Unless a Last Will is the subject of litigation challenging its validity because of claims of undue influence, mental incapacity, or a failure to meet the formalities of execution (signature) required by law, a Will that is probated by the Surrogate is intended to assure the transfer of a person’s estate to his/her named beneficiaries. Should there be no will, then the laws of intestacy govern. I have discussed these laws at length elsewhere on this site. HOWEVER, IF BENEFICIARIES WOULD LIKE TO MODIFY CERTAIN PROVISIONS OF THE WILL, THERE IS A WAY FOR THEM TO GET AROUND THE LAWS! Interestingly N.J.S.A. §3B:23-9, allows beneficiaries of an estate to come to a written agreement between themselves to alter the distribution of an estate. This agreement like any other agreement can direct a different means of distributing the estate from what the Will specifies. It can even supersede the direct distribution of assets under the Last Will (or no Last Will), subject to some stipulations, and conditions to their recognition.
Modifying a Last Will to Avoid Litigation
The first stipulation is that when beneficiaries disclose to the executor or administrator their agreement to modify a Will or the distribution formula under the law that governs an intestate estate, the beneficiaries must each be competent, meaning each beneficiary must be of “sound mind” and understanding of the proposed agreement, and be of legal age. The law presumes that those who enter into a contract are competent when they make an agreement. Since the law governing consensual agreements modifying a Last Will or Trust has not been the subject of much litigation (or legal discussion), the courts have not analyzed many of these agreements to determine if they are enforceable and because these agreements involve the probate of a will, they can be challenged by interested parties as being the product of undue influence, fraud, or coercion. This hasn’t happened yet, but it would be interesting to see if a court would apply the same legal reasoning it uses to decide a probate litigation case. I suspect they would.
If the agreement between beneficiaries is legally valid, the law states that the executor of the estate is bound by its terms. The single case to address this issue is the, Matter of Liss’ Will, which decided that an executor has no power to bring a lawsuit contesting the validity of an agreement between beneficiaries, and he/she must follow the agreement. Of course, while the law makes it clear that the executor is bound to the exact terms of the agreement made between beneficiaries, he/she still has a fiduciary duty to pay death and inheritance taxes, debts to creditors and other obligations of the estate. If the agreement proposes to distribute property that frustrates the rights of third parties, the executor may refuse to comply.
Finally, and most importantly, for those beneficiaries and potential beneficiaries who are not a party to the agreement, the law also provides that the agreement is subject to the executor’s obligation to provide for beneficiaries who may lawfully be entitled to the estate in the future. In these situations, where an agreement may frustrate the vested or contingent expectations of future beneficiaries, it is a good idea for the executor to file an action with the Chancery Division of Superior Court to approve the agreement and/or in the alternative, to ask for the court for direction on how to settle all claims, debts, taxes, costs of administration and beneficiary entitlements. If the court determines the proposed agreement is lawful, the executor is protected.
Are you a beneficiary or executor dealing with an issue(s) described in this page? If so, call our office today. Ask for Mr. Niemann and meet with him personally to discuss your questions and individual situation toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Estate Planning Attorney