In Re Helle

800 N.Y.S.2d 207 (App. Div. 2005)

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Nature of the Case

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Facts

Jacob Heller created a testamentary trust in 1984. The trustees of the trust are Jacob's two sons, Herbert M. Heller and Alan J. Heller (hereinafter the trustees). The trustees each hold a 20% interest in the remainder of the trust. The balance of the remainder interest is held in equal shares by their sisters, Suzanne Heller, and Faith Willinger. The income beneficiary of the trust is their stepmother, Bertha Heller (hereinafter Bertha), who is the mother of the petitioner, her attorney-in-fact. In February 2003 the trustees elected to treat the trust as a unitrust, retroactively to January 1, 2002. As a result of the trustees' election, Bertha will no longer receive any portion of the annual trust income in excess of four percent of the value of the trust's principal. Before the election, the trust had been paying Bertha its actual annual income, in the amount of approximately $190,000. After the election, the income she received was reduced to approximately $70,000 per year. Simple arithmetic suggests that the trustees will likely benefit personally, in their capacity as remaindermen, from the election that they have made in their fiduciary capacity. On this basis, the petitioner contends that the election should be set aside because the trustees are precluded by their concurrent status as remaindermen from making the election. The Surrogate Court denied the petitioner's motion for summary judgment annulling the election but granted her summary judgment annulling retroactive application of the election. The trustees appealed.