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Petitioner Seeks Final Judicial Settlement of Accounts


Petitioner seeks a final judicial settlement of its accounts as Executor under the last Will and Testament of the deceased. As a part of the judicial settlement, petitioner requests this Surrogate’s Court to direct by appropriate order that future payments of support to decedent’s surviving first wife be made an obligation of the Trustee of decedent’s residuary estate and payable from the income and, if necessary, the principal of that residuary trust.

It appears without dispute that by an agreement dated October 10, 1952, decedent assumed an obligation to pay the sum of $300 a month to his first wife, for her support. It was provided that such monthly payments were to continue for the lifetime of the first wife. The Executor properly concluded that the obligation for payment survived the decedent and was binding upon the estate. The agreement is valid and enforceable. The accounts of the Executor disclose that the required payments have been considered as periodically accruing debts and have been paid monthly by the Executor throughout the administration of the estate.

In this accounting proceeding, provisions for future payments of support to decedent’s first wife are required. It is axiomatic that these provisions must comply with the applicable statutes and fairly resolve the equities of all parties concerned. Proceeding within this general framework, an examination of relevant statutory provisions is first in order.

Sec. 1804 of the Surrogate’s Court Procedure Act sets forth the statutory requirements for payment of contingent or unliquidated claims. Subd. 1 of Sec. 1804 provides in part: ‘and there shall be no distribution without reservation of such estate assets as the court shall determine to be adequate to pay the contingent or unliquidated claim when the amount thereof shall become due and payable.

Subd. 2 of Sec. 1804 contains an additional relevant statutory provision: (i)f the contingent or unliquidated claim has not become so fixed and liquidated the decree on a final accounting shall direct that the assets found sufficient to satisfy the claim or the proportion to which it is entitled Be retained in the hands of the accounting party for such period or periods as the court may deem proper for the purpose of being applied to the payment of the claim when fixed and liquidated and so much of the assets as are not needed for that purpose Be afterwards distributed according to law’. (Italics added).

The acknowledged claim of decedent’s first wife is based upon a written contract providing for monthly payments of $300 until her death. Her claim is not dependent upon the happening of a future event. The right to payment exists presently. Only the amount of required future payments is uncertain. The claim here is unliquidated, not contingent.

Petitioner urges that payment of the unliquidated claim of decedent’s first wife would be best provided for by immediate discharge of the Executor and the final settlement of its accounts through an order directing that future payments on such claim be made from the trust of decedent’s residuary estate and by the Trustee of that trust.

The basis of petitioner’s argument appears to be paragraph ‘FIRST’ of decedent’s will. It provided as follows: ‘In the event that my former wife, shall survive me, I authorize and empower my executor to purchase an annuity in favor of the former, in an amount sufficient to cover the obligation that I have undertaken for her support by stipulation and agreement dated October 10, 1952, but this authorization shall not preclude my executor in its absolute discretion from making any different settlement or adjustment of said obligation’.

In support of its request petitioner advances several arguments. It first argues against the purchase of an annuity for decedent’s former wife. An affidavit of petitioner’s trust officer cites that she is 82 years of age and in an impaired condition of health; that the cost of an annuity, without refund, upon her death is $21,427.10 and the cost of an annuity, with a guaranteed return of basic purchase price is $26,609.90. Petitioner notes that an early death of the former wife would result in a non-recoverable loss of a substantial portion of the cost of any non-refund type of annuity. It notes that in the instance of a purchase of a guaranteed return type annuity that while the purchase price is fully recoverable, a portion of the recovery stems from income earned on the balance of the fund and over the full term of the annuity. The result, it contends, would be that recovery would be protracted over a period of years.

For the reasons stated petitioner contends that its voluntary purchase of either type of annuity would be an abuse of discretion. It further contends and upon the same reasons, that this court should not require such purchase. The court accepts the first contention. There is no nice precise litmus paper test for the exercise of discretion. It is not the province of this court to substitute its judgment for that of the executor, providing always that in the exercise of its discretion the executor has not acted arbitrarily, or contrary to established principles of law. This court cannot say that the risk of loss in the one instance and that of delay in the other are insufficient, or improper to support petitioner’s decision not to purchase an annuity. The court agrees with the second contention of petitioner, but for a different and more compelling reason, viz: the absence in this state of any authority, either by statute or judicial precedent that would authorize this or any Surrogate’s Court to order a lump sum purchase of an annuity in payment of the unliquidated claim currently due.

It does not appear that the Surrogate’s Court Procedure Act has changed the status of the law. Because petitioner is correct in what it has not done, it does not follow that it is correct in what it proposes do. This court can find neither authority nor reason to support the executor’s alternate proposal to fund payment of the unliquidated claim by recourse to a residuary trust.

The applicable statute, Sec. 1804 SCPA, does not authorize such procedure. It provides that provision for payment will be done by the ‘reservation of such estate assets as the court shall determine to be adequate to pay the unliquidated claim when the amount thereof shall become due and payable’. It directs that ‘assets found sufficient to satisfy the claim or the proportion to which it is entitled shall be retained in the hands of the accounting party. It commands that the decree on final accounting ‘shall direct’ the retention of required assets by the ‘accounting party’.

In the opinion of this court the real basis of the cited decisions is that the right to make a will is personal to a decedent. It is not alienable or descendible. It dies with the decedent. The cited authorities have particular application to the case for decision. The express terms of the decedent’s residuary trust provide that the income therefrom is to be paid or applied for the benefit of decedent’s second wife, for and during the term of her life or until such time as she may remarry, ‘whichever be earlier’. It also provides for invasion of principal of the trust for the benefit of the second wife after exhaustion of the marital deduction trust. The right of invasion of principal is to continue until such time as she dies or remarries and is to be in such amount as the trustee, in its discretion, determines necessary for ‘the proper care, support or maintenance’ of the second wife. Upon death or remarriage of the second wife the remaining principal of the trust is to be divided ‘into as many equal parts as shall equal in number those of my said children, , who shall then be living, and those of my said children who shall not then be living, but shall have issue then living, and to pay over and distribute one such equal part to each of my said three children then living, and one such equal part per stirpes to the issue then living of each of my said children who shall not be then living’.

Under the petitioner’s proposal of impressing upon this residuary trust the obligation of making support payments for the first wife for as long as she lives, not one of the terms of the residuary trust can be carried out as the decedent directed they should be. For if the trustee of the residuary trust is required to make monthly support payments of $300 to decedent’s first wife, it cannot pay the full income to the second wife as it was directed to do. Neither will the trustee be able to exercise its absolute and unlimited discretion as to invasion of the principal of the trust for the benefit of the second wife if such principal is to fund the support payments of the first wife. Finally, while the first wife lives, upon remarriage or death of the second wife, the trustee will be unable to divide and pay over to the remainder men the remaining principal because retention of it will be required as the source of continuing payments to the first wife.

It is the judgment of this court that the petitioner’s proposal if granted would substantially alter the decedent’s will and result in a plain deviation of his testamentary scheme. For this additional reason it cannot be permitted.

The conflict of interests which would result in granting petitioner’s proposal provides a third separate and independent basis of support for this court’s decision.

As proposed, the trustee of the residuary trust is to be charged with making support payments of $300 a month to decedent’s first wife. If the income therefrom is insufficient for this purpose, then it is proposed that the principal will be used. The value of the residuary trust as reflected in the account is $66,144.84 representing $52,258.13 of previously distributed property, together with a proposed distribution of the net balance of the property remaining in the hands of the executor of a value of $13,386.71.

In the light of the cited authority it is not necessary to consider the absence of any agreement to petitioner’s proposal by the issue of the children who are contingent remainder men under the residuary trust. It is sufficient that the creator of the trust is dead. The court holds that petitioner seeks to amend the decedent’s residuary trust by imposing upon it a charge for the payment of support to the first wife. It holds further that the trust of the decedent’s residuary estate is indestructible. Accordingly, it disapproves the petitioner’s proposal for this fourth separate reason.

The decision of this court is that the executor will retain in its possession assets of the value of $66,144.84 for the purpose of providing payment of the unliquidated claim of decedent’s first wife and in the management of such reserved assets the executor is free to exercise the discretionary power of investment granted it by the decedent.

It is ordered that a decree settling the accounts of the executor in accordance with the decision reached be submitted upon notice to all interested parties.

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