One recurring challenge in my practice is that it’s difficult to advise a client about how attorneys’ fees are likely to be handled in contested probate. I’ve spoken and written on the subject, but I’m always quick to admit that it’s still not something I can address with confidence. I’d like to thank attorney Robert Morris of the Mercer County Estate Planning and Probate Committee for calling my attention to a recent unpublished trial court opinion, IMO Estate of Cohen, in which Judge De La Cruz exclusively addressed the matter of attorneys’ fees in contested probate. The discussion is a bit technical, but I write here not just for the general reader but also for my own reference and edification. Accordingly, here’s a rather long section of the opinion:
The authority to allow an award of counsel fees is found exclusively in the rule so permitting in specified circumstances. State v. Otis Elevator, 12 N.J. 1 (1953) held “[f]rom the outset in New Jersey, following English precedents, the allowance of costs and counsel fees had been uniformly considered by the courts of this State to be a matter of procedure rather than of substantive law.” Ibid, p. 5. The New Jersey Supreme Court in In re Reisdorf, 80 N.J. 319, 326 (1979) unanimously held “[e]xcept in a weak or meretricious case, courts will normally allow counsel fees to both proponent and contestant in a will dispute.” Broad statutory power is lodged in the Court of Chancery to award counsel fees. Katz v. Farber, 4 N.J. 333, 339 (1950). R. 4:42-9(a)(3) provides the authority to award fees and costs in this case type. The Rule provides in pertinent part as follows: (a) Actions in Which Fee Is Allowable. No fee for legal services shall be allowed in the taxed costs or otherwise, except (3) …If probate is granted, and it shall appear that the contestant had reasonable cause for contesting the validity of the will or codicil, the court may make an allowance to the proponent and the contestant, to be paid out of the estate… In the assessment of such a permissible award, several factors should be considered. Among factors to consider in fixing the allowance for legal services rendered the estate are: 1) the amount of the estate and the amount thereof in dispute or jeopardy as to which professional services were made necessary; 2) the nature and extent of the jeopardy or risk involved or incurred; 3) the nature, extent and difficulty of the services rendered; 4) the experience and legal knowledge required, and the skill, diligence, ability and judgment shown; 5) the time necessarily spent by the attorney in the performance of his services; 6) the results obtained; 7) the benefits or advantages resulting to the estate, and their importance; 8) any special circumstances, including the standing of the attorney for integrity and skill; and 9) the overhead expense to which the attorney has been put. See In Re Bloomer, 37 N.J. Super. 85, 94 (App. Div. 1955). In any case, the counsel fee allowed should never exceed reasonable compensation for the services rendered the estate. The standard for the calculation of a reasonable attorney’s fee award payable under a feeshifting statute or rule has been plainly laid out in Rendine v. Pantzer, 141 N.J. 292, (1995). The Rendine Court held “[u]nder the LAD and other state fee-shifting statutes, the first step in the fee-setting process is to determine the lodestar: the number of hours reasonably expended multiplied by a reasonable hourly rate.” Id. at 335. The Court also made clear that this assessment is the most significant element in the award of a reasonable fee because that function requires the trial court to evaluate carefully and critically the aggregate hours and specific hourly rates presented by counsel for the prevailing party to support the application. Id. The trial court must then determine whether the assigned hourly rates for the participating attorneys are reasonable. Id. at 337. The sensibility of this formula is highlighted in the Court’s mention that “[t]hat determination need not be unnecessarily complex or protracted, but the trial court should satisfy itself that the assigned hourly rates are fair, realistic, and accurate, or should make appropriate adjustments.” Id.
Tempering the assessment of a reasonable award is the principle that this kind of award is not designed to achieve complete indemnification. Westinghouse Elec. Corp v. Local No. 449 of Int’l Union of Elec. & Radio Mach. Workers, 23 N.J. 170, 178 (1957) (citing Clements v. Clements, 129 N.J. Eq. 350 (E. & A. 1941)), In another helpful case, the Appellate Division has held that “[t]he aim is not to make the client whole, but to fix the amount of fees and costs at an amount which is reasonable in the circumstances. See, City of Englewood v. Veith Realty Company, 50 N.J. Super. 369 (App. Div. 1958). This Court understands that the charge is to identify a sensible, reasonable award not meant to completely indemnify. With the authority presented in R. 4:42- 9(a)(3), and given the binding and sensible guidelines for this assessment, this Court makes the following findings and conclusions.
No yardstick is available for the purpose, no standard percentages or per diem rates can be recognized which would be fair to both parties in all cases, precedents indicate that each case must be judged by its own overall circumstances. The best that can be said in the way of a general standard is that reasonable compensation should be allowed.” See City of Englewood v. Veith Realty Co., Inc., 50 N.J. Super. 369, 376 (App. Div. 1958).
New Jersey, like virtually every state, allows a spouse to take an “elective share” of their deceased spouse’s estate. The general notion, and the national model, is that you can’t cut your spouse completely out of your will.
In reality, though, New Jersey’s approach is very different from most states, and the right of a spousal share is far from a sure thing.
By statute, a spouse has a right to take an elective share against the estate, and an initial review of the statute makes the election calculation seem relatively straightforward: as a minimum inheritance, a surviving spouse in entitled to one-third of the “augmented” estate. N.J.S.A. 3B:8-1. The augmented estate means the gross estate, reduced by certain administration expenses, plus the value of property transferred by the decedent during the marriage under certain circumstances. The definition of the augmented estate is generally understood as primarily seeking to recover gifts made within 2 years of the date of death.
In application, the law providing for spousal election is so contorted that I’m inclined to say that the exceptions virtually swallow the rule. The most significant feature of New Jersey’s spousal election scheme is that, unlike similar laws in most other states, the New Jersey law is not designed to prevent disinheritance. Instead, it is designed to assure a modicum of continuing support if needed. The assets of the surviving spouse, whether vesting by virtue of the decedent’s death or independently acquired, are deducted from the elective share. If the disinherited spouse’s assets exceed one-third of the augmented estate, then the spouse is not entitled to an elective share. See, e.g., Aragon v. Estate of Snyder, 314 N.J. Super. 635 (Ch.Div. 1998); In re Estate of Cole, 200 N.J. Super. 396 (Ch.Div. 1984); In re Estate of Bilse, 329 N.J. Super. 158 (Ch.Div. 1999).
In short, it’s true that a surviving spouse is entitled to an elective share, but in effect, that share gets “paid” first from the surviving spouse’s own assets.
One recurring theme in my practice is that jointly held assets present a host of potential problems in the administration of a decedent’s estate. Generally, what I’m thinking of is bank accounts and other financial holdings, though other property can pass to a joint owner (real estate, for instance, often passes to a spouse by the entireties or to a joint tenant with right of survivorship).
Whenever an asset passes by virtue of being jointly held, it passes outside the decedent’s will, and the testamentary intent of the decedent may be inadvertently defeated. It’s regrettably common for someone to make will and then effectively make the will meaningless because, with no intention to do so, the person has removed all of the assets from their estate by naming joint owners. I have seen several cases where a person made a will leaving their estate to be divided equally among their children, and at the time the will was made all of their assets were in bank accounts and brokerage accounts jointly owned with just one of their children.
Joint accounts can create tax problems as well. The general statutory framework provides that a jointly owned becomes the asset of the survivor upon the death of the decedent. The New Jersey Multiple-Party Deposit Account Act provides that funds in a joint account belong to the surviving party absent clear and convincing evidence of a different intention. The New Jersey estate and inheritance tax rules make the opposite presumption. All funds held in a jointly-title account are presumed to belong entirely to the decedent and are included in the taxable estate absent a showing of other intent. If the joint tenant is someone other than the spouse, child, grandchild, or parent of the decedent, an inheritance tax is triggered, and the estate must file a return and, where appropriate, seek to establish that no inheritance tax should be applied.
It is common for people to hold a joint bank account with a child or trusted friend as a “convenience account,” to allow the co-owner to assist in the management of the decedent’s affairs. Many people also use joint-account designation as a form of do-it-yourself estate planning, with joint bank accounts intended to pass as gifts to the surviving owner.
There are manifest tax risks with these arrangements. For one, if the order of death is not as the maker of the account anticipated, they may find an estate tax imposed on their own money while they are living. For example, if a person adds her niece to an account so that the niece may assist in paying bills and the like, and then the niece predeceases, an inheritance tax will be triggered on the whole account, and the niece’s estate will be forced to file an inheritance tax return and fight to exempt the account from tax.
Another area of concern in administration is that joint accounts open the door for a certain category of probate litigation. Even if the account was in fact intended to pass to the survivor, another heir of the decedent may challenge designation as the result of undue influence. The close relationship that prompted the decedent to make the joint-owner designation may be the basis for such a challenge.
Joint bank accounts and joint investment accounts are the source of so many of the estate disputes I see in my practice. While joint bank accounts and joint brokerage accounts may seem like more or less the same thing – particularly as banks offer more and more accounts that would be traditionally considered investment vehicles – in distribution on death, joint bank accounts and joint brokerage accounts are governed by different statutes in New Jersey.
When two people own a bank account, the rights of the owners are governed by a statute called The Multiple-Party Deposit Account Act (N.J.S.A. 17:16 I-1 et seq.). This law lays out the owners’ rights while both are alive, and more importantly for my practice, the effect of the death of one of the owners.
Securities and brokerage accounts can also be jointly named, but are governed by another statute in New Jersey, the Transfer-on-Death Security Registration Act (N.J.S.A. 3B:30-1 et seq.). I am only aware of one New Jersey case specifically addressing whether the Multiple-Party Deposit Account Act applies to brokerage accounts (IMO Estate of Suraci), but it seems to me that the existence of a separate statute specifically addressed to brokerage accounts suggests it is not.
When representing a personal representative in my probate practice, it not unusual for my client to scoff at the idea of making a formal notice of probate.
Take a common situation in which the two children of the decedent are the sole heirs, and one of the children is the executor. If the sibling heirs are personally close, a formal notice of probate might seem silly. Sending the formal notice described in the court rule might even be irritating to the brother or sister; if they’ve read the Will and know that it was probated, the notice of probate they’ll receive will contain less information than they already know.
Now, within the context of my representation, the issue is easy enough to resolve. Notice of probate is simply part of the administration, and when it’s handled by the law firm it’s rarely questioned by the recipient.
A more interesting circumstance is where we get involved late in an administration where no formal notice of probate was delivered, or where we represent an heir who has not received a formal notice of probate. The question then is whether whatever notice the heir or next-of-kin received was sufficient.
Rule 4:80-6 describes what must be in a notice of probate. All beneficiaries and next-of-kin (in general terms) are to receive “a notice in writing that the will has been probated, the place and date of probate, the name and address of the personal representative and a statement that a copy of the will shall be furnished upon request.”
It is clear that mere knowledge of the existence of a Will and the identity of the executor named in the Will is not enough to constitute notice of probate. In re Estate of Green, 421 A.2d 600 (App.Div. 1980). It’s likewise clear that a technical defect separate from the contents of the notice itself – such as failure to file proof of notice with Surrogate – does not make the notice insufficient.
There is some authority to support the position that actual knowledge of the facts that should be contained in the notice is like sufficient, even where there is noncompliance with the literal requirement of written notice. See, e.g., In re Will of Landow 199 A.2d 43 (App.Div. 1964).
But far better to actually comply with the rule, even when all of the facts contained in the notice are already known to the recipient.
I was speaking recently with an excellent estate planning attorney, discussing the matter of joint bank accounts. From the point of view of the estate planning lawyer, joint bank accounts looked like a viable tool in the estate planning toolkit. From my point of view, as an estate litigator, joint bank accounts are an invitation for trouble.
I’m speaking here of bank accounts that are joint in name alone, where one person has contributed all of the money and simply named another person as joint owner. This happens for a variety of reasons; sometimes it is a “convenience” account, set up to let another person pay bills or the like, and sometimes it is a round-about way of estate planning, made with the intention that the money in the account will pass to the survivor upon the death of the person funding the account.
There are a host of problems with joint bank accounts of this kind. For one, these accounts are among the most common means an unscrupulous person can steer money out of the Estate and into their pockets. For reasons I don’t pretend to understand, it’s apparently easier to convince an aging relative to add you as a “joint owner” of a bank account than it is to have them make a more clearly intentional gift.
In every Estate involving a joint bank account where the decedent paid in all of the money, it’s reasonable to ask whether the account is an asset of the Estate or if it should pass directly to the surviving “joint owner.”
At first blush, the law in New Jersey seems clear enough. The Multiple-party Deposit Account Act (NJSA 17:16I-1 et seq.) says that the money in a joint bank account will pass to the surviving owner and not to the Estate of the decedent “unless there is clear and convincing evidence of a different intention at the time the account is created.” The standard of “clear and convincing evidence” is a high one, nearly the civil law equivalent of the more familiar “beyond a reasonable doubt.”
The question gets a lot more complicated when the question of undue influence is raised. A presumption of undue influence can be created quite innocently under New Jersey law. I’ll write more about that elsewhere, but I think it’s enough to say that, in many instances, the decedent leaving a joint bank account named as joint owner someone they relied on, trusted, and were close enough to that the specter of undue influence isn’t far away.
If the relationship between the decedent and the survivor was of a nature that creates a presumption of undue influence, the burden of proving that the decedent intended a joint bank account to pass to the survivor and not to the estate is completely inverted. Now, the survivor must show that the creation of the joint account was not the product of undue influence.
And undue influence is not the sole grounds for directing a joint bank account back to the Estate. Our Appellate Division directs that “[e]ven if no undue influence is found, a trial judge should still be free to look at all the direct and circumstantial evidence available to determine whether the depositor intended to create survivorship rights.” That is, even without a finding of undue influence, the court should broadly examine all of the evidence — direct and indirect — to look for donative intent.
While the presumption the under Multiple-party Deposit Account Act might seem to make gifts by joint account almost unassailable, the full context of the law governing such gifts suggests that joint bank accounts should always be reviewed as a potential asset of the Estate. I think that joint bank accounts in nearly all cases have no role in prudent estate planning, and that in the administration of an estate, from a litigator’s perspective, these accounts should always be viewed with suspicion.
A client comes to my office to discuss guardianship proceedings for her elderly mother. Her mother is no longer able to take care of herself, and without a durable power of attorney it is increasingly clear that court proceedings will be necessary to have her mother adjudicated incapacitated (what was once called mentally “incompetent”).
This is how nearly all of our private guardianship matters begin, and often enough, the consultation includes the whole family. There are always many concerns, and the decision to petition for guardianship is never an easy one. And one concern for many families is that they do not want to see their loved one stripped of all of right to participate in decisions affecting them.
The fundamental right of self-determination is highly valued, with good reason. And no one wants to see a loved one deprived of all of their rights, even when it is clear that a guardianship is needed.
An adjudication of incapacity is an extraordinary remedy, vesting the guardian and not the incapacitated person with ultimate responsibility to determine the best interests of the incapacitated person. It is a comfort for many families, I hope, to learn that a person does not lose all powers of self-determination when it is determined they are mentally incapacitated. I am not thinking only of negative rights – the right to be free from abuse, neglect, and the like – though those rights are certainly in place. I am thinking of the positive right to participate in all of the decisions, large and small, affecting the incapacitated person.
New Jersey law provides that the guardian of an incapacitated person must encourage the incapacitated person to “participate with the guardian in the decision-making process to the maximum extent of the ward’s ability in order to encourage the ward to act on his own behalf whenever he is able to do.” (N.J.S.A. 3B:12-57)
It is anticipated, and even required, that the incapacitated person’s own decision-making be considered to the full extent the person is able to participate. While the guardian of an incapacitated person must ultimately weigh the decisions and preferences of the incapacitated person against what the guardian believes is in their best interest, an incapacitated person retains the right to participate in all decisions and must be encouraged by the guardian to act on his or her own behalf whenever that is possible.
Many of the estate administrations we handle come to us midstream. Many people, when they learn they’re named as executor in a Will, begin the probate process without counsel; I have a lot of respect for people who try to minimize the costs to the Estate by doing the work themselves, and maybe even more for those who know when they’ve done all they can do and need the assistance of a lawyer.
Now, it’s almost always the case that an unrepresented personal representative won’t have done things quite as we would have, and probably the most common oversight is the notice of probate. In New Jersey, Rule 4:80-6 requires that a personal representative send all beneficiaries and other parties in interest (spouse, heirs, next of kin) written notice that the Will was probated, including the date and place of probate, and stating that a copy of the Will will be provided to them upon request. Proof of mailing has to be provided to the Surrogate within ten days after the notice is sent.
More often than not, when I ask a new client who’s serving as personal representative about the notice of probate, the client explains that all the beneficiaries know about the Will already. From a practical point of view, this makes excellent sense; why send formal notice to someone of a fact they already know? From my point of view as an estate litigator, this misses one of the primary functions of the notice of probate. The case In the Matter of Fanny Green, Deceased is one of the things I’m thinking of when we prepare a notice of probate.
Notice of probate protects the Estate and the personal representative from later Estate litigation. Until the notice of probate requirements are met, we cannot have confidence that the probate won’t be challenged down the road. The Fanny Green case makes clear that, even when a beneficiary or party in interest has actual knowledge of the probate, the personal representative is not relieved of their responsibility to give notice of probate, and a Will challenge can be brought long after it would ordinarily be barred. Notice of probate isn’t merely a nice thing to do; it’s an important part of the personal representative’s duty, and it’s a perilous thing to ignore.
Sidenote: as common as it is for the notice of probate to be overlooked, it is even more common for the proof of mailing requirement to be forgotten. Happily, the case law makes it fairly unlikely that the mere failure to file the proof of mailing will leave the Estate vulnerable. Which is not to say it should be ignored.
I’ve written here about how little time a litigant has to challenge the probate of a Will in New Jersey. Under Rule 4:85-1, in almost all circumstances, an action to set aside the probate must be brought within 4 months of the Will being admitted to probate, or within 6 months if the plaintiff doesn’t reside in New Jersey.
(Edit: Thanks to attorney Kevin Pollock for pointing out that, when I first posted on this topic, I’d omitted any mention of the 30-day relaxation of these time periods allowed under certain circumstances pursuant to R. 4:85-2.)
In civil litigation, it’s not at all uncommon to discover facts that support a claim you didn’t know about when the case was filed. Pleadings are routinely amended to include new claims, and while I’ve never actually seen it happen, there are circumstances where the Rules of Court allow a party to add a new theory or claim even after all evidence has been presented to the judge or jury.
A colleague asked me recently whether facts discovered in the course of litigation could allow for a Will challenge even after the 4-month period had run. (This was, I’m embarrassed to report, pretty much idle chat. Her actual case involves a decedent’s estate, but there’s no question as to whether or not probate is going to be challenged.)
I’ve never litigated the issue, and I was curious enough to spend a little time scratching around, I cannot find a single case where newly discovered facts were sufficient to allow a litigant to challenge probate after the period set out in the Rule. In fact, the few reported cases that touch on the question fall squarely against an expansion of time for newly discovered evidence. Where a plaintiff has alleged that the facts supporting a claim of undue influence, waste, or lack of testamentary capacity were only discovered after the time to challenge probate had run, the action to set aside probate was barred nonetheless.
The message for the practitioner is clear: if there is any hint that a probate challenge might be appropriate, the matter requires speedy investigation and timely filing.