By: Jennifer F. Hillman, Esq.
A recent decision out of the New York Appellate Division
Second Department broadened the range of powers enumerated to an
attorney-in-fact to include the ability to amend a previously executed irrevocable
inter vivos trust.
The facts in Perosi v.
LiGreci, 948 N.Y.S.2d 629, 2012 N.Y. App. Div. LEXIS 5448, 2012 NY Slip Op
5533 (2d Dep't July 11, 2012) [enhanced version available to lexis.com subscribers] are
not disputed. The creator established an irrevocable inter vivos trust ("Trust")
naming his grandchildren as beneficiaries, and his brother as trustee. The Trust
provided that "it shall be irrevocable and shall not be subject to any
alteration or amendment." Ten years later, the creator executed a durable statutory
short-form power of attorney appointing his daughter as attorney-in-fact. The
power of attorney granted the attorney-in-fact the authority to act as the
principal's agent with respect to all matters including estate transactions and
"all other matters" as defined in the New York General Obligations Law § 5-1502A through § 5-1502N.
The major gifts rider also granted the attorney-in-fact the power to establish
and fund revocable or irrevocable trust, transfer assets to a trust, make gifts,
and act as grantor and trustee.
Just prior to the creator's death, the attorney-in-fact
executed an amendment to the Trust pursuant to New York Estate Powers and Trusts Law ("EPTL") § 7-1.9
which sought to remove and replace the current trustee and successor trustee. All
three beneficiaries of the trust signed written consents as required by statute,
but the creator died before agreeing to the amendment.
The newly designated trustee then filed a petition seeking
an accounting from the former trustee, removal of the trustee and successor
trustee, as well as a direction that they turn over all Trust property, assets,
and records. The trustee then moved to "set aside" the amendment to the trust
and have him restored as trustee claiming that the amendment was void because
the trust was irrevocable and thus not subject to amendment. In opposition,
petitioners contended that because EPTL § 7-1.9 permits a creator to amend the
trust during his lifetime upon the consent of all beneficiaries; the
attorney-in-fact can also do so as the agent for the creator.
The Supreme Court held that the creator intended the trust
to be irrevocable and that the power of attorney did not grant the
attorney-in-fact the power to amend estate planning devices that were created prior to the execution of the power of
attorney. The Supreme Court determined that the power of attorney grants
"forward looking" powers and was silent as to previously created estate
planning devices. Perosi, 948
N.Y.S.2d 629, 632. The Supreme Court also found that the statutory right to
amend or revoke an irrevocable trust is a personal right which may only be
exercised by the creator, unless the power of attorney states otherwise. Id. at 636.
In a surprising decision, the Second Department reversed the
Supreme Court and granted the petition finding that if a trust instrument does
not set forth an amendment procedure, the creator is only restricted by the
statutory requirements set forth in EPTL § 7-1.9. The Second Department
determined that although neither the power of attorney nor Article 15 of the
New York General Obligations Law specifically authorizes an attorney-in-fact to
amend a trust, the general scope of a power of attorney is limited only by the
boundaries of the principal-agency relationship.
There are a few exceptions to this broad power which the
Second Department listed including the execution of a principal's will (EPTL 3-2.1(a)(3)); the execution of a principal's affidavit
upon personal knowledge (Cymbol v. Cymbol,
122 A.D.2d 771, 505 N.Y.S.2d 657 (2d Dep't 1986) [enhanced version available to lexis.com subscribers]);
or the entrance into a principal's marriage or divorce (Mallory v. Mallory, 113 Misc. 2d 912, 450 N.Y.S.2d 272 (Sup. Ct.
Nassau County 1982) [enhanced version available to lexis.com subscribers]).
These acts have been deemed acts which by their "nature, by public policy, or
by contract" required the creator's personal performance. The Second Department
ruled that the amendment of a trust with the consent of the beneficiaries was
such an act. "[W]hile the Legislature has determined that an agent cannot
execute a principal's will (see EPTL 3-2.1[a]), there is no such legislative
enactment which precludes an agent from amending a principal's trust." Perosi, at 635.
The lower court had found that the creator, acting through
the attorney-in-fact, was not permitted to amend the Trust absent a specific
delegation of that power in the Trust instrument or the power of attorney. The
Second Department turned this ruling on its head and held that because the
Trust did not prohibit the creator from amending the Trust by utilizing a power
of attorney, the attorney-in-fact, as alter ego of the creator, properly
amended the trust. In so ruling, the Second Department distinguished other
cases where the trusts themselves had specific provisions governing amendment
of the trust (Matter of Chiaro, 28
Misc. 3d 690, 903 N.Y.S.2d 673 (Sup. Ct. Suffolk County 2010) [enhanced version available to lexis.com subscribers]
(once grantor was found incapacitated,
the trust dictated that her guardian had no power to amend)) or the trust
specifically reserved the right to amend or revoke the trust to the creator (Matter of Goetz, 8 Misc. 3d 200, 793
N.Y.S.2d 318 (Sur. Ct. Westchester County 2005) [enhanced version available to lexis.com subscribers]).
Thus, the Second Department has made it abundantly clear
that the New York power of attorney provides an attorney-in-fact broad powers
to act as a principal may, except in extremely limited circumstances. Of
course, this power is always limited by the attorney-in-fact's fiduciary duty
to act for the benefit of the principal. Matter
of Ferrara, 7 N.Y.3d 244, 819 N.Y.S.2d 215, 852 N.E.2d 138 (2006) [enhanced version available to lexis.com subscribers].
Jennifer F. Hillman is an attorney at Ruskin, Moscou
Faltischek, P.C., Uniondale, New York where her practice focuses in the area of
trust and estate litigation. She can be reached at firstname.lastname@example.org
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