Probate. November 2, 2013 TABLE OF CONTENTS. I. Introduction II. Proper Venue for Probate Proceeding III. Requirements for Valid Will...

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1 Probate 2013 David L. Silverman, J.D., LL.M. (Taxation) Law Offices of David L. Silverman 2001 Marcus Avenue, Suite 265A South Lake Success, NY (516) November 2, 2013 TABLE OF CONTENTS I. Introduction II. Proper Venue for Probate Proceeding III. Requirements for Valid Will IV. Importance of Avoiding Intestacy V. Obligation to Propound Will VI. Probate Petition VII. Right to Challenge Admission of Will into Probate VIII. Notice of Probate IX. Witnesses X. Issuance of Letters Testamentary XI. Executors and Trustees XII. Wills Having Relation to Foreign Jurisdiction XIII. Objections to Probate i-

2 Probate David L. Silverman, J.D., LL.M. (Taxation) Law Offices of David L. Silverman 2001 Marcus Avenue, Suite 265A South Lake Success, NY (516) dsilverman@nytaxattorney.com November 2, I. Introduction. Following the testator s death, the original will may be propounded to the Surrogate s Court for probate. Probate is the process in which a will is proved to the satisfaction of the Surrogate and the named Executor given the legal right and power to implement the terms of the Will. For a propounded will to be admitted, the Surrogate must determine whether the will was executed in accordance with formalities prescribed in the EPTL. If the decedent dies intestate (without a will) the estate will still need to be administered in order to dispose of the estate to distributees. The term distributee is a term of art which defines those persons who take under the laws of descent in New York. A beneficiary under the will may or may not be a distributee, and vice versa. All distributees, whether or not provided for in the will, have the right to appear before the Surrogate and All rights reserved. Under no circumstances is this material to be reproduced without the express written permission of David L. Silverman, J.D., LL.M. David L. Silverman graduated from Columbia Law School and received an LL.M. in Taxation from NYU School of Law. He was formerly associated with Pryor Cashman, LLP, and is a former editor of the ABA Taxation Section Newsletter. Mr. Silverman practices encompasses all areas of federal and New York State taxation, including tax and estate planning, federal and NYS tax litigation and appellate advocacy, criminal tax, probate and estate administration, wills and trusts, will contests, trust accounting, like kind exchanges, asset protection, real estate transactions, and family business succession. Mr. Silverman is the author of Like Kind Exchanges of Real Estate Under IRC 1031 (Rev d, 2013), now in its third edition, and other tax publications. Mr. Silverman writes and lectures frequently to tax professionals in his areas of practice. His office also publishes Tax News & Comment, a federal tax quarterly journal. Articles, treatises and publications may be viewed at Circular 330 disclosure: Any tax advice herein is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code.

3 2 challenge the admission of the will into probate. Thus, even distant heirs may have a voice in whether the will should be admitted to probate. II. Proper Venue for Probate Proceeding. A proceeding to probate the will of a decedent domiciled in New York at the time of his death may be brought in any county in the State. However, venue is proper only in the county in which the decedent was domiciled at the time of his death. Accordingly, a probate proceeding commenced in another county will be transferred to the Surrogates Court with proper venue. SCPA 205. A. Domicile Defined. The traditional test of domicile is well established. Domicile is the place where one has a permanent establishment and true home. J. Story, Commentaries on the Conflict of Laws 41 (8th ed. 1883). Therefore, the will of a decedent who was a patient at NYU Medical Center for a few weeks before death but was living in Queens before his last illness would be probated in Queens County Surrogates Court. The issue of domicile has other important ramifications. For example, while New York imposes an estate tax, Florida does not. In addition, ancillary probate may be required to dispose of real property held by a New York domiciliary in another state. For this reason, it is sometimes preferable to create a revocable inter vivos trust to hold real property that would otherwise require probate in another jurisdiction. Converting real property to personal property by deeding it into a limited liability company might also provide a solution, since personal property (in contrast to real property) may be disposed of by will in the jurisdiction in which the will is probated. If no objections are filed, and unless the instrument is legally defective, the original instrument will be admitted to probate. In practice, clerks in the probate department make important decisions affecting the admission of the will into probate. For this reason, among a legion of others, probating of wills of decedents by persons other than attorneys is ill-advised. III. Requirements for Valid Will. For a will to be valid, the EPTL provides that the testator must (i) publish the will by declaring it to be so and at the same time be aware of the significance of the event; (ii) demonstrate that he is of sound mind, knows the nature of his estate and the natural objects of his bounty; (iii) dispose of his property to named beneficiaries freely and willingly; and (iv) sign and date the will at the end in the presence of two disinterested witnesses. A. Presumption that Will Formalities Adhered to When Attorney Presides Over Ceremony. While the execution of a will need not be presided over by an attorney, the EPTL provides that where an attorney does preside over execution, there is a presumption that will formalities have been observed.

4 3 B. Importance of Self Proving Affidavit. The execution of a self proving affidavit by the attesting witnesses dispenses with the need of contacting those witnesses when the will is later sought to be admitted to probate. The burden of proof that a will was executed in accordance with formal requirements imposed by EPTL is on the will s proponent, who may be the executor, a beneficiary, or an interested person. These requirements are intended to prevent revisions to the will after it has been executed. Even if there are no objections, SCPA 1408 provides that the court must be satisfied that will has been properly executed. C. Testamentary Capacity. Testamentary capacity requires that the testator be of sound mind, that he know the nature of his estate and the natural objects of his bounty. The threshold for testamentary capacity is low; the testator need not possess the mental capacity even to enter into a contract in order to execute a valid will. Delafield v. Parish, 25 NY 9 (1862). 1. Testator Must be Over Age 18. A will executed by a person under the age of 18 is void. 2. Felons and Aliens. Felons and aliens may validly execute a will. IV. Importance of Avoiding Intestacy. Unless all or most assets of the decedent have been designed to pass by operation of law, intestacy is generally to be avoided, for several reasons: First, the decedent s wishes as to who will receive his estate is unlikely to coincide with the disposition provided for in the laws of descent. Second, the will often dispenses with the necessity of the Executor providing bond. The bond required by the Surrogate may constitute an economic hardship to the estate if the estate is illiquid. If there is no will, there will be no mechanism by which the decedent may dispense with the requirement of furnishing bond. Third, a surviving spouse has a right to be left receive one-third of the decedent s estate under his will, whether or not there are children. If the will leaves her less, she may elect against it and take one-third of the net estate. However, if the decedent dies intestate, the surviving spouse has greater rights: Under the laws of descent in New York, a spouse has a right to one-half of the estate, plus $50,000, assuming children survive. If there are no children, the surviving spouse is entitled to the entire estate. In the event no administrator emerges from among the decedent s heirs at law, a public administrator will have to be appointed. Finally, disputes among heirs at law may arise as to who should serve as Administrator. If there are six heirs at law with equal rights to serve as Administrator, it is possible that the Surrogate would be required to issue Letters of Administration to six

5 4 different people. A. Locating Will. The Surrogate may grant an ex parte order for the examination of the decedent s safe deposit box to determine whether the will is located there. The order will provide that the will, if found, must be delivered to the Surrogate. SCPA Original Will May be Filed in Surrogates Court Before Death. At the option of the testator, the original will may be filed with the Surrogate during the life of the testator. SCPA Admission into Probate of Lost or Destroyed Wills. Can a lost or destroyed will be admitted to probate? Yes. SCPA 1407 provides that a lost or destroyed will may be admitted if it is established that (i) the testator had not revoked the will; (ii) due execution is proved in the manner required for an existing will; and (iii) all of the will provisions are clearly proved by at least two credible witnesses, or by a copy or draft of the will proved to be true and complete. a. What if a will executed later in time has been intentionally destroyed by a beneficiary of an earlier will, who seeks to probate the earlier will? In such a case, the requirements of SCPA 1407 with respect to proving the validity of a lost or destroyed will might be difficult to establish. Where the requirements of SCPA 1407 could not be satisfied, the court admitted the earlier will to probate, but denied the right of the person who destroyed the later will to benefit under the earlier will. A constructive trust was imposed for the benefit of the testator s son, who would have benefitted under the destroyed will. In re Katz, 358 N.Y.2d 616 (Sur. Schoharie Cty, 1974). b. Admitting Photocopy of Will into Probate. If the original will has been lost, a procedure exists for the admission of a photocopy, but the procedure is difficult and its outcome uncertain. Removing staples from the will to copy or scan it is a poor idea. To a degree not required of most other legal instruments, the bona fides of a will is dependent upon a finding that its physical integrity is unimpeachable, which means that the will is intact and undamaged. A will that has been damaged (e.g., staples removed for photocopying) may be admissible, though not without considerable difficulty. While the Nassau County Surrogate has accepted wills whose staples have been removed without undue difficulty, some New York Surrogates take a dim view of wills that are not intact. If the original will cannot be located and had last been in possession of the decedent, there is a

6 5 presumption that the will was revoked. The reasoning here is that in such cases it is likely that the decedent intentionally destroyed the will, thereby revoking it. B. Holographic and Nuncupative Wills. In certain limited circumstances applicable to persons involved in armed conflict or over the high seas, a nuncupative (oral) or holographic (not executed in accordance with will formalities under EPTL 3-2.1) will may be admitted to probate. EPTL C. Will of Person Presumed Dead. The will of a person who has disappeared under circumstances sufficient to justify the belief that he is dead may be admitted to probate. SCPA 1408(3). V. Obligation to Propound Will. Any person in physical possession of the will may propound it for probate. An attorney in possession of the original will is under an ethical, if not a legal, duty to propound the will into probate. Not propounding the will with respect to which one is in physical possession works to defeat the decedent s testamentary intent. Accordingly, legal proceedings could be brought by distributees (those who would take under the laws of intestacy) or other interested persons to force one in possession of the will to produce a copy of the will and to propound the will for probate. A. Proceeding to Compel Production of Will. A proceeding may be commenced under SCPA 1401 to obtain discovery with respect to the existence of a will. The petition may be brought only by a person who may file a probate petition under SCPA Such persons include legatees, devisees, fiduciaries, guardians, persons interested in the decedent s estate under SCPA 103(38), a person entitled to letters of administration c.t.a. under SCPA 1418, and creditors. If the Surrogate finds reasonable grounds exist to believe that the respondent named in the petition possesses knowledge of the whereabouts of the will, an order to show cause will be issued directing that person to appear and be examined. 1. No Priority to Any Potential Proponent. Although no priority is given to any potential proponent, letters testamentary will only be issued to the named Executor, and Letters of Administration c.t.a. will only be issued to a person so entitled in accordance with the priorities enumerated in SCPA Proceeding for Lost Will. If a SCPA 1401 proceeding fails to bear fruit, a proceeding under SCPA 1407 may be brought to probate a lost will.

7 6 VI. Probate Petition. The Probate Petition is a pleading which must be verified under SCPA 302 in accordance with CPLR The Petition must contain all of the information required by SCPA 304 (i.e., Contents of Petition ) and must state whether any children were born out of wedlock. NYCRR (a). If a person cited as a distributee derives from another person who is deceased, the Petition must state (i) the relationship of the distributee to the decedent and (ii) the name and the relationship to the decedent of each person so deceased through whom the distributee is related to the decedent. Alternatively, the proponent of the Probate Petition may submit a family tree describing the foregoing. NYCRR (b). If an original will exists, it must be filed with the Probate Petition. A. Estimate of Size of Estate. The Probate Petition must also furnish an estimate of the size of the estate. 22 NYCRR (a). Within six months of the date of issuance of preliminary letters, a list of assets must be filed with the Surrogates Court. In lieu of filing a list of assets, the Executor may file a federal estate tax return or New York State estate tax return. 22 NYCRR (c). B. Distributees Are of Remote Relationship to Decedent. If the only statutory distributees are of a more remote relationship than siblings of the decedent, the Petition must adduce proof that there are no persons who are of the same or nearer relationship to the decedent. The foregoing proof may be adduced by affidavit of a disinterested person. 22 NYCRR C. Distributees are Unknown. The Petitioner must submit an affidavit of due diligence where the Petition alleges that the distributees of the testator are unknown. 22 NYCRR D. Attorney Executors. An attorney requesting Letters Testamentary as sole Executor or Administrator must file a statement disclosing that the Executor (or Administrator) is an attorney and, if it is the case, that the attorney drafted the will. 22 NYCRR (g). VII. Right to Challenge Admission of Will into Probate. Distributees may waive their right to appear before the Surrogate by executing a waiver of citation. A distributee waiving citation is in effect consenting to probate of the will. Distributees, either when asked to sign the waiver, or when being served with a citation, will be provided with a true copy of the will. If a distributee does not execute a waiver, he must be served with a citation to appear before the Surrogate where he may challenge the admission of the will into probate. SCPA 306. If the distributee signs a waiver, the waiver must be filed with the Surrogates Court on or before the return date of the Citation.

8 7 A. Issuance of Citation. The citation, which bears the seal of the Surrogates Court, must state the name of the decedent, the name and domicile of the Petitioner, the names of persons to be served, the return date and place, and the nature of the relief sought (e.g., issuance of Letters Testamentary), the date of issuance, and the name and address of the Petitioner s attorney. If all required parties waive service of the citation, then no citation need be issued. 1. Person to be Served Unknown. The names of all persons required to be served (except for those who have waived citation) must be indicated on the citation. SCPA 306(1)(b). If the person to be served are unknown, the citation must provide a general description of those persons and their interest in the proceeding. SCPA 306(2). The NYS Attorney General must be cited where there is no known distributee. SCPA 306(2)(b). 2. Service of Citation. Service of the Citation must be complete at least 10 days prior to the return date if the person is served within the state; or within 20 days prior to the return date if the person is served within the United States but outside of New York; and within 30 days in all other cases. SCPA 307, 308. Personal service must be made within New York State. Substituted service may be made to persons outside of New York State. SCPA 307(2). Service by personal delivery is complete immediately upon personal delivery. Service of process by mail is complete upon mailing, unless the recipient refuses to accept delivery, in which case service is not complete. SCPA 309. B. Other Persons Required to be Cited. Persons other than distributees may also contest the admission of the will into probate, and they must also be cited in probate proceeding. The persons required to be cited in a probate proceeding include the following under SCPA 1403(1): 1. Distributees; 2. Designated Executor; 3. Successor Executor, but only where designated Executor fails to qualify; 4. Any person named as beneficiary, executor, trustee or guardian in any will of the decedent filed in Surrogates Court, if the rights or interests of that person are adversely affected; 5. The testator, where the Probate Petition alleges that the testator is dead; 6. The New York State Department of Taxation, where the decedent is a nondomiciliary; 7. The fiduciary of a deceased person to whom process is required, and to all

9 8 persons interested in the estate of such person; 8. The New York State Attorney General, where there are no known distributees, or it is not known whether or not there are distributees. (SCPA 316); and 9. Persons adversely affected may be required to be served VIII. Notice of Probate. Persons named in the will who are not required to be served with a citation must be mailed a Notice of Probate before Letters Testamentary may be issued. Those persons, which include legatees, devisees, trustees, guardians, or substitute or successor executors, are not parties to the Probate Proceeding, but may become parties by intervening in the Proceeding. SCPA IX. Witnesses. The execution of a self proving affidavit by the attesting witnesses dispenses with the need of contacting those witnesses when the will is later sought to be admitted to probate in an uncontested proceeding. SCPA In contested proceedings, or where the witnesses, at the request of the decedent, had not executed a self-proving affidavit, the witnesses must appear in Surrogates Court, and be examined before the will is admitted to probate. SCPA A. Death or Absence of Witness. In the event a witness to the will has died, is absent from New York, or is incompetent, the Surrogate may dispense with the testimony of that witness, and allow the admission to probate of the will based upon the testimony of one attesting witness. SCPA B. Affidavit by Witness When Will Executed. The attesting witnesses to a will, at the time the will is executed, may make an affidavit at the request of the testator stating such facts as would establish the genuineness of the will, the validity of its execution, and the competency of the testator. This affidavit may be accepted as a proxy for the witness testimony in court, provided no party to the proceeding objects to its use. SCPA C. Affidavit by Witness after Death of Testator. Following the death of the testator, the witnesses to a will, at the request of the Executor, the proponent of the will, the attorney for the proponent, or any other interested person, may make an affidavit establishing the validity of the will and the circumstances of its execution, again, providing no party to the proceeding objects to its use. SCPA 1407 X. Issuance of Letters Testamentary. The Surrogates Court must itself determine whether the will is genuine, and whether it was executed in accordance with will formalities. If the

10 9 Surrogate determines that admission of the will was executed in accordance with will formalities, and that the testator was competent, the Surrogate must admit the will to probate. SCPA 1408(3). Following the admission of the will into probate, the Surrogate will issue Letters Testamentary to the named Executor to marshal and dispose of assets passing under the will. If the will contains a testamentary trust, Letters of Trusteeship will be issued to named Trustees under the will. Letters Testamentary and Letters of Trusteeship are letters bearing the seal of the Surrogate which grant the fiduciary the power to engage in transactions involving estate assets. A. Persons Eligible to Receive Letters Testamentary. Letters testamentary may be issued to a natural person (i.e., an individual and not an entity) or to a person authorized by law (e.g., a trust company) to be a fiduciary. Letters may not be issued to infants, incompetents, convicted felons, a person who lacks the qualifications required of a fiduciary, and alien non-domiciliaries (except a foreign guardians). The Surrogate may also in its discretion declare ineligible a person unable to read and write the English language. SCPA Lacking Requirements of Fiduciary. A person may be ineligible to receive Letters if he fails to possess the required attributes of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office. B. Conflicts of Interest. A potential conflict of interest is not a ground to assert ineligibility to receive Letters Testamentary. SCPA 707. However, an actual conflict of interest may justify the removal of a fiduciary after Letters have been issued. SCPA 719(10), 711(2). C. Preliminary Letters Testamentary. The Surrogate, in his discretion, may issue Preliminary Letters Testamentary if a delay in the admission to probate of the Will is expected. Preliminary Letters enable the named Executor to engage in essential transactions prior to the formal admission of the will into probate. In order to request Preliminary Letters, the Probate Petition must have been filed with the Surrogates Court. The Surrogate may impose conditions on the fiduciary such as (i) requiring a bond, even if the will dispenses with the necessity of bond; (ii) limiting the authority of the fiduciary to receiving assets; or (iii) limiting the duration of the preliminary letters or requiring renewal of the letters. SCPA Inherent Limitations of Preliminary Letters. Preliminary Letters confer

11 10 upon the Executor all of the powers that would be conferred upon the grant of principal Letters Testamentary, except that (i) the Executor can have no power to satisfy legacies or distributive shares; (ii) The Executor can have no power to sell specifically bequeathed property without the consent of the beneficiary; and (iii) the Executor may be further constrained by provisions in the will or by directions for the Surrogate. Preliminary Letters are automatically revoked when principal Letters are issued. Although the Executor acting pursuant to Preliminary Letters may be allowed such compensation as the Surrogate deems reasonable, commissions cannot be paid until the will is admitted to probate. SCPA XI. Executors and Trustees. The Executor and Trustee are fiduciaries named in the will whose duty it is to faithfully administer the will or testamentary trust. If the named Executor does not Qualify, or if the will fails to name an Executor, an Administrator c.t.a ( cum testamento annexo ) will be appointed. The fiduciary is held to a high degree of trust and confidence. In fact, a fiduciary may be surcharged by the Surrogate if the fiduciary fails to properly fulfill his duties. In most cases, there will be only one Executor, but occasionally a co-executor may be named. The will may also contain a designation of a successor Executor and the procedure by which a successor Executor may be chosen if none is named. A mechanism by which an acting Executor may be replaced if unable to continue serving, or may depart, if he so wishes, would also likely be addressed in the appropriate will clause. Even in cases of intestacy, a bank, for example, will require proof of authority to engage in transactions involving the decedent s accounts. The Surrogate will issue Letters of Administration to the Administrator of the estate of a decedent who dies intestate. An Administrator is a fiduciary of the estate, as is the Executor or Trustee. A. Qualification or Renunciation of Named Executor. An nominated Executor must furnish the Surrogate with an acknowledged instrument stating the address of the Executor and designating the Surrogates Court as agent to receive service of process. The Executor must take an oath that he will faithfully and honestly discharge the duties of his office. In general, the Executor is not required to furnish bond unless otherwise required by the will. However, bond may be required of nondomiciliary of New York, or of a person who does not possess the degree of financial responsibility required of a fiduciary. SCPA Renunciation. A person may renounce his appointment as Executor by filing an acknowledged written instrument with the Surrogates Court. SCPA A renunciation may be retracted before Letters are issued, but the

12 11 Surrogate may require a hearing on notice to all interested persons. SCPA 1417(2),(3). B. Effect of Divorce or Annulment. The occurrence of divorce, annulment, or dissolution of marriage revokes by operation of law any disposition made to a former spouse, as well as the appointment of such spouse as executor or trustee, unless the will provides otherwise. However, if the spouses remarry, the stricken will provisions are revived. (EPTL 5-1.4) XII. Wills Having Relation to Foreign Jurisdiction. EPTL sets forth rules governing wills having some relation to a jurisdiction outside of New York. For a will to be admitted to probate in New York, it must be executed either in accordance with local law formalities imposed by (i) EPTL 3-2.1; (ii) the jurisdiction where the will was executed; or (iii) the jurisdiction where the decedent was domiciled, either at the time of execution, or at the time of the decedent s death. If a will has been executed in accordance with local law, EPTL 3-5.1(c)(3) further provides that [a] will disposing of personal property, wherever situated, or real property situated in this state... is formally valid and admissible to probate in this state. The law of the forum state applies to issues of due execution. However, in the context of a will contest, EPTL 3-5.1(c) governs issues of testamentary capacity, fraud and undue influence, regardless of the forum in which the will was executed. In re Gottfried, N.Y.L.J., May 20, 2002 (Surr. Ct. Bronx Cty). A. Will Admitted to Probate Outside of New York. Ancillary probate is ordinarily necessary where the original will has been admitted outside of New York. However, if the Surrogate determines that (i) ancillary probate would be expensive or inconvenient, where (ii) the testator has directed in his will that it be probated in New York; or (iii) where the laws of the decedent s domicile discriminate against domiciliaries of New York, either as fiduciary or beneficiary, original probate proceedings may be brought in New York. SCPA B. Will Denied Probate Outside of New York. Where a will has been denied probate outside of New York, probate in New York will also be denied, except where the grounds for denial in the jurisdiction where probate was denied are not grounds for rejecting the will in New York. SCPA XIII. Objections to Probate. Any person whose interest in the estate of the decedent would be adversely affected by the admission of the will into probate may file objections to the probate of the will. However, a named fiduciary whose financial interest is adversely

13 12 affected by reason of the loss of commissions may not file objections unless authorized by the Surrogate for good cause. Objections must be filed. Objections must be filed on or before the return day of the process or on such subsequent day as directed by the Surrogate; provided, however, that if an examination of the attesting witnesses is requested pursuant to SCPA 1404, objections must be filed within 10 days after the return date of process, or within such other time as agreed to by the parties or by the Surrogate. SCPA Objections to probate, if filed, may delay or prevent the will from being admitted to probate. If successful, a will contest could radically change the testamentary scheme of the decedent. To deter will contests, most wills contain an in terrorem clause, which operates to render void the bequest to anyone who contests the bequest. A. Effect of In Terrorem Clause. The effect of the in terrorem clause is that the failed bequest is disposed of as if the person making the challenge had predeceased the decedent. Were in terrorem clauses effective, will contests would not exist. Yet they do. Therefore, the bark of such clauses appears to be worse than their bite. Still, there is no more reason not to include an in terrorem clause in a will than there would be for omitting other boilerplate language. The existence of the clause is not likely to upset most beneficiaries expectations, and it could cause a disgruntled heir to pause before commencing a will contest. Although some believe that leaving a small amount to persons whom the testator wishes to disinherit accomplishes some valid purpose, doing this actually accomplishes very little.