Sure enough, when got to the branch, the broker just about refused to honor the client’s wishes, on the grounds that “this is such a bad investment decision, I’m not sure you’re competent.”  Further, the broker explained to both of us how bond interest was accrued and paid, and unless she was satisfied the client understood the mechanics of the bond interest computation, under no circumstances was she going to process the sell order.  Amazing, but true.  I wonder if this same test was given when the client purchased his bonds in the first place.

Granted, the client was pulling out over $400,000 from the bank, so I can understand how and why the broker would want to keep the money in house. Nevertheless, I now understood why the client wanted a lawyer to come with him during the transaction.

To some extent, reading between the lines of the court’s opinion leads a reader to conclude the objectant to the will: the person who objects to the decedent’s last will and testament being admitted to probate, had no real basis for objecting, but was doing so, most likely, to force the will’s executor to pay off the objectant. On the other hand, in this case the testator, Sarah Gross, left her estate to one of her three children: her daughter Doris. And who were the witnesses to to the will? Doris’ children! So it’s not entirely clear that there were no grounds to object to the will being probated; however, the fact that the will was drafted 17 years (!) before the decedent died is pretty clear evidence as to the testator’s intentions.

An interesting sidenote is that one of the objections stated that the testator was under “mistaken belief” at the time the will was executed. Unfortunately (or fortunately, as the case may be), the objectants did not articulate for the court what this ‘mistaken belief’ might have been, and therefore the court combined this objection with the other objections.

As to “testamentary capacity,” the law in New York is that a testator must be compentent to make a will: that she understood the nature and extent of her property, the “natural objects of her bounty,” and the provisions of the will itself (citing the case of Matter of Kumstar, 66 NY2d 691 (1985)). The statutory authority supporting this aspect of ‘testamentary capacity’ is New York Estates, Powers and Trusts Law (EPTL) section 3-1.1 (“Every person eighteen years of age or over, of sound mind and memory, may by will dispose of real and personal property and exercise a power to appoint such property.”)

The initial burden of proving the testator/decedent had ‘testamentary capacity’ falls on the person offering the will for probate. Typically in New York, when a will is executed (signed) by the testator and witnesses, the witnesses also sign a separate piece of paper called an “Affidavit of Attesting Witness.” This Affidavit, which is notarized, basically says that in the opinion of the witnesses, the testator was of sound mind and memory when she signed the will, was under no undue influence as far as the witnesses could tell, and that the formalities of due execution were followed. These Affidavits are typically stapled to the original will, and when the will is later on, at death, submitted for probate, these Affidavits serve to meet the executor’s burden of proving the will is valid. For this reason, the burden of proving that the will is not valid shifts to the person making the objection.

In this case, the objectants claimed only that their mother was “confused” at the time she signed her will, but could offer no medical evidence supporting this assertion, nor any other detailed reasoning to support the claim that their mother was ‘confused’. In fact, the objectants themselves admitted that for fourteen years after the will was signed, their mother continued working, and lived by herself and managed her own personal needs and financial affairs. The court therefore dismissed this objection as to the decedent lacking testamentary capacity.

Then, the court turned to the issues and objections as to “due execution” of the will, and whether the testator was under “undue influence and fraud.”

The only “evidence” offered by the objectants was the the attorney did not recall certain aspects of the will signing ceremoney, which had been held 18 years prior to the hearing. Surrogate Anderson dismissed the objectants’ claims on this point as without merit.

A more thorough discussion was had regarding the issues of “undue influence” and “fraud,” which the court points out are similar, but legally distinct grounds for objecting to a will. The law is that in order to support a claim of ‘undue influence’, the person who is alleged to be exerting this undue influence over the testator must be in some type of “confidential relationship” with the testator. This confidenential relationship can be a legally recognized relationship, such as between and attorney and client, for example, or a practical “confidential relationship,” as when, for example, the testator is dependent upon or subject to the control of another person. A parent favoring one child over another does not imply a confidential relationship such that undue influence can be claimed.

In the end, Surrogate Anderson dismissed the objections, and admitted with will of Sarah Gross to probate.

On the other hand, quite frequently people also find that the Power of Attorney is not worth the paper it’s printed on.  What does that mean? It means that the Power of Attorney is only effective if the person or financial institution to whom the agent is showing the document accepts it.  Many times, if the agent simply walks into the principal’s bank with a Power of Attorney and tries to make a transaction, the bank will send them right back out the door.  Banks and securities firms always want their own custom Power of Attorney forms to be completed.  Although this violates New York law, the only recourse for the agent is to hire an attorney and file an Order to Show Cause to force the bank or financial institution to accept the principal’s Power of Attorney.

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This Technical Memorandum put out by the New York State Department of Taxation and Finance makes it clear that same sex couples MUST use a “married filing joint” tax return for income tax purposes, and for the estate tax, the same-sex couple would be treated as married, despite the fact that the marriage is not recognized for federal tax purposes.

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Which way will this cut? In other words, will the same sex couple pay more or less taxes as a result of being married for state tax purposes, but unmarried for federal tax purposes? And, how will the myriad of tax laws related to married persons play out (e.g., the attribution of stock ownership rules as between married persons)? At this point, it remains unclear, unless and until someone actually runs the numbers and investigates different scenarios.

Interestingly, an audience member asked whether ‘offshore variable universal life insurance contracts’ were “foreign accounts” for FCAT purposes, and attorney Skarlatos responded, more or less, with a “yes.” I tried speaking with the fellow who asked the question after the presentation, but he disappeared. Not a lot of people are familiar with ‘offshore variable universal life insurance,’ so I was intrigued to find out how this attorney (I presume), was working in this market.

In any event, my thanks to attorney Bryan Skarlatos, the Jewish National Fund, and Alliance Berstein for an enjoyable evening.

Its always been part of the life insurance industry model that agency managers were expected to recruit new agents into the business, and train and nurture them for a few years to become Top of the Table producers. Yes, selling to friends and family was always the way new agents began their careers, in all companies (which is proper and correct, by the way), and that’s not so different from how MLM companies pitch to their new recruits. The difference, of course, is that the income made from selling products is eventually how agents become top producers in the insurance industry, whereas having an enormous ‘downstream’ line (like a pyramid) is the ultimate goal of a top producer in the MLM industry.

What seems to have changed now in the life insurance industry is that sales managers are now being told by corporate that their *exclusive* role is to recruit and grow the organization, with product sales and training being of secondary importance. See this excellent link to a primer on the legal definition of illegal pyramid schemes. On the whole, the life insurance industry does not come close to being a pyramid scheme, although certainly aspects of how its products are sold does have similarities to multi-level marketing organizations which are borderline illegal. The main point, I suppose, is that it wasn’t so many years ago that my buddy and I had a lot of fun ‘talking shop’ while cruising New York for wine, women and song. Now we go out and my buddy is just glad to have some respite from the enormous pressure he’s under to “grow his organization,” which as Penn Jillette says, is just bullshit.

Don’t misunderstand: it’s still my opinion that a career as a financial advisor, a Certified Financial Planner ™, and a traditional life insurance agent, is one of the most rewarding careers available in the US. But at the sales agency management level, it seems like the game has changed recently, and not for the better in my view. When the agency management’s focus changes from having the most sophisticated and quality organization to having the largest organization, something is going askew with the industry.