Wills and Estate

When most us us think about wills, we conjure up movie images of lawyers and bankers discussing gazillion-dollar trusts, ways to avoid taxes, which of the rich client’s relatives will inherit his fortune to and who will be disinherited for some petty reason and which conditions to place on a bequest to some ne’er-do-well relative. That sort of Hollywood nonsense probably convinced many people that wills are just for the rich who want to mess with their relatives.

The truth is that even people of modest means should have a will. It will spare your survivors unnecessary strife and could even save your family some money in the long run.

The Estate

An “estate” is not necessarily a mansion and a yacht. In legal terms, an estate is simply all of a person’s property and property rights. When you die, your property and your property rights still exist and they have to go somewhere. How your property is distributed after you die depends on whether you die testate — with a valid will —or intestate, without a will.

You Need a Will!

According to legal publisher LexisNexis, about 55% of American adults have no will. About 68% African-Americans, are intestate, and about 74% of Latinos have no will. The younger you are, the less likely to have a will. According to a US Legal Wills study, approximately 65% of those 65 and older had wills, while less than 15% of those under 24 reported having a will. The US Legal Wills study also indicated that only about 10% of people with incomes of $100,000 to $149,000 had wills. The same study showed that only 15% of those with incomes in excess of $150,000 had a will. Interestingly, 28% of those who make $25,000 to $74,000 have up-to-date wills.

Just because you don’t have a will doesn’t mean your loved ones will avoid probate. Probate is legal process to establish the validity of a will. In New York, there is a ‘Surrogate Court’ to handle probate actions. If you die without a will in New York, the Surrogate Court will administer the estate. The nature of the estate’s assets or the nature of the heirs may compel Surrogate Court administration.

Some assets can pass to your heirs simply because there is no need file any document to pass title to the property, such as most personal property like furniture and jewelry. If your estate consists entirely of such ‘untitled property,’ there may be no need to go to court unless the heirs cannot agree on how to distribute the property among themselves.

Likewise, some assets will pass to heirs outside the probate process and without the need for a will. Generally, property held in joint tenancy pass outside of probate. Some assets transfer automatically because they are contractual in nature and require you to designate a beneficiary who will take ownership when you pass on. These include life insurance proceeds, annuities with death benefits, and many retirement accounts. Bank accounts often have “payable-on-death” provisions that allow you to name a successor. In each of these cases, since there is already a designated beneficiary, there is no need for the intervention of the Surrogate Court. Other assets, like vehicles and real estate, require documentation to pass title. If the owner is deceased, usually the only way to pass title is through a court proceeding and a court order.

Intestate Administration

When a person dies intestate, that estate is distributed according to the law. In New York, that law is found in EPTL 4-1.1.

Who gets what depends on who the living relatives are and their relationship to the Decedent (the person who died.) The family members who are entitled to a share of the Decedent’s estate when there is no will are called “distributees”. In the simplest terms:

  • If the Decedent has a spouse (husband or wife) and no children then the spouse inherits everything.
  • The Decedent has biological or adopted children but no spouse then children inherit everything.
  • The Decedent has a spouse and biological or adopted children then the spouse inherits the first $50,000 plus half of the balance. The children* inherit everything else.
  • The Decedent has parents but no spouse and no children then the parents inherit everything.
  • The Decedent has siblings (brothers or sisters) but no spouse, children, or parents the siblings inherit everything.
  • If a child dies before the Decedent and had children of their own, then the Decedent would have grandchildren. Those grandchildren would step into the Decedent’s child’s place and inherit in place of the child.
  • If the Decedent has no family at all, then the property will go to New York State.

For children to inherit from their parents, New York State requires a legal parent-child relationship. In most cases this is not an issue but it’s not always clear.

  • Adopted children will inherit just like a biological child.
  • Foster children and stepchildren will not inherit unless they were legally adopted.
  • Children born after the Decedent dies will inherit.
  • Children born outside of marriage, also called non-marital child, will inherit from a male Decedent if paternity is established
  • Grandchildren will inherit only if their parent (the Decedent’s child) dies before the Decedent died.

Difficulties in Intestate Administration

An estate administration is often a lengthy, inefficient, and expensive because the court appointed administrator must seek permission from the Surrogate Court for nearly every action. This wastes a lot of time requesting court orders and attending hearings. An intestate administration will often take two years or longer and may bear little or no relation to the wishes of the deceased. Perhaps you told your daughter that you want her to have your mother’s pearl earrings and you’d like your best friend that to have your favorite fishing pole; however, the administrator is not obligated to honor or even consider those wishes and may well be required to sell those heirlooms and distribute the proceeds to other heirs by statute or the Surrogate Court. The unnecessary expense, effort and time spent on an intestate administration can be avoided by maintaining an up-to-date will.

Testate — Having a Will

A will, however, simplifies estate administration and helps to ensure your wishes are carried out, if at all possible, after you leave this world.

Of course, a will does not change the terms of transfer for those types of property that will pass outside of probate, like insurance proceeds, accounts with beneficiaries, property held under joint tenancy, or property with named successors.

Having a will means there is no court appointed administrator because you get to designate an executor to act as your personal representative. The executor has great autonomy and need not obtain court permission for most actions. This reduces the cost of probate, allows for more efficient and generally faster settling of the estate. Of course, the main benefit of a will is that you direct the distribution of your property in any way you choose.

Living Trusts

A living trust allows you to retain control over your assets if you become incapacitated. Living trusts help avoid the need for guardianship or conservatorship if you become unable to make decisions for yourself. You can name yourself as the trustee and retain control over the assets during your lifetime, and name a successor trustee who takes over upon your incapacity or death. In that way, a living trust can also help you to avoid probate.

Living wills provide a lot of flexibility during your lifetime including the ability to revoke or dissolve the trust as your needs change. A living trust can be made irrevocable. A revocable trust generally becomes irrevocable upon the makers death. An irrevocable trust cannot be changed once assets have been transferred to it but, irrevocable trusts generally allow for the best estate tax consequences.

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