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nycSurrogatesEstate planning in New York is important for the proper disposition of a person’s assets.  Planning an estate encompasses a broad array of considerations.  The New York Probate Lawyer Blog has published many articles on this topic.  Initially, the preparation of a Last Will and Testament is the central document when creating a plan.  A Will disposes of assets that are owned by a testator at death in his name alone.  Thus, assets which pass automatically to others by operation of law such as joint property or items which have designated beneficiaries such as retirement accounts, life insurance or other pay on death funds, are not generally controlled by the terms of a Will as long as the beneficiary survives a decedent.

In view of various rules regarding property disposition, it is imperative that any estate plan take into account the ownership and title of assets which are intended to be disposed of under a Will.  A recent Manhattan estate case, decided by Manhattan Surrogate Rita Mella on February 23, 2023 entitled Estate of McAulay, demonstrates the issues that may arise when a decedent’s asset ownership conflicts with the provisions of a Will.

In McAulay, the terms of a Will provided for equal distribution of a portion of the decedent’s residuary estate to four (4) individuals.  At the time of death, the decedent owned certain California real estate with one of the beneficiaries as joint tenants.  As a result, the California property passed to the joint owner by operation of law outside of the Will.  An issue was raised as to whether the value of the California real estate should reduce the amount of the share of the residue the beneficiary was to receive.

Estate-Settlement-300x200 There are many different rights which appear in the New York Trust and Estate laws.  The basic statutes concerning estate law and procedure are contained in the Estates, Powers and Trusts Law (EPTL) and the Surrogate’s Court Procedure Act (SCPA).

A surviving spouse of a decedent benefits from a number of provisions in the estate laws.  For example, if a person dies intestate (without a Last Will and Testament), EPTL 4-1.1 entitled “Descent and distribution of a decedent’s estate,” provides that a surviving spouse is entitled to receive, essentially, one-half of a decedent’s estate if there are also surviving children.  In the event no children are surviving, then the spouse has top priority and inherits the decedent’s entire estate.

SCPA 1001 entitled “Order of priority for granting letters of administration,” is another provision where a spouse has priority benefits.  This statute provides that a spouse is to be appointed as the administrator of an intestate estate before any other heir.  The New York Probate Lawyer Blog contains many articles discussing executors and administrators and estate settlement.

shutterstock_74680495-2-1-300x200An interesting aspect of New York estate law and practice is its intersection with other areas of law.  For example, the New York Probate Lawyer Blog contains numerous articles discussing issues concerning the appointment of a guardian for personal needs and property management under Article 81 of the Mental Hygiene Law.  In many cases, a decedent, due to advanced age or disability, may have been the subject of a guardianship proceeding prior to death.  Such proceeding may have dealt with issues regarding a decedent’s capacity or assets which may be directly related to post-death matters concerning the validity of a Last Will and Testament or pre-death transfers of property.

Similarly, prior to death, a decedent may have been involved in a divorce or other matrimonial action which may have been litigated and/or settled.  Issues and factual matters may have been raised in such cases which could impact upon Surrogate’s Court proceedings and the settlement of a decedent’s estate.  As a threshold matter, a divorce would sever and terminate most spousal and inheritance rights between the parties.  Also, matrimonial litigation might disclose the nature and value of assets which may be a part of a decedent’s estate.  These facts might impact both probate proceedings and intestate administration proceedings.

An example of the impact a pending divorce might have on estate administration was recently shown in a Bronx estate case entitled Estate of Wood decided by Bronx Surrogate Nelida Malave-Gozalez on February 3, 2023.  In Wood, the decedent and his spouse had entered into a stipulation of settlement with regard to a pending divorce action.  The stipulation was fully executed.  However, before a judgment of divorce was entered in the divorce action, the decedent died.  One of the primary issues which was presented to the Court was whether the terms of the stipulation were enforceable notwithstanding the death of the decedent.  This was an issue because the basic rule is that the death of a party abates a divorce action unless the entry of the judgment was only a ministerial act to be completed by the Court.

nycSurrogates Major issues that often arise in connection with estate settlement concern the identity and value of a decedent’s property.  In many estates, a decedent engages in estate planning and asset transfers during the months or even days before death.  Estate planning and/or transfers may occur for very legitimate reasons.  Concerns may arise as to tax planning which might include a need to take advantage of a change in tax laws or to account for a change in the value or nature of a decedent’s estate.

In other situations, a person may be experiencing a health or medical concern and desire to formulate a plan which can take advantage of requirements to receive Medicaid or other governmental benefits.  Another basis for a decedent’s planning activities may involve the need to alter beneficiaries or make changes to a Last Will or other documents due to the death or disability of a beneficiary or nominated Executor or Trustee.

As it turns out, many of these pre-death changes may adversely affect the interests to be received from an estate by a potential beneficiary.  A person who may be a possible recipient of a large financial benefit learns that shortly before death, a decedent made changes which drastically reduced his financial beneficial interests.  When this occurs, there is a high probability that estate litigation in the Surrogate’s Court will occur regarding these changes.  This is especially so where a decedent is elderly and experiencing poor health.

shutterstock_74680495-2-300x200The settlement of a New York estate may involve many different proceedings and issues.  Initially, a proceeding needs to be commenced in the Surrogate’s Court to have an executor or administrator appointed to handle estate affairs.  This includes the identification and collection of assets and the payment of claims and expenses.  The New York Probate Lawyer Blog has published many articles discussing estate settlement.

The collection of assets is typically straightforward.  A decedent’s bank account or other financial funds are obtained and deposited into an estate bank account held in the name of the administrator or executor.  If a decedent owned real estate such as a house, the property can be sold so the proceeds can be collected and distributed to the beneficiaries of the estate.

There are occasions when a decedent’s assets are not easily identified or collected.  In many cases, prior to a decedent’s death, assets may have been misappropriated by a third party or transferred to others under questionable circumstances.  It is not uncommon to find that a Durable Power of Attorney was used to withdraw funds before a decedent’s death.  There are many cases involving undue influence and financial or elder abuse whereby a person’s assets may be improperly obtained prior to death.

Guardianship-300x201The appointment of a Guardian for personal needs or property management is provided for by Article 81 of the Mental Hygiene Law.  This statute contains the numerous provisions regarding the procedure and substantive law for a New York Guardianship.  The New York Probate Lawyer Blog has published many articles regarding Guardianship issues.

As a recap, a Guardianship is appropriate when a person is found to be incapacitated. Incapacity is viewed in a functional setting dealing with a person’s ability to handle his various activities of daily living.  These activities include activities such as taking care of financial affairs, personal hygiene, shopping, and attending to health care and providing for meals.  When a person cannot functionally care for themselves, and lacks the insight as to their welfare and would be at risk if a Guardian is not appointed, then a Court will see that a Guardian is needed.

When a Guardianship petition is filed, the Court usually appoints a Court Evaluator to investigate the case, and sometimes, an attorney to represent the interests of the alleged incapacitated person (“AIP”).  Article 81 requires that clear and convincing evidence be presented before a Guardian is appointed.  This is due to the inherent removal of certain liberties which a Guardianship requires.  The least restrictive form of intervention is allowed and the AIP’s interests are of paramount importance.

accounting-300x199There are a number of aspects to the settlement of an estate.  The New York Probate Lawyer Blog has examined these matters in detail in many earlier posts.  The first stage of an estate is to obtain the appointment of a fiduciary.  This involves a petition to appoint an executor or administrator.  An executor is appointed when a decedent leaves a Last Will and Testament.  If there is no Will, a person dies intestate and the Court appoints an administrator.  The Estates Powers and Trusts Law and the Surrogate’s Court Procedure Act contain an extensive array of statutes regarding the manner by which an estate fiduciary can be appointed.

The next stage concerning the settlement of an estate deals with the collection of estate assets and the payment of debts, claims and other administration expenses.  Of course, each estate is different and some situations may involve Surrogate’s Court litigation of contested claims, or the sale of a decedent’s real estate, the payment of estate or income taxes or the collection of assets from various bank accounts and other financial holdings.

The third and final part of settlement is known as the accounting stage.  A fiduciary such as an administrator or executor must prepare a detailed accounting of his activities.  This accounting shows the various assets which were collected, the amounts paid or expended and the value of the assets remaining on hand to be distributed to the beneficiaries.  The parties who are interested in an estate have a right to receive and review an accounting.  Objections to an accounting can be made if any actions or transactions are disputed.  When a fiduciary fails to provide a proper accounting, a beneficiary or interested party may commence a proceeding in the Surrogate’s Court to compel or force the fiduciary to file an accounting.  SCPA § 2205 entitled “Compulsory account and related relief on a court’s own initiative or on petition; who may petition” provides the authority for requiring an accounting.  Compelling an accounting is a very effective way for a person who is to receive an estate benefit to force the fiduciary to complete estate administration and to distribute assets.

nycSurrogatesAn executor or administrator is responsible to complete estate settlement.  There are many aspects to settling an estate.  The fiduciary must identify estate assets and actively seek to collect the assets.  Additionally, an estate representative must ascertain the various debts and claims which may be outstanding.  Also, expenses of administering an estate must be paid.  These expenses include various costs such as amounts needed to protect assets and to pay attorneys’ fees and accountant fees.  There may also be costs associated with the sale of assets such as a house.

The fiduciary is obligated to perform these tasks for the benefit of the estate as a whole and cannot favor one beneficiary over another.  There is a fiduciary duty to act properly to avoid a breach of fiduciary duty.  The Estates, Powers and Trusts Law Section 11-1.1 entitled “Fiduciaries:  Powers, Duties and Limitations” provides various rules in this regard.  The New York Probate Lawyer Blog has published many articles concerning the role of an administrator, executor and trustee.

As noted earlier, a fiduciary must pay estate expenses.  While expenses are paid from estate assets, sometimes there are not enough liquid assets to allow for payment.  In such a case, assets may need to be sold.  While in many cases, the sale of assets such as a house owned by a decedent may be a straightforward transaction, this is not always so.  An interesting situation recently arose in an Erie County estate.  Matter of Manchester, which was decided by Erie County Surrogate Acea M. Mosey on August 18, 2022, involved a proceeding to settle the accounting of the executor.  One of the issues concerned the real estate which was owned by the decedent.  The decedent’s Last Will and Testament had specifically devised the property to his daughter.  Although the decedent died in 2013, the deed transferring the property to the daughter was filed in 2018.  The problem, however, was that at the time of the deed transfer, there were extensive unpaid estate claims and administrative expenses.  The real property was the only estate asset which could be used to pay these expenses.

One of the most valuable assets in an estate is typically real estate.  This asset is usually the decedent’s residence.  Since real estate predominates as an estate asset, many aspects of real estate law can be involved in estate settlement.  Also, estate litigation in the Surrogate’s Court often concerns this asset.  Issues that arise may concern the following matters:

  1. Title or ownership of the property.
  2. Claims against the property. These claims may be in the form of an outstanding mortgage or liens which arise due to judgments against the decedent or unpaid taxes or property violations.

shutterstock_1021207423-300x200A decedent’s estate may consist of many types of assets.  These may include bank and other types of financial accounts, retirement funds and real estate.  Another very common asset owned by decedents is an interest in a cooperative apartment.  A cooperative apartment, or co-op, is not real estate.  In fact, the owner of a co-op owns shares of stock in a cooperative corporation.  Due to such ownership, a person is entitled to be a lessee under a proprietary lease.  The interest in a co-op is personal property just like owning shares of stock in Microsoft.

A co-op owner is subject to and controlled by the terms of the proprietary lease.  Most importantly, unlike real property, typically a co-op cannot be transferred to another owner without the approval of the cooperative corporation.  As a result, the transfer of a co-op either by a Last Will and Testament or through intestate administration is a very problematic issue in estate settlement.  There is no assurance that the beneficiary in a Will or the decedent’s next of kin will qualify or be approved by the co-op management to become an owner.  In the event there is no approval or the designated beneficiary does not want to become the owner, the co-op would need to be sold.  The New York Probate Lawyer Blog contains numerous articles regarding the settlement of an estate, co-ops, and estate real estate.

If a co-op needs to be sold, board approval is required.  The approval process for a purchaser can be very stressful for an estate executor or administrator.  This is especially so where the co-op is subject to a mortgage and the estate does not have liquid assets to make the current payments.  Also, monthly co-op maintenance charges must be paid.  The co-op sale approval process may take months to complete.  The co-op may reject the buyer with whom the estate contracted to sell the co-op.  In such a case, the estate fiduciary would need to go back to square one and find a new buyer and endure the co-op approval process again.  All the while, mortgage payments and maintenance charges may be accumulating and foreclosures may be threatened.

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