New York Probate and Estate Administration Lawyer Blog
In this case, the Appellate Division considered whether assets acquired by a testator’s estate after the death of the testator should be distributed pursuant to the terms of a will or by the laws of intestate succession.
The purpose of a creating a will is to enable the testator to determine who gets their property after they pass away. Wills can be very general, e.g. leaving all property to one person such as spouse. Or, they can be very detailed, e.g. leaving specific property such as real estate, jewelry, or cash to different people. The common thread is that the testator’s intent is to leave their property, meaning whatever they have at the time of their death, to other people.
There are instances, however, when the decedent acquires property after their death. Because they had no knowledge of the property prior to their death, and certainly not at the time they made their will, they could not have intended to dispose of that property in their will.
The history of the Keough case goes back to 2004 when Katherine Keough died testate and left her stepson, Steven, her residuary estate. This meant that whatever was in her estate and was not otherwise specifically devised would go to Steven. In other words, Steven was entitled to everything that was left over after the specific gifts were transferred to the appropriate beneficiaries.
Normally, the division of property under these terms would not be problematic and certainly would not result in litigation. In this case there was a twist. The twist had its roots well before Katherine’s death. Katherine’s husband was William Keough. He was a hostage held captive in Iran for 444 days and released in 1981. He died in 1985.
In 2015, under the Justice for United States Victims of State Sponsored Terrorism Act, William and his family was entitled to compensation. Katherine received $600,000.
The question became—what happens to Katherine’s $600,000? If it is considered part of her residuary estate, then it would go to Steven. If it is considered an after-acquired asset, it would pass to her next of kin under New York’s intestacy rules. Her next of kin was her brother Fred. Fred died intestate in 2018. Note that under the intestacy law, Steven was not Katherine’s next of kin. Stepchildren are not legal heirs unless they are adopted.
The petitioner sought declaratory relief from the Surrogate’s Court that the money was property not subject to the will and must be distributed by the laws of intestacy. In other words, the petitioner’s position was that the money should go to Fred’s estate. The respondent’s position was that the money was part of the Katherine’s residuary estate and should go to Steven. The Surrogate’s Court ruled in favor of the respondent that the money was part of the residuary estate. The petitioner appealed.
The Appellate Division reversed.
The Appellate Division based its decision on EPTL 3-3.1 and the general law of testamentary capacity. EPTL 3-3.1 provides that a testator, through their will, is entitled to dispose of “all of the property (they were) entitled to dispose of at the time of (their) death.” If the testator did not acquire the property before they died, as in this case, they would not have been entitled to dispose of it in their will.
In addition, under the general law of testamentary capacity, a testator must have testamentary capacity to make a testamentary disposition. Katherine could not have had testamentary capacity to dispose of the $600,000 because she did not own it. It did not even exist at the time of her death. Thus, she could not have known the nature and extent of that particular asset—a requirement to have testamentary capacity with respect of a specific asset.
The court reversed the order for the Surrogate’s Court and declared that Katherine’s award under the Justice for United States Victims of State Sponsored Terrorism Act was to be distributed to Fred’s estate under the laws of intestacy.