In the Matter of the Estate of Kalikow, 2007 NY Slip Op 30431(U) (N.Y. Surr. Ct. 3/28/2007)
| Decision Date | 28 March 2007 |
| Docket Number | 0340361.,Decision No. 237. |
| Citation | 2007 NY Slip Op 30431 |
| Parties | Proceeding by EDWARD M. KALIKOW and LAURIE K. PLATT, for the issuance of Limited Letters of Administration in the Estate of PEARL B. KALIKOW, File No. 340361, Deceased. |
| Court | New York Surrogate Court |
The decedent's two children, Edward M. Kalikow and Laurie K. Platt, have commenced a proceeding, by order to show cause, seeking an order (i) issuing limited letters of administration to Edward M. Kalikow and Laurie K. Platt pursuant to SPCA 702(8) and/or (10) and (ii) suspending the letters currently issued to respondents Eugene Shalik and James DeVita pursuant to SCPA 711 as follows:
(1) restraining Respondents and their agents, representatives and anyone purporting to act on their behalf, from completing and filing that portion of any estate tax return that concerns in part or in whole the valuation of the assets of the Sidney Kalikow Trust;
(2) authorizing only Edward M. Kalikow and Laurie K. Platt and their representatives to complete and file with the Internal Revenue Service and New York State that portion of any estate tax return of the Estate of Pearl Kalikow that concerns the valuation of the assets of the Sidney Kalikow Trust;
(3) authorizing only Petitioners Edward M. Kalikow and Laurie K. Platt and their representatives in the event said returns are audited to defend same at all levels, including, but not limited to, audits and appeals conferences, and in consideration therefor, directing Edward M. Kalikow and Laurie K. Platt to indemnify and hold harmless respondents and the Estate of Pearl Kalikow from any and all additional tax liabilities, interest and penalties, if any, that are finally determined by the Internal Revenue Service and/or New York State to be due from the Sidney Kalikow Trust should said estate tax return(s) be audited and it be finally determined that additional tax, interest or penalties are due; and
(4) directing Eugene Shalik and James DeVita upon their being provided with that portion of any estate tax returns of the Estate of Pearl Kalikow that concerns the valuation of the assets of the Sidney Kalikow Trust, to make an application for deferral of the federal estate taxes under Sections 6161 and 6166 of the Internal Revenue Code, and a similar application for deferral of New York State estate taxes under applicable provisions of New York State tax law.
The order to show cause was returnable on March 20, 2007 at which time the court heard oral argument from counsel for petitioners and counsel for respondents.
The decedent, Pearl B. Kalikow, died on January 4, 2006, survived by two children, Edward M. Kalikow and Laurie K. Platt, the petitioners herein. A purported will dated July 16, 2003 and codicils dated September 29, 2004 and April 5, 2005 (herein collectively referred to as the "purported will") have been offered for probate by respondents Eugene Shalik and James DeVita, who are nominated as executors thereunder. By order dated April 5, 2006, preliminary letters testamentary issued to Shalik and DeVita. The purported will bequeaths the residuary estate to The Sunshine Foundation. The Sunshine Foundation is a charitable organization which was founded by the decedent during her lifetime. The preliminary executors are also the trustees of The Sunshine Foundation.
At the time of her death, the decedent owned a 1% general partnership interest and a 50% limited partnership interest in Hewlett Associates. Article TENTH of the purported will provides as follows with respect to the decedent's limited partnership interest in Hewlett Associates:
The decedent also created a revocable trust, under an agreement dated July 16, 2003, between herself as grantor and herself, Shalik and DeVita, as trustees. The trust provides that upon the grantor's death, the remaining trust principal is to be paid over to The Sunshine Foundation.
Sidney Kalikow, the decedent's husband, died on May 4, 1990, leaving a will dated May 26, 1982, which was admitted to probate by this court on May 29, 1990. Under Article THIRD of Sidney Kalikow's will, a marital deduction trust was created for the benefit of his wife, Pearl. The executors of Sidney's estate elected QTIP treatment of the Sidney Kalikow trust (the SK Trust) and thus it is taxable in Pearl's estate. Letters of trusteeship with respect to the SK Trust issued to his children, Edward M. Kalikow and Laurie K. Platt, and respondent Shalik. The SK Trust holds a 98.5% limited partnership interest in the Kalikow Family Partnership. The SK Trust terminated upon Pearl Kalikow's death. The assets of the SK Trust became distributable upon Pearl's death to two continuing trusts, one for the benefit of Edward M. Kalikow and one for the benefit of Laurie K. Platt.
The SK Trust holds a 98.5% limited partnership interest in the Kalikow Family Partnership, L.P. The Kalikow Family Partnership, L.P. owns income producing real estate. The general partner of the Kalikow Family Partnership, L.P. is Kalikow Management Inc. Kalikow Management Inc. holds a 1% general partnership interest in the Kalikow Family Partnership. Kalikow Management Inc. is controlled by a trust for the benefit of Edward Kalikow and his issue. The decedent owned a 1% general partnership interest and a 50% limited partnership interest in Hewlett Associates. The assets of Hewlett Associates likewise consist of income producing real estate.
The petitioners, presumably as co-trustees of the SK Trust, have engaged the services of James Levy of Appraisers and Planners, Inc. to value the underlying assets of both the SK Trust and Hewlett Associates. Mr. Levy had prepared the appraisal for many of the assets as part of Sidney Kalikow's estate. Mr. Levy has submitted an affidavit in support of petitioner's application. Mr. Levy avers that he had discussions with Shalik regarding the valuation of the underlying real estate owned by the SK Trust and Hewlett Associates. Mr. Levy states that respondent Eugene Shalik advised him that he needed "high" appraisals due to the oversight of the Attorney General's office on behalf of the charitable beneficiary. The preliminary executors did not engage Mr. Levy to perform the appraisals; however, the petitioners, purportedly in their capacity as co-trustees of the SK Trust, ultimately did. The preliminary executors instead retained Eric Haims to appraise the underlying real property of the SK Trust and Hewlett Associates for use in the preparation of the estate tax returns to be filed on behalf of the decedent's estate.
According to petitioners, the appraisal prepared by Mr. Levy (the "Levy appraisal") initially valued the assets of the SK Trust approximately $37,000,000.00 less than the appraisal prepared by Mr. Haims ("the Haims appraisal") and the assets of Hewlett Associates approximately $11,000,000.00 less than the Haims appraisal. In view of the large discrepancy, the preliminary executors engaged a third appraiser, the firm of Cushman & Wakefield, to review both the Levy appraisal and the Haims appraisal. Both petitioners and respondents concede that, as a result of Cushman & Wakefield's review, the disparity in the appraisals has been significantly narrowed as adjustments have been made to both the Levy appraisal and the Haims appraisal. On the return date of the instant order to show cause, neither petitioners nor respondents could identify with certainty the current disparity since, as of that date, the numbers had not been finalized. Petitioners' attorney did advise, however, that he believed that, after the Cushman & Wakefield adjustments, the valuation differential between the Levy appraisal and the Haims appraisal as to valuation of the SK Trust assets was approximately $10,000,000.00. In addition, the difference between the Levy appraisal and the Haims appraisal with respect to the underlying real property of Hewlett Associates had also been narrowed by reason of the Cushman & Wakefield adjustments.
Also, the petitioners and the respondents disagree over the discount to be applied once the underlying values have been established. The preliminary executors have retained the services of Empire Valuation to establish the discount to be applied. Petitioners allege that they had been initially advised that Empire Valuation had determined that a twenty percent (20%) discount should be applied; however, they were subsequently advised that Empire Valuation had fixed the discount at...
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