In Re Matter Of Heller

849 N.E.2d 262 (2006)

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Nature of the Case

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Facts

New York enacted legislation that permits trustees to elect a regime in which income is calculated according to a fixed formula and based on the net fair market value of the trust assets. In his will, after making certain other gifts of personal property and money, Jacob's will created a trust to benefit his wife Bertha, and his children. Jacob provided that his entire residuary estate be held in trust during Bertha's life. He appointed his brother Frank as trustee and designated his sons Ds as trustees on Frank's death. Every year Bertha was to receive the greater of $40,000 or the total income of the trust. Jacob named his daughters (Suzanne Heller and Faith Willinger, each with a 30% share) and his sons and prospective trustees (Herbert and Alan Heller, each with a 20% share) as remainder beneficiaries. Jacob died in 1986, and his wife Bertha survives him. Jacob's brother Frank died in 1997. Ds became trustees. From that year until 2001, Bertha received an average annual income from the trust of approximately $190,000. In March 2003, Ds elected to have the unitrust provision apply, pursuant to EPTL 11-2.4 (e) (1) (B) (I). Ds notified trust beneficiaries Bertha Heller, Suzanne Heller, and Faith Willinger. The trustees sought to have unitrust treatment applied retroactively to January 1, 2002, the effective date of EPTL 11-2.4. As a result of that election, Bertha Heller's annual income was reduced to approximately $70,000. P commenced this proceeding, as attorney-in-fact for her mother Bertha Heller. P sought an order annulling the unitrust election and revoking the letters of trusteeship issued to Ds. She also sought a determination that the election could not be made retroactive to January 1, 2002. The court voided D's retroactive application of the unitrust election but denied an annulment of the unitrust election itself. Everybody appealed. The Appellate Division reversed so much of the order as annulled the retroactive application of the unitrust election. It then granted leave to appeal and certified the following question to us: 'Was the opinion and order of [the Appellate Division] dated August 15, 2005, properly made?'