Matter of Bailis, 16 N.Y.2d 74 (1965)

A stipulation against the apportionment of accrued income in a trust does not automatically deprive a widow of her right to elect against a will under Section 18 of the Decedent Estate Law.

Summary

This case addresses whether a clause prohibiting the apportionment of accrued income in a trust established for a widow’s benefit disqualifies the trust from satisfying the requirements of Section 18 of the Decedent Estate Law, thus granting her the right to elect against the will. The Court of Appeals held that such a stipulation, by itself, does not deprive the widow of the income benefit, and therefore, does not automatically give rise to a right of election. Additionally, the Court addressed the issue of counsel fees, determining that they should not be awarded out of the estate in this instance.

Facts

The testator established a trust for his widow’s life benefit in his will. The trust contained a provision stipulating against the apportionment of accrued income, meaning income earned by the trust corpus but not yet payable to the trustee at a specific time (presumably, the widow’s death) would not be apportioned. The widow sought to elect against the will, arguing the trust did not provide her with the minimum benefit required under Section 18 of the Decedent Estate Law due to the accrued income clause.

Procedural History

The case originated in the Surrogate’s Court, Queens County. The Surrogate’s Court’s initial order was appealed. The Appellate Division’s order was then appealed to the New York Court of Appeals.

Issue(s)

1. Whether a stipulation against the apportionment of accrued income in a trust for life automatically deprives the widow of the benefit of the income from the trust under Section 18 of the Decedent Estate Law, thus granting her a right of election?

2. Whether counsel fees should be awarded out of the estate in this proceeding?

Holding

1. No, because a stipulation against the apportionment of accrued income, in and of itself, does not deprive the widow of the benefit of the income from a trust for life under Section 18 of the Decedent Estate Law.

2. No, because counsel fees should not be awarded out of the estate in this instance.

Court’s Reasoning

The Court of Appeals relied on Matter of Byrnes, 260 N.Y. 465 (1932) and legislative history to support its holding. The Court reasoned that the mere presence of a clause prohibiting apportionment of accrued income does not automatically render the trust insufficient to satisfy Section 18. The focus remains on whether the trust, as a whole, provides the widow with the intended benefits. The court emphasized that the intent of Section 18 was to protect widows, but not to allow them to invalidate testamentary plans based on technicalities if the overall benefit was adequate. Regarding counsel fees, the court cited Surrogate’s Court Act § 278 and Matter of Liberman, 6 N.Y.2d 525 (1959), indicating that awarding counsel fees out of the estate was inappropriate in this particular case.

The court directly stated its holding: “We hold that a stipulation against the apportionment of accrued income, i.e., income earned by the corpus, but not yet payable to the trustee, does not, in and of itself, deprive the widow of the benefit of the income from a trust for life under section 18 of the Decedent Estate Law.”