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A New York Resident Must Properly Provide Beneficiary Designations To Avoid Unwanted Results

Estate Planning for New Yorkers can be a very complex process.  When considering a testamentary plan, it is common to immediately think about estate taxes.  While such taxes are imposed in the form of New York State estate tax and the Federal estate tax, most estates are not subject to paying such taxes.

Earlier posts in the New York Probate Lawyer Blog have discussed the fundamental need to understand the nature and ownership of assets. A Last Will and Testament is going to control only the assets owned by a person in his name alone. Other assets that are owned jointly with persons with a right of survivorship are distributed to the surviving co-owners automatically upon the first party’s death. This is also true with assets that have designated beneficiaries such as life insurance and retirement accounts in the form of IRA’s and 401K’s.It has been very common during consultations that I have had with clients regarding estate planning, that information regarding the name of beneficiaries on insurance or retirement funds have been forgotten them. Typically, a name is put down when the insurance or account is started and not reviewed or updated for years or decades.

In many instances the original designated beneficiary may have died a long time ago or the client who owns the insurance or retirement fund may now want to name a different beneficiary. Circumstances in a person’s life change over time and the advent of marriages, divorces, children and even granchildren may require a change of beneficiary.

A recent case decided by Erie County Surrogate Barbara Howe on June 29, 2015 entitled Matter of Sugg, provides instruction as to the complications created when beneficiary designations are not carefully updated. In Sugg a decedent left a Last Will that provided for his estate to be distributed to his sister. The decedent also left a life insurance policy that left 60% of the insurance policy proceeds to his divorced wife as a named beneficiary. Many years before his death the decedent and his ex-wife had reached a settlement in their divorce that provided that the decedent had the right to remove his ex-wife as a named beneficiary on the insurance policy. At the time of his death, the decedent had not changed the policy designation. Thus, after his death, the ex-wife collected her share of the insurance proceeds. As a result of the divorce, the estate claimed that the ex-wife should be required to turn-over the insurance proceeds to the estate. The estate argued that Estates, Powers and Trusts Law (EPTL) Section 5-1.4 entitled “Revocatory effect of divorce, annulment or declaration of nullity, or dissolution of marriage on disposition, appointment, provision or other nomination regarding a former spouse” mandated that due to the parties divorce, all beneficiary designations and estate distributions naming the decedent’s ex-wife were deemed revoked. In opposition to this claim, the ex-wife asserted that since the decedent did not change the insurance beneficiary despite having the right to do so, the decedent intended to retain his ex-wife as a beneficiary.

The Court decided that EPTL 5-4.1 mandated that the beneficiary designation of the ex-wife be deemed revoked and directed the ex-wife to turn over all of the insurance proceeds she had received to the decedent’s estate.

I have represented many clients in connection with their estate planning. A significant aspect of such planning is determining the identity of all assets and any beneficiary that may be designated to receive them. Also, I have assisted numerous clients with estate litigation disputes regarding the recovery of estate assets and beneficiary designation controversies. If you have a question regarding any of these matters, call me now to discuss your issue.

New York Probate Attorney Jules Martin Haas has helped many clients over the past 30 years resolve issues relating to Probate, Administration and estate settlement throughout New York City including Brooklyn and Queens. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial consultation.

Jules Martin Haas provides his clients and members of the community with a free monthly e-newsletter which contains articles covering a variety of legal topics including estate planning, financial matters and real estate. If you wish to be placed on the e-newslist, simply e-mail me at jules.haas@verizon.net. You can cancel receiving the newsletter at anytime.

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