Planning a New York estate requires that all family beneficiary and asset information be obtained and thoroughly reviewed. Before considering the impact of estate or income taxes, a road-map should be created that provides for the concise disposition of assets to specifically named or identified beneficiaries. The New York Probate Lawyer Blog has previously discussed this issue.
A basic concept to always consider is that a Last Will controls the disposition of assets that are held in the name of a decedent. Thus, if a person dies owning a house or bank account in his or her individual name, the provisions of the Last Will determine how and to whom such asset will be distributed. However, many assets fall outside of this rule and their ultimate ownership will be determined differently. A jointly owned bank account or real property will automatically be owned solely by the surviving joint owner upon the death of the co-owner. Similarly, a designated beneficiary of a life insurance policy or retirement plan will receive these benefits upon the death of the insured or plan participant. In all these instances, the terms of the Last Will generally cannot override the rights of the designated beneficiary. The importance of coordinating Last Will provisions with the transfer provisions of other assets that pass automatically or by operation of law is imperative. The failure to provide for all such asset items can ruin an estate plan and cause hardship for intended beneficiaries during estate settlement.
An example of the perils encountered when not precisely reconciling all asset dispositions was recently shown in the case of Diversified Investment Advisors, Inc., v. Baruch, (EDNY) 09-CV-5377, reported in the New York Law Journal on June 29, 2011. In this Federal District Court case, the decedent died leaving an annuity that designated the decedent's ex-wife as the beneficiary. The designation was made prior to their divorce. In the divorce proceedings, the ex-wife had signed a separation agreement in which the she had "waived" claims to the annuity. In view of the waiver, the decedent's son, who was born by another woman, claimed that the annuity was payable to the decedent's estate, and not to the ex-wife. The Hon. Jack B. Weinstein in a decision dated June 24, 2011, found that the waiver was "sufficiently precise and explicit" to allow it to meet the test of validity and that the annuity funds should be paid to the estate and not to the ex-spouse.
While not applicable to the facts of this case, the Court did comment upon New York Estates, Powers and Trusts Law section 5-1.4 that became effective July 7, 2008 which provides, in part, that "a divorce . . .revokes any revocable . . . disposition or appointment of property made by a divorced individual to . . . the former spouse, including . . . a. . . beneficiary designation . . . in a pension or retirement plan."
As can be seen, stale or improper beneficiary designatons can disrupt the settlement of an estate that is otherwise well planned for purposes of property distribution and estate taxes. When preparing an estate plan it is always a good idea to review each asset owned, including bank accounts, real estate, life insurance and retirement accounts. Carefully ascertain the name or names in which the assets are held. Also, check to see the names of all designated beneficiaries and contingent beneficiaries. In the event any information is missing or unclear, especially with beneficiary designations, prepare and sign new beneficiary designation forms that state precisely the desired information.
I have represented many clients in preparing their estate plans. More often than not, clients encounter out-dated forms and directions that must be modified and updated to accomplish their planning goals and protect their families from unwanted confusion at the time of probate and estate administration.
New York Probate Attorney Jules Martin Haas, Esq. has been representing clients in Trusts and Estates and Surrogate's Court matters throughout New York City, including Brooklyn and Manhattan. If you or someone you know is involved with or has questions about a New York estate or beneficiary designation, please contact me at (212) 355-2575 or email: firstname.lastname@example.org, for an initial consultation.