Courts Tackle Issues Around the State; TRUSTS AND ESTATES

New York Law Journal

April 9, 2018 Monday

Copyright 2018 ALM Media Properties, LLC All Rights Reserved Further duplication without permission is prohibited

Section: EXPERT ANALYSIS; Pg. p.3, col.1; Vol. 259; No. 67

Byline: Ilene Sherwyn Cooper

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Recently, Surrogate and Appellate Courts throughout the state have been witness to an assortment of issues affecting trusts and estates. Indeed, opinions in the Third and Fourth Departments have respectively addressed testamentary capacity and the validity of a release, while surrogate's in the metropolitan area have confronted discovery requests, and the elective share. Each is the subject of this month's article.

Release Is No Defense to Accounting Objections

In Matter of Alford, 2018 N.Y. App. Div. 682 (4th Dept.), the Appellate Division, Fourth Department, reversed an order of the Surrogate's Court, Erie County (Howe, S.), which determined that a release signed by a beneficiary was valid, and constituted a defense to his objections to the executor's final accounting.

The subject release was executed by the objectant in June 2009, in connection with an initial accounting by the executor, and purported, inter alia, to relieve the executor from liability "for all matters relating to or derived from the administration of the estate." Additionally, the instrument consented to the entry of a decree settling the executor's account, and fully discharged him for his stewardship. Notably, several months later, the objectant refused to sign a second release, when the executor presented him with a revised account.

The executor subsequently filed his final accounting with the court, together with a petition for his judicial discharge. Soon thereafter, he passed away, and successors were appointed to finalize the proceeding. Objections to the accounting were filed, and the successor fiduciaries moved for summary judgment dismissing same, alleging that the release that was signed by the objectant in June 2009 barred his claims. The objectant opposed the motion, contending that the release was invalid. The Surrogate's Court denied the motion, and conducted an evidentiary hearing. At the conclusion of the hearing, the court determined that the release was valid, and the objectant, together with the guardian-ad-litem appointed to represent the interests of an infant beneficiary, appealed.

The Appellate Division held that the Surrogate erred in shifting the burden to the appellants to prove that the release was procured by fraud, and in determining that the release was valid. To the contrary, quoting Birnbaum v. Birnbaum, 117 A.D.2d 409 (4th Dept. 1986), the court opined that the burden rested with the fiduciary to prove that there was full disclosure to the beneficiary of the facts of the situation, as well as his/her legal rights. To this extent, the court noted that at the time the objectant had executed the release in June 2009, the executor had failed to disclose to him the actual value of the securities held by the estate that were to be utilized to fund a testamentary trust, of which the objectant was a co-trustee, and he and his descendants were beneficiaries.

Moreover, the court found that the executor had failed to disclose the legal ramifications of his plan to distribute the assets of the estate outright, rather than to fund the trust in accordance with the decedent's will, inasmuch as such proposal could have led to claims against the objectant for breach of fiduciary duty, of which he had not been informed in advance of signing the release.

Summary Judgment Denied On Testamentary Capacity

Before the Surrogate's Court, Sullivan County, in Matter of Cirnigliaro, 2017 NY Slip Op 51931(U) (Sur. Ct., Sullivan County), was a contested probate proceeding, in which the objectants moved for summary judgment on the issue of whether the decedent possessed the requisite testamentary capacity to execute the propounded will on Sept. 4, 2013.

In support of their motion, the objectants alleged that the decedent had been suffering from dementia since 2011, and that a home health care aide and nurse practitioner assigned to his care found him confused. Several months before he signed his will, he was evaluated by a registered nurse, who found that he had a history of wandering and falls, and required assistance with his daily activities. Other nurses and aides who cared for him during this period concurred, and one observed that he regularly became enraged, and made physical threats against her.

In opposition, the petitioner argued, inter alia, that the objectants had not presented any medical evidence of the decedent's purported dementia, that they had no personal knowledge of any of his alleged mental deficits, as they had very little if any contact with him, and that he was capable of conducting his business and financial affairs at or about the time the will was executed. Moreover, the petitioner pointed to the fact that the attorney who drafted and supervised the execution of the will had no knowledge of the decedent's supposed dementia.

The court noted that while the proponent has the burden of proving testamentary capacity, one need not have a perfect mind or memory to make a will. Moreover, a diagnosis of senility or dementia is not inconsistent with testamentary capacity.

Within this context, the court found that while the objectants had demonstrated that the decedent had multiple health problems at the time he executed his will, and may have suffered from dementia, they had not produced any credible medical evidence indicating that he lacked testamentary capacity. Accordingly, the court found that questions of fact existed as to whether the decedent was lucid and rational at the time the propounded instrument was signed, and denied objectants' motion for summary judgment.

Discovery Demands Stricken As Over-Broad and Improper

Before the Surrogate's Court, Suffolk County, in In re Dutton, NYLJ, Jan. 26, 2018, at 37 (Sur. Ct. Suffolk County), was a contested accounting proceeding, in which the objectant moved to compel responses to certain discovery demands, and the petitioner crossmoved for an order dismissing the objections.

In pertinent part, the petitioner claimed that because the objectant had failed to take issue with every action taken by him as executor, he ratified all such actions, and therefore lost his standing to object to the accounting. The court found this argument unavailing, concluding that the cases cited by petitioner were unavailing, and actually supported the opposite result. Additionally, the court concluded that petitioner's motion for summary judgment was premature given the outstanding discovery in the proceeding.

With respect to the objectant's motion to compel discovery, the court held that because objectant had failed to specify the deficiencies in the documents that petitioner had produced, it was satisfied that the demands had been properly complied with. Further, the court held that objectant's demands for pre-death documents, including but not limited to copies of the decedent's wills and codicils, health care proxies, and powers of attorney, were irrelevant to the accounting proceeding, especially since the distribution of the decedent's estate was the same as in intestacy. Additionally, the court found that petitioner's refusal to provide documentation related to pre-death transfers by the decedent, his personal financial records and tax returns, and the assets of the estate beneficiaries, was proper. Finally, the court held that objectant's discovery demands regarding nonprobate assets were over-broad and improper.

Court Directs Surviving Spouse's Elective Share Be Paid

In In re Baig, NYLJ, Jan. 16, 2018, at 18 (Sur. Ct. Kings County), the Surrogate's Court, Kings County, was confronted with a proceeding by the decedent's surviving spouse to determine the validity and effect of her notice of election, and for an order directing the New York City Employer's Retirement System (NYCERS) to pay to her, in satisfaction thereof, one-third of the decedent's death benefit. The decedent died without assets, and the only testamentary substitute subject to the elective share was the NYCERS death benefit. NYCERS objected to the application, and cross-claimed against the decedent's father, who had received the entire death benefit as the designated beneficiary. The petitioner and NYCERS each moved for summary judgment, and the decedent's father opposed to the extent the motions sought relief against him.

In granting the petitioner's motion, the court found that petitioner had timely filed her notice of election within the statutory constraints of EPTL 5-1.1-A(d) (1), and that, as such, she was entitled to one-third the value of the subject death benefit. Moreover, the court held that NYCERS was responsible for paying petitioner her elective share amount, concluding that it "knowingly and wrongfully" deprived her of the proceeds. Specifically, the court found the undisputed record demonstrated that, though petitioner repeatedly requested information regarding the death benefit, and indicated her desire to NYCERS to assert a claim to the proceeds, NYCERS had provided her with "confounding and contradictory" instructions, limited her to baseless deadlines for the assertion of her rights, and paid out the entire benefit, despite its knowledge of petitioner's claim.

Though NYCERS claimed it was absolved of liability pursuant to the provisions of EPTL 5-1.1-A(b)(4),1 the court rejected its defense, opining that principles of equity and fairness would not condone its reliance on the statute, when its wholesale disregard of and indifference to the petitioner's statutory right impeded the very purpose for which the statute was created.

Further, the court denied, without prejudice, NYCERS' crossclaims for contribution and unjust enrichment against the decedent's father, finding that the matter was a dispute between living persons over which it lacked subject matter jurisdiction.

ILENE SHERWYN COOPER is a partner at Farrell Fritz in Uniondale, and past-chair of the New York State Bar Association's Trusts and Estates Law Section.