Estate Settlement

October 30, 2013

A New York Estate Attorney Has Many Responsibilities

The estate planning process as well as estate settlement almost always requires a close relationship between a New York Estate Lawyer and a client. When a client is planning an estate and seeking advice regarding the disposition of assets and the naming of beneficiaries, there must be a personal discourse with the attorney advisor. Depending upon each particular circumstance, a testator’s confidential information regarding such matters as divorces, non-marital children and sensitive business issues can be essential to developing an effective estate plan. Typically, the estate planning attorney will inquire of the client as to all information regarding assets and family life and history so that the provisions of documents such as a Last Will or Trust accurately take into consideration the possible effect of the testator’s family circumstances. For example, if the testator was adopted at an early age and has no information regarding his next of kin, an attorney may suggest the use of a Living Trust as a Will substitute. This trust could avoid the need to search for next of kin and to provide such potential heirs with notice of a Surrogate’s Court probate proceeding which would be required if the testator disposed of his estate through a Last Will.

Estate settlement and administration also requires a good working relationship between the fiduciary and the attorney. An Executor, Administrator and Trustee face many issues dealing with asset collection, payment of debts and claims and various tax matters. In some instances, the interests of the fiduciary and the beneficiaries themselves may be at odds or in conflict. Particularly in family situations, the fiduciary may be knowledgeable about and have relationships with family members that can assist legal counsel in resolving disputes without Court intervention. While legal guidance is essential, it is always best if interested parties can resolve differences amicably. In order for an attorney and fiduciary to achieve such results, they must work closely together.

An interesting aspect of the relationship between an estate attorney and a client relates to the well-recognized attorney-client privilege. When a person dies, the attorney-client privilege between the decedent and his life-time attorney generally continues. Thus, an attorney is prohibited from disclosing communications between the attorney and client even after the client dies. However, in New York Civil Practice Law (CPLR) Section 4503(b), the statute creates an exception which provides that “in any action involving the probate, validity or construction of a will, an attorney or his employee shall be required to disclose information as to the preparation, execution or revocation of any will or other relevant instrument, but shall not be allowed to disclose any communication privileged under subdivisions (a) which would tend to disgrace the memory of the decedent“. Therefore, confidential communications can be disclosed when there is a Will Contest.

It is also interesting to note that the Courts have ruled that a fiduciary who represents an estate can waive the decedent’s attorney-client privilege for the estate’s benefit. Moreover, as provided of CPLR 4503(a)(2) communications between an attorney and a personal representative, such as an Executor and Administrator, are generally privileged.

New York Estate Planning and Estate Administration typically require close and confidential communication between an attorney and a client. While it may seem obvious, creating and continuing a strong and trusting relationship between legal counsel and a client is more likely to produce a positive outcome whether in the creation of an estate plan or the settlement of an estate.

October 23, 2013

New York Estate Executors and Administrators May Be Responsible for Real Estate

by Jules M. Haas

The estate of a decedent in New York may contain many different types of assets. The New York Probate Lawyer Blog has discussed in past posts that such assets may include bank accounts, stocks and bonds and real estate. In fact, real estate, in the form of a family residence, is commonly one of, if not the most, valuable asset involved in estate settlement.

An Executor or Administrator who is handling an estate that has a real property asset faces many issues. To begin with, the fiduciary must determine the ownership of the property. Real estate can be held in many different ways such as tenancy by the entirety between spouses, or joint tenancy with rights of survivorship, or tenancy in common among a number of parties. The manner in which a property is owned will determine the extent to which the decedent’s estate has an interest in such property. Moreover, there are a number of overlapping fiduciary responsibilities that flow from the determination of ownership. For example, if the decedent’s house is owned by the decedent and his spouse as tenants by the entirety, upon death the full ownership interest in the house passes to the surviving spouse and no portion would be part of the probate or intestate administration estate. However, the value of the house would need to be included in the decedent’s estate tax return (if a return must be filed). The estate fiduciary has a responsibility to prepare and file the estate tax return and pay any Federal or State estate taxes.

Suppose that the property was owned by the decedent along with others as tenants in common. In such a case, only the decedent’s share of ownership would be part of his probate or intestate estate and includable as part of his gross estate for estate tax purposes.

If, however, the decedent owned property as a joint tenant with rights of survivorship with a person who was not a spouse such as a child, upon the decedent’s death, the entire property interest would pass to the surviving joint owner. However, the entire value of the property would be includable in the decedent’s estate for estate tax purposes unless it can be shown that the survivor contributed monetarily towards the property such as payment of part of the purchase price.

Also, determining whether and to what extent a decedent owns real property may not always be an easy task. Many persons own property for many decades and may have inherited an interest in the property along with others over time. There may be co-owners of the property who predecease the decedent. In the event the estates of these co-owners were not have been administered it may prevent the clear transfer of the decedent’s property interest.

Another challenge facing a fiduciary is the valuation of the real estate. In most cases, a certified appraisal will be needed to provide an accurate and acceptable valuation for estate tax purposes and the potential sale of the property. If approval of the sale of property is needed from the Surrogate’s Court, the Court will require that a proper appraisal is obtained. In many instances of intestate administration, the Surrogate’s Court will appoint estate Administrators but place a restriction on their powers that requires the approval of the Court before the estate real property can be transferred, sold or mortgaged.

I have represented Administrators who have been required to obtain Court approval of their sale of real estate. Based upon my over 30 years of experience helping clients in Surrogate’s Court and real estate closings, I have prepared the necessary contracts and Court papers to obtain approval of the transactions.

October 16, 2013

New York Executors and Administrators are Responsible for Exercising Their Fiduciary Powers

by Jules M. Haas

A fiduciary appointed by a Court in New York is given various powers and authority to be used in carrying out the tasks of administration. The most common situation is the appointment of an Executor or Administrator by the Surrogate’s Court. In the case of an Executor, the decedent’s Last Will typically contains provisions that state the powers that the Executor is empowered to utilize such as the sale of the decedent’s real estate. The Will can limit or expand powers and the Executor is generally also afforded the powers that are provided by the statutes and rules such as Estates, Powers and Trusts Law (“EPTL”) Section 11-1.1 entitled “Fiduciaries’ Powers”. Paragraph (a) of the statute lists the various types of fiduciaries for which the statute applies such as executors and administrators. EPTL 11-1.1 then continues to provide the many and various powers that fiduciaries are entitled to exercise such as to invest and reinvest assets, to mortgage property, contest or compromise claims and sign deeds and other documents.

The New York Probate Lawyer Blog has discussed in earlier posts the obligations that a fiduciary has to act properly and not engage in self-dealing or other activities that would constitute a breach of fiduciary duties. The fiduciary can be personally liable to estate or trust beneficiaries or others if he acts in a manner that causes harm or losses to other parties’ interests. In view of the potential liability facing a fiduciary such as an executor, the fiduciary may be hesitant to make a decision regarding a matter that is causing dispute among beneficiaries or for which there is no absolute way to determine the right or wrong act before a decision needs to be made. For example, there may exist a situation where a decedent owned real estate or a business and the fiduciary needs to sell the asset for estate settlement. Although it is necessary to obtain appraisals and competing offers prior to a sale, the estate beneficiaries may nevertheless have conflicting views as to whether the fiduciary obtained the highest price for the asset when it is sold. In such an instance, a beneficiary may file objections to the fiduciary’s accounting and seek to hold him personally liable for an alleged shortfall between the claimed value and the proceeds received from the sale.

Unfortunately for the fiduciary in New York, he will most times be responsible to exercise his business judgment in making these decisions. The Surrogate’s Court routinely refuses to advise an executor or administrator beforehand as to the proper decision he is to make. The Surrogate’s Court Procedure Act (“SCPA”) does, however, contain provisions in SCPA 2107 that allow a fiduciary to obtain prior Court approval before acting at one’s own peril. This statute is entitled “Court may direct as to value, manner and time of sale of property and give advice and direction in extraordinary circumstances”.

The Surrogate’s Courts are not obligated to provide the fiduciary with “advice and direction” in all cases. The Court in its discretion must be convinced that there are sufficient extraordinary circumstances or other appropriate conditions before it will intercede and provide a fiduciary with direction. Most of the time the Court generally refuses to accept these types of cases and advises the fiduciary that it is their responsibility to exercise their business judgment in making administration decisions.

An executor or other fiduciary who accepts the responsibility of acting in such capacity needs to understand that he must proceed in a manner that does not breach his fiduciary duties. Moreover, while acting in good faith, the fiduciary may still be subject to situations where he is potentially liable for decisions made in the course of estate administration and that the Court will not usually provide advance guidance or protection regarding these matters. Thus, it is important that the fiduciary obtain advice from all possible and necessary sources such as a New York estate attorney, financial advisors, accountants, and other professionals relating to the particular situation involved.

June 5, 2013

Trust and Estate Disputes Often Involve a Variety of Issues

by Jules M. Haas

Controversies arising in Estate Planning, Estate Litigation and Estate Settlement involve a vast variety of issues. New York Estate Lawyers know that the many different problems that are found in the area of Trusts and Estates are as diverse and complex as the individuals whose lives are impacted by them. In today’s blog post, I will take the opportunity to discuss some recent examples of controversies with the goal of providing some insight into the different issues and problems each portrays.

The New York Probate Lawyer Blog has discussed in prior posts that a New York Executor or Administrator has an obligation to discover and to collect the assets of a decedent. This “marshaling” of estate property is one of a fiduciary’s jobs when engaging in the settlement of an estate. An interesting approach was taken by one estate administrator who sued Wells Fargo Bank for wrongful death, elder abuse and other grounds for causing a decedent’s death. In an article by Matt Reynolds in AlterNet dated May 14, 2013, it was reported that Wells Fargo’s alleged improper foreclosure action resulted in the decedent’s death after he collapsed in the courtroom in an attempt to oppose the bank’s action. The estate Administrator then sued the bank claiming that it should pay damages for commencing a negligent and wrongful and malicious foreclosure action.

As can be seen from the Wells Fargo case, the assets or potential assets of a decedent are not always readily apparent. While it may be rather easy to discover and collect some estate property such as bank accounts, a fiduciary should investigate and consider all potential sources that might benefit the estate and its beneficiaries.

Another recent news story reported that a World War II veteran was attempting to prevent his daughter from evicting him from his home. As reported by Debra Cassens Weiss in the ABA Journal on May 16, 2013, the veteran had given his daughter a Power of Attorney whereupon the daughter transferred the vet’s house to herself and her husband. Despite claims of undue influence, the vet’s attempt to void the transfer was denied and now the daughter was seeking to evict him from the home.

The giving and use of a Power of Attorney should be carefully considered by both the Principal and the Agent or Attorney-in-Fact. While a Power of Attorney can be useful in estate planning and in avoiding Guardianship Proceedings, the person who is given the authority must be someone that can be trusted and relied upon without any doubt. Also, the person receiving the power has a fiduciary duty to act responsibly and any transfer of property by the Attorney-in-Fact to himself is considered improper.

Professional advice from a New York Estate Planning Lawyer can be very helpful in considering and preparing a New York Power of Attorney.