Will was valid even if parent had discriminatory basis IN THE MATTER OF THE ESTATE OF KENNETH E. JAMESON, DECEASED

IN THE MATTER OF THE ESTATE

OF KENNETH E. JAMESON, DECEASED.

___________________________________

Argued June 7, 2016 – Decided August 12, 2016

Before Judges Yannotti, St. John, and Vernoia.

On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. CP-195-14.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

                                                                                    SUPERIOR COURT OF NEW JERSEY

                                                                                    APPELLATE DIVISION

                                                                                    DOCKET NO.  A-2154-14T4

  

PER CURIAM

            Plaintiffs Stacy Marie Wolin (Stacy), her daughters Erica Wolin and Jennifer Wolin, and Stacy as guardian ad litem for her son Brett Wolin, appeal a December 16, 2014 Chancery Division order dismissing their Amended Verified Complaint (complaint) with prejudice in accordance with Rule 4:6-2(e). We affirm.

I.

            Because plaintiffs appeal an order dismissing the complaint pursuant to Rule 4:6-2(e), we limit our summary of the facts to those alleged in the complaint, which we accept as true for purposes of our analysis of plaintiffs' arguments. Stacy is the sole surviving daughter of Yvonne Jameson (Yvonne), who died on January 4, 2011, and Kenneth Jameson (Kenneth), who died on April 18, 2014. Stacy's sister, Lisa, suffered from physical and learning disabilities and died in 1966 at age eight.

Stacy enrolled in college in 1982 and began dating Marc Wolin (Marc), a person of the Jewish faith. After telling her parents that she was dating Marc, Stacy's parents allegedly forbade her from talking, socializing, and having any contact with him because he was Jewish.

Stacy initially abided by her parents' instructions, but then began dating Marc. Upon returning home after her first semester at college, she advised her parents that she had resumed her friendship with Marc. In response, Stacy's parents took her to a Y.M.C.A. in Philadelphia and told her that she must stay there and get a job.

After a few days, Stacy asked for permission to return home. Kenneth would not permit her to return because Yvonne was opposed. Without Yvonne's knowledge, Kenneth arranged for Stacy to stay at the home of family friends.

Stacy's parents eventually permitted her to return home, but were not inclined to permit her to return to college. According to the complaint, Yvonne told her that if she had known how many Jewish students attended the college, she would not have permitted Stacy to attend in the first instance.  Her parents permitted her to return to the college to go to class, the cafeteria, and the library.

Toward the end of her second semester, Stacy informed her parents that she was dating Marc. Her parents refused to let her return home and said she was not welcome at their home.  During the summer after her first year of college, Stacy lived with her cousin.

At the conclusion of the summer, Stacy returned to her college, but could not enroll because she did not have sufficient funds. She applied for financial aid, but did not qualify because her parents had the financial ability to pay, and the college did not accept that Stacy had become independent of her parents.

Professors at the college assisted Stacy in finding different jobs on the campus and contacted the financial aid office to investigate the steps required for Stacy to obtain financial assistance. During this time, Stacy's parents sometimes visited her at college, but their attitude toward Stacy's relationship with Marc did not change. Plaintiffs claim that during one visit, Kenneth "backhanded [her] hard enough to give [her] a black eye" and on another occasion Kenneth "threatened to physically harm Marc."

            Ultimately, Stacy returned to school, paying her own way through student loans and financial aid, and graduated in 1987. Stacy did not return home during school breaks, but instead often stayed at Marc's home, where she met his parents and family.

            On one occasion, Kenneth allegedly confronted the rabbi at the temple where Marc's family worshipped.  Plaintiff's claim that Marc's father went to the temple, where Kenneth told him that the "Wolins were trying, among other things, to brainwash" Stacy.

            In April 1987, Stacy's parents executed separate Last Wills and Testaments.[1]  Kenneth's will devised his entire estate to his wife, Yvonne. In the event that Yvonne predeceased Kenneth, his estate was to pass to Hospitaller Brothers of St. John of God Community Services (Hospitaller), "to be used by them for the special education and rehabilitation of the mentally and physically handicapped" at their facilities in Southern New Jersey. If Hospitaller did not exist or offer appropriate services at the time of Kenneth's death, his estate would pass to the Roman Catholic Diocese of Camden, New Jersey for it to use "as nearly as possible for the intentions expressed herein, that is, for the special education and rehabilitation of the mentally and physically handicapped."

            Article Four of Kenneth's will stated that "[n]o part of [his] estate is at any time to be gifted, bequeathed, or devised to [his] daughter," Stacy. Article Four further stated as follows:

As an extremely loving and devoted parent, I found that the love, care and concern which I lavished on my daughter was not acknowledged or returned in any way by my daughter. Instead, she acted toward me with selfishness, manipulation, cruelty, and with abusiveness. My daughter . . . blatantly lied to and about me, acted with hatefulness and vindictiveness towards me, and was abusive and physically violent towards me. [Stacy's] shameful and hateful behavior towards me and her mother has brought me to my carefully considered decision that [Stacy] is to receive absolutely nothing from my estate.

            Upon her graduation from college in 1987, and following her parents' execution of their respective wills, Stacy became close with Marc's family and observed many Jewish holidays with them. A year after her graduation, Marc bought a home and Stacy moved in with him. They married in 1990. Stacy attended a comprehensive Judaism course prior to their marriage, but did not convert to Judaism. Stacy's parents were invited to their wedding, but Kenneth allegedly told Marc that "they would not attend the wedding because they would never endorse their daughter marrying a Jew."

            Stacy and Marc have three children. She and Marc agreed their children would be raised in the "Jewish Tradition."  Kenneth refused to meet his grandchildren and his will makes no mention of them.

            Through the time Stacy and Marc were married, her "parents' hostility was more frequently evidenced by [her] mother, who appeared to suffer from emotional difficulties as a result of the death of [Stacy's] sister, and . . . inability to have more children."  Yvonne allegedly had a "powerful influence over" Kenneth, who "desired to please" Yvonne and would do "whatever [Yvonne] instructed him to do."[2]

            Following Kenneth's death in April 2014, his will was admitted into the Chancery Division, Probate Part, and Stacy was provided with a copy of the will. Plaintiffs filed a complaint against Kenneth's estate[3] claiming in part that the statements contained in Article Four of Kenneth's will are "totally incorrect and completely fabricated."  Plaintiffs allege that Stacy was "disowned solely because [she] was dating Marc, who happened to be Jewish" and that Stacy was never "selfish, manipulative, cruel and abusive toward her parents" and "never violent or hateful toward her father."        

The complaint alleged that Kenneth's will was invalid because it was the product of undue influence (count one) and religious discrimination (count two), did not express a clear intent to disinherit his grandchildren (count three), and was libelous as to Stacy (count four).[4]  In response to the complaint, Kenneth's estate filed a motion to dismiss for failure to state a claim pursuant to Rule 4:6-2(e).

On December 16, 2014, the court heard argument, granted the estate's motion for reasons set forth in an oral opinion, and entered an order dismissing the complaint. This appeal followed.

II.

            In our consideration of a "trial court's decision to dismiss a complaint under Rule 4:6-2(e), we apply the same standard but our review is de novo." Teamsters Local 97 v. State, 434 N.J. Super. 393, 413 (App. Div. 2014) (citing Frederick v. Smith, 416 N.J. Super. 594, 597 (App. Div. 2010), certif. denied, 205 N.J. 317 (2011)).            The standard "requires an assumption that the allegations of the pleading are true and affords the pleader all reasonable factual inferences." Seidenberg v. Summit Bank, 348 N.J. Super. 243, 249-50 (App. Div. 2002) (citing Indep. Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956)). The court must search the pleading "in depth and with liberality to determine whether a cause of action can be gleaned even from an obscure statement." Ibid. (citing Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)).

            To avoid a dismissal for failure to state a claim, a plaintiff is not required "to prove the case but only to make allegations, which, if proven, would constitute a valid cause of action." Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App. Div.) (quoting Leon v. Rite Aid Corp., 340 N.J. Super. 462, 472 (App. Div. 2001)), certif. denied, 185 N.J. 297 (2005). "However, a court must dismiss the plaintiff's complaint if it has failed to articulate a legal basis entitling plaintiff to relief." Ibid.; see also Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div. 2011) ("A pleading should be dismissed if it states no basis for relief and discovery would not provide one.").

A.

            Plaintiffs first argue that the court erred by dismissing count one, which alleged that Kenneth's will should be set aside because it was the product of Yvonne's "undue influence."  We disagree.

            A decedent's bequest may be overturned if it is proven to be the product of undue influence. Haynes v. First Nat'l State Bank of N.J., 87 N.J. 163, 175-76 (1981).

[U]ndue influence is a mental, moral, or physical exertion of a kind and quality that destroys the free will of the testator by preventing that person from following the dictates of his or her own mind as it relates to the disposition of assets, generally by means of a will or inter vivos transfer in lieu thereof.

[In re Estate of Stockdale, 196 N.J. 275, 302-03 (2008) (citing Haynes, supra, 87 N.J. at 176).]

"It denotes conduct that causes the testator to accept the 'domination and influence of another' rather than follow his or her own wishes." Id. at 303 (quoting Haynes, supra, 87 N.J. at 176).

"Persuasion or suggestions or the possession of influence and the opportunity to exert it, will not suffice" to establish undue influence. In re Will & Testament of Liebl, 260 N.J. Super. 519, 528 (App. Div. 1992) (quoting In re Livingston's Will, 5 N.J. 65, 73 (1950)). The influence must be such that it destroys the testator's free agency and causes him to dispose of his property not by his own desires, but instead by the will of another, which the testator is unable to overcome.  Ibid.

Measured against this standard, we are convinced the court correctly concluded that the allegations in count one of the complaint do not set forth a cognizable claim of undue influence. Plaintiffs allege that Kenneth was under the undue influence of his wife Yvonne because he "would do whatever [Yvonne] wanted him to do" and "desired to please her."

These allegations are, however, insufficient to support a claim of undue influence.  Plaintiffs do not allege that Yvonne's requests destroyed Kenneth's ability to dispose of his property in accordance with his own intentions or that his independent will was overcome. Stockdale, supra, 196 N.J. at 302-03. In contrast, plaintiffs allege that Kenneth had the express desire and intention to disinherit Stacy because of her relationship with Marc.  That allegation is completely inconsistent with the claim of undue influence. 

B.

Plaintiffs also contend that the court erred in dismissing count two of the complaint, which alleged that Kenneth's will must be set aside because it was motivated by his rejection of Stacy's relationship with a man of the Jewish faith. Plaintiffs argue that Kenneth's disinheritance of Stacy violates public policy; the New Jersey Law Against Discrimination (NJLAD), N.J.S.A.  10:5-1 to -42; and N.J.S.A. 46:3-23.

It is well established that absent undue influence, the motivation of the testator is not relevant to the validity of a decision to disinherit a putative heir. See, e.g., In re Blake's Will, 21 N.J. 50, 57 (1956) ("If capacity, formal execution, and volition appear, the will of the most impious man must stand, unless there is something not in the motives which led to the disposition, but in the actual disposition, against good morals or against public policy." (quoting Den d. Trumbull v. Gibbons, 22 N.J.L. 117, 153 (Sup. Ct. 1849))).

"A will may be contrary to the principles of justice and humanity; its provisions may be shockingly unnatural and extremely unfair," however, courts are bound to uphold the validity of a will if made by a person of sufficient age to be competent and if made while of sound and unconstrained mind. "[A] will cannot be set aside on account of strong, violent and unjust prejudice of the testator . . . if such prejudice be not founded on delusions and does not show mental incapacity . . . [and] that the unreasonableness of testator's prejudice and unfairness in the disposition of his property will not alone avail the court to repudiate the will."

[Liebl, supra, 260 N.J. Super. at 530 (alterations in original) (citations omitted).]

            Even if the disinheritance of Stacy was motivated by Kenneth's alleged rejection of Stacy's relationship with a man of the Jewish faith, the court correctly dismissed count two. Kenneth's alleged motivation for his disinheritance of Stacy does not permit or require the setting aside of his will. Ibid.; In re Petkos's Will, 54 N.J. Super. 118, 128 (App. Div. 1959); In re Araneo's Will, 211 N.J. Super. 456, 461 (Law. Div. 1985), aff'd, 213 N.J. Super. 116 (App. Div.), certif. denied, 107 N.J. 62 (1986). As we noted in Liebl, "[e]ven if decedent had totally disinherited his [putative heir] due to an unreasonable discriminatory prejudice," that is not "a ground to set aside the will." Liebl, supra, 260 N.J. Super. at 531.

We also reject plaintiffs' argument that Kenneth's disinheritance of Stacy, based upon his alleged objection to her relationship with Marc, violates public policy. "The power to dispose of one's property by testament . . . is a long recognized and legislatively protected function having its roots in the 'sacred and inviolable right' of 'absolute dominion' of every man over his own property, subject only to compliance with law and non-interference with public policy."  Metzdorf v. Borough of Rumson, 67 N.J. Super. 121, 126 (App. Div. 1961) (citations omitted).  A violation of public policy, however, does not result from a testator's motivation for his or her actions, but instead occurs when the testator imposes a condition upon a bequest that violates public policy. Girard Trust Co. v. Schmitz, 129 N.J. Eq. 444, 454 (Ch. 1941); see also Liebl, supra, 260 N.J. Super. at 529 (finding that the testator did not violate public policy where he did not "place[] restrictions or conditions upon the legacy that are contrary to public policy and thus invalid"); In re Blake's Will, supra, 21 N.J. at 57 (finding a will to be valid "unless there is something, not in the motives which led to the disposition, but in the actual disposition, against . . . public policy").

Here, count two of the complaint alleges only that Kenneth's motivation for his disinheritance of Stacy violated public policy.  As noted, Kenneth's alleged discriminatory motive does not provide a basis to set aside the will. Moreover, the complaint does not allege that the will imposed any conditions related to Stacy's disinheritance or upon the bequest to Hospitaller that violate public policy.  Thus, the court properly dismissed plaintiffs' claim that Kenneth's will should be set aside as violative of public policy.

We also reject defendant's claim that Kenneth's will violates the NJLAD. The NJLAD reflects a strong and clear public policy against religious and other forms of discrimination.  Rodriguez v. Raymours Furniture Co., __ N.J. __, __ (2016) (slip op. at 15).  It prohibits discrimination in public housing, N.J.S.A. 10:5-9.1, and places of public accommodation, N.J.S.A. 10:5-4; discriminatory employment practices, N.J.S.A. 10:5-12; discrimination in the receipt of public assistance, N.J.S.A. 10:5-12.2; discrimination in land use and housing, N.J.S.A. 10:5-12.5; and other forms of discrimination. 

The NJLAD, does not, however, include a provision rendering it unlawful for a testator to disinherit his or her child based upon an alleged discriminatory motive founded upon religion or religious affiliation.  Thus, the NJLAD does not regulate the motive for Kenneth's testamentary transfer and has no application here.  Cf. Howard Sav. Inst. v. Trs. of Amherst Coll., 61 N.J. Super. 119, 128-29 (Ch. Div. 1960) (finding no violation of the NJLAD or public policy in a testamentary trust which selected student beneficiaries at a private institution based on religion and national origin), aff'd, 34 N.J. 494 (1961).

Similarly, defendant's contention that the will violates N.J.S.A. 46:3-23 is without merit. The statute makes void "[a]ny promise, covenant or restriction in a contract, mortgage, lease, deed or conveyance or in any other agreement affecting real property" that restricts "the sale, grant, gift, transfer, . . . [or] conveyance . . . of real property to or by any person because of race, creed, color, national origin, ancestry, marital status or sex."   N.J.S.A. 46:3-23.  Kenneth's will is not a contract or other agreement, and even if it was, it does not include any restriction on the transfer of real property.  We are therefore convinced that the statute does not make void either Kenneth's disinheritance of Stacy or the bequest of his estate to Hospitaller.

C.

Plaintiffs next contend that the court erred in dismissing count three of the complaint alleging libel by will based on its finding that our courts have never recognized the cause of action.  Plaintiffs alleged that Article Four of the will was defamatory as to Stacy, and that the defamatory statements were published by the estate following Kenneth's death by admitting the will in the Surrogate's Court, thereby causing damage to Stacy's reputation.

Plaintiffs acknowledge there is no New Jersey case in which a cause of action for libel by will has been recognized. They argue that we should recognize the cause of action under the circumstances presented here. For the reasons that follow, it is unnecessary for us to do so.

Libel occurs if a defendant makes "[a] defamatory statement . . . that is false and 'injurious to the reputation of another' or exposes another person to 'hatred, contempt or ridicule' or subjects another to 'a loss of the good will and confidence' in which he or she is held by others." Too Much Media, LLC v. Hale, 413 N.J. Super. 135, 168 (App. Div. 2010) (quoting Romaine v. Kallinger, 109 N.J. 282, 289 (1988)), aff'd in part, 206 N.J. 209 (2011).

A cause of action for libel arises with the publication of the alleged libel. See N.J.S.A. 2A:14-3 ("Every action at law for libel or slander shall be commenced within 1 year next after the publication of the alleged libel or slander."); Churchill v. State, 378 N.J. Super. 471, 478 (App. Div. 2005) ("[A] plaintiff alleging defamation has a single cause of action, which arises at the first publication of an alleged libel . . . ."). Plaintiffs do not allege that Kenneth published any defamatory statements regarding Stacy during his lifetime.  Instead, they allege that the libel occurred when the estate published the will following Kenneth's death by admitting it to the Surrogate's Court.

Executors have a duty to admit a will for probate. See In re Reisdorf, 80 N.J. 319, 324 (1979) ("[I]n offering the will for probate, he is but fulfilling his duty as an executor."); Ellicott v. Chamberlin, 38 N.J. Eq. 604, 611 (E & A 1884) (stating it was the duty of the executor to "proceed with the settlement of the estate"). Here, the executor admitted the will to the Surrogate's Court on behalf of the estate in fulfillment of his legal duty and obligation.

As a defense to claims of libel, there is an absolute privilege for "any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Hill v. N.J. Dep't of Corr. Comm'r Fauver, 342 N.J. Super. 273, 295 (App. Div. 2001) (quoting Hawkins v. Harris, 141 N.J. 207, 216 (1995)), certif. denied, 171 N.J. 338 (2002). "The litigation privilege is not limited to statements made in a courtroom during a trial; 'it extends to all statements or communications in connection with the judicial proceeding.'" Hawkins, supra, 141 N.J. at 216 (quoting Ruberton v. Gabage, 280 N.J. Super. 125, 133 (App. Div.), certif. denied, 142 N.J. 451 (1995)). Statements made in preparation for judicial and quasi-judicial proceedings are also privileged. Hill, supra, 342 N.J. Super. at 294-95.

For libelous statements to be covered by the litigation privilege, they must be relevant to the proceedings in some way. Id. at 218-19. "Relevancy usually is interpreted liberally so that the speaker does not act 'at his peril.'" Williams v. Kenney, 379 N.J. Super. 118, 137 (App. Div.) (quoting DeVivo v. Ascher, 228 N.J. Super. 453, 460-61 (App. Div. 1988), certif. denied, 114 N.J. 482 (1989)), certif. denied, 185 N.J. 296 (2005). "[J]udges, attorneys, witnesses, parties and jurors are fully protected against defamation actions based on utterances made in the course of the judicial proceedings and having some relation thereto." Rainier's Dairies v. Raritan Valley Farms, 19 N.J. 552, 558 (1955). So long as they have some relation to the judicial proceeding, "[a]n absolute privilege may be extended to statements made in the course of judicial proceedings even if the words are written or spoken maliciously, without any justification or excuse, and from personal ill will or anger against the party defamed." DeVivo, supra, 228 N.J. Super. at 457.

Although plaintiffs urge our recognition of the cause of action for libel by will, they acknowledge that the litigation privilege, if applicable, bars the putative cause of action alleged in count four of the complaint. They argue, however, that the statements in the will should not be subject to the litigation privilege and urge us to follow the decision of a New York trial court in Brown v. Mack, 56 N.Y.S.2d 910 (Sup. Ct. 1945). 

Under the circumstances presented in Brown, the court recognized a cause of action for libel by will against the decedent's estate.  The court found that, while a testator's reasons for disinheritance "are frequently important in a probate proceeding," the estate cannot claim an absolute privilege for libelous language and must instead defend against such a claim. Id. at 917.

We are not persuaded the reasoning of Brown and decline to follow it because it is inconsistent with New Jersey's well established absolute litigation privilege.  We find it unnecessary under the circumstances presented here to determine if libel by will should be recognized as a cause of action, and reject the reasoning of the court in Brown. The estate here published the alleged defamatory statements when it admitted the will into the Surrogate's Court. Thus, even if there was a cause of action for libel by will, plaintiffs' claim would be barred by the absolute litigation privilege.

The alleged defamatory statements explain Kenneth's motivation for the disinheritance of his only surviving child and were manifestly relevant to the proceeding before the Surrogate's Court. They provide an explanation for his disinheritance of Stacy wholly unrelated to Stacy's relationship with Marc. Thus, the statements are relevant to the judicial proceedings because they are inconsistent with Stacy's claim that the will should be set aside because of her relationship with Marc.

Based upon the allegations in the complaint and the content of Kenneth's will, we do not discern any reason to reject application of the absolute litigation privilege to plaintiffs' putative libel by will claim. See, e.g., Binder v. Oregon Bank, 284 Ore. 89, 92-93, 585 P.2d 655, 656-57 (1978) (affirming dismissal of a cause of action for libel by will because the alleged defamatory statements were published in a judicial proceeding and were therefore absolutely privileged). Based upon plaintiffs' allegations, we are satisfied that the purported defamatory statements were published by the estate during judicial proceedings, have significant relevance to those proceedings, and therefore provide the estate with absolute immunity from a defamation claim, including plaintiffs' putative claim for libel by will.  Rainier's Dairies, supra, 19 N.J. at 558.  The court correctly dismissed count three of the complaint.

D.

We also find no merit to plaintiffs' assertion that the court erred by dismissing count four of the complaint, which alleged that the will was unduly vague because Kenneth knew he had grandchildren and he omitted reference to them in the will. 

There is nothing vague about Kenneth's will. It is unambiguous and unequivocal. It provides that if Yvonne predeceased him, Stacy was not to receive any portion of his estate, and the entirety of his estate was bequeathed to Hospitaller or, if Hospitaller was no longer in existence, to an organization to be identified by the Diocese of Camden that provides services to the mentally and physically handicapped. There is no ambiguity in a will that disposes of the decedent's entire estate. See In re Estate of Gabrellian, 372 N.J. Super. 432, 443 (App. Div. 2004) (finding no ambiguity where "[t]he probated Will indicates the testator's intent that his wife receive his entire residuary estate").

            Plaintiffs characterize Kenneth's failure to mention Stacy's grandchildren as an omission, implying that the grandchildren should take under the rules permitting portions of an estate to pass to omitted children. N.J.S.A. 3B:5-16 allows "children born or adopted after the execution of [a] will" to receive a share of the estate. The definition of "child" "excludes any individual who is only a stepchild, a resource family child, a grandchild or any more remote descendant." N.J.S.A. 3B:1-1. By its express terms, the statutory accommodation for omitted children does not apply to Kenneth's grandchildren and there is no similar statutory accommodation for grandchildren. 

The court correctly concluded that the will is not ambiguous and its failure to make reference to Stacy's children does not create an ambiguity requiring that the will be set aside. We therefore discern no basis to reverse the court's dismissal of count four.

Plaintiff's remaining arguments are without sufficient merit to warrant discussion in a written opinion.  R. 2:11-3(e)(1)(E).

Affirmed.

---

[1] The will of Yvonne, who predeceased Kenneth by three years, mirrored the testamentary language of Kenneth's will.

[2]  We note that Stacy's marriage, attendance at the Judaism course, agreement to raise her children in the Jewish tradition, and increased hostility by her parents, and Kenneth's refusal to meet his grandchildren, followed Kenneth's disinheritance of Stacy in his will.

[3] The initial paragraph of the complaint reflects that plaintiffs' claims were asserted against Hospitaller, but it is clear from the substance of the allegations that plaintiffs sought to set aside Kenneth's will and to receive an award of damages from the estate. Counsel for the estate and Hospitaller appeared before the trial court and participated in this appeal.

[4] Count four also included a claim for damages.

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Presented in cooperation with the NJSBA Elder & Disability Law Section and NJSBA Young Lawyers Division Elder law is one of the fastest growing practice areas offering both young and established attorneys opportunities. As your current clients continue to grow older, you need to position yourself to be able to offer them and their families the legal services required by the elderly in today’s society. Or, you may be looking for lucrative areas in which to expand your current practice, including administering their estates. This practical program is designed to provide the practical legal tools of elder law practice & estate administration practice to general practitioners and young lawyers, as well as to more experienced lawyers seeking to expand into these fields. A highly authoritative and experienced panel of elder law attorneys & estate planners will share proven techniques and experience it would take you years to gather on your own. You’ll also gain insight on how Federal Medicaid Laws will impact your practice. Pick up everything you need to know about elder law & estate administration, including: • Why Have a Will? - Gathering information; standard provisions; designation of fiduciaries; protective clauses; sample forms; Ethics - who is the client? • Powers of Attorney - Types of POAs; what should be included; why clients need them; POAs and Living Wills; sample forms • Living Trusts (Revocable/Irrevocable) as an Estate Planning Tool - Why it should be used; Ethics - who is the client?; disadvantages; revocable vs. irrevocable; Life Insurance Trusts; sample forms • Basic Tax Considerations - Jointly-held property; “I love you” Will; no Will at all; insurance owned by client; unlimited marital deduction; estate planning in the testamentary document ; sample forms/letters • Estate Administration - How To Probate A Will - Probate process; duties of executor/fiduciary; gathering of assets; tax returns; tax waivers; access to property; sample forms/checklists • Medicaid Planning in Light of Federal Medicaid Reform - Countable assets of Medicaid applicant; income cap/Medical needy standard; look-back period; transfers of property; personal residence; Medicaid estate recovery rules; probate; undue influence; competency …and more! Program Speakers Include: Kenneth A. Vercammen, Esq., William P. Isele, Esq., Martin A. Spigner, Esq.

Uniform Trust Code enacted in NJ

         Uniform Trust Code enacted in NJ

   The governor signed the NJSBA-drafted Uniform Trust Code into law on Jan. 19, as part  of bills approved on the final bill enactment day of the last session. The law becomes effective on July 17.


This bill, as amended, titled the “Uniform Trust Code,” would supplement and revise the State’s existing laws concerning trusts. The bill is largely based upon model legislation prepared by the Uniform Law Commission (formerly the National Conference of Commissioners on Uniform State Laws), with some parts modified or altogether not included in order to better fit within New Jersey’s existing scheme on trust law. Most significantly, the model code contained two articles which have not been included in this bill: Article 2 concerning the jurisdiction of the court, as these matters are controlled by court rule and not statutory law; and Article 9 concerning prudent investor standards, as such standards are already part of the statutory law in this State, known as the “Prudent Investor Act,” P.L.1997, c.26 (C.3B:20-11.1 et seq.).

 A-2915/S-2035 (Lagana, McKeon, Ciattarelli/Bateman, Barnes) - "Uniform Trust Code"

ARTICLE 1 (3B:31-1 THROUGH 3B:31-12): This article provides the definitions and general provisions to be used throughout the bill, which would largely comprise a new chapter in Title 3B of the New Jersey Statutes. Among the provisions of general applicability are those detailing mandatory requirements for the creation and operation of trusts that cannot be modified or eliminated by the agreed upon terms of a trust; these would include the duty of a trustee to act in good faith, the rights of certain creditors and assignees to reach a beneficiary’s trust interest, and the periods of limitation for commencing judicial proceedings. The article also covers the means for determining which jurisdiction’s law governs a trust, as well as determining the location of a trust’s principal place of administration. Additionally, the article would permit the nonjudicial settlement of a trustee’s accounts and other matters related to trust administration, so long as any such settlement does not produce a result contrary to what is allowed in trust law, including, but not limited to, the modification or termination of a trust in an impermissible manner.

ARTICLE 2 (3B:31-13 THROUGH 3B:31-17). Article 2 sets out guidelines with regard to the representation of a trust in a transaction or proceeding. Representation may be provided by the holder of general testamentary power of appointment, by a fiduciary or a parent, or by virtual representation. Virtual representation allows a minor, incapacitated person, unborn individual, or a person whose identity or location is unknown to be represented by another having a substantially identical interest concerning a particular question or dispute. If a court determines that an interest is not represented or that available representation might not be adequate, the court may appoint a guardian ad litem or other representative for a minor, incapacitated person, unborn individual, or person whose identity or location is unknown.

ARTICLE 3 (3B:31-18 THROUGH 3B:31-34). This article details the methods and requirements for the creation, modification, and termination of a trust.

The methods to create a trust would be: (1) the transfer of property to a trustee under a written instrument during the life of a settlor (a person who creates or contributes property to a trust), or by will or disposition upon the settlor’s death; (2) a written declaration by the owner of property that the owner holds identifiable property as trustee; or (3) a written power of appointment in favor of a trustee. A trust would only be created if there is a definite beneficiary for the trust, or the trust is a charitable trust, a trust for the care of an animal, or a trust for a noncharitable purpose. The written instrument creating a trust or transferring property to a trust would not be invalid or ineffective because the transferee is identified as the trust rather than the trustee thereof.

A trust may generally be enforced if its purposes are lawful, not contrary to public policy, and possible to achieve. Any trust, to the extent its creation was induced by fraud, duress, or undue influence, would be void to such extent.

As to the modification and termination of a trust, the article sets forth the means by which a trustee or beneficiary may commence proceedings to approve or disapprove a proposed trust modification or termination. Additionally, a trust is subject to termination to the extent it is revoked or expires pursuant to its own terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.

A trustee for a trust consisting of property valued at less than $100,000 may, after notice to qualified beneficiaries, terminate the trust if that trustee concludes that the value of the trust property is insufficient to justify the costs of administration.

A court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination would further the purposes of the trust. To the extent practicable, any such modification should be made in accordance with the settlor’s probable intent. The court may also reform a trust, even if unambiguous, to conform the terms to the settlor’s probable intent if it is proved by clear and convincing

evidence that there was a mistake of fact or law, whether in expression or inducement.

Provisions in the article further provide that the court may modify the terms of a trust to achieve a settlor’s tax objectives, so long as done in a manner that is not contrary to the settlor’s probable intent.

ARTICLE 4 (3B:31-35 THROUGH 3B:31-41). This article establishes guidelines concerning creditor’s claims, and spendthrift and discretionary trusts.

A spendthrift provision restricts a beneficiary’s creditor from attaching the beneficiary’s interest in the trust until there is a distribution to the beneficiary. A spendthrift provision is created by a reference to a “spendthrift trust,” or words of similar import, in the trust instrument, that would restrain both voluntary and involuntary transfer of the beneficiary’s trust interest.

If there is no spendthrift provision in a trust, a creditor may reach a beneficiary’s interest by attachment of future or present distributions before the trust is distributed, subject to New Jersey law concerning wage executions (N.J.S.2A:17-50 through N.J.S.2A:17-56, and sections 3 and 4 of P.L.1981, c. 203 (C.2A:17-56.1a and C.2A:17- 56.6)).

The article also addresses a type of trust for the young, the elderly, or the disabled, known as a “special needs trust,” or “OBRA ’93” trust. Such a trust would limit distributions during the term of the trust to benefit one or more “protected persons,” such as a person who is aged, blind, disabled, developmentally disabled, or a person under the age of 18, or over the age of 18 and a full-time student, with a serious disability that may prevent self-sufficiency.

A creditor could not reach or attach an interest in a special needs trust, nor require the trustee to distribute to satisfy a creditor’s claim. A special needs trust would not be required to repay government aid provided to the protected person unless the aid was provided on the basis that the trust would repay the aid when the person dies, the trust is terminated, and the special needs trust instrument expressly calls for such repayment. This provision would not apply to first-party, self- settled OBRA’93 trusts.

Also, a creditor may not compel a trustee to make a distribution to a beneficiary that is discretionary.

Regardless of any spendthrift provision in a trust, the property of a revocable trust is subject to claims by a settlor’s creditor during the settlor’s lifetime. With respect to an irrevocable trust, a creditor (or assignee of the settlor) may obtain the maximum amount available that can be distributed to or for the settlor’s benefit. After the settlor’s death, and subject to the settlor’s right to direct the source from which liabilities are paid, the property of a trust revocable at the settlor’s death is subject to creditor claims, cost of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and to a surviving spouse or civil union partner and children

to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, and expenses.

ARTICLE 5 (3B:31-42 THROUGH 31-45). This article addresses the use of revocable trusts as alternatives to wills and seeks to clarify certain issues in connection with the use of revocable trusts. A revocable trust is one in which the settlor retains the power to control, amend, revoke, or add property to the trust similar to a will. The article sets forth the circumstances in which a settlor, a settlor’s attorney in fact, or guardian may revoke or amend a revocable trust. A trust is revocable unless the terms of a trust expressly provide that it is irrevocable, or unless there is clear and convincing evidence that it is irrevocable. The trustee of a revocable trust is responsible only to the settlor of the trust. The article establishes time limits on contesting the validity of a revocable trust after the death of the settlor, which generally conform to the time limits for contesting the probate of a will. The bill also protects a trustee who makes distributions from the trust after the settlor’s death, unless the trustee knows of a pending or possible contest concerning the validity of the trust.

ARTICLE 6 (3B:31-46 THROUGH 3B:31-53). This article provides a series of default rules concerning the office of trustee, many of which are already established in chapters 11, 14 and 18 of Title 3B of the New Jersey Statutes, New Jersey Rules of Court, and New Jersey case law. Except for the court’s authority to issue letters of testamentary trusteeship and to order bond, all of the provisions of Article 6 are subject to modification by the express terms of the governing trust instrument.

The article addresses the process of qualifying a trustee, including procedures for accepting or declining the office of trustee and bonding the trustee. It also establishes the duties and responsibilities between or among co-trustees, and provides standards for addressing various issues that may arise with co-trustees. For example, provisions would permit co-trustees to act by majority action and specify how and what happens when one of several trustees dissents from a course of action, as well as the extent to which the others must act when one is unable or has properly delegated performance of a function.

The article addresses changes in the office of trustee including: when and how a vacancy is filled, the procedure for resignation, grounds for removal, and the duties and obligations of a resigning or removed trustee. The settlor, a co-trustee, a beneficiary or the court on its own initiative may request that a trustee be removed on grounds as set forth in N.J.S.3B:14-21 (such as failing to file an inventory, render an account, refusal to abide by a court order, embezzlement, or neglect, refusal, or inability to perform trustee duties).

The article also prescribes standards for reimbursement for expenses advanced by the trustee. Since the matter of trustee compensation is addressed comprehensively in chapter 18 of Title 3B

 

of the New Jersey Statutes, the provision in the Uniform Trust Code concerning trustee compensation has not been included in the bill.

ARTICLE 7 (3B:31-54 THROUGH 3B:31-70). This article sets forth the basic duties and powers of trustees. The basic duty is the duty of loyalty which requires a trustee to manage the trust solely in the best interests of the beneficiaries and to avoid conflicts of interest between the interests of a trustee and that of a beneficiary. The other duties include the duty of impartiality, the obligation of prudent administration, the obligation to incur only reasonable costs, and the obligation to apply the trustee’s special skills when there is reliance on those skills in the naming of the trustee. A trustee may delegate certain duties and powers, but is held to a prudent standard of appointment in so doing. The agent of any such delegation is held to the fiduciary standard of the trustee in the exercise of the trustee’s delegated duties and powers.

With regard to the trustee’s duty to disclose and make reports, provisions require the trustee to keep qualified beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.

The article also includes a section, not included in the model legislation, concerning the powers of fiduciaries to direct investment decisions for a trust. When a governing instrument gives authority to one or more persons to direct, consent to, or disapprove a fiduciary's actual or proposed investment decisions, such persons would be considered to be investment advisers and fiduciaries when exercising such authority unless the governing instrument otherwise provides.

The section provides that if a governing instrument states that the fiduciary is to follow the direction of an investment adviser, and the fiduciary acts in accordance with such a direction, then except in cases of willful misconduct or gross negligence, the fiduciary would not be liable for any loss resulting directly or indirectly from any such act. Except to the extent that the governing instrument provides otherwise, the fiduciary, acting under the instrument to follow the investment adviser’s direction, would have no duty to: (1) monitor the conduct of the investment adviser; (2) provide advice to the investment adviser or consult with the investment adviser; or (3) communicate with or warn or apprise any beneficiary or third party concerning instances in which the fiduciary would or might have exercised the fiduciary's own discretion in a manner different from the manner directed by the investment adviser.

If the governing instrument provides that a fiduciary is to make decisions with the consent of an investment adviser, then except in cases of willful misconduct or gross negligence on the part of the fiduciary, the fiduciary would not be liable for any loss resulting directly or indirectly from any act taken or omitted as a result of such investment adviser's failure to provide such consent after having been requested to do so by the fiduciary.

Absent clear and convincing evidence to the contrary, the actions of the fiduciary pertaining to matters within the scope of the investment adviser's authority, such as confirming that the investment adviser's directions have been carried out and recording and reporting actions taken at the investment adviser's direction, would be presumed to be administrative actions taken by the fiduciary solely to allow the fiduciary to perform those duties assigned to the fiduciary under the governing instrument. Such administrative actions would not be deemed to constitute an undertaking by the fiduciary to monitor the investment adviser or otherwise participate in actions within the scope of the investment adviser's authority.

ARTICLE 8 (3B:31-71 THROUGH 3B:31-81). This article addresses the liability of a trustee and the rights of persons dealing with the trustee. It provides for remedies when there is a breach of an obligation by the trustee and specifies how money damages are to be determined. It also specifies certain trustee defenses, including the addition of a statute of limitations for claims alleging breach of trust. Generally, a beneficiary could not commence a proceeding for breach of trust against a trustee more than six months after the date the beneficiary (or beneficiary’s representative) received a report disclosing the existence of a potential claim. If such a report was not applicable to a potential claim, the claim would have to be filed within five years of the following first-occurring event: (1) the removal, resignation, or death of the trustee; (2) the termination of the beneficiary’s interest in the trust; or (3) the termination of the trust. However, the foregoing would not bar any proceeding by a beneficiary until five years after such beneficiary has attained majority, has knowledge of the existence of the trust and has knowledge that such beneficiary is or was a beneficiary of the trust, if these factors were applicable to the beneficiary’s situation.

ARTICLE 9 (3B:31-82 THROUGH 3B:31-84). Miscellaneous administrative provisions are addressed in this final article, such as clarifying the status of the proposed code’s provisions under the federal statutory law regarding electronic records and signatures. The article also provides a severability clause so that if any provision of the code is held invalid, the invalidity does not affect other provisions of the code.

The provisions of the code, as stated in this article, would apply to trusts created before, on, or after the effective date of the bill.

ADDITIONAL SECTIONS

In addition to the new supplemental chapter, described above, the bill amends existing law, at N.J.S.3B:14-37, clarifying that a person, other than a beneficiary, who in good faith assists a fiduciary or deals with the fiduciary for value is protected as if the fiduciary properly exercised his power. A similar provision would be added to the section concerning a person who in good faith assists a former trustee,

without knowledge that the trusteeship was terminated, to protect that person from liability as if the former trustee were still a trustee.

Lastly, the bill repeals four sections of existing law that are unnecessary or are inconsistent with the bill’s provisions: N.J.S.3B:11- 5 (trustee’s death or failure to act; appointment of new trustee by court; powers); N.J.S.3B:11-6 (vacancy in trusteeship upon discharge or removal); N.J.S.3B:11-7 (power of new, substituted or additional trustees); and section 1 of P.L.2001, c.144 (C.3B:11-38) (trust funds for pets).

The bill, as amended and reported by the committee, is identical to Assembly Bill No. 2915 (1R), also amended and reported today by the committee.

The committee amendments to the bill:

         -  add a definition for “beneficiary,” to specify that the term 
includes persons: who have any present or future trust interest, vested or contingent; who, in a capacity other than that of a trustee, hold appointment power over trust property; who are owners in a trust interest by assignment or other transfer; or who, relating to a charitable trust only, are entitled to enforce the trust;

         -  expand the definition of “trustee” set forth in existing law to include a corporate entity in its capacity as a trustee or co- trustee where two or more are appointed;

         -  provide that a nonjudicial settlement of a trust matter cannot be used to produce results contrary to the statutory trust law, including, but not limited to, attempts to terminate or modify a trust in an impermissible manner;

         -  indicate that a settlor may not represent and bind a beneficiary with respect to the termination or modification of a noncharitable irrevocable trust;

         -  clarify that a trustee’s power to select a beneficiary from an indefinite class is not void pursuant to section 14 of P.L.1999, c.159 (C.46:2F-10), which repealed the Uniform Statutory Rule Against Perpetuities, or any other applicable rule against perpetuities or restraint on alienation;

         -  eliminate a provision which would have allowed a settlor general authority to bring a proceeding to approve or disapprove a proposed modification or termination of a trust; instead, a settlor may only act to modify a charitable trust;

         -  provide that a noncharitable irrevocable trust may be modified or terminated upon consent of the trustee, not the settlor as originally provided in the underlying bill;

         -  add, regarding a trust spendthrift provision, that such a provision does not prevent the appointment of interests through the exercise of a power of appointment;

         -  grant, to a trustee of a special needs trust, broad discretion to make trust distributions, and require that such a trust have at least one protected person as a beneficiary;

         -  remove language concerning creditor claims on an irrevocable trust, so that assets of such a trust may still be subject to a creditor’s claim even when a trustee’s authority to pay taxing authorities directly, or reimburse the settlor for trust income tax payable by the settlor, is solely discretionary;

         -  add a new section, to be allocated within the proposed new chapter on trusts in Title 3B, concerning the investment functions of fiduciaries, as described in the statement above;

         -  require that a trustee keep qualified beneficiaries reasonably informed about the administration of a trust and of the material facts necessary for them to protect their interests;

         -  provide that the provisions establishing a general five-year statute of limitations on actions against a trustee would not bar a proceeding by a beneficiary until five years after such beneficiary has attained majority, has knowledge of the existence of the trust and has knowledge that such beneficiary is or was a beneficiary of the trust, if these factors were applicable to the beneficiary’s situation;

         -  include references throughout the bill to “partner in a civil union” whenever only the term “spouse” appears, to reflect the equal status between marriages and civil unions per the provisions of P.L.2006, c.103 (C.37:1-28 et al.), which established civil unions in this State; and

                  -  correct references to the term “co-trustee,” as well as correct and update internal cross-references and external references to existing trust law and other relevant applicable law.