Goldman's Estate, In re

• Decision Date: 04 May 1956
• Citation: 153 N.Y.S.2d 140,4 Misc.2d 31
• Parties: In re Joseph GOLDMAN'S ESTATE. Surrogate's Court, New York County
• Court: New York Surrogate Court

Page 140

153 N.Y.S.2d 140

4 Misc.2d 31

In re Joseph GOLDMAN'S ESTATE.

Surrogate's Court, New York County.

May 4, 1956.

Walter E. Godfrey, New York City, pro se and for petitioner City Bank Farmers Trust Co., executors.

Morris L. Bower, New York City, for respondent Sara Goldman, executrix.

Sidney Solway Miller, New York City, for respondents Morris Goldman, Julius Goldman, Harold Goldman and Eleanor Goldman Saffer.

Bernard E. Singer, New York City, for respondents Florence Goldman and Matilda Goldman.

Herbert Monte Levy, New York City, for respondent Carol G. Nackenson.

Le Vine & Schechter, New York City, for respondent Prudential Ins. Co. of America.

Galli & Locker, New York City, for respondent Travelers Ins. Co. Lee M. Gammill, New York City, for respondent New York Life Ins. Co.

COLLINS, Surrogate.

The court has heretofore construed certain portions of the testator's will, Sur., 145 N.Y.S.2d 919, 924. One of the questions presented in the prior proceeding was whether the 'First Trust' for the widow has a preference in the order of abatement of legacies. The court there held that '[d]etermination of her right to a preference ought to await clarification of the estate finances and * * * will accordingly be reserved for the accounting proceeding or such time as such proof is available.' Id. The question thus reserved has been presented in the executors' intermediate accounting.

The question of abatement of legacies usually arises because the testator left a smaller net estate than he had envisioned. In this case, however, the question comes before the court because the tax consequences are such that virtually none of the property passing outside the will qualified for a marital deduction, with the result that the so-called marital deduction trust created in paragraph sixth would require more than the entire net estate of the testator. The sixth paragraph of the will bequeaths to the trustees 'such portion of my estate, as when added to all other property included in the amount allowed as a marital deduction in the Federal Estate Tax Return of my estate, shall result in an amount equal to one-half (1/2) of my adjusted gross estate as defined by the Internal Revenue Act in effect at the time of my death.' The widow's trust is measured, therefore, not by the value of the assets subject to disposition by the will but by the value of the taxable estate of the decedent.

The gross principal received by the executors, including realized capital gains, amounts to $387,949.93. The adjusted gross taxable estate was fixed at $683,467.72. Life insurance policies aggregated almost $375,000. The widow has interests under insurance policies in the total amount of $282,271.66, but her interests are restricted to specified annual payments, with no rights to the corpus. None of the life insurance proceeds qualified for the marital deduction. One-half of the adjusted gross estate would be $341,733.86. Gifts that qualified for the marital deduction totalled only $13,522.29, thus fixing the value of the paragraph sixth trust at $328,211.57. The total net estate available for all legacies is estimated at less than $300,000.

Under the terms of the decedent's will virtually his entire estate is earmarked for the benefit of the widow, either outright or in trust. The other legatees are only three in number: $15,200 is bequeathed to a brother to enable him to pay sums owed by him in connection with the purchase of corporate stock; $1,428.49 is bequeathed to a nephew and $4,358.20 to a niece. None of these legacies is in a stated amount. Each was ascertainable by reference to extrinsic facts and the precise amount of each has been fixed in the prior proceeding herein. The income of the trust created in paragraph sixth is to be paid to the widow for life, and she has a testamentary power to appoint the principal. All the rest of the estate was directed to be set up in a separate trust for the primary life use of the widow and the ultimate benefit of the son or his issue, but there will be nothing available for that trust.

The widow will receive substantial benefits from the insurance moneys. Though she does not admit all of the executors' statements in respect of her interest in the policies, she concedes that the policies provide for payment of $1,075 a month for a period of ten years from the date of the decedent's death and $810 a month thereafter. She contends that allocation of estate taxes against the insurance funds will reduce these monthly sums to $785 and $591, respectively. The tax allocation has not yet been definitively settled.

When the assets of an estate prove insufficient to pay all legacies in full, the general rule is that the legacies abate pro rata, unless the will expresses a different intention. There are several exceptions to this general rule, see Matter of Cameron's Estate, 278 N.Y. 352, at page 358, 16 N.E.2d 362, at page 364, 117 A.L.R. 1333, only one of which is urged here, namely, that intent to create a preference may be inferred from the fact that a legacy is given for the maintenance of a near relative who is otherwise unprovided for. The basis for the allowance of such a preference has been stated thus: '[The testator] naturally expects that all legacies will be paid in full. If this becomes impossible he would desire that wife, children, or other near dependents should obtain the support and means of education necessary for their future, and which he supposed he had secured to them, before mere gifts to others are paid. 'Otherwise provided for,' therefore, must mean more than a nominal provision or one the testator would regard as plainly insufficient. It is the testator's mind we seek to read. Rightly or wrongly, did he think their necessities were already adequately supplied? Or did he believe their income must be supplemented by his legacy to accomplish the purpose he had in mind? To interpret this intent we may consider the circumstances known to him when the will was made, and we may search the will itself for any language that may give us light.' Matter of Neil's Estate, 238 N.Y. 138, 140, 144 N.E. 481, 34 A.L.R. 1245. The search for the testator's intent in this respect is, indeed, a curious one, for we recognize at the start that he believed all of the legacies would be paid and that he had no actual intention in respect of abatement. The question, therefore, is not one of intent in the usual sense. The argument for a preference is 'simply on presumption to prevent the failure to discharge a natural obligation.' Babbidge v. Vittum, 156 Mass. 38, 30 N.E. 77, 78. The presumption is somewhat different from the usual canon of construction which is supposed to guide us to the probable intention of the testator because here we recognize that he had no actual intention in this respect. However, the rule of intended preference is based upon equitable considerations, Scofield v. Adams, 12 Hun 366, 371, but, like the...