Estate of Gilbert

• Decision Date: 25 November 1992
• Citation: 592 N.Y.S.2d 224,156 Misc.2d 379
• Parties: Proceeding by Martin A. Coleman, as Executor of the ESTATE OF Peter GILBERT, Deceased, for Advice and Direction Pertaining to a Notice of Renunciation. Surrogate's Court, New York County
• Court: New York Surrogate Court

Page 224

592 N.Y.S.2d 224

156 Misc.2d 379

Proceeding by Martin A. Coleman, as Executor of the ESTATE

OF Peter GILBERT, Deceased, for Advice and

Direction Pertaining to a Notice of Renunciation.

Surrogate's Court, New York County.

Nov. 25, 1992.

Rubin Baum Levin Constant & Friedman, Brit Geiger, and Michael J. Weinberger, of counsel, New York City, for petitioner.

Ninette S. Bordoff, Hahn & Hessen, New York City, guardian ad litem.

RENEE R. ROTH, Surrogate.

The executor of the estate of Peter Gilbert asks the court to declare null and void a renunciation by Mr. Gilbert's son, Lester, of his interest in two wholly discretionary trusts under decedent's will.

Mr. Gilbert died on March 26, 1989, leaving an estate of over $40,000,000. He was survived by his wife and four children. Under his will, testator, after making certain pre-residuary legacies, created an elective share trust for the life income benefit of his wife. The amount of decedent's generation-skipping transfer (GST) tax exemption was divided into four discretionary trusts, one for the primary benefit of each of his children. The residue of Mr. Gilbert's estate was similarly divided. Upon the death of the widow, the remainder of her trust is to be added in equal shares to the residuary trusts for decedent's children. The trusts are wholly discretionary. Decedent's son, Lester, is therefore a discretionary income beneficiary of two testamentary trusts, one of which will be augmented at the widow's death. Decedent's issue, including Lester's sisters, nieces and nephews as well as Lester's issue (should he have any), are also discretionary beneficiaries of both of Lester's trusts.

Lester, who has no issue, timely served on the executor a notice of renunciation of his "dispositive share in the estate of Peter Gilbert".

The executor, supported by the guardian ad litem for decedent's minor grandchildren, takes the position that Lester's renunciation should be declared invalid. First, he states that permitting the renunciation would violate the testator's intention to provide for Lester. Second, the executor argues that Lester possesses no current property interest and therefore has nothing to renounce. The executor maintains that Lester's renunciation is premature and may be made only if, and at such time as, the trustees exercise their discretion to distribute income or principal to him.

The executor explains decedent's intention as follows:

Lester, who is approximately 32 years of age, ... has left the religion of his birth and has for some time lived in Virginia with a small group of people who share a similar religious doctrine. Some months ago he phoned your petitioner and announced that he planned to renounce whatever bequest was left for him. When asked what he planned to do if he were ever taken seriously ill and needed expensive medical care, he responded "Jesus will provide for me".

The fact that Lester had chosen to alienate himself from his family did not stop the decedent from loving his son or worrying about his future needs.... [T]he decedent wanted to know that funds would be available if the Trustees, acting in the manner that they thought the decedent would have acted had he then been living, should ever decide, for example, to pay a medical bill for Lester.

In effect, the executor argues that if the beneficiary of a wholly discretionary trust is permitted to renounce his or her interest, then no trust can ever be created to protect someone who is now disdainful of financial assistance but may in the future be in dire need, or simply have a change of heart.

However, under these circumstances, decedent's intention is not controlling. With respect to every renunciation, the intent to make a transfer is thwarted by the beneficiary who refuses to accept it. But clearly, "the law does not compel a man to accept an estate, either beneficial or in trust, against his will" (Burritt v. Silliman, 13 N.Y. 93, 96; see, also, Matter of Suter, 207 Misc. 1002, 142 N.Y.S.2d 353).

The executor suggests in his memorandum that he might be forced "to inquire into the mental capacity of Lester, since there is no rational reason which explains Lester's conduct". However, the desire to renounce wealth is not necessarily irrational. Presumably, the executor would not argue that a nun who takes a vow of poverty is mentally incompetent. Here, the acceptance of a monetary benefit apparently conflicts with Lester's religious beliefs. It would not be appropriate for the court to determine the validity of those beliefs, even if requested to do so. Furthermore, even if Lester's renunciation were purely whimsical, this would not in itself be sufficient reason either to reject the renunciation (Matter of Suter, supra) or to find him incompetent. In any event, the question of Lester's mental capacity has not been raised. There is no allegation in the petition or in any affidavit that Lester is a person under disability. The court must therefore proceed on the assumption that Lester is competent to make an effective renunciation.

The executor's second argument is that Lester has no current property interest which he can renounce. Rather, the executor maintains that Lester must wait until the trustees exercise their discretion to distribute income or principal to him, at which time, the executor asserts, Lester can renounce the property subject to such exercise of discretion. There appears to be no decision in New York with respect to the renunciation of a discretionary interest.

Renunciations are governed by EPTL 2-1.11. Paragraph (b)(1) of such statute provides that "[a]ny beneficiary of a disposition may renounce all or part of his interest ...". EPTL 1-2.4 defines "disposition" as "a transfer of property by a person during his lifetime or by will". "Property" is defined in EPTL 1-2.15 as "anything that may be the subject of ownership ...". Therefore, under the statute, a renunciation may be made only with respect to a transfer of something which may be the subject of ownership. The statute, however, does not require that property be transferred to the beneficiary. Instead, the property may be transferred to a trustee for the benefit of a beneficiary (see, e.g., Matter of Chadbourne, 92 Misc.2d 648, 401 N.Y.S.2d 139). Furthermore, the statute does not require that the beneficiary renounce the disposition itself; rather, he may renounce "all or part of his interest " in the disposition (EPTL 2-1.11[b][1] [emphasis added].

In this case, decedent by his will transferred property to trusts of which Lester is a beneficiary, albeit a discretionary beneficiary. Similarly, the subject of Lester's renunciation is his interest in the trusts, although that interest is discretionary. The renunciation, therefore, appears to satisfy the terms of the statute.

The executor, however, contends that Lester's interest in the trusts does not rise to the level contemplated by the statute. He argues that for a renunciation to be effective, the renounced interest must be in the nature of property. Claiming that Lester's interest is not property, the executor cites Hamilton v. Drogo, 241 N.Y. 401, 150 N.E. 496, where the Court of Appeals held that a judgment creditor was not entitled to levy on the interest of one of the beneficiaries of a discretionary trust. Holding that the judgment creditor could attach the income if and when the trustee distributed it to the beneficiary, the court observed:

In the present case no income may ever become due to the judgment debtor. We may not interfere with the discretion which the testatrix has vested in the trustee any more than her son may do so.... But ... if it is exercised in favor of the duke then ... [a]t least for some appreciable time, however brief, the award must precede the delivery of the income he is to receive and during that time the lien of the execution attaches (at 404, 150 N.E. 496).

Similarly, in Matter of Duncan, 80 Misc.2d 32, 362 N.Y.S.2d 788, the court held that a beneficiary of a discretionary...