Estate of Mirsky, Matter of

• Decision Date: 29 April 1992
• Citation: 154 Misc.2d 278,586 N.Y.S.2d 205
• Parties: Matter of ESTATE OF Joseph MIRSKY, Deceased. Surrogate's Court, Bronx County
• Court: New York Surrogate Court

Page 205

586 N.Y.S.2d 205

154 Misc.2d 278

Matter of ESTATE OF Joseph MIRSKY, Deceased.

Surrogate's Court, Bronx County.

April 29, 1992.

William A. Egan, Jr., for Carl Mirsky, petitioner.

LEE L. HOLZMAN, Surrogate.

In this SCPA 2103 discovery proceeding, the administrator, decedent's son, initially sought to recover from respondent, his sister, the proceeds from 13 bank accounts totaling $249,235.85 as well the proceeds of a life insurance policy in the face amount of $10,000. Petitioner alleged that respondent obtained the withdrawals from the accounts and the change of beneficiary on the insurance policy as a result of fraud and undue influence. To the extent that the answer responded to the merits of the litigation, respondent essentially denied the material allegations contained in the petition and alleged that she received the assets in issue as gifts.

Decedent died on June 19, 1979, at the age of 71 years. His wife, who had been battling cancer for approximately 2 years, had died unbeknownst to decedent the day before his own death. Decedent's distributees are petitioner, another son, and respondent. Before respondent ultimately defaulted in appearing for a court ordered deposition and defaulted on the date certain scheduled for trial of the issues raised in this proceeding, she had frequently and vigorously participated in this and related proceedings.

At the inquest, the ten passbooks still in issue, decedent's hospital records, decedent's spouse's hospital records, and respondent's examination before trial in the contested probate proceeding were admitted in evidence. Almost the entire balance in eight of the accounts had been withdrawn shortly prior to the death of decedent and the entire balance had been withdrawn from two accounts. The accounts were payable as follows: to either the decedent or his spouse or the survivor in trust for respondent; to either the decedent or his spouse or the survivor in trust for their granddaughter, who is respondent's daughter; to either decedent or his spouse or the survivor in trust for a son of decedent; and to decedent or his spouse or the survivor.

Respondent conceded at an examination before trial in the contested probate proceeding that she "took the money" and "put it into a personal account in Florida". However, she contended that this was done at the direction of her parents. Respondent further testified to obtaining all of the necessary "withdrawal slips" from either or both of her parents at a time when they were both in the hospital. Respondent did not recollect exactly when she obtained the withdrawal slips or whether she collected the proceeds in person or by arranging for collection by Florida banks.

Based upon the default of respondent, petitioner's uncontroverted allegations of fact, including the allegations as to the specific sums at issue and the dates of the wrongful withdrawals from the specified accounts, must be accepted as due proof thereof (SCPA 509). Moreover, respondent averred that she was the recipient of gifts. Inasmuch as decedent can no longer give his version of the transactions, respondent had the burden of establishing all of the elements of each gift by clear and convincing evidence [Matter of Lefft, 44 N.Y.2d 915, 408 N.Y.S.2d 1, 379 N.E.2d 1132; Matter of Abramowitz, 38 A.D.2d 387, 329 N.Y.S.2d 932, aff'd 32 N.Y.2d 654, 342 N.Y.S.2d 855, 295 N.E.2d 654; Matter of Kaminsky's Hill, 17 A.D.2d 690, 230 N.Y.S.2d 954, app. dsmd., 12 N.Y.2d 840, 236 N.Y.S.2d 618, 187 N.E.2d 470], including that the deceased donor had the capacity to make a gift [Matter of Creekmore's Estate, 1 N.Y.2d 284, 152 N.Y.S.2d 449, 135 N.E.2d 193].

The voluminous hospital records corroborate the contention that both decedent and his predeceased spouse lacked the capacity to make valid gifts during the last hospital stays of either of them. Thus, even if respondent's pleadings had not been stricken, it would have to be concluded that she failed to come forward with any proof to rebut these records and to meet her burden of establishing that either decedent or his spouse had sufficient mental capacity to form the requisite donative intent to make a valid gift. Accordingly, as to the five accounts payable to either decedent or his spouse or the survivor, respondent has wholly failed to sustain her burden of proof to establish that she was the donee of a valid gift and petitioner is entitled to recover the sum of $125,149.76 that was withdrawn from these accounts together with interest from the date of each withdrawal.

Different issues are presented with regard to the withdrawals from the accounts which were in decedent's name in trust for designated beneficiaries. There does not appear to be any authority directly in point as to whether the estate is entitled to pursue a claim for a wrongful withdrawal from this type of account where, as in this proceeding, there is no allegation that the recovery is needed to pay administration expenses, debts or for any other specific estate purpose.

The popular name for an account in trust for a designated beneficiary is a Totten trust account [Matter of Totten, 179 N.Y. 112, 71 N.E. 748; Blackmon v. Battcock, 78 N.Y.2d 735, 579 N.Y.S.2d 642, 587 N.E.2d 280]. A Totten trust account is referred to as a poor man's will because it is presumed that the account is used as a substitute "to avoid the trouble of making a will" [Matter of Totten, supra, 179 N.Y. at 124, 71 N.E. 748]. These accounts are similar to wills in that the beneficiaries have a mere expectancy rather than a vested interest while the depositor is alive and the depositor retains the full enjoyment of the amount on deposit prior to death, including the right to revoke the trust in whole or in part by making withdrawals therefrom [EPTL 7-5.2; Blackmon v. Battcock, supra; Matter of Totten, supra].

However, upon the death of the depositor, there are substantial differences between the rights of the designated beneficiary under the Totten trust account and a beneficiary under the will. Upon the death of the depositor, the account passes by operation of law directly to the designated beneficiary pursuant to the contract between decedent and the depository and irrespective of any provision in decedent's will unless the trust is revoked in the will by making the required specific references to the account, the beneficiary and the financial institution [EPTL 7-5.2(2), (4) ]. Inasmuch as the Totten trust account is not a testamentary asset, the proceeds from the account may not be used to pay either the administration expenses of the estate or decedent's debts unless the testamentary assets are insufficient to pay these obligations [Beakes Dairy Co. v. Berns, 128 App.Div. 137, 112 N.Y.S. 529; Matter of Garofalo, 109 Misc.2d 811, 812, 441 N.Y.S.2d 38, and cases cited therein].

Here, in essence, it has been concluded that respondent failed to establish that decedent was competent when respondent made the withdrawals from the Totten trust accounts. Had decedent been an adjudicated incompetent, the court would have followed a policy of preserving the Totten trust account "intact during the incompetency of the depositor" based upon the presumption that, provided that the incompetent would not otherwise be harmed by pursuing this policy of preservation, the incompetent, if competent, would have first expended funds which were not specifically earmarked for a designated beneficiary [Matter of Sabot, 28 Misc.2d 265, 267, 212 N.Y.S.2d 842; Matter of Biskur, 184 Misc. 239, 240, 55 N.Y.S.2d 662; see also Ganley v. Lincoln Savings Bank of Brooklyn, 257 App.Div. 509, 13 N.Y.S.2d 571]. The court held in Gorfinkel v. First Nat. Bank in Yonkers, 19 A.D.2d 903, 244 N.Y.S.2d 877, affd., 15 N.Y.2d 711, 256 N.Y.S.2d 338, 204 N.E.2d 497, that, after the death of the incompetent, the beneficiary of a Totten trust account was entitled to recover the full amount transferred without court order from the Totten trust account to a checking account in the name of the committee despite the fact that the committee had partially expended the proceeds from the...