IN RE: the ESTATE OF William F. ROTHWELL

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Surrogate's Court, Dutchess County, New York.

IN RE: the ESTATE OF William F. ROTHWELL, Jr., Deceased.

Decided: July 20, 2001

Robert A. MacKennan, Poughkeepsie, co-executor pro se, and for Evangeline Reilly, co-executor.

This is an uncontested probate proceeding.   It nevertheless raises several issues which compel the Court's intervention.   They are:

1.  The lack of a family tree and affidavit of heirship.

2.  Failure of the attorney/draftsman to comply with SCPA § 23307-a.

3.  The effect of decedent's lifetime trust and first amendment to it on the disposition of assets.

4.  The cash gift to the attorney/draftsman's wife and,

5.  The directive in the lifetime trust to allow full trustee's commissions and reasonable attorney's fees to the attorney/draftsman.

BACKGROUND

The decedent's Will is dated December 3, 1997.   It names Evangeline Reilly and Attorney Robert A. MacKennan co-executors.   Attorney MacKennan and Edith K. MacKennan are the two witnesses to the Will.

The decedent died a resident of Dutchess County.   New York on May 25, 2001.   The Will was offered for probate by petition filed July 12, 2001.   A revocable lifetime trust and subsequent first amendment both executed according to EPTL § 7-1.17 were filed at the same time. The lifetime trust is dated January 29, 1998, and the date of the first amendment is October 4, 2000.

The Will contains a series of bequests of cash and personal property to various individuals.   The residuary consists of three equal shares to named beneficiaries.

The grantor of the revocable lifetime trust is the decedent.   A list of the initial property comprising the trust corpus appears at the end.

The first amendment to the lifetime trust seeks to amend it by incorporating by reference changes to the Will, dated December 3, 1997.   Gifts of personal property and cash to named individuals and entities, as well as reference to the residuary clause of the decedent's Will and changes to it, are set forth in the balance of this document.

LACK OF DISTRIBUTEE INFORMATION

 Paragraph five of the probate petition states the decedent died without any distributees.   However, no affidavit from a disinterested person or a family tree or diagram accompanied the petition.   This is contrary to the mandate set forth in 22 NYCRR § 207.16(c).   Additionally, no affidavit was filed to indicate what efforts were undertaken to ascertain the existence of any distributees

The probate proceeding shall be held in abeyance until there is full compliance with the court rule.   Petitioners are directed to submit the required information no later than August 9, 2001.   Attorney MacKennan should have little difficulty in assimilating facts about the decedent's family.   He was his attorney for twenty years according to paragraph 8(a) of the probate petition.   A guardian ad litem may be appointed based upon the submission.

SCPA § 2307-a

 Attorney MacKennan is the scrivener of the propounded instrument and a named co-executor.   He has failed to comply with the requirements of SCPA § 2307-a (eff 8/2/95).   No written acknowledgment of disclosure by the testator was filed under either SCPA § 2307-a(1) or (2).   No explanation was offered by the attorney.   None of the beneficiaries under the Will signed a two part waiver (1) disclosing the fact that commissions for Attorney MacKennan would be reduced by one half and (2) giving their consent to increase commissions by one half in any event.   Thus, the issue of whether waivers from all affected parties would in some fashion satisfy SCPA § 2307-a is not before the Court.

No reasonable ground exists to excuse the absence of a written acknowledgment (SCPA § 2307-a[9][b][ii][B] ).   Therefore, the commissions of Attorney MacKennan shall be one half the statutory commissions to which he as executor would otherwise be entitled under SCPA §§ 2307 and 2313.

SCPA § 2307-a(7) mandates that a determination of compliance with the statute “shall be made in a proceeding for the issuance of letters testamentary.”   The probate proceeding before me is distinguishable from the holding by my colleague.   Honorable Lee L. Holzman, in Matter of Fleshler, 176 Misc.2d 583, 672 N.Y.S.2d 1005 (Surr.Ct., Bronx Co., 1998).   In that estate Surrogate Holzman held that since the only assets of the estate were pending causes of action, it made economical and practical sense to hold the issue of compliance determination in abeyance until an accounting or other appropriate future proceeding.   Here, the probate petition indicates the decedent's gross testamentary estate is greater than $500,000.00 but gives no ceiling on its approximate value.

LIFETIME TRUST AND FIRST AMENDMENT

 EPTL § 7-1.18 provides that “[a] lifetime trust shall be valid as to any assets therein to the extent the assets have been transferred to the trust.”   Simply attaching a schedule which recites that certain assets belong to the trust is not sufficient.   The grantor is obligated to actually transfer the assets.  (Turano, Supp Practice Commentaries, McKinney's Cons.Laws of NY, Book 17B, EPTL C7-1.18 2001 Pocket Part at 42).   Here, the decedent/grantor only “lists” the property which forms the corpus of the lifetime trust.

The memorandum in support of the Laws of 1997, Chapter 139, the statute creating EPTL Sections 7-1.17 and 7-1.18, states:

“The term transfer is defined in the statute;  in the case of assets which may be registered, such as stocks, bonds, bank accounts, real estate, etc, transfer means completion of the recording of the deed, change of title of the bank account, actual re-registration of the stock certificate or change of the security account, etc.”  (McKinneys 1997 Session Laws of New York, page 2130).

The list of assets appearing at the end of the lifetime trust, dated January 29, 1998, is therefore ineffective to accomplish the intent and purpose of the statute.

 The first amendment to the lifetime trust contains four paragraphs.   The first paragraph changes monetary bequests to separate individuals in paragraphs seven and eight of the Will, dated December 3, 1997.   Gifts to a named individual in paragraph fifth of the Will “are deleted.”   Paragraph two is a gift of tangible personal property to a named individual.   Paragraph three consists of a series of cash gifts to entities and persons, including a $50,000.00 gift to the attorney/draftsman's wife Edith MacKennan.   Paragraph four states:  “all the rest of my property not otherwise described in the will dated December 3, 1997, tangible and intangible, including securities and bank accounts, I give to Mr. and Mrs. Edward Reilly, Vassar College, or the survivor of them.”

New York has substantially rejected the concept of incorporation by reference with respect to decedents estates.   38 N.Y. Jur 2d, Decedents Estates, § 431.   There are exceptions so that not every attempt to dispose of assets by reference in the will to another instrument will be foiled.  (Matter of Ivie, 4 N.Y.2d 178, 181 [1958] ).   The propounded instrument makes no reference whatsoever to either the lifetime trust or first amendment.   Any reference to the Will is found in the two trust instruments.   In essence, the decedent/grantor employed a reverse incorporation by reference by making substantial changes to his Will by virtue of paragraphs one and four of the first amendment to the lifetime trust.

The decedent's attempt to amend testamentary and residuary dispositions in the propounded instrument through those paragraphs is ineffective.   EPTL § 7-1.17 provides the precise requirements for creating, amending and revoking lifetime trusts.   It does not allow for an alternative method nor supercede the exact formalities for the execution of wills and codicils set forth in EPTL 3-2.1. Thus, paragraphs one and four of the first amendment to the lifetime trust are null and void.

CASH GIFT TO ATTORNEY/DRAFTSMAN'S WIFE

 Paragraph three of the first amendment to the lifetime trust contains a cash gift of $50,000.00 to the attorney/draftsman's wife, Edith MacKennan.   The seminal case of Matter of Putnam, 257 N.Y. 140, 177 N.E. 399 (1931) contains a clear admonition that “attorneys for clients who intend to leave them or their families a bequest would do well to have the will drawn by some other lawyer.”  (Id at 143, 177 N.E. 399.) (emphasis added) Through the years the Putnam Rule has been applied in a variety of cases, including but not limited to inter vivos gifts.   See, Reoux v. Reoux, 3 A.D.2d 560, 562, 163 N.Y.S.2d 212 (3rd Dep't, 1957), aff'd. 4 N.Y.2d 1022, 177 N.Y.S.2d 527, 152 N.E.2d 543 (1958).   Although a gift requires no consideration, it must be shown to have been freely and voluntarily made.   Where facts show a confidential relationship between parties, a valid gift must be established by clear and satisfactory evidence.   It must be demonstrated that the transfer of property in question was freely and voluntarily made on the part of the donor.  Reoux v. Reoux, supra, pg. 562, 163 N.Y.S.2d 212.   The twenty year attorney-client relationship between MacKennan and the decedent is construed as being quite confidential.

 Therefore, pursuant to the cited decisional authorities, the Court will conduct an evidentiary hearing concerning the issue of the decedent's cash gift to the attorney/draftsman's wife on Thursday, September 6, 2001 at 10:30 AM. Adjournments are only granted with leave of the Court.   The burden of proving that the gift was freely and voluntarily made is upon the donee.

TRUST DIRECTIVE CONCERNING COMMISSIONS AND ATTORNEY'S FEES

Paragraph eleven of the lifetime trust, dated January 29, 1998, provides for the appointment of Attorney Robert A. MacKennan as successor trustee to act upon the decedent's death or his inability to act for whatever reason.   Paragraph nine of the same trust instrument provides that the successor trustee “shall be entitled to be paid trustee's commissions as provided by law and in addition to reasonable attorney's fees.”   The lifetime trust instrument is witnessed by the attorney/draftsman and another individual.

In Matter of Weinstock, 40 N.Y.2d 1, 386 N.Y.S.2d 1, 351 N.E.2d 647 (1976), the Court of Appeals held that letters can be denied to an attorney/draftsman who has induced a client to name that attorney to serve in a fiduciary capacity.   While the holding in Matter of Weinstock related to a probate proceeding, the essence of that decision should not be restricted to the probate of wills.   The position of trustee is no less important or sacred than the individual named to administer someone's estate under a will.   Therefore, the Court will conduct a hearing on Thursday, September 6, 2001 at 10:30 AM for the purpose of receiving evidence in acceptable form concerning the relationship and interaction between the decedent and the attorney/draftsman which caused the decedent to nominate him as the successor trustee under the lifetime trust.   Adjournments are only granted with leave of the Court.

JAMES D. PAGONES, J.