New York Probate and Estate Administration Lawyer Blog
This is a petition to terminate a testamentary trust pursuant to EPTL 7-1.19. The trust was established under the will of a decedent, which was admitted to probate on January 23, 2004. Under her will, the testator left her residuary estate, consisting of her residence located at 2531 Ocean Avenue, Brooklyn, New York, in trust. The trustee was authorized to distribute the income to her daughters for their “maintenance, education, advancement, health, comfort or benefit, including but not limited to the need for a suitable residence of the two daughters.
Upon the death of the survivor of the two daughters, the trust terminates and the principal is distributed to the testator’s son, or, if he does not survive her sisters, to his children living at the testator’s death.
On February 18, 2005, the daughter entered into a contract to sell the Ocean Avenue property for $990,000. In April, 2005, the siblings entered into a stipulation allowing the sister to borrow $175,000, secured by a mortgage on the property, to enable her to buy another home. The mortgage was to be satisfied upon sale of the property and the amount used to satisfy the mortgage charged to the daughter’s share of the sales proceeds.
The guardian then recommended termination of the trust and sale of the property (the “stipulation”). The guardian ad litem recommended this course of action because her investigation revealed that the taxes on the property were in arrears and bills were unpaid; both sisters admitted to being unable to manage the property, claiming it was a financial burden and required too much upkeep; neither sister appeared to have steady income; and Stella expressed her desire to move to California to pursue an acting career.
The daughter never settled a decree or qualified as successor trustee, as required by the decision of the Court. She has now filed an amended petition” to terminate the trust and transfer the property to her and Stella upon paying the other beneficiaries (and the guardian ad litem’s fee) the amounts due them under the stipulation.
Although labeled an amended petition, the petitioner is actually bringing a new proceeding. The facts alleged in the new petition supporting the claim for relief are entirely different from the facts on which the decision in the prior proceeding was based. As a result, the matter was treated as a new proceeding and a separate filing fee charged.
The instant petition asks that the Court terminate the trust subject to the payments authorized in the stipulation in the prior proceeding. The petitioner now alleges that she and Stella wish to either improve the property, sell the property in the future or use the property, in whatever way they see fit as the beneficiaries of the Trust, without the requirement of future Court approval. This is not a valid basis to terminate a testamentary trust, even with the consent of all the beneficiaries.
A New York testamentary trust is an irrevocable expression of the testator’s intent, which is to be respected by the Court. “Its duration may not be foreshortened by judicial fiat or by act of the interested parties.” While EPTL 7-1.9 permits termination of a trust upon consent of all interested persons, the statute is limited to terminations during the lifetime of the settlor of the trust. Therefore, except in limited circumstances, a testamentary trust is indestructible.
In recognition of the difficulty of terminating a testamentary trust, the legislature enacted EPTL 7-1.19. L. 2004, ch. 359. EPTL 7-1.19 provides that the court may terminate a testamentary trust if it finds that: (1) the continuation of the trust is economically impracticable, (2) the express terms of the disposing instrument do not prohibit its early termination, and (3) such termination would not defeat the specified purpose of the trust and would be in the best interests of the beneficiaries.
The petition assumes that the stipulation in the prior proceeding is still effective to value the other beneficiaries’ interests. The general rule is that stipulations of settlement are judicially favored and will not be lightly set aside. This is based upon the public policy that, unless public policy is affronted, parties to a civil dispute are free to chart their own course.
In the instant case, there is a countervailing public policy, namely the Court’s responsibility to promote the testator’s testamentary intent as described in his or her will. In the prior proceeding, the Court found that the termination of the testamentary trust fell within the ambits of EPTL 7-1.19, so that the trust could be terminated. Under the facts of the case, therefore, the agreement of the beneficiaries on the distribution of the trust raised no public policy issues. In this proceeding, the petition fails to state a cause of action to terminate the trust.
Therefore, the agreement of the parties as to its distribution is irrelevant. Moreover, there is a question as to whether a stipulation that was never performed can be binding upon all of the parties. For all of the above reasons, the petition is denied.
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