Trusts and Estates

September 24, 2010

A New York Fiduciary Accounting Provides Disclosure Of Financial Activities

A New York Fiduciary is generally required to provide a full accounting of his or her financial transactions. Fiduciaries include estate Executors and Administrators, Trustees and Guardians of incapacitated persons. The information set forth in the accounting can be simple or complex depending upon the nature of the estate or trust that is the subject of the accounting.

The Surrogate’s Court and the other Courts that have jurisdiction over the matters that are the subject of the accounting are guided by standard rules regarding the accounting process. For example, Article 22 of the Surrogate’s Court Procedure Act contains numerous sections that delineate the accounting process. Surrogate’s Court Official Form No. 12 provides the standard format for an “Account of Executors and Administrators”. Despite the variety of fiduciaries that are subject to these rules, in virtually all instances the accountings require that the fiduciary describe in detail: (i) the assets or items that were received: (ii) the payments or distributions that were made; and (iii) the balance of assets that remain on hand. The information contained in the numerous accounting Schedules can be extensive. Accounting for many types of equity holdings such as stocks and bonds particularly where sales, stock splits, mergers or other transactions occur can result in very lengthly and quite complex transaction descriptions.

Accountings will disclose additional financial information including a computation of fiduciary commissions, and the payment of estate and income taxes. The important aspect of the accounting process is that the beneficiaries of the estate or trust are entitled to receive and review the accounting. Any objectionable items can be brought to the attention of the Court overseeing the accounting process and rectified if appropriate. The accounting process is also helpful to the fiduciary who is given the opportunity to disclose all of his or her activities and make distributions of assets and obtain an approval of his or her actions.

Accountings can be informal, meaning that the parties can all agree and accept the accounting without formal Court proceedings. On the other hand, formal accounting proceedings require that the accounting be filed with the Court and approved or finalized through formal Court proceedings including discovery and hearings or a trial.

September 22, 2010

A New York Spouse May Inherit Despite Being Separated For Decades

by Jules M. Haas

The application of New York inheritance and estate laws and procedure are often seen within the variety of circumstances that effect individual lives. A recent article posted at MSNBC.com on September 22, 2010 talked about the World’s Oldest Man who just celebrated his 114th birthday. The article stated that Walter Breuning lives in a retirement home in Great Falls, Montana and that his wife died in 1957 and that he had no children. Given Mr. Breuning’s longevity, a similarly situated New Yorker without a Last Will might subject his estate to hardship in order locate surviving next of kin, (“distributees”), that would inherit the intestate estate. Kinship proceedings and the application of New York intestate statutes often result in long and costly legal proceedings before estate settlement.

The effect of the lapse of time had an interesting impact on intestate inheritance in a New York case entitled, In Re Morris, 893 NYS 2d 161 (A.D. 2nd Dept. 2010). In Morris, the decedent, Phyllis Morris, had married in 1971 and the couple separated in 1974 but never divorced. When Phyllis died in 2006, her husband petitioned the Court to be appointed as Administrator of her estate. Phyllis’ two daughters objected to his appointment and claimed that the husband was disqualified as surviving spouse under Estates, Powers and Trusts Law Section 5-1.2(a)(5) for abandoning Phyllis and Section 5-1.2 (a)(6) for failing to support her. The Appellate Court upheld the Surrogate’s decision that there was no abandonment since the daughters did not show that the separation was not consensual and that the daughters did not demonstrate an obligation by the husband to support the decedent. Thus, the husband who had been separated from the decedent over 30 years, was still entitled to be appointed as Administrator and was not disqualified as surviving spouse.

Situations such as those involving Mr. Breuning and Mrs. Morris demonstrate how estate laws and Surrogate’s Court procedure can eventually impact a person’s estate and the inheritance rights of beneficiaries following decades of inattention to potential consequences.

September 20, 2010

Fight over Benihana Steakhouse Chain Highlights need for Comprehensive Estate Planning

by Jules M. Haas

A probate court ruling has granted control of a family trust to the third wife of late Benihana founder Rocky Aoki, which could ultimately determine the fate of the Japanese steakhouse company, the New York Post reported.

New York City probate attorneys and estate planning lawyers are frequently called to assist in planning or administering estates that include a family business. The advantages of proper estate planning are many and may include trusts that bypass the probate process, as well as proper planning for the payment of taxes without forcing the liquidation or sale of a family business. The presence of multiple former spouses, and/or children, may also complicate the administration of an estate. But proper planning can go a long way toward ensuring that your wishes are followed after your death and that an estate’s administration is not subjected to long delays or excessive costs involving litigation.

The two-year court fight has resulted in Rocky’s third wife and widow being granted power over the trust that controls 38 percent of the steakhouse chain. The trust had been in the hands of his children, who were using the shares in an attempt to gain board seats and shakeup management, the Post reported. A lawyer for his widow, Keiko Aoki, said he expects her to become sole trustee by the end of the week.

The power shift came last week when a New York probate judge admitted Rocky’s Last Will and Testament for probate, rejecting an attempt by his children to block it. The Will calls for Keiko to be sole trustee of the entity controlling his shares until his children turn 45. Shares of Benihana were trading on the NASDAQ this week at $6.45 and are up 70 percent on the year.

September 17, 2010

The Use Of A New York Health Care Proxy Can Face Complex Issues

by Jules M. Haas

A New York Health Care Proxy can be a valuable part of an estate plan. It provides the means by which someone can appoint an agent to make health care decisions on their behalf in the event they are not able to make these decisions for themselves.

New York Public Health Law sections §2980 through 2994 provide the statutory guidelines for the New York Health Care Proxy. The law defines a “health care proxy” as “a document delegating the authority to make health care decisions, executed in accordance with the statutory requirements.” The statute further provides that “a competent adult may appoint a health care agent…”

The Health Care Proxy form must be “signed and dated by the adult in the presence of two adult witnesses” and “the witnesses must also sign the proxy”.

While the designation of a health care agent seems fairly straight forward, the actual appointment and utilization of the proxy can involve many complications. For example, the statute requires that the person creating the proxy be competent. Quite often, the issue of a person’s competency regarding the execution of a health care proxy is raised in an Article 81 Guardianship Proceeding where questions can arise concerning the validity of the appointment made by the alleged incapacitated person. Section 81.29 of the Mental Hygiene Law allows a Court to “modify, amend or revoke” a previously signed Health Care Proxy if the Court finds that it was made when the person was incapacitated or if there has been a breach of fiduciary duty by the agent. Public Health Law Section 2992 also provides a procedure for the commencement of a Court proceeding to determine issues such as the validity of the proxy or to have the agent removed or to override the agent’s health care decisions.

Complications may also appear when the health care agent attempts to exercise his or her authority on behalf of the appointing person. In Stein v. County of Nassau, 642 F. Supp.2d 135 (E.D. 7/23/09), a Federal District Court was called upon to review various aspects of the proxy statute. As reviewed by Daniel G. Fish in the New York Law Journal on August 20, 2010, Mr. Stein signed a Health Care Proxy and appointed his wife as his agent. When he became ill at home, his wife called for emergency assistance and she instructed that the ambulance to transport Mr. Stein to the hospital where he had been previously treated. Despite Mrs. Stein’s presentation of the signed proxy, the emergency personnel refused her request to go to the hospital she designated and claimed that the Health Care Proxy was not valid outside of a hospital-like setting. The Court found, as part of its decision, that the Health Care Proxy was valid everywhere and not just in a hospital-like setting.

September 10, 2010

New York Choice of Law Issues Can Determine Outcome of Case

by Jules M. Haas

Following a person’s death, it may be necessary to file papers with a Court to commence a Probate proceeding, if the person had a Last Will, or an Administration proceeding if the person died intestate. It may also be necessary to determine the appropriate set of laws that are to be applied to determine issues regarding estate administration. For example New York Surrogate’s Court Procedure Act section 3-5.1 provides in paragraph (7)(b)(1) that:

“The formal validity, intrinsic validity, effect,
interpretation,revocation or alteration of a
testamentary disposition of real property, and
the manner in which such property descends when
not disposed of by will, are determined by the law
of the jurisdiction in which the land is situated.”

Paragraph (7)(b)(2) of the statute states that:

“The intrinsic validity, effect, revocation or alteration
of a testamentary disposition of personal property, and
the manner in which such property devolves when not
disposed of by will, are determined by the law of the jurisdiction
in which the decedent was domiciled at death.”

Therefore, the determination of a decedent’s domicile and the location of real property owned by the decedent may determine the proper set of laws to be used in a particular situation.

The selection of the proper laws to apply may not be a simple affair and may impact upon many issues in estate administration, including various rights of potential heirs and beneficiaries.

Choice of law issues can affect an estate or heirship rights in many different ways. For example, in Bakalar v. Vavra, the U.S. Court of Appeals, Second Circuit, 08-5119 cv, was asked by heirs of a deceased art collector who died in a Nazi Concentration Camp to enforce their claim to a certain drawing that they asserted had been stolen from the decedent. As reported in the New York Law Journal on September 7, 2010, the lower Court had applied Swiss law in deciding that the artwork belonged to an American Art collector. The Appeals Court reversed the lower Court’s decision and determined that New York law should have been used to determine ownership and that further proceedings or a new trial was warranted. It appeared that New York law may favor the claim of the heirs.

As shown by the Bakalar case, issues concerning choice of law can have a significant impact on estate administration and the rights of parties involved in these proceedings. An experienced New York Probate attorney can assist with determining the proper laws to apply and protect the rights of parties interested in the estate.

September 7, 2010

Disqualification of New York Administrator Requires Specific Evidence of Wrongdoing

by Jules M. Haas

New York Administrators and Executors, also known as fiduciaries, have many responsibilities with regard to administering an estate and their relationship with estate beneficiaries. Very often, due to a fiduciary’s acts or failure to act or a conflict of interest, beneficiaries ask the Court to disqualify a fiduciary or to revoke their Letters of Administration or Letters Testamentary. However, such a request to the Court requires specific allegations for the Court to actually disqualify a fiduciary.

Such was the case in a recent decision by Bronx County Surrogate Holzman in Estate of Maria Minelli, New York Law Journal August 31, 2010. In Minelli, one of the decedent’s sons asked the Court to revoke the Letters of Administration that had been issued to his sister. The son claimed that his sister had fraudulently transferred real estate that had been the subject of an Article 81 Guardianship proceeding regarding the decedent. The son also claimed that his sister was involved with a fraudulent application to the New York City Department of Social Services.

After reviewing the evidence, the Court denied the son’s application to revoke his sister’s Letters of Administration and found that there was “no evidence to support the bald, conclusory allegations …” Since removal of a fiduciary is a significant act, the Court will always require very specific and clear evidence upon which to base its decision. While the removal of an Administrator or Executor may occur, the Court needs to have a strong foundation to support such relief.

The Minelli case also points to the interaction between Article 81 Guardianship proceedings and the administration of a decedent’s estate. It is common for many issues relating to property transfers and asset ownership to be investigated and determined in a Guardianship proceeding which may occur many years prior to the death of the incapacitated person. Therefore, it is important to fully examine and resolve these matters in the Guardianship case. If property is wrongfully transferred or disposed of at the time of the Guardianship proceeding, it may be too late to resolve these issues years later when the incapacitated person dies.

September 1, 2010

New York Estate Litigation Should Be Carefully Considered For Cost and Likelihood of Success

by Jules M. Haas

The process of settling the estate of a decedent can be either uncomplicated or filled with controversy. There are many aspects of estate administration that can lead to disputes and litigation.

For example, when a person dies, among the first questions to be asked is did the decedent leave a Last Will and, if so, where is the original of the Will located. Sometimes, the person who is in possession of the original Last Will refuses or just does not file the Will with the Surrogate’s Court. In such circumstances the New York Surrogate’s Court Procedure Act (SCPA) Section 1401 provides a procedure whereby the Court can issue an Order directing that the Last Will be produced and filed with the Court.

Will contests provide another example of estate litigation. Interested parties, such as disinherited children or other next of kin, may dispute the validity of a Will and thereby engage in protracted litigation with claims of undue influence or the decedent’s lack of testamentary capacity.

In all circumstances involving litigation, great consideration must be given to the cost and probable outcome of the case. Simply stated, thought should be given to the likelihood of success and whether the cost of prevailing is worth the effort. These are not easy questions to answer, particularly at the outset of an estate administration. However, a good faith review is always the best course.

A blind eye to such an inquiry can lead to disastrous results. Recently, as reported in The New York Law Journal on August 26, 2010, a New Jersey Superior Court Judge sanctioned two law firms and directed the firms to pay $1.96 million to defendants because the law firms engaged in “frivolous” litigation. The Judge’s ruling was in a case where the billionaire Ronald Perelman, as executor of his ex-wife Claudia’s estate, claimed that Claudia’s father had made an oral promise to leave a share of his estate to Claudia. The Judge found in Estate of Claudia Cohen v. Robert Cohen that the attorneys should have “recognized” that the claims being asserted were not supported by the evidence.

As the above decision demonstrates, good faith and responsibility to the Court play an important role in estate matters and litigation. A good New York Probate Attorney can help an executor make informed decisions regarding estate administration and litigation.

August 26, 2010

New York Planning For Retirement – A Practical Approach

by Jules M. Haas

Nowadays retirement seems like more of a dream than a reality given the tough economic environment. For many, it is difficult enough just to meet current expenses and obligations. However, whether a voluntary choice or due to events such as illness or job loss, retirement is a reality that needs to be planned for.

As reported by Jean Folger in Investopedia at SFGate, “10 Things You Must Know Before You Retire”, “27% of Americans have less than $1,000 in savings for retirement, and that only 46% of workers have tried to calculate how much money they will need to have saved for retirement.”

Estate planning is among the 10 items listed in the Article that should be part of a retirement plan. At its most basic level, without any estate plan or a Last Will, a person’s assets may have to be distributed according to the State laws of intestacy. This means that State statutes will determine the estate beneficiaries. Worse yet, if these heirs at law are unknown, complicated kinship proceedings may be needed and the assets may ultimately be taken over by the State treasury.

A good estate plan typically includes a Last Will, Living Will, Health Care Proxy and Power of Attorney. A Living Trust or other types of trusts may be needed and estate and gift tax considerations should be reviewed.

A Last Will provides the road map for the disposition of assets. Names of beneficiaries and specific amounts of bequests can be set forth. A person’s choice of Executors and Trustees can also be made clear in the Will. After the Will is admitted to probate, the process of estate administration can be completed and the intentions and desires of the testator (the person who made the Will) can be fulfilled and not left to chance by the application of the intestacy laws.

August 24, 2010

Clark Case May Be Subjected to Guardianship Oversight in New York

by Jules M. Haas

Update: MSNBC reports that New York City officials have begun welfare checks on the 104-year-old heiress and the Manhattan district attorney has launched a criminal investigation into the handling of her finances.

Where in the world is 104-year-old Huguette Clark? One only hopes that she has a world-class New York City estate lawyer who has her best interests at heart. Apparently, Ms. Clark has been confined to a hospital for many years.

She certainly has her choice of living accommodations, what with a $100 million Pacific Coast estate, a $24 million home in Connecticut that she apparently bought a half-century ago but never visited, and a $100 million apartment overlooking Central Park — rumored to be the largest residence on Fifth Avenue.

All are immaculately maintained and all have been unoccupied for decades. Clark has spent the last two decades in a hospital room — according to MSNBC.

With few family members — her father was in his 60s when she was born and was eligible for service in the Civil War — the lone heiress to a copper fortune is being looked after by an accountant with a criminal background and a 78-year-old attorney, MSNBC reported.

Clark has always been reclusive and fabulously wealthy — her father was a Senator from Montana at the turn of the century. She grew up in a 121-room mansion at 962 Fifth Avenue at 77th St.

It is unknown whether she has a living trust or other comprehensive estate planning. Elderly wealthy people are at risk of being victimized by fraud – particularly when no close relatives exist. Why she has spent more than 20 years in a hospital room has not come to light. Nor is it clear whether she is the subject of an Article 81 Guardianship Proceeding.

Such guardianship would permit a responsible adult to look after her finances. However, such a position of authority could be abused, despite court oversight. Since the story has come to light, more eyes are watching. The Manhattan District Attorney has started an investigation. Yet it has not been determined if Clark is under guardianship or if her vast estate is even subject to proper oversight.

Experienced New York City guardianship and probate attorneys have seen the best and worst of these types of situations. It is unusual to say the least to have as a client a 104-year-old eccentric woman who is fabulously wealthy who has spent two decades secluded in the hospital. We hope her caretakers come forward with a full accounting and that she is not victimized by fraud or abuse.

August 20, 2010

The New York Supplemental Needs Trust Is Useful To Protect Assets And Provide Added Benefits

by Jules M. Haas

There are many situations where a person who is disabled has assets available for his or her present use or may be in the position to receive assets at a later date such as a beneficiary under a Last Will or Trust.

While owning assets is usually beneficial, persons suffering from disabilities are often recipients of, or are qualified to receive, government benefits such as Medicaid or Supplemental Security Income. As a result, a conflict arises because the ownership of assets typically disqualifies a person from receiving the governmental benefits that would otherwise pay for the services that the private funds would be expended on.

In a perfect world a planner would want the disabled person to receive the maximum benefit from governmental resources and preserve or reserve the private and personal assets to spend on extras items and services that the government does not provide.

A Supplemental Needs Trust (SNT) can provide a mechanism whereby someone who is disabled can be the recipient of both government benefits and private assets. Truly the best of both worlds.

New York Estates, Powers and Trusts Law Section 7-1.12 provides the statutory requirements for the creation of these trust fund agreements. Paragraph (a)(5) of the statute defines a Supplemental Needs Trust as “a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability (the “beneficiary”) which conforms to” the statute’s guidelines.

The rules and intricacies for the establishment and use of a Supplemental Needs Trust can be complex. For example, the trust can be set up in the Last Will of a parent or other individual who wants to benefit the disabled person without interfering with the payment of governmental benefits. Another example of the use of a SNT is in a situation when the person who is disabled is the recipient of funds from a personal injury action or inheritance. A Court, in the context of the settlement of the action or within an Article 81 Guardianship Proceeding, may allow the establishment of the SNT so that the assets can be available during the person’s lifetime to provide added benefits and improve his or her quality of life and the activities of daily living. In these Court created trust situations, the assets remaining in the trust following the death of the disabled person may be subject to a lien to reimburse the government for benefits it had previously paid.

Depending upon your situation, a Supplemental Needs Trust can be very useful in any plan for the care and benefit of a person with disabilities. It is important to carefully examine each situation so as to avoid trust disputes at a later date such as government claims that the assets are not protected.