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In re Estate of Newman

Other Lower Courts

January 22, 2008

In the Matter of the Estate of William Newman, Deceased.

Editorial Note:

This case is not published in a printed volume and its disposition appears in a table in the reporter.

COUNSEL

Rivkin Radler, LLP, (Albert W. Petraglia, Esq., of Counsel) for Irving Newman, petitioner.

Alan Rabunski, Esq., Guardian ad Litem for Estelle Newman.

OPINION

Lee L. Holzman, J.

This is a proceeding by the decedent's son as successor trustee to reform a will dated July 18, 1973, so that the testamentary trust created by Article SECOND for the benefit of the decedent's daughter alleged to be under a disability is converted into a supplemental needs trust (SNT) for her benefit in conformity with EPTL 7-1.12. The remaindermen of the Article SECOND trust are the petitioner and the decedent's other living issue. The guardian ad litem appointed for the daughter opposes the application, contending that the petitioner has a conflict of interest as a remainderman and the testator intended that the entire trust principal be available for any of the daughter's needs, including those covered by governmental benefits.

The decedent died testate on September 10, 1988. The decedent's distributees were the daughter under a disability and three sons. Two sons have post-deceased and the remaining son, the petitioner, is now the successor trustee. Jurisdiction was acquired over all interested parties, including the remaindermen of the Article SECOND trust and the New York City Human Resources Administration.

Article SECOND of the will directs that the residuary be held in trust, with the net income of the trust to be used for the daughter's benefit during her lifetime and, with respect to the trust principal, states that:

"the trustee may at any time and from time to time, pay or apply to the use of my said daughter, so much of the principal of the trust as my trustee may deem proper for the more adequate support and maintenance of my said daughter or to defray the expenses of any sickness, physical or mental, accident or other emergency of my said daughter. The trust shall terminate on the death of my said daughter and the trust property then remaining shall be distributed to and among my issue who survive her, in equal shares, per stirpes." (emphasis in original).

The medical proof adduced indicates that the daughter is presently under a severe, chronic or persistent disability. The daughter lived with the decedent until his death in 1988, when she was approximately 60 years of age. Thus, at the time he executed the will, the decedent was aware that his daughter had developmental, cognitive and physical disabilities which prevented her from being educated past the third grade. After the decedent's death, the daughter temporarily lived on her own but, subsequently, she became unable to live independently and, in March, 2006, she moved to an adult facility in the Bronx where she now resides. At or around the time of her move to the adult facility, the daughter applied for Medicaid and received a notice of acceptance of her application which, apparently, precipitated the commencement of this proceeding. At the time of the decedent's death the trust corpus had a value of $378,348.56, and has a present value of $500,000.

Generally, reformation of testamentary instruments will be granted only where it effectuates the testator's intent (see Matter of Snide, 52 N.Y.2d 193 [1981]). The testator's intent is to be gleaned from a sympathetic reading of the instrument in its entirety and not from a single word or phrase ( Matter of Fabbri, 2 N.Y.2d 236, 240 [1957]).

Pursuant to EPTL 7-1.12(a)(5), enacted in 1993, a testamentary SNT may be created where: (1) the person for whose benefit the trust was established suffers from a "severe or chronic or persistent disability;" (2) the trust evidences the intent that the assets be used to supplement, not supplant, government benefits; (3) the trust prohibits the trustee from using assets in any way that may jeopardize the beneficiary's entitlement to government benefits or assistance; and, (4) the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distribution of trust assets. Public policy encourages the creation of supplemental needs trusts for statutorily qualified persons ( Matter of Kamp, 7 Misc.3d 615, 622 [2005]; Matter of Hyman, 14 Misc.3d 1232[A] [2007]) as a supplemental needs trust is "designed to enhance the quality of the disabled individual's life by providing for special needs without duplicating services covered by Medicaid or destroying Medicaid eligibility" ( Cricchio v Pennisi, 90 N.Y.2d 296, 303 [1997]).

Matter of Escher (94 Misc.2d 952 [1978], affd sub nom Matter of Gross,75 A.D.2d 531 [1980], affd 52 N.Y.2d 1006 [1981]) is the first case to explicitly recognize that most testators who establish discretionary trusts would prefer that the trustees decline to exercise their discretion in favor of using trust funds to pay expenses for care that, otherwise, would be covered by governmental benefits. However, in subsequent cases allowing the reformation of a testamentary trust to create a SNT, the courts have not focused upon whether the decedent's will was executed before or after either the decision in Matter of Escher (94 Misc.2d at 952) or the enactment of EPTL 7-1.12 (see Matter of Longhine,15 Misc.3d 1106[A] [2007] [the will was executed 12 years after the enactment of EPTL 7-1.2]; Matter of Hyman, 14 Misc.3d at 1232[A] [the will was executed the year after Matter of Escher, 94 Misc.2d at 952]). Similarly, the courts have permitted testamentary trusts to be reformed to create a SNT notwithstanding the fact that the trusts have been ...


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