Probate, trust, guardianship and inheritance litigation
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When Can A New York Fiduciary Ask The Surrogate’s Court For Help?

A New York fiduciary can ask the Surrogate’s Court for help and direction in extraordinary circumstances and as to the propriety, price, manner and time of the sale of real property if the value is uncertain or dependent on the time of sale.

An April 2020 case, Matter of Hoover, involved an application by a New York fiduciary for advice and direction regarding certain real property.

The Facts of Matter of Hoover

In Matter of Hoover, the Surrogate’s Court of Essex County granted petitioner’s application for advice and direction regarding certain real property.

Petitioner and George Fowler (Decedent), purchased a parcel of land as tenants in common.  They contracted to build a single family home on the land (the “Keene Property”).  They also executed a trust agreement naming themselves as grantors and cotrustees for the purpose of administering and maintaining the Keene Property and “determin[ing] the rights and claims that will accrue to each of them during the term of this trust and to their respective beneficiaries thereafter.”

The Trust provided that Decedent would initially obtain an 85% ownership interest in the trust and petitioner would initially obtain a 15% ownership interest, subject to annual amendment by the grantors “for the purpose of reflecting future capital contributions to the trust.”  The Keene Property was transferred into the Trust.

Decedent died unexpectedly in December 2017.  The Keene Property was not yet completed.  Decedent’s son was named as executor of the estate and cotrustee of the Trust.  Decedent’s son directed the builders to stop working on the Keene Property pending an agreement between himself and petitioner as to how costs would be split.   The bank pulled the loan commitment.

Petitioner commenced a proceeding in New York Surrogate’s Court to obtain approval to sell the Keene Property and for help and direction on how to appropriately distribute the proceeds of the sale.  Decedent’s son cross-petitioned for similar relief.

When Can A New York Fiduciary Ask For Help From The Surrogate’s Court?

SCPA 2107 provides that a New York fiduciary can ask the Surrogate’s Court for help and direction as to value, manner and time of sale of property and give advice and direction in extraordinary circumstances.  SCPA 2107 states:

1)  Whenever the value of property of an estate is uncertain or dependent upon the time and manner of sale thereof a fiduciary may apply by petition to the court for advice and direction as to the propriety, price, manner and time of sale thereof.

2) The court may entertain applications by a fiduciary to advise and direct in other extraordinary circumstances such as complex valuation issues, or tax elections, or where there is conflict among interested parties, but need not entertain jurisdiction if to do so would be merely to substitute the court’s judgment for that of the fiduciary.

3) A substantial compliance with the authorization so given shall relieve the fiduciary from any objection that the estate suffered a loss on account of the action taken under court advice and direction.

Why Should A New York Fiduciary Ask The Surrogate’s Court For Guidance?

The primary reason that a New York fiduciary should take advantage of the ability to get authorization from the Surrogate’s Court before taking a particular action is for the protection the authorization provides.  If the Surrogate’s Court authorizes a certain action, then as long as the fiduciary complies with the authorization, the fiduciary is protected from any negative consequences of the action.  SCPA 2107 can be a great resource for a New York fiduciary faced with an uncertain path to not only seek help from the Surrogate’s Court, but also to get some protection from any ramifications of the action.

However, just because a fiduciary is unsure about a decision does not mean that the Surrogate’s Court is available to provide the answer.  If the direction sought is regarding an issue other than real property, then the circumstances must be extraordinary.  The Surrogate’s Court does not have to entertain jurisdiction “merely to substitute the court’s judgment for that of the fiduciary.”

Here, the Surrogate’s Court determined that the terms of the trust agreement were unambiguous and that, pursuant to its own terms, it became irrevocable upon decedent’s death. Given the express purpose of the trust, the Surrogate’s Court directed decedent’s estate to pay 85% of the remaining construction costs should petitioner declare her willingness to reside at the Keene property.

The court further indicated that, by refusing to pay the costs associated with completion of the Keene property, the Decedent’s son breached the terms of the construction contract with the builders and his fiduciary duties to the trust.

The appellate division looked at the plain language of the Trust and affirmed the Surrogate Court’s decision stating:

The trust further provides that should one or both of the grantors die, the trust would become irrevocable and no longer subject to amendment or revocation. While it did direct that, in the event of the deaths of both petitioner and decedent, the successor trustees were to sell the property and distribute the proceeds thereof to the remainder beneficiaries, it also directed that, in the event of the death of one of the grantors, the trust provisions were to be “carried out even if all the beneficiaries hereunder at any time express a desire to terminate” the trust.

Thus, a plain language reading of the relevant trust provisions, which became irrevocable upon decedent’s death, unambiguously provide that it was the grantors’ intent for the surviving grantor — herein petitioner — to live, inhabit and enjoy the property for the rest of her lifetime, which necessarily required completion of construction of the Keene property in order to fulfill the very purpose of the trust.

Here, the New York Surrogate’s Court provided guidance to the parties pursuant to SCPA 2107.  While the fiduciary sought a different outcome, the New York Surrogate’s Court returned to the terms of the Trust to find the answer.

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