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Surrogate's Court Litigation - Trusts & Estates - Will & Trust Contests - Invalidation of Trust Amendment

2005 NY Slip Op 25129, *; 8 Misc. 3d 200, **;

793 N.Y.S.2d 318, ***; 2005 N.Y. Misc. LEXIS 639

In the matter of a proceeding to set aside the Limited Testamentary Power of Appointment created by Verena Goetz, as Attorney-in-Fact for Robert H. Goetz, under a December 12, 2000 Second Amendment to the Goetz Revocable Trust Agreement.

273/2001

SURROGATE'S COURT OF NEW YORK, WESTCHESTER COUNTY

2005 NY Slip Op 25129; 8 Misc. 3d 200; 793 N.Y.S.2d 318; 2005 N.Y. Misc. LEXIS 639

March 31, 2005, Decided

NOTICE: THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING THE RELEASE OF THE FINAL PUBLISHED VERSION. THIS OPINION IS UNCORRECTED AND SUBJECT TO REVISION BEFORE PUBLICATION IN THE PRINTED OFFICIAL REPORTS.

CASE SUMMARY

PROCEDURAL POSTURE: Petitioner son sought summary judgment setting aside a limited power of appointment under which his deceased mother, pursuant to a power of attorney granted by his deceased father, amended a trust created by his father. Respondent daughter, who was the father's estate's successor executor and the mother's estate's executor, opposed the motion.

OVERVIEW: The father, shortly before his death, signed a trust amendment revoking the trust's division of its residue equally among his children and granting the mother a limited testamentary power of appointment so she could adjust bequests among the children. Under her will, the son received nothing, including a share of assets of the trust. The amendment the father signed was not notarized, as required by the trust, so it was not effective. The next day, the mother, as the father's attorney in fact, signed the amendment. While the trust reserved to the father the power to amend it, the trust did not explicitly confer such authority on an agent, such as the mother, nor did the power of attorney confer such authority on her. N.Y. Gen. Oblig. Law § 5-1502G, regarding estate transactions, did not authorize an attorney-in-fact to amend a trust created by a principal. The trust and the power of attorney had to be construed as written, and the law did not allow a grantor's attorney-in-fact to modify a trust created by the grantor when the trust instrument did not explicitly authorize the method of amendment used, so the amendment the mother signed was void.

OUTCOME: The son's summary judgment motion was granted, as was his petition, and the trust amendment the mother signed was declared to be void, and her attempted exercise in her will of the power of appointment granted in that amendment was likewise void.

CORE TERMS: power of attorney, grantor, revoke, amend, authority to amend, power of appointment, gift, revocable, void, inter vivos trust, summary judgment, estate planning, codicil, signature, lifetime, executor, trust instrument, interest in land, same manner, ineffective, ambulatory, modify, family trust, inter vivos, real estate, coordinated, contending, conferring, authorize, effective

LexisNexis(R) Headnotes Hide Headnotes

Estate, Gift & Trust Law > Powers of Attorney

HN1 An attorney in fact may act for her principal in all matters which do not require that the principal act for himself, to the extent permitted by law and the terms of the power of attorney (N.Y. Gen. Oblig. Law § 5-1502O. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Revocable Living Trusts

HN2 N.Y. Est. Powers & Trusts Law § 7-1.16 provides that a lifetime trust is irrevocable, unless it expressly provides that it is revocable, and if it is, the trust may be revoked or amended in the creator's will, or by the method set forth in N.Y. Est. Powers & Trusts Law § 7-1.17(b). That section provides, inter alia, that any amendment or revocation authorized by a trust must be in writing and executed by a person authorized to amend or revoke the trust. The statute clearly presumes that a grantor may reserve to himself, or grant to another person, the authority to revoke or amend an inter vivos trust. More Like This Headnote

Estate, Gift & Trust Law > Powers of Attorney

Estate, Gift & Trust Law > Trusts > Modification & Termination

HN3 The scope of the authority to revoke or amend a trust is defined by the terms of the trust indenture and New York law, just as the scope of authority granted under a power of attorney is governed by the terms of the power of attorney itself, and, of course, the applicable law. More Like This Headnote

Estate, Gift & Trust Law > Powers of Attorney

HN4 The statutes concerning powers of attorney are found in N.Y. Gen. Oblig. Law § 5-1501 et seq. More Like This Headnote

Estate, Gift & Trust Law > Powers of Attorney

Estate, Gift & Trust Law > Trusts > Modification & Termination

HN5 N.Y. Gen. Oblig. Law § 5-1502(A), (B) and (C), which set forth an attorney in fact's authority in relation to transactions involving real estate, chattels and goods, and bonds and shares, respectively, each contains a subsection granting the authority to execute and deliver a modification of a trust, mortgage or other instrument which the agent may think useful for the accomplishment of any of the purposes enumerated in N.Y. Gen. Oblig. Law § 5-1502A(9)). N.Y. Gen. Oblig. Law §§ 5-1502B and C contain this same language. More Like This Headnote

Estate, Gift & Trust Law > Powers of Attorney

HN6 In general, N.Y. Gen. Oblig. Law § 5-1202A(9), regarding powers of attorney, refers to the purchase, sale, management, assignment or other acts necessary for dealing with real property, granting an agent the authority to dispose of any estate or interest in land. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Modification & Termination

HN7 A grantor's power of revocation of a trust has, historically, been deemed a personal right, terminating upon death, which cannot be exercised by an executor or legatee who is not granted that right in the trust. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Modification & Termination

HN8 Compliance with the method set forth in a trust instrument for amendment is required for an amendment to be effective. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Revocable Living Trusts

HN9 Revocable inter vivos trusts are commonly employed as estate planning tools and are coordinated with the grantor's will, functioning in much the same manner as a will. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Modification & Termination

HN10 Because an amendable trust remains ambulatory, alterations to it can affect a testator's estate plan in substantial ways, in the same manner as a codicil. More Like This Headnote

Estate, Gift & Trust Law > Trusts > Interpretation

HN11 Instruments must be construed as written, by their own terms, and courts may not add to or alter their provisions in the guise of interpreting them, nor interpolate into them broad grants of authority not included by the parties. More Like This Headnote

COUNSEL: Stanley M. Ackert III, Esq., Gersen, Blakeman & Ackert LLP, Attorneys for Petitioner, New York, NY.

Gail M. Boggio, Esq., McCarthy, Fingar, Donovan, Drazen & Smith, LLP, Attorneys for Respondent, White Plains, NY.

JUDGES: Anthony A. Scarpino, J.

OPINIONBY: Anthony A. Scarpino

OPINION:

[**200] [***319] Anthony A. Scarpino, J.

[**201] Stephen Goetz, the petitioner in this proceeding to set aside a limited power of appointment, now moves for summary judgment, contending that an attorney-in-fact may not use that authority to amend a trust created by another person and confer upon herself a limited power of appointment over the trust remainder. Sylvia Perle (respondent) is the successor executor of the estate of the late Robert Goetz (Robert) and the executor of the estate of Verena Goetz (Verena). She opposes the petitioner's motion, contending that both the creation and exercise of the power were lawful.

The Goetz family trust was created on May 11, 1995 as a part of the family's estate planning by Robert, Verena's husband and the father of both the petitioner and the respondent. Article ELEVENTH of the trust provides that the grantor reserves to himself the right to revoke or amend the terms of the trust during his lifetime. On March 9, 1995, Robert executed a statutory short-form durable power of attorney in Verena's favor, granting her the full authority included in the form at that time. Robert executed a first amendment to the trust on August 31, 2000, making an adjustment in a gift to Sylvia. In December 2000, Verena and Robert became concerned that a California real estate transaction between the petitioner and his father was not entirely fair to his parents. Robert had become very ill and it was clear that he would pass away before they could complete their investigation of the transaction. Their longtime estate attorney testified at a deposition that he visited them at home to discuss their estate plans and it was decided that, rather than Robert taking decisive action before the investigation was completed, Robert would revoke the trust provision dividing the residue equally among their children, and instead grant Verena a limited testamentary power of appointment so that she could adjust the bequests as appropriate among the four children. To that end, a second amendment to the trust was prepared for Robert's signature.

On December 11, 2000, one of the lawyers who prepared the amendment took it to the Goetz home, but although Robert signed the document, the attorney did not notarize his signature. She testified that she no longer recalled why not, speculating that perhaps she had doubts as to his competence. The following day, Verena, as Robert's attorney in fact, signed the second amendment. Robert passed away on December 15, 2000. Verena [*2] herself passed away on February 1, 2002, leaving a Last Will and Testament dated August 23, 2001 which expressly disinherited [**202] the petitioner and exercised the power of appointment in favor of her other three children.

Verena's will was admitted to probate after this court granted summary judgment dismissing the petitioner's objections, [***320] which included a protest of the second amendment to the trust. The court declined to address the effectiveness of the power of appointment in the context of the probate proceeding, requiring instead that this miscellaneous proceeding be commenced.

The petitioner contends that, as a matter of law, Verena's attempted amendment of the inter vivos trust under the power of attorney was invalid because Verena used it to make a gift to herself, did not have the authority to amend or revoke the trust, and exceeded the authority granted her under the power of attorney.

The respondent points out that the trust, the power of attorney and Robert's and Verena's wills were the product of careful planning, representing a coherent, coordinated testamentary scheme for both of them. Verena was a trustee of the Goetz family trust, as well as its income beneficiary, had fully participated in all of their financial decisions, and had held her husband's power of attorney since 1995. Respondent argues that Robert had made the gift of the remainder interest to his four children in the body of the trust, and the second amendment alters that disposition only to the extent of giving Verena the authority to designate which children would share in the gift, rather than conferring a gift upon Verena herself. The respondent contends that the amendment was signed by Verena due to Robert's failing physical condition, but was consistent with their plan and Robert's expressed wishes.

The parties have agreed that the issue presented here is one of law, rather than fact, as the facts are not in issue. The question of law presented here is whether an inter vivos trust may be amended by the use of a power of attorney when neither instrument explicitly authorizes such amendments.

HN1An attorney in fact may act for her principal in all matters which do not require that the principal act for himself (Zaubler v Picone, 100 A.D.2d 620, 621, 473 N.Y.S.2d 580 [1984]), to the extent permitted by law and the terms of the power of attorney (see GOL § 5-1502 O; Cymbol v Cymbol, 122 A.D.2d 771, 772, 505 N.Y.S.2d 657, [1986]; Mallory v Mallory, 113 Misc 2d 912, 450 N.Y.S.2d 272 [1982]).

HN2The New York Estates, Powers and Trusts Law (EPTL) section 7-1.16 provides that a lifetime trust is irrevocable, unless it expressly provides [**203] that it is revocable, and if it is, the trust may be revoked or amended in the creator's will, or by the method set forth in EPTL § 7-1.17[b]. That section provides, inter alia, that any amendment or revocation authorized by a trust must be in writing and executed by a person authorized to amend or revoke the trust. The statute clearly presumes that a grantor may reserve to himself, or grant to another person, the authority to revoke or amend an inter vivos trust (see Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 17B, EPTL § 7-1.17 at 335).

HN3The scope of the authority to revoke or amend a trust is, therefore, defined by the terms of the trust indenture and New York law, just as the scope of authority granted under a power of attorney is governed by the terms of the power of attorney itself, and, of course, the applicable law (see In re Estate of Farley, 186 Misc 2d 355, 356, 717 N.Y.S.2d 500 [2000]; Cymbol v Cymbol, 122 A.D.2d at 772; Zaubler v Picone, 100 A.D.2d at 621).

Article ELEVENTH of the trust sets forth the method for amending or revoking it. [*3] It provides:

[***321]

"The GRANTOR hereby reserves the continuing right and power, by instrument (other than a Will or Codicil thereto) executed and acknowledged by the GRANTOR and delivered to the Trustees during the GRANTOR'S lifetime, to revoke this Trust Agreement in whole or in part, or to alter or amend any terms or provisions thereof in any way except that the GRANTOR shall have no power to increase the duties or obligations of the Trustees without their written consent".

This provision clearly reserves the power to amend or revoke to the grantor, and conforms to New York law (see EPTL §§ 7-1.16, 1.17). However, it does not explicitly confer the same authority upon the grantor's agent, or upon any other person. The petitioner argues that EPTL 7-1.17[b] requires that, if an agent or other person is to be granted the authority to amend a trust, the indenture must so specify, and Article ELEVENTH does not do so.

It is not disputed that Robert himself retained the authority to amend the trust, and, had the second amendment been notarized, it would have been effective. However, for reasons which remain unclear, Robert's signature was not acknowledged as required by Article ELEVENTH. Regardless of Robert's intentions, whatever they may have been, he did not fully comply [**204] with the formalities necessary to amend the trust, and neither the trust nor the power of attorney explicitly authorized Verena to amend it.

The respondent argues that the power of attorney did, indeed, include the authority to make trust amendments. HN4The statutes concerning powers of attorney are found in the General Obligations Law, sections 5-1501 et seq. The respondent points toHN5 GOL §§ 5-1502(A)(B) and (C), which set forth the attorney in fact's authority in relation to transactions involving real estate, chattels and goods, and bonds and shares, respectively. Each of these sections contains a subsection granting the authority to execute and deliver a modification of a trust, mortgage or other instrument "which the agent may think useful for the accomplishment of any of the purposes enumerated in this section" (GOL § 5-1502A[9]). Sections B and C contain the same language quoted from A[9], and the respondent asserts that they form the basis of a broad grant of authority in relation to trusts. In particular, the respondent contends that the trust principal is real estate, so that the provisions of GOL § 5-1502A[9], together with GOL § 5-1502, grant Verena the authority to amend the trust, as Robert intended.

HN6In general, GOL § 5-1502A[9] refers to the purchase, sale, management, assignment or other acts necessary for dealing with real property, granting the agent the authority to "dispose of any estate or interest in land". The transaction here does not concern the disposition of an interest in land. Instead, it concerns the designation of persons entitled to take the residue of a trust. Additionally, it must be noted that the section of the General Obligations Law dealing with estate transactions (GOL § 5-1502G) does not contain the quoted language concerning trust amendments, nor does the GOL contain a section conferring upon agents authority over trust transactions in general.

HN7A grantor's power of revocation has, historically, been deemed a personal right, terminating upon death, which cannot be exercised by an executor or legatee who is not granted that right in the trust (Culver v Title Guarantee & Trust Co., 296 NY 74, 78, 70 N.E.2d 163 [1946]; In re Race's Trust, 9 Misc 2d 155, 157, 169 N.Y.S.2d 600 ([1957]). HN8Compliance with the method set forth in [*4] the trust instrument for [**205] amendment [***322] is required for an amendment to be effective (see Estate of Rothwell, 189 Misc 2d 191, 196, 730 N.Y.S.2d 664 [2001]; Culver v Title Guarantee & Trust Co., 296 NY at 78). Reading GOL §§ 5-1502 and 5-1502 as a broad, implicit grant of authority to amend any and all revocable inter vivos trusts necessarily overrules, or substantially modifies, this line of cases sub silentio.

Further, HN9revocable inter vivos trusts are commonly employed as estate planning tools and are coordinated with the grantor's will, functioning in much the same manner as a will (see Matter of Tisdale, 171 Misc. 2d 716, 718-719, 655 N.Y.S.2d 809 [1997]). Because the Goetz revocable trust was created as a part of the decedent's overall estate planning at the same time as his will, the trust can be deemed to "functions as a will since it is an ambulatory instrument that speaks at death to determine the disposition of the settlor's property" (Matter of Tisdale, 171 Misc 2d at 719). HN10Because an amendable trust remains ambulatory, alterations to it can affect the testator's estate plan in substantial ways, in the same manner as a codicil. Were the court to recognize the second amendment to the Goetz trust as valid, it could logically be compelled to recognize the validity of a codicil executed by the testator's agent under a power of attorney, a result not permitted under present law (see EPTL 3 -1.1 et seq).

Most substantially, the instruments at issue here do not contain the terms and grants of authority which the respondents seek to read into them. HN11Instruments must be construed as written, by their own terms, and courts may not add to or alter their provisions in the guise of interpreting them, nor interpolate into them broad grants of authority not included by the parties (Mercury Bay Boating Club v San Diego Yacht Club, 76 N.Y.2d 256, 267, 557 N.E.2d 87, 557 N.Y.S.2d 851 [1990]; Manning v Glens Falls Nat. Bank and Trust Co., 265 A.D.2d 743, 744, 697 N.Y.S.2d 203 [1999]. The petitioner has not cited any New York law or precedent which supports the proposition that an agent may use a power of attorney to modify a trust instrument which does not explicitly authorize that method of amendment. Other states have found attempted amendments not expressly authorized in the trust document or the power of attorney itself to be void and ineffective (Cal. Probate Code § 15401[c]; Tn. St. § 35-15-602; see also Williams v Springfield Marine Bank, 131 Ill. App. 3d 417, 419, 475 N.E.2d 1122, 86 Ill. Dec. 743 [1985]; Muller v Bank of America, N.A., 28 Kan. App 2d 136, 143, 12 P.3d 899 [2000]; Leahy v Old Colony Trust Co., 326 Mass 49, 52, 93 N.E.2d 238 [1950]).

[**206] The parties' other contentions have been considered and found to be without merit.

Accordingly, the motion for summary judgment is granted, and the petition is granted in its entirety. The second amendment to the Goetz Family Trust is declared to be void and of no effect, and the attempted exercise by Verena Goetz in her Last Will and Testament of the power of appointment is likewise void and ineffective.

Settle decree.

Dated: White Plains, NY

March 2005

HON. ANTHONY A. SCARPINO, JR.

Westchester County Surrogate