Weinstein & Randisi
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Good news for those trusts that don't get funded right away

As practicing estate planning attorneys, we come across clients who have set up various types of Trusts, whether with our office or with other attorneys. The problem is that many of these Trusts are unfunded - either there are no assets titled in the name of the Trust or there are some assets in the Trust and some still in the name of the client. When we meet with clients to review their estate planning situations, we always try to make sure that Trusts get funded - better late than never (and always easier when our clients are still with us).

The Surrogate of Suffolk County recently held that a Trust was valid, even though it was funded a lengthy six months after it was originally executed. Let me point out that we have clients who are funding their Trusts years after they are executed, and any other result in this case would have been a serious problem. The Surrogate was affirmed on appeal by the Second Department, in the Matter of Doman, 2009 NY Slip Op 09222 (http://www.nycourts.gov/reporter/3dseries/2009/2009_09222.htm).

A husband and wife set up separate Trusts to benefit each of their separate children from previous marriages. The husband owned a co-op apartment in New York City, which was eventually transferred to a Qualified Personal Residence Trust for the benefit of the wife. The wife was to receive the income of the Trust during her lifetime, and after her death, any remainder was to pass to the husband's son. At some point during the wife's lifetime, the apartment was sold and the proceeds were converted to an annuity. Again, the wife received income during her life, and at her death, the approximate $1.1 million remaining in the Trust was to pass to the husband's son.

The wife's daughter, who received all of her mother's other assets, challenged the validity of the Trust because it had not been funded with the shares of the co-op apartment until 6 months after it was executed. The daughter's argument was that since the Trust was invalid, her mother owned the apartment/annuity outright and any proceeds should go to the daughter, not the stepson.

The Second Department recites the requirements for a valid Trust in New York: "(1) a designated beneficiary, (2) a designated trustee, (3) a fund or other property sufficiently designated or identified to enable title of the property to pass to the trustee, and (4) actual delivery of the fund or property, with the intention of vesting legal title in the trustee."

Despite the daughter's argument that the six-month gap between execution and funding of the Trust meant that the fourth requirement above was not satisfied, the court ruled that this did not matter because the property was actually delivered to the Trustee after the six months. 

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Weinstein & Randisi
290 Linden Oaks, Ste. 200
Rochester, NY 14625

Toll Free: 800-768-1780
Phone: 585-310-1578
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