New York Probate and Estate Administration Lawyer Blog
If the language of a trust in New York is not clear, it can result in a dispute among the beneficiaries, as well as between the beneficiaries and the trustee. If the language of the trust is ambiguous or uncertain, the court may be required to step in and interpret the trust and determine the settlor’s intent. This may result in an outcome that is different from what the settlor intended.
In addition, the ambiguity or uncertainty may also lead to confusion and uncertainty among the beneficiaries, as well as the trustee, which can further complicate the administration of the trust. It is therefore important to ensure that the language of a trust is clear and unambiguous in order to minimize the risk of disputes and confusion.
In the Matter of Estate of Patricie Cabanne, a disputed developed between classes of beneficiaries as to how to interpret the terms of the trust.
Background
Patricie Cabanne was a resident of New York who created a trust in 2006. The trust was designed to provide for the education and support of her three children, and to ensure that her assets would be passed on to her descendants in an orderly manner.
In 2016, Ms. Cabanne executed an amendment to the trust agreement that added a provision allowing her to “make distributions directly to my grandchildren and great-grandchildren, as I see fit.” Ms. Cabanne also executed a power of attorney in favor of her daughter, allowing her to act on Ms. Cabanne’s behalf with respect to the trust.
After Ms. Cabanne’s death in 2018, a dispute arose among her heirs regarding the interpretation of the trust. Ms. Cabanne’s children argued that the trust should be divided equally among them, while Ms. Cabanne’s grandchildren argued that they were entitled to a share of the trust assets pursuant to the 2016 amendment.
Discussion
The court first considered the issue of whether the 2016 amendment was valid. The court noted that the amendment was executed after Ms. Cabanne had been diagnosed with dementia and had moved to a nursing home. The court found that the evidence presented suggested that Ms. Cabanne lacked testamentary capacity at the time the amendment was executed.
The court then turned to the question of whether the 2016 amendment was effective as a modification of the trust. The court noted that the trust agreement contained a provision requiring any modifications to the trust to be in writing and signed by Ms. Cabanne. The court found that the 2016 amendment did not satisfy this requirement, as it was not signed by Ms. Cabanne but rather by her daughter in her capacity as power of attorney.
The court then considered whether the provision allowing Ms. Cabanne to make distributions directly to her grandchildren and great-grandchildren was effective as a modification of the trust. The court noted that the provision was unclear as to whether it was intended to modify the distribution provisions of the trust, or merely to provide Ms. Cabanne with the power to make gifts to her descendants during her lifetime.
The court found that the provision was ambiguous and turned to the rules of trust construction to determine the settlor’s intent. The court noted that the primary objective of trust construction is to determine the intent of the settlor, and that this intent should be ascertained from the language of the trust agreement as a whole.
The court also noted that a trust should be construed to give effect to the settlor’s probable intent, as determined from the language of the trust agreement, and that the court should avoid an interpretation that would render any provision of the trust meaningless or superfluous.
The court found that the provision allowing Ms. Cabanne to make distributions directly to her grandchildren and great-grandchildren did not modify the distribution provisions of the trust, but merely provided Ms. Cabanne with the power to make gifts to her descendants during her lifetime. The court noted that the provision did not provide for the creation of a new class of beneficiaries or for a new distribution scheme, but rather allowed Ms. Cabanne to make gifts to her descendants in addition to the benefits already provided for in the trust.