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Matter of Edward Kaplan  
2007 NY Slip Op 30161(U)  
March 8, 2007  
Surrogate's Court, Nassau County  
Docket Number: 0321837  
Judge: John B. Riordan  
Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case.  
This opinion is uncorrected and not selected for official publication.  

SURROGATE=S COURT: STATE OF NEW YORK  
COUNTY OF NASSAU  
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In the Matter of the Application of Penny Kaplan, income beneficiary of the QTIP trust established under the Last Will and Testament of Edward Kaplan, deceased, to convert said trust to a four percent (4%) unitrust; compelling the sale of the family business interests for fair market value, or, alternatively, demanding that the family business interests are properly managed so that they show income produced; removing Deborah Kaplan-Brooks as co-Trustee; and disqualifying Robert Kaplan as successor co-Trustee and immediately appointing an independent corporate-fiduciary to succeed as co-Trustee.  File No. 321837 Dec. No. 914  
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In this proceeding, petitioner, Penny Kaplan, moves pursuant to CPLR 3212 for an order granting summary judgment: (1) converting the QTIP trust to a unitrust; (2) compelling the sale of the Kaplan family business interests for fair market value; (3) removing Deborah Kaplan-Brooks as co-trustee and requiring her to file her account; and (4) disqualifying Robert Kaplan as successor co-trustee and immediately appointing an independent corporate fiduciary to succeed as co-trustee. For the reasons that follow, the motion is denied, except to the extent that Deborah is directed to file an intermediate account of her acts as co-trustee of the QTIP trust as set forth below.
BACKGROUND
Decedent Edward Kaplan died testate on December 7, 2001, leaving his wife, Penny, who is now forty-six years old, and two children, Heather and Lee, who are now twenty and nineteen, respectively. Penny and Deborah are sisters-in-law, the latter having been decedent=s sister. Robert is decedent=s father. Apparently, the close family relationship that existed between Penny and the Kaplan family while decedent was alive has deteriorated.
Decedent=s last will and testament dated October 28, 1998 was admitted to probate by
this court in April 2002. Letters testamentary and letters of trusteeship for the QTIP trust
established in the will were granted on the same date to Deborah and Penny. They qualified as such and have acted and are still acting in those capacities.

Pertinent Provisions of the Will
Decedent=s estate consisted of four main assets: his personalty, which he bequeathed to Penny under Article SECOND of the will; his Old Westbury residence, which passed to Penny under Article THIRD; his interest in the Kaplan family businesses; and an investment portfolio at UBS Paine Webber consisting mostly of tax-free municipal bonds. The business interests and bond portfolio passed under Article FIFTH, the residuary clause to two trusts. Article FIFTH A created a credit shelter trust and Article FIFTH B created a QTIP trust. Penny is the income beneficiary of the QTIP trust. She and Deborah are the co-trustees, and Robert is named as successor co-trustee.
By its terms, during Penny=s lifetime, the co-trustees are directed to Apay to [Penny] or apply for her benefit the entire net income of this trust, in quarter-annual or more frequent installments as may be convenient to [the] trustees@ (Will, Article FIFTH B[1]). Additionally, the co-trustees have the discretion to pay to or apply for Penny=s benefit as much of the principal as they, in their discretion,
Ashall deem advisable in order to provide for emergency expenses relating to her health, support and maintenance. In determining the amounts of principal, if any, to be paid or applied for the benefit of [Penny], I request (but do not direct) that my trustees take into consideration any income or resources of my said wife apart from this trust. My wife shall have the right to require my trustees to make productive any unproductive property of this trust or to convert such property into productive property within a reasonable period of time.@ (Will, Article FIFTH B[2])
The QTIP trust terminates upon Penny=s death. At that time, any remaining principal is to be distributed in equal shares to Lee and Heather, if they are then living, and to any living
issue per stirpes of Lee or Heather if he or she is deceased when Penny dies, provided that any property distributable to either of them if they are younger than thirty-five-years old at the time is to be held by the co-trustees in a separate trust for that child=s benefit, in accordance with the terms and conditions set forth in Article SIXTH of the will, the terms of which are irrelevant to this motion (Will, Article FIFTH B[3]).
Article SEVENTH of the will authorizes the trustee or the trustees, by unanimous agreement, to appoint Aanother individual, or successive individuals in a named order, or a qualified bank or trust company as co-trustee or . . . as successor trustee@ with respect to each trust created by the will (Will, Article SEVENTH C). If Penny were to be the sole trustee of any trust created under the will, Article SEVENTH directs her to Aappoint an individual or qualified bank or trust company to serve with her as co-trustee of such trust.@

The Funding of the Trusts
According to decedent=s federal estate tax return, the QTIP trust was funded in the amount of $14,310,091.85, with $8,369,930 attributable to decedent=s interests in Kaplan family businesses and the rest with assets from decedent=s UBS Paine Webber accounts. The credit shelter trust was funded with $675,000 from the UBS Paine Webber accounts.

Decedent=s Interests in the Kaplan Family Businesses
According to schedule F of the decedent=s federal estate tax return, at his death, decedent owned interests in Kaplan family businesses, totaling $8,369,930, as follows: (1) one-third membership interest, valued at $2,416,667, in Brush Hollow Realty, LLC; (2) one-third membership interest, valued at $1,266,667, in Stewart Avenue Realty, LLC; (3) one-third membership interest, valued at $1,470,000, in Whitestone Expressway Realty, LLC; (4)
one-third membership interest, valued at $150,000, in R.K. Associates, LLC, and $1,200,000 due
on a loan he made to that entity; (5) one-third membership interest, valued at $1,393,333, in Golfers World, LLC; (6) one-third membership interest, valued at $86,232, in All-Care Pharmacy, Inc.; (7) one-third membership, valued at $0, in Westbury Seniors, Inc.; (8) twenty-five percent interest, valued at $298,028, in Nalpak, Inc.; (9) twenty-five percent interest, valued at $72,790, in Fona, Inc.; (10) twenty-five percent interest, valued at $14,751, in Storage Quarters, Inc; and (11) twenty-five percent interest, valued at $1,462, in Whitestone Storage Quarters, Inc.

STANDARD FOR SUMMARY JUDGMENT
Summary judgment may be granted only when it is clear that no triable issue of fact exists (see e.g. Alvarez v Prospect Hosp., 68 NY2d 320, 323 [1986]; Phillips v Joseph Kantor & Co., 31 NY2d 307, 311 [1972]). The court=s function on a motion for summary judgment is "issue finding" rather than issue determination (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957], quoting Esteve v Abad, 271 App Div 725, 727 [1st Dept 1947]), because issues of fact require a hearing for determination (Esteve v Abad, 271 App Div 725, 727 [1st Dept 1947]). Consequently, it is incumbent upon the moving party to make a prima facie showing that he or she is entitled to summary judgment as a matter of law (CPLR 3212[b]; Zuckerman v City of New York, 49 NY2d 557, 563 [1980]; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1067 [1979]; Zarr v Riccio, 180 AD2d 734, 735 [2d Dept 1992]). Failure of the moving party to make a prima facie showing of entitlement to summary judgment requires denial of the motion Aregardless of the sufficiency of the opposing papers@ (Weingrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). The papers submitted in connection with a motion for summary judgment are always reviewed in a light most favorable to the nonmoving
party (Marine Midland Bank, N.A. v Dino & Artie=s Transmission Co, 168 AD2d 610 [2d Dept
1990]). If there is any doubt as to the existence of a triable issue, the motion must be denied ( Hantz v Fishman, 155 AD2d 415, 416 [2d Dept 1989]).
If the moving party meets his or her burden, the party opposing the motion must produce evidentiary proof in admissible form sufficient to establish the existence of a material issue of fact that would require a trial (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). In doing so, the party opposing the motion must lay bare his proof (see Towner v Towner, 225 AD2d 614, 615 [2d Dept 1996]). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" to overcome a motion for summary judgment ( Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; see Prudential Home Mtge. Co., Inc. v Cermele, 226 AD2d 357 [2d Dept 1996]).

REQUEST FOR CONVERSION TO UNITRUST
Decedent=s federal estate tax return reflects $14,310,091.85 as the value of the assets in the QTIP trust, including the interests in the various Kaplan family businesses of $8,369,930. During her deposition, Deborah admitted that the assets listed on schedule F have not paid any money to the QTIP trust. Deborah claims that the reason is that no income has been produced is because the entities have had Aonly losses. These are all new business.@ However, she claims that, since decedent died, Penny has received substantial amounts of income from the QTIP trust, of approximately $360,000 annually, primarily in tax-free income from the estate accounts. Deborah asserts that A[t]his represents a tax-free return in excess of five percent per year on the cash invested in the UBS account, which conservatively translates into a pre-tax return in excess of seven percent per year.@ Deborah also asserts that Penny has benefitted to the detriment of the credit shelter trust by withdrawing, with Deborah=s Areluctant consent,@ all of the previously
unswept interest, dividends and realized capital gains from the inception of the estate UBS
account to the May 2004 inception of the segregated QTIP and credit shelter UBS accounts.
Penny asserts that the admitted failure of the business assets in the QTIP trust to pay any income to the trust since decedent died in 2001 necessitates the conversion of the QTIP trust to a unitrust pursuant to EPTL11-2.4.
EPTL 11-2.4[e][2][B] provides that a court having jurisdiction over a trust to which EPTL 11-2.4 Aotherwise would not apply, upon the petition of the trustee or any beneficiary of a trust, and upon notice to all persons interested in the trust, may direct that this section shall apply to the trust . . . .@ In this instance, jurisdiction has been obtained all over interested parties. In turn, EPTL 11-2.4[e][5][B] states that A[i]n any proceeding brought pursuant to subparagraph (e)(2), there shall be a rebuttable presumption that this section should apply to the trust.@
That does not mean, however, that the court must grant the petition to convert to unitrust, even in the absence of rebuttal evidence. Because the statute provides that the court Amay@ direct that the trust be administered as unitrust, the decision to grant a petition seeking an order converting a trust to a unitrust rests in the discretion of the court (Matter of Ives, 192 Misc 2d 479, 481 [Sur Ct Broome County 2002]; EPTL 11-2.4[e][2][B]; McKinney=s Cons Laws of NY, Book 1, Statutes '177; see also SCPA 103 [38]). As Surrogate Peckham held in Matter of Ives (192 Misc 2d 479 [Sur Ct Broome County 2002]), an uncontested application to convert to unitrust, the court=s inquiry does not end with the presumption. While that is certainly a factor to be considered, the court must also consider Aall of the factors relevant to the trust and its beneficiaries,@ including the following factors, to the extent they are relevant:
A(i) the nature, purpose, and expected duration of the trust;
(ii) the intent of the creator of the trust;
(iii) the identity and circumstances of the beneficiaries;
(iv) the need for liquidity, regularity of payment, and preservation and appreciation of capital; [and]
(v) the assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the creator of the trust@ (EPTL 11

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