Can You? Should You? When Your Trusts and Estates Client Crosses New York State Lines
Can You? Should You? When Your Trusts and Estates Client Crosses New York State Lines
By Jill Choate Beier and Jennifer F. Hillman
For years trust and estate practitioners have shared their concerns that New York’s high taxes are pushing wealthier residents to move out of state. In fact, an analysis released this year by New York City’s Independent Budget Office showed an 11% decline in the number of city taxpayers who earned between $1 million and $5 million in 2020 from the prior year.
This perceived migration has caused New York estate practitioners to be frequently confronted with cross-jurisdictional issues. Perhaps your New York clients are snowbirds with a second home in Florida, are beneficiaries of a South Dakota trust or are contemplating a move to Israel. Arguably the most commonly “cut and pasted” (but seldom appreciated) boiler-plate provisions in wills, trusts and other related documents are impacted by these cross-jurisdictional issues. Sometimes the outcome of an issue turns on whether the substantive or procedural law of one jurisdiction or another governs.
An attorney admitted to practice in New York must be aware of and consider the limitations of their law license when advising on these matters. What actions can a practitioner take based upon a conflict of laws analysis? Does taking such action involve the unauthorized practice of law in another jurisdiction? These issues are nuanced and fact specific, but the purpose of this article is to raise awareness that these issues exist.
How Is Domicile Established?
A threshold issue for any conflicts of law inquiry is the client’s domicile. Residence is distinguished from domicile in that residence is dependent upon physical presence or on the passage of time. Domicile, on the other hand, is dependent upon an individual’s intent to make a place their permanent home. The actions of an individual are most important because our actions tend to reflect our intent. Simply talking about changing domicile is not enough—talking or open declarations of intent will not overcome the facts showing evidence of domicile.
For example, assume an individual shortly before death sells all of her New York property and moves to Connecticut. Will she be considered a Connecticut domiciliary at her death? The courts will likely need more evidence to indicate that she intended to abandon her domicile in New York, such as changing her driver’s license and registering to vote in Connecticut, buying real property in Connecticut, filing tax returns in Connecticut, and the like.
It is worth noting that the burden of proof and types of evidence required to establish domicile for conflicts of law purposes is the same as for purposes of imposing personal income taxation by a particular state taxing authority.
Conflicts of Law
A client’s domicile has vast implications for practitioners and the courts alike in the determination of proper jurisdiction and the proper application of the law.
What if, in the scenario described above, the individual had executed a New York will shortly before her move to Connecticut and then died while in Connecticut? What if she died while in New York visiting family? What is the proper jurisdiction for the probate of the will? Even though the will was executed in New York and contains a declaration that the testator lives in New York, the evidence, as discussed above, may point to Connecticut as the more appropriate jurisdiction. What if the beneficiaries want to contest the will based on due execution or undue influence? What if a surviving spouse wants to exercise his right of election? The conflicts of law statutes for both New York and Connecticut require further analysis to determine which state’s law will apply.
The conflicts of law analysis is more straightforward where the decedent died intestate. In such situations, the disposition of real property is governed by the law of the jurisdiction in which the land is located, while the devolution of personal property is determined by the law of the jurisdiction in which the decedent was domiciled at the time of her death.
Conflicts of law issues also arise in connection with inter vivos trusts. Consider, for example, the conflicts of law issue raised when a trust is established in another state but has New York beneficiaries; when a trust is established in New York but has beneficiaries in another state; or when a trust contains a governing law clause directing that the trust be administered pursuant to another state’s law. Often the determination turns on whether the law being applied is procedural or substantive.
Whatever the situation, a practitioner should carefully evaluate the facts and determine whether he or she may represent a client and then evaluate whether he or she should represent the client.
The Unauthorized Practice of Law: What Actions Should You Take?
Pursuant to the NY Rules of Professional Conduct §5.5, a lawyer shall not practice law in a jurisdiction in a manner that violates the regulation of the legal profession in that jurisdiction. Accordingly, a New York practitioner must research and review the law of each jurisdiction to determine whether the actions that the practitioner might take would constitute the unauthorized practice of law in that jurisdiction. The Court of Appeals has long held that when counsel who are admitted to the New York State bar are retained in a matter involving foreign law, they are responsible to the client for the proper conduct of the matter and cannot claim they are not required to know the law of a foreign state. In re Roel, 3 N.Y.2d 224 (1957).
Moreover, pursuant to the doctrine of reciprocal discipline, if an attorney has been disciplined in a foreign jurisdiction the attorney could also be disciplined in New York based upon his or her discipline in the other jurisdiction, subject to some affirmative defenses. 22 NYCRR 1240.13.
What about the Client Who Wants to Move to Florida?
New York trust and estate practitioners frequently find themselves representing snowbirds who share their time between Florida and New York. Some aspects of Florida’s substantive law are materially different than those of New York in the estate and trust context. For example, the Florida rules regarding due execution of a will (§732.502 Fla. Stat. (2003)), the disposition of tangible personal property through incorporation by reference (§732.515 Fla. Stat. (2003)), and impact of joint accounts (§689.11 Fla. Stat. (2003)) are all treated differently in New York. In addition, the Florida Homestead Exemption is a concept that may be completely foreign to New York practitioners.
In Nassau County Bar Association, Committee on Professional Ethics, Opinion No. 1998-8, a New York attorney was asked to assist a potential Florida client with placing Florida assets in trust. While the opinion stated it did not have competence to answer the question of Florida law as to whether this would be the unauthorized practice of law in Florida (which would be decided by Florida’s law), under the facts presented the committee found that there was no ethical violation in New York because (i) there was an understanding that the attorney was not extensively consulting with and advising the client while physically meeting them in Florida; (ii) the attorney was consulting with a duly admitted Florida attorney to review the documents for compliance with Florida law; and (iii) the attorney would fully disclose these facts and arrangements to the client who was paying for the services.
However, this was only one bar association’s opinion based upon its analysis of New York law. Florida courts have held that “if the giving of advice and performance of the service affects important rights of a person and if the reasonable protection of rights and property of those advised and served requires that the persons giving such advice possess legal skills and knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct constitute the practice of law.” Florida Bar v. Sperry, 140 So2d 587 (Fla. 1962) judgment vacated on other grounds 373 U.S. 379 (1963).
As an additional cautionary tale, the Unlicensed Practice of Law (UPL) program was established by the Supreme Court of Florida to protect the public against harm caused by unlicensed individuals practicing law. As a result, the Supreme Court of Florida has given the Florida Bar the duty to investigate and take action against the unlicensed practice of law.
Whatever particular situation a practitioner may be faced with, it is important to recognize that the nuances of cross-jurisdictional issues require additional due diligence in order to protect your client and yourself.
Jennifer F. Hillman is a Partner in Rivkin Radler’s Personal, Family & Business Planning Practice Group as a fiduciary, trust and estate litigator.
Reprinted with permission from the January 27, 2023, issue of the New York Law Journal©, ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.