Estate Assets

What are non-probate assets and how to recover them?  

When a person passes away, their estate is often comprised of probate assets and non-probate assets.  Probate assets are assets that will be distributed according to the decedent’s Last Will & Testament.  These assets are titled solely in the decedent’s name.

Non-probate assets are sometimes called testamentary substitutes.  These assets have beneficiaries associated with the account or property.  The following are a list of testamentary substitutes:

  • Totten trust accounts, Payable on Death accounts (P.O.D.) or In Trust for Accounts (ITF)-  These accounts allow a person to control their funds and when they pass away the beneficiary listed on the account will receive the funds upon their passing. The beneficiary listed will have to show the bank or brokerage a death certificate to receive the funds.
  • Retirement Accounts- Retirement accounts should have beneficiaries attached to them.  They will pass outside the probate estate unless there is not a beneficiary listed.  To recover the retirement account the beneficiary listed should provide the retirement account company with a death certificate.
  • Life Insurance- Life insurance proceeds pass outside of the probate estate if there is a beneficiary listed. The beneficiary would need to file a claim form and a death certificate to receive the funds.
  • Jointly Held Property- Joint accounts pass automatically to the survivor of the account.
  • Real Property that is held as Joint Tenants with Rights of Survivorship or Tenants by the Entirety- These properties pass automatically to the survivor. The survivor should file a deed to clarify the chain of title. For more information on how real property can be titled, click here.
  • Trust Property- Property that is funded in a trust will follow the terms of the trust and pass outside the probate estate. The trustee must follow the terms of the trust.

 

Daredevil Dan Example:

Daredevil Dan went to the Bronx to watch the Yankees play.  He was too engrossed in his bucket of chicken fingers at the game and was struck by a foul ball, and that was the end of Daredevil Dan.  Daredevil Dan went to Ira K. Miller & Associates and executed a Last Will & Testament.

Daredevil Dan had a joint bank account with his wife, Brittany, with $25,000 in it.  He had a retirement account with $100,000 which had his wife designated as his beneficiary. He owned a property in Red Hook solely in his name. He owned a property in Park Slope with his wife titled as tenants by the entirety.  He owned a brokerage account worth $20,000 which was titled in trust for his son, Thomas and he owned a bank account with $40,000 in his name alone.

According to these facts, the non-probate assets that would go to Brittany would be the joint bank account for $25,000, the property in Park Slope, and the retirement account with $100,000.  Brittany should have the deed for the property in Park Slope changed solely to herself as surviving tenant by the entirety.

Thomas would be able to collect the $20,000 from the brokerage account by providing them with a death certificate.

The probate assets in Daredevil Dan’s estate would be the property in Red Hook and the bank account with $40,000 in Daredevil Dan’s name alone. The disposition of this property would be controlled by Daredevil Dan’s Last Will & Testament.

 

For questions about probate or estate planning contact  Ira K. Miller & Associates

1216_cash-dollars_650x455

What commissions are an Executor or Administrator entitled to?

An Executor or Administrator of a decedent’s estate is entitled to a commission.  The job of the Executor or Administrator is to gather all the assets of the decedent, pay the liabilities, and distribute the funds according to the decedent’s Last Will & Testament or according to the intestacy rules of New York.  The executor or administrator’s commission is based off the size of the estate.

Assets Excluded from Computing Commissions

Certain assets are excluded in calculating the executor’s commission.  Assets not included in the executor’s commission are:

  • Testamentary Substitutes- Assets that pass outside of the estate and have beneficiaries listed. These assets include, in trust for (ITF) accounts, payable on death accounts (P.O.D.),   assets with rights of survivorship, or joint accounts.
  • Real Estate not sold by the Executor
  • Specific bequests- for example, my gold Rolex watch to my son, Jimmy.

How Commissions are Calculated

Commissions for executors and administrators are codified in SCPA 2307. Executor and Administrator fees are calculated as follows:

  • For receiving and paying out all sums of money not exceeding $100,000 at the rate of 5 percent.
  • For receiving and paying out any additional sums not exceeding $200,000 at the rate of 4 percent
  • For receiving and paying out any additional sums not exceeding $700,000 at the rate of 3 percent.
  • For receiving and paying out any additional sums not exceeding $4,000,000 at the rate of 2 1/2 percent.
  • For receiving and paying out all sums above $5,000,000 at the rate of 2 percent.

Executors are also entitled to 5% of gross rents received on behalf of the estate.

Executors Commissions/Fees count as Taxable Income

Executors should be aware that executor’s commissions are considered taxable income. However, inheriting property from an estate is not considered income.  If the executor is a sole beneficiary, they could waive their commissions and receive their funds as an inheritance and not have to pay income taxes.

Daredevil Dan Example

On December 4, 2015, Daredevil Dan went to Ira K. Miller & Associates and executed a Last Will & Testament. The Last Will & Testament left Daredevil Dan’s watch collection to his friend, Ryan.   The remainder of his estate was to be left equally between his son Jeremy, his daughter, Jenny, and his friend Brian.  He made Jeremy the executor of his will.

On March 26, 2016, Daredevil Dan tried to recreate Houdini’s famous water escape, unfortunately Daredevil Dan was not very good at picking locks, and that was the end of Daredevil Dan.

Daredevil Dan passed away with the following assets:

  • A joint bank account worth $20,000 with Ryan listed as the joint owner
  • A 2 family home in Cobble Hill, Brooklyn worth $2,100,000. Daredevil Dan rented the top floor of his home for $3,000 a month.
  • A bank account with $200,000 solely in Daredevil Dan’s name and
  • A watch collection worth $30,000.

What assets of Daredevil Dan’s are commissionable to  Jeremy as executor?

  • He would not be entitled to any commissions for the joint bank account with Ryan. Ryan would become the sole owner of the $20,000 of the account after Daredevil Dan’s passing
  • Jeremy would only be entitled to commissions if he sold the Cobble Hill property. For this example we will assume Jeremy sold the property for $2,100,000. He also collected rent from the tenant on behalf of the estate for eight (8) months at $3,000 a month totaling $24,000 collected in rent.
  • Jeremy would be entitled to commissions from the $200,000 bank account marshaled.
  • Jeremy would not be entitled to any commissions on the watch collection and would turn the watch collection over to Ryan.

The size of Daredevil Dan’s estate would be as follows:

-$2,100,000 for the sale of the Cobble Hill property

-$24,000 in Income from the upstairs Tenant and

-$200,000 from Daredevil Dan’s bank account

Totaling $2,324,000

 

According to SCPA 2307, Jeremy’s commissions would be

5%    of $100,000 =          $5,000

4%     of $200,000 =         $8,000

3%     of $700,000 =         $21,000

2.5%  of $1,324,000 =     $33,100

              $2,324,000       $67,100

Estimated Total Commission for Jeremy as Executor of Daredevil Dan’s Estate: $67,100.00

Jeremy would also be entitled to 5% of the $24,000 in rent collected = $1,200.00

Jeremy’s full executor’s commission would equal $68,300.00.  If Jeremy were to take his executor’s commission, this would be taxable to Jeremy and must be included on his income tax return for the year.

As illustrated above, there are many intricacies in calculating an executor’s commission and administering a decedent’s estate. Contact Ira K. Miller & Associates for help regarding the administration or probate of an estate.

probate-logo

What is an Ancillary Probate or Ancillary Administration Proceeding?

When a person passes away with real property in multiple states, an ancillary proceeding may be necessary. The primary probate proceeding (if the person passed away with a Last Will & Testament) or primary administration proceeding (if the person passed away without a Last Will & Testament) is commenced in the State and County where the person was domiciled prior to passing away.  Once the Executor or Administrator is given legal authority from the court, that Executor or Administrator can start an Ancillary Probate or Administration proceeding in the State where the decedent owned real property but was not his primary residence.

Daredevil Dan Example:

Daredevil Dan owns a brownstone in Park Slope, Brooklyn and a house in Scottsdale, Arizona which he snowbirds to during the cold Brooklyn winters.  He is domiciled in Park Slope and he spends the majority of the year at his brownstone.  Daredevil Dan went to grab a candy bar from a vending machine, the candy bar got stuck and when Daredevil Dan shook the machine, the machine fell on him, and that was the end of Daredevil Dan.  Daredevil Dan went to Ira K. Miller & Associates and created a will that left everything equally to his two friends, Don and Meg.  He made Don the executor of his will.  Don would have to start a Probate proceeding in Kings County because that is where Daredevil Dan was domiciled.  Following the grant of Letters Testamentary by the Kings County Surrogates Court, Don would then have to start an ancillary probate proceeding in Arizona to gain authority to sell or transfer the Scottsdale home.

Probate proceedings and ancillary probate proceedings can end up being very costly due to filing fees and attorney fees. Both a probate proceeding and ancillary probate proceeding can be avoided with the use of a revocable trust.

Daredevil Dan Trust Example:

The facts in the above Daredevil Dan Example are the same, however, instead of creating a will at Ira K. Miller & Associates, Daredevil Dan created a Revocable Living Trust.  He deeded both his property in Park Slope, Brooklyn and his property in Scottsdale, Arizona into the trust.  The trust terms had Daredevil Dan as the trustee of the trust and upon his passing his friend Don would take over as trustee. The trust terms stated that upon Daredevil Dan’s passing both properties in Arizona and New York would be sold and the proceeds split between Don and Meg. Following Daredevil Dan’s vending machine accident, Don would have legal authority to sell both properties as trustee and would avoid  probate in New York and ancillary probate in Arizona.

If you own real property in multiple states, a trust is a great way to avoid probate and ancillary probate. Contact Ira K. Miller & Associates for any questions you may have regarding trusts, probate, and ancillary probate.

What is a Probate Estate?  

Probate is defined as the official proving of a Will.  Many people think that when they create a Will all their assets will be distributed according to their will. This may not be the case. The only assets that can be administered according to the terms of the Will are assets in the probate estate.

Assets includible in the probate estate are:

  • Any asset owned by the decedent alone
  • Any real property owned in the decedents name alone or assets owned in the decedents name that are titled tenants in common.
  • Personal property such as household items or jewelry as long as this property is not in trust.

Assets NOT includible in the probate estate are:

  • Joint accounts
  • Accounts that have beneficiaries attached to them
  • Any real property titled joint tenants with rights of survivorship or tenants by the entirety
  • Any properties that are in trust

Seven Benefits of a Revocable Living Trust

 

Trust

Many Americans simply leave a will to distribute their assets upon their passing.  However, the creation of a Revocable Living Trust creates several benefits unavailable to those simply leaving a will. Here are seven benefits to creating a Revocable Living Trust

1) Avoiding Probate- A great benefit of a living trust is that it avoids probate. Probate means the official proving of a will.  This official proving is done at the Surrogates Court in the county where the person was domiciled before their passing.  In order to probate a will, a copy of the will must be distributed to everyone who would inherit from the person’s estate if there were no will.  In some cases, locating these people who would inherit can be very difficult, costly, and time consuming.  By creating a trust, this issue can be avoided.

2) Privacy- Another key distinction between leaving a will and creating a living trust is the level of privacy. A living trust is not made public and upon death of the grantor, the distribution of an estate is done in private.  A will becomes a public document once it is probated and anyone can view how you left your estate upon your passing.

3) Quicker access to funds- Probating a will and having the Surrogates Court grant authority to the executor can take months. With a Revocable Living Trust, the successor trustee can gain access the person’s funds quickly and distribute them according to the terms of the trust.

4) Revocable- The trust can be changed, revoked, or amended at any point during the grantor’s life. Once the grantor dies, the trust becomes irrevocable.

5) Protect your beneficiaries from creditors- Terms can be placed in the trust to protect your beneficiaries from creditors. If a trust owns the beneficiaries funds, creditors cannot gain access to those funds.

6) Avoid Ancillary Probate- If a person has property in multiple states, they can deed or transfer all property into the trust. Upon the passing of the grantor, the property can be distributed according to the trust. If a person has a will and resides in New York and has property in Florida, a court proceeding for probate would have to be started in New York. Following the executor given legal authority under the will by the Surrogates Court of New York, a second proceeding for Ancillary Probate would have to be started in Florida in order for the executor to collect the property in that state.

7) More Specific Terms- A trust gives the grantor more options as to when a beneficiary receives an inheritance or what condition is necessary for the beneficiary to receive their inheritance.

A Revocable Living Trust is more complex and expensive than a simple will, however, there are many benefits associated with it.

Probate 103- Distribution According to the Last Will and Testament

The last step of an estate is everyone’s favorite, distribution. After all the estate’s property has been marshaled and liabilities have been paid, the executor can begin the process of distribution according to the Last Will and Testament. The executor should wait 7 months for any creditors to submit their claims to the estate. It also may be advisable for an executor to withhold some funds as a precaution in the event another claim was to surface against the estate.

Listed below are some of the steps the executor should take before distributing the estate:

  • Set up Trust – If a trust is specified in the Will, the executor is responsible for setting up the trust.
  • Specific Bequests – Distribute specific bequests.
  • Create Informal Accounting – An informal accounting will be created which details all the assets marshaled, administration expenses, and the amount that is set to be distributed to each person according to the Will. This document will be sent to the beneficiaries listed in the Will.
  • Release and Receipts – The releases will release and indemnify the Executor from liability and agree to the amount being distributed to them according to the Will. It is important that release and receipts are received prior to distribution.
  • Disblank checktribution – Checks will be made out to the residuary beneficiaries or to any testamentary trust.

Listed in this series of blogs were very basic steps to having an executor appointed, marshal the assets, and distribute an estate. For more information, contact a knowledgeable probate and estate attorney.

Probate 102 – Marshalling of Assets and Payment of Liabilities

Once the courts grant the Executor letters testamentary, it is time to marshal the assets and pay the liabilities of the estate. An experienced estate attorney can provide valuable advice and help with this process. Marshalling the assets involve first locating the assets of the decedent. The assets that are to be marshaled are any accounts and property that did not have a beneficiary attached to it. The following are other steps the Executor must account for:

  • Get EIN number - This number will be associated with the estate account for tax purposes.
  • Set up Estate Account - The Executor will need to create an Estate Account. The account will be titled the Estate of the decedent.
  • Transfer Property to Estate Account – Once the estate account is set up, the Executor will transfer any property that was in decedents name alone (no beneficiary designation listed on the account) to the estate account.
  • Appraisals of Property – An Executor may need to have appraisals done for businesses, real property, artwork, or anything that may have value.
  • Pay liabilities and reimburse parties for expenses expended – The Executor must make sure that claims are legitimate
  • Income Tax – Hire an accountant to file an income tax return for any years that have not been paid.
  • Estate Tax – Estate Taxes may need to be filed for New York State and Federally. Estate taxes are due 9 months from decedent’s date of death.
  • Wait for Creditors – Creditors have 7 months from the issuance of letters testamentary to come forward with any claims they have against the estate.
  • Keep a Detailed Accounting - Records of all the assets that have been marshaled and expended on behalf of the estate must be accounted for.

Being an Executor is no easy task. It can be very difficult to find where a decedent had their assets. Also, deciding whether to sell an asset or transfer at value is another difficult decision an Executor may need to make. The most important step of being an Executor is keeping detailed records. Every penny that was brought into the Estate should be accounted for.

For further legal advice and to talk with an experienced probate attorney, please feel free to give us a call at (718) 875-2191 or request a consultation.

Probate 101 – Appointment of the Executor

If you are named Executor in a Will, you may be asking yourself what are the next steps? Hiring a knowledgeable and experienced probate/estate attorney can help you with all the necessary steps in probating the Will. The first phase of probate is to get appointed as Executor by the Surrogates Court.

The following documents need to be submitted to the Surrogates Court to allow you to become Executor.

  • Original Will – The original Will needs to be submitted to the court.
  • Death Certificate – An original death certificate needs to be submitted to the court as well.
  • Petition – This is the document that informs the court that you were nominated as Executor, and that you are moving to have the Last Will and Testament probated. You are petitioning the court for Letters Testamentary which will give you authority to gather the assets of the deceased and act as Executor.
  • Waivers – Waivers need to be sent to the interested parties that would receive the estate if there were no Will (called intestacy). The waiver specifies that the party consents to the Will being admitted to probate and that you will be appointed as Executor. The waiver needs to be signed and notarized. If the waiver is not received a citation will need to be issued.
  • Citation – A Citation is served on interested parties that did not return the waiver. The citation is a date issued by the court which gives the interested party the right to object to the Will being probated. It is a matter of speak now or forever hold you peace. If the interested parties do not come forward they lose their right to object.
  • Affidavit of Due Diligence – If the location of an interested party is unknown and cannot be located after a diligent search, an affidavit to the court listing the methods attempted to find the interested party is needed.
  • Publication – If we are unable to find the addresses of an interested party after a diligent search, it is necessary to publish in a newspaper for four weeks that the Will is being offered to probate.
  • Notice – This document is sent to people mentioned in the Will who are not interested parties and would not receive anything through intestacy if the Will were not to be probated. It notifies them that they have been mentioned in the decedent’s Will.
  • Affidavit of Sole Heirship/Affidavit of Heirship – Depending on the situation, the Court will ask for an affidavit explaining the genealogy of the family.
  • Affidavit of Comparison – The court requires us to file a copy of the original Will that is examined by two witnesses attesting that the copy of the Will is the same as the original.
  • Submitting all documents to the court – Once all documents are submitted to the court, the court reviews them to ensure that everything has been done properly.

Letters Testamentary will be issued by the Court- Letters testamentary will allow the Executor the legal authority to perform the duties of the Executor such as gathering the assets of the deceased, paying liabilities, and distributing the estate according to the Will.

For more information or to schedule a consultation with Brooklyn’s Elder Lawyers, please feel free to give us a call at (718) 875-2191 or fill out a contact form.

 

What is Probate?

Probate sounds like a big scary word and often times can intimidate people. Probate is simply the legal process of distributing assets according to the Last Will & Testament of the Testator (person who created the will). The person that has this job is the executor of the estate listed in the Will. The executor has the responsibility of petitioning (asking the court) for authority to follow the terms listed in the Testator’s will. When a person passes away with a Will, the Will needs to be proven to the Surrogates Court of New York that the will is valid. The Probate of a will in Surrogates court is jurisdictional and the assistance of a qualified estate attorney is extremely valuable.

There are three phases to the probate process. The first phase is to get the person listed as executor in the Will appointed legally as executor. The second step is to marshal assets and pay debts of the testator. The third and final step is distribution according to the Will and closing of the estate. In the coming weeks we will discuss each step in further detail.

For more  information about Probate and Ira K. Miller Associates Elder Law services in Brooklyn feel free to give us a call at 718-875-2191 or fill out a contact form.