-  This bill is not active in this session.

A07519 Summary:

Amd 3-3.7, EPT L
Relates to testamentary disposition to trustee under, or in accordance with, terms of existing inter vivos trust and the timing of the transfer of assets and signing of the will.
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A07519 Actions:

05/08/2019referred to judiciary
05/23/2019advanced to third reading cal.447
06/03/2019substituted by s5513
 05/14/20191ST REPORT CAL.705
 05/15/20192ND REPORT CAL.
 05/22/2019PASSED SENATE
 05/22/2019referred to judiciary
 06/03/2019substituted for a7519
 06/03/2019ordered to third reading cal.447
 06/03/2019passed assembly
 06/03/2019returned to senate
 10/04/2019SIGNED CHAP.352
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A07519 Committee Votes:

JUDICIARY Chair:Dinowitz DATE:05/21/2019AYE/NAY:21/0 Action: Favorable

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A07519 Floor Votes:

There are no votes for this bill in this legislative session.
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A07519 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
  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 Matrimoni- al Practice Advisory and Rules 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*. 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 71.17, 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 frus- tration of the testator's intent, especially when it is seen that the testator, in simultaneously signing both the will and the trust instru- ment, had fully performed his own personal role in the required execution formalities. Moreover, under section 3-3.7, both as originally enacted in 1965, as well as at present (i.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**. On the other hand, if, as in D 'Elia, the testator chooses to name another person as trustee (or co-trustee) of the pour over trust, it is not unreasonable to require that such person also execute the trust instrument, 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.   2017-18 LEGISLATIVE HISTORY: OCA 2017-35; Assembly 6809 (M. of A. Stirpe, Weinstein) (PASSED in 2017; ordered to 3rd Rdg., Cal. 476 in 2018)   2016 LEGISLATIVE HISTORY: OCA 2016-76 *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 wheth- er 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".) ** 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.
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A07519 Text:

                STATE OF NEW YORK
                               2019-2020 Regular Sessions
                   IN ASSEMBLY
                                       May 8, 2019
        Introduced  by M. of A. STIRPE, DINOWITZ -- (at request of the Office of
          Court Administration) -- read once and referred to  the  Committee  on
        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.

        A. 7519                             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.
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