Articles Posted in Trusts

A trustee is responsible for managing trust property, making distributions to beneficiaries when appropriate, and carrying out the wishes of the person who created the trust. Although beneficiaries may disagree with a trustee’s decisions, not every disagreement is grounds for removal. In Matter of Damiano, the Appellate Division, Third Department, considered when a New York court may remove a trustee and what evidence is required to justify that decision.

Background

Jennifer Damiano created separate trusts for her two children through her will. The trusts were to hold the children’s inheritance until each child reached age 25. She appointed a close friend as trustee and gave the trustee broad authority to manage the trust assets, make investments, approve distributions, and hire attorneys when necessary.

When a trust is being administered, the court’s primary concern is protecting the interests of the trust beneficiaries. If a parent tries to act on behalf of a child in a trust proceeding but has financial interests that conflict with the child’s interests, the court may decide that the parent cannot represent the child.

In Matter of Barton, the Suffolk County Surrogate’s Court considered whether a mother involved in a divorce could participate in a trust accounting proceeding on behalf of her minor child while simultaneously claiming that the trust’s assets actually belonged to the marital estate.

Background

When married couples own property together, questions sometimes arise about who is entitled to the proceeds if the property is sold shortly before one spouse dies. Those disputes can become even more complicated when the money is deposited into only one spouse’s account and conflicting estate plans exist.

In Matter of Mantia, the Suffolk County Surrogate’s Court considered whether the estate of a deceased wife was entitled to proceeds from the sale of a cooperative apartment that had been deposited into her husband’s account shortly before his death. The court also considered whether a constructive trust should be imposed to prevent the husband’s estate from keeping money that belonged to his wife’s estate.

Background

An in terrorem clause, commonly found in wills and trusts, is a legal provision designed to deter beneficiaries from challenging the validity of the document or taking legal action against the estate. Also known as a no-contest clause, it threatens forfeiture of inheritances if a legal challenge is initiated. The clause aims to promote the testator’s intent, discourage unnecessary litigation, and maintain the integrity of the estate plan. While in terrorem clauses in New York wills and trusts are permitted, they are very narrowly construed.

Matter of Follman 2023 NY Slip Op 23292 involves a request for the construction of articles within three separate inter vivos trusts established by the decedent and his wife, Esther Follman. The petitioner, Ahron N. Follman, seeks a ruling that filing a petition for information and/or accountings will not trigger the in terrorem clauses in these trusts. Respondent Avraham Follman opposes the motion, asserting that the in terrorem clauses have already been triggered. This blog explores the background facts, the legal issue at hand, the court’s holding, and provides a comprehensive discussion of the case.

Background Facts

If the language of a trust in New York is not clear, it can result in a dispute among the beneficiaries, as well as between the beneficiaries and the trustee. If the language of the trust is ambiguous or uncertain, the court may be required to step in and interpret the trust and determine the settlor’s intent. This may result in an outcome that is different from what the settlor intended.

In addition, the ambiguity or uncertainty may also lead to confusion and uncertainty among the beneficiaries, as well as the trustee, which can further complicate the administration of the trust. It is therefore important to ensure that the language of a trust is clear and unambiguous in order to minimize the risk of disputes and confusion.

In the Matter of Estate of Patricie Cabanne, a disputed developed between classes of beneficiaries as to how to interpret the terms of the trust.

The trustees managing seven trusts executed by Martin B. in 1969, filed request that the Surrogate’s Court, New York County provide direction on distribution of trust assets to post-conceived children of Martin B.’s deceased son, James.  The court was asked to construe the terms “issue” and “descendants.”

Background

The grantor of a trust died on July 9, 2001, survived by his wife Abigail and their son Lindsay, but predeceased by his son James, who died of Hodgkins lymphoma on January 13, 2001. James, however, after learning of his illness, deposited a sample of his semen at a laboratory with instructions that it be preserved and that, in the event of his death, it be held subject to the directions of his wife Nancy.

In New York a construction proceeding involves a petitioner asking the Surrogate’s Court to interpret language in a will or trust that is unclear.  The language may be open to conflicting interpretations, the language may be inconsistent with other terms of the will, or the language simply might not make sense.

In In re Petition of Nadler, the decedent was survived by three adult children.  Four years prior to her death, the decedent created trust that was funded by shares of a realty company.  One of the decedent’s children is a trustee.  Under the terms of the trust, the children as beneficiaries were entitled to the income from the trust.   Five years after the decedent’s death, the primary asset of the realty company was sold for over $8 million, and a year later the realty company was dissolved.

The petitioners, the beneficiaries of the trust, petitioned the Nassau County Surrogate’s Court for a judicial construction to provide that because of the sale of the assets the realty company and its dissolution, there is no longer a need for the trust.  As a result, the trust should end and its assets distributed to the beneficiaries of the trust.  The petitioners argue that because the trust does not contain directions related to what should happen in the event of the dissolution of the realty company, there is an ambiguity that requires to court to make a judicial construction.  The petitioners point to language in a related trust that allows for the court to step in to resolve any ambiguity related to the trust termination date.  The petitioners also rely on the law which states that a trust can be terminated when its purpose ends.

Testators often include provisions for successor executors to take over the responsibilities of administration in the event that the primary executor is not able or is unwilling to serve through the entire period of administration.  Naming a successor trustee also provides for a more efficient transfer of responsibility in the event the primary trustee steps down.

In the case of Stavin’s Will, there was a dispute related to the appointment of a successor trustee that had its roots after probate began when one of the two co-executed died.  The person named by the testator as the deceased co-executor’s successor petitioned the court for letters.  The remaining co-executor objected.

In 1969 E. Stavin died testate. In her will she named her two sons, C. Stavin and M. Stavin as co-executors of her estate.  The will also named the wife of C. Stavin as his successor executor if C. Stavin predeceased the testator. Similarly, the will named the wife of M. Stavin as his successor executor if he predeceased the testator. Neither son predeceased the testator. However, in 1970, four months after letters were issued, M. Stavin died.  For the next 5 years C. Stavin when about the duties of administering E. Stavin’s estate.