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Court Decides Trust Income Issue


An uncle who lived in Connecticut died in March 1936 and in his will which was probated in Connecticut he created a trust for his nephew who lived in New York. The uncle deposited a certain amount of money with a bank. From this trust account, the bank will pay one-third of the income or interest earned by the trust fund to the nephew until he died.
The uncle’s will provided that the trust agreement between his estate and the trustee bank gives the trustee bank the right to pay itself a commission each time it makes a payment of income to the nephew.

The trustee bank made several payments of interest income from the trust fund to the nephew over the years. But several times, it had made payments of income without reserving a small amount corresponding to its commissions.

A New York Probate Lawyer said that periodically during the term of the trust, the trustee bank made accountings of the payments of interest income to the nephew. It reported that although payments had been made, it failed to deduct from the interest income the amount corresponding to commissions for the trustee bank which was allowed under the trust agreement between the trustee bank and the uncle’s estate.

From the accounting that was submitted to the Connecticut court, it showed that in December 1974, all of the trust fund and the income of the trust fund had already been paid to the nephew. In effect, there was no more source of cash in the hands of the trustee to pay out the commissions which were allowed. In its final account, the amount of commissions that the trustee bank wanted collect from the nephew was $1918.00. This represents the commissions it should have deducted from the interest income payment paid to the nephew.

The Connecticut court made the findings that the trustee bank had a right under the uncle’s will to deduct commissions for itself whenever it makes interest income payments. The Connecticut court also made a finding on the amount of commissions claimed. It also found that the commissions should be claimed from the nephew as overpaid interest income.
Manhattan Probate Lawyers said that the problem was that the Connecticut court’s decision ordered the filing of the accounting submitted by the trustee bank to be filed with the Connecticut court. The nephew was not ordered to pay although the Connecticut found that he was liable to return the amount of interest income that was overpaid.

The nephew died in January 14, 1976. During the probate proceedings in New York for the nephew’s will, the trustee bank came and asserted its claim against the estate of the nephew. It is the trustee’s assertion that its right to commissions that was granted in the will of the uncle was recognized by the Connecticut probate court. The amount of payments made to the nephew was also determined by the Connecticut probate court and the corresponding amount of commissions it was entitled to.

At the New York probate proceedings for the will of the nephew, the trustee bank wanted that the Connecticut Probate Court’s decision be enforced as a lien against the estate.
The New York Surrogate’s Court refused to enforce the Connecticut Probate Court’s Order because the Order of the Connecticut Probate Court did not order the nephew or the estate of the nephew to pay the commissions owing to the trustee bank. The only “order” contained in the Order of the Connecticut Probate Court was for the accounting document to be recorded and kept in file with the Connecticut Probate Court. The New York Surrogate’s Court found that there was no order for the payment of commissions from the estate of the nephew.

The Supreme Court now asserts that the Constitution of the United States calls on all states to give full faith and credit to all public acts, records and judicial proceedings in all other states. The State of New York enacted a statute that establishes the procedure for proving and enforcing orders of other courts in other states in the State of New York.

The Uniform Foreign Judgment Acts provides that a foreign order or decree may be filed within 90 days of its authentication in any county clerk in the state of New York. Queens Probate Lawyers said that the party seeking to authenticate the foreign judgment must also execute an affidavit that the foreign judgment or decree was not obtained by default of confession of judgment and is still unsatisfied and its enforcement has not yet been stayed; the affidavit must also state the last known address of the judgment debtor.

The Supreme Court found that when the Connecticut Probate Court heard the trustee bank’s claim for unpaid commissions, the executor of the estate of the nephew was not given notice of that hearing so the executor failed to attend the hearing. It turns out then that the Connecticut Probate Court’s order which is now sought to be enforced within the state of New York was obtained by a default. As such, it cannot be enforced as is in New York.

The Court upheld the Surrogate Court’s ruling to allow the parties to submit a stipulation of facts and proceeded to decide the question on the basis of the stipulation of facts. The Court resolved to apply the laws of New York to the question of the unpaid commissions.

Under New York laws, when the trustee has paid out all the interest income of a trust fund, it is deemed to have waived its right to be paid a commission. When the trustee paid out all of the amounts in the trust fund itself without deducting from the proceeds of the trust fund the commissions it should have earned, the trustee is deemed to have waived its right to be paid the commissions.

Probate proceedings often become complicated when income from trust funds form part of the properties of the estate. A lawyer must navigate through the legal issues using statutes that deal with conflict of laws. The lawyer you choose must be trained in knowing which statutes to apply. At Stephen Bilkis and Associates, our legal team is willing to help you determine which statutes favor your claim.

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