NYLE Trusts, Wills & Estates 5 — Questions and Answers
Question 1: Under New York law, a self-dealing transaction by a trustee (e.g., selling personal property to the trust) is:
- Void per se and always set aside upon demand by any beneficiary
- Voidable at the election of the beneficiaries unless authorized by the trust instrument or court order (Correct answer)
- Permissible if the trustee discloses the conflict to all beneficiaries
- Permissible if the transaction price is fair market value
Correct answer: Voidable at the election of the beneficiaries unless authorized by the trust instrument or court order
Self-dealing transactions by a trustee violate the duty of loyalty and are voidable, not automatically void, but require beneficiary consent or court approval to be valid.
Question 2: Under EPTL § 11-1.1, an executor's power to sell estate real property without court approval is granted:
- Automatically by operation of law
- Only if the will expressly grants such power (Correct answer)
- Only after the Surrogate's Court issues letters testamentary
- Never; court approval is always required to sell real property
Correct answer: Only if the will expressly grants such power
Under EPTL § 11-1.1, an executor has the power to sell real property only if the will expressly grants that power; otherwise, court authorization is required.
Question 3: A New York decedent names her unmarried partner of 10 years as sole beneficiary of her will. Her adult son challenges the will claiming undue influence. The most important factor courts examine is whether:
- The beneficiary and decedent had a romantic relationship
- The beneficiary had a confidential relationship with the decedent and actively participated in the will's preparation (Correct answer)
- The son was disinherited without explanation in the will
- The will was executed less than one year before the decedent's death
Correct answer: The beneficiary had a confidential relationship with the decedent and actively participated in the will's preparation
New York courts focus on whether the alleged influencer had a confidential relationship with the testator and was active in procuring the will, which creates an inference of undue influence.
Question 4: Under New York EPTL § 7-3.4, a trustee's power to make loans to a beneficiary from trust principal is:
- Prohibited in all circumstances
- Permitted only if the trust instrument specifically grants this power (Correct answer)
- Permitted only with prior Surrogate's Court approval
- Permitted as a default power under the statute
Correct answer: Permitted only if the trust instrument specifically grants this power
A trustee may make loans to beneficiaries only if the trust instrument expressly grants that power; it is not among the default trustee powers.
Question 5: Under New York law, a 'pour-over will' works in conjunction with a revocable inter vivos trust to:
- Create a new trust at death funded entirely by the probate estate
- Transfer probate assets into an existing trust at the testator's death (Correct answer)
- Avoid the need for any will by transferring all assets automatically at death
- Fund a testamentary trust with life insurance proceeds only
Correct answer: Transfer probate assets into an existing trust at the testator's death
A pour-over will directs probate assets into a pre-existing revocable living trust at death, consolidating administration under the trust.
Question 6: A New York decedent dies intestate survived only by first cousins on her mother's side and second cousins on her father's side. Under EPTL § 4-1.1, the estate passes to:
- The first cousins only, as the nearest degree of kinship (Correct answer)
- The first cousins and second cousins in equal shares
- The State of New York by escheat because cousins do not inherit intestate
- The first cousins on both sides split equally with the second cousins
Correct answer: The first cousins only, as the nearest degree of kinship
Under New York intestacy, property passes to the nearest degree of kinship; first cousins (third degree collateral kin) are closer than second cousins (fourth degree), so the first cousins take the entire estate.
Question 7: A trustee of a discretionary New York trust refuses to make any distributions to a beneficiary for five years despite the beneficiary's demonstrated financial need. The beneficiary's best legal claim is that the trustee:
- Violated the prudent investor rule
- Abused its discretion by acting in bad faith or failing to consider relevant factors (Correct answer)
- Breached the duty of loyalty by favoring remainder beneficiaries
- Violated EPTL § 7-1.6 by failing to account annually
Correct answer: Abused its discretion by acting in bad faith or failing to consider relevant factors
Even under discretionary trusts, a trustee must exercise discretion in good faith and consider relevant factors; a complete refusal to distribute despite clear need may constitute an abuse of discretion.
NYLE Trusts, Wills & Estates 5
Under New York law, a self-dealing transaction by a trustee (e.g., selling personal property to the trust) is: