YOU SNOOZE, YOU LOSE: POST-DEATH ESTATE PLANNING IS NOT A “USEFUL PURPOSE” TO DELAY OR AVOID PROBATE
Decedent executed a Last Will and Testament in 1976, which left his entire estate to his surviving spouse, and which also nominated her as Executrix. Decedent died in 1993. His wife never offered his Will for probate in 1993. Twelve years later, she sought issuance of letters of administration on waivers and consents from their two sons, who were the only other distributees of decedent’s estate. The wife argued that hundreds of thousand dollars would be saved in her estate at her death by permitting the administration proceeding to go forward, which would distribute the amounts between herself and her sons. Surrogate’s Court of Washington County (Berke, S.) denied her petition and this appeal ensued.
SCPA §1001, subdivision 9 states that letters of administration may be granted by the court in any case where a writing purporting to be a will has been filed in the court “and proceedings for its probate have not been instituted within a reasonable time or have not been diligently prosecuted”. In order for a court to grant such letters of administration, however, the court must be “satisfied that no useful purpose would be served by requiring a probate proceeding” Matter of VonRipper, 95 Misc. 2d 952; 408 N.Y.S.2d 686 (Surr. Ct. New York Cty 1978).
Here, the Appellate Division, Third Department, held that it is discretionary within Surrogate’s Court whether to issue letters of administration in cases like these. Further, the Court held that the testator’s intent was to leave his entire estate to his wife, and the “useful purpose” of ensuring that his testamentary bequest is honored is served by the probate of the Will and in no other way. The Court was loathe to permit the wife to engage in post-death estate tax planning to validate her delay of probate as a method to achieve beneficial estate tax results. In re Fischer, 2005 N.Y. App. Div. LEXIS 13613, 2005 NY Slip Op 9173, 804 N.Y.S.2d 863 (3d Dep’t 2005).
TRUST IS NOT ENOUGH: RELATIONSHIPS BETWEEN PERSONS WITH IMPAIRED CAPACITY AND THEIR CAREGVERS ARE SUBJECT TO “VIGILANT SCRUTINY”
Petitioners, the Temporary Administrator and the residuary beneficiary under the Wills of two decedents, commenced an action in each estate in accordance with SCPA 2103 for the turnover of $1 million allegedly converted by Respondent in her role as home health care aide. Probate of said Wills was suspended pending the determination of the authenticity of later Wills proffered by Respondent.
During the last two years of the lives of the decedents, during which Respondent acted as their caretaker, Respondent cashed checks drawn from the checking accounts of the decedents, totaling $979,394.70. Respondent claimed all checks were written and cashed for the benefit of decedents, on behalf of the decedents, or for her salary and gifts. Petitioners claim decedents were senile at the time and Respondent converted the funds. Testimony during trial portrayed the seriously declining mental and physical health of both decedents. Under the doctrine of constructive fraud, transactions between a couple with impaired capacity and their caregiver are subject to vigilant scrutiny. Gordon v. Bialystoker, 45 NY2d 692; 412 N.Y.S.2d 593 (1978). Further, such transactions are presumed void unless the stronger party, bearing the burden, can prove the absence of an abuse of confidence, and that “no deception was practiced, no undue influence was used, and that all was fair, open, voluntary and understood.” Gordon, supra at 698. Respondent failed to meet her burden to account for money expended on behalf of the decedents and to prove the elements of any gift by clear and convincing evidence.
Petitioners offered additional evidence of letters allegedly signed by decedent, making Respondent the beneficiary of his bank accounts. Petitioners employed an expert witness, a linguistics professor and expert in Caribbean English, who compared Respondent’s written English and that of the decedent, and concluded that, based upon decedent’s formal writing style, said letters were not written by him, but by an individual whose native language is that of deep Caribbean. He further concluded that Respondent’s speech demonstrated many of the structural features found in the documents.
Here, the New York County Surrogate, Eve Preminger, found Respondent liable for the entire sum, calculated as the sum of checks cashed and funds withdrawn by Respondent from the time of incapacity of the decedents and ordered it turned over to each estate, less the salary she was entitled to under the theory of quantum meruit. In re Fischer, N.Y.L.J. Dec. 8, 2005 at 31 (Sur. Ct. New York County).
NO TWO BITES AT THE APPLE: REMOVAL OF A FIDUCIARY MUST BE UPON A SHOWING OF CLEAR MISCONDUCT
In an application for preliminary letters, two distributees, potential objectants to the will’s admission to probate, objected to the issuance of said letters to proponent, alleging there was no urgency meriting such issuance, and that another court had found proponent not fit to be an executor. The objectants relied upon purported testimony of the proponent in a Mental Hygiene Law Article 81 guardianship proceeding and the holding of the Supreme Court in that decision.
Courts have a responsibility to both exercise the power of removal of a fiduciary sparingly as well as to nullify a testator’s choice of executor only upon a “clear showing of serious misconduct that endangers the safety of the estate” Matter of Duke, 87 NY2d 465; 640 N.Y.S.2d 446 (1996); Matter of Venner, 235 AD2d 805; 653 N.Y.S.2d 150 (3d Dep’t 1997). In the absence of such a showing, the Courts are reluctant to allow opposition to the issuance of preliminary letters testamentary to generate a “contest within a contest” Matter of Vermilye, 101 AD2d 865; 475 N.Y.S.2d 888 (2d Dep’t 1984); Matter of Fordham, NYLJ, Dec. 16, 1998, at 22. Only where fraud or undue influence rises to the level of dishonesty which constitutes a ground for disqualification under SCPA 707 will the Court deny preliminary letters to the executor selected by the decedent. See Matter of Israel, 64 Misc 2d 1035; 315 N.Y.S.2d 453 (Sur. Ct. Nassau Cty 1970).
Here, the Court held that the evidence offered by the objectants fell far short of establishing the ineligibility of the proponent as fiduciary: the opponents did not make a showing of undue influence, nor did they provide the Court with a transcript or copy of the alleged testimony. Further, the issue of undue influence raised by the opponents with regard to the issuance of preliminary letters is precisely the issue they will have to prove in the will contest.
The Court was reluctant to permit opponents to hold up the will contest proceeding with a trial concerning many of the same issues, and granted proponent’s application for preliminary letters. The Court did, however, require a bond for the full value of the estate, in accordance with the alternative relief sought by the opponents. In re La Valle, N.Y.L.J., Dec. 1, 2005, at 30 (Sur. Ct. Bronx County).
THE DANGERS OF SIBLING RIVALRY: LACK OF COOPERATION AND IMPROPER ACTIONS BY A CO-ADMINISTRATOR CAN RESULT IN REVOCATION OF LETTERS
A brother and sister were appointed as administrators of the estate of their deceased brother on consent of their parents, who were the sole distributees. The sister petitioned the Court for the revocation of the letters of administration of her brother as co-fiduciary, alleging he has frustrated her attempts to marshal the assets of the estate, including failing to turn over personal items belonging to the decedent and refusing to execute a deed transferring title of a piece of real property. She also alleged that her brother has moved or changed his address without notifying the Court. She petitioned the Court to revoke her brother’s letters of administration and to issue her sole letters of administration.
SCPA §711 governs the grounds for removal of a fiduciary, which include substance abuse, dishonesty, improvidence (as in improvident management of assets), misconduct of execution of duties, as well as failure to notify the Court of change in address. Also, upon a showing of a failure to cooperate between a fiduciary and co-fiduciaries interfering with the proper administration of the estate, and the unlikelihood of future cooperation, the fiduciary may be removed or denied letters. Estate of Levine, N.Y.L.J. June 21, 1994, at 23.
Here, the brother had not filed any opposition to his sister’s petition, nor did he appear in opposition. The Court granted the sister’s petition and issued sole letters of administration to her. In addition, the Court directed the brother to file an accounting of his administration because it is believed he had liquid assets of the estate in his possession. In re Nolan, N.Y.L.J., Oct. 27, 2005, at 31 (Surr. Ct. Suffolk Cty).
NURSING HOME THAT REFUSED TO INSTITUTE AN ARTICLE 81 GUARDIANSHIP PROCEEDING MUST PAY ATTORNEY’S FEES
Petitioner commenced a Mental Hygiene Law Article 81 proceeding to appoint a guardian for her 94-year old father when Hollingswood Nursing Home (“Hollingswood”), which provided rehabilitative care for a leg injury, alleged he was incapacitated and refused to discharge him. Hollingswood refused to discharge him even after Petitioner advised Hollingswood that she was her father’s health care agent. Petitioner hired an independent geriatric care manager to evaluate her father, who found him to have a high level of capacity and function. She also found his home environment to be clean, safe and appropriately equipped for release. Hollingswood still refused to discharge him, and applied for Medicaid on his behalf. Hollingswood advised Petitioner to file the instant proceeding, and a temporary guardian was appointed on behalf of Petitioner’s father. The temporary guardian found the patient to be lucid and competent, and found his home environment to be a proper one for release. The temporary guardian also contacted another geriatric evaluator, who indicated similar findings as the first evaluator. Upon these findings, the Petitioner requested that costs for this proceeding be paid by Hollingswood and sanctions be imposed upon them for their actions.
The Court found that Petitioner’s father did not need a guardian and was sufficiently competent to have executed his directives to be released from the facility to his home and into Petitioner’s care. Hollingswood objected, stating the Court had no jurisdiction over them, and the Court did not have authority to direct a third party to pay costs and fees in an Article 81 proceeding.
The fact that a temporary guardian was able to secure Petitioner’s father’s release did not divest the Court of jurisdiction, as the nursing home was where Petitioner’s father was being held. The Court found it had jurisdiction over Hollingswood as a necessary party.
Section 81.16 of Article 81 of the Mental Hygiene Law provides that “when a petition is granted, or where the court otherwise deems it appropriate, the court may award reasonable compensation for the attorney for the petition.” In addition, the Court has the ability to assess legal fees when litigation creates a benefit to another or when an opposing party’s malicious acts case another to incur a fee, provided the fees should be “proximately related to the acts themselves… [and] entirely motivated by a disinterested malevolence.” Harradine v. The Board of Supervisors of Orleans County, 73 A.D.2d 118; 425 N.Y.S.2d 182 (4th Dep’t 1980). The Court found in this case that Hollingswood created a benefit for themselves by refusing to release Petitioner’s father and thereby collect funds from Medicaid. Hollingswood was fully aware of its responsibility to institute a Guardianship proceeding if it questioned a health care proxy or discharge plan. The Court felt Hollingswood did not institute such a proceeding in order to obviate its financial and legal obligations, and therefore imposed the obligation to pay Petitioner’s attorney’s fees in this case. In re Topa, 2005 N.Y. Misc. LEXIS 2419, 2005 NY Slip Op 25645 (Sup. Ct. Queens Cty 2005).
ISSUE OF PRECLUSION ALONE WILL NOT OBVIATE OBJECTANT’S BURDEN OF A DECISIVE SHOWING OF FRAUD
Decedent died in 2002 and in her Will she left her entire estate to her daughter and her daughter’s issue. Her son objected to the probate of this Will and filed a motion for summary judgment denying probate on the grounds of fraud. Objectant alleged that the daughter had misled the decedent with regard to a lifetime gift of a painting by the decedent. Objectant commenced a proceeding against his sister in Westchester County Supreme Court during the decedent’s lifetime to establish that the decedent had made a joint gift of the painting to both her son and her daughter, rather than solely to her daughter. Objectant contended that the daughter made certain misstatements to the decedent during the painting litigation concerning its ownership that caused the decedent to change her will, ultimately disinheriting her son. A non-jury trial determined that the gift of the painting was in fact a joint gift to both children of the decedent. Objectant now sought a determination giving preclusive effect to the judicial determination of a joint gift, and upon that determination, an order granting summary judgment against the Proponent on the issue of fraud. More specifically, Proponent should be precluded from relitigating the circumstances of the gift of the painting based upon the doctrine of issue preclusion, and equitable considerations should govern resolution of the same issue in the instant probate proceeding.
The elements of collateral estoppel are: first, the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the same issue must have had a full and fair opportunity to contest the prior determination. Gilberg v. Barbieri, 53 N.Y.2d 285; 441 N.Y.S.2d 49 (1981). Here, the Court found that, although Proponent cannot contest the issue of ownership in the instant proceeding because she had a full and fair opportunity to litigate previously, the issue of ownership was not decisive of fraud in the instant proceeding and therefore the motion seeking issue preclusion was otherwise denied.
Further, the proponent of a summary judgment motion bears the burden of proof by clear and convincing evidence that a false statement was made to the testatrix and it induced her to make a Will disposing of her property differently (see Matter of Coniglio, 242 A.D.2d 901; 663 N.Y.S.2d 456 (4th Dep’t 1997)), and must make a “prima facie showing of entitlement to judgment as a matter of law, showing sufficient evidence to demonstrate the absence of any material issues of fact.” In re Lucia, 2 A.D.2d 638; 768 N.Y.S.2d 351 (2d Dep’t 2003). Objectant did not meet his burden of proof; therefore his motion for summary judgment was denied. In re Bronner, 9 Misc.3d 1119A, 2005 N.Y. Misc. LEXIS 2244, 2005 NY Slip Op 51643U (Sur. Ct. Nassau Cty 2005).
SELF-DEALING IS AN “ABUSE OF DISCRETION” RENDERING SUSPENSION OF LETTERS AN APPROPRIATE REMEDY
Petitioner trustee moved to revoke letters of trusteeship issued to her two step-children, including a request for the court to immediately suspend the letters pending the outcome of the hearing on the revocation, claiming Respondent co-trustees have continued to violate a court order even after it was affirmed by the Second Department. Respondents denied the allegations. Petitioner requested relief under SCPA 711 and 712.
The trust in question was a testamentary QTIP trust created for the benefit of Petitioner as principal and income beneficiary by her husband, the decedent, with Respondents as presumptive remainder beneficiaries. Upon the decedent’s death, Petitioner was granted letters testamentary and Respondents were granted letters of trusteeship. The QTIP trust was funded with limited partnership interests of which decedent’s son ran the day-to-day operations. The Appellate Division affirmed an order of this Court to prevent distributions from said QTIP trust from being reduced by depreciation amounts under IRC §754. Petitioner alleged that Respondent co-trustees have continued to violate this order and have withheld and delayed income payments as well as made such payments with the prohibited deduction. Respondents denied these allegations.
SCPA 712 expressly authorizes suspension of letters “upon issuance of process”; however SCPA 719 permits the summary suspension of letters without service of process, provided proper consideration to due process has been shown. Since SCPA 712 does not expressly state grounds for suspension of letters, the Court considered this application as controlled by Matter of Duke, 87 NY2d 465; 640 N.Y.S.2d 446 (1995), which holds that the summary removal of a trustee “will constitute an abuse of discretion where the facts are disputed, where conflicting inferences may be drawn therefrom, or where there are claimed mitigating facts that, if established, would render removal an inappropriate remedy.” Duke, id at 473.
While the Court would not suspend letters based upon the continuing violation of a court order, which the Court noted raised an issue of fact, the Court did find the record was sufficient to raise “serious concerns” that the Respondent co-trustee’s inherent conflict of interest as remainder beneficiary and his admitted self-dealing as co-trustee would color his judgment and he would administer the trust in a way that favored his own interests. Further, his sister’s non-participation did not serve to commend her efforts as a co-trustee, and permitting her to remain as co-trustee would exacerbate an already hostile relationship. Therefore, the Court stated it believed the trust was better and more efficiently served by suspending their letters of trusteeship, pending a hearing on revocation. In re Chadrjian, N.Y.L.J. Feb. 28, 2006 at 20.
SERVICE UPON PERSONAL REPRESENTATIVE IS SUFFICIENT TO “SUBSTANTIALLY COMPLY” WITH EPTL 5-1.1-A(d)(1)
Petitioner was decedent’s son and the nominated executor of his mother’s estate. Before letters testamentary were issued to him, Petitioner’s attorney directed the attorney for the decedent’s husband to mail all future correspondence to him, and not to Decedent’s husband. Thereafter, the attorney for the decedent’s husband filed a notice of election with the clerk of the Surrogate’s Court, and mailed a copy to the Petitioner’s attorney according to his instructions. Decedent’s husband died shortly thereafter and Petitioner sought a judicial determination that the decedent’s husband had not elected against decedent’s estate in conformity with EPTL 5-1.1-A(d)(1) because the notice of election had been served upon Petitioner’s attorney, and not upon Petitioner himself. Both parties moved for summary judgment on the issue of the notice of election. The Surrogate’s Court of Sullivan County granted Respondent’s motion for summary judgment, and Petitioner appealed.
EPTL 5-1.1-A(d)(1) states, in part, that written notice of election “shall be served upon any personal representative” and such notice “may be served by mailing a copy thereof, addressed to any personal representative…”. The statutory provisions regarding the spousal right of election are generally afforded a liberal construction. See Matter of Byrnes, 260 N.Y. 465; 184 N.E. 56 (1933). Additionally, the manner of service of notice of election may be sufficient when there has been “substantial compliance with the statute”. Matter of Prescott, 194 Misc. 827; 87 N.Y.S.2d 879 (Surr. Ct. Herkimer Cty 1949).
Here, Petitioner’s attorney directed the attorney for the decedent’s husband to mail all future correspondence to him rather than the Petitioner himself. The notice of election was mailed to that attorney within three months of such direction, and Petitioner had knowledge of such election. Further, the estate’s estate tax return contained a deduction for such spousal election. The Appellate Division, Third Department, upheld the Surrogate’s Court finding of substantial compliance with the statute, and the notice of election was held to be valid. In re Colin, 23 A.D.3d 824, 803 N.Y.S.2d 794 (3d Dep’t 2005).