In re the Estate of Block
598 N.Y.S.2d 668, 157 Misc. 2d 716, 1993 N.Y. Misc. LEXIS 194 (1993)
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Rule of Law:
Under New York law, a will's residuary clause exercises a power of appointment unless the intention not to exercise the power appears expressly or by necessary implication, a standard requiring overwhelming proof of contrary intent.
Facts:
- Dina W. Block died in 1981, and her will established a trust for the benefit of her son, Paul, Jr., and his twin sons, Allan and John.
- The will granted Paul, Jr. a limited testamentary power of appointment to distribute the trust principal by his will 'unto and among' Allan and John only.
- Dina Block's will explicitly excluded Paul, Jr.'s other son, Cyrus, as a permissible appointee.
- Paul, Jr. died in 1987 as a resident of Ohio.
- Paul, Jr.'s will, executed after his mother's death, did not mention the power of appointment.
- His will's residuary clause left his entire estate to a revocable trust he had created.
- This trust distributed the assets as follows: 35% to Allan, 35% to John, and 30% to Cyrus.
- Paul, Jr. had also served as a trustee for the trust created by his mother's will.
Procedural Posture:
- The trustees of the trust established by Dina W. Block's will filed a petition in the New York Surrogate's Court, a trial-level court, as part of a judicial settlement of their accounts.
- In their petition, the trustees asked the court for a determination on whether Paul, Jr.'s will had effectively exercised the limited power of appointment granted to him under his mother's will.
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Issue:
Does a will's residuary clause, which does not mention a limited power of appointment and partially disposes of the property to an impermissible appointee, effectively exercise that power under New York law where the will does not expressly negate such an exercise?
Opinions:
Majority - Eve Preminger, S.
Yes. A will's residuary clause effectively exercises a power of appointment, even if it does not mention the power and appoints property to an impermissible beneficiary, unless an intention not to exercise the power appears expressly or by necessary implication. New York's EPTL 10-6.1 creates a strong statutory presumption that a conventional residuary clause executes a power of appointment, abrogating the common-law rule requiring a clear intent to exercise. The standard to prove a 'necessary implication' of non-exercise is exceptionally high, requiring proof that is 'impossible to be otherwise' and 'inevitable.' Factors such as the testator's domicile in a state with a different rule (Ohio), his presumed knowledge of the power as a trustee, and the partial appointment to an impermissible person are insufficient, individually or combined, to overcome this statutory presumption. The invalid portion of the appointment does not void the entire exercise; instead, the court will reform the disposition to effectuate the testator's primary intent, reallocating the invalidly appointed 30% share equally between the permissible appointees, Allan and John.
Analysis:
This decision solidifies the strength of New York's statutory presumption that a residuary clause exercises a power of appointment under EPTL 10-6.1. It establishes an extremely high bar for demonstrating a 'necessary implication' of intent not to exercise, making it very difficult to rebut the presumption without an express statement in the will. The case serves as a crucial guide for estate planners, emphasizing that a testator's failure to mention a power, even when coupled with other suggestive circumstances, will not prevent its deemed exercise. Furthermore, it demonstrates a court's willingness to salvage a partially invalid exercise by reforming the distribution to align with the donee's discernible intent toward the valid beneficiaries.
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