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Court Decides Case Reqarding Distribution of Retirement Funds


An Executrix in a purported will dated June 29, 1964, has petitioned for its probate. Decedent’s brother has filed objections. The other eight distributees have appeared in the proceeding but have not filed objections.

A Probate lawyer said that subsequent to probate proceeding, all nine distributees, as plaintiffs, commenced an action in the Supreme Court of Richmond County against executrix as an individual, and against New York City Employees’ Retirement System of the Board of Estimate of the City of New York.
According to the complaint, the distributees seek, in that action, to set aside a designation dated January 10, 1956, whererby the Decedent designated the said the executrix as the beneficiary of his interest in funds payable on his death by the Retirement System.

The Proponent has now moved this Court for permission to transfer the Supreme Court action to this Court.

An Estate Lawyer said that during his lifetime the Decedent apparently executed various beneficiary designations. According to the complaint in the Supreme Court action, on his original application he named his father. On January 18, 1929, he named his wife. On November 6, 1952, he named his estate. On January 10, 1956, he named the executrix.

Nassau County Probate Lawyers said it is the contention of the plaintiffs in the Supreme Court action that the Retirement System funds are payable to Decedent’s estate. It would seem obvious then, that if the plaintiffs in the Supreme Court action are successful, the ultimate distribution of the Retirement System funds will have to await the determination of the Surrogate’s Court in the pending will contest and the administration of Decedent’s estate. Unless and until a representative of Decedent’s estate is appointed by the Surrogate’s Court and is made a party to the action in the Supreme Court, it is difficult to see how a final binding determination can be made. The validity of the designation of beneficiary might have to be relitigated in an action brought, this time, by an administrator of the estate.

Section 19(a) of Article VI of the Constitution of the State of New York provides that the Supreme Court may transfer ‘any action or proceeding to any other court having jurisdiction of the subject matter.’

A Staten Island Probate Lawyer said that section 33 of Article VI of the Constitution of the State of New York provides that ‘Existing provisions of law not inconsistent with this article shall continue in force.’

In the light of section 19(a) of Article VI of the Constitution of the State of New York, there may be some question as to the necessity of the Surrogate’s consent viewed as a prerequisite to an order of the Supreme Court transferring the pending action in question to this Court. However, since the action sought to be transferred is appropriate to the administration of Decedent’s estate and since full and final justice to all parties may depend upon the completion of the administration of the estate, the application is granted.

In another case, two proceedings concerning the estate of a deceased, who died in 1914, are before the Court. In one proceeding, an individual has asked to have his accounts settled and for permission to resign as executor and trustee. In an earlier opinion, dated May 22, 1963, he was allowed to resign and decedent’s son was appointed in his place. The other proceeding involves the settlement of the accounts of a deceased executrix and trustee. These two proceedings are consolidated with the consent of the parties.

A New York Estate lawyer said that there have been four prior accountings in this estate. The last one was in 1935. In settling that account the then Surrogate expressly reserved for a later determination the question of whether a certain extraordinary dividend received by the trustees from the a corporation should be treated as principal or income.

When he died, decedent owned undivided fractional interests in various parcels of real estate in Richmond and Suffolk Counties. In 1923 the executors and trustees sought and received Supreme Court approval of the formation of the corporation pursuant to Section 116 of the Real Property Law. The Corporation took title to the real property and the estate received stock and bonds in exchange. Prior to 1935 the Corporation sold substantial portions of its real estate holdings in Richmond County at a profit over book value of $91,816.70.

‘The right to a dividend as between the life tenant and remainderman of an estate is determined by the facts as to the source and character of the dividend considered in the light of the testator’s intention.’

As a general rule dividends representing the increased value of the investments of a corporation are to be considered a distribution of capital and should be added to the principal of the trust.
There are exceptions to the general rule, and it is urged that the exception established in a case, should be applied. This exception was based on a finding that the corporation there involved was a real estate trading corporation, and when it sold its real property it was merely selling its stock in trade. These facts led the Court to conclude that the profits realized were made in the ordinary course of business and belonged to the income beneficiary.

The corporation was not a trading corporation buying and selling real estate in the ordinary course of business. It was formed under a special statute, Real Property Law, § 116. This statute, while permitting a trustee to make what would otherwise be an unauthorized investment, does not authorize the formation of a real estate trading corporation. There is no evidence that the Corporation ever bought any real property. It appears that the lands initially conveyed to the Corporation produced enough income to pay expenses and from time to time to pay some ordinary dividends.

The Court concludes that the extraordinary dividends must be added to the principal of the trust.
Although no formal objections were ever filed in either of the proceedings, several matters were the subject to disagreement among the parties. These disagreements have now been resolved by stipulation.

Here in Stephen Bilkis and Associates, we have New York Estate Attorneys who are always ready and available to help you with your legal concerns. We will provide you an advice which will be beneficial for you and which we considered as the best solution. For matters involving allowing a last will and testament, you can ask for an advice from our New York Probate Lawyers.

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