Surrogate Rita Mella

 

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In this contested proceeding for settlement of the trustees’ account of an irrevocable trust by settlor, objectants sought partial summary judgment to void the trustees’ distribution of a $10 million insurance policy on settlor’s life from a 2004 trust to a new trust settlor created in 2012. The 2004 trust provided for distributions of income during settlor’s lifetime to his descendants. Article 2(b) referred to a proviso—”Crummey power”— to withdraw from additions to trust principal, but any unexercised withdrawal rights lapsed annually. Settlor had a falling out with daughter Cheryl, and exercised his reserved right to exclude any beneficiary from the group eligible to exercise the Crummey power. Trustees distributed life insurance policy from the 2004 trust to a 2012 trust—similar to the 2004 trust, except it eliminated Cheryl and her descendants as beneficiaries. Cheryl and her four children objected to distribution of the $10 million policy from the 2004 to the 2012 trust, including claiming the transfer did not comply with the requirements of EPTL 10-6.6—the decanting statute. Yet, the court ruled the procedure for decanting under §10-6.6 had no bearing on this case. Also, whether objectants received formal notice of their rights to withdraw, they had rights, and were subject to lapse.

Surrogate Rita Mella

 

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In this contested proceeding for settlement of the trustees’ account of an irrevocable trust by settlor, objectants sought partial summary judgment to void the trustees’ distribution of a $10 million insurance policy on settlor’s life from a 2004 trust to a new trust settlor created in 2012. The 2004 trust provided for distributions of income during settlor’s lifetime to his descendants. Article 2(b) referred to a proviso—”Crummey power”— to withdraw from additions to trust principal, but any unexercised withdrawal rights lapsed annually. Settlor had a falling out with daughter Cheryl, and exercised his reserved right to exclude any beneficiary from the group eligible to exercise the Crummey power. Trustees distributed life insurance policy from the 2004 trust to a 2012 trust—similar to the 2004 trust, except it eliminated Cheryl and her descendants as beneficiaries. Cheryl and her four children objected to distribution of the $10 million policy from the 2004 to the 2012 trust, including claiming the transfer did not comply with the requirements of EPTL 10-6.6—the decanting statute. Yet, the court ruled the procedure for decanting under §10-6.6 had no bearing on this case. Also, whether objectants received formal notice of their rights to withdraw, they had rights, and were subject to lapse.