New York Law Review

Tag: Right of Election

  • In re Estate of Reynolds, 87 N.Y.2d 633 (1996): Testamentary Substitutes and Retained Powers of Appointment

    In re Estate of Reynolds, 87 N.Y.2d 633 (1996)

    A trust in which the deceased spouse retained a limited power of appointment, excluding herself, her spouse, her creditors, or her estate, constitutes a testamentary substitute subject to the surviving spouse’s right of election under EPTL 5-1.1.

    Summary

    This case concerns whether an inter vivos trust, where the deceased spouse retained a limited power of appointment, is a testamentary substitute that violates the surviving spouse’s right of election. The Court of Appeals held that such a trust does constitute a testamentary substitute. Dorothy Reynolds created a trust, retaining the right to appoint beneficiaries (excluding herself, her spouse, etc.), and transferred most of her assets to it. Upon her death, her husband, William Reynolds, exercised his right of election, challenging the exclusion of the trust assets from the estate. The Court determined that the retained power of appointment gave Dorothy Reynolds meaningful control over the trust during her lifetime, making it a testamentary substitute subject to the elective share.

    Facts

    Dorothy Reynolds created an inter vivos trust to qualify for Medicaid, naming her children as trustees and remainder beneficiaries. She transferred the majority of her assets to the trust but retained the right to appoint remainder beneficiaries, excluding herself, her spouse, her creditors, or her estate. The trust terminated one day before her death. She left her entire estate to her children from a previous marriage. Her husband, William Reynolds, exercised his right of election, claiming the trust assets should be included in the estate for calculating his elective share.

    Procedural History

    The Surrogate’s Court initially admitted Dorothy Reynolds’ will to probate and gave effect to William Reynolds’ notice of election. William Reynolds then objected to the exclusion of the trust assets from the estate accounting. The Surrogate sustained the objection, including the trust assets in the estate. The Appellate Division reversed, holding the trust was not a testamentary substitute. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether an inter vivos trust, in which the deceased spouse retained a limited power of appointment (excluding herself, her spouse, her creditors, or her estate), constitutes a testamentary substitute subject to the surviving spouse’s right of election under EPTL 5-1.1?

    Holding

    Yes, because Dorothy Reynolds’ retained power of appointment, though limited, left her with meaningful control over the trust during her lifetime, contravening the statute’s intended protection for surviving spouses.

    Court’s Reasoning

    The Court focused on EPTL 5-1.1(b)(1)(E), which defines testamentary substitutes as transfers where the decedent retained a power to revoke or dispose of the principal at the date of death. The legislative intent behind this statute was to prevent the circumvention of the surviving spouse’s right of election through inter vivos transfers. The Court emphasized that the settlor’s retained power allowed her to essentially make testamentary transfers to specific beneficiaries of her choosing, which is equivalent to a power to dispose of the principal. The court distinguished Matter of Crystal, noting that it predated the relevant testamentary substitute statute. The fact that the power of appointment terminated one day before death was deemed an illusory limitation, as the termination date was temporally indeterminate until after the settlor’s death. The Court found that a narrow construction of the statute would frustrate the legislature’s remedial intent to protect surviving spouses. The court stated, “This was a functional substitute allowing disposal of the entire trust corpus by way of one or a series of specific bequests that constitute a forbidden reserved ‘power to consume, invade or dispose’ (EPTL 5-1.1 [b] [1] [E]).”

  • In re Estate of Riefberg, 58 N.Y.2d 136 (1983): Stockholder Agreements as Testamentary Substitutes

    In re Estate of Riefberg, 58 N.Y.2d 136 (1983)

    A buy-sell provision of a corporate stockholder’s agreement, amended shortly before death to divert proceeds directly to beneficiaries other than the estate, can be a testamentary substitute subject to a surviving spouse’s right of election under EPTL 5-1.1.

    Summary

    The New York Court of Appeals addressed whether a buy-sell agreement, amended just before the decedent’s death, constituted a testamentary substitute subject to the surviving spouse’s elective share. The decedent, Sid Riefberg, amended a stockholder agreement to direct payment of his shares’ value to his former wife and her children instead of his estate, thereby circumventing his current wife’s (Maria’s) right of election. The court held that the amended agreement was indeed a testamentary substitute, emphasizing the decedent’s control over the disposition of the property and the agreement’s impact on estate assets available to the surviving spouse. The court also upheld the lower court’s finding that Maria had not abandoned the decedent, thereby preserving her right to election.

    Facts

    Sid Riefberg’s will left the bulk of his estate to his former wife, Henrietta, and her children, with only a small bequest to his daughter from his second wife, Maria. Sid and his brother were equal shareholders in a close corporation. The original stockholder agreement mandated the corporation to purchase a deceased shareholder’s stock, with proceeds going to the estate. Shortly before Sid’s death, the agreement was amended to direct payment for Sid’s shares to Henrietta and her children, bypassing the estate. Maria had requested that the locks be changed on the marital apartment, and the couple was living apart at the time of Sid’s death.

    Procedural History

    Maria filed a spousal election, which Henrietta (as executrix) challenged based on alleged abandonment. The Surrogate’s Court ruled in Maria’s favor on the abandonment issue. Maria then initiated a proceeding to determine if the stockholder agreement constituted a testamentary substitute. The Surrogate’s Court found it to be a testamentary substitute and directed Henrietta to include the stock’s value in calculating Maria’s elective share. The Appellate Division affirmed both decrees, and Henrietta appealed to the Court of Appeals.

    Issue(s)

    1. Whether Maria forfeited her right to elect by unjustifiably abandoning Sid during his lifetime.
    2. Whether the amended buy-sell agreement constitutes a testamentary substitute under EPTL 5-1.1, thereby subject to Maria’s spousal right of election.

    Holding

    1. No, because the estate failed to prove that Maria’s departure from the marital home was unjustified and without Sid’s consent.
    2. Yes, because the agreement, particularly after the amendment, allowed Sid to retain control over the disposition of his property, effectively circumventing Maria’s elective share.

    Court’s Reasoning

    Regarding abandonment, the court emphasized that more than mere separation is required; the abandonment must be unjustified and without consent. The estate failed to provide sufficient evidence to meet this burden. As the court noted, proving abandonment is difficult without the testator’s testimony due to the Dead Man’s Statute (CPLR 4519). Regarding the testamentary substitute issue, the court delved into the history of EPTL 5-1.1 and its purpose of preventing circumvention of spousal rights. The court reasoned that the “in trust or otherwise” language of EPTL 5-1.1 (subd [b], par [1], cl [E]) should be interpreted broadly to include arrangements that, like the amended buy-sell agreement, allow a decedent to control the beneficial enjoyment of property while stripping the estate of assets. The court rejected the argument that because a contract can be abrogated by mutual consent, that it cannot be considered a testamentary substitute. The court stated, “[T]he agreement here was the means by which the decedent not only controlled the beneficial enjoyment of the property right at stake, but stripped the estate of assets which should have been subject to his surviving spouse’s right to her elective share. Indeed, its ‘express provisions’ enabled the decedent, in terms of an appropriate use of ejusdem generis, to retain a power to ‘revoke’, ‘consume’, ‘invade’, or otherwise ‘dispose’ of the corpus.” The court emphasized that while certain assets are specifically excluded from being considered testamentary substitutes (e.g., pension plans, insurance proceeds), stockholder agreements are not among them. Thus, the amended agreement fell within the statute’s definition of a testamentary substitute.

  • In re Estate of Wilson, 50 N.Y.2d 59 (1980): Effect of Reconciliation on Separation Agreement Waiver of Spousal Rights

    In re Estate of Wilson, 50 N.Y.2d 59 (1980)

    A separation agreement, including a waiver of spousal rights, is void ab initio if the parties are not actually separated at the time of execution, and the agreement is considered entirely revoked if the parties reconcile, unless there is clear evidence of a contrary intention to maintain specific provisions.

    Summary

    This case concerns a widow’s attempt to elect against her husband’s will, despite a waiver in a separation agreement. The court addressed whether the waiver was valid, considering the agreement’s initial validity (given that the couple may not have been separated when it was signed) and a potential reconciliation. The Court of Appeals held that the separation agreement was invalid from its inception because the couple was not separated when it was executed. Moreover, it found that even if the agreement had been valid initially, the subsequent reconciliation would have revoked the entire agreement, including the waiver, as the agreement’s purpose was to govern the affairs of separated spouses.

    Facts

    Robert and Earlene Wilson signed a separation agreement in 1966, which included a waiver of each spouse’s rights against the other’s estate. The agreement stated they were already separated and would live apart. Upon Robert’s death in 1975, Earlene filed a notice of election to take against his will. A devisee, Osceola Turner, challenged this, citing the waiver. Earlene argued the agreement was ineffective because she and Robert had reconciled in 1967 and lived together until his death, and also because they were not separated when the agreement was signed.

    Procedural History

    The Surrogate’s Court focused solely on the reconciliation claim, rejecting it based on the court’s assessment of witness credibility. The court failed to address the argument that the separation agreement was invalid from the start because the parties were living together. The Appellate Division reversed, finding that the Wilsons were not separated when the agreement was made, rendering it void ab initio. The New York Court of Appeals then reviewed the Appellate Division’s decision.

    Issue(s)

    1. Whether a separation agreement, including a waiver of spousal rights, is void ab initio if the parties are not actually separated at the time of its execution.

    2. Whether a valid separation agreement, including a waiver of spousal rights, is revoked by a subsequent reconciliation of the parties.

    3. Whether a waiver of spousal rights within a separation agreement is severable and enforceable even if the rest of the agreement is invalid.

    Holding

    1. Yes, because a separation agreement is intended to govern the affairs of separated spouses; if they are not separated when it’s made, the agreement is invalid from the beginning.

    2. Yes, because reconciliation implies an intent to void the entire agreement, including the waiver, absent evidence of a contrary intention.

    3. No, because the waiver is not independently enforceable when the entire agreement is brought to an end, either due to initial invalidity or subsequent reconciliation.

    Court’s Reasoning

    The Court of Appeals agreed with the Appellate Division’s finding that the Wilsons were not separated when they signed the agreement. The court emphasized that the agreement’s boilerplate recital of an ongoing separation had meager support in the record, while there was abundant evidence they were living together. “Most relevant to the circumstances surrounding the genesis of the agreement in the present case is the obvious fact that it, and all its provisions, were intended to govern as between separated spouses.”

    Regarding severability, the court stated that whether provisions are severable depends on the parties’ intent and the circumstances. The court found no evidence that the parties intended the waiver to survive the invalidity of the separation agreement. The court noted that, “Once the partners to the union renounce their incipient state of separation in favor of maintaining their coupled status, absent any indication to the contrary, it is to be assumed that, writing on a clean slate, they intended that all vestiges of the agreement that was to serve to memorialize their separation also fall”. The court distinguished cases where waivers were upheld despite the agreement’s invalidity, noting that those cases involved parties who continued to live apart.

    Judge Gabrielli, in his concurrence, emphasized that the revocation of the agreement upon reconciliation is based on the presumed intent of the parties and should not apply when a contrary intent is clear. He also suggested that in some cases, the court might condition a widow’s election on the return of property transferred under the agreement, depending on the equities and the rights of third parties.

  • In re Estate of Davis, 27 N.Y.2d 74 (1970): Validity of Antenuptial Agreements Absent Full Disclosure of Assets

    In re Estate of Davis, 27 N.Y.2d 74 (1970)

    An antenuptial agreement waiving a spouse’s right of election is valid even without full disclosure of assets, provided there is no fraud, misrepresentation, or overreaching, and the waiving party understands the agreement’s terms.

    Summary

    The New York Court of Appeals addressed the validity of an antenuptial agreement where the husband did not fully disclose his assets to his wife before the agreement was signed. The widow sought to invalidate the agreement, claiming overreaching. The court held that the agreement was valid because the wife was aware of its terms, had independent legal counsel, and there was no evidence of fraud or misrepresentation. The court emphasized that the waiver was mutual and that the wife initiated the agreement to protect her own assets for her children.

    Facts

    Anne G. Davis (the widow) and Harry Davis (the decedent) entered into an antenuptial agreement before their marriage, waiving their rights to each other’s estates. The agreement was prepared at the wife’s request, as she desired to keep her substantial assets intact for her children from a previous marriage. The husband did not disclose the full extent of his assets to the wife before signing the agreement. The wife had independent legal counsel who advised her on the agreement. The husband’s will made no provision for the wife, citing the antenuptial agreement.

    Procedural History

    The proponent of the will moved to strike the widow’s appearance in the probate proceeding, arguing that she had waived her right to object due to the antenuptial agreement. The Surrogate’s Court granted the motion, upholding the validity of the agreement. The widow appealed. The appellate court affirmed the Surrogate’s Court decision. The widow then appealed to the New York Court of Appeals.

    Issue(s)

    Whether an antenuptial agreement waiving a spouse’s right of election is invalid solely because the other spouse did not disclose the extent of their assets, absent fraud, misrepresentation, or overreaching.

    Holding

    No, because the absence of full disclosure alone does not invalidate an antenuptial agreement if the waiving party was aware of the agreement’s terms, had independent counsel, and there was no fraud, misrepresentation, or overreaching.

    Court’s Reasoning

    The court emphasized that New York public policy, as reflected in Section 18 of the Decedent Estate Law, does not presume antenuptial agreements are inherently invalid. The court distinguished prior cases cited by the appellant, noting that those cases involved evidence of fraud and deception, which were absent here. The court found that the wife initiated the agreement, had independent legal advice, and understood the agreement’s terms. The court stated, “To ascribe to such an agreement inherent fraud without regard to the fairness of its provisions and the reasonableness of the purpose to be accomplished or to the circumstances in which the agreement was proposed, is not, we think, in line with such public policy.” The Court reasoned that the wife was motivated to protect her estate for her children and was willing to give the husband reciprocal protection. The Court also cited Matter of Markel, 175 Misc. 570, which stressed that mutual waivers in antenuptial agreements indicate a lack of inequality. The court concluded that “In the absence of evidence showing fraud or imposition, she is bound with knowledge of the character and contents of the formal instrument.” Therefore, the court affirmed the lower court’s decision upholding the validity of the antenuptial agreement.

  • Matter of Bailis, 16 N.Y.2d 74 (1965): Accrued Income and Widow’s Right of Election

    Matter of Bailis, 16 N.Y.2d 74 (1965)

    A stipulation against the apportionment of accrued income in a trust does not automatically deprive a widow of her right to elect against a will under Section 18 of the Decedent Estate Law.

    Summary

    This case addresses whether a clause prohibiting the apportionment of accrued income in a trust established for a widow’s benefit disqualifies the trust from satisfying the requirements of Section 18 of the Decedent Estate Law, thus granting her the right to elect against the will. The Court of Appeals held that such a stipulation, by itself, does not deprive the widow of the income benefit, and therefore, does not automatically give rise to a right of election. Additionally, the Court addressed the issue of counsel fees, determining that they should not be awarded out of the estate in this instance.

    Facts

    The testator established a trust for his widow’s life benefit in his will. The trust contained a provision stipulating against the apportionment of accrued income, meaning income earned by the trust corpus but not yet payable to the trustee at a specific time (presumably, the widow’s death) would not be apportioned. The widow sought to elect against the will, arguing the trust did not provide her with the minimum benefit required under Section 18 of the Decedent Estate Law due to the accrued income clause.

    Procedural History

    The case originated in the Surrogate’s Court, Queens County. The Surrogate’s Court’s initial order was appealed. The Appellate Division’s order was then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether a stipulation against the apportionment of accrued income in a trust for life automatically deprives the widow of the benefit of the income from the trust under Section 18 of the Decedent Estate Law, thus granting her a right of election?

    2. Whether counsel fees should be awarded out of the estate in this proceeding?

    Holding

    1. No, because a stipulation against the apportionment of accrued income, in and of itself, does not deprive the widow of the benefit of the income from a trust for life under Section 18 of the Decedent Estate Law.

    2. No, because counsel fees should not be awarded out of the estate in this instance.

    Court’s Reasoning

    The Court of Appeals relied on Matter of Byrnes, 260 N.Y. 465 (1932) and legislative history to support its holding. The Court reasoned that the mere presence of a clause prohibiting apportionment of accrued income does not automatically render the trust insufficient to satisfy Section 18. The focus remains on whether the trust, as a whole, provides the widow with the intended benefits. The court emphasized that the intent of Section 18 was to protect widows, but not to allow them to invalidate testamentary plans based on technicalities if the overall benefit was adequate. Regarding counsel fees, the court cited Surrogate’s Court Act § 278 and Matter of Liberman, 6 N.Y.2d 525 (1959), indicating that awarding counsel fees out of the estate was inappropriate in this particular case.

    The court directly stated its holding: “We hold that a stipulation against the apportionment of accrued income, i.e., income earned by the corpus, but not yet payable to the trustee, does not, in and of itself, deprive the widow of the benefit of the income from a trust for life under section 18 of the Decedent Estate Law.”

  • In re Estate of Collins, 13 N.Y.2d 194 (1963): Testamentary Gift Conditioned on Having a Right of Election

    13 N.Y.2d 194 (1963)

    A testamentary gift conditioned on a surviving spouse “having a right of election” is satisfied when the spouse possesses the legal right to elect against the will, regardless of whether that right is actually exercised.

    Summary

    This case involves the interpretation of a will provision granting the testator’s wife a share of his estate in trust, but only if it was determined she had a right of election against the will. The wife failed to file a timely election. The court had to determine whether the wife’s failure to exercise her right of election barred her from receiving the testamentary gift. The New York Court of Appeals held that the bequest was conditioned solely on the determination that the wife had a right of election, not on the exercise of that right. Therefore, the wife was entitled to take under the will despite her failure to file an election.

    Facts

    Frederick Collins’ will contained a provision for his wife, Lucia, stating that if she survived him and it was determined she had a right of election against the will, she would receive a share of his estate in trust, equivalent to her intestate share under Section 18 of the Decedent Estate Law. Collins stated he believed she did *not* have this right. Lucia survived Collins, but failed to file a timely notice of election to take against the will. The lower courts determined that this failure barred her from taking under the will. It was settled that Lucia was lawfully married to the decedent at the time of his death.

    Procedural History

    The Surrogate’s Court initially addressed the issue of Lucia’s right to take a statutory share. The Appellate Division affirmed that Lucia was barred from taking a statutory share due to her failure to file a timely notice of election. The Court of Appeals dismissed a prior appeal related to that issue. The case then proceeded to the Court of Appeals solely on the issue of whether Lucia’s failure to elect also barred her from taking a testamentary share under the will.

    Issue(s)

    Whether the testator’s bequest to his wife, conditioned on a determination that she “has a right of election,” requires the wife to actually exercise that right by filing a notice of election, or whether the bequest is satisfied by the mere existence of the right to elect, even if unexercised?

    Holding

    No, the bequest was conditioned solely on the determination that the wife *had* a right of election, not on the actual exercise of that right. Therefore, the wife’s failure to file an election does not bar her from taking the testamentary share. This is because there is a difference between having a right and exercising that right.

    Court’s Reasoning

    The court focused on the specific language of the will, noting the testator conditioned the bequest on a determination that his wife *had* a right of election. The Court emphasized the distinction between *having* a right and *exercising* that right. The statute itself distinguishes between the “right of election” and the exercise of that right. The court found that the testator could have conditioned the bequest on the *exercise* of the right, but he did not. To interpret the will as requiring the exercise of the right would be to add a condition not present in the will’s language. The court stated, “To say… that testator intended that respondent-appellant would not receive the bequest unless she had exercised her right of election is to ignore the very words chosen by the testator.” Courts construe will provisions that tend to defeat estates strictly, and will not interpret them to work a forfeiture unless the testator’s overriding intention is unmistakably clear. Here, no doubt existed. The court cited *Matter of Uhlfelder*, *Matter of Fischer*, *Matter of Halpern*, and *Matter of Clark* to support its holding.