Court Opinion

ID: 5687656
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:16:57.920022+00
Date Added: 2024-06-11T08:40:03.420405
License: Public Domain

Pigott, Jr., P.J. (dissenting).
We respectfully dissent. In our view, the quarterly deposits from the charitable remainder annuity trust (CRAT) into the lifetime trust (LTT) between the time of the death of A. Charles Pioch (Charles), the settlor, and the death of Kathleen M. Pioch, his daughter, were additions to the principal of the LTT rather than income thereto.
In New York, the characterization of particular trust receipts as principal or income is subject to the “terms of the trust instrument” (EPTL 11-2.1 [a] [1] [A]). A trust instrument “is to be construed as written and the settlor’s intention determined solely from the unambiguous language of the instrument itself’ (Mercury Bay Boating Club v San Diego Yacht Club, 76 NY2d 256, 267 [1990]; see Matter of Fabbri, 2 NY2d 236, 239-240; see also EPTL 11-2.1 [a] [1] [A]). If the intent is ambiguous, the duty of Surrogate’s Court is to effectuate the intent of the settlor, “insofar as it can be ascertained from the instrument, the relationships and the surrounding circumstances” (Matter of Grove, 86 AD2d 302, 307 [1982]).
Even assuming, arguendo, that the majority is correct that both trust instruments must be read together (see Matter of Gagliardi, 55 NY2d 109, 113-115 [1982]), we nevertheless conclude that the majority’s analysis overlooks the following language in the LTT:
“[T]he Grantor has this day delivered to the Trustee the property described in Schedule A, attached hereto, and the Trustee agrees to hold, administer and distribute all of the aforesaid assets (together with all additions thereto and all reinvestments thereof) as the principal of a trust estate, for the benefit of the Grantor, in accordance with the terms and provisions hereinafter set out” (emphasis added).
By those express terms, the “principal” of the LTT included “all of the aforesaid assets” and “all additions thereto.” In our view, the LTT unambiguously sets forth the intent of Charles that the principal of the LTT include not only the initial assets deposited by him into the LTT but also the additional quarterly *170deposits that he had directed to be made into the LTT from the CRAT (see generally Mercury Bay Boating Club, 76 NY2d at 267).
Even if we were to conclude that the language in the LTT is ambiguous, upon our review of the parties’ relationships and the surrounding circumstances, we would conclude that the intent of Charles that Kathleen receive income from the LTT to cover her personal needs only is manifest (see generally id.; Grove, 86 AD2d at 307). Indeed, the LTT allocated no funds to Kathleen herself, but simply established a method by which the trustee could pay all of her living expenses and provide her with a modest weekly allowance. We can discern no intent expressed in the LTT that Kathleen ever have control over or the power to alienate those funds, nor is there any evidence of such intent in the dealings between Charles and his attorney. The record before us establishes that Charles told his attorney at the time the trusts were established that, after Kathleen’s death, he wished the remaining trust assets to pass to the objectant eleemosynary institutions. According to the affidavit of Charles’s attorney, Charles never indicated that he wanted anyone other than his daughter and the objectants to be the beneficiaries of his estate and trusts.
Our conclusion is buttressed by the EPTL, pursuant to which assets deposited into a trust are principal. EPTL 11-2.1 (b) (2) provides that “[principal is property, disposed of in trust, in income from which is payable to or to be accumulated for an income beneficiary and the title to which is ultimately to vest in the person entitled to the future estate.” EPTL 11-2.1 (b) (1) provides that “[ijncome is the return in money or property derived from the use of principal.” We agree with objectants that a plain reading of those paragraphs qualifies the funds at issue as “principal” because such funds were “disposed of in trust.” Moreover, once the funds were deposited into the LTT, the income from the assets was “payable to . . .an income beneficiary,” i.e., Kathleen (EPTL 11-2.1 [b] [2]), and title ultimately was to pass to the entities entitled to the future estate, i.e., objectants. Finally, in our view it is patently clear that the quarterly deposits from the CRAT into the LTT were not “income” because such funds did not represent any kind of “return in money or property derived from the use of principal” (EPTL 11-2.1 [b] [1]). Rather, the $6,000 quarterly payments derived from a source external to the LTT, i.e., the CRAT.
*171Accordingly, we would reverse the order, sustain the objections and remit the matter to Surrogate’s Court for further proceedings consistent with our dissenting opinion.
Martoche and Hayes, JJ., concur with Kehoe, J.; Pigott, Jr., P.J., dissents and votes to reverse in accordance in a separate opinion in which Green, J., concurs.
It is hereby ordered that the order so appealed from be and the same hereby is affirmed without costs.