party’s E-Discovery Vendor Fees

In Khagan, Surrogate Kelly recognized that beyond the actual copying/reproduction, “there are labor related costs in the search, retrieval and production of the documents, and often the expense of an e-discovery professional. Logically these costs incurred by a non-party should unarguably be compensable as reasonable production expenses.”

In support of its motion, the non-party submitted invoices from an electronic discovery vendor for services in facilitating the collection, hosting and production of the records totaling $5,571.28. The Court ordered the objectants to pay this amount in full.

The Non-Party’s Legal Fees

In further support of its motion, the non-party submitted its attorneys’ time records totaling $92,076.04 for services related to the objectants’ subpoenas. The Court noted there is no specific reference to attorney’s fees at CPLR 3122 nor are there many decisions addressing whether attorney’s fees are included as “reasonable production expenses”.

While the Surrogate’s Court does not have rules governing e-discovery, the Surrogate found a review of such rules in the Commercial Parts of Nassau County and New York City instructive. The Court observed that the procedure followed here by the objectants and non-party “did not remotely comply with any of these guidelines, especially with respect to the discussion of costs.”

The Court held:

Upon the court’s reading of the statute, case law, commentaries and various court rules for the commercial parts, and considering the rational[e] underlying the rule, the court is of the opinion that legal fees incurred by a non-party conducting e-discovery in complying with a subpoena are potentially reimbursable in Surrogate’s Court proceedings [footnote omitted].

In reaching this decision, the Court considered the following factors:

 

  • The breadth of the subpoenas’ demands;

 

  • The lack of any showing by the objectants as to why the information sought from the non-party could not be gleaned from the trustees’ own records or how the trustees’ documents were inadequate;

 

  • The failure to reach an agreement on reducing the scope of the subpoenas;

 

  • The lack of prior notice given by the non-party that it would seek reimbursement for legal fees;

 

  • The non-party’s relationship with the trustees in the management of the trust; and

 

  • That expenses for the non-party’s counsel to draft objections to the subpoenas and confer with the trustees’ counsel should be excluded from what the objectants pay.

Thus, of the $92,076.04 sought by the non-party for counsel fees, as “reasonable production expenses” related to the subpoenas, the Surrogate awarded $40,000.

The Court cautioned that its decision should not be read as a license to a non-party to incur fees that it would not deem reasonable and necessary if the non-party were shouldering the burden. The Court added that, “in the absence of a prior agreement between the demanding party and the non-party, such fees are subject to the exercise of the court’s power to limit or deny them to prevent unreasonable expense or other prejudice to any person as the circumstances may present (see CPLR 3103[a]).”

Conclusion

Although the Uniform Rules for Surrogate’s Court do not contain provisions governing e-discovery, the rules of other Courts on this topic may prove instructive, as they were to the Surrogate in deciding Khagan.[1] An early good faith meet and confer between counsel concerning the scope and cost (including cost shifting) of such discovery may allow discovery to proceed more efficiently and potentially avoid a party from incurring significant, and unexpected, litigation costs.

 

[1] See, e.g., Commercial Division, Nassau County Guidelines for Discovery of Electronically Stored Information (“ESI”), http://www.nycourts.gov/courts/comdiv/nassau.shtml

 

 

“The attorney client privilege, the oldest among common-law evidentiary privileges, fosters the open dialogue between lawyer and client that is deemed essential to effective representation” (Spectrum Sys. Intern. Corp. v Chem. Bank, 78 NY2d 371, 377 [1991] [quotation marks and citations omitted]). While an otherwise privileged communication can lose the protections of the privilege by reason of waiver, either intentionally or inadvertently, two principles complicate application of the rules governing waiver in Surrogate’s Court proceedings. The first such principle is that the attorney client privilege belongs to the client and, generally speaking, only the client can waive the privilege (see generally Manufacturers and Traders Tr. Co. v Servotronics, Inc., 132 AD2d 392, 400 [4th Dept 1987] [“the attorney-client privilege belongs to the client and can be waived only by the client”]).  The second such principle is that, in New York State, the privilege survives the death of the client (see Matter of Riconda, 90 NY2d 733, 740 [1997]). While it is well established that the right to waive the privilege also survives the death of the client, case law is still developing concerning who can effectuate a post-death waiver and in what circumstances.

Recently, in Matter of Thomas, 2019 NY Slip Op 08293 (4th Dept Nov. 15, 2019), the Appellate Division, Fourth Department, addressed whether the executor of an estate is authorized to waive a decedent’s attorney client privilege, an issue of first impression in that Department. Agreeing with the Second and Third Departments, the Fourth Department answered the question in the affirmative. Perhaps more significantly, the Court held that the executor in that case could waive the privilege regardless of his self-interest in the testimony of the decedent’s former counsel, and over the petitioner’s objection that the executor’s success in the proceeding would result in the exclusion of an asset from the estate and, thus, would not benefit the estate.

Thomas involved a dispute among the decedent’s children (and the issue of a post-deceased child) over the ownership of a closely held company, New York State Fence Company (“NYSFC”), previously owned by the decedent. The respondent in the proceeding was one of the decedent’s sons, the executor of his estate. He did not identify any shares of NYSFC as assets of the decedent’s estate. The petitioners, other issue of the decedent, commenced a proceeding challenging numerous real estate transactions between the respondent and the decedent, as well as the respondent’s failure to identify any shares of NYSFC as being assets of the estate. They sought to impose a constructive trust claim, based on the fact that the respondent failed to produce any records reflecting the transfer of the stock from the decedent to himself, or any records reflecting respondent’s payments for the stock.

The Surrogate dismissed the constructive trust claim, and, in a prior decision, the Fourth Department reinstated it (see 124 AD3d 1235 [4th Dept 2015]). Then, in another decision, the Fourth Department held that the Surrogate erred in directing a verdict in favor of the respondent at the close of the petitioners’ proof (see 148 AD3d 1764 [4th Dept 2017]). This decision was grounded in the Court’s determination that the Surrogate erred in determining that the petitioners had the burden of proof to establish that the stock had not been transferred to the respondent. The Fourth Department held that where an asset is not included in the inventory of the estate based upon a fiduciary’s assertion that he is the owner of the asset, it is the fiduciary’s burden to show a legal and sufficient reason for withholding it.

Which brings us to the third appeal. Upon remittal, the Surrogate held a nonjury trial during which the respondent, in his capacity as executor, waived the decedent and his deceased wife’s attorney-client privilege, and their former counsel thereafter testified that she did not include a specific bequest with respect to NYSFC in the Decedent’s most recent will because he had already transferred those shares to the respondent. The Surrogate accordingly determined that the respondent satisfied his burden and specifically established that the shares of NYSFC were sold and transferred to him prior to the Decedent’s death.

The petitioners appealed, arguing, inter alia, that existing case law, from the Second and Third Departments, permit waiver of the attorney-client privilege by an executor only if the waiver benefits the estate. They asserted that excluding an asset from the estate would only benefit the respondent, not the estate or its beneficiaries.

In affirming the Surrogate’s determination, the Court relied heavily on the Second Department’s decision in Mayorga v Tate, 302 AD2d 11 (2d Dept 2002). In that case, a legal malpractice action brought against the decedent’s attorneys, the court held that the assignee of the executor of the decedent’s estate could waive the decedent’s attorney client privilege and compel production of the attorney’s file concerning the decedent. The court provided a detailed discussion concerning New York’s attorney-client privilege statute, CPLR § 4503, noting that it merely codifies the common law. Further, the court noted that while the statute expressly permits the “client” to waive the privilege, the common law “has always provided that an executor may, in the interest of the estate, waive the attorney-client privilege of the deceased client.” The court stated that “it makes no sense to prohibit an executor from waiving the attorney-client privilege of his or her decedent, where such prohibition operates to the detriment of the decedent’s estate, and to the benefit of an alleged tortfeasor against whom the estate possesses a cause of action[.]” It concluded that, “under the terms of CPLR 4503, just as under the common law, an executor may waive the attorney-client privilege of his or her decedent[.]”

The Fourth Department also noted that the Third Department reached the same determination in Matter of Johnson, 7 AD3d 959 (3d Dept 2004), lv denied 3 NY3d 606 (2004).

Rejecting the petitioners’ argument that Mayorga and Johnson only support an executor’s waiver of the attorney-client privilege if the waiver benefits the estate, the Fourth Department noted that, subsequent to Mayorga, the Second Department permitted a waiver in Matter of Bassin, 28 AD3d 549 (2d Dept 2006). In Bassin, a proceeding in which the decedent’s daughter sought to recover for the estate certain real property the decedent had deeded to her son, the court permitted a waiver to allow the decedent’s attorney to testify regarding the decedent’s intent in executing the deed in favor of her son.

Nevertheless, it is quite possible to reconcile the determinations in Thomas and Bassin – where an executor was permitted to waive privilege even though the result was a determination that the estate had no interest in a valuable asset – with a general rule that an executor may waive a decedent’s attorney-client privilege only “in the interest of the estate.” In the universe of trust and estate law, the primary focus of most proceedings is giving effect to a decedent’s intent. One could well argue, therefore, that ascertaining a decedent’s intentions with respect to the descent, distribution, and ownership of his or her assets after death is both “in the interest of the estate” and “benefits the estate.” This is true even where, as in Thomas, the estate is deprived of an asset as a result.

 

SCPA § 1404 requires that “at least two attesting witnesses must be produced before the court and examined before a written will is admitted to probate.” Very often, litigators think of examinations pursuant to SCPA § 1404 as examinations before trial that are conducted under Article 31 of the CPLR. This is understandable given that the statute itself makes numerous references to CPLR article 31. For example, SCPA § 1404(2) provides that the Surrogate’s Court may issue a commission under CPLR 3113 to take testimony “where a will offered probate is on file in a court or public office under the laws of which jurisdiction the will cannot be removed.” CPLR 3113 sets forth before whom a deposition may be taken, the oath of the witness, the allowance of examination and cross-examination, and it permits the parties to stipulate to conduct a deposition by telephone or other remote electronic means. Additionally, SCPA § 1404(4) expressly provides that the party conducting the examination is entitled to “all rights granted under article 31 of the civil practice law and rules with respect to document discovery.” SCPA § 1404(5)(a) and (b) provide that the testator’s estate pays the costs associated with the pre-objection examinations of the first two attesting witnesses, and that article 31 of the CPLR governs the costs associated with the other pre and post-objection examinations conducted in the proceeding. And of course, an examination under SCPA § 1404(4) of the preparer of a will, the attesting witnesses to a will’s execution and, where the situation warrants, the nominated executor of a will, is where the witness gives sworn testimony before a person authorized to administer oaths—i.e. a deposition.

But, while SCPA § 1404 may incorporate certain provisions of article 31 of the CPLR, it is its own, separate and unique statute. An examination of an attesting witness sought pursuant to SCPA § 1404(4) before objections to probate are filed is not simply a deposition conducted under article 31 of the CPLR. This is apparent from a recent decision in the Estate of Wood, NYLJ, Aug. 7, 2019, p. 23, col 1 (Sur Ct, Bronx County). The testator was survived by his spouse, one son, and two daughters. According to the court, the will offered for probate nominated the testator’s spouse as executor. However, the instrument itself was not dated or signed. Rather, it contained an apparent self-proving affidavit that was dated and signed by the testator and witnesses and notarized. The testator’s son requested examinations pursuant to SCPA § 1404. Claiming that the attorney draftsman and one attesting witness lived outside of New York State, and that the estate lacked the funds necessary to pay for the in-person examinations thereof, the testator’s spouse requested that the SCPA § 1404 examinations be conducted by written interrogatories. The son objected and insisted that the spouse produce the witnesses in person for examination.

CPLR 3108 allows for a deposition to be conducted by written questions when either (1) the examining party and witness so stipulate or (2) when the testimony is to be taken without the state. That statute further provides that the court may issue a commission where necessary or convenient for taking a deposition outside the state. It would seem that if the examinations sought in Estate of Wood, supra, were depositions under CPLR article 31, then conducting them by written question would be permitted under CPLR 3108. But, the Court denied the spouse’s request and directed that these pre-objection examinations be conducted by personal appearance. It specifically noted that under SCPA § 1405(2), where an attesting witness is outside of the state, and his or her testimony can be obtained with reasonable diligence, the court “may and shall upon the demand of any party require his testimony be taken by commission.” Notably, the court did not even refer to CPLR 3108, thus indicating that the rules governing the how pre-objection examinations are to be conducted lie within article 14 of the SCPA and not article 31 of the CPLR.

 

 

One of the most fundamental duties of a fiduciary is the duty of loyalty. That is, every fiduciary must administer the estate or trust subject to his or her stewardship solely in the interests of the beneficiaries. That duty is breached when a fiduciary engages in self- dealing; i.e. places his/her own interests over those of the beneficiaries. Self-dealing can take several forms, not the least of which is when a fiduciary purchases an estate or trust asset, or engages in competition with the estate or trust subject to his/her charge.

Fiduciary self-dealing has been the subject of numerous decisions affecting trusts and estates practice, the most notable of which include Matter of Rothko, 43 NY2d 305 (1977) and Flaum v Birnbaum, 120 AD2d 183 (4th Dept 1986). These decisions and others of their kind have relied on the “no further inquiry” rule, established by long-standing precedent as the basis for declaring any such transaction voidable at the behest of the beneficiaries (see e.g. Flaum v Birnbaum, supra.; Matter of Bradley, 143 NYS2d 264 [1955]).

This rule and the liability attendant to fiduciary self-dealing was recently examined by the Surrogate’s Court, Albany County, in Matter of Smith, NYLJ, May 17, 2018, at p. 28. Before the court was a motion by the petitioner, the Public Administrator, as temporary administrator of the estate, for, inter alia, summary judgment finding that the respondent engaged in unlawful self-dealing.

The decedent died, testate, on May 19, 2003. The principal asset of his estate consisted of a 90% interest in a closely held company, Quailman Investors, Inc. (“Quailman Investors”). The remaining 10% interest was owned by the respondent. Pursuant to the pertinent provisions of his Will, the decedent directed that 70% of his interest in Quailman Investors be held, in trust, together with the remainder of his estate, for the benefit of a group of individuals, some of whom were minors. The remaining 20% of the decedent’s interest in the company was bequeathed to the respondent (15%) and to another named individual (5%). Preliminary letters testamentary were issued to respondent, who served as preliminary executor of the estate until the Will was admitted to probate, at which time he received Letters Testamentary. Although respondent was also the nominated trustee of the trust created under the instrument, he never received letters of trusteeship.

Thereafter, in a proceeding instituted by the respondent to terminate the trust as uneconomical, the guardian ad litem, appointed by the court to represent the interests of the minor beneficiaries, revealed a corporate resolution of Quailman Investors, which had been adopted by the Board of Directors, and signed by the respondent, as Secretary, authorizing the respondent, without prior court approval, to pay himself the sum of $725,453, consisting of deferred compensation and salary for a number of years. In addition, the report of the guardian ad litem noted that the net value of real estate sales by the company from October 2003 through May 2004 amounted to approximately $960,184.81. Notably, at the time of each of these transactions, the respondent remained a minority shareholder of 10% of the company, and was acting as preliminary executor of the estate, through which he controlled the remaining 90% interest held by the decedent.

The respondent was subsequently removed as executor of the estate due to his failure to comply with numerous court orders directing him to account, and the Public Administrator was appointed temporary administrator cta in his place and stead. Upon his appointment, the Public Administrator requested information from the respondent pertinent to the valuation of Quailman Investors, and instituted a discovery proceeding against him seeking recovery of $960, 184, i.e. the alleged profits derived from the sale of assets by Quailman Investors, and subsequently paid by respondent to himself. After a series of motions and appeals, the Public Administrator moved for summary relief.

The court observed that one of the most sacred duties of a fiduciary is to avoid self-dealing. Once self-dealing is disclosed, the “no further inquiry rule” is triggered, which will result in the transaction being set aside regardless of its fairness. The court further noted that in cases where a fiduciary places himself in a position where his interest is in conflict with his duty of loyalty, the fiduciary may be surcharged.

Based on the foregoing, and the undisputed record reflecting the improper payments the respondent made to himself, without prior court authorization, at a time when he was serving as preliminary executor of the estate, and was in full control of Quailman Investors, the court held that his conduct was an act of self-dealing in violation of his fiduciary duty of undivided loyalty to the estate beneficiaries. As such, the court set aside the payments, and directed the respondent to restore the sum of $725,453 to the estate.

In addition, the record revealed that the respondent, also, without prior court approval, paid himself a personal claim he had against the estate (see SCPA 1805). As in the case of self-dealing, when a fiduciary pays himself a claim without leave of court, he subjects himself to a surcharge, which can include, among other things, costs, attorney’s fees, and interest. Noting that attorney’s fees may generally not be collected by a prevailing litigant in the absence of statute or agreement, or where the losing party has not acted maliciously or in bad faith, the court, nevertheless, found based on respondent’s conduct, that an award of attorney’s fees, to be paid by respondent personally, was warranted. Accordingly, the court scheduled a hearing to determine the surcharge and fees in connection with the improper payment of the claim.

The foregoing opinion provides a sharp lesson to be learned by fiduciaries who are tempted to benefit themselves at the expense of the estate or trust to which they owe undivided loyalty.

In 2016, the New York Legislature enacted a version of the Uniform Law Commission’s Revised Uniform Fiduciary Access to Digital Assets Act in Article 13-A (“Article 13-A”) of the Estates, Powers and Trusts Law (“EPTL”).   As illustrated by two recently decided New York Surrogate Court cases, and as previously discussed on this blog (You’ve Got (E-)Mail! Can Your Survivors Access It After Your Death? and AN UPDATE ON A FIDUCIARY’S ACCESS TO THE DIGITAL RECORDS OF A DECEDENT), the Courts have created a distinction between the disclosure of a decedent’s catalogue and that of a decedent’s digital content (Matter of Serrano, 54 NYS3d 64 [2017]; Matter of White, 10/3/2017 NYLJ p. 25, col. 1). The catalogue of electronic communications includes the name of the sender, the e-mail address of the sender, and the time and date of the communication.   A decedent’s digital content includes the subject line and text of e-mail messages. The disclosure of a decedent’s non-content information to a fiduciary is permitted, if not mandated, by Article 13-A of the EPTL (see Serrano, supra).

On the other hand, with respect to a service provider’s obligation to disclose the “content” of electronic communications, the determinative factor appears to be whether the deceased user gave an affirmative direction to disclose the content. The law first looks to whether the user used an online tool to direct disclosure of the content. Absent online direction, the law then looks to a deceased user’s will or other written instrument (see Wills, Trusts & Estates: Plain & Simple – What happens to your Social Media and other digital life when you die?). These decisions demonstrate the emergence of digital assets as the impetus of disputes in estate litigation matters and the importance of properly planning for same.

More recently, Surrogate Mella of New York County, addressed the interplay of Article 13-A of the EPTL and a decedent’s digital images.   In Matter of Swezey, 2019 NYLJ LEXIS 135 (Sur Ct, New York County 2019), the executor of the decedent’s estate commenced an SCPA 2103 proceeding for the turnover of photographs stored in the decedent’s iTunes or iCloud account from Apple Inc. (“Apple”). The decedent’s will bequeathed his personal property and residuary estate to his surviving spouse, the executor of the will. However, the decedent did not use an online tool to provide direction for his digital assets, nor did his will specifically provide for the disposition of those assets. Apple informed the executor that a court order would be required to disclose the electronic data from the Apple ID.  Accordingly, petitioner turned to the Court for an order directing Apple to disclose the digital data.

In analyzing the determining factors, the Court noted that “no provision in decedent’s will expressly authorizes the executor to access decedent’s digital assets and petitioner points to no other document authorizing such access.   Nor does petitioner provide proof of decedent’s use of any online tool granting his personal representative access to his digital property” (id.). Nevertheless, the Court ordered Apple to disclose the photographs stored in the decedent’s Apple account. In reaching her decision, the Surrogate distinguished electronic communications from other digital assets, such as photographs, pointing out that the disclosure of other digital assets does not require proof of a user’s consent or a court order.

With regard to a fiduciary’s duties, the Surrogate further noted:

[i]n this age, a decedent’s property – which is defined as anything that may be the subject of ownership, real or personal – must include assets kept in a digital form in cyberspace. The New York legislature enacted Article 13-A of the Estates, Powers and Trusts Law to apply traditional governing fiduciaries to this new type of property and authorize fiduciaries to gain access to, manage, distribute and copy or delete digital assets. Fiduciaries are now charged with the same duty of care, loyalty and confidentially to marshal and protect a decedent’s digital assets as they do to manage a decedent’s tangibles.

The Swezey decision reflects the importance of taking measures at the planning stage to ensure a fiduciary of an estate will be permitted access to a decedent’s digital assets. The decision is also significant because it makes clear that a decedent’s digital images, as opposed to electronic communications, do not require proof of a deceased user’s consent before his or her fiduciary may access them.

In a recent decision in the Estate of Grunwald (NYLJ Jan. 28 2019, at 33 [Sur Ct, Richmond County]), Surrogate Titone aptly noted that “the concept of domicile is … very important in the Surrogate’s Court.” True words indeed. Where a decedent is domiciled at the time of his or her death determines which court has subject matter jurisdiction over the decedent’s estate.

SCPA § 205(1) provides that every Surrogate’s Court has subject matter jurisdiction over an estate of a decedent who died a New York domiciliary, but the particular county of domicile is the proper venue for any proceeding. Under SCPA § 206, the Surrogate’s Court may have jurisdiction of a non-New York domiciliary if the decedent died owning property in New York, or there is a wrongful death claim against a New York domiciliary. If the decedent had real property in more than one county, then the county where a proceeding is first commenced shall be the proper venue and retain jurisdiction (SCPA § 206(2)).

Laymen often use the terms “domicile” and “residence” interchangeably, yet in the Surrogate’s Court there is a distinction between the two with a very big difference. SCPA § 103(15) defines domicile as “[a] fixed, permanent and principal home to which a person wherever temporarily located always intends to return.” “Residence,” on the other hand, just means “living in a particular place” (see King v Car Rentals, Inc., 29 AD3d 205, 210 [2d Dept 2006], quoting Matter of Newcomb, 192 NY 238 [1908]). A person can have several residences, but only one domicile.

Disputes over a decedent’s domicile—whether it is a different state, country, or county—typically arise at the early stage of a probate proceeding. These are very fact driven issues, and the courts have routinely recognized that where a decedent was domiciled is a “mixed question” of law fact that is determined by the unique circumstances of each case (Matter of Urdang, 194 AD2d 615 [2d Dept 1993]; Estate of Grunwald, supra). The issue in Grunwald, was whether the probate proceeding was pending in the proper New York county. The petitioner brought the proceeding in Richmond County on the grounds that the decedent (his mother) had been domiciled in Staten Island for more than two decades. The decedent’s granddaughter from a predeceased son moved to transfer the proceeding to Kings County on the grounds that the decedent died a domiciliary of Poland but owned real property in Brooklyn. The case law tells us that in determining where a decedent was domiciled, the Surrogate’s Courts often look at the following factors: where the decedent owned real property, filed income taxes, and registered to vote (id). But these are hardly exclusive. The case law further shows that proving any one factor is not necessarily dispositive of the issue. For example the Appellate Division has held that the fact that a decedent registered to vote in a particular state does not mean that the decedent made that state his or her domicile (see Laufer v Hauge, 140 AD2d 671 [2d Dept 1988]; Matter of Estate of Gadway, 133 AD2d 83 [3d Dept 1987]).

As this is a fact driven issue, the Surrogate’s Court will more often than not order a hearing to determine the decedent’s domicile, rather than decide the issue on motion. This is precisely what the Court did in Grunwald.  Matter of Powers, 2018 NY Misc LEXIS 3710 (Sur Ct, Nassau County Aug. 1, 2018)[1] is also instructive in this regard. In that case, the Nassau Surrogate’s Court determined that a hearing was necessary to determine whether the decedent died a domiciliary of New York or North Carolina. The respondent moved to dismiss the probate petition filed in the Nassau County Surrogate’s Court on the grounds that the decedent was a North Carolina domiciliary because he was living in an assisted living facility in North Carolina at the time of his death. In support of that position, the respondent presented undisputed evidence that the decedent maintained his personal possessions, attended church and social activities, and received medical care all in North Carolina.

The petitioners opposed dismissal, asserting that the decedent’s transition to the assisted living facility was not permanent and he always intended to return to his home on Long Island. The petitioners presented undisputed documentary evidence that the decedent filed tax returns in New York State (while in the North Carolina assisted living facility), retained a New York driver’s license, maintained bank accounts in New York, and declared New York his residence in the will offered for probate. Finding that the evidence presented by both sides “lead to conflicting inferences regarding domicile,” the court held that a hearing was required on the issue of domicile before it could decide the motion to dismiss.

[1] Farrell Fritz represented the petitioners in this proceeding.