Executor of Estate Can Deduct Expenses Incurred in Caring for his Mother and Brother from Proceeds of Home Sale

Peter and his brother Sheldon are the only children of Anna Biber. Anna owned a home in Morristown, where she lived with Sheldon.

In 1994, when Anna’s health began to decline, Peter was appointed her guardian. In 1998, Anna’s healthcare expenses increased significantly. Since his mother had insufficient assets to pay for care, Peter began to pay from his own funds for Anna’s healthcare costs and other expenses related to the house. Peter’s outlay of funds for Anna’s healthcare costs quickly reached $30,000. To insure repayment, Peter executed a mortgage on his mother’s house. The mortgage was between Anna, signed by Peter as Anna’s guardian, and Peter in his personal capacity. The mortgage secured a “loan” of $30,000 and, in the event Peter made any repairs or incurred other expenses related to the house, the mortgage provided the cost would be added to the principal due under the mortgage.

Anna moved into a nursing home. To qualify Anna for Medicaid while preserving assets in accordance with the Medicaid rules, Peter and Sheldon agreed that Sheldon would take title to Anna’s house as a “caregiver child” for Medicaid planning purposes. Medicaid “vetted the transaction and approved the decision to transfer the property” to Sheldon. The house was then transferred to Sheldon, and Anna was deemed Medicaid eligible. The deed stated the conveyance of the property was subject to the mortgage between Anna and Peter.

Anna died in 2000. Sheldon continued living in the house after Anna’s death. From 1998 until Sheldon’s death in 2008, Peter paid all expenses related to the house, including utilities and property taxes. Peter kept records of the expenses related to the house.

In 2009, Peter was appointed as administrator of his mother’s estate. The Estate’s only asset was the house and Peter was the Estate’s only creditor. After his appointment as the Estate’s administrator, Peter spent $45,000 to repair the house because Sheldon neglected the home while he lived there. Peter tried to sell the house for $365,000. Due to the condition of the home, however, Peter sold the house for the best offer, $295,000. After the sale, Peter notified Joshua Biber, Sheldon’s only child, that he planned to take $165,000 from the proceeds of the sale of the house to repay himself for the expenses related to Anna and Sheldon and maintenance of the house.

In 2012, Joshua filed a verified complaint to compel an Estate accounting. Joshua also sought to void the mortgage, claiming Peter’s execution of the mortgage was a breach of his fiduciary duty as Anna’s guardian. On motion for summary judgment, the probate court dismissed Joshua’s complaint, finding that, while the mortgage was “facially suspect,” Joshua lacked standing to contest the mortgage. However, Joshua received a partial victory as Peter was ordered to provide an updated formal accounting. Joshua was allowed to file objections to the expenses identified in Peter’s formal accounting.

Thereafter, Peter provided an updated formal accounting, including attorney’s fees associated with the probate action, and Joshua filed objections to that accounting. The probate judge dismissed Joshua’s objections to Peter’s formal accounting, finding Peter provided sufficient evidence to support the expenses. Joshua appealed.

On appeal, Joshua argued (1) he had standing to contest the mortgage, (2) Peter’s formal accounting failed for lack of evidentiary support, and (3) Peter should not have been allowed to charge legal fees related to the validity of the mortgage to the Estate.

The appellate court affirmed the trial court’s decision in all respects. First, the court held that:

[O]nly persons with an interest in an estate [may bring a legal action] to void encumbrances by a fiduciary under N.J.S.A. 3B:14-36. In this case, the only person with an interest in Anna’s estate was Sheldon, and he never sought to void the transfer of the house. To the contrary, Sheldon benefitted for ten years by living in the house without contributing to any of its expenses. In addition, the transfer of the home was to Sheldon, not to Peter, his spouse, agent, or his attorney, and there was no conflict of interest under the statute.

Second, the appeals court, like the probate judge, found Peter’s formal accounting, with attached documentation, had a sufficient evidentiary basis. Finally, the appeals court held that “[t]he probate judge properly approved Peter’s legal fees and costs in defending against Joshua’s challenge to the mortgage in accordance with the terms of the mortgage.”

For the full text of this decision, go to: In the Matter of the Estate of Biber, (N.J. Super. Ct., App. Div., No. A-3970-17T3, June 11, 2019

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