Amendment of Trust by Grantor’s Attorney-in-Fact

An irrevocable and unamendable trust can be revoked or amended during the life of the grantor under certain limited circumstances. New York's Estate Powers and Trust Law (EPTL) provides in Section 7-1.9 that upon the written acknowledged consents of all persons beneficially interested in a trust, a grantor may revoke or amend the whole or any part of a trust by his or her written acknowledged instrument.

A New York Appellate Court has recently reversed a trial court decision and permitted an attorney-in-fact for the grantor of a trust to amend a trust pursuant to the above statute with the consent of all its beneficiaries. Matter of Perosi v. LiGreci, 2012 N.Y. App. Div. LEXIS 5448 (2d Dept. July 11, 2012) [enhanced version available to lexis.com subscribers].  The appellate court held that there need not be a specific delegation of the power to amend or revoke in the trust instrument or the power of attorney. The Court stated that as long as the Trust did not prohibit the grantor from amending the trust through his attorney-in-fact, the attorney-in-fact, as the creator's alter ego, could properly amend the trust.

The appellate court expressed an awareness that there are policy reasons for prohibiting an attorney-in-fact from amending or revoking an irrevocable trust similar to a testamentary instrument on behalf of her principal. The Court said such a policy is for the legislature to determine, not the courts.

In 1991, Nicholas LiGreci created an Irrevocable Life Insurance Trust the beneficiaries of which were his three adult children. Linda Perosi, his daughter and one of the beneficiaries was appointed his attorney-in-fact under a statutory short form power of attorney in April 2010. Nicholas LiGreci had named his brother John as Trustee and another unrelated party as successor trustee. The Trust provided that it "shall be irrevocable and shall not be subject to any alteration or amendment." The power of attorney granted powers with respect to estate transactions and all other matters. It also contained a Major Gifts Rider (MGR) which gave the daughter the authority to establish and fund trusts, transfer assets to a trust, make gifts, and act as grantor and trustee of a trust. Concededly neither the trust instrument nor the power of attorney granted the attorney-in-fact the specific power to revoke or amend an existing irrevocable trust.

Within one month of the appointment of the daughter under the power of attorney, she executed an amendment with the consent of all beneficiaries removing her uncle and the successor trustee and appointing her son as trustee and another person as successor trustee. Nicholas LiGreci died 15 days later and never signed the amendment. Thereafter, the new trustee sought an accounting from the decedent's brother John LiGreci, and the turnover of all assets and records of the trust to the "new" trustee. The decedent's brother and trustee moved to set aside the amendment. The Supreme Court denied the petition and granted the trustees' motion to set aside the amendment.

The Supreme Court held that the grantor intended the trust to be irrevocable, that the power of attorney (POA) granted no authority to amend estate planning devices created prior to the execution of the POA and the statutory right to revoke or amend under EPTL 7-1.9 is a personal right exercisable only by the creator, unless the POA or trust states otherwise.

The Appellate Court began by recognizing that EPTL 7-1.9 allows the creator and beneficiaries of an irrevocable and unamendable trust to reform or terminate it. They further recognized that where a trust instrument specifies a procedure to amend, it will only be valid if that procedure is followed. Thus they concluded if the trust does not set forth an amendment procedure, the grantor and beneficiaries are governed by the statutory requirements. Analyzing the POA in question, the Court found that under such a POA, the attorney-in-fact is authorized to act with respect to any matter of the principal with the exception of those acts which by their nature, by public policy or contract require personal performance. Such exceptions would include execution of principal's will, his affidavit on personal knowledge, or contracting a marriage or divorce. Execution of an amendment to a trust was not an act requiring the principal's personal performance. The Appellate Court rejected the trial court's determination that the amendment or revocation of a trust was a personal act, analogous to the execution or revocation of a will or codicil, stating that any such policy determination was for the Legislature to enact. The Court also distinguished other trial court decisions which found that an attorney-in-fact had no authority to amend a trust on the grounds that the power of revocation or amendment is a personal right.

It should be noted that courts and statutes in numerous other jurisdictions have found attempted amendments, not expressly authorized in the trust document or POA itself, to be void and ineffective. (Cal. Prob. Code § 15401 (c); Tenn. Code Ann. § 35-15-682; Williams v. Springfield Man. Bank, 131 Ill. App. 3d 417 (1985) [enhanced version available to lexis.com subscribers]; Muller v. Bank of America, 28 Kan. App. 2d 136 (2000) [enhanced version available to lexis.com subscribers]; Leahy v. Old Colony Trust Co., 326 Mass. 49 (1950) [enhanced version available to lexis.com subscribers]; Garfinkel v. Josi, 972 So. 2d 927 (Fla 2008) [enhanced version available to lexis.com subscribers]; Marital Trust of John W. Murphey, 169 Ariz. 443 (1991) [enhanced version available to lexis.com subscribers]; Weatherly v. Byrd, 566 S.W.2d 292 (Texas 1978) [enhanced version available to lexis.com subscribers].

The answer to this dilemma appears to be a matter of drafting. If an irrevocable trust is to be truly irrevocable an explicit provision should be made to draft around EPTL 7-1.9 in the trust instrument and the POA. If a grantor wants to create flexibility in the future even with respect to an irrevocable trust, they should explicitly give the statutory power to amend or revoke to their agent.

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