Estate of Guterman

• Decision Date: 31 May 1984
• Citation: 476 N.Y.S.2d 1006,125 Misc.2d 59
• Parties: Accounting of Jacob W. Friedman and Reuben Guterman, as Executors of the ESTATE of Samuel GUTERMAN, Deceased. Surrogate's Court, Nassau County
• Court: New York Surrogate Court

Page 1006

476 N.Y.S.2d 1006

125 Misc.2d 59

Accounting of Jacob W. Friedman and Reuben Guterman, as

Executors of the ESTATE of Samuel GUTERMAN, Deceased.

Surrogate's Court, Nassau County.

May 31, 1984.

Graubard, Moskovitz, McGoldrick, Dannett & Horowitz, New York City, for objectants.

Jack Korshin, Manhasset, for accounting parties.

Leonard C. Zamore, Garden City, for respondents.

Hayt, Hayt & Landau, Great Neck, for executors.

Shea & Gould, New York City, for Florence Guterman--wife.

C. RAYMOND RADIGAN, Surrogate.

In this accounting proceeding the objectants move for summary judgment as to a portion of the objections filed by them to the executors' account. Chief among the objections are several (Nos. 20, 21, 22 and 29) which relate to the objectants' contention that the marital deduction bequest has been erroneously treated by the executors as a fractional share of the residuary entitled to share in appreciation realized during administration.

Samuel Guterman, whose death occurred on July 19, 1972, was survived by Florence, his wife, and four children of a prior marriage, three of whom are the objectants and the fourth, Reuben, one of the co-executors together with Jacob Friedman, an attorney and son-in-law of Florence.

Subparagraph (A) of Article SIXTH, the residuary clause, establishes a trust for Florence of "an amount equal to one-third ( 1/3) of the value of my adjusted gross estate." Subparagraph (A) concludes with a grant of authority to distribute assets in kind, valuing each asset at the lower of distribution or "its basis in my estate for Federal income tax purposes."

The two basic types of marital deduction formula provisions are the pecuniary (or legacy) and the fractional bequest. The "true" pecuniary provision is of a fixed amount which does not vary, while the fractional increases (or decreases) with the fortunes of the estate during administration (Covey, The Marital Deduction and the Use of Formula Provisions pp 8, 21-22). An increase in value understandably finds the surviving spouse as here contending for a fractional bequest and the residuary beneficiaries for a pecuniary bequest.

The use here of the phrase "an amount equal to" to quantify the marital bequest employs traditional pecuniary provision language (Matter of Epping, 29 A.D.2d 410, 288 N.Y.S.2d 565, affd. 23 N.Y.2d 980, 298 N.Y.S.2d 993, 246 N.E.2d 753; Matter of Goutmanovitch, 105 Misc.2d 851, 432 N.Y.S.2d 768, Covey, supra, pp 8, 27-28; Comment, Federal Taxation: Formula Clause Marital Deduction Gifts, 40 Tul.L.Rev., 601, 603). However, the testator did not employ a "pure" pecuniary bequest unqualified by language authorizing distribution at specified dates, but empowered the executors to select the lower of either date of distribution or estate tax values in funding the marital trust. This has been referred to as a "minimum worth" or hybrid pecuniary legacy which is characterized as having a "floor" but no "ceiling" (Covey, supra, p 114; Trapp, Drafting and Funding Marital and Non-Marital Formula Bequests, 17 Univ. of Miami, Inst on Est Planning, par 1200, 1201.4). While a literal reading of the "minimum worth" provision would sanction the executors' distribution of appreciated assets in funding a marital bequest, the objectants contend that EPTL 2-1.9 dictates a contrary result.

EPTL 2-1.9 provides in part that where a fiduciary is authorized to satisfy a pecuniary bequest in kind and the instrument "requires the fiduciary to value the assets selected by the fiduciary for such distribution, the assets selected ... shall have an aggregate value on the dates of their distribution amounting to no less than, and to the extent practicable, no more than" the amount of the marital bequest.

It is clear from the extensive report of the Commission on Estates that the enactment of EPTL 2-1.9 was specifically designed to meet the exigencies of Revenue Procedure 64-19 (1964 1 CB 682) which threatened to disallow a marital deduction where pecuniary bequests authorized a distribution at estate tax values (Fourth Report of Comm. on Est., NY Legis Doc 1965 No. 19, Report No. 5.42A, p. 307, 326). The statute is completely unnecessary to protect a hybrid clause such as here since under such a provision the...