New York Beneficiary Designations on Assets May Complicate Estate Settlement

shutterstock_635914376-300x144There are many aspects to the settlement of a New York estate.  First and foremost, there needs to be a determination as to whether the decedent had a Last Will and Testament or died intestate without a Will.  The existence of a Will provides provisions for the distribution of a decedent’s assets.  Alternatively, when no Will is found, the New York intestacy statutes provide the provisions as to whom is entitled to receive the estate distributions.  The New York Probate Lawyer Blog has published many articles concerning the probate process and intestate administration.

Many times a decedent leaves assets which do not pass through his estate.  Instead, items such as joint bank accounts, or other jointly owned assets with rights of survivorship will be transferred by operation of law on death to the surviving joint owner.  Additionally, various assets may have a designated beneficiary such as life insurance and retirement accounts like IRAs and 401k plans.  Upon death, these items also are paid directly to the named beneficiary.

Problems may arise when a person designates a beneficiary of an asset and the designated beneficiary predeceases the decedent.  If there is no designation of a secondary or substitute beneficiary, then an issue arises as to who is the beneficiary of the asset.  If it is determined that there is no substitute payee, then the fund may end up as an estate asset to be controlled by a Will or the intestate statutes.

An interesting example of the issues which can arise in these situations is found in a recent estate case entitled In the Matter of the Estate of Manfred Assmann, decided by Schenectady Surrogate Vincent W. Versaci on November 1, 2023.  In this case, the decedent had an IRA account which named the decedent’s ex-wife as the designated beneficiary.  The account was created before the divorce.  There was no named secondary beneficiary.  The estate executor sought to have the account paid to the estate based upon the provisions of Estates, Powers and Trusts Law Section 5-1.4 entitled “Revocatory effect of divorce, annulment or declaration of nullity, or dissolution of marriage on disposition, appointment, provision or nomination regarding a former spouse.”  This statute provides for the revocation of certain beneficiary interests upon a divorce.

The Court reviewed the contract and account papers relating to the IRA.  It found that the IRA agreement by its terms was controlled by California law.  Under California law and, based upon the terms of the agreement and the beneficiary provisions selected by the decedent, there was no alternate disposition or alternate beneficiary provided for payment of the account proceeds.  Thus, the IRA was to be paid to the decedent’s estate.

As can be seen from this case, it is very important when settling an estate to make a careful review of all potential estate assets even when there is a designated beneficiary.  Also, it is imperative when creating an estate plan that all assets are reviewed so that beneficiaries can be properly named and that the estate plan account for all items which pass outside of a decedent’s administration estate.

I have been representing clients in estate matters for over forty (40) years.  Do you have a problem or question regarding an estate or guardianship?  Call Me Now for a free confidential review of your matter.  We offer 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.

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