Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Punitive Damages Okayed in Probate Dispute Case:

By Fredrick P. Niemann, Esq. a New Jersey Probate Dispute attorney

Our New Jersey Supreme Court has ruled under what circumstances punitive damages can be awarded against a fiduciary involved with Wills, Trusts, Probate proceedings and lifetime transfers.

 
A lawsuit was filed against a doctor who was alleged to have persuaded an elderly woman to transfer a large home in Spring Lake, New Jersey to him in lieu of the local Volunteer First Aide Squad who was the prior testamentary beneficiary under her Last Will and Testament.  In its analysis, the Court concluded that the remedy of punitive damages is limited to situations where an individual (who is essentially a stranger to the testator) gains access to him or her through undue influence and then carries out a scheme to place himself or herself in a position to seize control of the testator=s (decedents) assets through a lifetime transfer or a bequest under their Last Will and Testament.  Generally punitive damage awards filed in the Probate Division of the Superior Court must be in compliance with the New Jersey Punitive Damages Act.  This remedy will be infrequent and limited to circumstances in which the person who received the lifetime gift or bequest is an individual who otherwise cannot be punished through a lesser available remedy by the Probate Court. Because of the unique facts of this case, an award of compensatory damages and potentially punitive damages was available.   This decision is significant for the proposition that Executors, beneficiaries of lifetime and testamentary gifts when obtained through undue influence, suspicious circumstances, etc.  can be held personally liable for punitive damages.

 
If you have any questions, contact Fredrick P. Niemann, Esq. toll-free at (888) 800-7442, or e-mail him at fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

When a male graduate student pursuing a degree in military history was inclined to speak his mind in classroom discussions about women in combat and women in the military more generally, he felt inhibited by the university’s broadly worded policy on sexual harassment.

In pertinent part, the policy stated that “all forms of sexual harassment are prohibited, including… expressive, visual, or physical conduct of a sexual or gender-motivated nature, when… such conduct has the purpose or effect of unreasonably interfering with an individual’s work, educational performance, or status; or such conduct has the purpose or effect of creating an intimidating, hostile, or offensive environment.”  The student sued the university to prohibit the enforcement of the policy on the ground that it had a chilling effect on the exercise of his right to free speech.

A federal appeals court sided with the graduate student. The sexual harassment policy’s prohibition of expressive conduct of a “gender-motivated nature” that had the purpose or effect of either unreasonably interfering with other individuals or creating an intimidating, hostile, or offensive environment was unconstitutionally overbroad under the First Amendment. It impermissibly swept within its reach speech that should not be subjected to restrictive regulation.

Regarding the “gender-motivated” characteristic of speech, the court wondered: “Whose gender must serve as the motivation, the speaker’s or the listener’s?  And does it matter? Additionally, we must be aware that ‘gender,’ to some people, is a fluid concept.  Even if we narrow the term ‘gender-motivated’ to ‘because of one’s sex,’ we are far from certain that this limitation still does not encompass expression on a broad range of social issues.”

The term” gender-motivated” also necessarily required an inquiry into the motivation of the speaker, so that the policy punished not only speech that actually caused disruption, but also speech that merely intended to do so. To protect core forms of speech, there should have been a requirement in the policy that the conduct at issue objectively and subjectively create a hostile environment. A school must show that, before prohibiting it, targeted speech is so severe or pervasive that it will actually cause material disruption, and the university’s policy was fatally deficient for not having such a requirement.

It was important to the court’s decision that the challenged harassment policy was that of a university, as opposed to an elementary school or a high school.  It is well recognized that, in the words of United States Supreme Court decisions, “[the college classroom with its surrounding environs is peculiarly the 'marketplace of ideas,' "and "[t]he First Amendment guarantees wide freedom in matters of adult public discourse.”

Discussion by adult students in a college classroom should not be restricted, while certain speech which cannot be prohibited to adults may be prohibited to public elementary and high school students. This is particularly true when considering that public elementary and high school administrators have the unique responsibility to act in the place of parents, a disciplinary and protective role not shared by their counterparts in colleges and universities. Thus, in the case of the plaintiff graduate student, the court kept in mind that the university’s administrators were granted less leeway in regulating student speech than are administrators responsible for younger and more vulnerable students.

Estates holding a closely held business interest valued at greater than 35 percent of the adjusted gross estate can elect to pay estate taxes in installments. The rules also permit the IRS to require the estate to post a surety bond to secure the government’s interest in the deferred tax. The IRS has imposed a policy to make the bond mandatory and the issue was litigated in Tax Court. The Tax Court held that the IRS should apply the bond requirement on a discretionary case-by-case basis. In response, the IRS announced a revision of its policy (IRS Notice 2007-90, 2007-46 IRS 1003) and will apply various factors to determine the need to require a bond. Among the factors to be considered are (1) the duration and stability of the business, (2) the timely ability to pay the installments of tax and interest, and (3) the compliance history of the business. The Notice requests comments from practitioners about other factors that might be appropriate. If you have questions on this issue, please call me to discuss.

Failure to Name an Alternate Beneficiary to an IRA Accelerates Income Tax Liability

In a recent case, the decedent, aged 78, owned an IRA at the time of his death. The designated beneficiary of his IRA was his wife. The decedent failed to name a secondary beneficiary, although a prior designation named his daughter as secondary beneficiary. When his wife died, the decedent failed to complete a new beneficiary form before his death. The executor got the probate court to approve a change in the beneficiary to the IRA owner’s daughter subsequent to his death. The IRS ruled (Ltr. 200742026) that the estate is the beneficiary of the IRA and that no individual can be named beneficiary for the purposes of determining the applicable distribution period of the IRA. Thus, the account must be distributed over the decedent’s remaining fixed-term life expectancy instead of the daughter’s life expectancy, causing income taxes to be incurred earlier than necessary. This ruling indicates the importance of checking beneficiary designations and making timely changes as necessitated by individual circumstances.

APPELLATE DIVISION RULES ON SPOUSAL ELECTIVE SHARE RIGHTS UNDER A PREMARITAL CONTRACT

The New Jersey Appellate Division on June 20, 2007, decided that a widow’s premarital waiver of an elective share to the Estate of her late husband was void when the underlying premarital contract was found unenforceable.

In a case between a step-parent and the children of the decedent, the issued involved the enforceability of the steps-parents’ rights to inherit a portion of her late husband’s estate, even though she had waived her rights to the estate before her marriage. The Court found that because of the requirements of N.J.S.A. 3B:8-10 and N.J.S.A. 37:2-30, the premarital agreement could not be enforced and, therefore, plaintiff’s waiver was unenforceable.

Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold New Jersey law firm commented that this decision points out the extreme caution and adherence to form and substance that must be followed by individuals who contemplate second and/or successive marriages and who want to protect their estate for the benefit of their children. Mr. Niemann cautions that without a carefully prepared pre-marital agreement, “Older, financially successful men and women must be aware of the significant, almost enormous risks to them should the marriage fail. By consulting with a qualified attorney, the individual can take meaningful steps to protect their life’s savings for the benefit of all who are intended to receive it.”

Mr. Niemann is a partner of Hanlon Niemann, P.C. and directs the firm’s business and estate/elder law practice group. The case referred to is In The Estate of Shenn, A-3819-05T5.