## Facts

- Jacob Heller’s will created a residuary trust for his surviving spouse, Bertha M. Heller, for life, with the remainder to their children in specified percentages.
- The will directed annual distributions to Bertha of the greater of $40,000 or the trust’s total income.
- Frank Heller served as initial trustee; after Frank’s death, Jacob’s sons Herbert and Alan became successor trustees.
- From 1997 to 2001, Bertha received average annual trust income of about $190,000.
- After enactment of New York’s Uniform Principal and Income Act and the optional unitrust provision (EPTL 11-2.4), Herbert and Alan elected in March 2003 to convert the trust to unitrust treatment and provided statutory notice to income and remainder beneficiaries.
- The trustees sought to apply the unitrust election retroactively to January 1, 2002, the statutory effective date.
- After the election, Bertha’s annual distributions dropped to about $70,000.
- Bertha’s attorney-in-fact petitioned to annul the election, remove the trustees, and invalidate retroactive application.

## Issues

1. Whether trustees who are also remainder beneficiaries are disqualified from electing unitrust treatment under EPTL 11-2.4.
2. Whether trustees may apply a unitrust election retroactively to January 1, 2002, the effective date specified in EPTL 11-2.4.

## Decision

- The Court of Appeals affirmed the Appellate Division’s order and answered the certified question in the affirmative.
- The court held that a trustee’s status as a remainder beneficiary does not, by itself, invalidate a unitrust election.
- The court held that trustees may elect unitrust status retroactively to January 1, 2002.
- The court left undisturbed the refusal to annul the election prospectively and to remove the trustees.

## Legal Principles

- Under EPTL 11-2.4, trustees are not categorically barred from making a unitrust election solely because they also hold remainder interests in the trust.
- A unitrust election may be applied retroactively to the statute’s effective date when the statutory scheme authorizes elections as of that date and required procedures, including notice, are satisfied.
- Trustees’ beneficial interests do not eliminate fiduciary duties; alleged conflicts are evaluated under fiduciary standards rather than by a per se invalidation rule for statutorily authorized elections.
- The unitrust option is construed in light of the legislation’s goal of facilitating total-return investment and modernizing the income/principal allocation regime.

## Conclusion

The court upheld trustees’ conversion of a marital-residuary trust to unitrust treatment despite the trustees’ remainder-beneficiary status and permitted the election’s retroactive application to January 1, 2002, emphasizing statutory authorization and continued application of fiduciary-duty review rather than automatic disqualification.


In re Matter of Heller, 6 N.Y.3d 649, 849 N.E.2d 262 (N.Y. 2006)