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A06809 Summary:

A06809 Actions:

A06809 Committee Votes:

Committee:JUDICIARY   Chair:Weinstein      
DATE:04/24/2017AYE/NAY:21/0  Action: Favorable         
Weinstein
Aye
Palumbo
Aye
Dinowitz
Aye
Montesano
Aye
Titus
Aye
Barclay
Aye
Lavine
Aye
Goodell
Aye
Zebrowski
Aye
Graf
Aye
Weprin
Aye
Lupinacci
Aye
Braunstein
Aye
Simotas
Aye
Quart
Aye
Titone
Aye
Buchwald
Aye
Steck
Aye
Seawright
Aye
Simon
Aye
Joyner
Aye

A06809 Floor Votes:

A06809 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
 submitted in accordance with Assembly Rule III, Sec 1(f)



 
BILL NUMBER: A6809
 
SPONSOR: Stirpe

 
TITLE OF BILL:
 
An act to amend the estates, powers and trusts law, in relation to
testamentary disposition to trustee under, or in accordance with, terms
of existing inter vivos trust
 
This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of his Surro-
gate's Court Advisory Committee.
 
This measure would (1) clarify the relationship between EPTL sections
3-3.7 and 7-1.18, and (2) amend EPTL 3-3.7 in relation to the making of
a pour over bequest to a trust in a will. EPTL 3-3.7, which permits a
decedent's will to "pour over" probate assets to a revocable amendable
trust, was enacted in 1965 as section 47-g of the Decedent Estate Law
upon the recommendation of the New York Temporary Commission on Estates
(the Bennett Commission). In making its recommendation (which adopted,
basically verbatim, the 1960 version of the Uniform Testamentary Addi-
tions to Trust Act), the Bennett Commission made it clear that it had
(1) specifically considered whether the trust to which the will would
pour over had to be funded during lifetime, (2) decided against requir-
ing such funding, and (3) expressed that decision by adopting the
language of the Uniform Act that the pour over is valid "regardless of
the existence, size or character of the corpus" of the trust.{1}
 
 
In 1997, on the recommendation of the EPTL-SCPA Legislative Advisory
Committee, the Legislature added EPTL 7-1.18, which provides that a
lifetime trust is valid only to the extent of the assets successfully
transferred to the trust during the lifetime of the settlor. L. 1997, c.
139, § 3. However, in the Fourth Report of the Advisory Committee,
recommending the enactment of EPTL 7-1.18, there is nothing to indicate
any intention to disturb the Bennett Commission's decision to permit a
pour over to a trust under 3-3.7 even though no assets have been trans-
ferred to the trust during the decedent's lifetime.  Indeed, the same
chapter of law that added 7-1.18 also added EPTL 7-1.17 (which sets
forth new execution formalities required of a lifetime trust) and
amended section 3-3.7 to specifically require that these new formalities
of section 7-1.17 be met, but at the same time omitted any reference
whatsoever to the funding requirements of section 7-1.18.
 
All of the above makes sense when it is recognized that the purpose of
7-1.18 is to make clear that assets are made subject to a lifetime trust
only if they have been successfully transferred to the trust during the
settlor's testator's life, whereas section 3-3.7 is concerned not with
the existence of a lifetime trust but rather with the validity of a
testamentary transfer of probate assets.
 
Nevertheless, given that EPTL 7-1.18 was added after EPTL 3-3.7 and that
section 3-3.7 does not specifically reference the transfer requirements
of section 7-1.18, some have raised a question with respect to the
relationship of sections 3-3.7 and 7-1.18. It is, therefore, recommended
that clarifying legislation be enacted.  Specifically, it is proposed
that section 3-3.7 be clarified by removing the phrase "regardless of
the existence, size or character of the corpus", and inserting, in its
place, the phrase "regardless of whether any assets have been trans-
ferred to such insurance trust or other trust prior to the death of the
testator or testatrix."
 
II.Trust Formalities
 
A second, somewhat related, issue under section 3-3.7 was involved in
the recent decision of Matter of D'Elia, 40 Misc.3d 355 (Surrogate's
Court, Nassau County 2013).
 
In D'Elia, the testator's will left his residuary estate to a trust of
which he was the grantor and his son was the trustee. The testator
signed the trust at the same time he signed his will, but his son did
not sign the trust until seven days later. The Surrogate held that the
pour over failed because the trust had not been executed in compliance
with section 7-1.17, stating:
 
"EPTL 3-3.7 permits a testator to make a pour-over bequest to a trust in
a will provided that such trust instrument is executed in the manner
provided for in 7- 1.17, prior to or contemporaneously with the
execution of the will, and such trust instrument is identified in such
will. ... Here, the trust was signed by the decedent as settlor on March
22, 2011 contemporaneously with or prior to the execution of his
purported will. The trustee, however, did not sign the trust agreement
until March 29, 2011. Thus, the trust was not in existence at the time
the will was signed."
 
The result in D'Elia, although correct under the letter of sections
3-3.7 and 7-1.17 as presently written, seems an unduly harsh frustration
of the testator's intent, especially when it is seen that the testator,
in simultaneously signing both the will and the trust instrument, had
fully performed his own personal role in the required execution formal-
ities.
 
Moreover, under section 3-3.7, both as originally enacted in 1965, as
well as presently written (L e., as amended in 1997 to include the
requirement of complying with section 7-1.17), if (as is often the case)
the pour over trust is one in which the testator is both the grantor and
the sole trustee, the trust instrument need not be signed by anybody
other than the testator/grantor/trustee (although it must be notarized).
Thus, if the grantor in D'Elia had been the sole trustee to begin with,
the statutes would have been satisfied without his son ever having to
sign the trust instrument as trustee.{2}
 
On the other hand, if, as in D'Elia, the testator chooses to name anoth-
er person as trustee (or co-trustee) of the pour over trust, it is not
unreasonable to require that such person also execute the trust instru-
ment, at least prior to the testator's death when the pour over bequest
becomes effective.
 
We therefore recommend that section 3-3.7 continue to require that in
all cases the settlor execute the trust instrument prior to, or contem-
poraneously with, the execution of the will, but that if a person other
than the settlor is named as a trustee, such person must also execute
the trust instrument at some point prior to the testator's death.
 
This measure, which would have no fiscal impact on the State, would take
effect immediately and apply to all testamentary dispositions to a trus-
tee occurring on or after such effective date.
 
2016 LEGISLATIVE HISTORY:
 
OCA 2016-76
 
{1} Second Report of the Temporary Commission on Estates (1963)("
Because of the doubts which have been raised by decisions in other
states as to whether an unfunded insurance trust is a non-testamentary
act and whether a trust with merely nominal assets meets the requirement
that one of the elements of a valid trust is a trust res, the Uniform
Act in many of the other statutes so provide and it is desirable that
such doubts be removed by a specific provision that neither of such
facts shall affect the validity of the pour-over (p.312).....It is
suggested that a statute validating "pour-overs" to inter vivos trusts
should... state that (a) such trust shall include a funded or unfunded
life insurance trust although the testator has reserved any part or all
of the right of ownership in the insurance contracts, and (b) that the
existence, size or character of the corpus of the trust shall not affect
its validity".)

{2} It can also be pointed out that if this had been a testamentary
trust rather than a section 3-3.7 trust, only the testator's signature
would be required.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

A06809 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          6809
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                     March 21, 2017
                                       ___________
 
        Introduced by M. of A. STIRPE, WEINSTEIN -- (at request of the Office of
          Court  Administration)  --  read once and referred to the Committee on
          Judiciary
 
        AN ACT to amend the estates, powers  and  trusts  law,  in  relation  to
          testamentary  disposition  to  trustee  under,  or in accordance with,
          terms of existing inter vivos trust

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Section 3-3.7 of the estates, powers and trusts law, para-
     2  graph (a) as amended by chapter 139 of the laws of 1997 and such section
     3  as renumbered by chapter 472 of the laws of 1967, is amended to read  as
     4  follows:
     5  § 3-3.7 Testamentary disposition to trustee under, or in accordance with
     6            terms of existing inter vivos trust
     7    (a) A testator [or testatrix] may by will dispose of or appoint all or
     8  any part of [his or her] such testator's estate to a trustee of a trust,
     9  the terms of which are evidenced by a written instrument executed by the
    10  testator  [or  testatrix],  the  testator  [or testatrix] and some other
    11  person, or some other person, including  a  trust  established  for  the
    12  receipt  of the proceeds of an annuity or pure endowment contract, or of
    13  a thrift, savings, pension, retirement, death benefit, stock  bonus,  or
    14  profit-sharing  plan or system or a funded or unfunded life, group life,
    15  industrial life or accident and health  insurance  trust  (although  the
    16  [settlor]  person establishing such trust has reserved any or all rights
    17  of ownership of the insurance contracts), regardless of [the  existence,
    18  size  or character of the corpus of such insurance trust or other trust]
    19  whether any assets have been transferred to the trust prior to the death
    20  of the testator; provided that [such] the trust instrument is identified
    21  in the will and is executed by the person establishing the  trust  prior
    22  to  or contemporaneously with the execution of the will and, unless such
    23  person is the sole trustee, by at least one trustee thereof prior to the
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD09736-01-7
        A. 6809                             2
 
     1  death of the testator, in the manner [provided for in 7-1.17,  prior  to
     2  or  contemporaneously  with  the  execution  of the will, and such trust
     3  instrument is identified in such will] required  by  the  laws  of  this
     4  state  for  the  recording  of a conveyance of real property or, in lieu
     5  thereof, in the presence of two witnesses who shall affix  their  signa-
     6  tures to the trust instrument.
     7    (b) The testamentary disposition or appointment is valid, even though:
     8    (1) The trust instrument is amendable or revocable, or both, provided,
     9  however,  that  the  disposition or appointment shall be given effect in
    10  accordance with the terms of the trust instrument, including  an  amend-
    11  ment  thereto,  as  they appear in writing on the date of the testator's
    12  death and, where the testator so directs, including  amendments  to  the
    13  trust  instrument  after  his or her death, if the instrument evidencing
    14  such amendment is executed  and  acknowledged  in  the  manner  [herein]
    15  provided  for  [executing  and  acknowledging  the  instrument  which it
    16  amends] in paragraph (b) of 7-1.17.
    17    (2) The right is reserved in such trust instrument (A) to exercise any
    18  power over any property transferred to or held in the trust  or  (B)  to
    19  direct  during  the  lifetime  of  the [settlor] person establishing the
    20  trust or any other person, the persons and organizations to whom  or  in
    21  whose behalf the income shall be paid or the principal distributed.
    22    (3) The trust instrument or any amendment thereto was not executed and
    23  attested in accordance with the formalities prescribed by 3-2.1.
    24    (c) The property so disposed of or appointed by will becomes a part of
    25  the  trust  to which it is given, and title thereto vests in the trustee
    26  to be administered and disposed of in accordance with the terms  of  the
    27  trust instrument.
    28    (d)  Any  disposition or appointment to the trustee made by a testator
    29  who died prior to the effective date of this  section,  which  would  be
    30  invalid  under  the applicable law of this state pre-existing the effec-
    31  tive date of this section, shall be construed to create  a  testamentary
    32  trust  under  and  in  accordance with the terms of the trust instrument
    33  which the testator  originally  intended  should  embrace  the  property
    34  disposed  of or appointed, as such terms appear in such trust instrument
    35  at the date of the testator's death.
    36    (e) A revocation or termination of the trust before the death  of  the
    37  testator  shall cause the disposition or appointment to fail, unless the
    38  testator has made an alternative disposition.
    39    § 2. This act shall take effect immediately and  shall  apply  to  all
    40  testamentary dispositions to a trustee occurring on or after such effec-
    41  tive date.

A06809 LFIN:

 
NO LFIN