May 17, 2017
By: Carole M. Bass
At Moses & Singer our trusts and estates practice is more than just estate planning. Our attorneys are experienced in all facets of trust and estate litigation and administration. We regularly represent corporate and individual executors and trustees, family members, beneficiaries and others in both contested and uncontested matters, involving substantial assets, high-profile clients and complex family dynamics.
Beginning in this issue of our Wealth Advisory Newsletter, we will highlight some recent cases of interest from our local Surrogate’s Courts.
Reforming a Will for Tax Savings
When changes in the law occur it is important to revisit your estate plan to make sure that those changes do not adversely impact formula provisions in your will. While a court may permit a will to be reformed to correct such adverse consequences, the wiser course is to avoid the necessity for court intervention.
“Reformation as a general rule is only sparingly allowed . . . however, the courts have been more liberal in their regard for petitions seeking reformation when that relief is needed to avert tax problems caused by a defective attempt to draft a will provision in accordance with the then tax law or instead caused by a change in law, subsequent to execution of the will, that renders a tax-driven will provision counterproductive.” Matter of Brecher, 206-1971, New York Law Journal (Surr. Ct. NY County, Jan. 11, 2017).
In Brecher, the decedent died with an estate valued at approximately eight million dollars. The decedent’s will contained formula provisions designed to minimize estate taxes by dividing the estate between a credit shelter trust and a marital bequest to the surviving spouse. The marital formula provided, in essence, for an amount necessary to reduce the decedent’s federal estate tax to zero. The residuary was left in the credit shelter trust for the benefit of the decedent’s wife and descendants.
At the time the will was executed, New York State’s estate tax consisted of what was commonly referred to as a “sponge tax,” meaning that it was tied to the state death tax credit available as an offset against the federal estate tax. Under this tax system, if there was no federal estate tax liability there would automatically be no New York State estate tax. Thus, at the time the will was drafted it would have been pointless to structure the marital formula to provide for it to be funded in an amount necessary to reduce the decedent’s federal and state estate tax to zero.
By the time of the decedent’s death, the New York State estate tax law had changed to provide for its own estate tax exclusion, independent of the federal state death tax credit (which had also since been repealed), and smaller than the federal estate tax exclusion. As a result, the formula in the decedent’s will would result in significant New York State estate tax because it would require the funding of the credit shelter trust in an amount in excess of the New York State estate tax exclusion amount.
In Brecher, the Court permitted the reformation of the decedent’s will to alter the marital formula so that it would now provide for an amount necessary to reduce the decedent’s federal and state estate tax to zero. The Court found the reformation was consistent with the decedent’s intent to benefit his wife and descendants and to maximize tax savings.
Summary Judgment in a Will Contest
In a will contest, the proponent has the burden of establishing that the instrument offered for probate was duly executed and that the decedent possessed the requisite testamentary capacity at the time the instrument was executed. If the proponent satisfies that burden, the burden shifts to the objectant to establish with sufficient proof that material questions of fact exist to defeat a petition for summary judgment admitting the will to probate.
Objections to probate typically consist of (i) lack of testamentary capacity, (ii) lack of due execution, (iii) undue influence, (iv) duress, and/or (v) fraud.
In order to have standing to file objections to the probate of an alleged will, the objecting party must have a material or pecuniary interest that would be adversely affected by the probate of such propounded will. For example, a person who would take more under intestacy (if there were no will) than he or she would take under the propounded will would have standing to object to probate.
Where the objectant fails to present any triable issues of fact, summary judgment may be granted in favor of the will proponent. New York courts are increasingly granting summary judgment in probate proceedings where the will proponent makes out a prima facie case and the objectant makes only bare and conclusory allegations. See, e.g., Will of Wagner, 232 A.D.2d 180, 647 N.Y.S.2d 940 (1st Dep’t 1996); Matter of Spangenberg, 670 N.Y.S.2d. 48 (2d Dep’t 1998).
A recent illustration is Matter of Bellasalmo, 2015-4699, New York Law Journal (Surr. Ct. Queens County, February 9, 2017). The decedent in Bellasalmo left a purported will leaving her entire estate to her niece-in-law and nephew-in-law and disinheriting her two daughters. The will proponent made a prima facie showing that the will was duly executed by providing a copy of the will, including an attestation clause and contemporaneous self-proving affidavit, as well as the testimony of the attorney draftsman who supervised the will execution and two attesting witnesses. The court found that the decedent’s daughters, as objectants, failed to raise any factual issue with respect to due execution, lack of testamentary capacity, mistake, fraud, duress or undue influence. Evidentiary proof must be more than “mere conclusions, expressions of hope or unsubstantiated allegations or assertions.” See Zuckerman v. City of New York, 49 NY2d 557 (1980). In a will contest, “opposition to a motion for summary judgment…[must] consist of more than a hope on the part of the objectant that the uncontroverted evidence of the proponent should not be worthy of belief,” Estate of Steinman, New York Law Journal (Surr. Ct. Bronx County August 31, 1998).
Bellasalmo can be contrasted with a highly unusual recent case. In Matter of Alini, 2013-1273, New York Law Journal (Surr. Ct. Richmond County, March 16, 2017) the Court granted summary judgment to the will objectants, denying probate to the purported will, based on a finding of duress. In Alini, the attorney draftsman testified that the purported will did not express the decedent’s wishes. In fact, the attorney draftsman testified that the decedent declared the purported will not to be her last will and testament, stating that “if she did not leave my office with a document to show her son, that there would be all hell to pay.” While Alini seems unique in its facts and result, it does reinforce the point that each case is very fact specific and that it is important to consider the circumstances of a will’s execution if you suspect foul play.