15 Ways to Avoid NY Probate During the COVID-19 Crisis
The widespread death and illness caused by COVID-19 has many of us in New York very concerned about estate planning because:
- All New York Surrogate Courts are closed, except for essential matters. If you avoid probate, your family will not have to wait for the courts to reopen and catch-up on their backlog. Your family will have immediate access to your non-probate assets.
- Many people are rushing to have their wills and other estate planning documents updated. If you sign your will improperly without the guidance of an attorney, your will may be determined to be invalid. The Dangers of Writing Your Own Will?
- Health Care Proxies, Living Wills and Powers of Attorney are needed in case of disability caused by COVID-19.
- You can support your favorite charities during this difficult time with much-needed donations. 60% of your adjusted gross income can be deducted for gifts made to a public charity, These deductions can offset normal earnings, such as salaries and bonuses, as well as dividend and interest payments and capital gains.
- Non probate-assets can be used to help family members who have lost their jobs or are suffering other economic hardship from the pandemic.
For further details or for assistance with any of the following, click on the links below for videos, webinars and blogs from WNY-Lawyers.com or contact Robert Friedman, Mike Ranzenhofer, Sam Alba or Justin Friedman.
I. YOUR NEW YORK ESTATE
Assets that are in your name alone with no beneficiaries or joint owners will pass by:
A. Probate, through an Executor if you have a Will/Codicil. What is Probate?
B. Intestacy, through an Administrator if you do not have a Will. What happens if I Die Without a Will?
C. Small Estate, through a Voluntary Administrator if you have no real estate and your assets are worth $50,000 or less.
II. THE NEW YORK PROBATE PROCESS
Each county in New York has a Surrogate’s Court that handles the probate of Wills and appointment of Executors, the appointment of Administrators who serve for the estates of people who die without a valid Will, and any disputes over the validity of a Will or the administration of a decedent’s estate.
Probating a Will is the first step in any estate administration. The Executor must locate the original Will to file with the Surrogate’s Court along with the will witnesses’ affidavits, notices of probate, and the petition for probate.
New York law requires that all beneficiaries and fiduciaries named in a Will, as well as, all of the decedent’s distributees (those who would benefit if there were no Will) be notified that the Will is being submitted to probate. Any person who would be adversely affected by the probate of the Will is given an opportunity to appear in Court to object if he or she does not sign a waiver indicating consent to probate. If no one has any objection to the Will and the Surrogate believes that the testator’s Will is valid, it will be admitted to probate and the person named therein will be appointed as Executor.
III. AVOIDING PROBATE IN NEW YORK
The following assets do not pass through probate or estate administration. Instead, the proceeds go directly to the person you named as beneficiary or joint owner of that account. Avoid probate with these forms of ownership:
- Life Insurance, unless all beneficiaries are deceased.
- Uniform Transfer to Minors (UTMA) Accounts.
- U.S. Savings Bonds with payable on death beneficiaries or joint ownership.
- Investment Accounts Designated as Transfer on Death.
- IRAs/401(k)s – Required Minimum Distribution (RMD) rules for Individual Retirement Accounts and 401(k)s are waived for 2020. Effective January 1, 2020, the triggering age for RMDs was increased from 70 ½ to 72. If you have already received a distribution from your own IRA, or one inherited from a spouse for 2020, you can roll it back into your IRA within 60 days of receipt.
- Joint Bank Accounts.
- Payable on Death and Transfer on Death Bank Accounts out into Trust.
- Automobiles – One automobile, of up to $25,000 in value, may be transferred at the DMV by a family member. DMV FORM FOR TRANSFER OF VEHICLE
- Lifetime Gifts – Sign a Power of Attorney with a Gift Rider to authorize your Agent to make gifts during your lifetime. With the annual gift tax exclusion, in 20202 you can give up to $15,000 to each recipient without tax consequences For a married couple, the total is $30,000 per recipient. Giving away assets that you expect to appreciate in value as the economy recovers makes use of your exemption while also shifting that appreciation in value to the next generation. More on Statutory Gift Riders
- Living / Intervivos Trusts (see section V. below).
- Corporation Stock.
- Real Estate held as Joint Tenants with the Right of Survivorship, Tenants-by-the-Entirety or Life Estate.
IV. LIVING, OR INTER VIVOS, NEW YORK TRUSTS
The COVID-19 crisis has highlighted the utility of trusts as an important part of your estate plan. With stock market volatility, closed businesses, and Surrogate’s Courts being limited to only emergency filings, trusts can be very useful. An inter vivos trust (living trust) is created for holding ownership of your assets during your lifetime for the benefit of named beneficiaries and distributing those assets after your death. Trusts may be revocable or irrevocable. The trust consists of the creator (also known as the grantor), trustee, and beneficiary. Checklist of Trustee’s Duties
The advantages of trusts are:
- Immediate Access to the Decedent’s Assets: If the trust has been funded, trust assets can be used immediately to help pay for expenses, such as funeral costs, legal fees and medical bills.
- Savings on Probate and Administrative Fees: All assets in the name of the trust will avoid the probate process. If there are no assets in an individual’s name at his or her death, there is no need to probate a will. This can be especially helpful if you own real estate in more than one state. Ancillary probate is necessary to transfer real estate in other states. By transferring real estate to a trust, the need for ancillary probate proceedings is eliminated.
- Privacy: Whereas probate is a public process, trusts provide privacy with regards to the disposition of assets.
- Additional Tax-Free Gifts: Grantor Retained Annuity Trusts (GRATs) and Charity Lead Trusts (CLTs) allow you to pass the appreciation in the value of assets over a hurdle rate set by the IRS to your beneficiaries tax-free. The IRS hurdle rate dropped to 1.2% in April,2020.
- Preserve Your Assets from Nursing Home Costs with an Irrevocable Trust.
V. WHICH OF THE FOLLOWING ARE YOUR NEW YORK ESTATE PLANNING PRIORITIES?
Discuss these goals, needs, and situations with your legal, tax and financial advisors to determine which estate planning techniques meet your needs
- Rivalry or incompatibility among your children.
- Estrangement from your children or other relatives.
- Asset Protection.
- Qualifying for Nursing Home Medicaid.
- Minimizing Property, Estate, Gift, Income, and Corporate Taxes.
- Providing for your Children after a Second Marriage.
- Minimizing Legal Fees.
- Financial Security for Your Family.
- Income, Cash Flow, and Liquidity.
- Maintaining Control of Your Assets.
- Business Succession – Continuity of Ownership & Management.
- Minimizing the Costs and Delays of Probate.
- Medical Decision Making in the Event of Disability.
- Financial Management in the Event of Disability.
- Providing for Family, Dependents, Charities, and Pets.
- Preventing Elder Financial Abuse.
- Updating Wills, Powers of Attorney, Health Care Proxies, Living Wills, or Trusts.
VI. THE BENEFITS OF AVOIDING NEW YORK PROBATE
- Save Time and Costs.
- Control of your assets.
- Avoid Will Contests. What are the Grounds for Contesting a Will?
- No Medicaid Recovery.
- Providing for your Wife and Children if You’ve been Remarried.
VII. RISKS OF AVOIDING PROBATE
- Not Funding Your Living Trust
- Convenience Bank Accounts – Joint account holder may make withdrawals for purposes other than your convenience.
- Not Coordinating Your Non-probate Asset Distribution with Your Will.
- Joint Ownership – Joint owners can be sued, file for bankruptcy, or have the account compromised by divorce
- Ancillary Probate – This is necessary if you own real estate in other states.
This is not a substitute for legal, tax or financial advice. Always act only on the advice of your personal advisors. The laws are constantly changing and subject to differing interpretations. If you have any more questions on the ways to avoid NY probate during the COVID-19 crisis, please contact our office today.