Seidel v. Werner
81 Misc.2d 220, 364 N.Y.S.2d 963 aff’d on opinion below, 50 A.D.2d 743, 376 N.Y.S.2d 139 (1975)

  • Werner died. He left a testamentary trust that gave a life income and a testamentary power of appointment to his son Steven.
    • A testamentary power of appointment means that the money in the trust would go to whomever Steven gave it to in his will.
    • Werner stipulated that it Steven failed to exercise his power, the trust assets would be distributed to Steven’s children (aka the takers in default).
  • Steven was married to Harriet and had two kids, Anna and Frank. Steven went to Mexico and got a quicky divorce. He then married Edith.
    • The Mexican divorce agreement between Steven and Harriet included a clause in which Steven promised to make, and not revoke, a will exercising his power of appointment to establish a new trust which gave Harriet and the kids income until the kids turned 21, and then distributed the trust assets to them.
  • Four months later, Steven made a will, but it left everything to his new wife Edith.
    • That included the assets in the trust.
  • Steven later died. Harriet stepped forward and challenged probate on the grounds that her divorce decree gave her the money in the trust.
  • The Probate Court found for Edith.
    • Under New York State law, the divorce agreement amounted to a contract to exercise a testamentary power of appointment that was not presently exerciseable. Therefore it was invalid.
      • Steven could only exercise his power of appointment by dying. Since he was not dead, he could not make a testamentary appointment. Therefore, the contract was void because you can’t contract to give something you don’t presently have.
        • The donor wanted Steven to make the appointment at death. To allow him to make that appointment to Harriet and the kids while he was still alive defeated the intent of the testator.
    • Anna and Frank argued that New York State law also allows for someone with a power of appointment to release that power. If that happened, the Steven would not have been allowed to later exercise the power, which meant that it would be distributed to Steven’s children (aka the takers in default).
      • However, the Court found that a promise to exercise that power in a certain way did not amount to a release of the power.
        • The kids would have been better off in instead of getting Steven to promise to give them the money he simply released the power of appointment completely.
    • The Probate Court did note that Anna and Frank could sue Steven’s estate for restitution for breach of contract, but they would only be able to take Steven’s assets, since he never owned the trust assets.