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In re Estate of Bonardi

April 5, 2005

IN THE MATTER OF THE ESTATE OF WILLIAM BONARDI


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. P-499-03.

Before Judges Parrillo, Grall and Riva.

The opinion of the court was delivered by: Parrillo, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 7, 2005

This is an appeal from a judgment of the Superior Court, Chancery Division, certified as final, Rule 4:42-2, permitting termination of a testamentary trust. For the following reasons, we reverse.

William Bonardi died testate on March 9, 2002, survived by his wife, Donna, and his two daughters, Danielle and Jessica. At the time of his death, Danielle was eighteen-years old and Jessica was sixteen-years old. Although decedent's Will included some specific bequests to other individuals, his wife and two daughters were the primary beneficiaries under separate testamentary trusts, each made up of one-half of the residuary estate. Stephen F. Pellino, decedent's friend, was named Executor of decedent's estate and Trustee of the two testamentary trusts.

The first trust named plaintiff, Donna Bonardi, as the income beneficiary and devised the remainder to Danielle and Jessica. The second trust named the daughters as the only beneficiaries. In both instances, the daughters were not entitled to outright distribution of their interest before they reached the age of twenty-five.

Under the first trust, plaintiff's interest was subject to several terms and conditions. Paragraph TENTH of decedent's Will reads, in pertinent part:

For the duration of the life of my wife, DONNA, the Trustee shall pay her or apply towards her benefit, all of the net income of this trust. In addition, the Trustee may pay to her or apply to her benefit such amounts of the principal of the Trust as the Trustee, in the exercise of the Trustee's absolute discretion, deems advisable for her welfare. In deciding to make such distributions of principal to or for DONNA'S benefit, the Trustee shall be guided by the following statement of my purposes and intentions: It is my expectation that the trust income and principal will not be made available to provide primary support for the beneficiary, as I expect that DONNA in complete or large measure will support herself. I further direct that my Trustee shall, to the extent possible, not make payments to DONNA out of principal unless necessary, and that he rather seek to preserve the corpus, to the extent possible, for ultimate distribution to my children or survivor of them. My Trustee shall have complete authority to make these determinations which I direct shall not be subject to legal challenge. In making determinations as to distributions of principal for DONNA'S benefit, I ask that my Trustee be mindful of the standard of living that we maintained during my lifetime. [emphasis supplied.].

Explaining the limitations imposed pursuant to this paragraph, Pellino certified that decedent had expected his wife, who had gone to school and obtained a nursing degree during the marriage, to work in the nursing field on a full-time basis after his death. According to Pellino, decedent was also concerned about "his wife's inappropriate use of alcohol" and feared "that if the estate's assets were left to Donna outright, she would continue to lead this lifestyle which he felt was inappropriate, unhealthy and against his wishes." Further, decedent "did not want the proceeds of his hard work to be used for the benefit of any future boyfriend or husband that Donna might choose." None of these concerns, however, was expressly addressed by a spendthrift provision in the trust or anywhere else in the Will.

Even so, decedent evidenced his intent elsewhere in the Will. Notably, paragraph ELEVENTH, which concerned the daughters' trust, provided that "the trust income and principal will not be made available for primary support for the beneficiary as I expect that my wife will contribute to their support . . . ." Further, paragraph TWELFTH granted the Trustee the exclusive right to "deal with [the] corpus and the income of such trusts." Only if the accumulated income from the trust was insufficient could the Trustee invade the principal.

A dispute eventually arose between plaintiff and the Executor/Trustee over the amount necessary for plaintiff's support. Plaintiff claimed that because she was only able to work part-time due to chronic medical problems, her living expenses exceeded her income, including the amounts made available to her by the Trustee under the first testamentary trust. Essentially, she complained that Pellino was improperly withholding principal necessary for her support and requested immediate distribution of all principal in the trust.

While acknowledging that plaintiff's payments from the trust had decreased over time, Pellino insisted the reductions were necessary to preserve the corpus and carry out the trust's purpose. He explained that he initially allowed plaintiff to control all the finances in order to ease the transition after her husband's death, and that he paid her $8,000 per month when he first took over as Trustee, but that she was advised the payments would be reduced because she was expected to work and contribute towards her own support. As significantly, Pellino certified that the net monthly income from Donna's trust was only $2,845, yet he was paying plaintiff $4,545 per month, thereby depleting the principal by as much as $1,700 per month. Pellino also disputed plaintiff's assertion that she could only work part-time, stating that she had "resisted any discussion of where she works, how much she earns, how many hours she works, and why she is unable to earn more."

On account of this impasse, on December 16, 2003, plaintiff filed an action in the Chancery Division to compel formal accountings of her husband's estate and the testamentary trust created on her behalf, and to direct the immediate distribution to her of all net income as well as principal held pursuant to that trust necessary to maintain the marital standard of living. Simultaneously, decedent's two daughters filed a separate complaint, also seeking a formal estate accounting and ...


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