Will of Collia, Matter of

• Citation: 475 N.Y.S.2d 237,123 Misc.2d 1014
• Parties: In the Matter of the Judicial Settlement of the Final Account of Proceedings of United States Trust Company of New York, as Preliminary Executor and as Executor of the WILL OF Irene Dunbar COLLIA, Deceased, and as Trustee of the Trust created under Decedent's Indenture dated
• Decision Date: 26 May 1972
• Court: New York Surrogate Court

Page 237

475 N.Y.S.2d 237

123 Misc.2d 1014

In the Matter of the Judicial Settlement of the Final

Account of Proceedings of United States Trust Company of New

York, as Preliminary Executor and as Executor of the WILL OF

Irene Dunbar COLLIA, Deceased,

and as Trustee of the Trust created under Decedent's

Indenture dated May 26, 1972, as Amended.

Surrogate's Court, Suffolk County.

April 24, 1984.

Carter, Ledyard & Milburn, New York City, for petitioner.

Robert Abrams, Atty. Gen., New York City, for ultimate charitable beneficiaries.

Debevoise & Plimpton, New York City, Attorneys for respondents.

Winthrop, Stimpson, Putnam & Roberts, New York City, for objectant.

DECISION

ERNEST L. SIGNORELLI, Surrogate.

In this contested executor's and trustee's accounting proceeding, the court has been requested to determine the source of payment of estate taxes attributable to the inclusion of testamentary and nontestamentary assets in the decedent's estate.

Jurisdiction has been obtained over the necessary parties to this proceeding, who have, by stipulation, waived a hearing and agreed to submit this matter to the court for decision based upon the account of the petitioner, the pleadings, the deposition of the attorney-draftsman of the will and inter vivos trust in issue, and memoranda of law filed by counsel for the petitioner, and for the individual and charitable beneficiaries of the inter vivos trust.

The decedent died, testate, on the 17th day of June, 1979, survived by three first cousins and issue of predeceased cousins on her mother's side. Her husband passed away prior to her demise, on August 15, 1975, and there were no children of the marriage.

Aside from making certain specific cash bequests to relatives and friends, the terms of the decedent's last will and testament, dated April 9, 1976, make substantial pre-residuary dispositions of her appointive property, received pursuant to the terms of her mother's will, and nonappointive real and tangible personal property, to or for the benefit of her second counsin, and/or the issue of her second cousin, Jean Ellis Summers, and direct that the rest, residue and remainder of her estate be transferred and paid over to the trustee then acting under an indenture of trust, dated the 26th day of May, 1972, between herself as grantor, and the petitioner herein, as trustee, to be dealt with and disposed of as a part of the principal thereof.

In contrast to the terms of the decedent's will, the provisions of the decedent's inter vivos indenture of trust, dated May 26, 1972, as amended, on October 26, 1975, subsequent to the death of her husband, grant only a small sum of the trust estate ($2,000,000.00) to her second cousin, Jean Summers, and her issue, and dispose of the very sizable balance thereof (approximately $8,500,000.00), in trust, to and for the benefit of seven designated charities.

The decedent's gross estate, consisting primarily of cash, and the assets of the aforesaid inter vivos trust, was valued, on the date of her death, at approximately $11,580,000.00, and was subject to combined federal and New York State estate taxes of approximately $2,350,000.00.

Pursuant to the terms of Article Sixth of her will, the decedent made the following provision with respect to the payment of these taxes:

"Article Sixth: I direct that all transfer, estate, inheritance, succession and other death taxes which shall become payable by reason of my death, whether in respect of property passing under this will or otherwise, shall be paid out of my residuary estate as an administration expense, without apportionment. I have directed in my indenture of trust referred to in Article Fifth hereof [the 1972 Trust] that if my residuary estate is insufficient, funds be made available from said trust in an amount sufficient to satisfy said taxes."

Commensurate with the aforesaid provision in the decedent's will, Section I of the decedent's 1972 trust indenture states as follows:

"Section I. In case the grantor's estate is insufficient to pay her funeral expenses, all claims against her estate and all death taxes chargeable to her estate and to satisfy all pre-residuary legacies or devises given by her will, the trustee shall pay to the grantor's legal representatives, out of the trust fund, such sum or sums as such legal representative shall certify to be required to make good such deficiency. The trustee shall also pay out of the trust fund (i) all expenses of administration of the trust fund payable from the principal of the trust fund after the grantor's death and until the distribution of the trust fund as hereinafter provided is completed, and (ii) all death taxes chargeable to the trust fund as a result of the grantor's death."

The account of the petitioner reflects that the decedent's residuary assets on the date of her death were insufficient to fully satisfy the taxes assessed against her estate. As a consequence, the tax deficit of approximately $1,491,000.00 was charged by the petitioner against the assets of the trust estate.

By objections to the account filed with the court on April 7, 1983, and subsequently amended on August 30, 1983, the charities take issue with the manner in which the taxes were assessed by the petitioner against the trust fund. More specifically, it is the position of the objectants that the failure of the tax clause in the indenture of trust to particularize the source of funds, within the trust, from which the tax deficit of the estate was to be derived, mandated apportionment of the deficiency against the individual beneficiaries of the trust, in accordance with the provisions of EPTL § 2-1.8, and correspondingly, exonerated them from bearing any burden of the taxes due.

In opposition to the objectant's contentions, the petitioner and the individual beneficiaries of the trust maintain, largely on the basis of the recent decision by the Court of Appeals in Matter of Cord, 58 N.Y.2d 539, 462 N.Y.S.2d 622, 449 N.E.2d 402 (1983), that the statutory rules of apportionment have no application to the instant case, by virtue of the tax clause in the decedent's will specifically directing against apportionment of estate taxes. Moreover, the petitioner maintains that to direct apportionment would be in derogation of the express intent of the testator as evidenced by the testimony of the attorney-draftsman of the...