Attorneys Fees in Probate Court Actions are NOT Permitted on Proceeds on Life Insurance Policies or Pensions

In the Matter of the Estate of John Oliva, Jr., Superior Court of New Jersey, appellate Division, Docket No. A-2906-04T2, the executrix and sole beneficiary of the estate, Kellie A. McHugh, appealed the Order directing her to pay $17,000 counsel fees to decedent’s parents. The Appellate Division reversed.

On September 22, 2002, the decedent named McHugh as the sole beneficiary in a holographic will and the primary beneficiary on his life insurance policy and pension. The decedent committed suicide nine days later. Probate was granted and she was named Executrix. The parents commenced an action alleging undue influence and lack of testamentary capacity. The judge dismissed the claim of lack of testamentary capacity. The parties then settled the undue influence claim. The parents then moved to recover $61,949.47 in counsel fees. The judge initially granted counsel fees in the amount of $17,500 and reduced it to $17,000.

The executrix argued that the judge should not have awarded counsel fees since no fund existed from which the fees could be paid, that she should not have to pay them from her own funds or from the life insurance or pension proceeds she received as beneficiary. The Appellate Division agreed.

Rule 4:42-9(a)(2) “permits an allowance from a ‘fund’ when it would be unfair to saddle the full cost upon a litigant who is in court to advance more than her own interests.” In probate actions, the award of counsel fees is within the discretion of the courts. To satisfy the rule’s ‘reasonable cause’ requirement, those petitioning for an award of counsel fees must provide the court with ‘a factual background reasonably justifying the inquiry as to the testamentary sufficiency of the instrument by the legal process. Nevertheless, “[e]xcept in a weak or meretricious case, courts will normally allow counsel fees to both proponent and contestant in a will dispute.”

However, in this matter, the court held that non-probate assets such as life insurance and pension proceeds pass by operation of contract and property law outside of the decedent’s estate, and therefore, no authority exists stating that such assets, where an individual beneficiary is named, are a part of the probate estate available to satisfy an award of counsel fees. Additionally, an award of counsel fees against an executrix personally, is warranted only where there is a “gross abuse of the trust and confidence.”

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