Estate, Powers and Trusts, § 7-1.2: Trustee of Passive Trust to Take

When you create a trust, a trustee holds assets in the trust on behalf of beneficiaries you choose. You can transfer practically any type of property to a trust including cash, stocks bonds, other securities, insurance policies, real estate, antiques, and artwork. The type of property that you choose to transfer to a trust depends on your goals. Typically, the trustee has a variety of duties, based on the terms of the trust agreement. However, there are instances in which the trustee does not have to perform any duties. If this is the case, then the trust is referred to as a “passive trust.” Under New York Estate law, if a trust is passive, the right to possess the assets of the trust does not vest in the trustee, but in the beneficiaries of the trust. In other words, if the trust is a passive trust, then the beneficiaries have control over the trust assets and the trustee does not have the right to control or possess those assets. To learn more about the estate planning process and how to create a trust that will meet your estate planning goals, contact an experienced Manhattan Probate Lawyer.

1. When trust interests not to merge: Estates, Powers and Trust, § 7-1.1
2. Purchase-money resulting trust abolished: Estates, Powers and Trust, § 7-1.3
3. Purposes for which trust may be created: Estates, Powers and Trust, § 7-1.4
4. When trust interest inalienable; exception: Estates, Powers and Trust, § 7-1.5

In In the Matter of Estate of Mannara, 2004 NY Slip Op 24370 (NY, 2004), the administrator of the will of Lydia Mannara, asked the court to construe the provision of the will related to creating a trust: "I hereby bequeath all of my assets to my two nephews in trust for their education." The administrator argues that the will creates two residuary trusts and that he is the trustee. The guardian ad litem, appointed to represent the interests of the two nephews, contends that the will creates a "passive" or invalid trust and that the residuary bequest therefore vests directly in her wards.

The court concluded that the language of the will did not create a trust as it “lacks fundamental attributes of a trust. It neither designates a trustee, nor confers upon anyone who could be construed to be a trustee the duties of managing the fund.” The court went on the say that even if the testator’s intent was to create a trust, because no trustee was named and no active duties given to the trustee, the trust is a passive trust. That means that the property vests in the beneficiaries and not in the trustee.

Every disposition of property shall be made directly to the person in whom the right to possession and income is intended to be vested and not to another in trust for such person, and if made to any person in trust for another, no estate, legal or equitable, vests in the trustee.  But neither this § nor 7-1.1 shall apply to trusts arising or resulting by implication of law.

To learn more about probate, wills, trusts and other estate planning documents, contact Stephen Bilkis & Associates, PLLC. We will help create a trust for you that is consistent with your specific goals. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate issue. We serve individuals throughout the following locations: