Business Succession Agreements

It is important for businesses to plan ahead.  It is especially true to plan for those events that are foreseeable.  Whether we want to admit it or not, there will come a time when we will no longer be able to continue working.  It is also true of business owners. But what happens to the business when the founder or key member of the company retires, has a serious illness or dies?  That is where the business succession agreement comes into play.

A business succession agreement can address a multitude of issues that may arise when there is a change in the business’s management.  Among other things, it can specify what the roles and responsibilities of the new controlling members will be and under what circumstances the succession plan will be implemented. 

It can be especially difficult when these events involve family businesses.  If not properly addressed in a succession agreement, litigation between family members may arise or the family business may not survive.  For example, in Crabapple Corp v Elberg (153 AD3d 434 [1st Dept 2017]), siblings became embroiled in litigation over who would become the managing member of the family’s business after the death of their father. There was no succession agreement regarding the management of the LLC in the event of the death of their father, the majority member. 

Ruben Elberg, the son of Jacob Elberg, asserted that he was the sole managing member of the LLC.  His sister, Tamara, as co-executor of their father’s estate, asserted that their father was the sole owner of the LLC and that she was the LLC’s co-manager by virtue of her status as the co-executor, along with Ruben.  The record demonstrated that Ruben was a minority member and not a managing member.   Pursuant to Limited Liability Company Law § 608, the executor of a deceased member may exercise all of the member’s rights for the purpose of settling his or her estate.  Therefore, the Court held that their father’s controlling interest in the LLC passed to his estate upon his death, and Ruben and Tamara, as co-executors of the estate, both had authority as co-managers of the LLC.

Even where a succession agreement exists, if not carefully drafted, litigation may still occur.  In Shyer v Shyer (2019 NY Misc LEXIS 4022 [Sup Ct, New York Co, July 18, 2019]), after the death of Robert, one of the four siblings who owned and managed Zyloware Corporation, the company filed a third-party complaint against his widow, the preliminary executrix of his estate,  in her individual capacity, for among other things, wrongful interference with a contract.

In Shyer, the Shareholders Agreement and Master Executive Employment Agreement the siblings entered into were to formalize the succession of leadership in the company.  Pursuant to the Shareholders Agreement, the company informed Robert’s estate that it intended to purchase his remaining shares along with the price it was willing to pay for those shares.  Robert’s widow, on behalf of the estate, rejected the company’s terms.  She claimed that the company’s offer breached the Shareholder Agreement.  The company claimed the estate’s actions breached the agreement as it “ran contrary to the Shareholders Agreement.

The company alleged that the widow, in her individual capacity, improperly interfered with the Shareholders Agreement by inducing the estate to breach the shareholders agreement by failing and refusing to deliver the shares to the company no later than the Closing.  The company alleged that the widow procured the estate’s breach by forcing and directing the estate to act contrary to its contractual obligations.  The company alleged that she, as preliminary executrix, caused the estate to breach the agreements. 

The company argued that the widow was implicated in her role as preliminary executrix of the estate since the estate could act only at her behest as she was the “sole executor” of the estate.  The company claimed that the estate’s actions in allegedly breaching the shareholders agreement could not be “decoupled” from the widow’s ordering the estate to do so.

The court however reasoned that the claim that the widow interfered with the Shareholders Agreement was tantamount to a claim that she should be held personally liable for the estate breaching the Shareholders Agreement.  It held that the widow’s actions did not describe the procurement of a breach, but the breach itself.

Under New York Estates Powers and Trusts Law § 11-4.7(b), a personal representative is individually liable for obligations arising from ownership or control of the estate or for torts committed in the course of administration of the estate only if she failed to exercise reasonable care, diligence and prudence.

The court held that the company’s claim threatened to circumvent the statutory standard for imposing personal liability on estate administrators.  The company’s allegations against the widow stemmed from her “control of the estate or for torts committed in the course of administration of the estate.”  The company did not allege that the widow “failed to exercise reasonable care, diligence, [or] prudence.”  Although the court dismissed the company’s claim against the widow in her individual capacity, it did go on to say that the company could still sue the estate for breach of contract.

Planning for succession in a business, including a closely held family business, can help ensure the continuity of the management and operation of the business long after the founder or majority manager is gone.

Contribution by Jacque K. Vincent, J.D.

Estate Litigation Post-Divorce and Separation Agreements

Many trust, estate and probate litigation cases in New York are engendered by divorce. The great wealth transfer presumably will grow the trend of estate related disputes arising from circumstances of divorce. There are many reasons why the dissolution of a marital relationship can cause estate litigation. Wealth and emotion often are the primary drivers. This single case experience raises many common issues and reflects a litigated final outcome.

Facts
Mom and dad married in the 1960s. During the course of the marriage dad worked long hours and mom raised two children who were the product of the marriage. When the children were in high school mom and dad separated and then ultimately, became divorced, after about twenty years of marriage. Mom raised the two children and did not remarry. They got by on mom’s hard work and commitment to the children.

Mom was not happy about this outcome, as she had intended to remain married until she found out that dad had not been true to his vows. Mom, feeling scorned, set out to do the best that she could for herself and her children monetarily in the divorce proceedings. She retained counsel.

In the divorce proceedings dad offered present day, “price of freedom” assets like stocks and bonds and bank accounts. Mom accepted the offerings. The signed separation agreement also contained a provision that was not in focus at the time. It appeared natural and what was later described as some boilerplate language. The terms offered no present-day money or solace to the mom. When the division of the marital assets was finally determined by the separation agreement, it stated: mom and dad each agree to bequeath outright or in trust at least one – half of his or her adjusted gross estate to their children in equal shares, per stirpes.

The separation agreement defined “adjusted gross estate” as “the entire value of the decedent’s gross estate for federal estate tax purposes, less deductible funeral and administrative expenses, claims against the estate and a pro rata share of mortgages or indebtedness on property which is included in the gross estate, but not including any community property.” With respect to community property it stated that if either spouse owned any community property on death, “then the portion which is not vested in the spouse of either of them shall be bequeathed, either outright or in trust, to his or her children equally, per stirpes.”

Dad went on to marry his paramour, and they remained married for many years. They accumulated wealth and assets together. They commingled what they each brought into the marriage with the other’s assets. They had accounts set up that were titled in both of their names, as husband and wife, and they bought real property together and similarly titled it. They had a long marriage at Shangri- La, which brought no children, where they shared everything among themselves.

Years later, dad became ill. His two children were now independent adults living far away and with limited, if any, connections to him. He had a will prepared by an attorney that provided for all of his wealth to pass to his wife (number two). Wife number two fully participated in his planning process with his counsel. She was aware of his then stated intentions on death that everything they had went to her as well as the content of his will. She cared for him in his illness and until he died.

His will provided that on his death his wife would become the executrix of his estate. He left the residuary of his estate to her, in trust, and on her death the remainder of the trust was to be divided into two equal shares for his daughters.

After his death, his ex-wife remained mindful of their children. She produced the separation agreement anticipating that wife number two would comply in providing each of the children from the first marriage with their respective share of their father’s estate.

Dad’s wife refused to comply. His two children sued her and his estate. Their mother was not a party to the lawsuit. Wife number two advanced several reasons and justifications to the court for her position.

She made the classic estate litigation argument, that the outcome under the agreement was not the decedent’s intent. She argued that Dad intended for his second wife to receive everything.

Her position was that the decedent’s intent was manifest by his recent last will – not a separation agreement made with an ex-spouse five decades prior. Dad made a will and engaged in joint estate planning with wife number two, where the joint plan was for her to get it all. Her position was that the will controlled his estate over that old agreement.

She argued that she owned everything outright. Dad and wife number two had titled and retitled the marital assets in such a manner that they became hers on death by operation of law. Her counsel argued that the assets Dad owned at the time of this death were in his name jointly with his wife as tenants by the entirety. Thus, the assets were already hers.

Her further position was that there was no estate and that if there were, there were no assets in it. Since there was nothing in the estate as result of the retitling, wife number two, as his executrix, would not file a petition for probate of the will with the New York Surrogate’s Court. She argued that there was no need to probate the will.

Her attorneys also argued that since wife number two and the estate were not parties (did not sign) the separation agreement, therefore, it was not binding on them.

All of these arguments are common in these cases (See, e.g., Estate of Coffed, 59 AD2d 297 [4th Dept 1977], affd 46 NY2d 514 [1979]; Rubenstein v Mueller, 19 NY2d 228 [1967], and Matter of Shvachko, 2016 NY Misc LEXIS 3742 [Sur Ct New York County, October 14, 2016]). They are losers. In 2008, the New York State Legislature enacted EPTL 5-1.4 that provides for the automatic revocation of the fiduciary on divorce (see Matter of Sugg, 49 Misc 3d 455 [Sur Ct Erie County, June 29, 2015][holding former spouse’s designation as beneficiary to insurance policy is ineffective unless expressly provided otherwise]). The old rule made no such provisions and allowed for some awkward administrations of estates. Smart divorce lawyers counsel their clients to obtain strong and competent estate planning advice at the outset, during and post-divorce proceedings. It seems that in many cases they counsel their clients to change their wills at the outset, in recognition of the New York’s rule that one cannot entirely disinherit one’s spouse. Instead, by EPTL 5-1-1-A the legislature enacted a law whereby a spouse may elect a one third share of the other spouse’s estate regardless of what the will says. Further, where there is no will, the spouse of the decedent is provided for under the rules of intestacy EPTL 4-1.1.

This is a thumbnail sketch of the issues in one case. the ultimate outcome here was that the two daughters received their fair shares of their father’s estate in the end.

Inheritance By Non-Marital Children

I recently read an article on People.com about a poor young man who became “Lord of the Manor” after DNA proved he was the heir of a wealthy British aristocrat (https://people.com/human-interest/care-worker-inherits-60-million-english-estate-dna-test/). This got me wondering what happens in New York when a non-marital child shows up after the parent is deceased and demands his inheritance. Does he have a right to inherit Mom or Dad’s estate? How do the marital children, if any, respond to his demands?

New York Estates, Powers and Trust Law Section 4-1.2 specifically addresses the question of inheritance by non-marital children. In New York, a non-marital child is the legitimate child of his mother and can inherit from his mother and from her family unless specifically excluded.

But, the rules are different for a non-marital child to inherit from his father’s estate. Before a non-marital child can inherit from his father, paternity must first be established. Section 4-1.2 sets out three methods to establish paternity: (i) an order of filiation issued by a court during the lifetime of the father; (ii) a signed acknowledgement of paternity by the father; or (iii) clear and convincing evidence of paternity, which may include, but is not limited to, DNA evidence or evidence that the father openly and notoriously acknowledged the child as his own.

In some situations, the father either did not know about the child, or he kept the existence of his secret love-child from his family. One way an unknown or secret non-marital child can establish paternity would be through DNA evidence. The burden is on the non-marital child to prove he is the decedent’s child with clear and convincing evidence. First, the non-marital child must commence a Surrogate’s Court proceeding to establish inheritance rights to the father’s estate. A pre-trial motion can then be made for an order to posthumously perform a DNA test.

A court may grant a motion for posthumous DNA testing where the non-marital child provides some evidence that the decedent openly and notoriously acknowledged paternity and establishes that the testing is practicable and reasonable under the totality of the circumstances. (Matter of Poldrugovaz, 50 AD3d 117, 129 [2d Dept 2008].) Factors that courts consider include (i) whether evidence presented demonstrates a reasonable possibility that the testing will establish a match; (ii) the practicability of obtaining the tissue sample for the purpose of conducting the test, including whether it is readily available; (iii) whether there is a need to exhume the decedent’s body or obtain the sample from a nonparty; (iv) whether appropriate safeguards were, or will be, taken to insure the reliability of the genetic material to be tested; and (v) the privacy and religious concerns of the decedent and or his family members. (Matter of Betz, 74 AD3d 1459, 1463 [3d Dept 2010].) The rule is to safeguard the estates of decedents from fraudulent claims. The last thing grieving families need is to have someone show up claiming to be their father’s child and demanding his inheritance without any evidence to back up his claim.

Contribution by Jacque K. Vincent, J.D.

Excluding A Parent From Sharing In A Child’s Estate- Back Again!

In our first writing on this subject we committed to following Matter of Martirano, 2019 NY App Div LEXIS 3716 (3d Dept 2019), if it made its way to the Appellate Division. In a nine page Memorandum and Order dated May 9, 2019, the Third Department reversed the Surrogate. (Matter of Martirano, 2019 NY App Div LEXIS 3716 [3d Dept 2019]).

The Appellate Division revisited the Surrogate’s determination which granted the mother’s motion for summary judgment dismissing her son Michael’s petition and his objections to probate of her son Christopher’s will. We will not recite the facts again, except to the extent that the Appellate Division has mentioned more facts than what we learned from the decision below.

The will in question was executed three days before the decedent’s death. He left the bulk of his estate to Nikko Cruz and Dennis Helliwell, his friends and employees of his cleaning business. Unfortunately for them, they also witnessed the will and in a prior determination the Surrogate determined that the dispositions to them were void and that the dispositions were to pass through intestacy.

We also learn from the Appellate Division’s order that decedent’s will named Helliwell as executor; however due to a prior felony conviction, he was disqualified and Cruz was appointed as the named alternate executor. Later the court considered an application by decedent’s brother to revoke preliminary letters granted to Cruz, which, after a hearing, resulted in the court imposing restrictions on Cruz’s authority.

In the instant posture, the Surrogate had pending a motion for summary judgment made by the decedent’s mother seeking to dismiss the probate petition filed by her son Michael, together with a cross motion for summary judgment made by her son Michael on his petition. The determination was that the son failed to meet his burden demonstrating that their mother had abandoned and/or failed to provide for the decedent, and the court granted the mother’s motion dismissing the son’s petition. The son appealed.

Although the Appellate Division found no error with the ruling of the Surrogate’s Court as to the admissibility of the Catholic Charities records, it reversed the Surrogate finding that neither the mother nor the brother met their prima facie burden of establishing, as a matter of law, their entitlement to summary judgment on the issue of whether the mother had voluntarily abandoned decedent or failed to provide for him.

On the ground of alleged abandonment, the court found that although the mother claimed that she never intended to voluntarily abandon decedent, the court found that there is a triable issue of fact as to whether her efforts to maintain a relationship with decedent during his childhood were sufficient to fulfill the natural and legal obligations of training, care and guidance owed by a parent to a child.

On the ground of alleged lack of financial support, the court likewise found a question of fact as to whether the mother had the financial means available to provide for the decedent and failed to do so.

What struck us on reading the determination of the Surrogate below was that the parent had prevailed where many parents in these cases do not. Why did the Appellate Division reverse?

First, on the issue of abandonment, it is not enough for the parent to simply allege an intention never to voluntarily abandon the decedent. The stated intention must be corroborated by competent proof. The parent must set forth her efforts to maintain the relationship with the decedent in detail, with factual specificity, and offer precise dates. Here, the mother’s showing was criticized by the Appellate Division for her inability to aver specific facts. For example, the court found numerous inconsistencies in her deposition and an affidavit as to dates. Further, the court was troubled by her inability to state how many times she had visited the decedent over a period of about 8 years. As well, the court did not favor her inability to provide details as to the extent and quality of her visitations. Additionally, it found contradictions in her averments of visitations that were not corroborated by her son.

We see this as instructional. A parent in this position would be well advised to pursue production of telephone records, bills, credit card statements, travel tickets and perhaps available receipts for expenses. Documentary evidence that demonstrates that an effort, even if modest or small by general standards will help. If the child intermittently resides with the parent, records pertinent to health, school or childcare could be produced. Records from foster care or an agency can help too. Another avenue toward developing this proof would be production of affidavits from other witnesses corroborating interaction between the parent and child. Where the parent has poor or no records, counsel should immediately initiate third party discovery utilizing subpoenas and depositions in order to assemble the required proof either to move or survive a motion for summary judgment.

The court found a question of fact on the issue of financial support as well. The deficiency with her proof on the motion was that she failed to put sufficient evidence into the record with respect to the “status of her finances”. Apparently, she affirmatively demonstrated to the court that she had given birth to four children before the age of 21 and received public assistance for a time. Perhaps she mistakenly concluded that this proof was sufficient and that the court would simply presume her inability if she characterized her position as impoverished. It appears that in her deposition she conceded that while decedent was in foster care for 14 years, she did not provide for him other than with unspecified cash gifts. She also conceded that had she obtained custody of him she would have been able to provide for him because “[they] always made due”. The court seemed troubled more by the fact that she offered no evidence of her employment or ability to work coupled with an admitted lack of public assistance for a period of time where her husband was employed and they adequately provide for their other children and covered other expenses including travel costs to visit family.

Clearly, the Appellate Division rejected the characterization of finances approach here. The decision makes apparent that in order to succeed the parent is well advised to lay out her financial condition as if under a microscope. It is not sufficient to address income or expenses alone. The parent had better offer competent proof demonstrating income, expenses, and assets and address financial opportunities or abilities with detail. Clearly the court is examining the alleged lack of financial means at an overall level as well as in particular with respect to the individual parent’s own personal circumstances.

Renunciation Of An Inheritance Part 1

Most people welcome receiving an inheritance, but there are times when an inheritance causes problems for the beneficiary. Some beneficiaries want to avoid receiving their inheritance for tax purposes, while others may want to avoid paying a creditor. “Motives or reasons for the renunciation have no bearing on this statutory right, as long as no fraud or collusion is involved.” Matter of Oot, 95 Misc 2d 702, 705 (Sur Ct, Onondaga County 1978).    

Matter of Rosenberg, 2016 NY Misc LEXIS 261 (New York County, January 27, 2016) is an interesting case that involved renunciation for estate tax purposes. In this case, the decedent Paul Rosenberg, a Jewish art collector and dealer who lived in France, owned two paintings by Henri Matisse. In 1940, the Nazis confiscated the paintings. In 2012, the paintings were discovered and determined to belong to the Rosenberg’s who had immigrated to New York. The paintings were valued at over $12 million.

Paul Rosenberg died in 1959. Paul bequeathed half of his residuary estate to his son Alexandre or, in the event that Alexandre did not survive him, to Alexandre’s children. Alexandre died in 1987, survived by his wife and children. Alexandre bequeathed his residuary estate to his wife or, in the event that she disclaimed her interest, to a Marital Trust for her benefit. Alexandre’s wife did indeed disclaim, and as a result, his children were to receive any assets that pass as part of his residuary estate.

Alexandre’s wife petitioned the Surrogate’s Court to permit Alexandre’s estate to renounce an interest in the newly discovered paintings and any works of art discovered in the future that would be found to be assets of Paul’s estate. Her reason for the renunciation was to spare her children the cost of estate tax that would be payable otherwise. EPTL 2-1.11 (c)(2) gives the court discretion to extend the time to file and serve a renunciation upon a showing of reasonable cause. Here, the Court held that the extraordinary circumstances of this case warranted its allowance to extend the petitioner’s renunciation of assets found in the future.  

Subsequently, in 2014, after the Rosenberg family learned about the discovery of several stolen pieces of art held by a German citizen, the Court granted renunciation to the estate of Alexandre. 

Renouncing a property interest for purposes of avoiding creditors is also permissible. In Matter of Oot, Patricia Hoopingarner worked for William Prescott, the petitioner, as a receptionist-bookkeeper from 1972 to 1976. In 1976, the Prescott discovered that Hoopingarner had misappropriated over $40,000. Hoopingarner signed a confession of judgment which was filed in the Clerk’s office. In 1978, her mother, Marion Oot, died and Hoopingarner was named as a legatee under the will.

As long as the beneficiary has not accepted the disposition, a legatee has a statutory right to renounce any gift made by a will (EPTL 2-1.11). Hoopingarner filed a renunciation under the will to avoid paying the judgment against her. Prescott sought to set aside the renunciation as a fraudulent conveyance. The Court held that “the fact that the renunciation of a legacy might frustrate the claims of creditors is of no consequence if the statutory renunciation procedures have been meticulously followed.” Id. at 706.

By Jacque K. Vincent, JD

Renunciation Of An Inheritance Part 2

What happens when a person renounces a bequest?

Filing a renunciation has the same effect with respect to the renounced interest as though the renouncing person had predeceased the testator unless a provision relating to a possible renunciation is included in the will. In other words, if you decide to renounce your bequest, you will be treated as if you died before the grantor did, and your share is redistributed according to the terms of the will.

In Estate of Cooper, the decedent left residuary shares of his estate to his three daughters. He did not provide any provision relating to a possible renunciation of a bequest in his will. When one daughter renounced her bequest, that portion of the estate went to her children. Estate of Cooper, 73 Misc 2d 904, 906 (Sur Ct, Onondaga County 1973).

Because the daughter’s renunciation of the bequest was treated as if she had predeceased her father, the disposition vested in her surviving children, per stirpes, in accordance with the antilapse statute.

The antilapse statute provides that where a testator has made bequeaths to his issue or his siblings, and the beneficiary dies before the testator, the deceased beneficiary’s disposition vests in his surviving issue. EPT § 3-3.3.

By Jacque K. Vincent, JD

Renunciation Of An Inheritance Part 3

Unintended Consequences of Renunciation

One issue to note is that renunciation can negatively impact a distributee’s eligibility for Medicaid benefits or other public assistance. In assessing need and eligibility, the Department of Social Services will consider any financial asset or resource the applicant may immediately or potentially have available. Courts have held that a recipient of public assistance is obligated to utilize all available resources to eliminate or reduce the need for public assistance. Although when a distributee renounces his inheritance and the disposition never vests, the Courts still allow Social Services to consider the inheritance as a potential resource for the applicant when determining eligibility. Molly v Bane, 214 AD 2d 171, 176 (2d Dept 1995).

Something else to be aware of is that proceeds recovered from an action for wrongful death cannot be renounced. Renunciation is limited to the distribution of testamentary or administration assets. Since proceeds from a wrongful death action are not passed through a testamentary instrument, renunciation is not applicable. In re Estate of Summrall, 93 Misc 2d 420 (Sur Ct, Bronx County 1978).


By Jacque K. Vincent, JD

Can a Felon Serve As A Fiduciary?

SCPA § 707 sets forth a list of ineligibles – those persons automatically disqualified from serving as a fiduciary in Surrogate’s Court. The statute is clear: felons cannot serve. It does not matter when the felony occurred, the age of the offender at the time, or the type of crime committed. All felons have been branded as unsuitable to manage the affairs of others in Surrogate’s Court.

Notwithstanding the prohibition, felons have argued that exceptions exist and that a certificate of relief from disabilities renders them eligible. This is based on language in the Correction Law providing that a certificate may relieve a felon from “any forfeiture or disability … automatically imposed by law by reason of [the] conviction” (Correction Law § 701 [1]). This statute generally trumps “any other provision of law” to prevent the “automatic forfeiture of any license…, permit, employment, or franchise, including the right to register for or vote at an election, or automatic forfeiture of any other right or privilege” (Correction Law § 701 [1]).

Despite this language, the Surrogate in Matter of McNair was not convinced. There, the court concluded that a certificate does not alter the mandate of SCPA 707. According to the court, the Correction Law “merely affords [a felon] the privilege of obtaining gainful employment” and that a felon “remains ineligible to hold public office, a position for which society’s trust is rightfully expected” (Matter of McNair, 16 Misc 3d 1102[A], 2007 NY Slip Op 51223[U] [Sur Ct, Dutchess County 2007]).

The conclusion reached in the McNair case appears to be a minority view. In Matter of Pullman, for example, the Second Department held that the certificate indeed removes the automatic disqualification (89 AD2d 608 [1982]; Matter of Bashwinger, 92 Misc 2d 716 [Sur Ct, Albany County 1978]; see also Matter of Smith, 14 Misc 3d 1232[A] [Sur Ct, Bronx County 2007]).

Even these cases, however, recognize that a court may still deny the appointment of a felon in its discretion, and that a certificate does not preclude the court from denying the appointment under SCPA 707 (1) (e), which renders persons ineligible for other reasons, including dishonesty (see Matter of Pullman, 89 AD2d at 608; see also Correction Law § 701 [3] [permitting any judicial authority from relying upon the conviction as the basis for the exercise of its discretionary power to suspend, revoke, refuse to issue or refuse to renew any license, permit or other authority or privilege]).

The Surrogate in the McNair case, for example, relied on SCPA 707 (1) (e) as an alternative basis for its decision. There, the felon was a former attorney who had been convicted of grand larceny in the third degree and disbarred. The court found persuasive that at least two prior estates had allegedly suffered financial losses as a result of the felon’s dishonesty.
Similarly, in the Pullman case, the court concluded that the felon was ineligible as a “dishonest” person despite the certificate. He was indebted to the estate, had exercised undue influence over the decedent and commingled trust funds in another case, and had no less than 13 unsatisfied judgments against him.

So, to answer the question posed above – yes, convicted felons may serve as fiduciaries, but only the honest ones.

How To Prepare For a 1404- Subscribing Witnesses

The order of the witnesses’ testimony is ordinarily not known prior to the hearing. Thus, the subscribing witness is well advised to prepare for his testimony in advance of the hearing. When the hearing is scheduled, the witness should be provided with a copy of the self-proving affidavit and a copy of the will. The witness should review them in advance. In many cases subscribing witnesses are called upon to testify first. Often this is based upon the expectation that the testimony will be brief in contrast with that of the supervising attorney. In any event, the witness should be told that he will not be permitted to remain in the courtroom and listen to other witnesses testify, as the court will likely exclude the subsequent witnesses from the courtroom.
Most witnesses participate willingly as volunteers, knowing it is part of the lawyer’s duty to the decedent. Most do not retain counsel, nor do they require counsel in the ordinary case. A noncooperative witness is subject to subpoena.
A meeting should be scheduled for the witness with counsel for the proponent who will conduct the examination in court. The witness should be told of the significance of the examination and the formality of the matter before the court. The witness should be prepared to review any interactions with the decedent prior to the will execution. Attention should be directed to whether the decedent’s condition changed over time. All interactions with the decedent leading up to the will signing should be reviewed. Equally, if the witness continued to have contact with the decedent after the signing that should be explored as well. The witness should be asked if he maintained any notes independent of the law firm files. Further, the witness should be asked at the outset if there are documents that would refresh his recollection. In most cases it makes sense to provide them to the witness as they are ordinarily in the law firm’s file, possession or control.
It is not uncommon for the meeting with the witness to start with the witness professing to have no recollection of the signing. While that can be problematic in some cases, often use of the law firm diary or calendar together with time and billing entries can successfully rehabilitate a lagging memory. The file can be reviewed to refresh a recollection.
The statutory elements of due execution of the will should be considered and reviewed in detail with the witness. Special attention should be afforded to what the witness may have observed relative to the supervising attorney’s custom and practice in will executions. Many lawyers utilize a checklist and often state the identical words at every will signing that they supervise. The witness’ recollection of this can be powerful in defeating a potential objection alleging lack of due execution. It is critical that the witness be prepared to cover the exact elements required by the statute in order to prove due execution.
After covering due execution of the will, the witness’ attention should be directed to the subject matter of other potential objections in the case. Capacity of the decedent must be covered in all cases, even if in a cursory manner. The witness should be asked to describe the decedent’s condition at the time of the signing. The witness should become prepared to answer in his own words why the decedent was of sound mind and memory at the time that the will was signed. That testimony can often be the crux of defeating an objection alleging lack of capacity.
Rather than allowing the witness to opt out with a series of answers professing not to know or remember, the witness should be directed to state what he observed – both with his eyes and his ears. Often the most probative facts establishing capacity seemingly are the most innocuous and inconsequential at the time (e.g. where the decedent planned to go next after the signing or where she had been, who accompanied her to the meeting, sports, politics, heath, or the weather to name a few). It can be very helpful to have the witness relate a conversation that he had with the witness at the time of the signing.
The most important aspect of the examination is that part pertaining to what happened and what was said at the time that the will was signed. In order to ward off potential objections that testimony ideally should be strong and fact specific. The witness must be asked questions to eliminate all doubts. The witness should be asked to describe why (the reasons) he concluded that the decedent was free from undue influence at the time of the signing. This can be done by addressing who was present and what was said. Where a relative, friend or other person not associated with the law firm is present, the witness must take care to state the facts on which he relied in concluding that the decedent was free of undue influence.
The potential objection based upon fraud is difficult to prove. In any event the witness should be prepared to testify that no person made any false statements on which it appeared the decedent relied causing him to sign the will.
It is advisable to prepare the witness for the cross examination by allaying concerns. For example, the witness should be told that many cross examiners inquire about the decedent’s clothing, attire, personal appearance, hygiene and similar subjects. The witness should be directed to do his best to patiently and truthfully answer all the questions. The witness should be directed to be polite and professional with the cross-examining attorney no matter how disrespectful or silly the questions may seem.
The witness should also be reminded that the cross examiner may seek to exploit divergence in recollections and testimony. Thus, while that effort may be unnerving for the witness, he should do his best based upon his recollection and the documents.
It is not uncommon for the cross examiner to try to cast doubt. The witness should be prepared for this approach and in the appropriate instance rebut the effort with facts.

How To Prepare For Your 1404 Exam- Drafting Attorneys

LOCATE THE ESTATE PLANNING FILE

Many experienced estate planning attorneys assert that estate planning files of law firms should not be purged or destroyed. They often agree that destruction or purging of planning files is only allowable after the estate is closed. Additional factors to consider are expiration of the applicable statute of limitations for potential legal malpractice claims and the law firm’s policy on document and client file retention.
Minimally, the request for a 1404 examination requires that the attorney draftsperson should have a litigation hold immediately in place. A prudent practice is that on learning of the decedent’s death the hold should be put in place. The hold must include all electronically stored information. This will protect the attorney draftsperson and the firm from an embarrassing or harmful circumstance where the file becomes lost or destroyed. It is also an easy way to bolster credibility.

Notes which pertain to the client’s instructions given to the attorney draftsperson are critical. All prior drafts of the instruments prior to execution should be located. The correspondence section of the file and the billing records should be located as well.

ASCERTAIN THE WHEREABOUTS AND STATUS OF SUBSCRIBING WITNESSES

The court will rely on the proponent and counsel to produce the witnesses. Cooperation is key. Most non-attorney witnesses naturally will look to avoid coming to court. Even more so, they seek to do little to nothing in preparation for their testimony. It is unwise to leave the arrangements to the last minute. In some instances, a witness cannot be found. We have had experience with cases involving deceased supervising and drafting attorneys. The details must be considered before coming to court. No judge likes to be surprised or confronted with a circumstance that causes delay.
Minimally, the witnesses should be provided with a copy of the will, together with any affidavit that the witnesses signed as subscribing witnesses.

DO YOUR HOMEWORK PRIOR TO TESTIFYING

In order to fulfill the obligation to the testator, the supervising attorney has a duty to prepare for the examination. The obligation of the attorney that drew the will continues through the examination. The examination, particularly the attorney’s testimony is an opportunity to prove the client’s will by showcasing the great care and attention that was provided to the decedent’s legal work.

The supervising attorney and the subscribing witnesses must read the will and any self-proving affidavit in advance. The contents should be well known and understood by the attorney and ideally the witnesses before taking the stand. Incredibly, attorneys continue to testify that they are unfamiliar with the contents of the will, cannot recollect the plan or worse, have been too busy to re-read the will and the affidavit.

Many highly skilled estate planning attorneys find their work reduced to confusing and broken-down ruble where they have not prepared. Many attorneys fail to read their own file before taking the stand. They are unprepared to address or explain contradictory notes or case sensitive issues. Some fail to produce the entire file when required to do so. A rambling effort to explain away non-compliance does not bolster confidence in the will execution. These circumstances of muddled testimony do not escape the court’s attention.

False confidence causing a lack of preparation often leads to a highly adversarial examination with the drafting attorney coming across to the court as highly defensive, perhaps arrogant and in some instances lacking credibility. Adept counsel for objectants will immediately sense the defensiveness and exploit it heavily in both the exam and in further proceedings with the court and perhaps a jury.

Amazingly, attorneys continue to testify concerning the subject of due execution without regard for what the statute actually says. While the statute itself is somewhat forgiving in terms of the sequence of events in the signing, it does prescribe the elements which are required to make a valid will.

An effort should be made to refresh recollections. This can be accomplished in several manners. If the preparation is undertaken with a degree of seriousness and professionalism, the entire file and the notes should help greatly. There may be other law firm records, including time and billing entries that can greatly aid recollections. Colleagues are often able to recall some helpful details about particular clients as it is often the case that clients have contact with more than one person in a firm.