Matter of Constantine

[*1] Matter of Constantine 2023 NY Slip Op 50492(U) Decided on May 18, 2023 Surrogate's Court, Erie County Mosey, S. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 18, 2023
Surrogate's Court, Erie County

In the Matter of the Article VI Trust f/b/o Ann E. Constantine Under the Last Will and Testament, dated August 14, 1961, of Harold J. Constantine, Deceased.



In the Matter of the Article VI Trust f/b/o John B. Constantine Under the Last Will and Testament, dated August 14, 1961, of Harold J. Constantine, Deceased.



In the Matter of the Article VI Trust f/b/o William J. Constantine Under the Last Will and Testament, dated August 14, 1961, of Harold J. Constantine, Deceased.



In the Matter of the Article VI Trust f/b/o Walter E. Constantine, Jr. Under the Last Will and Testament, dated August 14, 1961, of Harold J. Constantine, Deceased.



In the Matter of the Article VI Trust f/b/o Robert W. Constantine Under the Last Will and Testament, dated August 14, 1961, of Harold J. Constantine, Deceased.



File Nos. A-3688/C, A-3688/D, A-3688/E, A-3688/F, A-3688/G


BARCLAY DAMON, LLP
Appearing for Petitioner-Trustee Citibank, N.A.
Jennifer G. Flannery, Esq., of Counsel

PHILLIP L. BURKE, ESQ.
Guardian ad Litem for Infants

CATHERINE E. NAGEL, ESQ.
Guardian ad Litem for Unborn Contingent Beneficiaries

Acea M. Mosey, S.

Harold Constantine [hereafter, Constantine] died on August 3, 1962, a resident of Erie County, New York, and his 1961 Will was admitted to probate by this Court [Regan, J.] on [*2]August 17, 1962. Article VI of the Will deals with Constantine's residuary estate, and sets up various testamentary trusts — one trust for each child of his brother Walter "living at the time of my death"[FN1] —and makes specific directions governing payments out of each such trust:

"My Trustee shall set apart and hold one such equal part as a separate trust fund for the benefit of each such child living at my death and shall invest and reinvest each such trust fund, and shall collect the income therefrom and apply so much of the net income therefrom (and any accumulated income) to the support, education and maintenance of the child for whom such trust fund shall have been set apart, as my Trustee shall see fit, and shall accumulate, invest and reinvest the balance of said income until such child shall attain the age of twenty-one years, at which time all accumulations of net income shall be paid to such child, and thereafter shall pay the entire net income to such child in quarterly installments during his or her life.c) Upon the death of each such child, the then corpus of his or her trust fund (and, if such child dies before attaining the age of twenty-one years, any accumulated income) shall be paid over and distributed to the issue of such child living at the death of such child, in equal shares per stirpes, and if there be no such issue then living, to the aforesaid brothers and/or sister of such deceased child in equal shares per stirpes."

For reasons which will be discussed intra, certain of the current income beneficiaries have considered requesting that this Court permit conversion of the trust to a unitrust (see EPTL 11-2.4). However, because such conversion, if permitted, would statutorily require an annual 4% distribution of the net fair market value of the trust assets, those income beneficiaries express concern that "4% income would be excessive for each of their current needs, and it would be potentially detrimental to" the remainder interests under the trust (emphasis added).

The current income beneficiaries also suggest that a 3% income distribution would be more suited to their current needs, 1% less than a New York unitrust required 4% distribution. And, these beneficiaries say, a 3% income distribution would be in line with what Constantine directed, in effect, with respect to his Will's Article II trust set up for his sister-in-law, Pauline Constantine [hereafter, Pauline]. The Article II trust was funded with $100,000, and the Trustee was directed to ensure payment to Pauline of $3,000 annually even if that would require an invasion of the Article II trust principal to make up any difference between annual income for any given year and the required annual $3,000 payment to Pauline. That $3,000 annual payment to Pauline, these beneficiaries say, evinces an intent of Constantine that a 3% income distribution—$3,000 equaling 3% of $100,000—would be appropriate.

Thus, the Trustee, based upon the current income beneficiaries' thinking and concerns, has now petitioned this Court to permit transfer of decedent's testamentary trust to the State of South Dakota where, the Trustee asserts, there is a more flexible unitrust distribution format [3% to 5% annually]. All necessary parties have been cited, there are no objections to the proposed [*3]transfer to South Dakota, and the matter is now before this Court for determination.

(A)

It is well-settled that a court has the authority to change the situs of a trust subject to its jurisdiction (Matter of Rockefeller, 2 Misc 3d 554 [2003]; Matter of Beneditto, 83 Misc 2d 740 [1975]). If the trust instrument specifically authorizes a change in situs, or does not expressly or impliedly prohibit it, courts may approve the change if it can be shown to have some beneficial effect (Matter of Weinberger, 21 AD2d 780 [1964]; Matter of Matthiessen, 195 Misc 598 [1949]). Significantly, however, a court is without authority to change the situs of a trust simply because the parties request it (Matter of Rockefeller, supra, at 556).

Here, the language of the Will does not specifically authorize, nor does it expressly prohibit, transferring jurisdiction of the trust. The lack of a specific prohibition, however, is not reason enough to authorize a change (id.).

(B)

Petitioner has advanced no compelling reason to warrant transfer of the situs of this trust. There is no asserted family connection in or to the proposed transferee State, namely South Dakota, now or at any time in the past. Decedent was a long-time Buffalo, New York, resident, and 60 years after his death much of his family remains New York-based.[FN2] There has been no issue for the past 60 years in administering the trust here in New York State under New York State law, and the only reason now being advanced for the proposed transfer is that the current income beneficiaries may be able to—put colloquially—get a more favorable income distribution in South Dakota.

I say "may be able to" advisedly. There is nothing in the papers before me which alleges that South Dakota would ultimately permit conversion of this testamentary trust to a unitrust if the situs were transferred to that state.

For example, reading decedent's Will, I note that the Article VI trust provisions do not permit any invasion of trust principal for a current trust beneficiary but rather strictly limit distributions to the trust beneficiaries of "net income". This is in complete contrast to the Article II trust provisions for Constantine's sister-in-law Pauline, where a principal invasion was permitted, thus highlighting the absence of invasion authority for the Article VI trusts. See, e.g., Matter of Ives, 192 Misc 2d 479, 483 [2002], where Surrogate Peckham observed that conversion to a unitrust option would mean that, to the extent the unitrust payout exceeded the normal income distribution, such excess "would be an invasion of principal."

In addition, Article IX of decedent's Will revokes "all benefits provided for [any] such beneficiary" who "seeks to prevent any provision [hereof] from being carried out in accordance with its terms (regardless of whether or not such proceedings are instituted in good faith and with probable cause)". Article IX also provides that "[e]ach benefit conferred herein is made on the condition precedent that the beneficiary shall accept and agree to all of the provisions of this Will and the provisions of this ARTICLE IX are an essential part of each and every benefit." So, for example, the Will provides that, if all trust beneficiaries were disqualified from taking by virtue of Article IX, the entire Article VI trust would "pass to the University of Buffalo outright, [*4]free and clear of any trusts."

I express no view about how the foregoing provisions might be construed under New York law if a request were made here to convert this trust to a New York unitrust under EPTL 11-2.4, nor do I have any sense how South Dakota would construe those provisions in similar circumstances. I do, however, feel constrained to point out the potential for missteps with the present transfer petition.

Under all the circumstances, I find and conclude that the situs of decedent's testamentary Article VI trust may not be transferred to South Dakota, and the Trustee's petition seeking such relief is hereby denied in all respects.

Finally, I find that the requested fees of the guardians ad litem have not been objected to, and that, as follows, each such fee is fair and reasonable under the circumstances, each is hereby approved, and each shall be paid by the Trustee within twenty (20) days of the date hereof by making payment to each of the guardians ad litem of one-fifth of each approved amount from the principal of each of the five trusts at issue here:

(a) $3,650.00 - payable to Catherine E. Nagel, Esq., guardian ad litem for possible unborns;(b) $5,000.00 - payable to Philip L. Burke, Esq., guardian ad litem for minor ultimate beneficiaries.

This decision shall constitute the Order and Decree of this Court and no other or further order or decree shall be required.

DATED: May 18, 2023
BUFFALO, NEW YORK
HON. ACEA M. MOSEY
Surrogate Judge Footnotes

Footnote 1: Those Article VI trust beneficiary nephews and niece are as follows: (1) John B. Constantine [b. 1941], living currently in Andover, Massachusetts; (2) Walter E. Constantine, Jr. [b. 1942], living currently in Elma, NY; (3) William J. Constantine [b. 1944], currently living in New York City, NY; (4) Ann E. Constantine [b. 1945], currently living in Andover, Massachusetts; and (5) Robert W. Constantine [b. 1948], currently living in Sarasota, Florida (and formerly a well-established attorney in the Western New York State area).

Footnote 2: Of the 5 current income beneficiaries and their 35 total issue [children and grandchildren], 18 reside in New York, 6 reside in Massachusetts, 5 reside in New Hampshire, 4 reside in Vermont, 3 each reside in Maryland and Virginia, and 1 resides in Florida.