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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When Estate Planning Goes Awry: Ambiguous Beneficiary Designations on Testamentary Substitutes

Beneficiary designations appear most often in insurance contracts, retirement plans, and annuity contracts.  These contracts are known as  testamentary substitutes because they pass outside of the probate estate. The insured or annuitant is asked to designate both the primary beneficiary(ies) and the contingent beneficiaries.  We will examine a case where an issue of construction with respect to the primary beneficiaries required Surrogate Court intervention.

On March 10, 1989, Archibald Foley executed a Will in which he divided the residuary estate as follows:  “…shall be divided into six (6) equal shares․ one each of those shares to each of my brothers and/or sisters who shall survive me and one share to be divided equally between my niece, Carmel Foley, and my nephew, Lawrence Foley, or their survivor.   If neither of them survive me or if any of my brothers and sisters shall fail to survive me, then I direct such share as would have gone to them to be divided equally amongst those brothers and sisters who do survive me.”

On March 13, 1989, Dr. Foley changed the beneficiary designation on four 20-year guaranteed retirement annuities with a combined date-of-death value of $275,872.75 to read:   “to be divided equally, share & share alike among my living brothers and sisters, and one share to be divided equally between my niece (Carmel Foley) & nephew Lawrence Foley.’  Then on March 20, 1989, Foley designated the primary beneficiary under his defined contribution retirement plan with a date-of-death value of $709,380.04 to read:  “to be divided in equal shares among my living brothers and sisters-and an equal share to be divided between my niece Carmel Foley and my nephew Lawrence Foley.” He did not designate contingent beneficiaries under either the retirement annuities or the defined contribution retirement plan.  Foley’s Will was admitted to probate on April 7, 1998 (In re Estate of Foley, 181 Misc. 2d 258, 693 N.Y.S.2d 843, 1999 N.Y. Misc. LEXIS 241 (N.Y. Sur. Ct. May 24, 1999)) [http://caselaw.findlaw.com/ny-surrogates-court/1444422.html]

By the time Archibald Foley died, all of the primary beneficiaries under the annuities and the retirement plan had died except for his sister Edna and his niece Carmel.  The executor of Foley’s Will sought a judicial ruling as to how to distribute the proceeds, particularly the 1/4 share to his predeceased nephew Lawrence.

As it turned out, this was an issue of first impression for the New York County Surrogate’s Court.  ” No authority has been discovered which addresses whether a predeceased beneficiary’s share under a retirement plan or annuity contracts passes to the estate of decedent or to the surviving beneficiaries.” Basing its analysis on prior analogous cases (The New York City Fire Department Life insurance Fund and totten trust accounts), the court reasoned that where beneficiaries were designated as individuals (Carmel and Lawrence) and not as a class (my living brothers and sisters), then they took as tenants in common and not joint tenants with right of survivorship. “Here, Mr. Foley did not expressly declare a joint tenancy in the beneficiary designation of either the retirement plan or the annuities.   Nor does the Court find the evidence that Mr. Foley intended for Lawrence Foley’s proceeds to pass to the surviving beneficiary, Carmel Foley, to be sufficiently clear.  Thus, the Court is required to hold that a tenancy in common has been created.  [See EPTL 6-2.2(a) ]. Accordingly, Lawrence Foley’s share of the proceeds from the retirement plan and the annuities are to be distributed to the estate of Mr. Foley.”  The Will then governed the distribution of Lawrence’s share, being the only document with express instructions as to predeceased relatives.  Thus a non-probate asset became a testamentary asset subject to probate.

The court was sensitive to the fact that this holding may have disrupted the intent of Mr. Foley’s estate plan, but in the absence of express declarations and named contingent beneficiaries, and the ambiguity of the language used to create the primary beneficiary designations, this was the only possible result.  Yet the court was aware that this was an anomalous result: “In the absence of legislation reversing the general common law presumption in the context of retirement plans, annuity contracts and other testamentary substitutes, modern thinking as to presumed intent cannot be extended to these assets.   This anomaly merits consideration and therefore is referred to the EPTL-SCPA Advisory Committee for such action as it deems appropriate.”

The lesson here is clear:  the drafting of beneficiary designations on testamentary substitutes needs to be done with great care.  Moreover, you should safeguard even your testamentary substitutes by having a Will with clear bequest, beneficiary, and residuary estate language.

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Marilyn Monroe’s Will and the Right of Publicity: Residency Matters

After her divorce from Yankee slugger Joe DiMaggio on 27 October 1954, Marilyn Monroe decided to form Marilyn Monroe Productions on 31 December 1954 before leaving California to begin a new life in New York City.  She would reside in New York until shortly before her death in 1962.  In early 1955, Monroe studied privately with Lee Strasberg before joining the famed Actors Studio and taking classes there.  Determined to become a serious actress, Monroe also hired Strasberg’s then wife Paula as her new acting coach.  At Strasberg’s urging, she also began psychoanalysis with Dr. Marianne Kris as a way of helping her to bring out more of herself in the development of character roles.

After her marriage to playwright Arthur Miller in 1956, the newlyweds made their home in Manhattan’s Sutton Place overlooking the East River beginning in August of 1957.  Marilyn Monroe was still a resident of this apartment (and thus of New York) when she died in her Brentwood, CA home on 5 August 1962.

On 14 January 1961, Marilyn Monroe executed her Last Will and Testament in New York.  The Will was drafted by “lawyer to the stars” Aaron R. Frosch, who was also Richard Burton and Elizabeth Taylor’s attorney.   The Will named Frosch as the executor of the Will and as the trustee of the trust that Monroe established to care for her mother Gladys Baker.

After Monroe’s death in California in 1962, Frosch filed the Will for probate in New York County Surrogate Court.  According to a Time Magazine article, “for all her troubled personal life, her business affairs seemed in extraordinarily good order. Unencumbered by the debts, tax claims and pending lawsuits so common to Hollywood’s money minters, the value of her estate was listed “in excess of $500,000,” a legalism often meaning much more. She left $100,000 in trust for her mentally ill mother, $50,000 to her onetime secretary, May Reis, $93,750 to her Manhattan psychiatrist, Marianne Kris, the rest to her sister and friends, chief among them Method Director-Teacher Lee Strasberg, 60, who reportedly will get a munificent $240,000 and all her personal belongings.”

Strasberg received the bulk of Monroe’s estate as a result of the following stipulation in the Will:

SIXTH: All the rest, residue and remainder of my estate, both real and personal, of whatsoever nature and wheresoever situate, of which I shall die seized or possessed or to which I shall be in any way entitled, or over which I shall possess any power of appointment by Will at the time of my death, including any lapsed legacies, I give, devise and bequeath as follows:

(a) to MAY REIS the sum of $40,000.00 or 25% of the total remainder of my estate, whichever shall be the lesser,

(b) To DR. MARIANNE KRIS 25% of the balance thereof, to be used by her as set forth in ARTICLE FIFTH (d) of this my Last Will and Testament.

(c) To LEE STRASBERG the entire remaining balance.

Monroe’s psychiatrist Dr.  Marianne Kris founded the Anna Freud Centre in London, which inherited her share of Monroe’s estate after Kris’s death.  When Lee Strasberg died in 1982, his inheritance from Monroe passed to his last wife Anna who then created Marilyn Monroe LLC, which now owns her estate share of the publicity rights to Marilyn Monroe.  In 1996, Anna Strasberg hired Indiana-based CMG Worldwide to manage Monroe’s publicity rights.  When Aaron Frosch died in 1989, Anna Strasberg was appointed as the administrator of Monroe’s estate by the New York County Surrogate’s Court.  In 2001 Anna Strasberg was given permission by the Surrogate’s Court to close out the estate and to transfer the remaining assets to Marilyn Monroe LLC (MMLLC).

Monroe’s Will did not mention a right of publicity.  A right of publicity is a creature of state statute.  There is no federal law that governs the right of publicity.  Indiana has the most far-reaching statute concerning the right of publicity, an important fact in Monroe’s case because CMG Worldwide is based in Indiana.   Passed in 1994, Indiana’s Code 32-36-1 recognizes the right of publicity for 100 years after the death of the celebrity in question.  Its application is far-reaching, covering everything from “name, image and likeness” to “voice; signature; photograph; image; likeness; distinctive appearance; gestures; or mannerisms.”

New York, on the other hand, has a much more limited right of publicity.  In New York, the right of publicity is governed by  N.Y. Civ. Rights Law §§ 50, 51.   The right of publicity does not survive the decedent in New York.

In 2007 the Shaw Family Archives (SFA), a family-owner company established by the children of Sam Shaw, filed suit against CMG in the Southern District of New York (Shaw Family Archives Ltd. v. CMG Worldwide, Inc., 486 F. Supp. 2d 309, 312 (S.D.N.Y. 2007)).  At issue was whether Marilyn Monroe LLC held the actress’s post-mortem right of publicity.  At stake was over $7 million annually on the sale of Monroe merchandise, and CMG claimed exclusive rights over Monroe’s postmortem right of publicity.

Sam Shaw was a photographer and friend of Monroe’s who took many photographs of her, including the iconic photo of Marilyn standing over the subway grate with her skirt billowing, a photo that was used as a publicity shot for the film The Seven-Year Itch.   SFA asserted in its complaint that the Shaw children were the holders of the copyright to these photographs (486 F. Supp. 2d at 312-13).  SFA argued that “even if a postmortem right of publicity in Marilyn Monroe’s name, likeness and persona exists, MMLLC and CMG cannot demonstrate that they are owners of the right because only property actually owned by the testator at the time of her death can be devised by will” (Shaw, 486 F. Supp. 2d at 313-14).

Relying on the Indiana statute, Marilyn Monroe LLC (MMLLC) responded by saying that it was the holder of Monroe’s postmortem right of publicity.   MMLLC even counter sued SFA, claiming that SFA had violated Indiana’s Right of Publicity Act because SFA had permitted the sale of a T-shirt bearing a photo of Monroe to be sold in a Target department store in Indiana.

The court granted SFA a summary judgment, meaning that the court found no genuine issue as to any material fact and that SFA was entitled to a judgment as a matter of law.  The court said that because Marilyn Monroe was not a domiciliary of Indiana at the time of her death, she could not transfer her right of publicity through her Will.   She was either a domiciliary of California or New York, and at the time of the trial neither state recognized a postmortem right of publicity.

The case was decided on May 4, 2007.  In October of 2007, California Governor Arnold Schwarzenegger signed into law Senate Bill 771 that created a postmortem right of publicity for non-family members named in the residuary clause in a Will, so long as the decedent was a resident of California at the time of death.   The law was made retroactive, thus impacting Monroe’s estate.  The Screen Actors Guild and Anna Strasberg had lobbied heavily for the passage of the law.

But the passage of the law did not fully resolve the case of Marilyn Monroe.  Was Monroe a resident of New York or of California at the time of her death?  In a choice of law case decided in May 2008, the District Court for the Central District of California held that since the executors of Monroe’s estate had chosen New York as her place of residence at the time of her death and had probated her Will in New York, Monroe was a resident of New York at the time of her death.  And because New York does not allow postmortem rights of publicity, Monroe’s estate could not claim those rights under California law.

The irony was that, in choosing New York over California, the executors unknowingly deprived the residuary beneficiaries (Marilyn Monroe LLC) from gaining exclusive control of her postmortem right of publicity.  They had chosen to probate the estate in New York because California inheritance taxes were higher than New York’s.

What are the lessons to be learned from Marilyn Monroe’s Will?  First, it is a cautionary tale about the importance of the language for the residuary estate in the drafting of a Will.   Secondly, where a person has more than one residence, it is wise to look at how the laws of each state will impact and be implicated in the person’s Will.  And thirdly, each person’s estate is unique, and no boilerplate form can take the place of a carefully crafted Will in the hands of a competent attorney.  Your unique estate deserves the attention it will be given by your attorney.

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.

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