Amendment of Trust by Grantor’s Attorney-in-Fact

An irrevocable and unamendable
trust can be revoked or amended during the life of the grantor under certain
limited circumstances. New York’s Estate Powers and Trust Law (EPTL) provides
in Section 7-1.9 that upon the written acknowledged consents
of all persons beneficially interested in a trust, a grantor may revoke or
amend the whole or any part of a trust by his or her written acknowledged
instrument.

A
New York Appellate Court has recently reversed a trial court decision and
permitted an attorney-in-fact for the grantor of a trust to amend a trust
pursuant to the above statute with the consent of all its beneficiaries. Matter of Perosi v. LiGreci, 2012 N.Y.
App. Div. LEXIS 5448 (2d Dept. July 11, 2012) [enhanced version available to lexis.com subscribers].  The appellate court held that there need not
be a specific delegation of the power to amend or revoke in the trust instrument
or the power of attorney. The Court stated that as long as the Trust did not
prohibit the grantor from amending the trust through his attorney-in-fact, the
attorney-in-fact, as the creator’s alter ego, could properly amend the trust.

The
appellate court expressed an awareness that there are policy reasons for
prohibiting an attorney-in-fact from amending or revoking an irrevocable trust
similar to a testamentary instrument on behalf of her principal. The Court said
such a policy is for the legislature to determine, not the courts.

In
1991, Nicholas LiGreci created an Irrevocable Life Insurance Trust the beneficiaries
of which were his three adult children. Linda Perosi, his daughter and one of
the beneficiaries was appointed his attorney-in-fact under a statutory short
form power of attorney in April 2010. Nicholas LiGreci had named his brother
John as Trustee and another unrelated party as successor trustee. The Trust
provided that it “shall be irrevocable and shall not be subject to any
alteration or amendment.” The power of attorney granted powers with respect to
estate transactions and all other matters. It also contained a Major Gifts
Rider (MGR) which gave the daughter the authority to establish and fund trusts,
transfer assets to a trust, make gifts, and act as grantor and trustee of a
trust. Concededly neither the trust instrument nor the power of attorney
granted the attorney-in-fact the specific power to revoke or amend an existing
irrevocable trust.

Within
one month of the appointment of the daughter under the power of attorney, she
executed an amendment with the consent of all beneficiaries removing her uncle
and the successor trustee and appointing her son as trustee and another person
as successor trustee. Nicholas LiGreci died 15 days later and never signed the
amendment. Thereafter, the new trustee sought an accounting from the decedent’s
brother John LiGreci, and the turnover of all assets and records of the trust
to the “new” trustee. The decedent’s brother and trustee moved to set aside the
amendment. The Supreme Court denied the petition and granted the trustees’ motion
to set aside the amendment.

The
Supreme Court held that the grantor intended the trust to be irrevocable, that
the power of attorney (POA) granted no authority to amend estate planning
devices created prior to the execution of the POA and the statutory right to
revoke or amend under EPTL 7-1.9 is a personal right exercisable only by the
creator, unless the POA or trust states otherwise.

The
Appellate Court began by recognizing that EPTL 7-1.9 allows the creator and beneficiaries of an
irrevocable and unamendable trust to reform or terminate it. They further
recognized that where a trust instrument specifies a procedure to amend, it
will only be valid if that procedure is followed. Thus they concluded if the
trust does not set forth an amendment procedure, the grantor and beneficiaries
are governed by the statutory requirements. Analyzing the POA in question, the
Court found that under such a POA, the attorney-in-fact is authorized to act
with respect to any matter of the principal with the exception of those acts
which by their nature, by public policy or contract require personal
performance. Such exceptions would include execution of principal’s will, his
affidavit on personal knowledge, or contracting a marriage or divorce. Execution
of an amendment to a trust was not an act requiring the principal’s personal
performance. The Appellate Court rejected the trial court’s determination that
the amendment or revocation of a trust was a personal act, analogous to the
execution or revocation of a will or codicil, stating that any such policy
determination was for the Legislature to enact. The Court also distinguished
other trial court decisions which found that an attorney-in-fact had no
authority to amend a trust on the grounds that the power of revocation or
amendment is a personal right.

It
should be noted that courts and statutes in numerous other jurisdictions have
found attempted amendments, not expressly authorized in the trust document or
POA itself, to be void and ineffective. (Cal. Prob. Code § 15401 (c); Tenn. Code Ann. § 35-15-682; Williams v. Springfield Man. Bank, 131 Ill. App. 3d 417 (1985) [enhanced version available to lexis.com subscribers];
Muller v. Bank of America, 28 Kan.
App. 2d 136 (2000) [enhanced version available to lexis.com subscribers];
Leahy v. Old Colony Trust Co., 326
Mass. 49 (1950) [enhanced version available to lexis.com subscribers];
Garfinkel v. Josi, 972 So. 2d 927
(Fla 2008) [enhanced version available to lexis.com subscribers];
Marital Trust of John W. Murphey, 169
Ariz. 443 (1991) [enhanced version available to lexis.com subscribers];
Weatherly v. Byrd, 566 S.W.2d 292
(Texas 1978) [enhanced version available to lexis.com subscribers].

The
answer to this dilemma appears to be a matter of drafting. If an irrevocable
trust is to be truly irrevocable an explicit provision should be made to draft
around EPTL 7-1.9 in the trust instrument and the POA. If a
grantor wants to create flexibility in the future even with respect to an
irrevocable trust, they should explicitly give the statutory power to amend or
revoke to their agent.

….

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