Application of Halpern, 277 App. Div. 525, 100 N. Y. S. 2d 894 (1st Dep\u27t 1950)

Fleming, Robert B.

Miserendino, Samuel R.

English

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Buffalo Law Review Volume 1 Number 1 Article 11 4-1-1951 Wills—Totten Trusts—Distribution of Balance of Deposit After Invasion by Widow Samuel R. Miserendino Robert B. Fleming Follow this and additional works at: https://digitalcommons.law.buffalo.edu/buffalolawreview  Part of the Estates and Trusts Commons Recommended Citation Samuel R. Miserendino & Robert B. Fleming, Wills—Totten Trusts—Distribution of Balance of Deposit After Invasion by Widow, 1 Buff. L. Rev. 40 (1951). Available at: https://digitalcommons.law.buffalo.edu/buffalolawreview/vol1/iss1/11 This Recent Decision is brought to you for free and open access by the Law Journals at Digital Commons @ University at Buffalo School of Law. It has been accepted for inclusion in Buffalo Law Review by an authorized editor of Digital Commons @ University at Buffalo School of Law. For more information, please contact lawscholar@buffalo.edu. BUFFALO LAW REVIEWWILLS - TOTTEN TRUSTS - DISTRIBUTION OF BALANCEOF DEPOSIT AFTER INVASION BY WIDOWDecedent's will gave everything to his widow, but prior to his death heestablished four savings bank accounts in his own name in trust for a grand-child, the passbooks being retained by decedent. The widow instituted anaction for deterniination as to whether these accounts were a part of theestate, contending that the transfers were illusory. The Surrogate ruled thatthe trust accounts (Totten trusts) belonged entirely to the estate and passedin toto to the widow under the will. Held: decree modified. The Totten trustsare illusory only to the extent that they encroach upon the widow's distributiveshare under Sections 18 and 83 of the New York Decedent Estate Law. Theamount of the deposits is to be added to the value of the.rest of the estate todetermine the widow's share, and the balance of the trusts remaining after herexpectancy is satisfied goes to the beneficiary of the trusts. Application ofHalpern, 277 App. Div. 525, 100 N. Y. S. 2d 894 (Ist Dep't 1950).It is a generally accepted principle that if the settlor of a trust reservesnot only the power to revoke and modify but also the power to deal with thetrust property as his own, the intended trust becomes a testamentary dis-position and is invalid unless it complies with the Statute of Wills. I SCOTT,THE LAW OF TRUSTS 354. An exception to this rule is recognized in New Yorkwhere the creation of a savings bank deposit in the name of the depositor intrust for the benefit of another, the settlor retaining power to make deposits orwithdrawals during his lifetime, results in a tentative trust. Though revocableat will, there is a presumption that an absolute trust was created as to thebalance on hand at the death of the depositor. Matter of Totten, 179 N. Y.112, 71 N. E. 748 (1904).Totten trusts, however, are not fully effective for all purposes. When thedepositor dies insolvent, or if the remaining assets of the estate are insufficientto pay the debts, creditors can reach the Totten trust deposit. Beakes DairyCo. v. Berns, 128 App. Div. 137, 112 N. Y. Supp. 529 (2d Dep't 1908); Matterof Weinberg, 162 Misc. 867, 296 N. Y. Supp. 7 (Surf. Ct. 1937). Similarly,the deposits may be resorted to for the purpose of paying funeral and adminis-tration expenses. Matter of Greniewich, 243 App. Div. 811, 278 N. Y. Supp.279 (2d Dep't 1935) ; Mann v. Shrive, II1 App. Div. 452, 97 N. Y. Supp. 688(2d Dep't 1906); Matter of Reich, 146 Misc. 616, 262 N. Y. Supp 623 (Surr.Ct. 1933). Any excess however, goes to the trust beneficiary; the presumptionof the trust being absolute is rebutted only to the extent necessary to makethese- payments. Mann v.Shrive and Matter of Reich, supra.A widow may attack a Totten trust since as to her the transfer is illusoryand in contravention of her rights under § 18 of the Decedent Estate Law.Krause v. Krause, 285 N. Y. 27, 32 N. E. 2d 779 (1941); Steixner v. BowerySavings Bank, 86 N. Y. S. 2d 747 (Sup. Ct. 1949). [Section 18 gives a surviv-RECENT DECISIONSing spouse a personal right of election against the will, allowing her to takeher share of the estate as in intestacy, i.e., as provided by Section 83, but withcertain limitations and exceptions, so that her elective share may be somewhatless than she would take in intestacy.]The ability to invoke § 18 to defeat an illusory trust has been held not tobe dependent upon the existence of a will against which the widow could electto take. Burns v. Turnbull, 294 N. Y. 889, 62 N. E. 2d 785 (1945) ; Schnaken-berg v. Schnakenberg, 262 App. Div. 234, 28 N. Y. S. 2d 841 (2d Dep't 1941);contra: Murray v. Brooklyn Savings Bank, 258 App. Div. 132, 15 N. Y. S. 2d915 (lst Dep't 1939).The above decisions lead to the conclusion that Totten trusts in net effectare analogous to testamentary dispositions. The fiction, perhaps induced bya desire for convenience, is evidence of an underlying judicial policy to sur-mount the obstacles of formality required by the Statute of Wills.Where the will provides for the widow the minimum statutory benefitsrequired by § 18, she has no right of election. Newman v. Dore, 275 N. Y. 371,9 N. E. 2d 966 (1937) ; In re Kalinds Will, 184 Misc. 367, 53 N. Y. S. 2d 775(Surr. Ct. 1945). But, though possessing no right of election, the widow canmaintain an action to set aside illusory transfers. Newman v. Dore. The griev-ance of the widow relates not to direct violation of § 18 but to evasion thereofby an apparent but not real reduction of the quantum of the estate. Schnaken-berg v. Schrakenberg, supra.A re-examination of the meaning of the word "illusory" may be helpfulin considering the problems of the present case. This word has at times beenused somewhat indiscriminately in the cases, as the decisions already notedmay suggest. Newman v. Dore, supra, is the leading case on illusory trusts;there the testator set up a revocable trust whereby he reserved the right toenjoy all of the income for life and the power to control the trustees as well.Testator's will gave his widow a life income in one third of his estate so thatshe was barred from an election; but since the trust disposed of all of hisproperty there was no effective provision for her. The court held that the trustfailed entirely upon the widow's challenge so that all of the trust corpus wasdistributed according to the will. The Court of Appeals there determined thatthe true test of validity is whether the challenged transfer is "real or illusory,"in the sense of whether or not the husband in good faith (as regards intent,not motive) divested himself of ownership of the property involved. Krausev. Krause, supra, applied this test to a Totten trust under attack by a widow andreached a similar conclusion: that the Totten trust was illusory because thedecedent had not sufficiently divested himself of ownership. The court in theKrause case was not faced with the instant'problem because the will had notbeen probated so as to allow final distribution of: the estate; but there seems41BUFFALO LAW REVIEWlittle doubt that the court would have reached the same result as did the New-man case (entire failure of the trust), since the test applied and the reasoningemployed were all in terms of failure to divest. In the light of the foregoingdiscussion, the present decision would seem to be erroneous.As noted, the theory upon which a spouse challenges doubtful transfers isnot that of a direct violation of § 18, rather that the statute has been evaded.That is to say, the spouse invokes the policy of the section. There is somelogical inconsistency in relying upon the policy of a statute when the termsthereof preclude its direct application; here, that is, bar an election. Newmanv. Dore allowed the widow to invoke the spirit of the statute when there couldbe no election, however, as did Burns v. Turnbull and Schnakenberg v. Schna-kenberg, both supra. The present case adds a further logical difficulty; not onlywas the policy of § 18 invoked when an election was barred by the will leavingeverything to the widow, but almost all of the terms of the statute were appliedas well. The spouse thus was allowed to invade the trusts but only to the exactextent specified by the statute, just as if there had been an election. It canwell be argued, however, that the spouse should be allowed no more than her"property right" (so termed in Newman v. Dore) which is surely limited aswell as contingent; that there is not practical need to give her more than thestatute would allow; that the result here is just - compare the position ofcreditors as regards Totten trusts noted supra; and that consideration of logicshould hardly be decisive as regards Totten trusts which are anomalous bynature in existing outside the Statute of Wills.In Application of Halpern, the principal case, Totten trusts otherwise valid(i.e., outside the estate) failed only partially upon a widow's attack, while inNewman v. Dore a trust otherwise valid (expressly so assumed for purposes ofthe appeal) failed completely. Stated another way, in the Newman case theother beneficiaries of the will profited by the widow's challenge, whereas herethey would not; here of course there were no beneficiaries except the widow.The Halpern decision was and only could be reached by ignoring the basicapproach of the Newman and Krause cases, by disregarding the failure-to-divest criterion. Following that approach to the present result of partial in-validity might have necessitated a discussion in terms of divisible divestmentor some such equally implausible fiction. But if the divestment test were em-ployed to invalidate the present trusts completely, it might possibly mean thatTotten trusts ultimately are no more secure than "Newman" trusts, which arepresumably susceptible to attack ordinarily by persons other than the widow.Rather than suffer a diminution of the Totten magic, the court - by stressingthe special nature of Totten trusts, their longstanding sanction by the courtsand widespread use - chose to enhance the Totten doctrine and made Tottentrusts even more like wills than has been the case hitlherto-made them in effectadditional "clauses" of the will. This means that the widow's action in suchRECENT DECISIONScase becomes much more like an election rather than an action to set aside an"illusory" transfer; it becomes an election in fact for most purposes. Buteven so, the widow remains excused from the procedural requirements of § 18,that is, from actually filing an election and doing so within six months ofprobate.This decision may be termed just, considering the statute very generally.It should not be considered sound since it was made possible by a reading ofthe authorities, especially Krause v. Krause, so narrow as to vitiate their spirit.Further, the result was achieved at the expense of additional illogical inroadsupon the statutory scheme of testamentary disposition, a course the courtswould do well to avoid.Samuel R. MiserendinoRobert B. FlemingADMINISTRATIVE LAW- WORKMEN'S COMPENSATION"ACCIDENTAL INJURY" AS A QUESTION OF. FACTDecedent steamfitter having a congenial aneurysm of a cerebral arterycollapsed immediately after emerging from a boiler which he had been clean-ing. The temperature inside the boiler was above normal and the workingspace limited; the work was such that it had to be performed in twenty tothirty minute relays. Death was caused by rupture of the defective artery andsubsequent hemorrhage. The employer contended death was due to a cQn-dition, not an accident. Held: award of death benefits affirmed; whether aninjury was accidental, and thus compensable within the meaning of § 2(7),N. Y. Workmen's Compensation Law, is a question of fact on which the de-cision of the Workmen's Compensation Board is conclusive. Broderick v.Liebmann Breweries, 277 App. Div. 422, 100 N. Y. S. 837 (Nov. 1950) [allcompensation appeals are handled by the 3d Department.]In determining the appropriate scope of review for a finding on a mixedissue of law and fact, the court here adopted a fresh approach to compensationappeals, one that emphasizes the administrative law aspect of compensation.Mixed issues have given the courts difficulty because the statutory directivesregarding review are predicated on the traditional law/fact clasiification: factfindings of the Board are conclusive on review, but the courts are free to cor-rect errors of law. N.Y. Work. Comp. Law, § 20, see BENJAMIN, ADMINISTRA-TIVE ADJUDICATION IN NEw YORK, first volume, p. 347. The substantial evidencetest is applied to fact findings, however, so that they are conclusive only if thereis substantial evidence to sustain them, and if that is determined the courts willnot reweigh the evidence. Matter of Helfrick v. Dahlstrom Metallic Door Co.,256 N. Y. 199, 176 N. E. 141 (1931), affd, 284 U. S. 594 (1931). The lawversus fact distinction may be of little use however when the disputed issue is43

Wills—Totten Trusts—Distribution of Balance of Deposit After Invasion by Widow

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Wills—Totten Trusts—Distribution of Balance of Deposit After Invasion by Widow

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