Where the Grantors Intend a Trust to be Modified Jointly, A Surviving Grantor May Not Make Unilateral Modifications After the Death of the Co-Grantor
Whitehouse v. Gahn, 84 A.D.3d 949 (N.Y. App. Div. 2011)
In a case before the Appellate Division of the Supreme Court of New York, a trust beneficiary appealed a New York Supreme Court decision that declared the trust amendment naming her as sole beneficiary to be void and unenforceable. The Appellate Division affirmed the lower court ruling and remitted the case for an entry of judgment.
In their lifetimes, the mother and father, as grantors, established an irrevocable trust naming their three children as the beneficiaries of the trust estate, which consisted of the family home. The trust instrument expressly reserved for the grantors a limited power of appointment to change or alter the remaindermen. Approximately five months after the father died, the mother executed an amendment to the trust, naming the daughter as its sole beneficiary. Less than one month after the amendment was executed, the mother died. The two children who were removed as trust beneficiaries sought a declaratory judgment in the Supreme Court to declare the amendment void and unenforceable. The court decided in their favor, and the daughter who had been named sole beneficiary appealed the decision.
According to New York case law, a trust instrument is to be construed as written and the grantor’s intent is to be determined solely from the unambiguous language of the trust instrument itself. Mercury Bay Boating Club v. San Diego Yacht Club, 557 N.E.2d 87 (N.Y. App. Ct. 1990); see Matter of Wallens, 877 N.E.2d 960 (N.Y. App. Ct. 2007); Matter of Chase Manhattan Bank, 846 N.E.2d 806 (N.Y. App. Ct. 2006). The Appellate Division found that the terms of this trust instrument were unambiguous, and clearly expressed the grantors’ intent that their three children share the trust estate equally. These unambiguous terms may not be altered by a separate provision of the trust which may allow the plural usage of “grantors” to be interpreted as a singular “grantor.” The Appellate Division held that because the trust agreement allowed an amendment to be made with the joint consent of the grantors, a surviving grantor may not unilaterally amend the trust after the death of the co-grantor. Therefore, because only the mother executed the amendment to the trust, it was void and unenforceable.
New York law permits a court to amend an irrevocable, unamendable trust if its grantor and all the beneficiaries consent to the amendment. N.Y. Estates, Powers and Trusts Law § 7-19. Because that did not happen in this case, the Appellate Division found further reason to determine that the purported amendment was void and unenforceable.
The Appellate Division of the Supreme Court remitted the matter to the Supreme Court where it originated for entry of judgment declaring that the amendment to the trust was void and unenforceable, and that all three children were beneficiaries of that trust.
Should you have any questions relating to trusts, estate planning or personal asset protection issues, please do not hesitate to contact Attorney Susan Maya, at SMaya@Mayalaw.com or 203-221-3100, and Attorney Russell Sweeting, at RSweeting@Mayalaw.com or 203-221-3100, in the Maya Murphy office in Westport, Fairfield County, Connecticut.