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Court Decides if Decedent Meant to Name Petitioner as Sole Fiduciary

A New York Probate Lawyer said that, this case, and an analogous matter decided on the same day, raise troubling questions about the use of pre-printed or form living trusts, which are now being heavily marketed in New York State. The instant case is especially disturbing, because its trust takes the form of loose pages contained in a three ring binder. The proceeding was initiated by the petitioner” for the probate of the Will of the decedent who died on September 9, 1996. The decedent’s Will, executed April 30, 1996, leaves his entire estate to the ” Revocable Living Trust dated April 30, 1996 and any amendments thereto.” The trust agreement provides for lifetime income and principal payments to the decedent as he directs. Upon the decedent’s death the principal remaining is to be distributed to the petitioner, a friend. An alleged amendment leaves 99.75% of the principal balance to the petitioner and .25% to another friend. The decedent is the sole lifetime trustee. The petitioner is either sole personal representative under the Will and sole successor trustee under the trust, or a co-fiduciary in each. A prior Will, dated October 24, 1990, which bequeathed one tenth of one percent of the estate outright to the other friend and the balance to the petitioner, was also filed with the court. The decedent left assets of about $1 million, of which approximately $950,000 had been transferred into the trust and passes according to its terms and $60,000 remained in his name at death and passes according to the provisions of the Will.

A New York Estate Lawyer said that, in reviewing the probate submissions, the court discovered that both the Will and the trust were so ambiguously worded that it was impossible to determine the decedent’s wishes regarding one of the most fundamental elements of his estate plan–the nomination of the fiduciary. Further examination of the documents revealed a staggering number of additional ambiguities, inconsistencies, apparent irrelevancies, and outright errors, many of which pose major problems in ascertaining or effectuating the decedent’s dispositive intent.

A Queens Probate Lawyers said that, at this same time, another construction proceeding involving a form living trust, which contained provisions analogous to those in the document already under review, was brought before the court. The executor of the Will of concerned that the merger of legal and equitable interests in her father’s trust might render it ineffective and hence not a proper receptacle for the pour-over of his estate assets, sought a construction permitting all of the property to be disposed of according to the trust’s terms. Faced with the Howard request for construction of similar provisions, as well as with the immediate need in the instant case to identify the fiduciary and to ascertain the decedent’s intentions regarding other significant provisions of both instruments, this court determined that a construction of the instant Will and trust was necessary at the present time. The Surrogate’s Court has the power to construe a Will when construction is necessary to determine questions in a proceeding before it or to make a complete disposition of a matter. Because one major obscurity concerning the ultimate disposition of the probate estate in the instant matter involved minors or unborn as possible takers, a guardian ad litem was appointed.

A Long Island Probate Lawyers said that, on the return date of the citation for probate and construction of the Will and trust, the decedent’s intestate distributees, five nieces and nephews (hereinafter “the respondents”), appeared by counsel. The respondents maintained that the merger of legal and equitable interests rendered the trust ineffective, but they did not challenge the validity of the Will. Additionally, they argued against any construction upholding the pour-over of the estate into the trust or, alternatively, incorporating the trust into the Will by reference. They sought an interpretation of both instruments that would distribute all of the decedent’s property to them under the Will but by intestacy. The other friend also appeared but raised no objections. After hearing the oral arguments of the parties and requesting written memoranda, this court reserved decision.

The issue in this case is whether the decedent meant to name the petitioner sole fiduciary under both instruments or to designate him and the co-executors and co-successor trustees has been rendered moot by his renunciation of any right to act as primary fiduciary during the pendency of this proceeding. Because many other such form documents are extant, however, this ambiguous language may be expected to give rise to future proceedings.

The trust agreement in question consists of 42 pages, each page having 3 holes in the left margin, contained in a three-ring looseleaf binder, entitled “Estate Planning Portfolio.” The two inch thick binder contains numerous other documents, including a “Certificate of Trust;” various informational pages describing the trust; a copy of the pour-over Will; an “Affidavit of Trust;” a duplicate trust, also signed, but lacking the dispositive sections; a Living Will; a 20-page property power of attorney; a health care power of attorney; and, in a pocket of the binder, an audio tape describing a husband-wife estate plan (although the decedent was unmarried). All pages are easily removable by opening the binder’s rings. The April 30 Will is printed on the same orange paper stock as the trust, but its pages are stapled together at the top. All documents prominently bear the copyright of the attorney-draftsman.

The estate planning package containing the living trust and pour-over Will is an example of a product being heavily promoted throughout New York State, in newspaper advertisements and free seminar programs. In many cases, those marketing the documents, attorneys and enterprising laymen alike, have themselves purchased the forms (or a computer program containing them) from an “estate planning institute” headquartered out of state, through a franchise or other arrangement. In some instances, such franchise agreements also afford the marketer “technical assistance” in the use of the various forms. One of the dangers of such a system, which the instant case points up, is that it leads participant franchisees, who may have little if any experience in sophisticated estate and tax planning, to consider themselves competent to “draft” complex instruments and purvey them on a large scale. In the matter before us, as the guardian ad litem reports to the court, such “drafting” appears no more than piecing together various sections from the forms, often in a seemingly feckless, haphazard manner.
Indeed, this Will and trust agreement collectively represent the most egregious example of maladroit “drafting” this court has encountered. More than a dozen problems involving inconsistencies, obscurities, and outright errors have been brought to the court’s attention. In her preliminary report, the guardian ad litem has identified and enumerated the most serious of these, which include the difficulty of determining the fiduciary under both instruments; the merger of the trust’s legal and beneficial interests and the possible inefficacy of the trust itself; the invalidity of an amendment to the trust, which involved the removal from, and insertion into, the loose-leaf binder of unsigned and unacknowledged pages; the possible failure of the pour-over from the Will to the trust and, concomitantly, of the attempt to incorporate the trust by reference into the Will; and the questionable effect of the attempted exclusion of the respondents from a share in both the estate and trust.

In addition, as the guardian notes, the trust sections describing the disposition of assets upon the settlor’s death seem to direct, on the one hand, a further trust and, on the other, outright distribution. Finally, she points out that both instruments are replete with inconsistencies (for instance, Article One, Section 6 of the Will directly follows Section 2, the Will’s page numbers do not conform to its table of contents, Article Four of the trust provides for distributions to lineal descendants, of which the Will declares the decedent has none), irrelevancies (Articles Six and Seven of the trust are entirely unnecessary), and outright errors (Article One, Section 6 of the Will references this trust agreement and an Article Twelve not even found in the Will, which contains only five articles; several consecutive pages of the trust have the same page numbers) that cumulatively create confusion and doubt about the decedent’s intent and raise concern about possible tampering.

The guardian argues that because the many problematic provisions of both instruments obfuscate the decedent’s meaning and frustrate his purpose, assistance from the court is required to ascertain his intention. We agree. We also determine that, for reasons of judicial economy, the construction of questionable sections of both instruments essential to the administration and disposition of the decedent’s assets should be undertaken now, at the time of the admission of the Will to probate.

It is well established that in a construction proceeding, a court must ascertain the intent of the testator and that it must glean such intent, “not from a single word or phrase, but from a sympathetic reading of the will as an entirety and in view of all the facts and circumstances under which the provisions of the will were framed”. We must first attempt to discern testamentary intent from the four corners of the Will itself, searching for a dominant purpose or plan of distribution and reading and giving effect to individual parts in relation to that purpose. We adhere to the same settled principles in interpreting the trust agreement. And, because of the interrelation of the two documents created by the pour-over, we will view each in conjunction with the other in determining the decedent’s dispositive purposes.

The petitioner, respondents, and guardian all urge, however, that, so confused is the articulation of the testator’s intention in the two instruments, the court consider extrinsic evidence in the form of the testimony of the attorney-draftsman. We do not agree. In a number of decisions involving draftsmen’s errors, we and other courts have warned that to permit a draftsman, perhaps years after the event, to recount a testator’s oral expressions of intent is to risk allowing him to rewrite the Will. Moreover, many factors, including the draftsman’s imperfect memory, his concern for his professional reputation, or his fear of legal action over perceived errors, may influence his testimony, rendering it of little utility.

The potential dangers are, we feel, particularly acute under the circumstances of the instant case. As the copyrights indicate, the documents before us, but especially the trust agreement, represent standard or generic forms. The provisions of this trust are therefore substantially similar to those of thousands of other such agreements sold to consumers by this and other “draftsmen.” As many sections of the instant trust reveal, this draftsman has made little attempt to tailor the form to the particular circumstances of the individual settlor (witness the numerous references to lineal descendants, which this unmarried, childless decedent does not have, as well as the audio tape depicting this as a husband-wife estate plan). A marketer of living trusts, who sells thousands of such “one size fits all” documents annually, may be expected to have only a limited recollection of the circumstances and intentions of each of his customers. And the careless, even reckless, manner with which the provisions of these instruments are pieced together casts serious doubt on the value of any explanation that might be proffered.

Accordingly, we will not entertain any testimony of the draftsman as to the decedent’s stated intentions.

The instant case points up numerous problems involving living trusts (in particular, the different standards by which the validity of a pour-over Will and its receptacle trust are evaluated and the widespread use of loose-leaf trusts). Enactment of legislation such as that recently passed in Florida, requiring that trusts be executed with all the formalities of Wills, or the extension to receptacle trusts of the SCPA 1408 provision for independent court scrutiny of the instrument’s genuineness would provide essential safeguards for the citizens of this state.

Accordingly, the court held that the merger of the trust’s legal and equitable interests in the decedent during his lifetime does not render the petitioner’s remainder interest invalid and that assets held in the trust as of date of death pass outright to the petitioner, after the payment of taxes and other expenses; that the disposition of estate assets to the trust pursuant to Article Three, Section 1 of the Will cannot be given effect, since the trust is not a valid receptacle for the pour-over; that the provision under Article Three, Section 2 of the Will for incorporation of the trust’s terms by reference into the Will cannot be given effect and that accordingly the estate assets pass under the Will, in the absence of objections to its probate, to the respondents as the decedent’s intestate distributees.

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