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.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7519
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 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.
STATE OF NEW YORK
________________________________________________________________________
7519
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
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.
LBD10069-01-9
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.
