r the marital deduction ( Matter of Pasquale, NYLJ, Mar. 21, 1997, at 38, col. 5; Matter of Opperman, NYLJ, Oct. 18, 1989, at 26, col. 4; Matter of Martin, 146 Misc 2d 144; Matter of Khadad, 135 Misc 2d 67; Matter of Lepore, 128 Misc 2d 250); to maximize the generation-skipping transfer tax exemption ( Matter of Choate, 141 Misc 2d 489); to take advantage of the tax-savings aspect of a credit shelter trust ( Matter of Quigan, NYLJ, Nov. 17, 1994, at 34); and to limit a power in a trust instrument in order to avoid inclusion for estate tax purposes ( Matter of Gottfried, NYLJ, Apr. 11, 1997, at 25, col. 6). In addition, there is precedent for reformation of a trust to meet the requirements of a qualified subchapter S trust as provided in Section 1361 of the Internal Revenue Code ( 26 USC ยง 1361) ( Matter of Fischer, NYLJ, June 26, 1996, at 26; Matter of Gordon, NYLJ, June 27, 1994, at 32, col. 3; Matter of Pivnick, NYLJ, Aug. 24, 1992, at 25, col. 5; Matter of Mainzer, 151 Misc 2d 203; Matter of Romita, 134 Misc 2d 410). Here, if the trusts are not reformed, they will fail to meet the qualified subchapter S trust requirements.
Before EPTL 7-1.13 was enacted, a trust could not be split without court approval. Although our Surrogate's Courts reformed wills and trusts to obtain various tax benefits (Matter of Choate, 141 Misc.2d 489 [generation-skipping transfer tax (GST) exemption]; Matter of Kaskel, 146 Misc.2d 278 [GST grandfathering]; Matter of Nossiter, 146 Misc.2d 879 [GST exemption]; Matter of Martin, 146 Misc.2d 144 [qualified terminable interest property (Q-TIP) requirements]; Matter of Romita, 134 Misc.2d 410 [subchapter S requirements]; Matter of Heller, 161 Misc.2d 369 [minimize liability on real property]), there was a concern that the Internal Revenue Service, under Commissioner v Estate of Bosch ( 387 U.S. 456), would not be bound by the decisions because they were not rendered by the State's highest Court or pursuant to a State statute (see, Legis Mem in Support of L 1995, ch 523, 1995 McKinney's Session Laws of NY, at 2221, 2224; see also, Fraiman, Trust Splitting Under the New Statute, NYLJ, Nov. 20, 1995, at 1, col 1). This uncertainty is eliminated by the new legislation which authorizes a trustee or executor, unless prohibited by the disposing instrument, to establish two or more trusts without court approval or the consent of the beneficiaries for the following tax purposes: to separate qualified terminable interest property (Q-TIP) or property held in a qualified domestic trust (Q-DOT) for purposes of the marital deduction; to effectuate a marital deduction by segregating the
In other instances, wills have been reformed to authorize the splitting of a single trust into two trusts to allow one to qualify for the charitable deduction. In Matter of Romita ( 134 Misc.2d 410), the court authorized the separation of trusts to permit a closely held corporation to qualify for the subchapter S election. In Matter of Stalp (supra), the court separated a single charitable remainder trust into two separate trusts to permit the larger one to qualify for the charitable deduction.