McDonnell's Will, In re

• Decision Date: 13 October 1965
• Citation: 263 N.Y.S.2d 653,47 Misc.2d 967
• Parties: In re McDONNELL'S WILL. In the Matter of the Judicial Settlement of the Final Account of Proceedings of MORGAN GUARANTY TRUST COMPANY OF NEW YORK and Howard E. Buhse, Executors of the Last Will and Testament of Edward O. McDonnell, Deceased. Surrogate's Court, Nassau County
• Court: New York Surrogate Court

Page 653

263 N.Y.S.2d 653

47 Misc.2d 967

In re McDONNELL'S WILL In the Matter of the Judicial Settlement of the Final Account of Proceedings of MORGAN GUARANTY TRUST COMPANY OF NEW YORK and Howard E. Buhse, Executors of the Last Will and Testament of Edward O. McDonnell, Deceased.

Surrogate's Court, Nassau County.

Oct. 13, 1965.

T. Roland Berner, New York City, for petitioner; by Julian S. Bush, New York City, of counsel.

Francis J. Werber, New York City, for Helen Fisher McDonnell; by Howard A. Rochford, Great Neck, of counsel.

Jackson, Nash, Brophy, Barringer & Brooks, New York City, for respondent Ann M. Kendall; by William E. Murray, New York City, of counsel.

Abraham Schlissel, New York City, special guardian for all infants.

JOHN D. BENNETT, Surrogate.

This is a motion by the executors for the court to reconsider its decisions dated February 4, 1965 and April 20, 1965 (Matter of McDonnell's Will, 45 Misc.2d 57, 256 N.Y.S.2d 149 and 45 Misc.2d 1062, 258 N.Y.S.2d 591 respectively) in view of the subsequent enactment on July 2, 1965 of section 17-f of the Personal Property Law. The decedent's widow, the objectant herein, moves to dismiss said motion and interposes a cross-motion to have the executors and their attorneys examined to determine their knowledge of the enactment of section 17-f of the Personal Property Law and whether they prejudiced the rights of the objectant by not distributing her share prior to the enactment of said section.

Section 17-f of the Personal Property Law was specifically enacted in order to save the estate tax marital deduction in those estates where the provisions of the will or trust instrument did not comply with 'Revenue Procedure 64-19' of the United States Internal Revenue Service issues on March 16, 1964 (Fourth Report of the Temporary State Commission on the Modernization, Revision and Simplification of the Law of Estates, N.Y.Legis.Doc., 1965, No. 19, App. 21, Report No. 5.4.2A, p. 6).

In effect the new statute provides that where a will does not otherwise expressly provide and authorizes the fiduciary in his discretion to satisfy a pecuniary marital bequest at a value other than that which exists on the date of distribution, the total assets selected by the fiduciary for that purpose must have an aggregate value on the date of distribution of no less than, and to the extent practicable no more than, the amount intended to be given by the testator as evidenced by the amount of the bequest or the formula to be employed.

The entire theory behind 64-19 (supra) was to prevent postmortem estate planning which enabled an executor to take full advantage of the marital deduction and then distribute valueless or less valuable securities to the surviving spouse in order to diminish taxes in her estate. (See App. 21 of Fourth Report of the Temporary State Commission, supra.)

In enacting this statute, the legislature cured the tax problem by prohibiting the satisfaction of a marital deduction bequest with a distribution to the surviving spouse of assets worth less at the time of distribution than at the date of valuation for tax purposes.

However, the new statute not only provides for a minimum value but a maximum value: 'and to the extent practicable to no more than, the amount of such bequest * * * as stated in, or determined by the formula stated in, the instrument' (Personal Property Law, § 17-f, subd. 2, par. b). This provision was not necessary to protect estates from the 64-19 ruling and was enacted for the express purpose of seeing to it that the spouse received no more than what the testator intended her to have under a pecuniary bequest (App. 21 of Fourth Report of the Temporary State Commission, supra).

In article 'Third', paragraph '(A)', of the decedent's will, he gave to his trustees a legacy 'in amount equal to the maximum marital deduction allowable in determining the Federal estate tax payable by reason of my death, diminished by the value of all other property and interests in property which shall be included in my gross estate for Federal estate tax purposes * * *.'

Article 'Third', paragraph '(B)' of the will provides: '* * * Such legacy may be satisfied by distribution in cash or in kind or partly in cash and partly in kind and each item of property or interest in property so distributed in kind shall be valued at the date or dates of such distribution or at the value determined therefor in the Federal estate tax proceeding in my estate, whichever value shall be lower, * * *.'

It is evident that the decedent's will complied with 'Revenue Procedure 64-19' (supra) and did not have to rely on section 17-f of the Personal Property Law to enable it to obtain a marital deduction.

The legislature, in the last clause (§ 2) of Chapter 693, Laws of 1965, provided that the section shall take effect on enactment and 'shall apply to wills of decedents dying before or after such date *...