One of the most important aspects of planning a New York estate is having complete knowledge regarding the nature and value of the person’s assets. The various financial accounts and property interests that are owned may seem straightforward upon initial examination. However, a thorough review can be the difference between a well-planned estate and post-death problems.
As discussed on many occasions in The New York Probate Lawyer Blog, a Last Will and Testament controls assets that are in the name of a decedent alone. Thus, a bank account that is titled solely in the name of a decedent will be part of the probate estate. Similarly, such asset is to be distributed pursuant to the laws of intestacy where there is no Will. However, many assets are owned or titled in different forms. There may be joint assets with rights of survivorship, or assets held in the name of a decedent “in trust for” a named beneficiary or in a “pay on death” form for a named party. These types of items are not controlled by the terms of a Will and are not subject to distribution by the laws of intestacy. Thus, the type of asset ownership must be carefully examined so that the planning of an estate has the desired results. A person may prepare and execute a Will expecting that assets are to be paid to a Will beneficiary when these assets, in reality, are titled to be transferred to someone else automatically upon death.
A very popular form of death transfer is provided for by Estates, Powers and Trusts Law (EPTL) section 7-5.2 entitled “Terms of a trust account.” Pursuant to this statute, when a beneficiary of a trust account survives the depositor, the trust terminates and the title to the trust fund vests in the beneficiary “free and clear of the trust.” EPTL 7-5.2(4). This is the “ITF” type of account that most people, including estate lawyers, are familiar with. However, if the beneficiary should die before the trust account owner-depositor, the trust terminates and the account funds remain owned by the depositor, clear of any trust. EPTL 7-5.2(3).
The statute also contains very specific rules regarding the manner by which the trust can be revoked. Of course, the depositor is always free to withdraw or add funds to the account. A revocation can also be effectuated by a writing that specifies the beneficiary and the financial institution which is properly signed and acknowledged and filed. Also, a provision in a Last Will can effectuate a revocation if it complies with the statute.
Since the statutory requirements relating to trust accounts are very specific, there are dangers that an imperfect application of the statute’s rules can disrupt an estate plan. An interesting example of problems encountered complying with EPTL 7-5.2 was presented in Vilhena v. HSBC Bank USA, N.A. decided by U.S. District Court Judge Victor Marrero, Southern District of New York, on April 1, 2020. In Vilhena, the plaintiff sued HSBC to obtain payment of certain ITF accounts. The main reason that the accounts were not paid to plaintiff after both depositors’ deaths was because one of the depositors had sent a letter to the bank to remove plaintiff as the ITF beneficiary. The Court found that the letter did not comply with the express rules of EPTL 7-5.2 for revocation since it was not acknowledged. The Court also found that the depositors had not disposed of the accounts in any Last Will. Thus, the Court decided that the trust was not revoked and directed that the accounts be paid to the ITF beneficiary.
I have represented clients with regard to their estate plans and disputes concerning beneficiary designations and other estate issues. Call me now for a free confidential review of your estate or trust issue. We provide reasonable and flexible fee arrangements and personal representation.
New York Trusts and Estates Attorney Jules Martin Haas has helped many clients over the past 40 years resolve issues relating to Guardianship and probate and estate settlement throughout New York City including the Bronx, Queens, Brooklyn, Manhattan, Nassau and Suffolk County. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial free consultation.