WHEN QUIET TITLE ACTIONS INVOLVE ESTATES

There can be situations even after a title search that the true ownership of property is unclear. In one actual situation, a property record search showed that the deed of the property from the 1940s showed ownership by one party, yet through the 1960s through the 2000s, there are records of mortgages on the property and satisfaction of mortgages under various names other than the names on the deed, yet no new deed recorded.

Moreover, the person occupying the home is a grandson of the last named persons who had a mortgage on the property. Now that grandson wants to probate the deceased grandparents’ estates in the hopes to pay off tax liens that are against the grandparents as owners of the property. The situation becomes even murkier because the grandson’s mother is still alive and incapacitated.

Given all this, what is necessary to resolve this title issue?  One option is to commence a quiet title action to have the court decide and order who has title to the property. One title insurance company said it would not provide insurance without such an order and assurance from the court.

Quiet Title

Quiet Title actions usually provide that any person who claims an interest in real property can make a claim to compel the determination of the ownership of that property. The defendants can make a claim adverse to that of the plaintiff. Competing claims can be based on public records or other evidence. In other words, if someone has some direct or circumstantial evidence sufficient to make a claim of ownership of the property, that person can file a claim in court with notice to any other party that may have a similar claim to the property with the court determining ownership.

Sometimes it is virtually impossible to notify or to join all potential defendants. For example, in the above situation, the grandson, if he ever was able to become the personal representative of his last to die grandparent’s estate, filed a claim, the court could likely order a publication in a newspaper of the claim since it would be unlikely that the owners of the property in 1940 are locatable or are still alive, or their heirs are locatable.

With this, after all are joined or notified to satisfy the court, the Judge would review the evidence and make a determination. Even after the quiet title decision, there could be issues pertaining to the distribution of the property among the heirs, and outstanding claims against the property such as the tax liens in the situation described above.

A list of other reason for a quiet title action can include the following:

Adverse possession claims;

Fraudulent conveyance claims;

Title registration, clerical errors and unrecorded claims;

Tax issues regarding back taxes;

Boundary disputes;

Survey errors; and

Competing claims among heirs and lien holders.

There can be many challenges to Quiet Title actions, even after a final court decree. In any event, if someone wants to inherit property that they think they are entitled to receive, and there is no clear ownership of the property, and there is the chance that no one would buy the property without title insurance if the heir wants to profit from the property, then a Quiet Title action may become necessary to attempt to resolve the issue.

Feel free to contact me to discuss more or to share your insights here in the comment section. If we are not Linked In, feel free to Linked In with me. Damien Bosco, Esq., Bosco Law Firm, LLC, dbosco@boscolawfirm.com, 1350 Avenue of the Americas, 2d Floor, New York, New York 10019. www.boscolawfirm.com

WHAT HAPPENS IN PROBATE WHEN THERE ARE UNKNOWN HEIRS?

During an estate proceeding, the petitioner for probate (probate is an estate proceeding when there is a will) or the petitioner for administration (when there is not a will) will have to supply to the court the names of the heirs of the decedent. So if Grandma dies and Grandpa died before her, then all her children are listed and if one her kids died with kids, then the grandchildren may have to be listed also.

Sometimes the courts will require the petitioner to provide a family tree affidavit. This would be an affidavit submitted by someone not related to the decedent like a neighbor who knows the family. Problems occur when there is not any known relatives or knowledge of the relatives in incomplete.

For example, and this happens frequently today when people are living to an older age, let’s say someone dies at 95 years old. Most of the siblings could have already died and possibly even some of the children. Further, the person could have been single, or with no children, or the spouse predeceased with no children, no aunts or uncles living, no siblings living, so the nearest relatives are first cousins that cannot be found.

If the petitioner alleges that any of the heirs of the decedent or others required to be cited are unknown or that the names and addresses of some persons who are or may be heirs are unknown,  in most jurisdictions, the petitioner must submit an affidavit showing that he or she has used due diligence in endeavoring to ascertain the identity, names and addresses of all such persons.

Compliance with this due diligence requirement is not intended to burden the estate with costly or overly time-consuming searches. Absent special circumstances, the affidavit will be deemed to satisfy the requirement of due diligence if it indicates the results obtained from among the following:

  1. examination of decedent’s personal effects, including address books;

(2) inquiry of decedent’s relatives, neighbors, friends, former business associates and employers, the post office and financial institutions;

(3) correspondence to the last known address of any missing heirs;

(4) correspondence or telephone calls to, or internet search for, persons of same or similar name in the area where the person being sought lived; and

(5) examination of the records of the Motor Vehicle Bureau and Board of Elections of the state or county of the last-known address of the person whose whereabouts is unknown.

In some probate proceedings, the court may accept, in lieu of the above, an affidavit by decedent setting forth the efforts that he or she made to ascertain relatives.

If after doing due diligence heirs still cannot be located, then in most jurisdiction a publication in a newspaper could be necessary to find heirs. Afterward, if no one comes forward or there are still unknown heirs, a court may appoint someone to represent the unknown heirs. And even if someone comes forward, the court may require a kinship proceeding to prove they are the heirs.

It can be complicated, time consuming and costly.  One way to prevent such a situation is to have the person list for an estate planning attorney the known heirs and their addresses when drawing a will and other estate planning documents.

For further discussion, feel free to contact me, Damien Bosco, Esq. at (212) 201-1908 or at dbosco@boscolegal.com. If we are not connected on LinkedIn and you have a profile on it, feel free to connect with me.

INSURANCE FORMS NOT END ALL REGARDING BENEFICIARY DISPUTES

An interesting case regarding a dispute of insurance proceeds in the Eleventh Circuit, US Court of Appeals, came down this past July. (Prudential Insurance v. Kopp). The case involved a dispute about who was entitled to death benefits under a decedent’s life insurance policy. Specifically, the question was whether a written request to change the beneficiary of the policy that the insurance company never processed is valid. The insurance company stated that since it never processed the paperwork, the initial beneficiary remains the beneficiary. However, the court held that strict compliance to an insurer’s internal regulations about changing beneficiaries is not always necessary. The court sent the case back to the district court to review the facts behind the matter to determine who should get the insurance proceeds.

In this case, the question was whether a written request to change the beneficiary of the policy to the wife of the decedent, submitted to the insurance company and signed by the decedent and one of his sons was sufficient to show that the wife was the beneficiary notwithstanding the fact that the insurance company did not process the request. The district court denied the request of the wife. The wife argued that the district court applied too strict a standard of compliance and that, as an equitable matter, she is entitled to receive the death benefits from her husband’s life insurance policy. The district court ruled against the wife.

Specifically, the form that the decedent and one of his sons submitted to change the beneficiary to the wife was to change the owner of the policy from a trust to the decedent, and the beneficiary to his wife. However, the insurance form stated that each trustee was to sign unless the trust itself or state law provides otherwise. In this case, the second trustee, the other son, never signed the form even after the insurance company sent notice it did not process the request because of that reason.

The appeals court disagreed with the district court with regard to the standard that it used to deny the wife’s claim. Applying, Georgia law, the court stated that when a insurance company stands indifferently to the parties, strict compliance with the insurer’s regulations are not required, and the court is permitted to use its equitable powers to determine which claimant should receive the benefits. The court reasoned that an insurer’s regulations are made solely for its benefit and protection. So if the insurer is not an interested party, the court may award the funds on equitable principles. The court held that the insurer’s regulations merely serve as an indication of the possible intent of the insured or other party authorized to request a change in the beneficiary.

Finally, the court held that a change in beneficiary request is effective where it is clear that the requesting party has a right to make a change, intends to change it, and takes reasonable step to bring about the change.

What does this all mean

This case is interesting because most people believe that insurance forms and the details of the forms are a matter of law, rather than an insurance company’s internal regulations. This means that there may be flexibility when someone claims to be a beneficiary even if the forms are not fully completed. The laws vary in each state, but this case shows that the policy holder’s intent is key. Unfortunately, the flip side is that there can be more reason for litigation.

For further discussion feel free to contact me at DBosco@boscolegal.com, or connect with me on LinkedIn if were are not already connected.

WHAT TO DO WHEN SOMEONE ABUSES A POWER OF ATTORNEY

Providing someone a power of attorney to act on your behalf is part of a good estate plan. Sometimes though, usually when you are elderly and need help handling your finances, or become incapacitated, the person you selected abuses the power. This can lead to dispute that may arise during your life or after your passing.

What is a Power of Attorney

A Power of Attorney is usually a statutory form wherein an individual can appoint a person or persons to act on the individual’s behalf to make financial decision during the lifetime of the individual. The person who has to power to act is sometimes called the “attorney-in-fact.” This person is not an attorney, but is permitted to act on behalf the individual for financial decisions outlined in the Power of Attorney. You would have to properly execute the Power of Attorney to be valid and most of the time requires either a notary or witnesses. Most importantly, you have to have the capacity to execute the power of attorney.

The Powers delineated in the Power of Attorney can be narrow or broad. The Power of Attorney can allow the attorney-in-fact to make banking decisions, real estate decisions and even gift making decisions. These powers have to be expressly allowed in the Power of Attorney especially pertaining to gift giving, which can require additional witnesses and signatures of the individual to make sure the individual knows she or he is giving this right to the attorney-in-fact.

Most of the time a Power of Attorney is durable, meaning that it is valid while the person is alive and well, and while the person is incapacitated. There are other power of attorneys, sometimes called a springing power of attorneys, which only takes effect when a person becomes incapacitated.

Where Disputes Arise

Where dispute mostly occur is when the attorney-in-fact acts outside what is permitted in the power of attorney. This almost invariably occurs when the attorney-in-fact is accused of self dealing (using the individual’s money for their own purposes rather than for the benefit of the individual). Other disputes arise when there is a claim that the individual lacked capacity to execute the power of attorney.

Who can Make a Claim Against An Attorney-In-Fact alleged to have abused the Power

During the lifetime of the individual, the individual who executed the Power of Attorney can revoke the power and/or make a claim against the attorney-in-fact if there is alleged an abuse of power. Unfortunately, what happens is the individual becomes incapacitated and cannot make the claim. Many family members want to make the claim on the individual’s behalf, but they do not have standing to do so (the right to do so) while the person is still alive. In order to receive standing, a family member would have to commence a guardianship proceeding to become the guardian or conservator of the individual.

If the individual who executed the power of attorney is deceased and family members believe that there was an abuse of power, then the personal representative of the estate can make a claim against the former attorney-in-fact. In many circumstances the attorney-in-fact is the same person as the personal representatives. In this case, other family members can motion the court to remove the personal representative arguing a conflict of interest and have the court appoint a successor personal representative.

Feel free to contact me for further discussion. dbosco@boscolegal.com; (212) 201-1908. Also feel free to connect with my on LinkedIn. https://www.linkedin.com/in/damienbosco

SEVEN REASONS WHY ESTATE ADMINISTRATION CAN BE ANNOYING

When a close relative dies, usually there is a period of mourning and loss followed by the need to handle the person’s estate. In most cases an estate administration proceeding is necessary to distribute the assets to beneficiaries or heirs of the decedent. Exception could be because of a low valued estate or because assets are held as non-probate assets (e.g., assets held in trust, or jointly with rights of survivorship, or with a beneficiary designation). In any event, when an estate proceeding is necessary, a petitioner has to seek administration of it.

When there is a Will, the named Executor in the Will should be the petitioner. When there is not a Will, then an heir has to petition the court to be the estate administrator of the estate.

Sometimes the petitioner attempts to handle the paperwork on their own because either it is a small estate or the petitioner wants to save on attorneys fees. Almost in all cases, the petitioner realizes what a pain it is to complete the forms and to petition the court to probate the Will or administer of the estate. It may at first seem to be very simple to do, but there can be many annoyances along the way when administrating the estate.

Here is a list of seven annoyances:

1. The numerous forms to complete can be confusing or a mistake is easily made;
2. The clerks who approve the paperwork may have different opinions or knowledge levels;
3. Service on heirs of a citation to appear in court may be difficult when heirs are unknown or their addresses are unknown;
4. Disputes arise for among other reasons because there is an objection to the will or to the one handling the estate;
5. Collecting assets may be difficult because they may not be easily locatable among various jurisdictions;
6. Distributing assets is difficult because it is hard to sell something (i.e., can’t get a good price or the market is down) or can’t agree on an appraised value of something or someone is objecting to an account.
7. An estate is left open because some loose end that cannot be resolved easily.

Even the most proficient of persons handling these matters have to deal with these issues. That is why an executor or an administrator usually hires an attorney because of the attorney having experience in dealing with these issues on an ongoing basis on other estate matters. Further, it is not all about the paper work. Even when using a paralegal who is helpful and valuable for the paperwork, to argue a motion in court on your own without an attorney is quite difficult to do. The Judge may be patient with a pro se litigant but that does not mean a Judge will rule in the pro se litigant”s favor.

So, from the start, even with relatively small estates, there may be aspects of the administration process that can cause delays and frustrations. Sometimes people would rather give this burden to something with more knowledge about how to handle the matter rather than suffering the annoyances themselves.

Feel free to connect with me on LinkedIn or contact me to discuss further issues. DBosco@boscolegal.com; or (212) 201-1908

AVOIDING PROBATE WHEN TRANSFERRING REAL PROPERTY

When someone dies owning real property, a transfer occurs upon the death of the decedent, sometimes immediate upon operation of law (without the need for an estate proceeding); or sometimes through the estate administration process. It depends on the ownership of the property. The personal representative of the estate has to review the deed to determine who owns the property and in what form. Depending on the type of ownership, you may be able to avoid probate of the real property.

Generally forms of Ownership

Various ways to own real property include:

– sole owner (i.e., own it alone),

– joint owners with rights of survivorship (i.e., own it with another person and either party inherits the other party’s share),

– tenants in common (i.e, own it with another person but the heirs of each party inherits their own share), or

– tenancy by the entirety (i.e., own it as a married couple passing it to the surviving spouse).

Other ways to own real estate are through an entity such as a corporation, LLC or partnership (ex: a commercial building), or through a trust.

Avoiding Probate

The most common way to avoid probate is when spouses owning the property as tenants by the entirety. By owning the property together, the real property passes to the surviving spouse outside of the probate process, avoiding delays and hassle. Another way to avoid probate is for two individuals to own the real property jointly with rights of survivorship. When one owner dies, the other owner inherits. You must be careful that this meets your wishes because you may not want the other owner to inherit your share of the property when considering the total value of your estate.

A revocable trust is another way to own real property that allows for the avoidance of probate. The benefit of the trust holding title to the real estate is that you can have the trust document specifically address who will inherit the property without having the need to probate the property. One hurdle you will have to address is when the property has a mortgage. If so, you must review the mortgage agreement and in most cases get pre-approval of the transfer of property to the trust. Generally, mortgage companies permit the transfer to a revocable trust. Also, you must make sure you file forms and pay fees to your local governmental entity to effectuate the transfer and record the new deed.

There is a tradeoff for creating a revocable trust for the transfer of real property. There are legal costs, but ultimately, the legal cost to use this estate planning technique is less than the cost of probate. Hence the reason why people want to use a revocable trust, not only because of cut in costs, but sometimes to keep things private. Probate is public and the use of the trust can sometimes be more private.

Using ownership techniques to limit liability

Some owners of real property want to avoid personal liability, especially if the property is commercial property or a rental property. These owners typically create a corporation or a limited liability company to own the real property. At the time of death, these shares or membership interest pass through the individual’s estate through the probate process (or again, with advance planning techniques, you may be able to hold the shares in a trust). In the individual’s will or trust, you can designate who will inherit the share of the corporation.

Holding title as a sole owner or tenants in common without the use of a trust may have the property go through probate. Holding title to property in these way sometimes results in contention between the other owner of the real property and the persons who will inherent your share. It is best to discuss these issues with the other owner and the heirs to help alleviate any tension that may occur with new ownership of the real property.

Feel free to contact me for further discussion. dbosco@boscolegal.com (212) 201-1908

PROTECTING AGAINST AN HEIR CONTESTING YOUR WILL

When you meet with your attorney to draft your will, you will discuss to whom you would like to distribute your assets. There may be a life circumstance where you do not want to distribute assets to a family member or relative whom would inherit from you if you did not have a will (called intestate distribution). There could be various reasons behind your decision: you already gave the heir financial support during your lifetime above and beyond other heirs; or you lost contact with the heir, or you are estranged. This could lead to a situation where the heir wants to contest the will when it is offered for probate in court.
You cannot necessarily prevent your heir from contesting your will, but you can provide an incentive not to do so. If there is likelihood that an heir will contest your will, you could consider a clause in your will to address this issue.
Courts will honor your wishes and intent as set forth in the will. However, a will contest could cloud what your true intent was with possibly a claim of unduly influence, or lack capacity, or fraud.
Therefore, if you decide to disinherit someone, a drafting technique would be to mention the person and state that you are not leaving the person an inheritance, stating the reason or stating something like “for reason know to her or him.” This allows the court to know (and the heir to know) that you did not “accidentally” leave out the heir but that you intended to disinherit the heir.
However, disinheriting someone outright does not provide an incentive to not contest the will. The heir has nothing to lose when you leave them nothing (except maybe attorneys fees). A good practice is to leave the person a relatively nominal amount so there is an incentive not to contest. For example, let’s say you have an estate worth $4 million. You have four children (your spouse predeceased you), but you have not heard from one of the children in years. No matter how many times you attempted to contact the child, the child refuses to speak with you. So, you decide to disinherit the child.
If you left the child $10,000 and included an ad terrorem clause in your will, then the child could be less likely to contest it. An ad terrorem clause would state that if any named beneficiary contests or seeks to invalidate this Will because of undue influence, lack of capacity or fraud (and loses), they would be disinherited. In this case, the child would lose the $110,000.
Note that an heir can always contest the will based on improper execution and lose without being disinherited. Usually an improper execution claim will fail when an attorney supervises the execution of the will. In any event, an heir can still contest based on undue influence or other claims previously mentioned. Therefore, proper estate planning is necessary.
There could be other ways to help protect against estate litigation, such as the use of trusts. Feel free to contact me for further discussion. dbosco@boscolegal.com (212) 201-1908.

WILL CONSTRUCTION: HANDLING AMBIGUITIES IN A WILL

Introduction

Sometimes terms of a will are ambiguous. This usually occurs when someone attempts to draft a will without using an attorney, either on their own or using an internet service provider that disclaims any liability. Or this can occur even with an attorney who is unfamiliar with estate planning and drafting.

When someone dies with a Will

When a personal representative (“PR”) obtains the original will from the decedent, the PR upon reading the will, must follow its terms. Sometimes the PR alone comes to realize that some terms of the will are ambiguous and other times, the heirs of the decedent or the beneficiaries listed in the will challenge the PR’s interpretation of the will.

When there is no resolution as to how to interpret certain terms of a will, the PR, heirs or beneficiaries, may seek court intervention. The court will look at the construction of the will and in most cases can look at the intent of the testator (the person who’s will it is).

Generally, a fiduciary or a person interested in obtaining a determination as to the validity, construction or effect of any provision of a will may petition the court in what is commonly known as a will construction proceeding wherein the court will make a decision on the particular portion of the will that is ambiguous.

Two types of ambiguities

There are two types of ambiguities that the Court could review: patent ambiguity and latent ambiguity.

A will is patently ambiguous if it is ambiguous on its face. In other words, the ambiguity results from the language or wording in the instrument. With patent ambiguity, there is uncertainty, contradictions, or deficiencies of the language of an instrument, so that no outside evidence can be used to interpret the terms of the will without adding ideas that the words themselves cannot sustain. The trouble with patent ambiguities is that extrinsic evidence cannot remove the difficulty without putting new words into the mouth of the testator.
A patent ambiguity exists, for example when a testator list a beneficiaries to receive a specific gift in one part of the will, but then states in another part of the Will, that someone else is to receive the gift. Or the gift to one beneficiary is unclear. For example the will states that I bequeathed the sum of five dollars ($5,000) to my sister, Mary. In this case, what is the gift: a sum of five dollars or five thousand dollars? The gift could fail because the Will does not accurately identify which amount the testator intended to give Mary.
A latent ambiguity occurs when the language of the instrument is clear (i.e., the defect does not appear on its face); however, when coupled with some extrinsic fact or some extraneous evidence, there could be two or more possible meanings. In other words, a latent ambiguity arises when it is not clear how to apply certain words of the Will.
For example, a will may state that I leave all my belongings to Jack Jones. However, the testator may have two John Jones as cousins. In this case, extrinsic evidence would be need to determine what Jack Jones is to receive the bequest (e.g., the Jack Jones who took care of the testator before death; or a Jack Jones who has not spoken to the testator in years).
Speak with you attorney before drafting a will so you can avoid ambiguities in your will. Or if you are a personal representative, speak with your attorney about how to commence a will construction proceeding. Feel free to contact me for further discussion.

LIFE ESTATES – HOW TO USE THEM IN ESTATE PLANNING

Life estates are used in estate planning for various purposes. This article will discuss some of the ways. First, we will explain what a Life Estate is.

What is a Life Estate

A life estate is when a person has a right to live in a home or occupy real property during their lifetime. The person does not have a right to bequeath the real property upon death, but the right to live on the property. It lasts only for the life of the person. The life estate holder cannot leave the property or land to anyone in their will, because their interest in the land ceases to exist when they die.

The person with the life estate has a full right to possess the land or transfer their interest during their lifetime, but must refrain from engaging in waste or activity that would prevent the next person in line (usually called the remainderman) from putting the property to full use.

How a Life Estate is created

A person owning land can create a life estate in a deed that gives the land to a person “for life” and identifies what should happen to the property after that person dies.  For example, the deed could state that the property is transferred to Sam Doe do for life, and upon Sam’s death, is transferred to Jane Doe.  The owner of a life estate is called a “life tenant”.

Right of Life Tenant

The Life Tenant has certain right including income derived from rent or other uses of the property, during his or her possession. However, as mentioned, the life tenant cannot damage or devalue the land or cause the destruction of it. Sam could use the property during his lifetime, and possibly even sell or rent out his interest to a third party, but that third party would have to surrender the property to Jane upon Sam’s death.

Duties of the Life Tenant

Generally, the Life Tenant is responsible for the upkeep of the property, including the payment of property taxes, utilities and ongoing household expenses. The issue of expenses usually take a toll when there are necessary major renovations such as a roof repair, electrical or plumbing issues to be done. Case law shows that if the renovation is minor in nature then it is the responsibility of the Life Tenant, but if major in nature, may be responsible by the remainderman. For example, if there is a leak in the roof and it just needs patching, that would be the responsibility of the Life Tenant. If the whole roof needs replacing, this cost may be share or mostly funded by the remainderman. This is when disputes usually occur.

Major Uses of Life Estates

One of the major uses of a Life Estate is for couples in a second marriage to provide a life estate to the surviving spouse with the remainder to go to the first to die’s spouse’s children. For example, let’s say Jane owns a house, is widowed with three children. She meets Sam who lives in another house. They fall in love and get married. They agree for Sam to sell his house so he can live with Jane in her house. Because Sam gave up his house, he runs the risk of not being able to have a place to live if Jane dies first. So, Jane gives Sam a life estate in the him in her Will or Trust so that if she dies first, Sam gets to stay in the house during his lifetime. Also, this allows for Jane to give the house to her children upon the death of Sam.

Life Estate are used in the same matter if the couple wants the real property to go to charity upon the last surviver’s death. After passing to the surviving spouse, upon the surviving spouse’s death, the house is given to a charitable organization.

Life Estates are also used in Medicaid planning. For example, Jane can give a remainder interest in her house to her children, while retaining a life interest for herself. The transfer of the property with a retained life estate triggers Medicaid’s five year look-back period for nursing home care, which means the earlier she would transfer the home, the sooner she would be eligible for Medicaid nursing home care coverage. By retaining a life estate,l the penalty period will be much less than if she had transferred the property outright, since the penalty is based on the value of the transfer.

Another Medicaid planning strategy involves a parent purchasing a life estate in the home of a child. This takes some cash out of the estate of the parent. Medicaid allows this technique so long as the parent actually resides in the home for at least a year after the purchase.

Speak to your attorney about the use of Life Estates in your estate plan.
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