It takes more than good intentions to create a valid trust. This fact was driven home recently when New York’s Second Department Appellate Division issued its ruling in Fasano v. DiGiacomo 853 N.Y.S. 2d 657. In 1998, Lucy Fasano executed a trust agreement naming her sister Anna as trustee and her children Ralph Fasano and Lucille DiGiacomo as beneficiaries. The trust agreement designated Lucy’s home as the trust corpus and she actually did execute a deed transferring the property to Anna as trustee. That, however, is where the wheels came off, beginning with Anna’s failure to sign the trust document .
Apparently, after Anna received a property tax rebate payable to her as trustee, she re-conveyed the house back to Lucy who subsequently conveyed the property to her daughter, Lucille . This turn of events prompted son Ralph to bring suit for a judgment voiding the conveyance which Lucy had made to her daughter. DiGiacomo countered with a request that the court declare the deed valid and the trust invalid.
That is, in fact, just what the Kings County Supreme Court did — with the Appellate Division affirming the lower court. The decision noted that Section 7-1.17(a) of the Estates Powers and Trust Law requires that "a lifetime trust agreement must be in writing, and requires that it shall be executed and acknowledged by the initial creator and, unless such creator is the sole trustee, by at least one trustee thereof " in recordable form (which means in the same way one would have to execute a deed to real property in order to have a county clerk record the deed). The court also found that Anna and Lucy had no concept of what was being done insofar as the creation of the trust was concerned. Therefore, the trust was found to be invalid and the transfer of the deed to Lucy’s daughter Lucille was upheld, even though that meant that Ralph — a co-beneficiary under the trust — would now get nothing.
This case underscores the many pitfalls which can invalidate a trust. One of the most frequent problems I have encountered is the "dry trust". This happens after folks have paid good money to a lawyer to draft a trust which is then properly executed by the trust’s creator and the trustee. The problem is that no body ever gets around to actually placing the trust property into the trust. The end result is a failed trust.
The lesson to be learned here is that the follow-up after a trust is drafted can be just as important as the proper drafting of the instrument itself.