In re the Estate of Niedelman

M. M. Frank, J.

The prime question posed on this appeal is ' whether a trust created by a decedent for the benefit of a surviving spouse, which provides for a principal share equal to or greater than the intestate share, is in violation of the Decedent Estate Law (§ 18), if the trust is subject to termination before the death of the surviving spouse and in that event the spouse would take the trust principal as an absolute gift.

We are inclined to believe that the problem is no longer one of first impression, although no reported case deciding the precise question was brought to our attention by the litigants.

The dissenting opinion quite correctly states that all of the surviving beneficiaries and remaindermen are in complete accord with the widow and join in her effort to elect to take against the trust created under the will. In fact, the only opposition to the petitioner’s application comes from the sole executor and trustee who qualified and consented to serve, of the two designated by the testator. We shall disregard, for the moment, the question of the limited right of election to take $2,500, as provided in section 18.

The claim that the election to take, as in intestacy, may properly be exercised here is predicated upon the widow’s assertion that the trust created: (1) is not a trust for life; (2) that the broad powers given the trustee, including the power to terminate, render the trust illusory; and (3) that the testator did not provide a fair cross section of the estate for his widow’s proportionate share.

The deceased and his surviving widow held all the ont.standing stock- of a corporation that he actively managed in his lifetime. The decedent’s 90% stock interest, valued at $326,888, was the only asset left in his estate after the other property was used for the payment of debts, administration expenses and taxes. Had the decedent died intestate, the widow would have taken 50% of this asset. By the terms of the trust, 60% is set aside for her, so that the trust exceeds her share as in intestacy, and in that respect complies with the Decedent Estate Law. Although *294subdivision, (a) of paragraph Second of the will provides, “ To my wife, Hilda Hiedelman, the net income from the trust of 60% of such capital stock established for her benefit for and during the term of her natural life, unless sooner terminated as hereinafter provided ”, the petitioner contends that the trust is for less than life and is therefore violative of section 18. This is so, it is urged, because in paragraph Third the trustee may sell the corpus of the trust, i„e., the stock, or liquidate the corporation, and if he should, the trust terminates and the principal may be distributed to the life tenants absolutely. Certainly it cannot be disputed that if the testator had provided that upon a sale of the stock or liquidation of the corporation, the proceeds were to be retained in the trust and invested in other permissible securities, no right of election could be validly exercised.

To sustain her contention, the petitioner places great reliance upon Matter of Byrnes (141 Misc. 346, affd. 235 App. Div. 782, affd. 260 N. Y. 465). In Byrnes, the testator created a trust of the residuary of his estate ‘‘ during her life, or until her remarriage. ” (P. 468.) She could never receive principal, and income would cease upon remarriage. It is evident, then, that if Margaret Byrnes remarried, she would be deprived of the income from the trust ostensibly created for her benefit during her lifetime. Such a situation the Court of Appeals said (p. 472) ‘could not reasonably be regarded as substantial equivalents for the intestate share.”

In discussing the purpose of the Decedent Estate Law, the Court of Appeals quoted the following excerpt, with approval, from the report of the commission which recommended the adoption of section 18 of the Decedent Estate Law (p. 472): “ ‘ Therefore, in the larger estates the Commission proposes to preserve to the testator a right to create a trust, with income payable to the wife, upon a principal equal to or greater than her intestate share.’ (Leg. Doc. [1930] No. 69, p. 87.) ”

The entire tenor of section 18 of the Decedent Estate Law indicates that the Legislature intended that a surviving spouse, absent issue, should receive 50% of the decedent’s estate in intestacy, or its equivalent under a will, either by outright devise of at least 50%, or the income from a trust whose principal be not less that that proportion. Scattered through the various subdivisions are words that indicate that the survivor’s share in intestacy shall not be construed to mean more than one half of the net estate; that the provisions with respect to a trust shall likewise apply to a legal life estate, an annuity or any other form of income for life, and that the granting of broad powers to an *295executor or a trustee with respect to the sale, retention or allocation of the trust property shall not give to the surviving spouse an absolute right of election. All of these provisions demonstrate that the legislative purpose was to create minimal provisions for a trust and not to prevent bequests in excess thereof, and certainly not to invalidate a trust for life which may terminate before the death of the survivor if the termination results in an outright gift of the entire trust res.

We do not believe that Matter of Byrnes is to the contrary. In that case, the vice in the life estate was not its termination short of the death of the life tenant, but the deprivation of the minimal intestacy equivalent by the termination. Therefore, while the trust in Byrnes was held violative of section 18 because the widow was deprived of the equivalent of her intestate share in that estate, we do not believe it to be authority for our problem because the same result does not follow. Here, in the event of a termination of the trust created for the life of the petitioner prior to her death, she would receive as an outright bequest the entire corpus of the trust created for her benefit, and that would be 10% more than she would be entitled to receive as her share of the estate in intestacy.

The common-law rule that a trust for life terminating upon a contingency is nevertheless still a life estate has not been abrogated by Byrnes. The Court of Appeals in that case so stated and did not hold that trusts for life terminable upon a contingency are less than life estates. What it did say is (p. 472): “We think that the Legislature had no thought to deprive a surviving spouse of an election, where a will made gifts in trust for life for the use of the spouse, which, while technically life estates, could not reasonably be regarded as substantial equivalents for the intestate share.”

The provisions of section 18 were enacted for the liberal purpose of protecting a spouse against disinheritance (Matter of Byrnes, 260 N. Y. 465). When there is a fair participation by the spouse in the estate, the right to elect disappears (Matter of Eddy, 173 Misc. 723, 726). Here there is no disinheritance, there is no diminution, but rather an enlargement to the wife of the trust bequest upon termination before death. There is in the devisory scheme, complete adherence to the mandate of section 18. The term ‘‘ trust for life ’’ should not be so restricted as to give it a meaning not heretofore applied.

We believe the precise point with which we are here concerned was considered and properly decided in Matter of Noble (3 Misc 2d 565, mod. 2 A D 2d 897). There the will created a trust for *296the surviving spouse with income payable to her, and additionally provided that each year, 10% of the corpus was m be paid to .her until she received the entire.fund, if she survived the required length of time. The learned Surrogate held me trust was not violative of section 18. The Appellate Division. Second Department, in unanimously affirming on this point, said, “ No right of election exists by reason of the provision in the will for periodical payments of principal ’’. On that phase of Matter of Noble, there appears to be no essential difference from the question raised here.

There was no allocation of the corpus in this estate to favor other beneficiaries. The entire estate remaining after the payment of debts and other charges consists of the corporate stock, so that the widow has as complete a cross section of the assets as it was possible to provide. The claim that corporate control by the trustee creates the possibility of a conflict of interest, as well as the suggestion that the broad powers given the trustee do not assure the widow of income, and separately or together make the trust illusory, are without merit. In Matter of Shupack (1 N Y 2d 482), the same propositions were urged upon and rejected by the Court of Appeals. We should not decide otherwise.

Courts may not vary or void the terms of a valid will by the exercise of judicial hindsight in order to improve upon the decedent’s scheme of testamentary disposition. It is the obligation of the courts to endeavor to fulfill the testator’s intention, if the terms of his will are not violative of statutory restrictions. To do otherwise is to tread into the quicksand of conjecture.

It should not be assumed that this decedent arranged for the disposition of his property improvidently, for it. may well be that concern for his widow and his knowledge of the nature of the corporate business wisely dictated the provision for the administration of this major asset.

The allowance made to the special guardian is a proper charge against the entire estate or against the interest of the wards (Surrogate’s Ct. Act, § 280) and should not-have been charged against the interest of the petitioner in the trust fund. In this case the .allowance should be charged against the estate.

The decree should be modified on the law to the extent indicated and as modified should-be affirmed, with costs to all parties filing briefs payable out, of the estate..