New York Probate Lawyer Blog

December 3, 2010

Knox Saga Illustrates Importance of Choosing a Trustee For New York Trusts

In what is being described as possibly the largest probate court award in New York history, HSBC Bank USA has been ordered to pay more than $25 million to seven trusts of the Seymour Knox Family for “negligent and Imprudent” handling of the trust funds dating back to the mid-1990s.

The Buffalo News reported the suit was launched by the bank in 2006 when it requested to be discharged as manager of the Knox trusts.

This case illustrates the risks associated with institutional trust administration. A New York City probate lawyer can assist in establishing a trust, which can have many advantages, including tax benefits and privacy.

Choosing a Trustee for a New York trust is an important step, which can greatly impact the ability of a trust to protect an estate’s wealth for future generations. A New York trust lawyer can best advise you on establishing a proper system of checks and balances.

In this case, the bank may also be ordered to reimburse the family for stock trading commissions, attorney fees and court expenses. A guardian ad litem appointed to represent the Knox children said the award rights decades of wrongs and replenishes a trust that deteriorated over time as a result of the bank’s actions as a corporate trustee.

The Guardian blamed the trust’s deterioration on inattention and bad decision making on the part of the bank.

By law, the bank had to petition the court for approval to be relieved of its duties as a fiduciary. At that time, attorneys for the families reviewed the status of the trusts and found numerous red flags. The Knox family is a legendary business family in the Buffalo area, perhaps best known statewide for bringing the Buffalo Sabres into the National Hockey League.

November 30, 2010

New York Incapacity Under Article 81 of the Mental Hygiene Law Does Not Void All Prior Contracts

by Jules M. Haas

A New York Court can appoint a Guardian of the person or property for an individual who is found to be incapacitated. As previously discussed in the New York Probate Lawyer Blog, Mental Hygiene Law Section 81.29(d) provides, in part, that “the Court may modify, amend, or revoke any previously executed. . . contract, conveyance, or disposition during lifetime or to take effect upon death, made by the incapacitated person prior to the appointment of the guardian . . . .”

While the Court has the power to undo agreements that were unfairly entered into while a person was incapacitated, such power will be exercised by a Court only after a thorough examination of the facts and circumstances in each instance. In JPMorgan v. CV Haedrich, reported in the New York Law Journal on November 3, 2010, the Court had appointed a Guardian for the person and property of Oden and Marie Haedrich in or about 2005. Prior to such appointment in or about 1999 and 2003, the Haedrich’s had taken mortgage loans. Beginning in or about 2008, payments on the mortgage loans stopped and a foreclosure action was commenced. The Guardian then asked the Court to void the mortgage foreclosure on the ground that the Haedrich’s did not have the capacity to enter into these loans.

The Court, however, refused to vacate the foreclosure. Essentially, the Court found that the loans were taken many years prior to the 2005 determination of incapacity. No credible evidence was presented by the Guardian that either Mr. or Mrs. Haedrich were incapacitated when the transactions occurred or that the lender knew of or was notified of any such incapacity.

As shown by the Court in the Haedrich decision, the mere determination of incapacity does not in and of itself overturn or void all past transactions by the incapacitated person. Specific demonstration of incapacity and/or notice at the time of the occurrence that a party is incapacitated is essential for a Court to revoke a transaction.

November 24, 2010

Thanksgiving May Offer Families Time to Discuss Estate Planning Issues

by Jules M. Haas

By some measure, more than half of all adults will die without a will. In some cases, the consequences for those left behind can be quite severe. Proper planning can ensure your estate goes to your loved ones, that you are protected from excess taxation, and that you can enjoy life with the peace of mind that comes with knowing your affairs are in order.

New York City Probate Attorney Jules Martin Haas and the staff at his law office wish each of you a safe and enjoyable Thanksgiving weekend with friends and family. These gatherings may be the perfect opportunity to open a general dialogue with relatives about such planning.These conversations do not have to be morbid. Nor do they need to be prying or invasive. By starting a conversation that includes younger relatives, our older loved ones will feel more comfortable and may be more apt to share. It will become apparent rather quickly whether they have done the proper planning, and whether the issue has been on their mind in a way that such a conversation provides the necessary outlet and relief.

At the very least, it can help put a loved one’s wishes on the record in front of the whole family. And it may be the catalyst necessary to prompt more thorough and proper estate planning. Here are some basic issues and talking points.

Intestate Estate: This is what happens to an estate without a will. It is distributed by probate court in accordance with state law, which means your estate will pass to your spouse and/or other close relatives in outward concentric circles (children, parents, siblings, etc.) The drawbacks are many and include an inability to choose heirs or to divide your estate in a manner of your choosing. Those omitted from an estate typically include step-children, former spouses, friends or domestic partners.

Trusts and Living Trusts: Trusts are not just for the rich and famous. Establishing a trust may allow your estate to bypass the probate court process. If your Will is probated it will become a public record for all to see. Establishing a trust may also have certain tax advantages.

Powers of Attorney: Powers of Attorney can serve a purpose but can also be ripe for abuse and are best narrowly tailored for a specific circumstance.

Living Will: Advanced Directives, Health Care Proxies and other similar documents allow you to make your wishes known and designate a person to carry them out in the event that you become incapacitated.

Guardianship: May be established to assist a person with managing their personal and/or financial affairs.

Special Needs Trust: Can be established to care for a loved one with special needs after your passing. Establishing such a trust can be critical to ensuring that an inheritance does not disqualify them from receiving government health care or other assistance to which they are entitled.

November 19, 2010

New York Pre-Nuptial Agreements Can Avoid Rights of Spouse To Share In Estate

by Jules M. Haas

New York estate laws provide many protections for husbands and wives with regard to their spouse’s estate. For example, if a spouse dies intestate (i.e. without a Last Will), Estates, Powers and Trusts Law section 4-1.1 provides that the surviving spouse will receive the entire estate if no issue (i.e., children) survive or $50,000.00. and one-half of the estate if issue do survive.

Where a spouse dies and leaves a Last Will and Testament, New York Law prevents one spouse from disinheriting the other. New York Estates, Powers and Trusts Law Section 5-1.1-A provides a rather complex set of guidelines that attempt to ensure that a surviving spouse receives at least the greater of $50,000.00 or one-third of the decedent’s estate.

Because of the provisions guaranteeing a spouse an interest in the others estate, concerns may arise where one spouse has substantial family assets and the other spouse has little or no personal estate. The inheritance of a family fortune over successive generations may be an important pre-marital consideration.

In such instances, and also with possible matrimonial divorce concerns in mind, a pre-nuptial agreement may be a consideration. These agreements can limit and delineate spousal rights in the case of death or a divorce. The upcoming royal wedding of William and Kate is a perfect case-in-point. Pre-nuptial agreements, like all estate and financial planning documents, involve much consideration and extensive preparation. They can be very helpful but also the source of dispute and litigation.

November 16, 2010

Proper Planning Can Avoid Theft, Other Estate Settlement Issues in New York

by Jules M. Haas

The widow of a former New York City transit worker left her estate to four beneficiaries when she died in 2007. Unfortunately, three of them never collected on their inheritance and the fourth sits in a Florida jail cell charged with robbing the estate, the St. Petersburg Times reported.

A New York City probate lawyer can minimize such risks through proper estate planning and administration. In some cases problems still arise and can result from abusing a power of attorney or a breach of fiduciary duty.

By consulting an experienced estate attorney in New York at the earliest signs of problems, you can help minimize the risk that an estate will be violated.

In this case, the 49-year-old niece of the deceased was charged with grand theft and contempt of court after not responding to a probate judge’s order to repay tens of thousands of dollars and then missing a court date.

The 78-year-old deceased lived in New York City most of her life. Her husband worked for the transit authority and she did a variety of odd jobs, including working at the Bronx Zoo. Upon her death in 2007, court records indicate the defendant petitioned to be the estate’s representative. She allegedly failed to deposit $107,000 into a trust account after selling the decedent’s home and subsequently refused to show up for court.

November 11, 2010

New York Kinship Proceedings Can Involve Deposit of Estate Funds With New York State Comptroller

by Jules M. Haas

A New York Administration Proceeding is typically required when a person dies intestate without leaving a Last Will and Testament. New York Estates, Powers and Trusts Law Section 4-1.1 provides the statutory guide for the intestate distribution of estate assets beginning with the decedent’s spouse and issue (i.e. children and their decedents). If no spouse or child survives then the property goes to the next class of living heirs such as parents, siblings and so on.

In many Administration proceedings, the identity and whereabouts of a decedent’s next of kin or distributees are unknown or only partially identifiable. This situation is more prevelant where the decedent never married or never had any children. So-called “cousin cases”, i.e: where the next of kin are cousins or even more distant heirs, usually require a kinship proceeding whereby the Surrogate’s Court can be satisfied as to the proper individuals to receive the decedent’s estate. New York Public Administrators are typically appointed to handle the estate administration in these cases. Generally, a kinship proceeding is the Court process whereby evidence in the form of documents, such as birth and death records, and the testimony of the decedent’s family and acquaintances is submitted to show relationship to the decedent. Very often professional genealogists are needed to testify as to the nature and extent of diligent searches that have been performed, sometimes in many different countries, to eliminate the possibility that unknown heirs exist. Kinship proceedings are complex and involve numerous rules of evidence and presumptions in law. For example, a person who would have been more than 100 years old when the decedent died is presumed to have predeceased the decedent.

There are also technical procedural requirements. When kinship cannot be proved to the Court’s satisfaction, the estate property is paid to the state comptroller. New York Surrogate’s Court Procedure Act (SCPA) Section 2222. However, pursuant to SCPA Section 2225, when three (3) years have passed after the decedent’s death, an application can be made to the Court to withdraw the estate funds from the state and have them paid to the known distributees by demonstrating that a diligent and exhausting search was made for all unknown heirs.

November 9, 2010

Government Calls into Question New York Probate Oversight of Guardianship Matters

by Jules M. Haas

The U.S. Government Accountability Office reported that probate courts are not doing enough to protect vulnerable older adults against exploitation by guardians appointed to look after their health and finances.

Experienced New York City probate attorneys are frequently called to help establish Article 81 guardianship over an adult who cannot handle his or her own affairs. In many cases, such formal guardianship arrangements are preferable to powers of attorney or other less formal ways of acting on a person’s behalf, which frequently fall outside a court’s review and can be more ripe for abuse.However, this review found that many court systems are also not doing enough to protect the rights even of those placed under formal guardianship. In such cases, it becomes even more important to have an experienced New York City guardianship attorney who understands the system and can make sure your rights are protected on both sides of the guardianship arrangement.

The GAO review found substantial issues in 45 states from 1990 to 2010. Some $5.4 million was illegally obtained from 158 incapacitated victims, usually seniors. In other cases, physical abuse or neglect was prevalent. In other cases, an inappropriate guardian — including those with criminal records — was permitted to be appointed.

The government watchdog found that the New York process in particular was flawed after it tested four states by submitting fictitious guardianship information. Those states were Illinois, Nevada, New York and North Carolina. The GAO used applications with bad credit and false social security numbers but nevertheless passed the certification process. It noted that individuals under financial strain were more likely to engage in theft and people with criminal histories could easily conceal them by submitting false social security numbers.

The GAO said the results raised questions about the effectiveness of the certification program in New York and the other states tested.

Whichever side of the guardianship case you are on, whether you are seeking guardianship, challenging guardianship, or have been appointed guardian and are defending your actions, consulting with an experienced guardianship attorney in New York is critical to protecting your rights throughout the guardianship process.

November 4, 2010

New York Guardianship Court Evaluator Report Can Support Finding of Incapacity

by Jules M. Haas

The New York Mental Hygiene Law provides for the appointment of a Guardian for and individual’s property management and personal needs. Article 81 of the statute requires that a Court find clear and convincing evidence to determine that a person is incapacitated. Mental Hygiene Law Section 81.12.

As discussed on our New York Probate Blog, there are numerous participants in a Guardianship proceeding, including the petitioner, the Alleged Incapacitated Person (AIP), the Court Evaluator and sometimes a Court appointed attorney representing the interests of the AIP. Among these persons, the Court Evaluator always plays an essential role. He or she provides the Court with independent information concerning such issues as the need for a Guardian and the AIP’s capacity, the appropriateness of the proposed Guardian, the nature and extent of the AIP’s property and the powers that the Guardian should possess. In some instances, the investigation by the Court Evaluator and information provided by the Court Evaluator’s report may constitute the major basis for the Court’s ultimate decision as to capacity and Guardianship appointment.

Such was the case in Matter of Incorporated Village of Patchogue v. Zahnd, NYLJ March 12, 2010 at 29 (Col. 1) (Supreme Court, Suffolk County 2010). In Zahnd, the attorney for the AIP asked the Court to dismiss the Guardianship Proceeding on the ground that the petitioner had failed to present “clear and convincing evidence” that the AIP was incapacitated.

The Court had appointed the New York State Mental Hygiene Legal Service as Court Evaluator. Over the objection of the AIP’s attorney, the Court determined that it would allow the Court Evaluator to present its report and testify before deciding the motion to dismiss. Essentially, the Court found that the Court Evaluator’s report and testimony was essential to a full determination of incapacity and such submission was in accordance with the Mental Hygiene Law. Thus, based upon the proof provided by the petitioner and the information supplied by the Court Evaluator, the Court denied the application to dismiss the Article 81 proceeding.

Guardianship proceedings can be very complex and involve numerous issues. Professional guidance and analysis is usually essential for the protection of anyone involved in these proceedings.

November 2, 2010

New York Last Wills Must Be Signed By Two Attesting Witnesses

by Jules M. Haas

A New York Last Will and Testament is subject to many requirements provided by both statutes and Court decisions. These rules determine various aspects of a Will such as its validity and effect or interpretation.

The starting point regarding the proper form for a Will is New York Estates, Powers and Trusts Law Section 3-2.1 which is entitled “Execution and attestation of Wills; formal requirements.” Among this statute’s numerous provisions is a requirement that “there shall be at least two attesting witnesses …” EPTL Sec. 3-2.1(a)(4). The statute also states that “The signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses…” EPTL 3-2.1(a)(4). The statute also states that “The signature of the testator shall be affixed to the will in the presence of each of the attesting witnesses…” EPTL 3-2.1(a)(2).

While the EPTL mandates “at least two” witnesses, there is no prohibition against having more than the minimum two. In fact, it is a common practice to use three attesting witnesses to insure that at least two of the witnesses may be available if their testimony is needed years after the Will is signed in connection with a probate proceeding.

While having two witnesses sign the Last Will in the presence of the Testator appears to be a simple and straightforward requirement, there are may instances where this requirement has not occurred. For example, in In Re Postma, 895 NYS2d 778 (Surrogate’s Court, Westchester County 2009), the Court reviewed a Will which had been signed at the end by one witness and by a notary public. The Court denied the Will probate because it had only been signed by one attesting witness. The Court pointed out that EPTL 3-2.1 requires two attesting witnesses and that a person who signs a Will in the capacity of a Notary Public does not comply with the statutory requirement.

It is important to utilize the advise and direction of an attorney experienced with the requirements of the execution of a Will as well as the Probate procedure in the New York Surrogate’s Courts.

October 28, 2010

Estate Planning in New York requires Knowledge of State and Local Tax Obligations

by Jules M. Haas

The case of Billionaire Julian Robertson highlights an issue less frequently talked about when it comes to estate taxes: The presence of some state and even city taxes on the estate of a deceased and/or his or her income while still alive. In this case, Mr. Robertson recently won a tax case dealing with income while he is alive. But the decision might also impact any claim made that he owed New York income taxes upon his death.

We frequently report on our New York Probate Lawyer Blog regarding the ongoing saga of the federal estate tax — on hiatus this year but slated to return next year on estates valued at more than $1 million. But, as we discussed when Yankee’s owner George Steinbrenner died, estate planning in New York must take into account much more than just the federal estate tax when it comes to proper tax planning.

The New York State estate tax currently applies to estates valued at more than $1 million.

In other cases, it is equally important to protect your estate from undue taxation while you are alive.

In the case of billionaire hedge fund pioneer Julian H. Robertson Jr., it all boiled down to where he spent a pair of days. The divided three-member New York State Tax Appeals Tribunal upheld an administrative judge’s decision that Robertson was not a resident of New York City in 2000, saving him $27 million in taxes, according to Forbes magazine.

A dissenting opinion said the decision could create “confusion and mischief” in the future by placing the burden on tax authorities, who under the ruling were required to prove Robertson was in the city on certain days rather than requiring Robertson to demonstrate “by clear and convincing evidence” that he was not within the city.

Robertson was warned by his advisor not to spend more than 183 days a year in the city or he’d be taxed as a full-time city resident since he lived in the city more than half the time. His legal residence is a 10-acre estate in Locust Valley, Long Island. Becoming a resident of New York City would have subjected his worldwide income to the city’s 3.88 percent tax. Robertson assigned an executive assistant to track his days and let him know when he was nearing the limit.

He spent additional time in the city in 1998 and 1999 when is late wife Josephine was being treated for breast cancer — and he willingly paid the city taxes. But, while publicly supporting the estate tax, the 78-year-old did not want to pay additional taxes on income he felt were not legally owed.

In 2000, Mr. Robertson claimed that he did not exceed the 183 days and no additional taxes were owed. The city challenged his whereabouts on four days that would have put him over his limit and lost the argument on two of those days.