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FALL 2006 • Vol. XLV
- Cy Pres
- Changes in the Rules Governing IRS Offers in Compromise
- Brooklyn Law School Alumni Reception
- The Firm Highlights
- A Date to Remember

Cy Pres

by Robert H. Groman, Esq. and Robert H. Groman, Esq.

One concept constantly stressed by theestate planning team at The Firm is that beneficiary designations should be accurateand an estate plan should be reviewed on aregular basis to be sure that no changes have occurred that will have an adverse impact onthe estate plan. Care must be taken, not only in the preparation of your will, but in beneficiary designations made outside the will. Inaccurate or out-of-date beneficiary desig-nations can result in strange and expensive results. Such a situation and such a result occurred in a recent estate handled by Robert H. Groman, a partner in our tax and estate department, and Barry C. Feldman, a senior tax and estate attorney.

The facts were as follows: A person opened a bank account in her name "in trust for" a charity. The person who established the account died approximately six years after this bank account was set up. Groman and Feldman were retained by the executor of that person's estate to represent the estate. A review by counsel found that no charity had the exact name as designated on this "in trust for" account. After many hours of research,the estate planning team determined that there was a charity in Texas with a name similar to the charity named on the bank account. After further investigation it was determined that the charity with the similar name had become defunct four years after the bank account was established and prior to the death of the account owner.

Based on the dissolution documents filed bythe Texas charity, it was confirmed that the charity with the similar name transferred its assets to another charity at a Texas university. The legal question - what happens to the money in this bank account? Assuming that it was the intent of the decedent to name the charity with the similar name as the designated charity to which the money in the bank account was to go, would the money go to the Texas university charity since the similar named charity was now defunct or would the "in trust for" status be deemed negated and the balance in the bank accountbe paid to the decedent's estate? Under the law governing bank accounts with "in trust for" designations ,if the person or entity named as the beneficiary on the trust account predeceases the person who established the account, then the account has no beneficiary and the assets in that account will pass through the estate of the deceased person. On the other hand, there is a long established doctrine in the State of New York called "cy pres". That doctrine, in its simplest form,provides that a charitable bequest should not lapse, and the courts will do their best to follow the intent of the person who opened the bank account and see that a charity receives the monies in the account. There was no clear answer as to which concept would govern this situation.

This matter was brought before the Surrogate of Nassau County and the Surrogate of Nassau County ruled that the doctrine of cy pres was the superior doctrine and that the monies in this bank account should go to the charity at the Texas university.

Mr. Groman stated that, "It was unfortunate that the charitable entity was not correctly named. While the charity did receive the money from this bank account, some ofthe funds were dissipated by the court costs and legal fees and,o f course, payment to the charity was delayed. "Mr. Feldman's conclusion: "Be accurate in your planning and keep your estate plan current."

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