Articles Posted in Wills

Most people plan their estate believing that everyone they have left money or bequests to will survive them, such as when a parent specifies that money or property will be left to a child. But sometimes unexpected deaths happen and when it does, many people are left wondering what will happen to the property that they specified to go to the predeceased. It is a tricky situation, but thankfully New York law and proper estate planning precautions can address the problem.

New York “Anti-Lapse” Statutes

Common law followed in the past dictated that gifts to someone who was deceased was null and void. This is due to the fact that a dead person cannot own property. Since they cannot have property, they cannot inherit it. When someone left property to a person who had predeceased them, the bequest would be said to have lapsed. This would have unintended consequences, such as cutting out people who would have inherited the property if the bequest had not failed and others receiving more than the testator intended.

2016 will not relent in claiming high profile celebrities. This week’s death was as tragic as it was needless. Anton Yelchin, aged only 28, an only child, was killed in his Hollywood home’s driveway when his Jeep rolled down a slope and pinned him between a brick wall and the car, possibly due to a known defect in the Jeep. Mr. Yelchin, most prominently known for his starring roles in Odd Thomas and Charlie Bartlett, will be deeply missed by all.

An Estate Unplanned

There is no information currently available about whether or not Mr. Yelchin had a will or an estate plan when he passed, but if he is like the majority of Americans, chances are that he did not even have a simple will. According to a survey by Rocket Lawyer, 51 percent of Americans age 55 to 64 do not have wills. Even worse, 62 percent of those ages 45 to 54 have never drafted a will. The lower the age, the higher the chance that that person does not have a will.

No one likes discussing their own demise. The topic is generally considered taboo amongst most people and is possibly the most uncomfortable conversation topic. This is unfortunate for everyone though, because if a person is unable to discuss their own death, chances are they are unwilling to plan for it either. That is one of the worst cases possible for not just for the person who fails to plan but their family members and people who rely on them as well. Discussing death is the first step to engaging people to plan their estate and while it is a difficult topic to broach, there are certain steps that a person can take to help bring people closer to planning their estate.

  1. Do Not Put Estate Planning In Terms of Death

People looking to engage others about estate planning should not discuss death, rather they should focus on planning for incapacity. A good estate plan does not just encompass what happens when a person dies. It will also discuss plans for what happens when a person becomes incapacitated such as if they are in an accident and unable to communicate and are unconscious.

We’ve already discussed Prince’s passing previously here on the Estate Planning blog.  Prince, one of the most successful music artists of all time, passed away without leaving a will. This means that he died intestate, and the laws of the state he was domiciled in dictate who will inherit from his estate. That almost universally means that your closest living relatives, usually a spouse or child, will inherit in an intestate situation, but this can get tricky. In Prince’s case, siblings, nieces, nephews, cousins and now self-proclaimed children have come out of the woodwork to lay claim to the late singer’s vast fortune and catalogue of music. Prince has no acknowledged surviving children, who would be near the front of the line in an intestate situation. So how exactly do you go about proving you’re the son of a decedent?

Acknowledged Children, Have No Fear

New York intestacy law is very clear on who will inherit when the deceased is intestate. If there is a spouse but no children the spouse inherits everything. If there are children but no spouse, the children inherit everything. If there is a spouse and children, the spouse inherits the first $50,000 plus half of the balance of the estate, with the children splitting the rest.

STATE SPECIFIC PROTECTIONS

        The current aggregate value of retirement assets in America is roughly $21 trillion, with individual retirement accounts (IRAs) amounting to the largest single investment asset.  While many, if not most, types of retirement assets and accounts are protected against creditors, the IRA is not necessarily one of them.  The various protections for IRA are dependent on the amount, how long ago you put the money into your account and the state or jurisdiction you live in.  Employer sponsored plans are covered by protections found in federal law, so it is much easier to talk about what protections exist for such plans.  The Employer Retirement Income Security Act of 1974 (ERISA) created a large host of protections for employees, including protections against creditors, except when the creditor is the Internal Revenue Service (IRS) or a spouse or former spouse for debt incurred through domestic relations.  

The protections found under ERISA have expanded over time through both Congressional action and judicial interpretation of the law.  ERISA plans must provide periodic updates to the employees, information about the plan features, creates fiduciary responsibilities for the plan administrators as well as things such as an appeal process for certain decisions that the employee disagrees with.  One large collective group of accounts that are not protected, however, are IRAs.  IRAs, as the name implies, are owned by an individual and thus do not fall under the protections of ERISA.  Most protections for IRAs are found in state law.  

SPRING CLEANING TIME MEANS CLEARING OLD PAPERWORK

        With tax day over and the need to collect and forward any number of financial and tax documents to the government and with the coming of spring, it is time to turn to spring cleaning.  The question should be asked, what paperwork can I throw out, should I throw out and what paperwork should I keep.  To be accurate, you should never throw out any financial paperwork, you should shred or incinerate such documents.  It is inevitable that in any such endeavor, you will come across documents that matter for purposes of your estate planning, such as wills, trusts and the various financial documents that speak to your estate planning.  In any event, you should rely on a system to help you collate these important documents for future use.  

You should keep certain original documents in an easily accessible but safe place, such as a fire proof safe or perhaps even a safety deposit box.  Things such as birth certificates or adoption paperwork, licenses and passports, marriage certificates, judgments of divorce, military discharge papers and social security cards.  Other documents do not necessarily need to be kept as an original, they should be regularly review, at least bi-annually, if not more often.  Documents such as a will, trust or other testamentary documentation will be kept by your attorney or law firm, but it still always best to maintain a copy or, better still, several copies on hand.

CHOOSING THE RIGHT PERSON AND STEPS TO TAKE

        As noted in a previous blog, being an executor of an estate can be a thankless job.  There are ways, however, that can allow you to make the job and life of an executor easier and less painful.  It is a job that carries with it much responsibility, so taking a few proactive steps may help to save the executor a lot of heartache.  One of the first steps you need to do, even before helping a named individual is to name the individual.  In other words, pick the right person; in fact it is even better to pick a few individuals as successors in the event that the executor passes away before you or is otherwise unable to serve as the executor of your estate.  Even better is to pick two people who will serve as co-executors; if you do this, you must make someone the primary person who shall serve and who has the final authority to make whatever decision needs to be made in the event that there is a disagreement.  

It is important to keep in mind that the person you chose is going to in charge of your assets that you amassed throughout your life.  All other things being equal, it is best to have someone who lives local and in the same state as you.  Few things in life provide such a stark choice.  It may be more important to you and the heirs, however, that you pick someone who is familiar with you, your wishes and your assets, even if they live further away or in a different jurisdiction.  If you choose a professional, such as an attorney, it is important to keep in mind that there will be costs associated with this.  If you permit and allocate a specific payment structure into the will or testamentary trust, it may not matter, since even a family friend or relative may also be entitled to a fee.  Finally, it is best to speak with that person in advance to ensure that they understand that they are being named as the executor of your estate and that they will do so.

LARGE NEED TO REDUCE AND PREVENT FINANCIAL EXPLOITATION

        The American  Bankers Association is looking to serve a large market that is only getting larger by the day.  At the same time, they are working to shore up the larger financial markets in a larger effort to prevent financial fraud perpetrated against seniors.  As one banker noted during a speech on the topic, the banking community responded to the need to protect those with diminished ability to discern the difference between a real deal being sold by a legitimate vendor and a scam by predators.  In February, 2016 it launched the Safe Banking for Seniors program, with various state bankers association across the nation rolling out their own version modeled on the American Bankers Association.  

As of the inception of the program, 30 states joined in to help usher in the program.  The New York Bankers Association is not one of the 30 states and does not currently such a program.  Nevertheless, it is gaining popularity across the nation and many states bankers associations are seeing the utility and popularity of such a program.  Furthermore, the program is not restricted to states bankers associations, individual banks, regional banks and bank chains can join in the program.  As the American Bankers Association notes, 30% of the population of the country will be 60 or older by 2025.  The Consumer Finance Protection Bureau and the American Bankers Association both note that $2.9 billion per year is lost to fraud perpetrated against elder Americans.  Some estimates are as high as $36 billion per year, with only one in 43 cases of financial fraud against an elderly American properly documented and reported.  The primary program is designed for banks and bankers associations, which will in turn filter down to individual elderly bank customers.

COMMON PROBLEM

There is much talk lately of how to deal with email, facebook, twitter accounts, et cetera of people who pass away.  For those of us who have friends or family who passed away and see their facebook account send a reminder to all of their friends on their birthday or some other event, it is nothing short of strange, even ery to see their former friend live into perpetuity in the digital realm.  Many people use it as an opportunity to post memories and give a public shout out to the living that their friend or family is still alive in their heart.  Others find the matter to be a painful memory.  

Facebook instituted a policy whereby a legacy contact can delete your account or transition the account to a memorialized account, whereby your name will be changed to a remembered account (more properly a “remembering account“).  Currently, New York does not allow an executor, or anyone else for that matter, to access the emails, online drives and various other digital accounts owned by a person after they pass away.  If it was private while the person was alive, shouldn’t it be alive after they pass away?  Yet, this is a rapidly evolving area of the law, with private corporations creating their own rules in the absence of legislative pronouncements to the contrary.   In the 2012-2013 legislative session, Representative M. Kearns introduced a bill that would address the issue of access to such accounts by an executor.

As was outlined in the most recent blog posting, if you compare the costs and benefits of creating a will now versus passing away intestate, there is no doubt that the benefit is huge and the cost is small.  It is thus high time to explore New York’s intestacy laws in detail.  It is important to note that intestacy laws are important not only because they instruct a probate Judge on how the estate must be divided but it also tells the probate Court what is not permitted as well as what is neither required nor prohibited; in other words the parties can agree to certain final dispositions.  The specific statute that defines intestacy and the outlines the specific requirements that a Court must adhere to is found at New York Estates, Powers and Trusts Law (EPTL) Section 4-1.1.  

Family Law and intestacy laws are one of the few areas of the law that recognizes and codifies a different treatment of the sexes, insofar EPTL Section 4-1.2 requires that a child conceived outside of marriage (so called and grossly titled “illegitimate” children) must have an acknowledgement of paternity by their father or a finding by a Court that the children in issue are indeed the children of the deceased man before those children can inherit as a child of the deceased.  Not so with mothers, since, except in the case of children mistakenly switched following birth, there is no doubt that children are the issue of their mother.

The technical legal term when a person passes intestate is that their estate is administered and a person who passes with a will, called testate, has their will probated.  Within the universe of individuals who are material to the probate Court are children, spouses and siblings.  Adopted children at treated the same as biological children although unadopted stepchildren are not considered children as far as the intestacy law is concerned.  New York has adoption proceedings and recognizes adult adoptions to legally redefine this relationship.  Divorced spouses are immaterial, although separated spouse are still considered spouses as far as the law is concerned.  

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