Wills

In 1994, Helen M. Weste executed a Last Will. She was single and had no children. The Will made three charitable bequests, left her personal property to a niece, and left the remainder of her estate to be divided in differing percentages among a sister along with eight nieces and nephews.

In 2002, Helen executed a new Will. This Will made a bequest to only one of the three charitable institutions, left her personal property to another niece along with 10% of her residuary estate, left a bequest to the niece who was to receive the personal property under the 1994 Will, and left 90% of the residuary estate to a neighbor she met on or about 1995.

Inexplicably, when Helen died on March 6, 2010, one of her nieces filed the 1994 Will for probate. As all of the named Executors had either died or renounced, she qualified to act as administrator. Over the next few years, she initiated the administration of the estate.

In October 2011, the neighbor filed an action to set aside the 1994 Will and have the 2002 Will admitted to probate. The administrator under the 1994 Will objected claiming that the 2002 Will was the product of undue influence and lack of testamentary capacity.

After reviewing the evidence presented by both sides, the Middlesex County probate judge set aside the 1994 Will and admitted the 2002 Will to probate among other forms of relief. The Appellate Division upheld this decision. (See In re Estate of Weste, No. A-0436-14T1, 2016 N.J. Super. Unpub. LEXIS 1450 (App. Div. June 24, 2016))

This case highlights the need to dispose of a prior Will when executing a new one. The law does provide for what are known as “After Discovered Wills” to be admitted to probate. However, there are two costs in doing so. First, an after discovered Will can only be admitted by a probate court action which, even if uncontested, is costly. Second, although it may not have happened in this matter, there is a substantial risk that part or all of the estate assets could be distributed to the wrong beneficiaries and in the wrong proportions, or both. If the assets have been distributed, it may be difficult, if not impossible, to collect from those who have received distributions to which they are not entitled.

Many assert that old Wills should be kept in the event a new Will is set aside in a Will contest. However, in this author’s opinion, that does not make much sense, as a new Will should not be executed if it seems clear that it should not be valid to begin with. Moreover, the reality is that the need to admit an after discovered Will can often be untimely. Thus, old Wills should be destroyed or, at the very least, marked with some notation that they have been superseded by a new Will.

A never ending issue facing the court system is the establishment and enforcement of an individual’s obligation to support his or her minor children.  A question which should be diligently explored in this area is the enforcement of that obligation if a parent dies prior to fulfilling all of his or her obligations.  A recent New Jersey case, In The Matter of the Estate of Keith O’Malley, Deceased, No. A-3560-14T1 (App. Div. June 1, 2016), has made it clear that the answer will likely not be found in the probate courts.

Keith O’Malley fathered a son out of wedlock with Renee Brozowski in August 2000.  The child resided with his mother in the Albany, NY area while Keith was a resident of Spring Lake, NJ.   In 2008, Keith, who was a multi-millionaire, entered into a Child Support Agreement, which in relevant part, called for monthly payments of $3,000 in child support, payment of childcare and unreimbursed medical expenses and $7,500 annual payments to an education fund.  These obligations would continue until the child attained the age of 21.

On June 1, 2014, Keith died unexpectedly at the age of 36.  The estate took a position that his obligation to support his son ceased at his death.  In response, Renee filed an action to set aside or reform Keith’s Will as Keith’s Will disinherited his son.  She asserted a variety of grounds including mistake, undue influence, lack of capacity and breach of contract.  The court dismissed all of the claims with the exception of breach of contract.   In doing so, it held that the trial court should ascertain whether or not the parties intended the agreement to survive death.

The key takeaway from this case is that child support and other family law agreements do not necessarily survive death.  Although a court action may preserve them, it is clear such protection is not automatic.  In the event one enters into an agreement for any form of alimony, property distribution, or child support, he or she should affirmatively address the survival of such obligations upon the death of the party responsible for such payments.

Jean M. O’Mealia died on April 21, 2014. She was predeceased by her husband, William Francis Xavier O’Mealia (“Francis”), who died on July 13, 2001. The couple had been married for thirty (30) years. It was the second marriage for both. They had no children together. Each had children from a prior marriage.

Upon her death, Jean’s Last Will and Testament of October 4, 2007 was admitted to probate.  In relevant part, it distributed her entire estate to her children.  This included the marital home which she shared with her husband.

Francis’ family filed a contest to claim one-half of the marital residence for Francis’ children and grandchildren.  Although the house was owned entirely by Jean, and Jean’s Will directed the disposition of her estate, Francis’ family argued that there was a contract to provide for their side of the family upon Jean’s death which superseded the terms of the Will.  The Court agreed.

In 1999, Francis transferred his interest in the marital home to Jean shortly before he filed for bankruptcy protection.   A Will was executed by Jean at that time although no original or copy would be found after Jean’s death.  In 2000, Jean executed a Codicil to that which stated that she would leave one-half of the marital home to Francis’ family if Francis predeceased her.  In doing so, she stated that she would not revoke her Will.  She contemporaneously executed a document known as an Affidavit and Agreement confirming same.

Pursuant to N.J.S.A. 3B:1-4, “A contract to make a will or devise, or not to revoke a will or devise, or to die intestate, if executed after September 1, 1978, can be established only by (1) provisions of a will stating material provisions of the contract; (2) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract; or (3) a writing signed by the decedent evidencing the contract.”    In this case, the first two possibilities were not established as the 1999 Will could not be found and the 2000 Codicil did not refer to a contract.

Francis’ family asserted that the Affidavit and Agreement satisfied the third possibility as it was evidence of the contract in question.  Jean’s family argued that this document did not establish a contract because it was not executed by Francis.  However, the Court found that the there is no requirement that the agreement be signed by both parties.  It cited N.J.S.A. 3B:1-4(3) which only mentions that the writing be signed by the Decedent.  In addition, the Court noted that Francis was aware of the agreement as testimony established that he provided a copy of the Codicil to his family.  It is clear that the Court inferred that an agreement existed as Francis had conveyed his interest in the marital home at the time the 1999 Will was executed.

In all, this case is significant in that it shows a Court willing to view extrinsic evidence as elements of a contract that could supersede a Will.  Although a Will normally provides for the disposition of an individual’s probate assets, it is clear that a Will is nevertheless subject to the terms of a valid contract.  Thus, proper estate planning must address not only the desires of a testator but any obligations by which he or she is subject.

Any adult should have three core estate planning documents: (a) a will, (b) an advance directive (commonly known as a living will and/or health care power of attorney) and (c) a general durable power of attorney.  To the extent, personal and financial factors warrant it, one or more trusts may be advisable.  After they are executed, it is imperative that they are stored in a safe place.

Unfortunately, many individuals either misplace these important documents or store them in an inaccessible setting.  The greatest challenge that has arisen over the past two years has been the storage of a Will at a bank safe deposit box.  In the early 1990s, the State of New Jersey changed its statute to allow for the designated executor of an estate to access a safe deposit box so he or she could retrieve a decedent’s Will.  The executor would need to provide a certified copy of the death certificate to the bank.  However, the statute streamlined the initiation of the estate administration process.

Inexplicably, over the past two years, a number of banks have taken the position that a designated Executor can no longer obtain the Will unless they have a short certificate evidencing their appointment from the county Surrogate or a Court Order authorizing access to the safe deposit box.  The former is impossible as the Surrogate won’t issue a short certificate absent production of the original Will.   The latter potentially generates an unnecessary cost to the estate as Court orders typically are issued after a filing fee and pleadings to obtain same.

Fortunately, it appears that the local county Surrogates will issue an Order upon request to access the safe deposit box, but to have the Will sent directly from the bank to the Surrogate.  Although this appears to be done without additional charge, it requires an additional trip from the designated Executor to the Surrogate’s office.  When confronted with the state statute, banks are stating that they are chartered elsewhere and not subject to New Jersey law.  In short, it is an absurd position.  However, it exemplifies that individuals should be careful where they store their Wills, Living Wills and Powers of Attorney.

Here’s my tips as to storing your estate planning documents:

• Where Should They Be Stored –
  1. Wills – It is imperative that a Will be stored in a safe place. In New Jersey, the county Surrogate can only admit an original Will to probate.  If the original Will cannot be located after the testator dies, the only way a photocopy of unexecuted copy can be admitted to probate is through a formal court action.   In addition to the significant cost to file this action, the party seeking to admit the copy must bear the burden of overcoming the presumption that the Will was destroyed by the testator, and that burden must be met by clear and convincing evidence.

On more than one occasion, I have encountered instances in which Wills “disappear” after an individual dies when there is an unequal distribution among children or similar circumstances where a potential beneficiary is unhappy with the terms of the Will.  Thus, the Will must be stored safely.

I recommend that the original Will be stored at the law office of the attorney who drafted it.  A competent law firm should offer this to its clients.  In the alternative, a safe at one’s home should be sufficient.  However, it should be fireproof.  If one or more trusts have been executed, these options should be used as well.

1. Advance Directives and Powers of Attorney – Many people feel the need to place these in a safe deposit box. Aside from the obstacles discussed as to Wills, this is just impractical.  For example, if you are in a car accident at 9 pm on a Saturday night, the bank wouldn’t even be open to provide these documents.  A law office would not be a proper place either.  A safe place at your home should suffice.  If you are aging and having health issues, the residence of the agent under these documents may be an appropriate alternative.
2. 2. Who Should Know – Some families feel the need for everyone to know everything. Although candor is a good principle in life, it is not always practical.  There are enough occasions in which I and other attorneys have seen where one child gets bent out of shape when his or her brother or sister are appointed as a fiduciary.  It is not uncommon in these situations to see a frail parent brought to an attorney by this child to change the agents.  Thus, in my opinion, the best course of action is to let the agents know that they are appointed and where the documents are located in the event they are needed, but to otherwise avoid discussing the matter.
3. Changing Documents – From time to time, individuals change their Wills, Living Wills and Powers of Attorney. In that event, it is imperative to shred old documents.  If another party has them, that party needs to return them so that they can be destroyed.  In addition, if the documents have been registered with financial institutions, such institutions needs to be notified of the change and the revocation of the old documents.

A commonly asked question in both estate planning and estate administration is “How much does the executor get paid?”  In order to evaluate that question, three issues need to be addressed: (1) the statutory allowance for compensation, (2) the options in drafting compensation clauses in a Will, and (3) the effect of case law of commissions.

In New Jersey, the law provides that an executor is entitled to three forms of payments.  The first is commissions on principal.  When an individual dies, the executor may take a commission on the principal of 5% of the first $200,000, 3 ½% of the next $800,000 and 2% of the balance.  The executor may also take a commission of 6% of the income generated on the estate assets between  the date the executor receives his or appointment and the date the assets are ultimately distributed to the estate’s beneficiaries.  If taken, both of these commissions are taxable income to the executor.  It should be stressed that the commissions are only to be taken on probate assets which pass through the probate estate.  Thus, assets which pass to a joint account holder or by beneficiary designation, such as life insurance, retirement plans and annuities, are not included.  Also, certain specific bequests such as real distributed to one or more individuals is not included.  The third form of payment is for out of pocket expenses incurred by the executor such as travel costs and reimbursements for payments advanced on behalf of the estate.  These are not taxable.

Recognizing what the law allows, there are a variety of ways in which wills can be drafted to address this issue.  There are four primary provisions.  The first is a direct statement that the executor is entitled to the statutory allowances detailed in the preceding paragraph.  The second is that the executor will serve for a flat fee.  The third is that the executor will serve without any compensation.  The fourth is a statement that the executor shall be entitled to reasonable compensation.  Although this last form allows the statutory allowances to be taken, it can be interpreted as a request for the executor to consider whether he or she should take the full amount or not.  These provisions effect the appointment of an individual executor.  It should be noted that financial institutions typically require language that they will serve pursuant to their existing schedule of charges.

Of course, regardless of what is said in the statute or a Will, the compensation of an executor can be changed in one of four ways.  First, if the performance of an executor entailed extraordinary efforts, additional compensation may be sought (although this is rarely, if ever, granted).  Second, the court will not enforce a clause that deprives the executor of a commission.  Third, if the Executor, by his or her acts or omissions, causes a loss to the estate in a manner deemed grossly negligent or fraudulent, he or she may have to repay the estate for such loss.  Fourth, a court may reduce the commission if it determines that the effort which the executor had to undertake did not warrant the amount of compensation set forth the statutory formula.

Millions of Reasons to Say “I Do”

Lillian Garis Booth and Michael Dabich, residents of Bergen County, were companions for 51 years.  They met in New York when Booth was 42 and Dabich was 27.  According to Dabich, they held themselves out as husband and wife before his family and society in general in his home state of Pennsylvania.  No ceremony was ever held in any State.

Lillian died on November 22, 2007 at the age of 92.  Mr. Dabich filed a suit against her estate, as she had a Will created in 1958 and codicil created in 1991, neither of which mentioned of him.  The matter was settled.

The good news for Michael is that he received $9.9 million in the settlement.  The bad news was that Lillian’s estate was worth approximately $200 million.  Because they were not married in a valid civil or religious ceremony, the estate had to pay nearly $1.5 million in taxes as the payment to him was neither exempt from inheritance tax nor could qualify for the marital deduction for the estate tax.

More significantly, depending on when a valid marriage ceremony would have taken place, Michael could have received substantial economic benefit.  Under the theory of the omitted spouse share (where a will is written before marriage), he could have received the entire estate, as she had no children. Under the theory of the elective share (where a will is written after marriage), he could have received one-third, or approximately $67 million dollars.

The decision to marry or not marry is extremely personal.  Certainly, as the old axiom goes, one should not marry solely for money.  Yet, in the case of a longstanding personal relationship, each party should consider the economic ramifications of their decision to forego marriage.

On September 2, 2011, Karter Wu, a resident of Queensland, Australia, committed suicide.   Just before he took his life, he created a series of documents on his iPhone.  Most of these were final farewells.  However, among them was his expression of his Last Will.

The document began with the words, “This is the Last Will and Testament of Karter Wu.”  The subsequent text detailed his testamentary intentions.  He detailed the beneficiaries of his estate and he appointed an executor and successor executor.  At the end, he typed his name at a spot where a signature would typically be made as well as his address.

The Queensland probate court admitted this document into probate as his Last Will.  It held that an atypical document could be admitted as a Will if it met three conditions: (1) it has to be a document, (2) it has to purport to state the decedent’s intentions, and (3) the decedent had to intend it to form his Will.  The court held that the Wu will met this criteria.

In New Jersey, N.J.S.A. 3B:3-2 allows for writings which do not comply with the formalities of execution to be admitted to probate if clear and convincing evidence exists that a decedent intended same to be his Will.  This statute has led to a growing body of law known as “the doctrine of substantial compliance.”  As such, documents which never would have been considered for probate can now possibly be admitted.

Of course, developments such as these are not to encourage individuals to stray from executing Wills in the correct fashion, as the court fees to required to get a non-complying document into probate dwarf the cost of obtaining counsel for preparation and execution of proper estate planning documents.  Yet it should be noted that there is a possibility that such documents may be admitted to probate when an individual dies without a traditional Will.