When Estate Planning Goes Bad: An Introduction to Estate and Fiduciary Litigation

The vast majority of estate plans work exactly as they are intended to-assets are administered and distributed in the manner outlined by the creator of the estate plan to benefit their chosen beneficiaries.  But, for the estate plans that fail to achieve their creators’ goals, the plan’s failure may not be the only negative consequence.  Depending on the reasons and severity of the failure, an estate or fiduciary litigation matter may be commenced.

Estate and fiduciary litigation is a broad category that includes all litigation matters related to estates and trusts brought in the New York Surrogate’s Court.  Each county of New York (including each of the five boroughs) has a Surrogate’s Court that handles the administration of its residents’ estates and trusts as well as any litigation related thereto.  Unlike traditional civil litigation, litigation in the Surrogate’s Court is guided by two estate and trust specific statutes, the Estates Powers and Trust Law (E.P.T.L.) and the Surrogate’s Court Procedure Act (SCPA).

Among the common forms of estate litigation are the following:

Will Contests-If an interested party does not believe that a will submitted for probate accurately reflects a Decedent’s wishes and intentions, he or she may contest the will’s validity.  The two most common objections to a will’s validity are that the Decedent lacked testamentary capacity or that the Decedent was unduly influenced by another party.

Testamentary capacity is presumed unless a challenging party can establish that the Decedent, at the time the Will was executed, was unaware of certain information.  This includes the extent and value of his or her property; who the natural beneficiaries of his or her estate were; what the disposition under the Will being offered was; and how these elements combine to form a plan for distribution. If the challenging party can show that the Decedent lacked one or more of these elements, the offering party will be forced to rebut the presumption of incapacity.

Establishing that a party was unduly influenced requires that the challenging party show that the Decedent was controlled or dominated by a relative or advisor to the specific benefit of that relative or advisor.  It is also necessary to show that the Decedent would not have made the dispositions he or she made without the influence of that advisor or relative.  If the advisor or relative uses their influence to benefit another rather than themselves, a claim for fraud may also be made.

Construction Proceedings-If a will or trust is drafted in a manner that makes the disposition of property unclear, the court may be asked to interpret the document and decide how property will pass.  This type of proceeding may be sought when the assets of an estate are insufficient to make all the required bequests and the fiduciaries and beneficiaries cannot agree on how to distribute the remaining property.

In making its determination, the Court will look to the document first and determine if the Testator or Grantor’s intention can be determined.  If it cannot be determined by the document alone, the parties seeking a specific construction will be required to submit evidence that establishes what the Testator or Grantor’s intent was when executing the document in question.

Contested Accountings-All fiduciaries are required to periodically account for their actions as a fiduciary and provide a statement of what assets were collected and disbursed from an estate or trust.  An accounting is often filed with the Surrogate’s Court as a way to obtain approval over a fiduciary’s actions.

If the beneficiaries of an estate or trust are unsatisfied with the fiduciaries’ actions, they may contest the accounting and seek sanction or removal of that fiduciary.   Objections include a failure of a fiduciary to prudently invest; a failure to properly marshal the assets; a failure to make adequate distributions; a fiduciary engaging in self-dealing; and other claims of misconduct.

Removal Proceedings-The information gathered during an accounting procedure may be used as a basis to seek the removal of a fiduciary.  In New York, the removal of a fiduciary is difficult to achieve and a clear showing of misconduct must be made.  Examples of conduct that may lead to removal include fraud; self-dealing (unless directly authorized by the will or trust instrument); gross mismanagement of the estate or trust funds; and failing to abide by court orders.

As with any form of litigation, estate and fiduciary litigation can be extremely costly.  But, unlike most civil litigation, the subject matters of these forms of litigation are exceedingly personal and achieving a “happy ending” for individuals and families becomes incredibly difficult.  The best solution is to ensure your estate planning is executed properly, your fiduciaries are selected with care and that your wishes are expressed as clearly as possible.  This may not guarantee that your family can avoid litigation, but it can dramatically reduce the chances that it will become a possibility.

Please contact info@levyestatelaw.com for more information.

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