When thinking of the Surrogate’s Court, jurisdiction over eviction proceedings does not normally come to mind. Yet, over the past 18 months, the Surrogates of New York and Bronx counties have found cause to order an eviction from estate or trust property in order to facilitate its sale. Consider the following:

In In re Jenkins, 2020 NYLJ LEXIS 1723, the Surrogate’s Court, Bronx County, was confronted with an application, characterized as the equivalent of a proceeding pursuant to SCPA 1902, to sell the decedent’s interest in a parcel of realty, and to evict the decedent’s grandson from the premises. The application was supported by two of the decedent’s granddaughters. However, it was opposed by the decedent’s grandson, who stated that he wished to buy the realty, but for a price less than the contract price.  The court noted that courts have liberally granted SCPA 1902 (1), (6) and (7) applications to sell realty over the objections of some of the co-tenants in common who derived their interest in the realty from the decedent, provided that there is a sufficient nexus between the relief requested and the administration of the decedent’s estate.

The record revealed that the decedent died on August 18, 2006 owning several parcels of realty. Letters of administration issued to her son on June 12, 2007. Thereafter, one of the decedent’s granddaughters commenced a compulsory accounting proceeding in October, 2015 not only seeking an accounting for almost a decade of stagnation, but more importantly for payment of her distributive share.

In view of the foregoing, and the delay in administering and distributing the estate for the 14 year period since the decedent’s death, the court, although sympathetic to the decedent’s grandson, granted the petitioner’s application, and issued a warrant of eviction, which was stayed for thirty days in order to allow the grandson to vacate the premises voluntarily.

Prior to the decision in Jenkins, the Surrogate’s Court, New York County, (Anderson, S.) in In re Flender, 2019 NY Slip Op 33676(U), issued a warrant of eviction from trust property finding that it was in the best interests of the beneficiaries, and in keeping with the intent of the testator.

The subject proceeding had been commenced by the co-executors and co-trustees of the estate against the decedent’s daughter, her companion, and their two children. The decedent’s daughter opposed the application alleging that the executors had withheld a distribution of funds to which she, and/or a trust for her benefit, was entitled, and thus, effectively deprived her of her right to purchase the premises within the time frame authorized under the decedent’s will.  After denying the petitioners’ motion for summary judgment, the court held a three day evidentiary hearing to determine whether the daughters’ failure to purchase the property was due to petitioners’ abuse of discretion as trustees of trusts in which the daughter had a beneficial interest.

In determining that the petitioners acted properly in denying the daughter certain requested distributions, the court first considered the provisions of the decedent’s will which directed that the property be sold. Secondly, the court recognized that the will of the decedent expressly conferred absolute discretion on the petitioners as to how and when to invade the trust principal with which they were entrusted. The court noted that while this discretion could not be abused, where a fiduciary’s discretion is exercised in good faith, it may not be superseded by a court’s own sense of what might be wiser or fairer. Assessed within this context, the court found that there was no evidence of bad faith or misconduct in the petitioners’ refusal to make a substantial invasion of trust principal in order to enable the daughter to purchase the subject property, which was demonstrably beyond her means. Indeed, it appeared that the daughter would have been unable to maintain the property even if she obtained the requisite funds to satisfy the purchase price.

As such, the court found the record amply supported the petitioners’ conclusion that the daughter and other trust beneficiaries would be better served by avoiding depletion of the trust assets in order to enable the daughter to continue to reside in the property. In fact, the court observed that the decedent’s direction in his will that the premises be sold soon after her death reflected her intention that the property be utilized as a source of liquidity for his children’s trusts, an objective that would have been undermined by a reduction of the trust funds in order to accommodate the daughter’s requested invasion of principal.

Accordingly, the court granted the petitioners’ application, and directed a turnover of the premises, and that an order be settled providing for the issuance of a warrant of eviction.

Given the travel restrictions that have arisen during the COVID-19 pandemic, it is unlikely that many recently-commenced adult guardianship proceedings have led to jurisdictional disputes in courts in different states.  Pre-pandemic, however, in anticipation of commencing adult guardianship proceedings, parties moved the subjects of those proceedings from one state to another, presumably to gain a strategic advantage in forthcoming guardianship disputes.  Indeed, this happened so often that a majority of states in the Nation enacted a uniform law in order to address it.  This blog post addresses the New York version of that uniform law, and a New York case applying it to an interstate guardianship dispute, both of which are likely to be relied upon as pandemic-related travel restrictions ease, and interstate guardianship disputes become more common than they are at the moment.

The Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (“UAGPPJA”) is intended to “resolve jurisdiction issues in guardianship proceedings when two states have connections with the individual over whom guardianship is sought” (see Matter of J.D.S., 70 Misc3d 556, 558 [Sur Ct, New York County 2020]).  UAGPPJA does so by “providing a more streamlined and predictable process, saving state funds and conserving judicial resources, and reducing the possibility for abuse and expense of the alleged incapacitated person and that person’s family and caretakers” (see id.; Schwaber & Kafer, P.C. v Alpizar, Index No. 157599/2020, 2021 WL 408231, at *2 [Sup Ct, New York County Feb. 5, 2021]).  A majority of states in this Country have adopted UAGPPJA (see J.D.S., 70 Misc3d at 558).

As effective on April 21, 2014, New York’s version of UAGPPJA is codified in Article 83 (“Article 83”) of the Mental Hygiene Law (“MHL”) (see MHL § 83.01).  Article 83 applies to adult guardianships that parties commence under Article 81 of the MHL and Article 17-A (“Article 17-A”) of the Surrogate’s Court Procedure Act (“SCPA”) (see MHL § 83.15; SCPA § 1758[1]).[1]

In Matter of J.D.S., New York County Surrogate Rita Mella rendered what appears to be the first reported decision addressing whether a court in New York, or another state, was the appropriate forum for a guardianship dispute concerning a person under a disability (see J.D.S., 70 Misc3d at 557-65).  The proceeding concerned J.D.S., a thirty-five year-old respondent whose parents were divorced (see id.).  Prior to 2016, J.D.S. lived with his mother for the majority of his life, including a significant period of time in North Carolina (see id.).  In 2016, J.D.S. moved to New York to live with his father and stepmother (see id.).  In 2018, J.D.S. left New York to live with his mother (see id.).  In July 2018, the father filed a guardianship petition in North Carolina, which prompted the mother to do the same and ultimately gave rise to a consolidated guardianship proceeding in that state (see id.).  In September 2018, the father and stepmother commenced an Article 17-A guardianship proceeding, and petitioned for “a determination that New York is J.D.S.’s home state”, in New York County Surrogate’s Court (see id.).  In November 2018, a North Carolina court clerk advised the Surrogate’s Court that a North Carolina court had determined (a) North Carolina to be a “significant-connection state” under UAGPPJA, and (b) New York to be J.D.S.’s “home state” (see id.).  Surrogate Mella then held a hearing to determine whether to “exercise jurisdiction over this guardianship proceeding or if North Carolina . . . is the more appropriate forum” under Article 83 (see id.).

Based upon the evidence presented at the hearing, Surrogate Mella determined that North Carolina was a more appropriate forum for the guardianship dispute involving J.D.S. (see id.).  In doing so, the Surrogate relied upon the factors set forth in MHL § 83.23: (a) J.D.S.’s “expressed preference to stay in North Carolina”; (b) the absence of any evidence of abuse or neglect toward J.D.S., or any suggestion that “North Carolina was less capable of protecting J.D.S. from harm” than New York; (c) J.D.S. had spent significantly more time in North Carolina (with his mother) than in New York (with his father and stepmother); (d) J.D.S. was located significantly closer to the North Carolina guardianship court than the New York Surrogate’s Court; (e) J.D.S.’s assets were modest, and it would be less burdensome for J.D.S. to travel to a North Carolina guardianship court than to the New York Surrogate’s Court; (f) most of the witnesses who would testify at a guardianship hearing were located in North Carolina; (g) either the New York Surrogate’s Court or the North Carolina guardianship court would be well equipped to promptly determine whether to grant a guardianship of J.D.S.; (h) although the New York Surrogate’s Court had more recent familiarity with J.D.S., both the Surrogate’s Court and the North Carolina court had guardianship petitions concerning J.D.S. before them; and (i) nothing in the hearing record undermined a New York Guardian ad Litem’s conclusion that the North Carolina courts “are bound to play a more robust monitoring role than their New York counterparts under SCPA Article 17-A” (see id.).  Accordingly, pursuant to Article 83, Surrogate Mella declined to exercise jurisdiction over the New York Article 17-A guardianship proceeding (see id.).

As the first reported decision in which a New York court applied Article 83 to determine the appropriate forum for an adult guardianship dispute, J.D.S. provides an excellent roadmap for guardianship courts and practitioners who are confronted with interstate guardianship disputes.  Indeed, J.D.S. illustrates the factors that a New York court must consider in evaluating whether New York, or another state, should preside over an adult guardianship proceeding.

 

[1]             Article 83 also sets forth the process for transferring a guardianship granted in one state to another state (see MHL §§ 83.31 and 83.33).  This blog post does not address the guardianship transfer issue.

In an April 2020 post to this Blog entitled “The Remote Witnessing of Estate Planning Documents during the COVID-19 Pandemic,” my colleague Cheryl L. Erato addressed Governor Cuomo’s Executive Order authorizing the remote witnessing of wills.  Since April 2020, trusts and estates practitioners have questioned, from a public-policy perspective, how well the remote witnessing of wills works, and speculated about litigation that is anticipated to arise therefrom.

Until earlier this week, a Surrogate’s Court had not addressed the admission of a remotely witnessed will to probate.  By Decision and Order, dated January 25, 2021, Broome County Surrogate David H. Guy issued what appears to be the first reported New York decision addressing the admission to probate of a remotely witnessed will (see Matter of Ryan, 2021 NY Slip Op 21010 [Sur Ct, Broome County Jan. 25, 2021]).

In Matter of Ryan, the testator’s health quickly took a turn for the worse, causing the testator to be admitted to a hospital at a time when COVID-19 restrictions prevented visitors from entering the hospital.  As a result, the testator’s attorney’s office caused the testator’s original will to be delivered, in a sealed envelope, to the testator by a social worker at the hospital.

The testator’s counsel also arranged for the social worker to serve as a “videographer” for the testator’s execution of the will, using a cell phone camera for that purpose.  The testator’s counsel and two staff members from the attorney’s office virtually “‘attended’ and participated in the execution ceremony via a computer [in the attorney’s] office.”  Having previously received a copy of the testator’s driver’s license, the testator’s counsel and the attorney’s staff confirmed the testator’s identity during the execution ceremony.

After the testator opened the sealed envelope containing the will and reviewed the instrument, the testator affirmatively responded that “the instrument he was about to sign was his will,” and that “he wished for [the attorney’s] staff to serve as witnesses to the execution of [the]” will.  The testator signed the will, with the testator’s attorney and his staff watching the testator do so on their office computer.  “The cell phone angle was such that [the testator] could be seen signing the document in front of him.”  Immediately after the testator signed the will, “the original was driven back to [the testator’s attorney’s] office, where [the testator’s attorney’s] two staff executed the attestation clause and the witness affidavit, which had been stapled with the original will in a will cover.”

Relying upon Estates, Powers and Trusts Law (“EPTL”) § 3-2.1, Surrogate Guy found that the execution ceremony summarized above satisfied the statutory formalities for due execution of a will in New York.  The Surrogate reasoned that, although the testator “was not physically present in the same room as the witnesses, [the witnesses] were able to see him execute the will, in real time, using the cell phone camera and the computer.”  The Surrogate further reasoned that, given the COVID-19 restrictions that were in place at the time, the execution ceremony satisfied the “presence requirements” set forth in EPTL § 3-2.1.

Equally important, Surrogate Guy held that the testator’s execution of the will satisfied the provisions contained in the Executive Order authorizing the remote witnessing of wills.  The Surrogate explained that the “Executive Order anticipates that witnesses may sign an electronically transmitted copy of the signature page of the will and may, but are not required to, sign the original signature page of the will, if received within 30 days of its signature by the testator.”

While Ryan presents the first published decision in which a Surrogate’s Court addressed the remote witnessing of a will, Ryan certainly will not be the last one.  It will be interesting to see whether Surrogates in counties other than Broome County conclude that similar circumstances satisfy the statutory formalities set forth in EPTL § 3-2.1 and the Executive Order authorizing the remote witnessing of wills.

When a child is born to parents who are not married, the child oftentimes must satisfy Estates, Powers and Trusts Law (“EPTL”) § 4-1.2 (which requires, among other things, an order of filiation, an acknowledgement of paternity by the father, or other clear and convincing evidence of paternity, such as genetic-marker testing) in order to inherit from his or her father (see EPTL § 4-1.2).  However, as the Appellate Division’s recent decision in Tiwary v. Tiwary illustrates, a child born of parents who are not married at the time of the child’s birth, but who subsequently marry each other, generally need not satisfy EPTL § 4-1.2 in order to inherit from his or her father.  The reasons why are discussed below.

Under Domestic Relations Law § 24, a child born to parents who are married at the time of the child’s birth is presumed to be “the legitimate child of both” parents (see Domestic Relations Law § 24[1]).  A similar presumption of legitimacy arises when a child is born to parents who are not married at the time of the child’s birth, but who subsequently enter into “a civil or religious marriage,” or consummate “a common-law marriage where such marriage is recognized as valid” (see id.).  Where a child’s legitimacy is presumed, “the child is legitimated for all purposes of New York law,” including inheritance (see Tiwary v. Tiwary, Docket Nos. 2019-5671 and 2020-2665N, 2020 NY Slip Op 07479 at *1 [1st Dep’t Dec. 10, 2020]).

In Tiwary, the plaintiff’s mother gave birth to the plaintiff in 1973 (see id.).  Two years after the plaintiff’s birth, the plaintiff’s mother married the decedent (see id.).  At some point after the plaintiff’s birth, the decedent consented, in writing, to add his name to the plaintiff’s birth certificate as the plaintiff’s father (see id.).  When the decedent died, a dispute arose as to whether the plaintiff should be treated as one of the decedent’s distributees, since the plaintiff’s birth occurred before the decedent married the plaintiff’s mother (see id.).

Although the Supreme Court denied the plaintiff’s motions for a summary determination that he was the decedent’s distributee, the Appellate Division modified the Supreme Court’s order, holding that the plaintiff was the decedent’s marital child; and recognizing the plaintiff as the decedent’s distributee (see id.).  In doing so, the Appellate Division explained that the plaintiff should be presumed to be the decedent’s legitimate child, since (a) the plaintiff’s birth certificate constituted prima facie proof that the plaintiff’s mother and the decedent were the plaintiff’s parents, and (b) the decedent married the plaintiff’s mother after the plaintiff’s birth (see id.).

As Tiwary illustrates, a child born to parents who are not married at the time of the child’s birth, but who subsequently marry, is presumed to be a marital child.  Such a child’s legitimacy generally will be presumed for all purposes of New York law, including inheritance from the child’s father.

Stipulations of settlement often serve as the objective in Surrogate’s Court litigation, ending disputes and the ongoing expense of controversy. Towards that end, stipulations of settlement, while sometimes the subject of 20-20 hindsight by a party, are generally found enforceable. Indeed, the Court of Appeals has recognized that “[s]tipulations of settlement are favored by the courts and not lightly cast aside…Only where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation.” Hallock v. State of New York, 64 NY2d 224 (1984), citing Matter Dolgin Eldert Corp., 31 NY2d 1, 10; Matter of Frutiger, 29 NY2d 143, 149-150.

Within this context, the New York County, Surrogate’s Court, in In re Hassine, addressed a motion to vacate two pre-trial stipulations — a Joint Stipulation of Undisputed Facts and a Joint Statement of Issues (the “Stipulations”) — entered into by the movants’ prior counsel. The motion was made by the sole residuary beneficiaries of the estate during the course of contested consolidated proceedings for the settlement of the executor’s account, and to remove the executor and appoint the residuary beneficiaries as successor co-executors of the decedent’s estate.

In support of their applications, the movants asserted that the subject Stipulations should be vacated on the grounds that (1) they were the result of a mistake by prior counsel; and (2) prior counsel lacked the authority to enter the agreements. Specifically, the movants claimed that when the executor’s counsel first circulated drafts of the Stipulations, they had expressed their disagreement with some of the terms to their prior attorney, who had long represented them, and they believed that he was editing the agreements accordingly. They further asserted that after their lawyer unexpectedly left his firm, movants were not aware that the attorneys who took over the case had submitted the unedited versions of the Stipulations to the Court.

Citing the opinion in Matter of Frutiger, supra, the Court observed that a stipulation will not be set aside without a showing of good cause therefor, such as fraud, collusion or mistake. Within this context, and based on the record, the Court concluded that the movants had failed to demonstrate that any mistake had been made by prior counsel, no less identify what mistakes they claim were made. Rather, they essentially asserted that there was a miscommunication between them and the attorneys at prior counsel’s office, which, according to the Court, could have been remedied or avoided.

Further, the Court held that the movants had failed to establish that the prior firm was without authority to enter into the Stipulations. The Court noted that in executing the Stipulations, the prior firm was exercising its judgment as to the content of the agreements, which counsel was expectedly required to do in managing the pending proceedings. In view thereof, the Court held that no basis existed to vacate the Stipulations.

All too often co-fiduciaries do not see eye to eye in the administration of an estate or trust. They can usually work through their disagreements, but when they cannot, and their arguing and finger pointing have reached a level where their administration reaches a stand-still, one fiduciary might seek to remove his co-executor or co-trustee.

The grounds for removal are specifically enumerated in SCPA § 711, and they include the following: (1) at the time or after letters were issued, the fiduciary was or has since become ineligible or disqualified to act; (2) the fiduciary has wasted or improperly applied the assets of the estate, made investments unauthorized by law, or otherwise improvidently managed or injured the property in his charge; (3) the fiduciary willfully or neglected to obey a lawful court order; (4) the letters were obtained by a false suggestion of a material fact; (5) per the terms of a will or trust, the fiduciary’s role was to act upon the occurrence of an act which has occurred; (6) the fiduciary failed to notify the court of a change in address within 30 days after such change; (7) the fiduciary removed property from the state without prior court approval; (8) the fiduciary does not possess the requisite qualifications by reason of substance abuse, dishonesty, improvidence, want of understanding, or is otherwise unfit to act as fiduciary; (9) in the case of a guardian, where he has removed or is about to remove from the state or where the interests of the infant will be promoted by the appointment of another person as guardian; (10) in the case of a testamentary trustee, where he has violated or threatens to violate his trust or is insolvent or is otherwise deemed unsuitable; (11) in the case of an inter vivos trustee, where the Supreme Court could have cause to remove the trustee, or suspend or modify the appointment; and (12) where a fiduciary fails to file an account after being directed by the court to do so.

Where the orderly administration of an estate or trust comes to a standstill because of friction between co-fiduciaries, SCPA § 711(8), a “want of understanding” of what it means to be a fiduciary provides a basis for removal. But removal is not an easy task, as the courts give great deference to a testator’s choice of fiduciary. Thus, where the facts supporting the removal petition are disputed, the courts will generally not remove a fiduciary without a hearing. But this is not always the case. There are instances where the record supports removal without a hearing.

This is exactly what occurred in the recent decision in Estate of Sullivan. There, the decedent’s will nominated his siblings, James and Judith, as co-executors of his estate. James brought a petition to remove Judith as co-executor on the grounds that her refusal to engage with him—essentially abdicating her role as fiduciary—hindered his ability to effectively administer the estate. Specifically, James alleged that after he was granted court permission to sell a parcel of real property, Judith failed to share certain pertinent information with him regarding the tenants and she had maintained disorganized records of the leases, which prolonged that sale for 18 months. James also alleged that Judith frustrated his ability to see other real properties belonging to the estate by refusing he remove her personal belongings from the buildings, disputing how to list the properties for sale, and refusing to meaningfully engage in discussions with him regarding necessary repairs to the buildings. According to the decision, this deadlock continued even after counsel for James and Judith had seemingly reached an agreement on the issues during a court conference, and drafted a stipulation in that regard.

James sought to remove Judith as a fiduciary under SCPA §711(6) and (8). Judith filed objections to the petition, but the Court granted the petition and removed Judith as fiduciary withhold holding a hearing. Critical to the Court’s decision was the fact that Judith did not dispute the allegations in the petition or in James’s accompanying affidavit with any admissible evidence. She did not file an affidavit disputing any of the facts set forth in the petition or supporting her objections. Rather, she relied on an affirmation of her attorney who professed to have personal knowledge of the history of the administration of the estate. That affirmation along with a draft affidavit from Judith in which she merely “adopted and incorporated” her counsel’s statements was not sufficient for the Court. It stated:

An attorney affirmation not based upon personal knowledge has no evidentiary value. Zuckerman v. New York, 49 N.Y.2d 557, 560 (1980). While Judith’s counsel purports to have personal knowledge of the facts, it is Judith who is the co-executor and who must answer to the allegations that she has abdicated her fiduciary duties, delaying and thwarting efforts to resolve this estate.

The Court was also not satisfied with Judith’s objections to the petition, verified by counsel and not Judith, which were “sparse and evasive.” Particularly, the Court was not impressed with Judith’s denials of certain allegations because she “lacks sufficient information to form a belief” as to their truth. Indeed, a fiduciary’s very job is to personally know what is going on with the administration of an estate.

The Court found that Judith’s failure to refute the facts demonstrated her wanton understanding of what it meant to be a fiduciary, and concluded that removing her as co-executor without a hearing was proper. Additionally, the Court found that it could remove Judith without a hearing because she did not dispute that she moved and failed to give the Court the requisite notice (SCPA § 711(6)).

As our everyday life continues to be impacted by the novel coronavirus (COVID-19), Governor Andrew Cuomo has signed various executive orders to address the issues faced by the State and its residents during these unprecedented times.  In light of the executive orders that have been issued, the resulting closure of non-essential businesses, the quarantine orders and the aggressive social-distancing requirements, a recurring question being asked by both estate attorneys and their clients is: can estate planning documents be remotely executed and witnessed in accordance with New York State law?  As of April 7, 2020, the answer is clearly “yes.”

On April 7, 2020, the Governor issued Executive Order 202.14 (the “Executive Order”) which, among other things, modifies the laws concerning the execution of a last will and testament (see EPTL 3-2.1), a lifetime trust (see EPTL 7-1.17), a statutory gifts rider to a statutory short form power of attorney (see General Obligations Law 5-1514[9][(b]), real property instruments (see Article 9 of the Real Property Law), health care proxies (see Public Health Law 2981[2][a]) and an instrument to direct the disposition of a person’s remains upon their death (see Public Health Law 4201[3]).

In its relevant part, the Executive Order provides the following:

  • For the purposes of Estates Powers and Trusts Law (EPTL) 3-2.1(a)(2), EPTL 3-2.1(a)(4), Public Health Law 2981(2)(a), Public Health Law 4201(3), Article 9 of the Real Property Law, General Obligations Law 5-1514(9)(b), and EPTL 7-1.17, the act of witnessing that is required under the aforementioned New York State laws is authorized to be performed utilizing audio-video technology provided that the following conditions are met:
    • The person requesting that their signature be witnessed, if not personally known to the witness(es), must present valid photo ID to the witness(es) 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 witness(es), and the supervising attorney, if applicable (e.g. no pre-recorded videos of the person signing);
    • The witnesses must receive a legible copy of the signature page(s), which may be transmitted via fax or electronic means, on the same date that the pages are signed by the person;
    • The witness(es) may sign the transmitted copy of the signature page(s) and transmit the same back to the person; and
    • The witness(es) may repeat the witnessing of the original signature page(s) as of the date of execution provided the witness(es) receive such original signature pages together with the electronically witnessed copies within thirty days after the date of execution.

Laws Addressed by the Executive Order

EPTL 3-2.1 provides the formal requirements for the execution and attestation of a last will and testament.  The provisions addressed by the Executive Order are copied below:

  • EPTL 3-2.1(a)(2) states “[t]he signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses, or shall be acknowledged by the testator to each of them to have been affixed by him or by his direction. The testator may either sign in the presence of, or acknowledge his signature to each attesting witness separately.”
  • EPTL 3-2.1(a)(4) states “[t]here shall be at least two attesting witnesses, who shall, within one thirty day period, both attest the testator’s signature, as affixed or acknowledged in their presence, and at the request of the testator, sign their names and affix their residence addresses at the end of the will. There shall be a rebuttable presumption that the thirty day requirement of the preceding sentence has been fulfilled. The failure of a witness to affix his address shall not affect the validity of the will.”

EPTL 7-1.17 provides the formal requirements for the execution, amendment and revocation of lifetime trusts:

  • EPTL 7-1.17(a)states “[e]very lifetime trust shall be in writing and shall be executed and acknowledged by the person establishing such trust and, unless such person is the sole trustee, by at least one trustee thereof, in the manner required by the laws of this state for the recording of a conveyance of real property[1] or, in lieu thereof, executed in the presence of two witnesses who shall affix their signatures to the trust instrument.”
  • EPTL 7-1.17(b), in pertinent part, states “[a]ny amendment or revocation authorized by the trust shall be in writing and executed by the person authorized to amend or revoke the trust, and except as otherwise provided in the governing instrument, shall be acknowledged or witnessed in the manner required by paragraph (a) of this section, and shall take effect as of the date of such execution.”

General Obligations Law 5-1514(9)(b) requires a statutory gifts rider to a statutory short form power of attorney to “[b]e signed and dated by a principal with capacity, with the signature of the principal duly acknowledged in the manner prescribed for the acknowledgment of a conveyance of real property, and witnessed by two persons who are not named in the instrument as permissible recipients of gifts, in the manner described in subparagraph two of paragraph (a) of section 3-2.1 of the estates, powers and trusts law. The person who takes the acknowledgment, under this paragraph, may also serve as one of the witnesses.”

Public Health Law 2981(2)(a) states “[a] competent adult may appoint a health care agent by a health care proxy, signed and dated by the adult in the presence of two adult witnesses who shall also sign the proxy. Another person may sign and date the health care proxy for the adult if the adult is unable to do so, at the adult’s direction and in the adult’s presence, and in the presence of two adult witnesses who shall sign the proxy. The witnesses shall state that the principal appeared to execute the proxy willingly and free from duress. The person appointed as agent shall not act as witness to execution of the health care proxy.”

Public Health Law 4201 provides that a person designated in a written instrument executed pursuant to the provisions of this section has the prior right to control the disposition of the remains of a decedent over any other individual.  The written instrument must be in proper form as exemplified in Pub Health § 4201(3) and must be signed and dated by the decedent and the agent and properly witnessed.

Article 9 of the Real Property Law is titled “Recording Instruments Affecting Real Property” and encompasses §§ 290-336.

*  *  *

Indeed, without the issuance of the Executive Order, many individuals were unable to obtain access to the assistance they so required to duly execute their estate planning documents.  Health care facilities and hospitals are generally closed to the public, non-essential attorneys are required to work remotely from home, and to request witnesses to physically participate in a document execution ceremony is imprudent, if not impossible.  The Executive Order permits a person to duly execute their estate planning documents in the virtual presence of the supervising attorney (if any) and the requisite witnesses, while they all remain in the safety of their respective residences (or health care facility or hospital).  The Executive Order not only averts the risk of an individual exposing himself or herself to the virus, it provides the ability to those most impacted by the virus to have their estate planning documents duly executed.

The Executive Order is in effect for thirty days until May 7, 2020.

The Executive Order can be found at: https://www.governor.ny.gov/news/no-20214-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency

[1]  The Executive Order addresses Article 9 of the Real Property Law.

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.