In the courthouse across the street from our Bergen County, N.J., office, a bitter litigation has raged for over five years between Samantha Perelman, granddaughter of Hudson News founder Robert Cohen and daughter of billionaire cosmetics magnet Ronald Perelman, and her uncle James Cohen.
Perelman alleges that after her mother Claudia passed away in 2007, Cohen took control of her grandfather’s estate planning and, taking advantage of the 86-year-old Robert Cohen’s frail state, coerced him into reducing Samantha’s inheritance in his will. Perelman’s challenge came after Robert Cohen passed away, making any determination of whether or not he was unduly influenced far from infallible.
The Perelman v. Cohen lawsuit is playing out in New Jersey, one of 47 states that employs post-death probate procedures (known as post-mortem probate), under which the mental capacity of a testator, like Robert Cohen, can only be considered after his death. Although widely used, the system is inherently flawed, allowing will contests that all suffer from the same evidentiary problem: The testator is no longer alive to testify as to his or her mental capacity and testamentary wishes. As a result, these contests are generally rife with speculation and conjecture that not only increase the expense of these proceedings (the Perelman case is entering its fifth month of trial on the issue of undue influence alone), but also leave the accuracy of their ultimate outcome in doubt.
North Dakota, Ohio, Arkansas and Alaska have addressed this problem by enacting pre-death or “ante-mortem” probate statutes that authorize lifetime will validation. (See N.D. Cent. Code Ann. § 30.1-08.1-01, et seq.; Ohio Rev. Code Ann. § 2107.081, et seq.; Ark. Code Ann. § 28-40-201, et seq.; Alaska Stat. Ann. § 13.12.530, et seq.) These statutes permit testators to have a court declare the validity of their wills during their lifetimes, reducing the probability of a will contest after death.
In North Dakota, for example, a testator can petition a court to enter a judgment during his lifetime concerning certain aspects of his will, specifically: (1) the testator’s compliance with the state’s will execution requirements; (2) that the testator is mentally capable of creating a will (known as testamentary capacity); and (3) the absence of undue influence on the testator. All beneficiaries named in the will and the present intestate successors (those who would inherit from the testator in the absence of a will) must be named as parties to the action and can appear and challenge the will’s validity. With few exceptions, a court’s validation of the different aspects of the will is binding on all parties.
Expanding on North Dakota’s model, Ohio’s statute provides that the failure to use the pre-death probate process cannot be used as evidence of the testator’s wishes. Rather than only allowing judgments on specific aspects of a will, Ohio’s statute allows the entire will to be validated during the testator’s lifetime.
Arkansas’ law also closely tracks North Dakota’s, but is similar to Ohio’s statute in that it permits judgments based on the entire will rather than just specific matters. In addition, Arkansas allows a will to be “modified or superseded by subsequently executed valid wills, codicils, and other testamentary instruments,” whether or not they are validated with a new pre-death probate proceeding.
In 2010, Alaska became the fourth state to adopt pre-death will validation proceedings. Unlike the other three states, Alaska’s model allows pre-death validation of wills and trusts. Additionally, Alaska allows will validation proceedings to be initiated by either a testator or any interested party who has obtained the testator’s consent. Furthermore, Alaska will entertain pre-death probate proceedings even when the testator lives in another state or has no connection to Alaska.
Although there are several options for reducing the likelihood of a will contest currently available in the other 46 states, each fails to offer the protection a pre-death probate proceeding would provide. See Tracy Costello-Norris, Note, Is Ante-Mortem Probate a Viable Solution to the Problems Associated with Post-Mortem Procedures?, 9 Conn. Prob. L.J. 327, 353-55 (1995) (providing a list of alternatives to ante-mortem probate).
Among these options are the following:
Self-Proved Wills. A self-proved will is one that is witnessed by two or more individuals, typically before a notary public, who affirm that the will was signed by the testator in their presence. While the self-proved will provides assurances that the will was actually signed by the testator, it often does not stop claims, like those in the Perelman case, that the will was the product of undue influence or that the testator lacked the mental capacity to make a will. Pre-death probate, on the other hand, would allow individuals like Robert Cohen to offer direct testimonial evidence during their lifetime establishing their mental capacity and the absence of undue influence.
In Terrorem Clauses. In terrorem clauses are clauses in wills that mandate the disinheritance of any beneficiary that challenges the terms of the will. In that regard, in terrorem clauses reduce the financial incentive to challenge a will by increasing the risk of a failed challenge (disinheritance of the challenger). Although these provisions might appear to be effective in preventing will contests, if a reasonable basis for contesting the will exists, courts in some states will not enforce them even if the challenge ultimately fails. A pre-death probate process would allow an individual to protect his or her will from attack without such risk.
Revocable inter vivos trusts. These trusts allow an individual to transfer an interest in property to a trust for distribution after death, while at the same time maintaining the ability to revoke the trust during his or her lifetime. Inter vivos trusts allow individuals to bequeath assets at death while avoiding the probate process, which can be quite burdensome in some states. Despite these benefits, however, revocable inter vivos trusts, just like wills, can be challenged on the basis of fraud, undue influence or lack of capacity.
Joint Ownership with Survivorship Rights. Joint ownership gives multiple individuals the right to control an asset such as the family home during life and then provides a mechanism for transferring rights when one individual dies. If a husband and wife jointly own a home together, for example, when the husband dies, his interest automatically passes to the wife. While this option is very convenient, many individuals may not wish to share control of their assets prior to death. In addition, joint tenancy arrangements can also be contested on various grounds, such as fraud, lack of capacity, or undue influence. A pre-death probate process allows an individual to retain control of his assets until death and provides protection against subsequent attacks on their disposition.
Outright Gifts. Making outright gifts can be a useful way of disposing of assets while an individual is alive. Although easy and convenient, gifts can be contested after death on many of the same grounds as bequests in a will. Additionally, individuals may not wish to dispose of the majority of their estate in this fashion due to control issues, financial constraints and tax implications. Again, pre-death probate avoids these problems while also allowing an individual to retain control of his estate during his lifetime.
Videotaped Will Execution Ceremonies. Like self-proved wills, videotaped will execution ceremonies may assist in establishing the validity of a will if performed properly. This videotaped evidence, however, is not as effective as a pre-death proceeding because it does not allow for interaction between the judge and the testator. In addition, videotaped evidence often raises additional questions, such as what took place before the recording, whether there were “outtakes,” and whether or not the testator was coached by someone behind the camera. At a pre-death probate proceeding, a judge can make careful inquiries regarding the testator’s capacity and freedom from undue influence, while at the same time affording interested parties an opportunity to present contrary evidence.
While the winner of the Perelman case likely won’t be known for many months, if not years, a clear loser is Robert Perelman, who certainly did not want his estate tied up in lengthy and costly litigation between his son and granddaughter. Having the option to go through pre-death probate would have afforded Robert Perelman, and others like him, the opportunity to significantly reduce the probability that litigation will interfere with carefully crafted estate plans. With the benefit of having four states’ pre-death probate laws to draw from, the time has come for all states to adopt their own pre-death probate laws. Doing so will provide individuals with a useful option to consider as an alternative to traditional “after-death” probate.
Glenn R. Kazlow and Christopher P. Massaro are N.J.-based members of the litigation department at the law firm Cole Schotz. Michael R. Yellin is a member of the firm’s litigation and intellectual property departments.