New York Probate and Estate Administration Lawyer Blog
A New York Probate Lawyer this is an action to vacate a deed or, in the alternative, impress a constructive trust, which was originally commenced by RM, as executor of the estate of MM, in the Supreme Court of Nassau County. The proceeding was later on transferred to the court at bar by order dated 21 October 2005.
RM moved for summary judgment and the respondent, CS, cross-moved for summary judgment for a declaration that the transfer was a valid gift.
The particular events that took place are detailed below.
The New York Will Lawyer on 12 July 2004, MM died leaving a will dated 29 May 1987. This will was admitted to probate by decree dated 14 March 2005. Letters testamentary issued to RM, the petitioner herein. In addition to RM and CS, MM was survived by three other children, T, J and W.
MM, before staying in an assisted living facility, used to reside at 18 Marden Avenue, Sea Cliff, New York (“the premises”). Pursuant to the subject 28 October 1998 deed, MM purportedly transferred her interest in the premises to CS and reserved a life estate.
A Westchester County Probate Lawyers the deed provided as follows: “The grantor reserves the power to appoint the premises, or any portion thereof, outright or upon trusts, conditions and limitations, to any one or more of the children of the grantor. This power shall be exercisable only during the grantor’s lifetime by a deed making express reference to this power and executed and recorded within two months of execution. No exercise of this power shall be deemed to release any other interest of the grantor, including any reserved life estates, unless a release is explicitly made. The exercise of this power shall not exhaust it and the deed recorded last shall control as to any ambiguities or inconsistencies. If the Office of the County Clerk does not have a recorded deed reflecting an exercise of this special power of appointment on record within three (3) months after the death of the grantor, it shall be conclusively presumed that this power was not exercised by the grantor during his/her lifetime. No exercise of this power of appointment shall be effective against or constitute notice to any bona fide purchaser or mortgagee unless the deed purporting to effect such exercise of this power is executed and recorded as provided for herein. This power shall not be exercisable by the grantor to appoint her remainder interest in the premises, or any portion thereof, to herself, her estate, her creditors or the creditors of her estate, under any circumstances.”
A Suffolk County Probate Lawyer said that RM moved for summary judgment. According to RM, the transfer was revocable due to MM’s retention of a limited power of appointment and, thus, an invalid gift as a matter of law; and, the premises should be an asset of MM’s estate and divided among MM’s five children equally pursuant to the terms of her will.
CS cross-moved for summary judgment for an order: denying the motion for summary judgment and declaring that the transfer was a valid inter vivos gift. According to CS, MM intended to make a gift of the premises to her to compensate her for the losses she suffered in connection with a failed business venture by her brothers; she and her brothers entered into a business venture in 1991; the start-up funds for that venture were obtained from mortgages taken on two properties owned by MM; one of the properties was the premises and the other was a commercial property located in Locust Valley; sometime in March of 1993, MM transferred title to the Locust Valley property to herself and her five children; at some point in 1995, the business venture failed and the business was closed; the mortgages on the two properties were still outstanding, and in 1997, foreclosure proceedings were commenced against MM and the five children as the owners of the Locust Valley property; in April 1997, RM and W petitioned for the appointment of a guardian for MM but was later discontinued; thereafter, the Locust Valley property was sold to avoid a foreclosure sale; together with JM and T, they used the proceeds from that sale to pay down the mortgage on the premises; sometime in September 1998, when MM was living in an assisted living facility in Glen Cove, she and MM met with PV, a lawyer, to discuss estate planning issues; PV then met with MM alone at the assisted living facility; and, on 12 October 1998, PV returned to see MM at which time she executed the deed.
According to PV, in his affidavit, the first time he visited MM was in September 1998; although CS was also present, he met with MM privately; MM expressed to him concerns about the costs of her ongoing medical care and protecting her assets, particularly, the premises; he then explained that one option was to make a gift of the premises while retaining a life estate; MM then advised him that she wanted to gift the premises to CS; MM understood that, by signing the deed, title and sole ownership of the premises would be vested in CS to the exclusion of her other children; and, when the deed was executed, he again explained the consequences of the transaction and MM acknowledged that she understood.
Clearly, the special power of appointment language was used by PV as a means of avoiding the payment of a gift tax when the deed was recorded.
According to J, in his affidavit, it was his understanding that MM wanted CS to have the premises to compensate for the financial losses she suffered because of her brothers’ failed business venture.
T also submitted an affidavit adopting that of J’s.
The court ruled on the issues as follows:
The court first resolved the summary judgment.
Often termed as a drastic remedy, summary judgment is used sparingly as it is the procedural equivalent of a trial, and should not be granted if there is any doubt as to the existence of a triable issue of fact. As a rule, the moving party must make a prima facie showing of entitlement to summary relief as a matter of law, producing sufficient evidence in admissible form to demonstrate the absence of any material issue of fact. When the moving party makes out a prima facie case, the burden then shifts to the opposing party to produce evidence, in admissible form, demonstrating that material issues of fact exist. Regardless of the possible insufficiency of the opposing paper, failure of the moving party to make out a prima facie case requires denial of the motion.
With respect to establishing a gift, the donee must prove donative intent, delivery and acceptance by clear and convincing evidence. As a rule, a donor may make a valid gift of property with the right of enjoyment postponed until after death, as long as her intention is to presently transfer an enforceable interest in that property to the donee.
Here, by the terms of the deed, the premises were conveyed to CS retaining a life estate with a limited power of appointment of the remainder in MM in favor of her children.
First, RM incorrectly argued that since the transfer was revocable by virtue of the limited power of appointment, the transfer did not constitute as a valid gift.
As held in Matter of Bassin, a life estate and power of appointment are commonly used Medicaid planning devices to avoid gift taxes by making an incomplete gift but still maintaining Medicaid eligibility. In that case, the court held that the transfer by deed of a remainder interest in real property subject to divestment under a limited power of appointment could constitute a valid gift so long as the donor had the requisite donative intent and capacity to make a gift. Similarly, in Matter of Levitt, 13 March 1998, Sur Ct, Nassau County, the court held that a valid remainder may be created subject to being divested by a reserved power of appointment.
Second, RM incorrectly argued that if a transfer is an incomplete gift for gift tax purposes, it does not constitute a valid gift.
Under the law, the primary element of a completed gift for gift tax purpose is the abandonment of dominion and control over the property. A completed gift does not occur if the grantor retains a power of appointment because he has the right to change beneficial enjoyment.
Section 25.2511-2(b) of the Gift Tax Regulations (26 CFR 25.2511-2) provides as follows: “As to any property, or part thereof or interest therein, of which the donor has so parted with dominion and control as to leave in him no power to change its disposition, whether for his own benefit or for the benefit of another, the gift is complete. But if upon a transfer of property (whether in trust or otherwise) the donor reserves any power over its disposition, the gift may be wholly incomplete, or may be partially complete and partially incomplete, depending upon all the facts in the particular case. Accordingly, in every case of a transfer of property subject to a reserved power, the terms of the power must be examined and its scope determined. For example, if a donor transfers property to another in trust to pay the income to the donor or accumulate it in the discretion of the trustee, and the donor retains a testamentary power to appoint the remainder among his descendants, no portion of the transfer is a completed gift.”
Third, RM confused the issue of whether a transfer is a valid gift under state law (i.e. whether the elements of a gift are established) with the issue of whether a transfer is a complete gift for federal gift tax purposes.
Accordingly, the motion for summary judgment was denied. The transfer did not constitute an invalid gift as a matter of law.
The court next resolved the cross-judgment.
Here, CS’s testimony, although admissible to defeat the motion for summary judgment where it would be otherwise barred by CPLR 4519, was inadmissible in support of her cross-motion. Nonetheless, RM incorrectly argued that: CS had a confidential relationship with MM as her attorney-in-fact under a durable power of attorney which required her to establish by clear and convincing evidence that the transfer was free of coercion or undue influence and CS failed to meet this heightened burden of proof.
As held in Matter of Bassin, where the parties to a gift transaction are close family members, the existence of a confidential relationship is a question of fact. Moreover, pursuant to the ruling in Matter of Puckett, Sur Ct, Nassau County 2005, even assuming that a confidential relationship between MM and CS existed, CS met her heightened burden that the transfer was free from any undue influence. Based on the affidavit of the attorney, the execution of the deed was clearly not subject to the exertion of any undue influence; and, based on the testimony of the attorney, MM indeed intended to transfer the premises to CS. With the attorney’s affidavit coupled with the recording of the deed and the presumption of delivery arising therefrom, as held in Matter of Romano, Sur Ct, Nassau County 2005, the respondent established her entitlement to summary judgment.
Accordingly, since RM failed to raise any issue of fact as to MM’s capacity, the cross-motion was granted.
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