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The New York Estate Settlement process may require that an Estate Tax Return be filed for a decedent’s estate. Not all estates are required to file returns or pay an estate tax. In New York, the estate value threshold for having to file the return is $1,000,000. The Federal requirement is equivalent to the exclusion amount which for 2013 is a gross value of $5,250,000.

Even in an estate that is required to file a return, no estate tax may be due on account of various deductions such as the marital or charitable deduction or because of debts or liens such as mortgages or other claims. The gross estate value of an estate is comprised of all of the decedent’s assets that are considered under the tax laws to be includable for estate tax purposes. These items include assets that were owned by the decedent in his name alone at death such as bank accounts, brokerage accounts, real estate, etc. The gross estate also includes assets owned by the decedent that were held jointly with a right of survivorship, and other items where there is a named beneficiary such as life insurance, retirement accounts (i.e., IRA’s or 401K’s) and Totten Trusts.

The New York Probate Lawyer Blog has previously discussed that assets owned in a decedent’s own name typically are administered by an Executor or Administrator as part of the administration estate. Property that has named beneficiaries or joint owners is transferred automatically to such beneficiary/joint owner upon the decedent’s death and is not subject to estate administration.

Regardless of the nature of the assets, where an estate is subject to estate tax, the tax must be paid due to the inclusion of such item for tax purposes. The issue that is always presented is what source is responsible for the payment of the estate tax – is it the decedent’s administration estate or is payment the responsibility of the beneficiary or joint owner who received the property. Of course, like many answers in the legal world, the response is “it depends.”

In the first instance, the tax laws generally require that the estate fiduciary (i.e. Executor or Administrator) is responsible for paying the tax.

It is a common practice that a provision in a decedent’s Last Will provides that all of the decedent’s estate taxes be paid from the decedent’s administration estate which is the property owned by the decedent in his own name and passing under the Will. Such a provision would exempt from the payment of the tax any beneficiary of property passing outside of the Will such as insurance or jointly held assets. This result may not be fair to the persons who are beneficiaries under the Will since they are required to pay the estate taxes allocable to the assets passing to the other outside beneficiaries.

In order to avoid an unintended burden of estate taxes being placed on unsuspecting beneficiaries, a New York Estate Attorney will examine a client’s entire portfolio of assets and discuss the tax issues with a client so that estate taxes can be properly allocated.

The basic law in New York is that each asset is to share its allocable portion of estate taxes. These principals are set forth in New York Estates, Powers and Trusts Law Section 2-1.8 entitled “Apportionment of Federal and State Estate or Other Death Taxes; Fiduciary to Collect Taxes from Property Taxed and Transferees Thereof“. Therefore, if there is no specific direction in a Last Will or other instrument that changes this allocation, all of the outside beneficiaries must contribute their allocable share of estate taxes. EPTL Section 2-1.8 even allows the Surrogate to direct such persons to pay their share of the tax.

Estate Administration can be a very complex process. Calculating the amount of estate taxes that may be payable and determining the persons that are ultimately responsible for such payment adds even more responsibility to the job which each Executor and Trustee is required to perform. Since Estate fiduciaries are responsible for the proper payment of estate tax it is important that they obtain guidance from Estate Lawyers and tax professionals so that the interests of the estate and all beneficiaries are protected.

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There are legions of articles and information postings explaining the benefits of having an Estate Plan. New York Estate Planning, as well as planning in all other states, requires that an individual take the time and consideration to develop the precise manner in which assets, financial affairs and personal matters can be handled in the event of death or incapacity.

However, despite all of the pronouncements and guidance that is offered, New York Estate Lawyers know that a lack of estate planning or an ineffective plan is often the rule rather than the exception. In a recent post by Russ Rankin at entitled “Survey: Most SBC pastors not prepared to die“, it was reported that almost 40 percent of pastors in the Southern Baptist Convention have no estate planning documents. It appears that this lack of planning is remarkable since members of the clergy would seemingly interact with parishioners on a day to day basis who face the personal hardships of having to deal with the death and incapacity of family members and friends.

The New York Probate Lawyer Blog has discussed Estate Planning Documents in many posts. These documents include a Last Will, Health Care Proxy, Living Will, General Power of Attorney and Living Trust. When creating an estate plan, an individual should consult with a legal advisor to determine which documents are most suited to his circumstances. Specific provisions and beneficiary designations in a Last Will or Trust, as well as other documents, may need to be crafted to deal with particular circumstances and to insure that a person’s intentions are carried out without confusion or delay.

Interestingly, in Mr. Rankin’s article, the author notes that over half of the pastors believed that when a person dies intestate (without a Will), the decedent’s family determines what happens to the deceased person’s assets. The fact is in New York, like most states, when a person dies intestate New York law determines the persons who inherit the estate. These persons are called distributees (i.e., next of kin) and the order of priority of inheritance is set out in New York Estates, Powers and Trusts Law Section 4-1.1. Also, typically an Administrator will be appointed from this group of distributees after a petition is filed with the Surrogate’s Court in New York.

Since it is always best to create an estate plan, which includes naming one’s Executors and Trustees rather than leaving their selection to an artificial state law, steps should be taken to put a plan in place and to update the plan periodically.

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Estate Planning in New York requires a review and understanding of all of a person’s assets and property interests. The New York Probate Lawyer Blog has previously discussed that a Last Will typically controls or directs the disposition of assets that are owned or held in a decedent’s name alone.

Other assets may pass from a decedent to a beneficiary by operation of law. For example, jointly owned property such as a bank account or real estate is automatically transferred to the surviving joint owner upon death. Similarly, named beneficiaries of life insurance and pension or retirement funds directly receive these assets when a decedent dies. Typically, a Last Will does not control the disposition of these funds without very explicit directions. Similar principals apply to a bank account known as a “Totten Trust”. Such bank accounts are usually created by a decedent and are titled in the name of the decedent “ITF” with the name of the beneficiary appearing thereafter. During his lifetime, a decedent would be completely free to add or subtract funds to the account and the “ITF” beneficiary would have no rights to any of the funds. However, upon the death of the account owner, all of the funds pass automatically to the “ITF” beneficiary. New York Estates, Powers and Trusts Law Section 7-5.2 sets forth many of the rules regarding these types of accounts.

New York Estate Lawyers are aware that an estate plan and creating a Last Will must take into consideration these accounts. The provisions of the Will may provide for property dispositions to persons other than those named as a beneficiary of a Totten Trust. Such an estate plan may not reflect a decedent’s actual intent and may also lead to Surrogate’s Court Litigation.

An example of the potential for contests regarding estate settlement and Totten Trusts was recently provided in a case decided by Manhattan Surrogate Nora Anderson on January 10, 2013 and reported in the New York Law Journal on January 28, 2013. In Matter of Wess, the decedent died leaving a Totten Trust in the name of her former lover in a sum of over $400,000. The Executor of the decedent’s Will claimed that the bank account containing these funds should not be found to be a Totten Trust passing directly to the friend. Instead, the Executor claimed that the bank funds should pass to the estate under the Will.

Based upon a review of the bank records, 1099 Forms, testimony of bank personnel and other evidence, the Court determined that there was a valid Totten Trust. Thus, the bank funds passed directly to the decedent’s friend and not pursuant to the Will provisions.

The Wess case demonstrates that Estate Planning in New York must include a careful review of how assets are owned. If Will provisions conflict with beneficiary designations on assets such as bank accounts, it is essential that a person understand where his assets will go upon death so that his intent is carried out. Moreover, if the intention is that a Totten Trust beneficiary receives an account and that a Will does not control this asset, it would be advantageous to confirm that the bank account name and bank records are absolutely clear as to this intention. In Wess, although the Totten Trust was upheld, the bank had lost the signature cards and destroyed other old papers associated with the original creation of the Totten Trust account.

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The New York Estate Settlement process is often an overwhelming challenge to family members and friends who are appointed as Executors or Administrators of a decedent’s estate. Putting aside the sometimes complex task of Probating a Will or seeking Letters of Administration in an Intestate Estate, the newly appointed fiduciary is faced with the duties of marshaling or collecting assets, paying debts and expenses and filing estate and income taxes related to the decedent.

New York Estate Lawyers who represent fiduciaries assist their client with many of these items. However, dealing with assets, debts, claims and taxes, particularly where a decedent’s personal affairs were kept private during a decedent’s lifetime, requires time consuming research and attention to the details provided in the decedent’s records and papers.

In the Facebook and Web centered age, investigating a person’s lifetime affairs is even more difficult due to on-line banking, social media contacts, and web-based information in the “cloud”, all of which is accessed by a plethora of passwords and user ID’s. Thus, rummaging through a decedent’s paper bank and brokerage statements and incoming mail may not provide a full insight into his affairs which may, in fact, be paperless. Just accessing an e-mail account may be impossible.

In this regard, the authority of an Executor or Administrator may be thwarted by privacy rules and restrictions that are imposed on the users of these web/social media accounts. For example, the state of Virginia is now considering legislation that would allow the state’s probate laws to apply to so-called “digital assets”. As reported by Tracy Sears in a post on January 9, 2013 in, this legislation was prompted after the suicide death of a 15 year-old high school student. When the student’s parents attempted to access his Facebook account to try and discover reasons for his untimely death, Facebook refused the family access due to its privacy policies. Unfortunately, there was no state or federal law that gave an estate a right to override these company policies.

It appears that New Hampshire is also considering this type of legislation that would allow an Executor to have control over a decedent’s social media accounts.

An estate fiduciary is entrusted with the obligation of Administrating an Estate and providing finality to a decedent’s affairs so that the estate beneficiaries can ultimately receive their share of estate assets. It is, indeed, ironic that the web/social media avenues that can seemingly provide efficiency and productivity to a person during life are now an impediment to the settlement of that person’s affairs after death.

Providing the Estate Planning to avoid these issues of non-access to account information is always a good practice. Along with estate planning papers such as a Last Will, Health Care Proxy, Living Will, and Power of Attorney, a person should keep a clear and up-to-date record of user ID and password information. A trusted family member or friend should know where to locate this valuable information. Additionally, there has been a new trend towards preparing a “Digital Will”. As reported in an article by Claire Connelly at on August 30, 2012 entitled “Your digital Will: How to share your data after death“, specialized on-line sites allow you to store your user information and designate the beneficiaries who are to receive this information after your death.

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Back at the end of 2010 when the Estate Tax had disappeared for a brief moment in time, Congress and the President agreed on a new and improved version of the law that raised the Federal Estate tax exemption to $5,000,000 for each individual. However, in the combined wisdom of these lawmakers, the modified tax provisions were to take effect for only two years and were scheduled to expire at the end of 2012 as part of the dreaded fiscal cliff. Certainly it did not seem to matter to the leaders that individuals who were engaging in Estate Planning and Gift Planning had no idea as to what plan they should follow after December 31, 2012.

Fortunately, before the bell tolled on 2012, the estate tax exemption of $5,000,000 (adjusted for inflation), was made a permanent structure of the Federal Estate Tax. There was a small change in the estate tax rate that increased the tax rate to 40 percent.

For New York State residents, there was no change to the $1,000,000 exemption. Also, the annual federal gift tax exclusion continues to rise with inflation and is presently at $14,000 for each individual gift.

The law that was recently passed is called the “American Taxpayer Relief Act of 2012″. However, it is questionable whether most taxpayers are relieved since the recent payroll tax reductions are eliminated resulting in fewer dollars in most wage earners paychecks. A summary of some of the most relevant tax changes is set forth in an article by Steve Parrish in Forbes on January 9, 2013 entitled “What the New Tax Law Really Means and New ‘Tax Price Points.’
Since Federal and New York State Estate Taxes appear to be here to stay, it is always a good idea to review an estate plan every few years. New York Estate planning lawyers know that even if there does not appear to be any tax impact, updating documents such as a Last Will, Living Will, Living Trust, Health Care Proxy and Power of Attorney is important to reflect changes in life and beneficiary planning. Estate planning is not just about taxes. The more mundane issues relating to the smooth transfer of assets and avoiding estate battles such as Will contests is always a paramount goal. This is especially true for business owners where estate planning papers and business agreements such as Shareholder Agreements are needed for effective business transition in case of death or disability.

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New York Guardianship Laws are contained in Article 81 of the Mental Hygiene Law (MHL). These statutory provisions are utilized in many situations where a person in need is Alleged to be Incapacitated. Quite often the Alleged Incapacitated Person (“AIP”) is elderly and is suffering from the effects of a sudden medical condition such as a stroke or cardiac arrest or the long term deterioration of mental capacity due to dementia.

Whatever the circumstances may be, the family or friends of an elderly individual who loses the ability to attend to Activities of Daily Living, can follow the procedures outlined in Article 81 and attempt to have a Guardian appointed. New York Guardianship attorneys provide guidance to their clients who want to petition the Court for the appointment of a Guardian of the Person or Guardian for Property Management.

The Guardianship law provides a sort of safety net for persons lacking capacity, particularly in the case of the elderly. MHL Section 81.06 entitled “Who may commence a proceeding”, allows a Guardianship Petition to be commenced by just about anyone who has a concern about the AIP including anyone who resides with the AIP and “a person otherwise concerned with the welfare of the person. . . .” While petitions for Guardianship are usually commenced by family members, the proceedings are sometimes started by a hospital, a nursing home or a governmental agency such as the New York City Department of Social Services where Adult Protective Services provides community intervention. By having an expansive list of individuals and entities that can intercede on behalf of an AIP, there is a greater possibility that an AIP can receive Court intervention and protection particularly where no family member exists or the AIP’s family will not become involved.

A recent article in published on December 28, 2012 describes the situation of the elderly in China where the national legislature amended its laws to require that adult children visit their elderly parents “often” or run the risk of being sued by the parent. According to the article, the law was instituted due to a number of factors including increased elderly population in China where the social safety net is lacking and there is a limit on family size which creates a large financial burden for elderly care on just a single child.

One can only imagine the plethora of lawsuits that would deluge the Courts if such a law was enacted in New York. While Guardianship proceedings in New York may be formalistic by requiring Court papers and hearings in front of a Judge, the proceedings do provide a process to protect elderly persons from harm due to incapacity. Of course, Estate Planning prior to incapacity in the form of a Health Care Proxy, Living Will, Living Trust and Last Will is always the best course to follow in order to avoid the need for a Guardianship.

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The execution or signing of a New York Last Will is subject to very strict statutory requirements. While the Will signing ceremony may seem somewhat formal and old-fashioned the requirements of the statutes must be adhered to for the Will to be admitted to probate or validated.

As previously reviewed in earlier posts in the New York Probate Lawyer Blog, Estates, Powers and Trusts Law (EPTL) Section 3-2.1 provides the “formal requirements” for the “Execution and attestation of wills”. A summary of the requirements includes the following:

(i) The Will must be signed at the end.
(ii) No effect is given to any matter which is after the signature or added after the
Will is executed.
(iii) The Will should be signed in the presence of the attesting witnesses.
(iv) The testator should declare to the witnesses that the paper is his Will.
(v) There should be at least two (2) witnesses to the Will.

Sometimes obtaining the mandatory two (2) witnesses is not an easy task. If the Will is signed in an attorney’s office it is typically easy for the supervising attorney to obtain independent attorneys or office staff to act as witnesses. However, sometimes due to inconvenience or a testator’s inability to travel, the Will execution ceremony is performed in a residence or other location. In such situations, controlling the execution ceremony so that it complies with the statutory requirements is more difficult.

Attention is called also to EPTL Section 3-3.2 entitled “Competence of attesting witness who is beneficiary; application to nuncupative Will.” Essentially, this statute provides, in part, that where an attesting witness receives a benefit under the Will, such disposition is to be deemed void unless there are at least two other witnesses who do not receive a beneficial disposition. Thus, if the benefiting witness’s testimony is needed to validate the Will, the disposition is voided and lost.

A recent case decided by Surrogate John M. Czygier (Suffolk County Surrogate’s Court) on December 14, 2012 and reported in the NYLJ on December 31, 2012 cited as “Probate Proceeding 2012-337″, is an example of a problem presented by a witness having a beneficial interest in a Will. In this case, the Will had a provision whereby a bequest of $100,000 was made to the “Peconic Landing Employees Appreciation Fund.” All three attesting witnesses were employees of Peconic Landing and the Court found that they would benefit from the bequest to the Fund. Therefore, the Surrogate determined that the witnesses received a “beneficial disposition’ and voided the $100,000 bequest to the Fund.

As can be seen from the above decision it is important that the preparation and execution of a Last Will be done with an eye towards potential problems in probating the Will. New York Estates Lawyers typically are familiar with the statutory requirements for Will executions and probate and work closely with their clients to achieve their estate planning goals.

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The New York Probate Lawyer Blog has discussed in numerous posts that determining the identity of a decedent’s distributees (i.e., next of kin) is very important.

It was recently reported in an article by Jacqui Goddard in The Telegraph on December 27, 2012, entitled “Louis Armstrong’s secret daughter revealed, 42 years after his death” that the jazz legend, Louis Armstrong, had a daughter whose identity was kept secret until 42 years after his death. Although Armstrong died in 1971, his daughter just recently stepped forward claiming she was his natural born child. Interestingly, the article states that Armstrong’s fourth wife had signed a Probate Court affidavit asserting that he had no biological children.

In New York when a Last Will is filed with the Court for probate, the Probate Petition requires that all of the decedent’s next of kin be named and that their addresses be provided. A New York Estate Lawyer typically prepares the Probate forms and Probate papers that must be filed wit the Surrogate’s Court. In many instances the Court asks for additional information regarding kinship. Sometimes when there is only one heir, the Court will ask for a kinship affidavit. Also, when the heirs or distributees are somewhat distant, such as nieces and nephews or grand nieces or nephews, more detailed information is needed. These kinship affidavits provide the Court with full information and documentation regarding the decedent’s family tree.

Problems arise when a decedent’s next of kin are either unknown or cannot be located. The use of professional geneologists and kinship hearings may be required. In the case of Louis Armstrong, it appears that his estate affairs were settled many decades ago. However, in somewhat similar cases where a person claims to be the child of a decedent that the child’s status is disputed, the alleged or purported relationship must be disclosed in the Probate Petition and all interested parties must be given an opportunity to have a hearing regarding the alleged child’s rights. Such rights include the opportunity to Contest a Will or inherit an intestate share. Usually an official Surrogate’s Court notice called a Citation will be served on the interested parties to advise them about the Court proceedings.

It is not always easy to determine or locate a person’s heirs. Individuals may have heirs as the result of multiple siblings or marriages or adoptions and these individuals may be dispersed throughout many counties. Nevertheless, kinship identification is an essential aspect of estate administration and estate settlement.

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The various rights afforded to persons by the New York estate laws generally require that a person be related by blood to a decedent. New York Estates, Powers and Trusts Law (EPTL) Section 4-1.1 provides the relationship of individuals who can inherit an estate of a decedent who died without a Last Will. The priority established in this statute begins with a surviving spouse and issue and continues through the family tree to great-grandchildren of grandparents. Section (b) of the law provides that the “decedent’s relatives of the half blood shall be treated as if they were relatives of the whole blood.” Thus, half sisters and half brothers, for example, achieve inheritance rights. The statute further recognizes rights of adopted persons. Such familial relationships also afford a person certain rights to contest a Last Will.

However, absent an adoption, a child of a natural parent who has remarried has no rights with regard to the estate of the step-parent. This situation can present many problems, particularly in the case where the child is young. For example, if the child’s natural parent dies, the deceased parent’s estate or a large portion of it may pass to the surviving spouse if there is no Last Will or the Last Will does not provide for the child. Once the surviving spouse has received the estate property, the surviving child has no rights or expectation regarding the estate of the step-parent since there is no blood-relation between them. If the step-parent dies without a Last Will all of the step-parent’s estate, which includes the assets derived from the step-child’s deceased natural parent, may go to the step-parent’s blood relatives. Unfortunately, the step-child would be excluded under the law from participating as a distributee or next of kin of the step-parent.

This problem was recently recognized in Australia where laws have been changed to protect the interests of step-children. An article by Amanda Banks appearing in the West Australian dated December 3, 2012, entitled “Stepchildren get will rights” discusses this topic.

The best remedy for disinheritance of a step-child is for the child’s natural parent to prepare a comprehensive estate plan which includes a Last Will, Living Will, Health Care Proxy and even a Living Trust. The provisions of these documents can provide for estate assets to go to a child and also that the child be appointed as an Executor or Health Care Agent. If the child is a minor, a trust can be created with an independent trustee to protect the property that is given to the child. While disinheriting a child is allowed under New York, the unintended disinheritance of a child in a second marriage situation can have devastating life-long financial consequences.

Many individuals believe that estate planning is only for those that are wealthy and want to limit estate tax liability. In fact, there are many family situations where there are second marriages, adopted children, unknown heirs or other family concerns unassociated with tax issues which require extensive estate planning and foresight.

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The New York Probate Lawyer Blog has discussed many of the proceedings that can arise in the Surrogate’s Court such as the Manhattan Surrogate’s Court and Nassau Surrogate’s Court. Each of the counties in New York State has its own Surrogate’s Court.

The various proceedings include Probate Proceedings, Intestate Administration Proceedings, Accounting Proceedings, Kinship Proceedings, and various other Miscellaneous Proceedings such as proceedings to revoke the appointment of a fiduciary.

In order for the Court to determine the issues in the cases that are filed, the Court must be certain that all parties interested in the case have received a proper notice and have had an opportunity to appear before the Court and protect their interests. Very often, the Notice that a party receives is a Citation or an Order and Show Cause. These Notices must be properly served on a party and provide information as to the date, time and place of the Court hearing.

It is not uncommon in many cases that one of the parties may not be legally capable to protect their interests or appear in Court. An infant (i.e., someone under age 18) or a person who is incapacitated cannot act for his or her own welfare. When these situations arise, there are a number of avenues that can be followed so that the incompetent party can participate in the Court proceeding.

With regard to an infant, he or she may appear by a Court appointed guardian of his or her property. See Surrogate’s Court Procedure Act (SCPA) Section 402. This section also provides that an incapacitated person may appear by a Court appointed guardian. Article 81 of the Mental Hygiene Law provides an extensive procedure for the appointment of a Guardian of the person and property for an incapacitated person.

When an infant or other disabled person has not had a Guardian appointed to represent them or when the Court feels that such Guardian cannot adequately represent them, the Court can appoint a Guardian ad Litem. SCPA 403 provides for the appointment of a Guardian ad Litem selected by the Court but also provides a procedure whereby the Guardian ad Litem can be nominated by an infant over 14 years old or his parent or guardian. Of course, such nomination is subject to approval and appointment by the Court.

In a recent case entitled a Will of Nanaline Duke, decided by Manhattan Surrogate Nora Anderson on November 28, 2012 and reported in the New York Law Journal on December 10, 2012, the Court allowed the family members to nominate the Guardian ad Litem.

Typically, the Guardian ad Litem will act as the representative of the person under disability and protect his or her interest in the Court case. SCPA 405 provides the procedure for the Guardian ad Litem to be paid for services rendered.

Estate Litigation involves many complex issues and procedures. As a New York Estate Lawyer I have represented many clients where the Court has appointed a Guardian ad Litem to represent a party’s interest. I have also acted as the attorney for Guardians who are acting on behalf of incapacitated individuals. For example, in a situation where a decedent dies intestate and his or her sole heir is incapacitated, I have petitioned the Court to appoint the sole heir as an Article 81 Guardian who then had the authority to act as the Administrator of the decedent’s estate.

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