My colleagues have written on the enforceability of in terrorem clauses, and the courts continue to confront challenges in reconciling the testator’s intent to impose an in terrorem condition with the rights of beneficiaries to challenge the conduct of their fiduciary. The New York County Surrogate’s Court’s recent decision in Matter of Merenstein provides further guidance to practitioners in assessing the kind of conduct that will trigger an in terrorem clause. It illustrates that the courts, in construing broad in terrorem provisions, will draw a distinction between conduct aimed at challenging the conduct of an executor and conduct aimed at nullifying a testator’s choice of executor.

In Merenstein, the decedent bequeathed his estate to his two daughters. His daughter Ilene was favored under the will – – she received 73% of the decedent’s residuary estate and was nominated the sole executor. His daughter Emma received 27% of the decedent’s residuary estate. The in terrorem clause in Merenstein provided as follows:

If any person in any manner, directly or indirectly, challenges the validity or adequacy of any bequest or devise to him or her in this Will, makes any other demand or claim against my estate, becomes a party to any proceeding to set aside, interfere with or modify any provision of this Will or of any trust established by me, or offers any objections to the probate hereof, such person and all of his or her descendants shall be deemed to have predeceased me, and accordingly they shall have no interest in this Will.

Decedent’s will was admitted to probate and Ilene was appointed executor without objection.

Emma brought a proceeding asking the court whether certain contemplated conduct on her part would trigger a forfeiture of her beneficial interest under the in terrorem clause. Her first question was whether a petition to compel the executor to account, and a subsequent petition to remove the executor in the event that the executor disregarded a court order to account, would trigger the in terrorem clause. That was easy. The court held, consistent with well-settled law, that a beneficiary will not trigger an in terrorem clause by demanding an accounting of an executor, by objecting to an executor’s accounting, or by seeking removal of the executor in the event of the executor’s failure to comply with an order to account.

Emma also asked whether she would trigger the in terrorem clause by petitioning for limited letters of administration giving her the authority to conduct an investigation into whether Ilene had fraudulently used the decedent’s credit card during the decedent’s life. This was another easy one. Consistent with well-settled law, the court held that a petition for the issuance of limited letters to pursue an investigation into whether there are assets of the estate in the possession of others, including someone who is also a fiduciary, does not seek to challenge the validity of the will or any of its provisions. The filing of such a petition and even a subsequent discovery or turnover proceeding would not cause the beneficiary to forfeit her benefits under the will.

The court drew a line however, when Emma asked whether filing a petition to suspend Ilene’s letters testamentary during the investigation into the credit card charges would trigger a forfeiture under the in terrorem provision. Emma claimed that such an order of suspension was necessary to prevent Ilene from interfering with her investigation as limited administrator. The court held that such an application would trigger the in terrorem clause. Such conduct, according to the court, would constitute an attack on the decedent’s choice of fiduciary. The court explained:

Seeking the suspension of Ilene’s letters pending any investigation that Emma may pursue and in the absence of any allegation of misconduct by Ilene in her fiduciary capacity is akin to a challenge to the testator’s choice of fiduciary as established under the will. The in terrorem clause in decedent’s will disinherits a beneficiary who commences a proceeding to set aside any of the provisions of the will, and therefore, the filing of this type of petition, which does not fall within the safe harbor provisions of EPTL 3-3.5 (b), would result in forfeiture in this case

Finally, Emma asked the court whether a petition to remove Ilene as executor in the event that Ilene was determined to have engaged in improper conduct with respect to the credit card charges would trigger the in terrorem clause.   The court declined to rule on that question. It did however, point out that the alleged credit card charges occurred while the decedent was still alive, and earlier in the decision, cited to Matter of Cohn, which was affirmed by the Appellate Division, First Department.

In the Cohn estate, the courts confirmed that public policy will bar the application of an in terrorem clause where a beneficiary seeks removal of an executor based on allegations of the executor’s misconduct in their capacity as executor, but will not bar the application of an in terrorem clause where a beneficiary seeks to remove or supplant an executor based on some other ostensible basis that constitutes an attack on the testator’s choice of fiduciary, or on the powers and authority given to the fiduciary by the testator. There, the courts recognized that an attempt to displace the testator’s chosen executors based on the allegation that such executors had failed to fully inform the testator of the compensation that they would receive as executors was simply an attack on the testator’s choice of fiduciary that would trigger an in terrorem clause similar to the in terrorem provision in Merenstein.

The court in Merenstein, like the courts in the Cohn estate, recognized that fidelity to a testator’s intent warrants a fact-sensitive inquiry in enforcing terrorem clauses. Based on Merenstein and Cohn, it is clear that a beneficiary would be hard-pressed to claim that a limited administrator should supplant an executor in representing the estate in a litigation where the executor has no conflict, has not failed to act, and has not engaged in misconduct as executor, without triggering an in terrorem provision like that in Merenstein. Similarly, a beneficiary should understand that petitioning for a limited administrator to perform some estate administration task on the mere allegation that the executor has bias or hostility towards the beneficiary because of some events that occurred between the beneficiary and executor while the decedent was still alive is sure to be considered a challenge to the testator’s choice of fiduciary. Such a challenge will trigger an in terrorem clause like that in Merenstein. When faced with an in terrorem provision like that in Merenstein, a beneficiary must consider whether it is challenging the conduct of the fiduciary, or attacking the decedent’s choice of fiduciary. There is a difference, and it could mean a forfeiture.

It is easy to be cynical about the “pots and pans,” “tchotchkes,” and “junk” – – the property that is often divided in a contentious manner at the bitter end of an estate litigation, or sometimes forgotten after years of litigation. An ongoing dispute in one of my cases led me to reflect on a New York Times piece by Annie Correal, which explores a very personal account of the Great Migration through a discarded item of what estate lawyers might call “personalty” or “tangible personal property” – – a photo album. The photo album belonged to the late Etta Mae Taylor, and through good fortune, it caught the eye of a journalist before it could be collected by DSNY. The story is remarkable. While Etta Mae Taylor’s photo album may not be of tremendous pecuniary value, it is arguably a treasure of a different sort.

 

Etta Mae Taylor’s photo album may cause some reflection about our own personal effects, whether they are of pecuniary value, sentimental value, or both.  Ms. Taylor’s photo album is also an invitation to a mundane but perhaps useful discussion about tangible personal property in the law of trusts and estates.

 

What does “tangible personal property” mean? It depends. It generally means furniture, clothing, household goods, tools, jewelry, antiques, and other like personal effects. However, it can be up for interpretation. Quite often, wills and trusts dispose of personal effects with a general provision similar to the following:

 

I bequeath to Jane Doe all personal effects, household effects, automobiles, and other tangible personal property, whether located as at present at 40 Park Avenue, New York, NY, or elsewhere, at the time of my demise.

 

In an oft-cited case, the Surrogate’s Court held that cash in a safe deposit box did not fall within the definition of a tangible personal property in the face of the foregoing provision. As the Court explained “cash is not ordinarily thought of as ‘tangible personal property’ and here, under the familiar doctrine of ejusdem generis, the words ‘tangible personal property’ should be limited to property of the same or similar character as that described by the preceding words, to wit, personal effects, household effects and automobiles.”

 

What about a valuable stamp collection? Reggie Jackson’s rookie card? Fine art? Etc. . . Sometimes, the testator is detailed – – you will see a provision similar to the following:

 

I bequeath my jewelry, silverware, furs, leather goods, china, and any art to Jane Doe, if she shall survive me, and all my other tangible personal property shall be distributed to my children, in equal shares, or all to the survivor. If none of my children shall survive me or shall not desire any such property, I authorize my Executor to sell such property at such time or times, at such prices and on such terms as he or she shall deem advisable and to distribute the net proceeds of sale thereof as part of my residuary estate. However, my Executor shall be empowered to retain for the benefit of my children and any other family members any item of such property deemed to have a personal, a family or sentimental character such as pictures, memorabilia, keepsakes or the like, and he or she shall distribute such property among my children and any other family members at such time or times and in such proportions as he or she shall, in his or her sole and absolute discretion, deem advisable.

 

A fairly recent, and again, oft-cited and discussed decision of the Bronx County Surrogate’s Court, Estate of Rothschild, illustrates why specificity and clarity might avoid wasteful estate litigation. There, the petitioner received a bequest of tangible personal property pursuant to the following provision:

 

I give all of my tangible personal property (other than currency) including without limitation, wearing apparel, personal effects, jewelry, furniture, furnishings, pictures, paintings and other objects of art, silver, china, glassware and other household effects, books and automobiles to my wife, or if she does not survive me, to [the petitioner]. . .

 

The petitioner maintained that the decedent’s collections of stamps, platinum, gold, and silver coins (worth millions of dollars) passed to her under the foregoing provision as “tangible personal property.” Petitioner relied on a New York case, where the court held that collections of medallions, stamps and coins were “tangible personal property.”

 

The Bronx County Surrogate’s Court ruled against the petitioner, holding that the decedent’s collections were not items of “tangible personal property” that passed to the petitioner, but rather were residuary assets. The Court explained that “tangible personal property” is generally understood and construed “as being limited to tangible property having an intimate relation to the testator and ordinarily used by him.” It distinguished the principal case that petitioner relied upon – – in that case there was a disposition of tangible personal property “of every kind” (expansive language), while the foregoing will provision contained the language “and other household effects” (limiting language). The Court held that the tangible personal property identified in the will did not embrace items beyond the kind of household effects that the decedent used on a daily basis, and that the decedent’s collections were of a different character of property.

 

Notably, the disposition of valuable tangible personal property of the kind encountered in Rothschild could have a drastic effect on estate tax apportionment in a taxable estate. If the will directs against apportionment, and provides that estate tax is to paid from decedent’s residuary estate, and a tremendously valuable tangible item is disposed of as a pre-residuary bequest of “tangible personal property” (perhaps contrary to decedent’s true wishes), the residuary estate could be significantly depleted by estate tax, perhaps even leading to an interrelated computation.   The tax allocation clause can sometimes be a very important provision in a will – – as illustrated in another blog post – – and perhaps in further blog posts.

This is a common question from clients involved in litigation – – especially estate litigation. As a general rule, a party cannot recover attorney’s fees for successfully prosecuting or defending a lawsuit. This is the “American Rule,” and it is engrained in our legal system. New York courts are wary of deviating from the American Rule, and will only do so under certain circumstances, such as (1) where the dispute litigated arises out of a contract, and the contract expressly provides for recovery of attorney’s fees; or, (2) where an applicable statute or rule expressly and unambiguously permits recovery of attorney’s fees.

Award of Legal Fees Pursuant to Contract

Sometimes, parties to a contract will agree that the “prevailing party” to any litigation arising out of the contract may recover legal fees incurred in the litigation. This begs the question – – what does “prevailing party” mean? The courts have defined a “prevailing party” as the party that succeeded on the central relief sought, or prevailed on the central claims advanced and received a substantial remedy.

Once the court identifies the “prevailing party” it will fix the legal fee. The attorneys for the “prevailing party” will apply for an award of fees and the court will permit recovery of a reasonable legal fee after considering several factors. Some courts have held that the most important factor in fixing the reasonable legal fee of a “prevailing party” is the “degree of success obtained.”  It follows that a “prevailing party” who achieved only modest success on its claims advanced and relief sought should not recover the same measure of legal fees as a prevailing party who achieved total victory on all claims advanced and requests for relief.

In deference to the American Rule, the courts narrowly construe contracts that provide for recovery of legal fees. In some cases, attorneys have attempted to recover attorney’s fees for their time and effort in making an application for an award of fees. However, the courts have made it clear that legal fees for time and effort incurred in making a legal fee application will not be awarded absent unmistakably clear language in the contract permitting recovery of same.  

Award of Legal Fees Pursuant to Statute

There are statutes in various contexts that provide for an award of attorney’s fees. Like contractual fee shifting provisions, such statutes have been narrowly construed.

With respect to estates and trusts, the fiduciary stands in a unique position. The fiduciary who incurs legal fees in discharging his or her fiduciary responsibilities may pay such fees from the estate (to the extent that they are reasonable and always subject to court review). For example, a nominated executor generally may pay legal fees incurred in seeking the probate of the decedent’s will from the decedent’s estate. Legal fees incurred by an executor or trustee who files a formal judicial accounting with the court seeking approval and discharge, and litigates over objections in the accounting proceeding, are also generally a proper charge to the estate. The Surrogate’s Court considers the following factors in fixing a fiduciary’s attorney’s fees: (1) the time and labor required; (2) the difficulty of the questions involved, and the skill required to handle the problems presented; (3) the lawyer’s experience, ability and reputation; (4) the amount involved and benefit resulting to the client from the services; (5) the customary fee charged by the Bar for similar services; (6) the contingency or certainty of compensation; (7) the results obtained; and, (8) the responsibility involved.

In certain litigations, where a beneficiary’s attorney brings a benefit to the estate, the Surrogate’s Court may grant an award of fees from the estate.

Moreover, as my colleagues, and others, have observed, in certain instances, the Surrogate’s Court may direct the source of payment of legal fees of the fiduciary to beneficiaries or distributees depending on several factors, namely: (1) whether the objecting beneficiary acted solely in his or her own interest or in the common interest of the estate; (2) the possible benefits to the individual beneficiaries from the outcome of the underlying proceeding; (3) the extent of the individual beneficiary’s participation in the proceeding; (4) the good (or bad) faith of the beneficiary; (5) whether there was justifiable doubt regarding the fiduciary’s conduct; (6) the relative interest of the objecting beneficiary in the estate; and (7) the effect of allocating fees on the interest of the individual beneficiary. Thus, where one beneficiary objects to a fiduciary’s administration of the estate, and those objections are without merit, the legal fees incurred in connection with defending such objections may be charged against the objecting beneficiary’s share of the estate.

Mental Hygiene Law Article 81 governs guardianships, and allows for a petitioner’s legal fees to be paid from the assets of the incapacitated person where the petitioner secures the appointment of a guardian for an incapacitated person or otherwise brings a benefit to the incapacitated person (MHL 81.16 [f]). It further allows reasonable legal fees incurred by a movant who succeeds in removing a guardian for cause (MHL 81.35). Further, it permits charging a petitioner with the attorney’s fees incurred by court-appointed counsel for an alleged incapacitated person where the petition is dismissed or withdrawn (MHL 81.10[f]). Like all statutory provisions that provide for an award of legal fees, these provisions are narrowly construed. For example, MHL 81.10 [f] only allows recovery of legal fees of court-appointed counsel for an alleged incapacitated person; the courts have rejected an expansive view of Mental Hygiene Law 81.10 [f] to allow recovery of the legal fees of an alleged incapacitated person’s retained counsel.

Finally, the courts will sometimes shift attorney’s fees and costs as a sanction for frivolous litigation conduct.  Allegations of frivolous litigation conduct have become common to the point of being meaningless – – it has become the standard practice for some attorneys to seek sanctions against parties and attorneys who disagree in good faith on a point of law, or who dare to adduce evidence in defense of a cause of action that contradicts or refutes the allegations forming the basis of that cause of action. However, the courts will occasionally shift fees for truly frivolous litigation conduct.

thatIn some will contests, lawyers will speculate that the decedent may have misled people as to his true estate plan, either out of weakness, to keep the peace, to measure reactions, to avoid uncomfortable conversations, and perhaps, sadly, intending to cause pain and disappointment. When this happens, it may be easier, for example, for a son to believe that his sister was responsible for subverting their mother’s wishes than to even approach the idea that his mother was not being truthful when she told him that he would receive “everything.” Bitter litigation is often the result. We can speculate that there may have been a bit of that going on with the parties involved in Gersh v. Nixon Peabody LLP, 2017 NY Slip Op 30363(U), (Sup Ct, New York County 2017), outside of the context of a will contest.

Decedent’s surviving spouse was the Plaintiff in Gersh, suing individually, and as executor of Decedent’s estate, for legal malpractice against Nixon Peabody LLP. She alleged that the firm committed malpractice in rendering planning services to her and to the Decedent, who jointly retained the Nixon firm in 2003. At that time, the Decedent — married for the third time, some forty years after his divorce from his first wife — decided to create a will and amend an existing revocable trust. When he did so, his obligations to the children of his first marriage under a separation agreement were seemingly unaccounted for in his estate plan.

Decedent and his first wife had two children, Laurie and Ellynn. The couple entered into a separation agreement 1963. The agreement provided that if the first wife survived Decedent, and if Laurie and Ellynn had reached the age of 21 at the time of Decedent’s death, then Decedent was obligated to leave 50% of his estate in trust for the first wife, with the remainder passing to Laurie and Ellynn upon their mother’s death. This provision is not a model of clarity. For example – – what are the terms of this “trust”? What is this separation agreement referring to when it refers to Decedent’s “estate”? Is it the Decedent’s probate estate? Or the Decedent’s net estate for estate tax purposes? Or something else?

If the Decedent had wanted his surviving spouse to receive all of his wealth despite the separation agreement, he could have employed trusts, life insurance, beneficiary designations, lifetime transfers and gifts, and other mechanisms to, at the very least, reduce what his first wife and children would receive . Arguably, it was possible to plan around the separation agreement, and for the Decedent to ensure that his surviving spouse received all of his assets, and that his first wife and Laurie and Ellynn received nothing. However, no such planning was done.

The Decedent died in 2014, and it appears that he died with a substantial probate estate. The Decedent’s first wife died shortly thereafter, and their children, Laurie and Ellynn, promptly claimed that they were entitled to 50% of their father’s estate pursuant to the separation agreement. Their claim against the Decedent’s estate ultimately settled for $2.367 million.

After compromising the claim, Plaintiff sued the Nixon firm. She alleged that the Nixon firm was aware that the Decedent had been divorced twice, but nevertheless neglected to perform a proper inquiry and investigation to determine the existence of the separation agreement. She maintained that the Nixon firm committed legal malpractice because it never inquired about or obtained a copy of the agreement, and never informed her and the Decedent that the Decedent’s first wife and children had a potential claim to as much as 50% of his estate. She further alleged that the Nixon firm did not provide her and the Decedent with advice to reduce exposure to such a claim in order to fulfill the Decedent’s wish to leave virtually all of his assets to Plaintiff. She claimed that if the Nixon firm had done so, the Decedent would have taken appropriate steps in planning and that she would have received the $2 million-plus that was paid to Laurie and Ellynn in settlement of their claim.

Examining Plaintiff’s claim on a motion to dismiss, the Court observed that it was undisputed that the Decedent was aware of the separation agreement at all relevant times, and that the Decedent did not inform the Nixon firm of the existence of the separation agreement. Citing well-settled law, the Court held that an attorney cannot be held liable for legal malpractice for failing to disclose facts already known to the client. Moreover, the Court held that even assuming that the Nixon firm had a duty to investigate separation agreements attendant to the Decedent’s prior marriages, and advise as to the effect of same, and was negligent in failing to do so, that Plaintiff could only speculate that this negligence was the proximate cause of her loss in the settlement paid to Laurie and Ellynn. Citing the familiar case of Leff v. Fulbright & Jaworski, LLP, 78 AD3d 531 (1st Dept 2010), the Court held that Plaintiff’s assertions as to what Decedent would have done had he received advice concerning the effect of the separation agreement on his estate plan were speculative and insufficient to support a legal malpractice claim.

In Gersh, it may have been that the Decedent had some sense of obligation to his first wife and Laurie and Ellynn. He may have known full well that his first wife and/or children might make a claim for 50% of his estate when he was working with the Nixon firm on his estate plan. He may have decided that it would be easier to let his first wife and children make a claim against his estate rather than talk to his wife about how he wanted to leave them something out of a sense of obligation. He may have wished to avoid a conversation, or a series of excruciating conversations, with his wife about whether and to what extent his children should receive assets upon his death. On the other hand, perhaps Decedent relished the idea of a fight between his surviving spouse and his first wife and children after his passing and his estate plan was so designed. Even if the Nixon firm had enlightened him as to the effect that the separation agreement would have had on his estate plan, he might have opted to do nothing. We can only speculate.

Attempting to determine the rightful intestate distributees of decedents in kinship hearings can be interesting. To illustrate, in the most general way, how the process works in Surrogate’s Court, let us take the simple case of Joe, an MTA switchman who never executed a Will, never married, and died at the age of 90, having lived in a modest apartment in Flushing, New York for the last 70 years (except for the years 1944 through 1949 when he served in the armed forces). There is no sign that Joe has any family. What happens to Joe’s $75,000 condominium and $2 million in cash and marketable securities?  

Joe’s assets will be administered by the Public Administrator – the Public Administrator will marshal Joe’s assets, pay all debts and administration expenses, and after due diligence, will render an accounting to whatever potential heirs the Public Administrator is able to locate through due diligence and the Attorney General of the State of New York. To get a bit of an idea as to what the Public Administrator does, check out these websites, http://queenscountypa.com/ http://www.nyc.gov/html/kcpa/html/home/home.shtml. (You can also follow the Queens County Public Administrator on twitter if you are interested).

In Joe’s case, the Public Administrator is able to determine through due diligence, e.g., talking to Joe’s neighbors, reviewing Joe’s birth certificate found among Joe’s personal effects, looking at census records, looking at Joe’s draft registration card, and looking at social security records, the identity of Joe’s long deceased mother, and two gentlemen who may be cousins of Joe on his mother’s side (maternal cousins). The Public Administrator is unable to obtain any information about Joe’s father.  The Public Administrator has not found any records showing that Joe was married or had any children. 

Because Joe’s intestate distributees are unknown, the Public Administrator will request that the Surrogate permit the Public Administrator to pay the assets of Joe’s estate to the Commissioner of Finance for the City of New York (Comptroller of the State of New York for Counties outside of New York City) in the absence of a determination of Joe’s intestate distributees. The Public Administrator would cite to the unknown heirs of Joe’s estate by publication, the two potential maternal cousins, and the Attorney General. If no-one appeared in the accounting proceeding, the assets would be deposited with the Commissioner of Finance and would be subject to being recovered by Joe’s heirs that come forward and prove heirship. If potential heirs appear in the accounting proceeding, there will be a kinship hearing in the context of the accounting proceeding. The kinship hearing in that SCPA § 2222 withdrawal proceeding would proceed in the same manner as a kinship hearing in the accounting proceeding. Those persons claiming to be heirs of Joe and seeking to receive Joe’s assets would be required to prove that they and Joe share a common ancestor and that there are no missing or unknown intestate distributees with an equal or superior right to inherit.

Kinship hearings often involve alleged heirs presenting documentary evidence, such as birth certificates, death certificates, social security applications, mortuary records, probate files, obituaries, baptismal certificates, marriage certificates, decrees of divorce, census records and any other publicly available documents that are useful in demonstrating kinship. The presentation of this documentary evidence will also be accompanied by the testimony of witnesses.  In Joe’s case, his birth certificate and his signed social security application indicate that his father is unknown. In Joe’s case, we might also hear from the fellow who lived in the apartment next to Joe, who would testify that he never saw anyone visit Joe, and that he spoke with Joe quite often and that Joe stated that he regretted that he was never married and never had children. The absence of any record of Joe being married or having children (after a thorough search of public records) together with Joe’s neighbor’s testimony, would be highly probative to the issue of whether Joe died with a spouse and issue, as these would be the first people to take in intestacy.  This testimony would be admissible over a hearsay objection based on the pedigree exception to hearsay. There are certain presumptions that a person claiming to be an heir can avail themselves of, such as the presumption that a person is deemed to have predeceased the decedent if he would have been 100 years old at the time of decedent’s death. Another oft employed presumption arises by statute, namely, the three-year presumption under SCPA § 2225. In some cases a professional genealogist will assist counsel in attempting to prove heirship, and even scientific evidence, such as DNA evidence, might come into play in a kinship hearing.  

Kinship proceedings, aside from telling sometimes compelling narratives of peoples’ lives, can be illuminating from a historical perspective. Census records reveal extended families struggling to make it in their new country in ethnic enclaves, and the chaos of World War II and the devastation of the Holocaust can present special challenges to those attempting to prove kinship to a decedent. With vast public records destroyed and the world having been robbed of the memories of millions of people, evidentiary hurdles may abound. In similar fashion, the legacy of slavery and racial discrimination present challenges when attempting to prove kinship to an African-American decedent.          

 

 

In a recent decision in the Estate of Mildred Rosasco , Surrogate Glen carefully explains the difference between undue influence and duress, two legal concepts that have become conflated in Surrogate’s Court practice. 

If you speak with a trusts and estate’s lawyer and ask her to define undue influence, you will hear something like “undue influence is moral coercion that destroys a testator’s will to act independently and leads the testator to act contrary to his own desires because he cannot refuse or is too weak to resist.”   However confident that lawyer sounded in her recitation of this definition, understand that the Court of Appeals has stated, as Surrogate Glen tells us, that "[i]t is impossible to define or describe with precision and exactness what is undue influence . . ."  In Rosasco, Surrogate Glen explains how courts have struggled with the concept of undue influence, citing to decisions dating back to the 19th Century, and how the Court of Appeals, in Matter of Walther (6 NY2d 49 [1959]), affirmed the explanation of undue influence cited above.

What is critical in a probate contest involving an objection on the grounds of undue influence is that a prima facie case of undue influence requires a showing, not only of opportunity and motive to exercise undue influence, but also, of the actual exercise of undue influence.  Although undue influence can be proven by circumstantial evidence, as there is rarely direct proof of undue influence, it can only be proven by substantial circumstantial evidence.  Undue influence is difficult to prove, but the burden of proving undue influence is eased where there is a showing that the testator was in a relationship of trust and dependence with proponent of the will, i.e., the existence of a confidential relationship. Surrogate Riordan’s decision in Matter of Zirinsky is a must read for anyone trying to get a handle on undue influence (Also review the Appellate Court decision on the appeal of the Zirinsky case).

As to duress, Surrogate Glen, citing the Restatement (Third) of Property, notes that duress is something different from undue influence. She explains that a will or a bequest is procured by duress if the wrongdoer threatened to perform or did perform a wrongful act that coerced the testator into doing something that she would not otherwise have done. A “wrongful act” in this definition means a criminal act or an act that the wrongdoer had no right to do. 

One can understand how the two concepts differ by examining a three-year-old child’s threats.  When a three-year-old has his mind set on eating a second piece of chocolate or on watching a cartoon that features incredible acts of violence, he might threaten to flush his father "down the toilet."   In the alternative, he might repeatedly and sincerely state that he will not talk to his father until he receives his chocolate or is gratified by watching Spiderman deliver bone-crushing blows. Flushing another human being down the toilet would certainly constitute a crime.  The three-year-old child’s father taking this threat seriously and acting on this threat could be said to be acting under duress.   On the other hand, absent some legal relationship, such as that which a guardian has with his ward, a person is well within his rights to refuse and refrain from talking or associating with another.  If the three-year-old child’s father is acting on the child’s threat to cut off all communication, he might be said to be acting as a result of undue influence.   

The newly elected Surrogate for Nassau County, Edward W. McCarty III, recently issued a decision in what appears to be a gut-wrenching case involving an infant decedent. In the Estate of Jessica Fernandes, Surrogate McCarty attempts to get to the bottom of two commonly encountered issues in an infant decedent’s estate, that is 1) who should serve as administrator of the decedent’s estate; and 2) whether one of the decedent’s parents should be barred from receiving estate assets. 

In most estates, the answer to the question of who will serve as fiduciary is straightforward. Where a decedent dies having executed a last will and testament, the will identifies the nominated executor (or co-executors). The nominated executor will serve unless the Court finds that he or she is ineligible to serve for the reasons set forth in SCPA § 707. Every person interested in the estate has the opportunity, pursuant to SCPA § 709, to object to the appointment of the nominated executor. Where a person dies intestate, a person interested in the estate may object to the appointment of an administrator on one or more of the grounds set forth in SCPA § 707Article 10 of the SCPA governs the order of priority of who is entitled to serve as an administrator of an intestate estate. 

In Fernandes, the decedent was a 12 year-old girl who succumbed to respiratory failure. She had been incapacitated since birth, and her mother had been appointed her personal needs guardian, as well as co-guardian of her property along with an attorney, pursuant to Article 81 of the New York Mental Hygiene Law. The decedent had recovered in excess of $3.5 million in the settlement of a medical malpractice action.   All else being equal, the decedent’s mother and father have equal priority to serve as administrator of her estate pursuant to SCPA § 1001, and the Court may appoint, in its discretion, one or both of them.

Following the decedent’s death, her mother petitioned for letters of administration and requested that the decedent’s father be disqualified, pursuant to EPTL § 4-1.4, from taking an intestate share of decedent’s estate on the basis of his alleged failure to provide for, and abandonment of, the decedent. The decedent’s father struck back, denying that he had abandoned the decedent, objecting to the decedent’s mother’s appointment as administrator of the decedent’s estate pursuant to SCPA § 707 on the grounds that the decedent’s mother had engaged in fraud and dishonesty, and cross-petitioning for letters of administration. The decedent’s mother appears to have also alleged that the decedent’s father is a non-domiciliary alien and thus ineligible to serve as administrator pursuant to SCPA § 707 (1) (c), and that he cannot read or write in English, and that the Court should thus, in its discretion, find him ineligible to serve pursuant to SCPA § 707 (2). The decedent’s mother also alleged that decedent’s father’s open hostility to her rendered him ineligible to serve. 

Judge McCarty’s decision indicates that he is poised to address the factual allegations that the parties have made. He explained that summary judgment was inappropriate; the papers before him left several issues of fact to be resolved at a hearing (the hearing may have already been held). Aside from untangling the issue of the decedent’s father’s immigration status, it seems that the Surrogate will be faced with determining whether each of the decedent’s parents can read and write in the English language, and, if not, whether this should affect their ability to serve. In this inquiry, he may be informed by a recent decision from the Surrogate’s Court, New York County, Matter of Torbibio.   

Moreover, while dishonesty is one of the grounds set forth in SCPA § 707 (e) as a basis to render someone ineligible to receive letters, dishonesty as contemplated by the statute is not dishonesty in answering questions such as “how big was that fish that you caught last fall?” but, as the First Department recently explained, dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the contemplated fiduciary.   As for the decedent’s mother’s claim that the decedent’s father’s hostility renders him ineligible, as countless Surrogate’s Court practitioners have explained to their clients, mere hostility is simply not enough. It is well-settled that an individual will only be barred from being appointed fiduciary where friction or hostility interferes with the proper administration of the estate, and future cooperation is unlikely. 

Barring a settlement, it appears that the Court will reach the second issue, whether the decedent’s father should be disqualified from sharing in the decedent’s estate, at the close of discovery. His decision contains a granular analysis of disputes among the parties as to documentary discovery – the kind of analysis that is helpful to lawyers when they get down to the task of drafting demands for documents.       

One of the first reported Surrogate’s Court decisions of 2011 comes from Monroe CountyThe decision is interesting in that the court addresses various legal issues in the context of what it describes as “a power-sharing arrangement that is rather unconventional, even by today’s standards of Trust and Estate practice.”   The decision addresses an exoneration clause, the delegation of investment responsibility, the overriding duty of loyalty of fiduciaries, the Prudent Investor Act, the construction of wills and trust instruments, and the status of an “advisor” as a de facto trustee.

The inter vivos trust at issue was created in 1945, in conjunction with the grantor’s outright gift to the University of Rochester to create a clinic under the auspices of the University’s Department of Psychiatry. The grantor directed that Trust income be used to operate and maintain the clinic. The grantor named an institutional trustee (“Trustee”) and also created an “Investment Advisory Committee” comprised of three individuals, two to be named by the University of Rochester and one by the Trustee.

By the provisions of the Trust instrument, the Advisory Committee has considerable power and control over the investment of Trust assets. The Advisory Committee was granted “sole and exclusive power and control over the investments making up this trust fund, the sale of securities, and the reinvestment of any funds at any time in the trust estate” and given the power to direct the Trustee in writing in connection with such power and control. The Trust instrument also contains an exoneration clause, and provides that “[t]he Trustee shall be charged with no responsibility or duties with respect to the investment or reinvestment of trust funds, other than to carry out the written directions or communications received by it from the Committee.”

Approximately 65 years after the Trust was created, a disagreement arose between the Advisory Committee and the Trustee that required judicial attention. Specifically, the Advisory Committee directed the Trustee to invest all of the Trust assets in the University’s long-term investment pool, and the Trustee sought advice from the Court. 

The Court made clear that its task was to determine whether the proposed investment in the long term investment pool would frustrate the intent of the grantor.  It first addressed the intent of the grantor and the purpose of the Trust. Reading the Trust instrument as a whole, the Court found that that the Advisory Committee and Trustee were required to work in concert to promote the goals of the grantor to fund the operation of the Psychiatry Department. Although the terms of the Trust instrument quoted above confer broad authority upon the Advisory Committee, the Court held that such authority could not be used in contravention of the stated purpose of the Trust, and that the Trustee and the Advisory Committee, as a de facto co-trustee, share the fiduciary obligation to invest and manage the assets in a manner consistent with the purpose of the Trust. 

In reaching this conclusion, the Court noted the limits of the Trust instrument’s allocation of investment responsibilities to the Advisory Committee and the concomitant exoneration clause. The Court found that the exoneration clause employed in the Trust instrument, an attempt to render the Trustee completely unaccountable in deference to the Advisory Committee, is inconsistent with the nature of a trust, and void as against public policy.   If the Advisory Committee’s control over investment decisions was completely dispositive, there would be little sense in having a trustee.   According to the Court, while the Trustee is under a duty to comply with the directions of the Advisory Committee with respect to investment decisions, the Trustee cannot ignore its fiduciary responsibility; the Trustee could be held liable for abiding by the direction of the Advisory Committee where there may be reason to believe that the Advisory Committee is not fulfilling its fiduciary duty. 

The Court had several problems with the proposed investment in the long term investment pool. The investment would remove both the Trustee and the Advisory Committee from any role in administering the Trust assets. Trust funds would be transferred to the University’s custodian bank, and such bank would have no fiduciary obligation to the Trust. The funds would be managed by numerous investment management firms under the oversight of a subcommittee of the University’s Board of Trustees.   Once the Trust’s funds were invested in the long term investment pool, neither the Advisory Committee, nor the Trustee, would have input concerning asset allocation, or the discretion to select, retain or sell off any individual assets. Such decisions would be overseen by the subcommittee of the University’s Board of Trustees. 

Quoting Meinhard v. Salmon, the Court first noted that two of the three members of the Advisory Committee were employed by the University, and that the proposed investment would place the majority of the Advisory Committee, owing a duty of loyalty to both the University and the Trust, in a position of conflict if questions were to arise as to the handling of Trust funds in the long term investment pool.   The Court was “hard-pressed” to allow the majority of the Advisory Committee to be allowed to direct the investment of Trust assets in the long term investment pool under these circumstances. The Court acknowledged that the third member of the Advisory Committee was also in a potential position of conflict as an employee of the Trustee, but found that this third member’s conflict was less of a concern considering the minority status.

The Court also held that while delegation of investment and management functions is permissible under the EPTL, the proposed investment constituted a delegation far afield from what is permitted by statute (EPTL § 11-2.3(c)), and would be inconsistent with the Trust instrument.

This case is certainly worth a read.

 

A recent decision from the Westchester County Surrogate’s Court, Edelman v Hatami is an entertaining read. The decision addresses the Statute of Frauds, and provides a good example of how litigants will attempt to employ the equitable doctrines of promissory estoppel and constructive trust in estate litigation. 

In Edelman the defendant sought recovery against a decedent’s estate, claiming breach of contract, promissory estoppel, and constructive trust. According to the decision, the defendant met the decedent sometime in 1995 or 1996, when the defendant became a tenant in a building owned by the decedent. At that time, the defendant was in her early 30s, and the decedent was in his late 60s. They developed what the Court described as an “intimate” relationship that lasted until the decedent died in September 2004 at the age of 77. According to the defendant, in exchange for certain services rendered on her part, the decedent orally agreed to pay her living expenses for a three-year period, to pay her law school tuition, and to transfer to her the apartment in which she resided. The services allegedly provided to the decedent included ensuring that decedent was cared for and fed healthy, nutritious meals; monitoring the decedent’s medical and physical condition; acting as the decedent’s personal confidant concerning all aspects of the decedent’s life; and, acting as decedent’s business confidant. The Court dismissed all of the defendant’s claims. 

The Court’s dismissal of the defendant’s breach of contract, promissory estoppel and quasi-contract claims was based, in part, on its determination that the services provided by the defendant were consistent with the “intimate” relationship that the decedent and the defendant shared. The Court also noted that the defendant received substantial benefits from the decedent in the course of their relationship, such as an allowance of approximately $5,000 per month, nearly $200,000.00 in credit card charges over a period of several years, and a year-long all-expense-paid trip to England.  The Court’s dismissal of the defendant’s constructive trust claim was based on the defendant’s failure to demonstrate a necessary element of a constructive trust; a transfer on the defendant’s part in reliance on a promise of the decedent. If you enjoy reading the decision, stay tuned, as it appears that the defendant may be taking an appeal.