Recent Cases:
Trust Litigation – Accounting Issues
In the Matter of the Irrevocable Funded Life Insurance Trust Established by Joseph Weinberg U/A Dated May 11, 1982, 2011 N.J. Super. Unpub. ____ (Docket No.: A-2351-09T3) (App. Div. 2011). On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Somerset County. Before Judges Parrillo, Yannotti and Espinosa.
This is the third appeal brought by a beneficiary/trustee daughter of two (2) trusts established by Joseph Weinberg. Joseph Weinberg created two trusts for the benefit of his daughters, Lynn and Deborah, the 1982 life insurance trust and the 1997 revocable trust. Joseph named Lynn and Deborah as beneficiaries of his estate under his Will. In this appeal, Lynn requests a remand of the matter to allow for further review of the accounting irregularities.
Joseph was a resident of Florida when he died in 2001. In 2002, Deborah and Lynn entered into a settlement agreement pertaining to the estate and the 1997 trust. As a result of the settlement, Lynn became the sole executor of the estate, the sole trustee of the 1997 trust and the sole beneficiary of both. The settlement did not affect the 1982 trust, in which Deborah and Lynn remained equal beneficiaries. A third party remained trustee of the 1982 trust.
Lynn filed an action requesting an accounting and other relief against the trustee of the 1982 trust. After a hearing, the trial court allowed the third and final accounting of the trustee of the 1982 trust with certain exceptions. The court awarded commissions and allowed attorneys’ fees paid from the 1982 trust. The court’s order provided that the trustee was to supply documentation to Lynn. Five months later, Lynn filed a motion to enforce the Order. After oral argument on the motion, the trial court closed the case, directing the trustee to turn over to Lynn some stock and denying Lynn’s request for further discovery and documentation. Lynn appealed.
On appeal, the Appellate Division affirmed the trial court’s denial of Lynn’s request for additional discovery, citing res judicata and estoppel issues. The trial court properly denied Lynn’s request to reopen the estate and 1997 trust, which was settled, and to reargue issues already adjudicated in two prior appeals.
Trust Litigation – Creditor Collection – Spendthrift Clause
Pickett v. Pritchard and Peapack Gladstone Bank, 2011 N.J. Super. Unpub. ____ (Docket No.: A-2820-09T1) (App. Div. 2011). On appeal from the Superior Court of New Jersey, Law Division, Mercer County. Before Judges Wefing, Payne and Koblitz.
This appeal involves plaintiff’s attempt to collect a judgment against the interest of a beneficiary of a trust established for his benefit under the Wills of his late parents. The Trusts contained a spendthrift provision. The trial court dissolved a writ of execution served upon Peapack Gladstone Bank, respecting a prior order of dissolution entered by a Pennsylvania court, and the plaintiff appealed.
Plaintiff obtained a judgment against Defendant in the US District Court. Defendant is the beneficiary under trusts established under his late parents’ wills. The Trusts were originally administered in Pennsylvania. Plaintiff sought a writ of execution in Pennsylvania seeking to attached Defendant’s income interest in these trusts. A writ of execution was issued by a Pennsylvania Court. Defendant filed a request to dissolve the writ of execution in light of the spendthrift provisions of the trusts, and the Pennsylvania court agreed. No appeal was taken from the order dissolving the writ of execution.
Plaintiff then filed the judgment in New Jersey. The Pennsylvania trustees had resigned and the trust assets were transferred to a New Jersey bank. The Defendant sought execution on his judgment in New Jersey. The Bank objected, claiming that the Pennsylvania order of dissolution should be given full faith and credit, and the trial court in New Jersey agreed, thereby granting the bank’s motion to dissolve the writ of execution. This was upheld on appeal, the Appellate Division finding that the spendthrift provisions of the trusts prevented attachment of the writ of execution.
Trust Litigation – Designation of Successor Trustee
In the Matter of the George Link, Jr. Charitable Trust Established Under the Last Will and Testament of Eleanor Irene Higgins Link, Deceased, 2011 N.J. Super. Unpub. ____ (Docket No.: A-4930-09T4) (App. Div. 2011). On appeal from the Superior Court of New Jersey, Law Division, Monmouth County. Before Judges C.L. Miniman and LeWinn.
This matter involves an appeal by two of the co-trustees of the George Link, Jr. Charitable Trust and the lower court’s denial of their application to approve their designation of a successor trustee.
Soon after the death of decedent, the three trustees of the trust met to discuss trust issues. At the meeting, they appointed successor trustees pursuant to the terms of the will establishing the trust. One of the trustees, Robert Link, also announced his intention to resign as a trustee. Soon thereafter, the other two trustees executed designations of trustees naming their children and revoking any prior designations by Robert. They sent the designations to Robert for his signature. In response, Robert changed his mind about stepping down as trustee. Robert also executed a designation of trustee naming his daughter as his successor. A month later, Robert filed an Order to Show Cause and Complaint seeking to declare the prior designations by the other trustees null and void and to declare the designation of his daughter as successor trustee as valid.
Based on the terms of the will, the lower court found that Robert was given the “right” to designate his successor. Although the discretion exercised by the trustees was subject to majority vote, and Michael, also a trustee was given veto power of the exercise of the trustees’ discretion in making distributions and investments, the court found that this did not apply to the designation of a successor trustee. The court concluded that there was no ambiguity in the terms of the will and therefore no need to examine extrinsic evidence outside the four corners of the will. The will provided that each trustee was given the “right” to appoint a successor. The designation made by Robert was valid, and this decision was affirmed on appeal.
Trust Litigation – Failure to Impute Income to Beneficiary of Discretionary Trust for Purposes of Computing Alimony
Tannen v. Tannen, 2011 N.J. Super. Unpub. ____ (Docket No.: A-53-10) (2011). Before the New Jersey Supreme Court. On appeal from the Superior Court of New Jersey, Appellate Division’s decision reported at 416 N.J. Super. 248 (App. Div. 2010).
The Supreme Court, in affirming the Appellate Division, held that an ex-wife’s beneficial interest in a discretionary trust is not an asset for purposes of computing alimony.
Mark Tannen and Wendy Tannen were married for 18 years. Mark filed for divorce. During their marriage, Wendy’s parents established an irrevocable discretionary support trust for Wendy’s benefit, with Wendy and her parents acting as co-trustees. Before trial, the trial court ordered Mark Tannen to name the trust as third-party defendants. After trial, the trial court issued judgment and applied the Restatement (Third) of Trusts, determining that the terms “support” and “maintenance” in the Trust required the trustees to distribute “such sums as are necessary to maintain” Wendy’s lifestyle. The trial court then held that it must consider trust benefits before computing alimony and imputed income to Wendy from the Trust. An appeal was taken.
On appeal, the Appellate Division noted that the Restatement (Third) of Trusts had not been adopted by any reported decision in New Jersey, and therefore refused to apply this new law. Based on existing law, the Appellate Division held that Wendy’s beneficial interest in the discretionary trust was not an asset for computing alimony. The Supreme Court affirmed for the reasons expressed by the Appellate Division in its decision reported at 416 N.J. Super. 248 (App. Div. 2010).
Trust Litigation – Insurance Broker Liability for Lapse of Life Insurance Policy
Joseph J. Triarsi, as Trustee for the Joseph H. Halpin Insurance Trust v. BSC Group Services, LLC and Herbert Wright , 2011 N.J. Super. Unpub. ____ (Docket No.: A-5047-09T1) (App. Div. 2011). On appeal from the Superior Court of New Jersey, Law Division, Union County. Before Judges Carchman, Messano and Waugh.
Plaintiff, Trustee of an irrevocable life insurance trust, filed suit against the insurance broker and his agency for allowing the Decedent’s life insurance policy to lapse before his death. Specifically, the Trustee claimed that the insurance broker assumed a role beyond that of a broker and because he regularly met with the insured, he knew that the insurance policy in question was critical to decedent’s estate plan as the sole asset of the Trust.
Prior to his death, decedent’s health declined, causing him to become despondent and less attentive to business affairs. This caused the policy to lapse. The Complaint alleged breach of fiduciary duty, breach of duty of care and breach of special relationship between insurance agent and claimant. The matter was designated as a professional malpractice matter requiring the filing of an Affidavit of Merit. Plaintiff did not file an Affidavit of Merit. Defendants filed a motion to dismiss which was opposed, and Plaintiff did not file an Affidavit of Merit in response. The lower court dismissed the Complaint, finding that the Affidavit of Merit Statute applied to insurance producers.
Plaintiff then field an Affidavit of Merit and a motion for reconsideration, claiming that the Affidavit of Merit statute was inapplicable as the lower Court did not hold a Ferreira conference, required within 90 days of the filing of a malpractice Complaint, and that there were extraordinary circumstances warranting reinstatement of the Complaint. This motion was denied. Plaintiff appealed.
On appeal, the Court found that it is the nature of the proof required to prove the claims that controls whether an Affidavit of Merit is required, not how the claims are captioned in the Complaint. The Court held that expert testimony is required to establish that the insurance broker had a duty with respect to the payment of renewal premiums, avoidance of cancellation and reinstatement in the event of cancellation. However, the third count of the Complaint alleged a special relationship between the broker and the decedent whereby the broker, by his conduct, took on responsibility for the policy and invited plaintiff’s detrimental reliance. The appellate Court allowed this claim to go forward as it did not involve professional malpractice. Matter was reversed reinstating this count. The Court also failed to allow the filing of an Affidavit of Merit as no “extraordinary” circumstances existed, this was basically a judgment call by Plaintiff not to file. He also failed to file the Affidavit in response to the motion. Also the failure to hold a Ferreira conference does not toll the time limits of the statute.
Trust Litigation – Partition Action
James F. Silva, Jr. v. Ann E. Fitzpatrick and Joseph Fitzpatrick, husband and wife, 2011 N.J. Super. Unpub. ____ (Docket No.: A-1528-09T3) (App. Div. 2011). On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County. Before Judges Carchman, Graves and Messano.
This matter arises out of a dispute between siblings and the lower court’s order permitting either party to purchase the property which they owned together pursuant to an auction process, without any offsets.
The parties received real estate located in Longport, New Jersey worth approximately $900,000 as a distribution from a trust established by their now deceased parents. At the time of distribution from the trust, the interest of 2 of the siblings were paid off, and a Deed was transferred into the names of plaintiff and defendant. They owned the property equally, with plaintiff occupying the property during the winter months and defendant and her family using the property primarily in the summer months. Plaintiff testified he paid in excess of $200,000 to upgrade the property. He filed a complaint to have the property sold and for reimbursement of the costs associated with the upgrades, claiming that a partition was not practicable. Defendant field an answer claiming that plaintiff had sole possession of the property for over 10 years and that none of the improvements were approved by her. Defendant also sought reimbursement of monies she paid to maintain the property after plaintiff vacated the premises.
At trial, a real estate expert testified that improvements were made to the property but she was unable to pinpoint exactly what improvements were made and when, or what value may have been added by any such improvements. The parties presented conflicting testimony on the improvements. The trial court found that plaintiff failed to establish that defendant had agreed to reimburse him for the improvements, nor had plaintiff established that the improvements had improved the property. The court also recognized that plaintiff in fact made some improvements and therefore refused to charge him for the years of costs associated with maintaining the property after he moved out. Thus, neither party was entitled to a credit.
The Appellate Division affirmed the decision, finding that plaintiff simply failed to prove the value of his improvements to the property.
Trust Litigation – Reformation of Inter Vivos Insurance Trust after Decedent’s Death
In the Matter of the Irrevocable Life Insurance Trust of William McLellan, 2011 N.J. Super. Unpub. ____ (Docket No.: ESX-CP-0107-2011) (Ch. Div. 2011). Decision by the Superior Court of New Jersey, Chancery Division, Essex County.
Decedent’s wife sought reformation of an insurance trust established by her husband to remove the generation skipping provisions of the Trust. Decedent filed for divorce and was living separate and apart from his wife at his death. Pursuant to the terms of the Trust, in the event the parties were living separate and apart, Decedent’s wife was eliminated as a beneficiary. This was conceded, however, the plaintiff sought to continue as trustee.
The reformation of a trust agreement in a probate action requires clear and convincing proof of the testator’s intent. Here, plaintiff sought reformation of the generation skipping provisions of the Trust to allow for her to distribute the insurance proceeds to decedent’s children as opposed to his grandchildren, as she believed that the Trust was established to take advantage of the GST Tax provisions which were no longer necessary in light of the increased exemption of $5.0 million. The Court found that this request failed to meet the clear and convincing evidence standard required under the doctrine of probable intent as no evidence was offered to show that the only reason decedent’s grandchildren were named as beneficiaries of the Trust was to take advantage of the federal estate tax exemption.
The Court also held that the plaintiff may continue as trustee as the provisions in the Trust pertaining to the appointment as trustee did not preclude her from acting as such, even though the decedent had filed for divorce and was living separate and apart from plaintiff at the time of his death.
Trust Litigation – Surcharge Against Trustee for Misappropriation of Trust Funds
In the Matter of the Trust Under the Will of Antonia Zanengo, Deceased, 2011 N.J. Super. Unpub. ____ (Docket No.: A-4997-09T3 (App. Div. 2011). On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Somerset County. Before Judges Sapp-Peterson and Ashrafi.
Defendant appeals from the lower court’s judgment entered against him in the amount of $414,457, plus interest, in favor of the trust for which he was the trustee.
Defendant, a CPA, was appointed as trustee under the Will of decedent, who died in 1994. The trust required defendant to pay income to decedent’s husband, then 80 years old, and principal for his health, maintenance and support. Decedent’s grandchildren were named as residuary remainder beneficiaries. The trust was initially funded with $320,000, but at the death of decedent’s husband, the trust had virtually no assets.
Plaintiff, the father of three of decedent’s grandchildren, brought an action for an accounting from the defendant. After trial, the lower court found that defendant had looted the trust, and entered judgment against him.
On appeal, defendant claims that plaintiff lacked standing, and that defendant had provided services to the beneficiary which the beneficiary agreed to pay for. These arguments were rejected by the court as a minor beneficiary is an interested person under the statute. Defendant also failed to prove by clear and convincing evidence, under the Dead Man’s Statute, that the beneficiary had agreed to pay for services from the defendant. In light of defendant’s looting of the trust’s entire corpus, the court also denied his request for compensation under quantum meruit.
Probable Intent – Imposition of Trusts on Intestate Estate
In the Matter of the Trusts to be Established in the Matter of the Estate of Margaret A. Flood, Deceased, 417 N.J. Super 378 (App. Div. 2010). On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County.
The Court considered whether the doctrine of probable intent applied to a person’s intestate estate where the Decedent had engaged in certain estate planning prior to her death without executing a formal Will.
Decedent, Margaret Flood, had 4 children, 2 of which were disabled and received governmental assistance and Medicaid. Decedent first considered estate planning after her husband’s death in 2004. According to testimony presented to the trial court, Decedent was concerned about protecting the inheritance of her disabled daughters and their obligation to reimburse the government for disability payments. She did not consult an attorney until March of 2008. These plans were delayed due to the illness of one of her children and Decedent’s own injuries. Decedent died on May of 2008 without having executed a Will. The administrator of the Estate filed a Complaint seeking authorization to establish special needs trusts for the Decedent’s 2 disabled children.
The trial Court held that the doctrine of probable intent may extend to give effect to Decedent’s intention to establish special needs trusts for her disabled children.
The Appellate Division disagreed, reversing the trial court’s decision and ordering the disposition of the Decedent’s estate in accordance with intestacy. The doctrine of probable intent is a will construction statute, but it cannot be used to write a will that the testator did not write.
Trusts – Undue Influence
In re the JosephBuscavage and HelenA.BuscavageLiving Trust, 2010 N.J. Super. Unpub. ____ (Docket No.: A-6041-08T3 (App. Div. 2010). On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Somerset County.
This case involved allegations of undue influence pertaining to changes to Decedent’s revocable trust agreement.
Joseph and Helen executed a revocable living trust in 1998 naming various beneficiaries. They had no children and Helen predeceased Joseph. After Helen died, Joseph made 2 unchallenged amendments to the trust in 2001 and 2003, amending the percentage distribution to various nieces and nephews. In 2007, Joseph made additional amendments with a new attorney. The 2007 amendment eliminated certain beneficiaries and is at the center of this appeal.
Joseph’s niece, Helen, contacted a new attorney and brought Joseph to a meeting to discuss his intentions to amend the disposition of his assets under the trust. The attorney went to the hospital to have Joseph sign the amendment. He had surgery the same day he signed the amendment. Five months later, Joseph signed another amendment to the trust further increasing the disposition of his estate to his niece, Helen, and cutting out one of his sisters. This Amendment was signed in the presence of Helen at Joseph’s home, who was notably sick but “mentally fine”, according to the attorney draftsman. Joseph also changed the beneficiaries of some CDs.
Joseph died a few months later on 9/11/07 at the age of 82.
The beneficiaries receiving a reduced interest due to the amendments challenged the validity of same based on undue influence and conflict of interest of the attorney draftsman who also represented Helen who benefited from the change in disposition.
The trial court found that appellants failed to establish that Joseph lacked testamentary capacity, that there was the presence of undue influence, or a conflict of interest by the attorney draftsman which compromised his representation of Joseph. Appellants claim the trial court erred by focusing on testamentary capacity, which was not raised in their complaint, instead of performing an analysis of the case based on undue influence.
Although the trial court denied a motion to dismiss as it found the presence of a confidential relationship and suspicious circumstances, it failed to reference same in its opinion. Nor did it mention its finding of suspicious circumstances, a key element to undue influence. The lower court also failed to make a finding whether the prior relationship with Helen created a conflict of interest.
The matter was remanded for further findings of fact on the issue of undue influence.
Trusts – When is an Inter Vivos Trust subject to equitable distribution?
Tannen v. Tannen, 2010 N.J. Super. Unpub. ____ (Docket Nos.: A-4185-07T1 & A-4211-07T1 (App. Div. 2010). On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County.
In litigation over equitable distribution, alimony and child support, the trial court ordered plaintiff husband to join as third party defendants four separate inter vivos trusts in which the defendant wife or the couples’ children were beneficiaries. The trusts requested dismissal of the third party complaint based on lack of standing and other grounds.
The trusts sought to exclude income from the trusts as an asset for alimony and child support purposes, which was denied. The trial court considered the income generated by the trusts as income for computation of alimony. The court also reasoned that it had the authority to compel a distribution of income when the trustees were being unreasonable in refusing to make distributions..
On appeal, the crucial issue became whether defendant wife’s beneficial interest in the trust was an asset held by her, whether she had control of the income generated by the trust, or the ability to tap into the income. This required the court to analyze the terms of the trust and the probable intent of the settler of the trust by looking at the four corners of the document.
The language of the large trust for defendant wife limited distributions to health, maintenance and support, and specifically stated that distributions could not be compelled by defendant wife. It also had a spendthrift clause. The Appellate Court held that the trust was a discretionary trust not an asset of defendant wife for computation of alimony.
Trustee Compensation
Herder and Fine v. J.P. Morgan Chase Bank and The Francese Light Trust u/w/o Aaron Helwitz, 2009 N.J. Super. Unpub. LEXIS 1425 (Docket No.: A-2635-07T3) (App. Div. 2009). Before Judges Wefing, Parker and LeWinn.
Issue: Was the award of a termination commission and counsel fees to the trustee of a testamentary trust proper?
Holding: Yes. The compensation sought by the Trustee was proper and is provided by statute, and the award of counsel fees to be assessed against the trust for having to defend the action was also proper where no breach of any duty was found. The lower Court found that the trustee’s handling of the trust after the death of the income beneficiary was proper and reasonable. There was also no evidence that the trustee enhanced its statutory fee in any way by its handling of the trust. Plaintiff withdrew their claim of trust mismanagement and their request for a formal accounting prior to trial. The trustee merely defended against the baseless opposition to the termination fee, and counsel fees to the trustee payable from the trust, which were affirmed on appeal.
Trusts – Jurisdiction – Prudent Investor Act
Edelman, et al. v. Merrill Lynch Bank and Trust Company (Cayman) Limited, et al., 2009 N.J. Super. Unpub. LEXIS 296 (Docket No.: A-4529-06T3) (App. Div. 2009). Before Judges Wefing, Yannotti and LeWinn.
Issue: Do the New Jersey Courts have jurisdiction over a trust established by an Argentinean resident which was signed in Florida and governed by the laws of the Cayman Islands where the trustee, Merrill Lynch Bank and Trust Company (Cayman) Limited did not have offices, employees or assets in New Jersey, did not do business in New Jersey, but merely opened an asset management account in Investment, a New Jersey limited partnership, to invest trust assets?
Holding: The trial Court dismissed Plaintiff’s complaint for lack of jurisdiction and forum non conveniens. On appeal, the matter was remanded to allow for discovery on the jurisdictional issues.
A Revocable Trust was established by an Argentinean resident under the laws of the Cayman Islands, who travelled to Florida to execute the documents. The trustee, Merrill Lynch (Cayman), has no offices, employees or assets in New Jersey, and is not registered to do business in New Jersey. The trust provided for income and principal distributions for the grantor, and at her death, for her son and his family. The Trust granted Merrill Lynch (Cayman) broad powers of investing and managing assets. Subsequent to establishing trust, grantor sent Merrill Lynch (Cayman) a letter memorandum expressing her intentions as to limiting distributions from the trust. In light of the memorandum, an advisory committee was established and the assets were conservatively invested. After Grantor’s death, it was determined that grantor’s child and his family would require less income, so more equities were purchased. The assets were reinvested in an asset management account with defendant Investment, a limited partnership in New Jersey, and a subsequent decline in value occurred. The committee issued a recommendation that more fixed income assets be purchased to avoid any further losses.
Eventually, plaintiffs filed suit seeking to recover the more than $1,000,000 loss in value under the NJ Prudent Investors Act. Merrill Lynch (Cayman)sought dismissal of the Complaint based on forum non conveniens, urging that New Jersey had no interest in having its Courts and judicial system resolve the dispute. Plaintiffs argued that by engaging Investment, where the investment decisions were made, Merrill Lynch (Cayman) had purposely availed itself of New Jersey.
In general, defendants must have sufficient contacts with New Jersey for jurisdiction to attach. The record demonstrates that Investment had a role in selecting investments. Due to the fact that the record is not sufficient to support the trial Court’s dismissal as to the role Investment played in managing the trust assets, the matter was remanded for further proceedings and jurisdictional discovery.
The doctrine of forum non conveniens applies where there is a choice of 2 jurisdictions, and a trial in one jurisdiction over the other would serve the convenience of the parties and the ends of justice. Dismissal should be granted only when Plaintiff’s choice of forum is demonstrably inappropriate. The Appellate Court held that dismissal on forum non conveniens grounds should not have been granted without jurisdictional discovery.
Trusts – Title Insurance Policy Voided by Transfer to Trust
Marie Carney-Dunphy v. Title Company of Jersey & Chicago Title Insurance Company, 2009 U.S. Dist. LEXIS 55418 (Docket No.: Civil No.: 07-3972 (JBS/AMD) (U.S.D.C. 2009). Before Judge Simandle.
Issue: Is a beneficiary of a trust fund established by her mother entitled to title insurance coverage on the real estate Deeded to the trust prior to the mother’s death, in light of the subsequent transfer of the real estate into the beneficiary’s individual name?
Holding: No; the beneficiary does not succeed to the grantor’s rights in the title insurance policy.
Plaintiff, who received the real estate in question from a family trust established by her mother, did not succeed to her mother’s rights in the property by operation of law, as that term was used in the title insurance policy, and therefore the policy does not provide coverage to plaintiff.
Mrs. Carney purchased a property in Avalon, New Jersey in her individual capacity, subject to riparian rights of the State of New Jersey and the United States. A title insurance policy was issued in Mrs. Carney’s individual name prior to the purchase which excepted the riparian rights. The term “insured” in the policy included the name insured and all those who succeed to the interest of such insured by operation of law, as distinguished from purchase. Mrs. Carney applied for a riparian grant which was approved. However, the required payment was never made by Mrs. Carney.
Thereafter, Mrs. Carney created an irrevocable trust and transferred the real estate to the trust in 4 separate deeds over time. The trust was held for the benefit of one of Mrs. Carney’s children, and Mrs. Carney relinquished all rights to the income or principal of the trust. The trustees did not obtain a new title insurance policy on the property at the time the transfers were made. Plaintiff and her brother, as beneficiary of the trust, entered into an agreement whereby plaintiff transferred her interest in a family business to her brother and he transferred his interest in the trust to the plaintiff. Plaintiff then folded up the trust and transferred the real estate to herself.
After obtaining the property, plaintiff attempted to prosecute the tidelands grant and satisfy New Jersey’s claim against the property. She sought coverage from the issuer of the original title policy and she was refused coverage.
The Court held that plaintiff did not succeed to her mother’s rights in the property by operation of law and is therefore not a named insured pursuant to the terms of the policy.
A property passing by operation of law passes automatically, such as an involuntary lifetime transfer. A voluntary lifetime transfer does not cause the property to pass by “operation of law”. Plaintiff received the property through voluntary lifetime transfers, as opposed to inheritance or involuntary transfer, and therefore the property did not pass to her by operation of law. Her interest is therefore not covered by the title insurance policy issued to Mrs. Carney, and she was properly denied coverage.
In light of this decision, particular attention should be given to title insurance policies in drafting an estate plan where real estate is involved.