International Policy and Estate Planning: Foreign Distributees in the Crosshairs

Article 16 of the New York’s Surrogate’s Court Procedure Act deals with foreign estates.  The legislative purpose for the enactment of the procedure with respect to foreign estates includes the following:  “If the law of such jurisdiction does not provide for the appointment of a fiduciary but vests the property of a decedent in a person or persons subject to the obligation to pay the decedent’s debts and expenses and the legacies bequeathed in his will or the distributive shares provided by law, such a person shall be recognized as the person acting therein to administer the decedent’s estate in accordance with the law thereof, but only if such person has complied with all the requirements of such jurisdiction to entitle him to receive the property of the decedent and is acting or will act there to administer the estate“ (underlining my own).  What may seem to be at first glance a benign statement can yield unanticipated complications, particularly if foreign policy is diametrically opposed to the wishes of the testator.

In re Estate of Gyfteas, 59 Misc. 2d 977, 300 N.Y.S.2d 913, 1968 N.Y. Misc. LEXIS 993 (Surrogate's Court of New York, New York County December 12, 1968), the testator was a Greek citizen and domiciliary who owned property in New York.  His Will named three executors and devised some monetary bequests, with the residuary going to charity.  Since the decedent did not have a valid New York Will, an administration proceeding was begun by one of the executors for the property in New York.  Then the legatees filed a separate petition for letters of administration for the New York property claiming that the executors had no right to distribute the New York-based assets.

N.Y. Surr. Ct. Proc. Act § 1604(1) establishes a priority list as to the granting of ancillary letters with respect to a foreign testator’s property in New York:

(a) The person expressly appointed in the will as executor with respect to property located within this state.

(b) The person to whom domiciliary letters have been issued or if domiciliary letters are not issued, the person appointed in the will to administer all property wherever located.

(c) The person acting in the domiciliary jurisdiction to administer and distribute the testator’s estate.

(d) A person entitled under this act to letters of administration c.t.a.

Since the Will was a Greek Will, the New York court looked to the law of Greece to determine whether the named executors in the Will had the authority under SCPA § 1604 to qualify for ancillary letters.  A hearing was held on this issue.  Under Greek law, where a Will contains a charitable bequest, only the executor may distribute the assets.  Where there are no charitable bequests, the powers of the executor are subordinate to those of the legatee(s).  Citing Greek law, experts for both the petitioners and the respondents agreed on this point.  Thus, under New York law and the priorities established under SCPA § 1604(1), the executor under the Greek Will was granted ancillary letters in preference to the legatees.  However, the court stipulated that no assets from New York could be moved to Greece without further order of the court and notice to the legatees.

In part, this result was possible because the United States has diplomatic relations with Greece.  But what happens when the legatees reside in a country where State Department regulations circumscribe what the courts may do?

In re Estate of Mitzkel, 36 Misc. 2d 671, 233 N.Y.S.2d 519, 1962 N.Y. Misc. LEXIS 2467 (Surrogate's Court of New York, Kings County October 15, 1962 ), the decedent, a New York resident of Lithuanian descent, left his New York estate to his two sisters, both citizens and residents of Lithuania.  At the time, Lithuania had been annexed by the Soviet Union.   The Consul General of Lithuania at New York filed a petition in Surrogate’s Court on behalf of the Lithuanian nationals.  Thereafter, the sisters were transported 500 miles from Lithuania to Moscow where they executed a power of attoney before the U.S. Consul in Moscow appointing a New York law firm to represent them in Surrogate’s Court.   Based on this power of attorney, the Soviet government had  hired attorneys in New York to represent the interests of the sisters.  These attorneys then filed a notice of appearance with the court.   The Consul General of Lithuania then filed a motion seeking to have declared as invalid the sisters’ power of attorney executed to the Soviet government and the notice of appearance by their attorneys.

At issue was the validity of the power of attorney.  Several factors pointed to the illegitimacy of the Soviet power of attorney.  First, the instrument stated that the sisters lived in the U.S.S.R instead of Lithuania.  Second, the sisters were illiterate and could not have understood the contents of the power of attorney.  Third, the sisters had been forced the travel from their homes under duress by Soviet officials.  Fourth, the services of the law firm had been illegally procured by an agent of the Soviet Union, namely a lawyers’ collective called the "Iniurcolleguia" and described as being "an essential force in subjecting the common people of Russia to the dictator's power" (Wash. U. L. Q., supra, June, 1958, p. 252), and "tools of the State" (48 Cal. L. Rev., supra, pp. 794-795).  In the instant case, the goal of the Soviet lawyers’ collective was to extract fees from the sisters to be deposited into a common treasury used to pay these Soviet lawyers.

The United States never recognized the incorporation of the Baltic States (Estonia, Latvia, and Lithuania) into the Soviet Union.  In a letter dates March 26, 1948, the State Department had cautioned each State governor not to give access to the Surrogate’s Court (or its State equivalent) to any Soviet officials or their attorneys for the settling of estates of decedents from Baltic States dying in the U.S.  The Surrogate’s Court found this sufficient to declare the Soviet power of attorney invalid as well as the notice of appearance by the New York attorneys representing  the "Iniurcolleguia."

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What is the Difference between an Heir and a Beneficiary?

In everyday life, you will often hear people speak about their hope for an inheritance from a family member or relative.  However, this commonplace use of the term "inheritance" often masks a misunderstanding of the law and can lead to unintended consequences when misplaced assumptions are not addressed.  Today we are going to examine exactly what the term "inheritance" means from a legal standpoint, and how having a Will takes uncertainty out of the equation.

What defines an "heir"?  Strictly speaking, one is not an "heir" of a living person.  That is because the exact identity of an "heir" is determined at the time of the decedent's death.  The determination is made by the laws of the jurisdiction, and not by the decedent.  An "heir," then, is a legal creation and its terms are defined by a State.  One becomes an heir by virtue of satisfying the definition in a statute.  In New York, that statute is EPTL § 4-1.1. That is because New York  has an interest in the smooth transfer of property from one generation to the next.  As such, an "heir" is the statutory recipient of property from a decedent who dies without a Will (intestate).  The State is also the final "heir" in most statutory schemes.  If there are no statutory heir, then the property will go to the State (escheat).  In New York, a person who inherits property under intestate succession is called a distributee.

New York also has a "laughing heir" statute (EPTL §4-1.1(6)).  A "laughing heir" is someone entitled to inherit by law who is so remotely connected to the deceased that he or she would not feel any sorrow at hearing of the death.  To prevent this occurrence, New York cuts off heirs at the grandchildren of the deceased:  "For the purposes of this subparagraph, issue of grandparents shall not include issue more remote than grandchildren of such grandparents."  No one more remote, such as a great-grandchild, may inherit.  After that, the property of the deceased escheats to the State.

When a person dies without a Will, New York uses as its default an intestate distribution system called per capita ("each head") at each generation.  In this system, each person is weighed equally.  By virtue of their presence on the family tree, no one can be disinherited.  The first thing we have to do is determine the number of surviving distributees. To illustrate: Beth is a single person who dies without a Will.  She had two sons named Luke and Dick, and a daughter named Nancy.  Luke had two children, Bill and Jane, and Nancy had one child named Jim, and Dick had two children named Sandy and Sam.

At the time of Beth's death, Luke had already predeceased her.  Had Luke been alive, he, Nancy and Dick would have each received 1/3 of the estate.  Because Luke has already died, Nancy and Dick each receive their 1/3 share, and Luke's children divided what would have been their father's share equally between them.  So Nancy receives 1/3, Dick receives 1/3 , and Bill and Jane each receive 1/6.   

Depending upon your family situation, the New York default system of distribution may not suit your needs.  In that case, you may want to draft a Will stipulating that you want your estate distributed per stirpes ("by each branch") to give you more control over the outcome.  In New York, a person who receives under a Will is called a beneficiary.  Let's say that you want your great-grandchild to receive something from your estate.  Drafting a Will eliminates the "laughing heir" statute and allows you to leave something to your great-grandchildren.  A Will also allows you to distribute your estate to a class of beneficiaries, such as "to all my children" or "to all of my grandchildren" to cover any issue born or adopted after the execution the Will (pretermitted child).  The class closes at the time of the death of the testator.

Finally, instead of having your estate possibly escheat to the State, you can name a person unrelated to you or a charity as a beneficiary of your residuary estate.  Your property can then be used in a way that is consistent with your life and beliefs.  You should seek the advice on an attorney in drafting a Will so that your wishes are reflected in the resulting document.

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