Chusid's Estate, In re

• Citation: 301 N.Y.S.2d 766,60 Misc.2d 462
• Parties: In re Proceeding for an order directing the trustees to make payment of income for the support of the children of Sol CHUSID beneficiaries under a trust; and for reimbursement to petitioner of monies advanced for the support of said children by petitioner. Estate of George Chusid, Deceased. Surrogate's Court, Kings County
• Decision Date: 20 June 1969
• Court: New York Surrogate Court

Page 766

301 N.Y.S.2d 766

60 Misc.2d 462

In re Proceeding for an order directing the trustees to make

payment of income for the support of the children of Sol

CHUSID beneficiaries under a trust; and for reimbursement to

petitioner of monies advanced for the support of said

children by petitioner.

Estate of George Chusid, Deceased.

Surrogate's Court, Kings County.

June 20, 1969.

Maxwell H. Goldstein, New York City, for petitioner, Helen chusid.

Schwartz & Frank, New York City, for respondents, Anne Chusid, Lawrence A. Chusid and George H. Schwartz, as trustees under will [60 Misc.2d 463] of George Chusid.

Myron Beldock, New York City, guardian ad litem for Candie Chusid, Alan Chsid and Robert Chusid.

Levy, Heller, Kessler & Walzer, Brooklyn, for Sol Chusid.

NATHAN R. SOBEL, Surrogate.

The will of George Chusid after providing a trust for his wife out of the residuary equal to the full marital deduction, directs the division of the balance of the residue into ten equal shares in trust for his sons. Three-tenths are allocated as a trust for his son Sol Chusid. Specific provisions applicable solely to that trust make it in nature a spendthrift trust (to pay or apply the income to the use of the beneficiaries) but in law a discretionary trust.

Under the will the principal of Sol Chusid's trust is also payable to him in periodic installments of 5 percent of total corpus each year commencing at age 35 until exhausted. Unlike the discretionary authority to the trustees with respect to income, the directions for periodic payments of principal out of corpus are absolute. The trustees have no discretion. However, there is a restraint against alienation of principal by the beneficiary While such principal is in the hands of the trustees (Par. 20th, Codicil 6/22/67).

Sol Chusid is presently 42 years of age and is presently entitled to 35 percent of the principal when the corpus of his trust is allocated and thereafter 5 percent thereof each year. His trust cannot as yet be set up until substantial realty holdings of testator are sold.

The petitioner in the instant proceeding is Helen Chusid, wife of Sol Chusid. The couple have been living apart since 1962. Since that time, petitioner-wife has maintained a home and supported their 3 infant children (now 7, 9 and 11). In proceedings in the Family Court, the wife has from time to time been awarded some small sums for support. However in February 1967, the Family Court entered a suspension order--Sol Chusid having established that he had no assets, was unable (for reasons not pertinent to this decision) to earn any living and was dependent for his support on his wealthy parents. At the time of the suspension order, arrears on prior orders had accumulated in the sum of $3,640. It does not appear whether a judgment has been entered (Family Ct.Act, § 460). There is no dispute in respect of these basic facts. It is evident from this brief statement that the wife and children have received no support whatsoever for 2 years and very little In toto since 1962.

The answer of the trustees raises questions of law. It has been stipulated that the issues of fact, since not in dispute, may be determined on the basis of the affidavits submitted. Sol [60 Misc.2d 464] Chusid has been served with citation and has filed an affidavit herein.

The petition of the wife requests a direction by the Court to the trustees to pay (1) a part of the income from the trust and (2) a part of the presently due and future payments of principal for the support of the three infant children. A guardian ad litem appointed for the children joins in the petition.

The general proposition may be broadly stated. A testator may dispose of his own property as he pleases. Among other things he may create a trust for the benefit of an infant or improvident person and place it beyond the reach of the beneficiary and his creditors so as not to defeat the settlor's purpose by the beneficiary alienating the income or squandering the principal (Matter of Wentworth, 230 N.Y. 176, 129 N.E. 646). He may create a spendthrift trust, a discretionary trust or a trust for support and surround any of these with protective features providing that the trust shall terminate upon any attempt to alienate by the beneficiary or his creditors.

All of the foregoing and more is within the power of the testator Provided the protective provisions are not contrary to statute or against public policy.

Today, despite contrary expressed intention and purpose of the testator, statutes permit judgment creditors to reach excess income and even principal of a trust (CPLR 5205(e), 5226, 5231). The principle codified by the statutes is that no man should be permitted to live at the same time in luxury and in debt.

And, more important, despite provision against alienation in the trust instrument, the beneficiary of a spendthrift trust is permitted by statute to transfer or assign any part or all the income to or for the benefit of a person whom he is legally obligated to support (EPTL 7--1.5(d)). This relatively new statute permits only voluntary assignments. But long before its enactment, decisions had approved such assignments. (Matter of Littauer's Estate, 285 App.Div. 95, 98, 135 N.Y.S.2d 582, 584; Matter of Bellamore, 27 Misc.2d 118, 211 N.Y.S.2d 826; Griswold, Spendthrift Trusts (2d ed.), § 338; Restatement, Trusts 2d, § 157, comment g.)

Also in the absence of statute and without the consent of the beneficiary, public policy has recognized the right of a wife and dependent children to reach the income and on occasion the principal of spendthrift trusts. The principle here is that restraints on alienation and protective provisions are void as against public policy insofar as the

rights of wives and dependent children are concerned (See Annotation, 91 A.L.R.2d 262--316; [60 Misc.2d 465] Restatement, Trusts 2d, § 157 comment a; 1 Scott on Trusts § 157.1, p. 1210)

The public policy is stronger where the rights of dependent children rather than wives are concerned, particularly where they may become public charges. In a case quite similar to the matter under consideration the Oregon Supreme Court discussed the considerations underlying that public policy as expressed in the decisions throughout the Nation (See Shelley v. Shelley, 223 Or. 328, 354 P.2d 282, 91 A.L.R.2d 250). These need not be repeated here. The court's conclusion was that the obligation to support dependent children transcends all other obligations including that of the beneficiary himself for his own food, clothing and shelter. It decided that the children could reach the income in the face of spendthrift trust restraints broad enough to bar them. It adopted the view of the trial court that the children may reach only so much of the income as the trial court found reasonable having in mind the respective needs of the children and father, the amount of the income, the availability of the corpus and other factors found relevant.

From these broad considerations, we consider the claims of the children to part of the income from the trust and part of the principal separately.

I

Short attention need be given to the claims of the children to income for, under the terms of the will, the three children are Named income beneficiaries. Paragraph Seventh in pertinent part provides:

'my trustees shall have the right and power in their absolute discretion as they shall from time to time determine, to pay or apply the income of said trust to the use of my son Sol Chusid and the children of my son Sol Chusid, or for their benefit in such shares or proportions and in such manner as they shall from time to time deem advisable without equality of treatment and to the exelusion of any one or more of them, taking into consideration the best interests and welfare of all of them.'

The children are clearly income beneficiaries under a 'mixed' discretionary trust. They are entitled to share with their father when the imcome is distributed. True, the trustees are vested with 'absolute discretion.' This is however a defensive term not to be given too literal a meaning. It is generally purposed to protect the trustees from unreasonable demands of the beneficiary (Matter of Siloti's Estate, 192 Misc. 201, 80 N.Y.S.2d 456) and from demands of creditors. It does not insulate of protect [60 Misc.2d 466] the trustees from responsibility to and reasonable directions from the Court. (Ireland v. Ireland, 84 N.Y. 321; Ford v. Ford, 230 Ky. 56, 18 S.W.2d 859; In re Sullivan's Will, 144 Neb. 36, 12 N.W.2d

148; Eaton v. Eaton, 82 N.H. 216, 132 A. 10; cf. Hamilton v. Drogo, 241 N.Y. 401, 150 N.E. 496; Matter of Sand v. Beach, 270 N.Y. 281, 200 N.E. 821). This is particularly true where the income beneficiaries are dependent children who will either starve or become public charges if the trustees refuse to exercise discretion in their favor. So that even where the trust is a pure discretionary trust, the trustees' discretion yields to and is subordinate to the equity powers of the Court to direct payment for the support of minor dependent children. (In re Sullivan's Will, Supra)

It is concluded that a court supervising a discretionary trust for the benefit of named dependent children, may direct the trustees to make appropriate payments out of the income for their support. (Griswold on Spendthrift Trusts (2d ed.) $ 333; 1 Scott on Trusts § 157.1.) Upon all of the relevant evidence, taking into consideration the needs of the children and their father, the potential income from the trust and the father's right to periodic principal payments, the trustees are directed to distribute as soon as practicable the income from the Sol Chusid trust in the proporation of at least two-thirds to petitioner for the support of the three children of Sol Chusid.

Insofar as their right to income is concerned the Court obviously has jurisdiction since the children are parties as named beneficiaries. This would also be...