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Archive for February, 2010

ATTORNEY’S FEES – Burden on Attorney to prove reasonableness of fees other than simply tying fees to executor’s commission

Attorney submitted to Surrogate Court of Monroe County accounting showing attorney’s fees of $18,750.00 for legal services.  The Court reiterated that the question of attorney’s fees in estates is one of reasonableness, and the burden is on the attorney to prove that the fees sought are reasonable.  In this case, the Court found that the attorney had submitted no proof of reasonableness for his fees other than to state that their calculation was equivalent to one executor’s commission.  The attorney had offered no proof of hours worked and in fact kept no time records whatsoever. 

The Court noted that while time spent is “one of the least emphasized factors in setting attorney’s fees” in this area, the keeping of records does serve as one form of proof of work performed and results achieved.  The Court went on to hold that while an “executor’s commission is a rough guideline for the reasonableness of fees, it is not exclusively determinative of reasonableness'”.  The Court then awarded him fees in quantum meruit of $8,000.00 based upon 40 hours at $200.00 an hour.  In re Duffy, 885 N.Y.S.2d 401 (Surr. Monroe Co. 2009).

PRECATORY REQUEST – Letter to Executor not binding contract or sound basis for constructive trust 

Decedent’s will left his entire estate to his surviving spouse and decedent left her a letter expressing his “wish” that upon her death or remarriage, certain commercial properties would be conveyed to their three children.  The letter was signed by both the decedent and surviving spouse.  Surviving spouse later wrote a new will completely disinheriting one of their  children.  Surviving spouse and two of the children brought a proceeding to declare the decedent’s letter unenforceable.  The Appellate Division, Third Department agreed, declared the letter a precatory request and dismissed the disinherited child’s request that a constructive trust be established.   The Third Department held that the language of the letter did not create a clear and unambiguous promise by the surviving spouse and did not meet the requirements of EPTL 13-2.1 for establishing a contract to make a testamentary provision.  Aaron v. Aaron, 64 A.D.3d 1103 (3rd Dept. 2009).

This case highlights the need for careful drafting of estate planning documents and for practicioners to ensure that language in any will or other testamentary device is crafted in accordance with the statutes and applicable caselaw to ensure that the client’s last wishes come to fruition.   It also highlights the need for clients to contact their attorneys before self-crafting any sort of estate planning document.

UNDUE INFLUENCE – Error in Jury Charge Regarding Confidential Relationship

The Appellate Division, Fourth Department reversed a Surrogate Court decision out of Oneida County where the Surrogate instructed the jury that the respondent had a confidential relationship with the decedent as a matter of law.  The Fourth Department stated that  when the issue of undue influence based on a confidential relationship is raised, “the initial burden is on the objectant” to make the threshold showing that a confidential relationship existed.  If that relationship is established, the burden then shifts to the beneficiary of the transaction to show that the transaction was fair and free from undue influence.  In this case, the Fourth Department found that there was conflicting evidence as to the existence of a confidential relationship and therefore it was error to instruct the jury to find that relationship as a matter of law.   Prievo v. Urbaniak, 64 A.D.3d 1240 (4th Dept. 2009).

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The new Statutory Power of Attorney that became effective on September 1, 2009,  represent a significant change for attorneys and their clients.  The new form is substantially longer and more involved than the old form and there is now an additional Statutory Major Gifts Rider (SMGR) to be completed in the event the client wishes to grant their agent the authority to make such gifts.  However, several issues have arisen with the new forms and the length, complexity and required signatures have made execution of the new form lengthy and cumbersome.  The new law is set out in the General Obligations Law and the statutory form can be found in NY G.O.L. § 5-1513.

The Major changes effective September 1, 2009 are as follows:

1. The new form must be signed, dated and acknowledged by the agent, as well as the principal.  This is true for the primary or alternate agents.  The agent need not sign the POA on the same date as the principal, but the power does not become effective as to that agent until the date that they sign.

2. If two or more agents are designated to act together, the collective power does not become effective until all of the agents have signed.

3. Provisions have been added to specifically allow agents to deal with healthcare billing and payment matters, which should allow agents access to healthcare information in accordance with HIPPA.

4. Modifications:  A “Modifications” section has been added to allow the principal to add, subtract or change provisions as they wish.

5. The new form specifically outlines the fiduciary responsibilities (and liabilities) of the agent.  More specifically, the agent will now be held to the “prudent person” standard of care.

6. Major Gifts:  Major gifts are no longer a delineated power in section A – P.  Now, in order to give agents such authority, the principal must execute an additional “Statutory Major Gifts Rider” (SMGR).  The principal must initial that they wish to grant such authority within the statutory form, and then complete the accompanying rider.  The rider must be signed, acknowledged, and witnesses by two witnesses in the same manner as the execution of a will.  If the principal wishes to allow their agent to gift to themselves, additional information must be provided in the rider.  Note however that the agent may still gift to individuals and charities up to $500 per recipient per calendar year without the execution of the rider.  The SMGR adds additional paperwork and confusion to the will ceremony and, together with the POA form, takes substantial time to complete.  Attorneys need to budget their time accordingly when clients come in to do a traditional Will, POA and HC Proxy.

7. Designation of Monitor:  The principal can appoint a “Monitor” to hold agents accountable and request documentation of their transactions under the power.

8. Compensation of Agents: The new form creates an option for the principal to grant their agents the right to be reimbursed from their assets for the value of reasonable expenses incurred by the agents.  However, there is no definition of “reasonable expenses”.

9. The new form is Durable unless otherwise noted and revokes any and all previously executed Powers of Attorney, unless the principal chooses otherwise by indicating as such in the “Modifications” section.

The new form raises a number of issues, both legal and practical.  The form significantly increases the amount of time it takes for the attorney to review the document with the client and explain the various details.  It also significantly increases the amount of places the client must initial and sign the document.  Additionally, unlike the old form, often the power envisioned to be created by the client will not come to fruition in the attorney’s office the day they come in to execute the form.  It will not be until the requisite agent(s) have properly signed and had their signature acknowledged that the power will become effective.  This creates a real problem in situations where the intended agent is difficult to reach or far away. 

Additionally, under the “Grand of Authority” Section, the language of the “P” line requires that the client indicate which of the powers listed above in the A through O sections that they intend to grant.  Practice Tip – If the client intends to grant all of the above enumerated powers,  have your clients simply initial P and then write “A – O” on the line following the language “identified by the following letters:”. 

Conclusion
This article is not intended to be a comprehensive review of the new Statutory Power of Attorney forms.  It is merely intended to highlight some of the major changes and their implications for attorney’s practicing in this area.  Attorneys should be aware of the changes and how it will affect your clients.  It should be noted that there has already been a lot of push back within the legal community and it is anticipated that the legislature will make further changes to the statutory forms in the future, so stay tuned for updates.

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