In Matter of Keough , a June 17, 2021 opinion from the New York Appellate Division, Fourth Department, the Court 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 intestacy.
The Court determined that after-acquired estate assets must pass by intestacy, relying on New York EPTL 3-3.1 and the requirement that a testator have testamentary capacity.
The Facts of Matter Of Keough
William F. Keough (William) was one of the hostages who was held captive in Iran for 444 days between 1979 and 1981. William had three children, including Steven Keough (Steven). William died in 1985, and his wife, Katherine E. Keough (Katherine) died testate in September 2004.
In her will, Katherine devised the residuary of her estate to William’s son Steven. Under New York’s laws of intestacy, Katherine’s brother Fred was her sole distribute. See EPTL 4-1.1[a][5]. Fred died intestate in August 2018; petitioner is Fred’s cousin and the administrator of Fred’s estate.
In 2015, Congress enacted the Justice for United States Victims of State Sponsored Terrorism Act (Act), which provided monetary compensation to former Iranian hostages and their family members (34 USC § 20144). Under the Act, William was entitled to $4.4 million; Katherine was entitled to $600,000; and each child of William was entitled to $600,000 (34 USC § 20144 [c] [2] [B], [C]). Under the Act, if a person entitled to compensation is deceased, payment from the fund is to be made “to the personal representative of the estate of that person” (34 USC § 20144 [d] [1]).
In 2019, Fred’s cousin and the administrator of his estate sought declaratory relief and named as interested parties Sue Stewart, who is the executrix of Katherine’s estate (respondent), and Steven.
Petitioner asserted that the award under the Act to Katherine’s estate was not governed by the will and must pass under New York’s intestacy laws. Petitioner sought a declaration that the payments now becoming a part of Katherine’s estate are after-acquired assets that pass to Fred’s estate by the laws of intestacy.
Respondent filed an answer and objections to the amended petition, arguing that the payments should be distributed under the residuary clause of Katherine’s will.
The New York Surrogate’s Court agreed with respondent, finding that the payments under the Act should be governed by Katherine’s will, and dismissed the petition.
What Can a Testator Dispose Of By Will In New York?
A New York testator can only dispose of property owned by the testator at death. EPTL 3-3.1 provides that, “[u]nless the will provides otherwise, a disposition by the testator of all his [or her] property passes all of the property he [or she] was entitled to dispose of at the time of his [or her] death.”
The New York Court examined the case law regarding estate assets acquired after the death of the testator, noting that case law is sparse, but consistent with EPTL 3-3.1 that only property a testator is entitled to devise at death may be distributed pursuant to the terms of the will. The Court stated:
We are particularly persuaded by the decision in Shaw Family Archives Ltd., which involved a dispute over ownership interest in Marilyn Monroe’s right of publicity after her death. The court determined that New York law did not permit a testator to dispose by will of property that she did not own at the time of her death (id. at 315). The court cited to EPTL 3-3.1 and held that “[t]he corollary principle recognized by the courts is that property not owned by the testator at the time of his [or her] death is not subject to disposition by will” (id. ; see Nordwind v Rowland , 584 F3d 420, 432 [2d Cir 2009] [citing Shaw Family Archives Ltd. with approval]).
A New York Testator Lacks Capacity To Devise Assets Not Owned At Death
The New York Court determined that the rule that a testator can only dispose of property owned at death is grounded in the testator’s lack of capacity to devise property he or she does not own at the time of death. The Court reviewed the requirements of testamentary capacity in New York (at the time of execution, decedent must understand three things in a general way: (i) the nature and extent of his/her property; (ii) the natural objects of his/her bounty; and (iii) the provisions of the instrument) and reasoned that: “Here, Katherine did not have the testamentary capacity to dispose of assets she did not own at the time of her death because she could not have “kn[own] the nature and extent” of such assets at that time (id. ).”
The Court reversed the New York Surrogate Court’s determination that the Will governed the disposition of the payments under the Act, because the assets were not part of decedent’s estate at death, stating:
We therefore conclude that, under EPTL 3-3.1 and the general law of testamentary capacity, a testator may not dispose by will of property that is not owned by him or her at the time of his or her death. Accordingly, we reverse the order, reinstate the amended petition, and grant judgment in favor of petitioner, and we declare that the payments made to Katherine’s estate under the Act must be distributed pursuant to the laws of intestacy to Fred’s estate.
