Opinion
No. 75861/C & D.
02-11-2016
In the Matter of the JUDICIAL SETTLEMENT OF the FINAL ACCOUNT OF BANK OF AMERICA, N.A., (continuing by merger with Fleet National Bank, Effective 06/13/05) and Leighton R. Burns As Co–Trustees of the Article “Seventh” Trust U/W of John H. Weeks for the benefit of Irene R. Weeks, deceased February 21, 2014.
James A. Coniglio, Esq., Underberg & Kessler LLP, Attorneys for Petitioners. Sarah C. Hughes, Esq., McMahon and Grow, Attorneys for John A. Weeks, Jr. & Ethel I. Weeks, James Williams, Esq., Assistant Attorney General.
James A. Coniglio, Esq., Underberg & Kessler LLP, Attorneys for Petitioners.
Sarah C. Hughes, Esq., McMahon and Grow, Attorneys for John A. Weeks, Jr. & Ethel I. Weeks, James Williams, Esq., Assistant Attorney General.
GENERAL BACKGROUND
LOUIS P. GIGLIOTTI, S.
John H. Weeks (herein “John H.”) died a resident of Oneida County, New York on November 30, 1977. His Last Will & Testament dated September 30, 1971, was admitted to probate on December 29, 1977. Article “SEVENTH” of John H.'s Will created a credit shelter trust (hereinafter referred to as the “Trust”.) Article “TENTH” of his Will designated The Oneida National Bank and Trust Company of Central New York (now known as “Bank of America, N.A.”) and Leighton R. Burns, Esq. as co-trustees of the Trust (they are herein collectively referred to as either the “Trustees” or “Petitioners”). Letters of Trusteeship were issued to Petitioners on December 29, 1977 and they have served as Trustees from that date until the present time.
In addition to other language, Article “SEVENTH” of the Will contains three numbered paragraphs which read as follows:
Said Trust Fund shall be held, administered and disposed of by said Trustees as follows:
1. Said Trustees shall manage, invest and reinvest the same and keep the same invested; shall collect and receive the income and profits therefrom; and after paying thereout and therefrom the necessary taxes, charges and disbursements, shall pay the net income therefrom to, or shall apply the same to the use of my said wife, Irene R. Weeks, at least semi-annually and if practicable at more frequent intervals, for and during the term of her natural life, together with such sums out of principal as may be requested by my said wife, for her care, support and maintenance.
2. Upon the death of my said wife, Irene R. Weeks, my Trustees shall pay over the then remaining principal of said Trust Fund to such persons or corporations as my said wife may appoint, in and by her Last Will and Testament; and I hereby give and grant unto my wife, Irene R. Weeks, sole and full power and authority to make such appointment, including the power of appointing her own estate as the beneficiary of such appointment.
3. If my wife, Irene R. Weeks, does not exercise the said power of appointment conferred upon her, the then remaining principal of said Trust Fund shall fall into, become a part of and be disposed of as hereinafter provided with respect to the remainder of the residuary trust upon the death of my wife, as set forth in Clause EIGHTH of this my Last Will and Testament. (emphasis added)
In essence, the above referenced provisions of Article “SEVENTH” require the Trustees to apply the net income of the Trust to the use of John H.'s wife Irene R. Weeks (hereinafter “Irene”) at least semi-annually during her life, together with such sums as Irene might request from principal for her care, support and maintenance. Upon Irene's death the Trustees are to pay the remaining principal balance to such persons or corporations as Irene may appoint in and by her Will. Irene could also appoint her estate as the beneficiary. If Irene did not exercise her power of appointment, the remaining principal balance of the Trust would become part of a residuary trust established in Article “EIGHTH” of John H.'s Will.
Paragraph numbered “2.” of Article “EIGHTH” is important for purposes of this proceeding and reads as follows:
2. Upon the death of my said wife, Irene R. Weeks, or upon my death in the event she shall predecease me, then to divide the balance and remainder of said Fund into three separate shares and portions, one for the benefit of John Smith Weeks, one for the benefit of Shirley Smith Schmitt and one for the benefit of my daughter, Ethel Smith Weeks; and as to the funds so created for John Smith Weeks, Shirley Smith Schmitt and Ethel Smith Weeks,
(a) To manage, invest and reinvest the same and keep the same invested; to collect and receive the income and profits thereof; and after paying thereout and therefrom the necessary charges and disbursements, to pay the net income therefrom to, or apply the same to the use of, the beneficiary for whom such Trust Fund is held at least quarterly during the term of his or her natural life, together with such sums out of principal as in the discretion of my Corporate Trustee shall be necessary or proper for the care, support and maintenance of such beneficiary.
(b) Upon the death of a beneficiary, then the principal of said Trust Fund of and for such deceased beneficiary shall pass to my other then living beneficiaries. In other words, upon the death of a beneficiary, the principal of said Trust Fund shall not pass and belong to such beneficiaries issue.
(c) Upon the death of the last of the three beneficiaries, this trust shall terminate and the balance of the principal and income shall be paid over and delivered to the Mohawk United Methodist Church of Mohawk, New York.
Irene died testate on February 21, 2014, survived by her three children Shirley Smith Schmitt, John A. Weeks, Jr. and Ethel I. Weeks. On March 28, 2014, Irene's Will, dated November 28, 2001, was admitted to probate and Leighton R. Burns, Esq. was appointed executor.
Irene's Will did not expressly exercise the power of appointment granted to her by Article “SEVENTH” of John H.'s Will. However, in Article “Fourth” of her Will, Irene disposed of all of her residuary property to two of her children, i.e. John A. Weeks, Jr. and Ethel I. Weeks, in equal shares. In paragraph “Second,” Irene discharged her daughter Shirley Schmitt from any indebtedness and in paragraph “Third,” devised specified real property to her son John A. Weeks, Jr. and other real property to her daughter Ethel I. Weeks .
Upon request of the Court, Trustee Leighton R. Burns submitted an Affirmation signed January 29, 2016 which verifies, to the satisfaction of the Court, that “John Smith Weeks” mentioned in Article “EIGHTH” of John H.'s Will and “John A. Weeks, Jr.” mentioned in Irene's Will are the same person. The Affirmation also confirms that “Ethel Smith Weeks” mentioned in Article “EIGHTH” of John H.'s Will and “Ethel I. Weeks” mentioned in Irene's Will are the same person and that by reason of marriage, she is a/k/a “Ethel I. Litz”.
PROCEDURAL BACKGROUND
On October 22, 2015, Bank of America, N.A. and Leighton R. Burns, Esq. filed the within proceeding for judicial settlement of their final account as co-trustees of the Trust. In addition to asking the Court to judicially settle their final account and discharge them as to all matters and things contained therein, petitioners have also asked the Court to construe whether the language used in Article “Fourth” of Irene's Will is a valid exercise of the power of appointment granted to her under Article “SEVENTH” of John H.'s Will. If it is found that Irene did not validly exercise the power of appointment in her Will, the Trust will terminate and be distributed to three separate residuary trusts created under Article “EIGHTH” of John H.'s Will for the lifetime benefit of “John Smith Weeks”, “Shirley Smith Schmitt” and “Ethel Smith Weeks.” Upon the death of the last of them, the balance of principal and income would be paid over to “Mohawk United Methodist Church of Mohawk, New York” (now known as Morning Star United Methodist Church). If the Court finds that Irene did validly exercise the power of appointment under Article “Fourth” of her Will, the Trust will then terminate and be distributed outright to John A. Weeks, Jr. and Ethel I. Weeks, in equal shares.
A citation, returnable December 1, 2015, was issued to John A. Weeks, Jr., Ethel I. Weeks, Shirley Smith Schmitt, Morning Star United Methodist Church and the New York State Attorney General's Office. Jurisdiction over all the cited parties was obtained.
EPTL § 8–1.4(e)(1)(D) requires that the New York State Attorney General's Office be given notice of this proceeding.
On the return date, John A. Weeks, Jr. and Ethel I. Weeks appeared by counsel. No one appeared on behalf of Morning Star United Methodist Church although, as indicated, the Attorney General's Office was notified of the potential disposition to a charitable purpose. Shirley Smith Schmitt did not appear. On that date the Court also asked counsel to submit a memorandum of law by January 8, 2016, setting forth their respective positions on the issue. Counsel for John A. Weeks, Jr. and Ethel I. Weeks submitted a letter memorandum dated December 10, 2015. The Attorney General's Office submitted one dated January 7, 2016. Petitioners' counsel has indicated that the Trustees take no position but, instead, leave the issue to the sound discretion of the Court. The Court has reviewed all submissions.
The Court's current Principal Court Attorney formerly represented John A. Weeks, Jr. and Ethel I. Weeks with regard to matters raised in the Trustees' petition, and this fact was disclosed to all appearing parties on the return date. The Court confirmed the Principal Court Attorney would be insulated from this case, following which all attorneys consented to the undersigned remaining assigned to the file.
DISCUSSION
In their memorandum, counsel for Ethel I. Weeks and John A. Weeks, Jr. assert that, by the language of her Will, Irene validly exercised the power of appointment granted to her by John H.'s Will. In support of this assertion, they point to EPTL § 10–6.1(a) which states:
[A]n effective exercise of a power of appointment does not require an express reference to such power. A power is effectively exercised if the donee manifests his intention to exercise it. Such a manifestation exists when the donee:
....
(4) Leaves a Will disposing of all of his property or all of his property of the kind covered by the power, unless the intention that the Will is not to operate as an execution of the power appears expressly or by necessary implication. (emphasis added)
Counsel also cites cases interpreting Personal Property Law § 18, the predecessor to EPTL § 10–6.1, including In re Latimer's Estate, 19 A.D.2d 270, 242 N.Y.S.2d 233 [2d Dept 1963].
It its memorandum of law, the Attorney General's Office states that it is in agreement with the position set forth in the memorandum submitted by counsel for John A. Weeks, Jr. and Ethel I. Weeks.
The Court finds that EPTL § 10–6.1, which sets forth some of the statutory rules governing the exercise of a power of appointment, resolves the issue. EPTL § 10–6.1(a) makes clear that to effectively exercise a power of appointment, a donee need not make an express reference to such power. The section then provides that the power is effectively exercised if the donee manifests [an] intention to exercise it. More importantly, sub-paragraph “4” of this section provides that the leaving of a Will disposing all of one's property, or all of the property covered by the power, effectively exercises the power unless the intention that the Will is not to operate as an execution of the power appears expressly, or by necessary implication, therein. Irene's Will does not expressly state that it is not intended to operate as an execution of the power of appointment, and the Court finds nothing in her Will that necessarily implies that it is not to operate as an exercise of the power.
Moreover, John H.'s Will did not expressly direct that Irene make a specific reference to the power when exercising it. Hence, EPTL § 10–6.1(b) does not apply to prohibit a finding that the power was validly exercised.
Accordingly, the Court finds that the language used in Article “Fourth” of Irene's Will is a valid exercise of the power of appointment granted to her under Article “SEVENTH” of the Last Will and Testament of John H. Weeks and that, as a result, the sole beneficiaries of the remaining principal balance of the Trust are John A. Weeks, Jr. and Ethel I. Weeks.
The accounting, being proper in all other respects, is approved.
Petitioners' counsel is directed to submit a proposed decree in conformance with this Decision and which directs distribution in accordance with “Scenario No. 1” as shown on Schedule J.
Schedule J. of the accounting also sets forth two different methods for the computation of attorneys' fees. On the return date of the Citation counsel for John A. Weeks and Ethel I. Weeks requested that the lesser amount (computed using the “hourly rate method”) be approved. Counsel for the Petitioners, and the Attorney General, agreed to this request. The Court will thus approve the lesser amount in the final decree.
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