Construction of Wills and Trusts

Although acknowledging that the Appellants’ position was “sympathetic”,  on June 14, 2011, the Appellate Division, Second Department affirmed the decision of Surrogate Riordan of Nassau County, denying two children of the decedent the rights accorded after-born children under EPTL 5-3.2. (Matter of Roy Gilmore Sr., 2011 NY Slip Op 05272 [2d Dept 2011]) .

Mr. Gilmore executed a Will in June 1996. He left his entire estate to a daughter, Angela, although he was survived by eleven children. 

The Appellants were born prior to the execution of the Will, but the Decedent did not know that the they were his biological children until after the Will was executed in 1996.  The proof showed that Decedent, in 2006, learned that Appellants were his children and, in fact, introduced them “as his two children whom he had recently learned of.”

A parent in New York, of course, is under no obligation to leave any part of his estate to his children. However, to address situations where a child is inadvertently left out of a parent’s will because such child was born after the Will’s execution, the Legislature enacted EPTL 5-3.2 which provides that in such a case, after-born children will share with the children provided for in the Will.

Here the children were not after-born, but it was contended that Decedent’s lack of knowledge of the two children who were born prior to the Will, prevented him from benefitting them in his Will.  Appellants argued that children born prior to execution of a Will, but only later gaining status as children of a decedent by adoption, are included as children, thus evincing a policy in New York allowing pre-borns to take in some situations. The Court declined to treat these “after acknowledged” children in the same manner as “after adopted” children, relying on the literal language of the statute and saying that if rights are to be given to such so-called “after known children,” which some states have done, this is a matter for the Legislature, not the Courts.

In a decision issued yesterday by the First Department, the Appellate Division affirmed the Surrogate’s holding that a proceeding pursuant to SCPA §711 to revoke letters testamentary and letters of trusteeship would trigger an in terrorem clause. The petitioner alleged that the fiduciaries failed to inform the decedent of the benefits to which they would be entitled as a result of their fiduciary positions.

The subject in terrorem clause in Hallman v Bosswick, 2010 NY Slip Op 03486 (1st Dept 2010) provided that it would be triggered by any beneficiary who was to commence a proceeding “‘to void, nullify or set aside all or any part’ of the will”. Noting that a revocation proceeding did not fall within the safe harbor provisions of EPTL §3-3.5(b), the Court stated that its determination would be based upon the decedent’s expressed intent.

 

The respondents, the co-executors and co-trustees whose letters would be placed in issue by the proposed revocation proceeding, had no familial relationship to the decedent. Based on this fact, the petitioner, a child of the decedent, argued that because the will provided no bequests for respondents, the decedent must have intended to limit the scope of the in terrorem clause to challenges against his family members. The Court disagreed. It opined that the decedent’s choice to leave his estate in trusts for his children and grandchildren, as opposed to making outright devises, illustrated an intent to deprive them of complete control over his assets; an intent that was furthered by his nominating non-relatives as co-executors and co-trustees.

 

The Court also disagreed with the petitioner’s alternate assertion that if the testator had intended the clause to be triggered by the commencement of a SCPA §711 proceeding, public policy should prevent its enforcement. According to the Court, this argument was conditioned upon a rule that the safe harbor provisions of EPTL §3-3.5 are not exclusive, and despite the recent decision of the Court of Appeals in Matter of Singer, 13 NY2d 447 (2009) which stated as much (as discussed in a prior entry), the First Department opined that the language was dicta. Thus, the Court rejected the petitioner’s public policy argument, reasoning that a court’s expansion of the safe harbor provisions should not originate with a lower or intermediate court, but instead with the Court of Appeals. 

 

This last argument is an interesting perspective on Singer, and may pave the way for a conservative interpretation of the Court of Appeals’ decision. Accordingly, we may have to wait for the Court of Appeals to implement its own rule as law before the lower courts will follow suit.

A couple of months ago, we posted an entry discussing the unsealing of adoption records in New York State, and the manner in which courts must weigh the State’s interests of confidentiality and maintenance of the adoptive parent-child bond against an applicant’s interests in unsealing his or her records. Prompting that discussion was Matter of Victor M.I., 23 Misc 3d 1103A (Sur Ct, Nassau County 2009), a case in which the Nassau County Surrogate’s Court permitted the unsealing of adoption records for purposes of proving the petitioner’s Hungarian lineage to establish Hungarian citizenship.

More recently, in Matter of B.F., 674, an application was brought before the Nassau County Surrogate’s Court to unseal an adoption file and obtain a certified copy of the order of adoption to determine whether the adoptive child was distributee of an estate. Specifically, in a proceeding for letters of administration in a Queens County estate, the petitioner sought to demonstrate that a sibling of the decedent had been adopted out of the family in the late 1930’s or early 1940’s. 

In its decision, the Court discussed its discretionary power to unseal records upon a showing of “good cause”. Although it recognized that “good cause” has no particular definition, it noted that section 114(4) of the Domestic Relations Law provides a statutory basis for the unsealing of adoption records for obtaining medical history when serious health issues arise.   In non-medical situations, it appears that an applicant has a higher burden to prove that his or her interest outweighs that of the State, as applications are granted only on rare occasions (Matter of B.F., 674).

The Surrogate granted the application after an analysis of the State’s interest in confidentiality for purposes of maintaining anonymity for the natural parents, protecting the bond between the adoptive parents and child, and shielding the adoptive child from potentially unsettling information. It was noted that these factors were largely irrelevant in this case (id.). 

The adoptive child was born in 1927, so the Court opined that both the natural and adoptive parents were likely deceased. In addition, confidentiality was not an issue inasmuch as the applicant already possessed all information in the one document requested from the file. The court distinguished between the more typical cases, in which an applicant seeks identifying information, and the circumstances presented; the petitioner was aware of the adoptive child’s identity but simply sought a document to legally determine the decedent’s heirs at law (id.).

As Surrogate Riordan recited, “[w]hether [good cause] exists, and the extent of disclosure that is appropriate, must remain for the courts to decide on the facts of each case” (Matter of B.F., quoting Matter of Linda F. M.,52 NY2d 236, 240 [1981]). In view of this rule, it would be interesting to see how a court handled a petition with the same cause, i.e., a determination of a decedent’s heirs at law, if the adoptive child were younger and some of the confidentiality concerns remained. But then again, if the applicant had enough information to pursue the inquiry, it is probable the he or she, like the applicant in Matter of B.F., already possessed identifying information. 

 

 

The issue of ownership of real property has frequently arisen in Surrogate’s Court proceedings, most particularly, in the context of applications by a testamentary beneficiary to sell or dispose of realty devised pursuant to the terms of the decedent’s Will. As discussed in my article in the New York Law Journal several years ago, often-times the outcome of such a application hinges upon a determination of whether the beneficiary holds a life estate in the premises or simply a right of occupancy or other lesser interest (see Ilene Sherwyn Cooper, The Meaning of a Life Estate and Other Decisions of Interest, NYLJ, Nov. 10, 2005, at p.3). 

Recently, this issue was again before the court in In re Gullo, 7/6/2009 NYLJ. 37 (col 1) (Sur Ct, Suffolk County). In Gullo, the threshold issue before the court was whether the provisions of the decedent’s will provided the petitioner with a life estate in the decedent’s residence. The petitioner requested leave of court to purchase the premises, and to credit herself with the value of her life estate in the property and improvements she made to the premises subsequent to the decedent’s death. The application was opposed by the trustee under the decedent’s will, on the grounds that the petitioner did not receive a life estate in the realty, but rather a fee on limitation. Petitioner claimed the contrary, maintaining that the language in the decedent’s Will provided her with a life estate, and that a sale of the property was both expedient and in the best interests of the estate.

           

Pursuant to the pertinent provisions of his Will, the decedent devised and bequeathed the subject property to the petitioner, his daughter, as a “life estate”, and authorized her to reside and remain in the premises for as long as she wished, so long as it remained her principal residence. If for any reason the decedent’s daughter declined the life estate, or decided to vacate the property, the Will directed that the property be sold and the net proceeds be distributed pursuant to the provisions of the residuary clause.

           

In analyzing the issue as to the nature of the petitioner’s interest in the subject premises, the court held that a life estate in property conveys exclusive ownership of the land during the lifetime of the life tenant, subject only to certain well-defined limitations or duties. Moreover, the holder of a life estate may, under certain circumstances, be able to force the sale of the property and collect the value thereof, assuming it is demonstrated that the sale is expedient. The court opined that in comparison to a life estate, a right of occupancy or a lesser interest to a life tenancy is a personal privilege that does not confer the benefits of a life estate.

           

Although the language of the decedent’s Will utilized the words “life estate” in referring to the petitioner’s interest, the court did not consider that fact dispositive of the issue raised. Further, the Court found that the conditions expressed in the Will requiring the petitioner to pay taxes and maintenance on the property were inconsequential to the result, and insufficient to elevate petitioner’s ownership from a right of occupancy to a life tenancy. Rather, the Court held that the language employed in the instrument was significant of a “fee on limitation”, as defined in EPTL 6-1.1(a)(3). That being the case, the court concluded that petitioner’s interest did not lend itself to computation or application of a credit for a life estate.

           

Accordingly, the court determined that the petitioner held a fee on limitation in the property and was not entitled to a credit for a life estate. The court further opined that the expediency of the sale was unclear from the record inasmuch as the circumstances which usually give rise to such a conclusion usually involves sales to third parties, and not necessarily parties in possession of the property.      

Legislative amendments to EPTL 2-1.6, the statute pertaining to disposition of assets under circumstances of apparent simultaneous deaths, are forthcoming. The new legislation has been approved by the New York State Senate and Assembly, and awaits Governor Paterson’s signature.

The current version of EPTL 2-1.6 addresses the disposition of property where there is no evidence that individuals died other than simultaneously. Under these circumstances, absent a clause in the decedents’ wills stating otherwise, the statute presumes that each individual predeceased the other. Thus, property is generally distributed as if each individual survived the other, with some exceptions.

The new EPTL 2-1.6 will repeal the former statute, and essentially provides that absent clear and convincing evidence that one individual survived the other by one hundred and twenty hours, that individual is treated as if he or she predeceased. In effect, this statute enacts the 1993 version of the Uniform Simultaneous Death Act.

In Matter of Feinberg, an Illinois appellate court recently addressed the enforceability of a will clause that provided that the testator’s descendants could only inherit from his estate if they married within the Jewish faith (or their spouses converted to Judaism within one year of the marriage) (383 Ill App3d 992, 992 [Ill App Ct 2008], app. all’d, 229 Ill2d 667 [Ill Sup Ct 2008]). The court found that it was not enforceable in that it violated public policy (id.). In doing so, the court analogized the Feinberg clause to will provisions that imposed similar faith-based marriage requirements on beneficiaries, and concluded that the clause impermissibly restrained marriage and encouraged divorce (id. at 994-95). 

Would such a clause likely be enforceable in New York? The answer may be “yes.” Although no New York court has addressed the issue recently, several older decisions opine that such a clause is enforceable. Those decisions are, of course, subject to the general rule that the clause not encourage divorce or discourage marriage (cf. Robinson v Martin, 200 NY 159, 167 [1910] [discussing a bequest as a restraint on marriage]). 

Matter of Silverstein’s Will is illustrative (155 NYS2d 598 [Sur Ct Queens County 1956]). There, the testator’s will provided for the equal distribution of his personal property to his grandchildren, but only if they married Jewish spouses (id. at 599-600). The Surrogate’s Court held the clause to be enforceable, explaining that conditions “not to marry a person of a particular faith . . . are not [per se] invalid” (id.). As a result, the court also concluded that one of the testator’s grandchildren was not entitled to a share of the testator’s personal property, since he married outside of the Jewish faith (id.).

 

Continue Reading A Matter of Faith: Conditioning Bequests on Religious Observance and Marriage

My post dated December 31, 2008, concerned the trust created by Leona Helmsley, specifically, the two page “mission statement” in which she expressed her desire that the trust funds be used for the care and welfare of dogs and “such other charitable activities as the Trustees shall determine.” My previous post discussed the possibility that the mission statement would not be viewed as a legally binding directive.

While Leona may have been steadfast in her commitment to helping man’s best friend, an article in the New York Times dated February 25, 2009, reports that it is now official — the mission statement is “all bark, no bite.” In an Order dated February 18, 2009, Surrogate Troy K. Webber (of Surrogate’s Court, New York County) confirmed that the trustees can distribute the money as they deem appropriate.  Her determination was grounded in the fact that in addition to expressing Ms. Helmsley’s preference for canine causes, the mission statement also gave the trustees discretion in spending the money.

 

If you don’t like dog puns, you might want to stop reading now.

Hotelier and real estate magnate Leona Helmsley loved dogs and she made no bones about it. Leona Helmsley left $12 million in her will in trust for her dog, Trouble. And, although Surrogate Renee Roth reduced the trust to $2 million, that amount should still be sufficient for Trouble to live, well, a dog’s life for her remaining years. (After all, Trouble’s annual living expenses have been estimated at only $180,000.)

The amount of the Trouble Trust, however, pales in comparison to the full amount of the charitable trust Mrs. Helmsley created — valued at between $5 billion and $8 billion. In a two page “mission statement,” Mrs. Helmsley expressed her desire that the money be used for the care and welfare of dogs. (Actually, it has been reported that she initially stated that the money should go to poor people and dogs, but she later turned tail on poor people, dropping them from the list.)

 

Continue Reading Leona’s Wishes May be Thrown To The Dogs