New York Probate Lawyer Blog

March 15, 2011

New York Executors Have Authority to Act on Behalf of the Estate

An Executor of a New York estate, or other fiduciary such as an Administrator, is the party empowered by law to act on behalf of the estate. The underlying purpose of a Surrogate’s Court probate or administration proceeding is to have the Court officially appoint a person or institution that has the legal authority to handle the decedent’s affairs. Similarly, a Trustee is empowered to represent a Trust.

There are many circumstances in which the authority of an Executor or other fiduciary may arise. The recent case of Friedman v. Clearview Gardens, concerned issues of an Executor’s powers and arose in a landlord-tenant eviction proceeding involving a cooperative apartment.

In Friedman, decided by the Hon. Charles Markey on February 3, 2011, (Supreme Court, Queens County), Ron Friedman (“Ron”) brought a lawsuit against the cooperative corporation essentially to stop an eviction proceeding and to have the cooperative corporation put the coop stock into his name. Although Ron had lived in the apartment for over 50 years, the coop stock ownership was in the name of Ron’s mother who had died in 2006. Ron’s brother, Daniel, was named as the Executor of the mother’s estate by the Queens County Surrogate’s Court.

The Court ruled that Daniel, as Executor, and not Ron, had the legal authority to sue the cooperative corporation. Moreover, the Court found that a power of attorney that Daniel had given to Ron was ineffective since an Executor is not allowed to delegate his or her authority.

The Friedman case demonstrates that a Court appointed fiduciary is necessary to control and oversee the assets and other affairs relating to the settlement of a decedent’s estate.

I have represented many Executors and other fiduciaries in various matters, including landlord-tenant proceedings, that involve a decedent’s interests. A decedent’s estate may need to evict a tenant from estate property if it must be sold or if the tenant is unwanted. Similarly, an estate or trust may require protection from an eviction to protect the decedent’s rights property.

March 10, 2011

Undue Influence In Changing Life Insurance Beneficiary Can Be Difficult to Prove

by Jules M. Haas

The New York Probate Lawyer Blog has previously discussed the naming of a beneficiary on a life insurance policy or other asset such as a pension or retirement account. Upon a person’s death, these assets are paid directly to the named beneficiary (assuming the beneficiary is surviving) and are not part of the probate or intestate administration.

It is of utmost importance that the beneficiary designation clause be completed properly and clearly so that the intended beneficiary can receive the asset proceeds following a death. These designations should be well thought out as part of an overall estate plan.

Unfortunately, controversy and Court litigation often arises when beneficiary selections are changed while a person is elderly, or experiencing medical problems or when the change occurs shortly before death. Such changes are particularly dramatic when the new beneficiary is a person who has not been involved in the decedent’s life until recently such as a new friend, spouse or health aide. The initial reaction to such change, particularly from the now disinherited beneficiary – such as a child, long-time friend or other seemingly natural beneficiary selection – is that the change could only be the result of some kind of undue influence perpetrated upon the decedent at a time when he or she was vulnerable, weakened due to illness or old age or incapacitated.

However, despite the ready appearance of wrongdoing, actually demonstrating that the decedent did not intend the change and that the new designation should be voided is not an easy task. Such was the situation in a recent case entitled Metropolitan Life Insurance v. Felecia Bradway, decided in the Federal District Court, Southern District of New York, 10 Civ. 0254. As reported in the New York Law Journal by Mark Hamblett on February 28, 2011, the decedent, Bradway, had designated his daughter as the beneficiary of a $300,000 life insurance policy in 1998. However, in May, 2008 Bradway changed the beneficiary designation to a co-worker whom he married later that year. Bradway had been taking a narcotic pain medication and was diagnosed with liver cancer shortly before his wedding. Bradway then died in March 2009.

The disinherited daughter claimed that the new spouse, “who was 30 years younger than Mr. Bradway, influenced him by proposing marriage while he was ‘terminally ill’ , by attempting to isolate him from his family following his cancer diagnosis and by failing to provide him with proper medical care after the diagnosis.”

As reported in the article, notwithstanding the daughter’s allegations, the Court found that “there was not enough evidence for a ‘reasonable finder of fact’ to show Mr. Bradway’s mind was subverted when he made the May 27, 2008 designation of beneficiary.”

The Bradway case demonstrates that it is important to make clear beneficiary designations as part of an estate plan. Probate, Guardianship, and other Court proceedings provide avenues to attack designations that may seem particularly improper under the circumstances. Such attacks however, require the proper presentation of proof to succeed.

March 8, 2011

Queens and Manhattan Guardianship As Well As Throughout New York Requires A Thorough Review Before Court Appointment

by Jules M. Haas

The appointment of a Guardian for an incapacitated person is provided by the guidelines enacted in Article 81 of the Mental Hygiene Law (MHL). The New York Probate Lawyer Blog has discussed many of the aspects involved in New York City Guardianship cases such as Guardianship powers and the petition that is filed with the Court requesting appointment.

A couple of recent Court decisions in which a Guardian was appointed are typical examples of the many factors and issues that are considered before an appointment is actually made.

In Matter of C.T., reported in the New York Law Journal on June 23, 2011, Justice Alexander W. Hunter of the Bronx Supreme Court issued a decision dated June 10, 2011, in which he appointed the sister of the alleged incapacitated person (“AIP”) as Guardian of his person and property. The Court noted at the outset of the decision that the AIP and other parties were properly served with the Order to Show Cause and petition. As referred to by the Court, section 81.07 of the MHL provides for very specific requirements regarding notice and the service of papers on interested parties. If these requirements are not complied with the Court would lack proper jurisdiction to conduct a hearing.

The AIP in Matter of C.T. had assets in excess of $2 million dollars. It appears that as part of the sister’s petition to the Court she requested that as Guardian she be allowed to provide for Medicaid planning. Such planning typically involves the transfer of the AIP’s assets to a family member so that the AIP can qualify for government benefits. Since the Court found that the plan presented by the sister for preserving the AIP’s assets was “vague”, the Court decided that such plan would require further Court approval before implementation. MHL section 81.21 provides for the granting of power to a Guardian to transfer assets. However, as was recognized by Judge Hunter, there is always a concern that notwithstanding benefits that may be obtained by a family by preserving assets through transfers, assets also need to be retained and used for the care and comfort of the AIP.

In a different case, there was an interesting issue regarding the potential conflict of interest between an AIP and the proposed Guardian. In Matter of A.M., a case reported in the New York Law Journal on May 12, 2011 and also decided by Judge Hunter on April 25, 2011, the petitioner was the brother of the AIP. It appears that the parents of the AIP left her over $1 million dollars in a testamentary trust and that the brother was the trustee. In the Guardianship proceeding, the brother was seeking only to be appointed as Guardian for his sister’s personal needs. The Court found that the brother was not eligible to be appointed pursuant to the requirements of MHL section 81.19 (“Eligibility as guardian”), because of the potential monetary conflict of interest. Among other problems, the Court was concerned that the potential of the Guardian selling the AIP’s house “creates financial gain” for the brother. Also, the Court stated that “Another motivation that cannot be ignored is that Mr. M [the brother] may no longer desire to directly care for his sister as he is currently doing. Placement in a facility and sale of the home will allow him to return to Florida where he lives. This also constitutes a conflict of interest in that Mr. M may choose his own well-being over that of his potential ward.”

As is shown by these recent Court decisions, Guardianship proceedings can be quite complex and involve issues of incapacity, transfers of assets and potential conflicts of interest that may impact on the appointment of a Guardian. Guidance from an experienced attorney is essential in these matters.

March 7, 2011

The New York Probate Process Involves Numerous Documents

by Jules M. Haas

The Probate of a Last Will in New York can appear to be a complicated and mysterious procedure. While the rules and procedures of the Surrogate’s Court are complex, certain fundamental requirements for Probate are fairly easy to set forth.

Among the essential aspects to a Probate proceeding is providing the parties interested in the proceeding with proper notice that the Court case has been commenced. In particular, the decedent’s “distributees” or closest next of kin are required to be served with a “Citation”. A “Citation” is like a summons in a regular civil action. The Citation will advise the parties who receive it as to the Court date and that they need to appear if they desire to object to the Probate of the Will. The necessity of having to serve a Citation and wait for a Court date, which may not be scheduled for a month or more after the Will is filed with the Court, results in a delay in the administration of the decedent’s estate.

In most estates where close family members, such as spouse or children, have no objection to the Probate of the Will, a form entitled “Waiver of Issuance and Service of Process and Consent to Probate” can be signed by the interested party. This form once signed and notarized, dispenses with the need to serve a Citation on such person. In fact, if all the necessary parties sign such a form, there is no need to serve a Citation at all and the Probate process and estate administration can be expedited.

Surrogate’s Court Procedure Act Section 401(4) provides, in part, that the Waiver Form “shall state the date of the will to which it relates and that a copy has been furnished or examined.”

In most instances when a client has requested that I represent them in Probate proceedings, efforts are made to obtain signed Waiver forms from all necessary parties as quickly as possible. While there are many aspects to and requirements for Probate, obtaining Waivers is always a first essential step, where possible.

March 2, 2011

New York Article 81 Guardians Are Bound By The Court To Act Properly

by Jules M. Haas

The New York Probate Lawyer Blog has discussed the powers and obligations of a property management and personal needs Guardian. When a person is found to be incapacitated and a Guardian is appointed, the Court maintains scrutiny over the actions of the Guardian.

One of the safeguards provided by Article 81 of the Mental Hygiene Law (MHL) is that the Court may require the posting of a bond (MHL Sec. 81.25). A bond is essentially an insurance policy issued by a surety company that insures payment to creditors and others entitled to receive the incapacitated person’s funds in the event the Guardian misappropriates those funds. The Court will set the amount of the bond based upon the value of and income from the assets of the incapacitated person. Since the Court appointed Guardian must qualify for the bond, the surety will check the Guardian’s credit and financial history. A poor credit history may result in the denial of a bond and, thereby, prevent a person from qualifying as a Guardian.

It is a good practice, which I follow, to have the bonding company review a client’s credit before he or she files a petition for appointment as a Guardian so that we can be certain the client can qualify if appointed.

Another safeguard provided by the law is contained in MHL Section 81.31 which requires that the Guardian file an Annual Report with the Court every May. The Annual Report contains information concerning the Guardianship financial transactions that occurred during the prior year along with information regarding the incapacitated person’s physical and mental condition. This information is typically reviewed by a Court Examiner. In the event the Court Examiner finds information that shows improper conduct on the part of the Guardian, the findings will be reported to the Court.

A recent case where a Guardian’s actions were found to be improper was reported by Daniel Wise in the New York Law Journal on January 6, 2011. The Article entitled Guardian Must Return Funds Paid to Family For Ward’s Care, described a case where a lawyer-guardian was required by the Court to repay to the incapacitated person’s estate over $100,000.00 that the Guardian had paid to a company that provided care to the Incapacitated Person. It was found that the company was controlled by the Guardian’s spouse. Judge Charles J. Thomas also ruled that the Guardian had to forfeit commissions and legal fees.

Guardians are required to be diligent in the performance of their duties. Both Guardians and the families of the Incapacitated Person often require legal representation to fully understand and protect their interests.

February 24, 2011

Properly Naming Beneficiaries of Retirement Accounts Critical to New York Estate Planning

by Jules M. Haas

As part of our ongoing series on Avoiding Probate in New York, we examine the issue of retirement accounts and beneficiaries.

As always, we preface the discussion by saying that avoiding probate does not mean you do not need a New York City probate lawyer. In fact, investing in professional estate planning services in New York is the best way to ensure your assets are protected, and that your estate is distributed in accordance with your wishes after your passing.Previously on our New York Probate Lawyer Blog, we reported on why avoiding probate in New York might not be for you, as well as the complications that may arise from bypassing probate in New York.

One of the most common issues — and certainly the most easily corrected– is the failure of a decedent to properly name beneficiaries on retirement accounts. When we say easily corrected, we are of course speaking about corrections made prior to death. After death, the naming of an incorrect beneficiary on a retirement account is much more complicated. Still, ex-wives and ex-husbands routinely remain on retirement accounts, which are often the most valuable asset of a deceased. This is particularly true in cases of sudden death in middle age.

As a general rule, however, properly naming a beneficiary on a retirement account can bypass the probate process in many cases. Even after the market meltdown, 401 (k) plans and similar retirement vehicles held a total of $14 trillion in 2008. A potential complication of such inheritance is income tax, which may be due on withdraws made even after a person dies.

Properly naming the beneficiary is critical, particularly in divorce situations as we have already discussed. In cases where a current spouse inherits, he or she may have more flexibility (including leaving the money in the account) than in those instances where someone else is the named beneficiary. Typically, unless a spouse inherits, the beneficiary will be required to begin withdrawing money and will therefore incur the associated tax consequences.

Additional considerations should be made when naming a minor child. A large inheritance to a minor child could result in court supervision. Another common complication is the naming of more than one beneficiary, which can result in a spouse’s forfeiture of the ability to leave the money in the account and will result in mandatory withdraws based on the age of the oldest beneficiary.

We see there are many benefits to properly naming beneficiaries to a retirement account. And, of course, a few complications. But with a little diligence and planning, significant assets can be left to the beneficiary of a retirement account without the intrusion inherent in the probate court process.

February 22, 2011

Contested Will Results in Settlement after Undue Influence Alleged with Dementia Patient

by Jules M. Haas

The beneficiaries of the estate of a wealthy Connecticut woman have agreed to settle a dispute over changes made to her Will after she was diagnosed with dementia, Bloomberg News reported.

Sadly, theft from the elderly and other forms of estate fraud are an all-too-common occurrence. A New York City estate planning attorney can assist residents with making estate plans that minimize such risks. In some cases, a loved one may file for Article 81 Guardianship in New York to take over the affairs of a vulnerable or aging loved one.And safeguards in probate court may also offer some protection. In still other cases, contesting a Will in New York may be the best option.

In this case, a trial over the $3.6 million estate was set to begin this month in West Harford. However, the sides have reached an agreement. The 89-year-old art teacher’s fortune was left to several colleges and other beneficiaries. Her husband, an aviation executive, died in 1999 and their only child passed away in 1963.

The dispute centered around two people who were close to her at the time of her death; they were set to inherit about $1.3 million after changes were made to her Will in 2006. The settlement will largely restore the directives of a previous Will. The changes eliminated large donations to several colleges and other beneficiaries, which led to the probate court challenge.

The decedent left $1 million to the University of Hartford to establish a scholarship in her daughter’s name. Jeanne died of meningitis while a freshman at the university. The 2006 Will cut the donation to just $100,000. Other schools that were set to receive money until being cut from the 2006 Will were Columbia University’s Teachers College, New York University and Parsons.

The settlement calls for the University of Harford to get about $900,000 and for the three New York schools to get about $160,000 each. The 2006 Will was completed shortly after doctors diagnosed her with dementia. She was moved to an assisted living facility a month later.

February 17, 2011

New York Estate Fiduciaries and Guardians Must Consider Internet Information and Assets

by Jules M. Haas

New York Executors, Administrators and Guardians have the responsibility of ascertaining, protecting and collecting the assets, documents and other effects of the estate or incapacitated person they are appointed to oversee. The New York Probate Lawyer Blog has previously discussed fiduciary responsibility concerning asset determination and protection.

An interesting aspect in this area of responsibility concerns assets, information and accounts that are internet or web-based. A fairly basic question is what becomes of a website or Facebook account or other internet based information after a person dies or becomes incapacitated. An insightful article by Ken Strutin entitled What Happens to Your Digital Life When You Die? appeared in Law Technology News on January 26, 2011. As noted in the article “the majority of state laws make no specific provisions for information assets such as those stored in the cloud.”

An Article 81 Guardian or a New York Executor faces issues not only with collecting and preserving these internet items, but may need to be able to value them for tax purposes or possibly for disposal by sale. For the most part, the estate settlement process will be in unchartered waters when dealing with such matters. As a New York Guardianship and Probate attorney, I have assisted clients in resolving many different and complex issues regarding asset identification, collection and disposal. Fiduciaries that are appointed by the Court bear a lot of responsibility in resolving the diverse issues they encounter in administering an estate. It is important for them to consider all matters thoroughly and make decisions that avoid Court criticism.

February 15, 2011

Federal Estate Tax Changes Affect New York Estates

by Jules M. Haas

The Federal estate tax ceased to exist in the year 2010. At least for most of the year it seemed that the estate of a person who died in 2010 would not be subject to any Federal estate tax. However, since other provisions relating to the estate tax, particularly, “step-up” basis rules, also drastically changed with the disappearance of the tax, both confusion and potential hardship faced many 2010 estate administrators. In New York, the estate tax exemption remained at $1,000,000.00 which added even more complexity and uncertainty to planning and estate settlement in New York.

In late December 2010, Congress and the President finally passed legislation which provided at least some clarity to the void that had existed earlier in the year. Essentially, the new law reinstated the Federal estate tax for 2010 but raised the exemption to $5,000,000.00 for estates of decedent’s who died in 2010, 2011 and 2012. However, the $5,000,000.00 exemption for gifts does not apply until 2011.

Under the new law, the “step-up” basis rules again apply to estate assets. An estate is also given the option of opting-out of the 2010 estate tax and instead, accepting “carry-over” basis treatment for estate assets. Another interesting and beneficial feature of the new law allows portability of the $5,000,000.00 exemption between spouses. Thus, if one spouse dies in 2011 and does not use all of his or her exemption (say – $1,000,000), the unused portion can be transferred to and used by the surviving spouse thereby increasing his or her exemption above the $5,000,000.00 level.

The new Federal tax law does not change the New York estate tax exemption limit of $1,000,000.00. Therefore, the variance between the State and Federal tax laws and the unfamiliarity with the nuances of the just passed Federal legislation present challenges to planning a New York estate.

It should be remembered that the Federal and New York estate tax applies to a decedent’s gross estate. Generally, the gross estate includes all assets that pass through probate and are distributed according to a Last Will or by intestate administration as well as assets that pass by operation by law such as joint bank accounts or life insurance that has designated beneficiaries.

February 9, 2011

Complications May Arise From Estate Settlement Outside New York Probate

by Jules M. Haas

As we discuss the pros and cons of avoiding probate court that certainly does not mean you will not need the help of a probate lawyer in New York City.

As part of our ongoing series on estate settling options, we reported on our New York Probate Lawyer Blog that avoiding probate in New York is not for everyone. However, there are certain advantages to avoiding probate in New York.An article in The New York Times also tackled the issue.

Probate is the system used to determine the validity of a Will before an estate is distributed to heirs. It is a public process, and can be time consuming. Passing assets outside of probate keeps the process private.

Establishing a Living Trust in New York is the most common method of avoiding probate. A Living Trust holds assets for your use during your lifetime and then distributes them to your chosen heirs after you pass. However, such trusts only avoid probate to the extent assets are placed in the trust.

Non-trust assets must still go through the probate process. Other assets that will avoid probate include assets that have a named beneficiary such as retirement assets, life insurance, savings bonds and jointly held real estate or bank accounts. This can also cause problems — as in cases where one child is named in a joint account for the purposes of taking care of an aging parent. Money in that account will automatically pass to the surviving account holder, whether or not that was the intention.

Checking the beneficiaries on accounts and life insurance policies is an important consideration. Seeking the advice of a New York estate lawyer can be a great investment when it comes to ensuring that your affairs are in order. The peace of mind can be priceless.