Mental Capacity and Marriage in New York, Part 3: The Secret Marriage

Marriage fraud has always had as a consequence the disruption of family estate planning, or even the potential of an unfair result where the state's intestate laws are applied when the decedent dies without a Will.  But if the bride or groom suffers from dementia and their fiance(e) has been in a caregiver position, the resulting marriage could be considered a form of elder abuse because the person suffering from dementia is being exploited for financial reasons.

Consider the case in Matter of Berk, 2010 NY Slip Op 02139 [2d Dept 2010]).  Irving Berk was a very successful businessman, having founded the Berk Trade and Business School.  In 1982, he executed a Will naming his sons Joel and Harvey as co-executors.  Over the next few years, Irving's memory began to fail.  His physical health also deteriorated, and he became wheelchair bound.    In 1997 his sons decided to hire a live-in caregiver. At the time, Irving Berk was 91 years old.  His caregiver, a recent immigrant from China named Hua Wang (also known as Judy Wang), was 40 years old.

Friends of Irving reported that Wang took advantage of Berk's increasing dependency on her, and that she physically and verbally abused him.  By 2005 Irving Berk could no longer recognize his sons who by then were contemplating guardianship proceedings.   As part of this process, Irving was examined in April 2007 by a physician who diagnosed him as having dementia and stated that Berk did not possess the mental capacity to enter into contracts.  His family physician who examined him a short time later found that Irving did not have the mental capacity to handle his social affairs.

Nevertheless, on 17 June 2005 Irving Berk and Judy Wang were married in the civil ceremony in the New York City Clerk's Office.   The marriage was kept a secret.  Neither Berk nor Wang wore wedding bands thereafter, nor did family and friends ever witness displays of affection between them.

On 16 June 2006, Irving Berk died leaving an estate worth more than $5 million.  The day before the funeral, Wang informed his sons of the secret marriage as they drove to the funeral home.  When the Will was read, it was discovered that Irving Berk had never changed his Will to make his new wife a beneficiary.  The named beneficiaries remained his two sons and four grandchildren.  Because Irving had made no provision for his new wife in the Will, Judy was now entitled to ask for the elective share. 

On 29 December 2006, after the Will was filed for probate and within the requisite six months after the Will was probated, Judy Wang Berk petitioned the Surrogate's Court in King's County for a determination of her right to take her elective share as Irving's surviving spouse.  Under New York law, the surviving spouse is entitled to $50,000 or one-third of the decedent spouse's estate, whichever is greater.   The Surrogate found that Judy was married to the decedent at the time of his death and that, as a matter of law, she was entitled to her elective share under EPTL 5-1.1-A [a].

Berk's sons appealed.  The Appellate Division, Second Department found that Judy Wang had married Irving Berk in the full knowledge that he lacked the mental capacity to consent to a marriage.   Under the principles of equity, the court found that Wang should thus not be unjustly enriched because she took unfair advantage of Berk's mental incapacity at the time of their marriage.

Over 5 million people are affected by Alzheimer's disease and other forms of dementia, and this number is expected to grow.  The time is now to protect your assets and your loved ones.  You cannot afford to wait for a diagnosis because once you have been diagnosed with dementia, your diminished mental capacity will prevent you from taking the necessary legal steps to protect yourself, your property, and your family.

What can you do to protect yourself?  Irving Berk had a Will, after all.  A Will is certainly a good first step, but it is not enough.  Unless the Will has been carefully drafted by an attorney to make sure that it is in compliance with New York Law and contains the necessary language about the elective share so as to mitigate against unscrupulous persons, then the door is left open for a sham marriage or other forms of unjust enrichment to occur.  Do-it-yourself online wills should be used with extreme caution or not at all as a result.

Secondly, you should meet with your attorney at least once a year in the same way that you meet with your doctor for your annual physical exam.  Your attorney will ask you questions to determine what has changed in your personal and legal affairs, and may suggest redoing your Will or adding a codicil based upon your responses.  Your attorney will also evaluate your mental capacity as you answer the questions.  If the attorney determines that there is a doubt about your mental capacity, then your attorney will strongly advise that any codicils or new Will be videotaped during the execution ceremony.  This service is worth its weight in gold.

Next, your attorney may suggest that you place you assets into a trust.  If you go this route, you may want to execute a pour-over Will, meaning that your assets will go directly into the trust at the time of your death, to be administered according to the terms of the trust.  Remember that assets such as bank accounts and property that can be held jointly are vulnerable to sham marriage schemes.  You may want to re-title these in the name of the trust.  Note that trusts are contracts, and that contracts require the highest level of mental capacity in New York.  If you wait too long, you may not have the requisite mental capacity to execute the trust documents.

You will also need full mental capacity to give a durable power of attorney to someone you trust or to your bank so that your affairs can be managed should you lose mental capacity.  Your attorney will discuss these options with you in detail so that you comfortable with your choices.

Finally, your attorney will review your planning for medical decision-making including having a living Will and a health care proxy.  These are known as advance directives.   The case does not disclose whether Irving Berk had these instruments in place.  If he did not, Judy Wang Berk as his legal wife would have been the one to make the decisions about his health care, and not his sons.

If you would like to discuss your own personal situation with me, you can get a free 30-minute consultation  simply by filling out this contact form.   I will get back to you promptly.

I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.

Mental Capacity and Marriage in New York, Part 2: Surviving the Surviving Spouse

In New York, a person is considered a surviving spouse even if the marriage is subsequently annulled or voided.  This is particularly problematic where a sham marriage has occurred, such as when a caregiver marries a person with known dementia.   Under the current law in New York, even if the marriage was annulled after the death of the mentally incompetent spouse, the surviving spouse may still claim his/her right of election against the estate.  This may have the effect of nullifying the decedent's Will provisions or intestate distributions.

The issue is complicated in New York by the fact that there are several statutes that touch upon the issue of mental capacity and marriage.  Together they create a patchwork of referring statutes that nonetheless leave open the possibility that a surviving spouse from a voidable marriage may still take against the estate.

Domestic Relations Law §7 provides that a marriage contracted between two people where one person "is incapable of consenting to a marriage for want of understanding" is deemed "void from the time its nullity is declared by a court of competent jurisdiction."  In other words, such a marriage is voidable, that is, it remains valid until such time as a court declares it void.  When a court declares such a marriage void, then it has the effect of being void from its beginning.  Voidable marriages are distinguished in the law from void marriages, such as incestuous marriages.  These are considered void from the start, and require no judicial action to render them void. 

The Domestic Relations Law § 140 [c] provides that "[a]n action to annul a marriage on the ground that one of the parties thereto was a mentally ill person may be maintained at any time during the continuance of the mental illness, or, after the death of the mentally ill person in that condition, and during the life of the other party to the marriage, by any relative of the mentally ill person who has an interest to avoid the marriage"

Nevertheless,  EPTL 5-1.1-A defines a "surviving spouse" as having a right of election against the deceased spouse's estate "unless it is established satisfactorily to the court having jurisdiction of the action or proceeding that: (1) A final decree or judgment of divorce, of annulment or declaring the nullity of a marriage (. . .) was in effect when the deceased spouse died," or that in the instant case "(2) The marriage was void as incestuous under section five of the domestic relations law, bigamous under section six thereof, or a prohibited remarriage under section eight thereof " (EPTL 5-1.2 [a]).  There are no provisions that address what happens to the surviving spouse's right of election if the marriage is annulled by a court due to the diminished capacity of the deceased at the time of the marriage.

As Presiding Judge Prudenti noted in Campbell v Thomas (2010 NY Slip Op 02082 [2d Dept 2010],   "New York, however, does not yet have a statute specifically addressing a situation in which a person takes unfair advantage of an individual who clearly lacks the capacity to enter into a marriage by secretly marrying him or her for the purpose of obtaining a portion of his or her estate at the expense of his or her intended heirs. When a marriage to which one of the parties is incapable of consenting due to mental incapacity is not annulled until after the death of the nonconsenting party, a strict reading of the existing statutes requires that the other party be treated as a surviving spouse and afforded a right of election against the decedent's estate, without regard to whether the marital relationship itself came about through an exercise of overreaching or undue influence by the surviving party. On this appeal, we have occasion to consider whether the surviving party may nonetheless be denied the right of election, based on the equitable principle that a court will not permit a party to profit from his or her own wrongdoing."

In  Campbell v Thomas, New York's Second Department addressed the issue of mental capacity with respect to sham marriages.   In February 2001 Nancy Thomas left for a well-deserved one-week vacation, leaving the care of her 72 year-old Alzheimer-suffering father Howard in the care of Nidia Colon whom Nancy hired.  Unbeknowst to Nancy, Nidia married Howard during Nancy's vacation.  She then had valuable assets transferred into her name, specifically putting her name as joint owner of Howard's $150,000 bank account, and naming herself as sole beneficiary of Howard's New York City Teachers' Retirement System account then valued at $147,000.

Howard Thomas died in August 2001.  In November 2001 Nancy and her brothers Christopher and Keith commenced an action in Supreme Court asking that the court declare Nidia's marriage to Howard as null and void, as well as the subsequent transfer of assets.  In their pleadings, they alleged undue influence, conversion, and fraud and moved for summary judgment.  On October 1, 2004 the Supreme Court denied the plaintiffs' motion for summary judgement.  The Thomas children appealed.

The Appellate Court for the Second Department heard the appeal and found that the Thomas children had succeeded in demonstrating that Howard "lacked the capacity to understand his actions before his marriage, and that his mental state only diminished thereafter" (Campbell v Thomas, 36 AD3d 576, 576 [2007]).  The court reversed the Supreme Court and granted the plaintiffs' motion for summary judgment.  Further, the court sent back the matter to the Supreme Court "for the entry of a judgment declaring null and void (1) the marriage between the defendant Nidia Colon Thomas and the decedent Howard Nolan Thomas, (2) a change in beneficiary in Howard Nolan Thomas' Teacher's Retirement System of the City of New York account, and (3) a change in the ownership of Howard Nolan Thomas' Citibank accounts" (id.).  The Supreme Court so ordered on June 21, 2007.  Nidia Colon Thomas appealed.

In her appeal, Nidia alleged  that, under the applicable statutes, even if the marriage had been annulled, she was still considered the surviving spouse.  As such, she was entitled to the spousal elective share of Howard's estate.  Since the marriage to Howard had been annulled almost six years after his death, the strict application of the statutes in question would have resulted in Nidia having a claim to the greater of $50,000 or one-third of the net estate.

However, the court demurred from such a strict application of the statutes on the principles of equity and public policy, so that "(n)either in criminal nor in civil cases will the law allow a person to take advantage of his own wrong" (Diaz v United States, 223 US 442, 458 [1912], quoting Falk v United States, 15 App DC 446, 460 [1899]).  Due to her overreaching and undue influence in marrying Howard, the court denied Nidia the benefit of her marriage to Howard.  Through her conduct, the court found that she had forfeited any benefit that stemmed from her marriage so that she would not be unjustly enriched.

In my next installment, I will examine another case where the mental capacity of one spouse was the determining factor.  I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.

Mental Capacity and Marriage in New York, Part 1: Background to the Issue

In New York, a person is presumed to have the mental capacity to marry.  But the standard that defines the mental capacity to marry is very low.  The mental capacity required to marry is lower than testamentary capacity, or the capacity to make a Will.  In turn, testamentary capacity is lower than the mental capacity required to execute a contract.  To put this into perspective, New York requires greater mental capacity to sign an apartment lease than it does to marry someone.

The U.S. Constitution also protects an individual's right to marry.  The U.S. Supreme Court has affirmed that the right to marry is a fundamental right.  In Loving v. Virginia, 388 U.S. 1, 12 (1967), the Court held that the Due Process Clause includes a constitutional right to marry because "freedom to marry has long been recognized as one of the vital personal rights essential to the pursuit of happiness by free men."  In addition, the Full Faith and  Credit Clause in Article IV requires states to credit the "public Acts, Records, and judicial Proceedings" of sister states, including marriage.

A marriage in New York results in two separate outcomes:  the marriage itself, and the property consequences that flow from the marriage.   As we will see in this series, there is a loophole in the law that has permitted some unscrupulous individuals to take advantage of elderly individuals with diminished capacity.  That is because, while the marriage itself may be annulled or broken, the property consequences of marriage are not necessary severed as a consequence.  As we will see in this series, that can result in unintended estate consequences for heirs and distributees, particularly in the area of  so-called "deathbed" marriages.

Arguably,  the property rights that flow from marriage are much greater than they are for signing an apartment lease even though the mental capacity required to enter into a marriage is significantly lower.  Federal property rights that flow from marriage include such things as Social Security survivor benefits for a spouse, and spousal survivorship rights for qualified retirement plans under the Employee Retirement Income Security Act (ERISA) that can only be waived in writing.

Among the New York State property rights for spouses is the right to title property in a tenancy by the entirety.  Neither spouse can sell or diminish the 100% share that each owns without the consent of the other.  Should a creditor obtain a lien on one spouse’s interest in the property, the lien will only survive if the debtor spouse is the surviving spouse.  Otherwise, the lien is extinguished with the death of the debtor spouse.  Moreover, the property cannot be reached in a bankruptcy proceeding.   New York also has an elective share statute, meaning that a surviving spouse can elect to one-third of the decedent spouse's estate against the decedent's Will if there is surviving issue, or one-half of the property if there is no issue.  Even if there is no Will, New York's intestacy statutes provide that a surviving spouse will receive at least one-third of the decedent's property.

In New York, a marriage can be void from the start (ab initio) due to such reasons as bigamy or an incestuous marriage.  In such a case, the marriage is a legal nullity:  it never existed from the start.  The spouse, the State, or an interested third party can attack the marriage directly or collaterally in court on the ground that it is void.  The attack can even take place after the death of one or both spouses.  Note that diminished mental capacity is not a ground for voiding a marriage in New York.

A voidable marriage is valid for any civil purpose unless it it attacked by one of the spouses in an action for annulment. The grounds for deeming a marriage as voidable include fraud, duress, temporary or permanent mental incompetence, undue influence, and sham. As concerns mental incompetence in the case of a voidable marriage, Domestic Relations Law § 140 [c] provides that "[a]n action to annul a marriage on the ground that one of the parties thereto was a mentally ill person may be maintained at any time during the continuance of the mental illness, or, after the death of the mentally ill person in that condition, and during the life of the other party to the marriage, by any relative of the mentally ill person who has an interest to avoid the marriage."

Even if a third party should succeed in proving that there was sufficient evidence of diminished capacity before the marriage took place (for instance, with documented medical evidence showing dementia), the surviving spouse of an annulled marriage may still take against the Will under the right of election or under intestacy. The property stakes are high when one enters into a marriage. They are even higher for the children of aging parents with diminished capacity who find themselves (and their property) prey to unscrupulous persons who will marry them (sometimes in secret) in order to obtain the federal and state property benefits that flow from marriage.

In this series, we will look at how New York courts have dealt with the issue of mental capacity and marriage, especially in cases where the results have been egregious.   I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published.  Thank you.

 

The Carvel Soft-Serve Empire: Avoiding an Estate Meltdown

When I was growing up, one of my favorite treats was a Carvel chocolate-dipped vanilla soft-serve cone.  And  no birthday party was complete without a Carvel ice cream cake.  Tom Carvel was able to parlay my sweet tooth and millions of others into an empire at one time valued at $250 million.  When he died in 1990, he left behind his wife, the former Agnes Stewart, who had once loaned her future husband $15 to begin his ice cream business.  It proved to be a spectacular investment.  

Tom Carvel owed his spectacular good fortune to a flat tire.  When Carvel began his business in Hartsdale, New York in 1929, he used a truck to bring his homemade confection to his clients.  One day, a tire blew in the proximity of a pottery store parking lot.   With his ice cream quickly melting, Carvel decided to start selling right from his parked truck.  Thus began the idea for soft serve ice cream, which Carvel refined over time.  He then worked out a deal with the pottery store so that he could sell his ice cream in the parking lot by running an electrical wire to keep his confection refrigerated.  His sales took off.

In 1936 Carvel purchased the pottery store and formed the Carvel Brand Corporation.  Carvel realized that there was money to be made from real estate as well.  Having established a successful business model, Carvel proceeded to map out a plan to franchise his business.  As part of his franchising model, Carvel purchased the properties upon which his franchisee's store would be located, leasing back the space to the franchisee as part of the license agreement.  Thus the expansion of the Carvel brand also meant the expansion of the Carvel real estate holdings.

A known control freak, Carvel fought for years with the Federal Trade Commission against antitrust charges.  He required his franchisees to attend a three-month intensive training program, and the purchase of all supplies were to come directly from the Carvel Brand Corporation.  While this mentality may have served him well in business, the Will that he executed reflected his need to control from the grave.  The Will became the fodder for controversy and chaos.

His estate planning needs were relatively simple.  He and Agnes had no children, and his intent was to provide for Agnes during her lifetime and after her death the estate would go to charity.  There were several simple ways to accomplish this.  One way would have been to purchase a non-probate asset, such as an annuity, with Agnes as the beneficiary.  She could then have received structured payments immediately after his death.  

By naming a disinterested executor (he would instead name seven interested executors), such as a bank or law firm, Carvel could have assured the continuity needed to administer his large postmortem estate without controversy.  And while there are fees associated with this option, it may be a wiser course of action than the litigation costs associated with squabbling executors and beneficiaries. 

His Will would still have provided for the statutory spousal elective share.  Under New York Estates, Powers and Trusts Law (EPTL) § 5-1.1, a surviving spouse has the option of taking the the greater of $50,000 -or- 1/3 of the net estate. 

The rest of the estate could have been given to charity through an irrevocable charitable remainder trust. §664 of the Internal Revenue Code of 1986 as amended provides for either the payment of a fixed amount through a charitable remainder annuity trust (§664(d)(1)(D)), or a percentage of trust principal through a charitable remainder unitrust (§664(d)(2)(D)).  Carvel would have received two immediate benefits.  He could have claimed a charitable income tax deduction.  And given his sizable real estate portfolio, the estate would not have had to pay immediate capital gains taxes as the trust disposed of the trust property in its portfolio.

What Tom Carvel left behind instead when he died of a heart attack in 1990 was a chaotic estate.  Nine years later, the estate was still in litigation.  A lawsuit filed by his niece Pamela Carvel against the Thomas and Agnes Carvel Foundation in 1999 before the Second Circuit Court of Appeals (188 F.3d 83 (2nd Cir. 1999)) revealed that Tom and Agnes had executed "mirror wills," or two separate but identical Wills, each naming the Foundation as the beneficiary of their entire residuary estate.  At the same time, they executed a reciprocal agreement agreeing to refrain from changing their Wills or making certain transfers.

In addition to the Foundation, Carvel had created at least five other entities:  a Florida trust for his wife, a charitable remainder unitrust, two real estate holding companies, and the estate created by the mirror Will containing the statutory spousal election share and bequests to 83 different beneficiaries.

A year before his death, Tom Carvel sold his 700 stores to Middle East investors for a reported $80 million.  In the years following his death, a good portion of that sum was spent on litigation over the estate.  His widow Agnes, one of seven named original executors of his estate,  stepped down as executor and Foundation board member and fled to London in the wake of a call for a capacity hearing.  She died in London in 1998, having herself litigated against the estate to received the $600,000 quarterly payments stipulated in her husband's Will.  A well thought-out estate plan could have avoided this strife and achieved Tom Carvel's postmortem goals.

I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.