Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Estate Planning Attorney
Unless a Last Will is the subject of litigation challenging it because of claims of undue influence or a failure to conform to the formalities of content and/or execution required by law, a will that is admitted to probate by the Surrogate is intended to assure the transfer of a person’s assets to its named beneficiaries. Should there be no will, the laws of intestacy govern, which I have discussed at length on this site, and a decedent’s assets are subject to the default laws of distribution set forth in our state statutes. HOWEVER, THERE IS A WAY TO GET AROUND THIS LAW! Interestingly N.J.S.A. §3B:23-9, allows beneficiaries of an estate to come to a written agreement to alter the distribution of an estate. This agreement like any other contract can prescribe a different method of distribution of an estate than the will provides. It can supersede the distribution of a will (or no Last Will), SUBJECT to some stipulations.
The first stipulation is that when the beneficiaries seek to propose an agreement to modify a Will or intestate estate to the executor of the estate the beneficiaries must be competent, meaning of “sound mind” and understanding of its terms. The law presumes that those who enter into a contract are competent when they make an agreement. Since this law has not been the subject of much litigation (or legal discussion), the court has not analyzed many of the agreements created between beneficiaries and the executor to determine if they were validly made. Because these agreements involve the probate of a will, they can be challenged by interested parties as being the product of undue influence, fraud, or coercion. This hasn’t happened yet, but it would be interesting to see if a court would apply the same legal reasoning it uses to decide a probate litigation case to this type of case. I suspect they would.
If the agreement is legally valid, the law states that the executor of the estate is bound by its terms. The single case to address this issue is the, Matter of Liss’ Will, which decided that an executor has no power to bring a lawsuit contesting the validity of the agreement, and he/she must follow the agreement. Of course, the law makes it clear that while the executor is bound to the exact terms of the agreement made by the beneficiary an executor still has a fiduciary duty to pay off the taxes, debts and other obligations of the estate. If the agreement distributes property that frustrates this purpose, the executor may be excused from performance.
Finally, and most importantly, for those beneficiaries and potential beneficiaries who are not a party to the agreement, the law also provides that the agreement is subject to the executor’s obligation to provide for those who may lawfully be entitled to the estate. In these situations, where an agreement may frustrate the bested or contingent expectations of future beneficiaries, it is a good idea for the executor to file an action with the Chancery Division of Superior Court to strike the agreement and/or in the alternative, to ask for the court for direction on how to settle all claims, debts, taxes, costs of administration and beneficiary entitlements while following the agreement if the court determines it is valid. This way, the executor is protected.
Are you a beneficiary or executor dealing with an issue(s) described in this page? If so, call our office today. Ask for Mr. Niemann and meet with him personally to discuss your questions and individual situation toll-free at (855) 376-5291 or e-mail him at firstname.lastname@example.org.