On May 20, 2014, U.S. District Court Judge John Jones III declared that Pennsylvania's laws banning same sex marriage was unconstitutional. Besides the practical implication that same sex couples in Pennsylvania may now get married, it also means that when one spouse dies, the survivor can now inherit tax free.
Previously, only a heterosexual surviving spouse could inherit assets of the deceased spouse tax free. Additionally, for same sex couples, if one partner left money to another, that would be taxed at a 15% rate - the same as if the person were a total stranger.
If you are in a same sex marriage (that was licensed in another state) you may wish to consider revising your estate planning documents as a result of this ruling. Additionally, if you have recently lost a same sex spouse, you may wish to consider amending the Pennsylvania inheritance tax return to request a refund.
Monday, May 26, 2014
Thursday, May 22, 2014
Change in New York Estate Tax Law
Effective April 1, 2014, the State of New York made numerous changes to its tax law. Most dramatically, New York is increasing its estate tax exemption amount from $1,000,000 to match the federal estate tax exemption amount.
New York's New Estate Tax Exemption Amount
Until March 31, 2015, the new estate tax amount will be $2,062,500.
From April 1, 2015-March 31, 2016, the exemption amount will be $3,125,000.
From April 1, 2016-March 31, 2017, the exemption amount will be $4,187,500.
From April 1, 2017-December 31, 2018, the exemption amount will be $5,250,000.
From January 1, 2019 on, the exemption amount will be indexed to the federal estate tax exemption amount.
However, New York has created a devastating Estate Tax "Cliff" by phasing out the benefit of the New York Exclusion Amount for estates that exceed 100% - 105% of the exclusion amount.
The practical implication of the "Cliff" is that for estates under the NY estate tax exemption amount, there will be no tax. For estates just above the threshhold, there will be an effect tax rate of as high as 252% (Source www.jdsupra.com). For estates above 105%, there is a flat 16% tax on all assets owned by the decedent, not just the amount above the exemption limit.
Addition of a Three Year Look Back Provision
New York has also added a three year look back provision for gifts made within three years of death. This provision only applies for gifts made between April 1, 2014 and January 1, 2019. The lookback will not apply if the gifts were made when the decedent wasn't a New York resident or if the gift is otherwise includible in the decedent's taxable estate.
Other Important Changes to NY Estate Tax
Other major changes made by the new law are to:
1) repeal New York's generations skipping transfer tax; and
2) allow a marital deduction for non-citizen spouses.
New Law Regarding Income Taxation of NY Resident Trusts
Finally, the new law aggressively pursues an income tax on trusts for the benefit of New York residents. The bill is going after two types of trusts. The first one being one that a wealthy New York resident sets up for his own benefit, retaining a discretionary interest in the trust. The second one being any trust for the benefit of a New York resident.
With respect to the first type of trust, for years, wealthy individuals have set up "incomplete gift non-grantor trusts" to avoid the New York income tax. The idea was that if you created a trust in another jurisdiction (with the assets and trustees outside of NY) then New York would not have the right to tax the income earned in that trust to the extent income was retained in the trust.
With respect to all other trusts, New York will now tax the distributions of accumulated income to New York residents. However, the State will offer a credit to the extent a tax is paid to another jurisdiction.
Important Items That Were Considered But Not Changed
1) New York has not adopted the concept of portability of the estate tax exemption; and
2) New York had considered a maximum 10% tax rate, but decided to keep it at 16%.
New York's New Estate Tax Exemption Amount
Until March 31, 2015, the new estate tax amount will be $2,062,500.
From April 1, 2015-March 31, 2016, the exemption amount will be $3,125,000.
From April 1, 2016-March 31, 2017, the exemption amount will be $4,187,500.
From April 1, 2017-December 31, 2018, the exemption amount will be $5,250,000.
From January 1, 2019 on, the exemption amount will be indexed to the federal estate tax exemption amount.
However, New York has created a devastating Estate Tax "Cliff" by phasing out the benefit of the New York Exclusion Amount for estates that exceed 100% - 105% of the exclusion amount.
The practical implication of the "Cliff" is that for estates under the NY estate tax exemption amount, there will be no tax. For estates just above the threshhold, there will be an effect tax rate of as high as 252% (Source www.jdsupra.com). For estates above 105%, there is a flat 16% tax on all assets owned by the decedent, not just the amount above the exemption limit.
Addition of a Three Year Look Back Provision
New York has also added a three year look back provision for gifts made within three years of death. This provision only applies for gifts made between April 1, 2014 and January 1, 2019. The lookback will not apply if the gifts were made when the decedent wasn't a New York resident or if the gift is otherwise includible in the decedent's taxable estate.
Other Important Changes to NY Estate Tax
Other major changes made by the new law are to:
1) repeal New York's generations skipping transfer tax; and
2) allow a marital deduction for non-citizen spouses.
New Law Regarding Income Taxation of NY Resident Trusts
Finally, the new law aggressively pursues an income tax on trusts for the benefit of New York residents. The bill is going after two types of trusts. The first one being one that a wealthy New York resident sets up for his own benefit, retaining a discretionary interest in the trust. The second one being any trust for the benefit of a New York resident.
With respect to the first type of trust, for years, wealthy individuals have set up "incomplete gift non-grantor trusts" to avoid the New York income tax. The idea was that if you created a trust in another jurisdiction (with the assets and trustees outside of NY) then New York would not have the right to tax the income earned in that trust to the extent income was retained in the trust.
With respect to all other trusts, New York will now tax the distributions of accumulated income to New York residents. However, the State will offer a credit to the extent a tax is paid to another jurisdiction.
Important Items That Were Considered But Not Changed
1) New York has not adopted the concept of portability of the estate tax exemption; and
2) New York had considered a maximum 10% tax rate, but decided to keep it at 16%.
Friday, March 14, 2014
Excellent Guide on International Estate and Inheritance Taxes
While I have not had a chance to review it thoroughly to confirm its accuracy, I note that the accounting firm, Ernst & Young, has posted a detailed analysis of the estate and inheritance tax laws of almost every country in this brochure.
For those of you who have assets in multiple jurisdictions or are citizens living abroad, you should familiarize yourselves with these laws and hire competent counsel to asset you in minimizing your taxes.
For those of you who have assets in multiple jurisdictions or are citizens living abroad, you should familiarize yourselves with these laws and hire competent counsel to asset you in minimizing your taxes.
Monday, March 10, 2014
Calculating Trustee Commissions in NJ
From time to time, people ask me how executor's commissions and
trustee's commissions should be calculated. I have already written a post on calculating executor and administrator commissions, so this post will focus on Trustee commissions.
New Jersey statutes on trustee commissions are very difficult to interpret because they use the term fiduciary to apply to executors, administrators, trustees, guardians and conservators. This would not be a problem if the fees were calculated the same, but they are not. Additionally, there are different rules for testamentary trusts (trusts created under a Will) and intervivos trusts (a trust created while the Grantor was alive). Going forward, if a particular rule applies to everyone, I will call that person a fiduciary.
To start, the Grantor of a Trust can specifically provide for a trustee commission. However, for testamentary trusts, if the commission is higher than the amount allowed under the New Jersey statutes, the Will must specifically state that the testator is aware of the commissions allowed under the New Jersey statutes and expressly authorize payment in excess thereof. N.J.S.A. 3B: 18-31.
Failure to expressly authorize a commission in excess of the NJ statutory limit or failure to state whether or not a trustee is even entitled to commission will result in the trustee being able to take a fee as provided in New Jersey Statutes 3B:18-23 through 3B:18-29. These statutes also apply to Guardians and Conservators.
So how is the trustee's fee actually calculated?
Unlike an executor who typically takes a one time fee, Trustees are more likely to take annual commissions, especially if the trust goes on for a long time.
The fee is comprised of both an income commission and a corpus commission. A trustee is entitled to annual income commissions of 6% without prior court approval. N.J.S.A. 3B: 18-24.
The corpus commission is a bit more complicated to calculate:. Normally an executor will take a one time commission as follows:
A trustee is entitled to a minimum fee of at least $100 per year and corporate trustees may set their own rates.
Upon the termination of a trust, the trustee is entitled to a termination fee in addition to the annual fees he or she may have taken. 3B:18-28. The termination commission is as follows:
Let's presume the following facts: Trust owns a house worth $500,000, a $1,400,000 in stocks and bonds, and $100,000 worth of cash. This is the value at the end of the previous year.
Let's also presume that there is only one trustee and in the year in question the stocks and bonds gave off $56,000 of income.
Accordingly, the calculation would be as follows:
0.5% on the first $400,000 would be $2,000
0.3% on the next $1,600,000 would be $4,800
6% on the $56,000 of income would be $3,360
So the trustee would be entitled to a total commission of $10,160 for the previous year.
Final thoughts about trustee's commissions
Any commission that a trustee takes will be subject to an income tax. As a result, if the trustee is also a beneficiary, he or she may not want to take a commission. Additionally, many times relatives do not appreciate the amount of work involved and will become upset at a trustee if he or she takes a commission. You should think about the dynamics of your family before taking one.
A trustee that does extraordinary work can apply to the court for a commission in excess of the statutory fee. A trustee needs to prepare an annual accounting, and one that fails to adequately communicate with the beneficiary or otherwise behaves badly can be removed by the court. If a trustee is removed from office, he or she may be required by a judge to forfeit his commissions. This is not automatic though.
Finally, as discussed in back in May of 2013, an attorney who is serving as a trustee may be entitled to a fee for legal services AND a commission.
New Jersey statutes on trustee commissions are very difficult to interpret because they use the term fiduciary to apply to executors, administrators, trustees, guardians and conservators. This would not be a problem if the fees were calculated the same, but they are not. Additionally, there are different rules for testamentary trusts (trusts created under a Will) and intervivos trusts (a trust created while the Grantor was alive). Going forward, if a particular rule applies to everyone, I will call that person a fiduciary.
To start, the Grantor of a Trust can specifically provide for a trustee commission. However, for testamentary trusts, if the commission is higher than the amount allowed under the New Jersey statutes, the Will must specifically state that the testator is aware of the commissions allowed under the New Jersey statutes and expressly authorize payment in excess thereof. N.J.S.A. 3B: 18-31.
Failure to expressly authorize a commission in excess of the NJ statutory limit or failure to state whether or not a trustee is even entitled to commission will result in the trustee being able to take a fee as provided in New Jersey Statutes 3B:18-23 through 3B:18-29. These statutes also apply to Guardians and Conservators.
So how is the trustee's fee actually calculated?
Unlike an executor who typically takes a one time fee, Trustees are more likely to take annual commissions, especially if the trust goes on for a long time.
The fee is comprised of both an income commission and a corpus commission. A trustee is entitled to annual income commissions of 6% without prior court approval. N.J.S.A. 3B: 18-24.
The corpus commission is a bit more complicated to calculate:. Normally an executor will take a one time commission as follows:
- 0.5% on the first $400,000 of all corpus received by the executor; plus
- 0.3% on the excess over $400,000. (N.J.S.A. 3B: 18-25)
A trustee is entitled to a minimum fee of at least $100 per year and corporate trustees may set their own rates.
Upon the termination of a trust, the trustee is entitled to a termination fee in addition to the annual fees he or she may have taken. 3B:18-28. The termination commission is as follows:
- If the distribution of corpus occurs within 5 years of the date when the corpus is received by the fiduciary, an amount equal to the annual commissions on corpus authorized pursuant to N.J.S. 3B:18-25, but not actually taken by the fiduciary, plus an amount equal to 2% of the value of the corpus distributed
- If distribution of the corpus occurs between 5 and 10 years of the date when the corpus is received by the fiduciary, an amount equal to the annual commissions on corpus authorized pursuant to N.J.S. 3B:18-25, but not actually received by the fiduciary, plus an amount equal to 1 1/2 % of the value of the corpus distributed;
- If the distribution of corpus occurs more than 10 years after the date the corpus is received by the fiduciary, an amount equal to the annual commissions on corpus authorized pursuant to N.J.S. 3B:18-25, but not actually received by the fiduciary, plus an amount equal to 1% of the value of the corpus distributed; and
- If there are two or more fiduciaries, their corpus commissions shall be the same as for a single fiduciary plus an additional amount of one-fifth of the commissions for each additional fiduciary.
Let's presume the following facts: Trust owns a house worth $500,000, a $1,400,000 in stocks and bonds, and $100,000 worth of cash. This is the value at the end of the previous year.
Let's also presume that there is only one trustee and in the year in question the stocks and bonds gave off $56,000 of income.
Accordingly, the calculation would be as follows:
0.5% on the first $400,000 would be $2,000
0.3% on the next $1,600,000 would be $4,800
6% on the $56,000 of income would be $3,360
So the trustee would be entitled to a total commission of $10,160 for the previous year.
Final thoughts about trustee's commissions
Any commission that a trustee takes will be subject to an income tax. As a result, if the trustee is also a beneficiary, he or she may not want to take a commission. Additionally, many times relatives do not appreciate the amount of work involved and will become upset at a trustee if he or she takes a commission. You should think about the dynamics of your family before taking one.
A trustee that does extraordinary work can apply to the court for a commission in excess of the statutory fee. A trustee needs to prepare an annual accounting, and one that fails to adequately communicate with the beneficiary or otherwise behaves badly can be removed by the court. If a trustee is removed from office, he or she may be required by a judge to forfeit his commissions. This is not automatic though.
Finally, as discussed in back in May of 2013, an attorney who is serving as a trustee may be entitled to a fee for legal services AND a commission.
Friday, March 7, 2014
Calculating NJ Executor Commissions
From time to time, people ask me about executor's commissions and trustee's commissions in New Jersey. Because it is a bit complex, I have broken it down into two posts and I will focus on commissions for executors and administrators today.
To start, a Will can specifically provide for an executor's commission. In that absence of expressly authorizing a commission an executor will be entitled to take an executor's fee as provided in New Jersey Statutes 3B:18-12 through 3B:18-17. These same statutes also provide that if a person dies intestate (dies without a Will), the administrator of the estate may also take a fee. Since the fees for an executor and administrator are the same, I will use the term interchangeably for purposes of this post.
New Jersey statutes are very difficult to interpret because they use the term fiduciary to apply to executors, administrators, trustees, guardians and conservators. This would not be a problem if the fees were calculated the same, but they are not.
So how is the executor's fee actually calculated?
First, an executor is entitled to annual income commissions of 6% without prior court approval. (N.J.S.A. 3B:18-13)
Second is the calculation of the corpus (or principal) commission. This is a bit more of a complicated formula. Normally an executor will take a one time commission as follows:
What assets are part of the corpus when determining the executor's commission?
The corpus of an estate is generally defined to mean any asset that has come into the hands of the executor.
Examples of assets that come into the hands of the executor are: Bank accounts, automobiles, tax refunds, business interests, an interest in a lawsuit or litigation, life insurance payable to the estate, retirement accounts with no beneficiary and real estate that were owned by the decedent.
Examples of assets that do not come into the hands of the executor and are not subject to the commission include: Life insurance (if there is a beneficiary other than the estate), retirement accounts where a beneficiary other than the estate is named, property that is held as joint tenancy by the entirety or joint tenants with rights of survivorship.
What about mortgaged property - do I use the net value or the gross value?
While it may be unfair if the estate is heavily leveraged, the commission is taken on the gross estate, not the net. If the result is too onerous, a beneficiary may wish to seek judicial relief.
An illustration of how to calculate the executor commission
Let's presume the following facts: Decedent owned a vacation house worth $500,000 and a mortgage of $100,000, a primary residence owned with his wife as tenancy by the entirety worth $1,000,000 and a mortgage of $300,000, a $400,000 IRA payable to his wife, $200,000 in stocks and bonds, a $200,000 life insurance policy payable to his children, and $100,000 worth of insurance with no beneficiary.
Let's also presume that there is only one executor and during the administration, the $200,000 of stocks and bonds gave off $5000 of income.
Included for purposes of calculating the commission are: the $500,000 house, the $200,000 in stocks and bonds and the $100,000 life insurance policy with no beneficiary (for a total of $800,000). There is no deduction for the the $100,000 mortgage. The primary residence, the IRA and the $200,000 life insurance policy are excluded.
5% on the first $200,000 would be $10,000
3.5% on the next $600,000 would be $21,000
6% on the $5000 of income would be $300
So the executor would be entitled to a total commission of $31,300.
Final thoughts about executors commissions
Any commission that an executor takes will be subject to an income tax. As a result, if the executor is also a beneficiary, he or she may not want to take a commission. Additionally, many times relatives do not appreciate the amount of work involved and will become upset at an executor if he or she takes a commission. You should think about the dynamics of your family before taking one.
An executor that does extraordinary work can apply to the court for a commission in excess of the statutory fee. An executor that behaves badly can be removed by the court. If an executor or administrator is removed from office, he or she may be required by a judge to forfeit his commissions. This is not automatic though.
Finally, as discussed in back in May of 2013, an attorney who is serving as an executor may be entitled to a fee for legal services AND a commission.
To start, a Will can specifically provide for an executor's commission. In that absence of expressly authorizing a commission an executor will be entitled to take an executor's fee as provided in New Jersey Statutes 3B:18-12 through 3B:18-17. These same statutes also provide that if a person dies intestate (dies without a Will), the administrator of the estate may also take a fee. Since the fees for an executor and administrator are the same, I will use the term interchangeably for purposes of this post.
New Jersey statutes are very difficult to interpret because they use the term fiduciary to apply to executors, administrators, trustees, guardians and conservators. This would not be a problem if the fees were calculated the same, but they are not.
So how is the executor's fee actually calculated?
First, an executor is entitled to annual income commissions of 6% without prior court approval. (N.J.S.A. 3B:18-13)
Second is the calculation of the corpus (or principal) commission. This is a bit more of a complicated formula. Normally an executor will take a one time commission as follows:
- 5% on the first $200,000 of all corpus received by the executor;
- 3.5% on the excess over $200,000 up to $1,000,000;
- 2% on the excess over $1,000,000;
- and 1% of all corpus for each additional executor provided that no one executor shall be entitled to any greater commission than that which would be allowed if there were but one executor involved. (N.J.S.A. 3B:18-14)
What assets are part of the corpus when determining the executor's commission?
The corpus of an estate is generally defined to mean any asset that has come into the hands of the executor.
Examples of assets that come into the hands of the executor are: Bank accounts, automobiles, tax refunds, business interests, an interest in a lawsuit or litigation, life insurance payable to the estate, retirement accounts with no beneficiary and real estate that were owned by the decedent.
Examples of assets that do not come into the hands of the executor and are not subject to the commission include: Life insurance (if there is a beneficiary other than the estate), retirement accounts where a beneficiary other than the estate is named, property that is held as joint tenancy by the entirety or joint tenants with rights of survivorship.
What about mortgaged property - do I use the net value or the gross value?
While it may be unfair if the estate is heavily leveraged, the commission is taken on the gross estate, not the net. If the result is too onerous, a beneficiary may wish to seek judicial relief.
An illustration of how to calculate the executor commission
Let's presume the following facts: Decedent owned a vacation house worth $500,000 and a mortgage of $100,000, a primary residence owned with his wife as tenancy by the entirety worth $1,000,000 and a mortgage of $300,000, a $400,000 IRA payable to his wife, $200,000 in stocks and bonds, a $200,000 life insurance policy payable to his children, and $100,000 worth of insurance with no beneficiary.
Let's also presume that there is only one executor and during the administration, the $200,000 of stocks and bonds gave off $5000 of income.
Included for purposes of calculating the commission are: the $500,000 house, the $200,000 in stocks and bonds and the $100,000 life insurance policy with no beneficiary (for a total of $800,000). There is no deduction for the the $100,000 mortgage. The primary residence, the IRA and the $200,000 life insurance policy are excluded.
5% on the first $200,000 would be $10,000
3.5% on the next $600,000 would be $21,000
6% on the $5000 of income would be $300
So the executor would be entitled to a total commission of $31,300.
Final thoughts about executors commissions
Any commission that an executor takes will be subject to an income tax. As a result, if the executor is also a beneficiary, he or she may not want to take a commission. Additionally, many times relatives do not appreciate the amount of work involved and will become upset at an executor if he or she takes a commission. You should think about the dynamics of your family before taking one.
An executor that does extraordinary work can apply to the court for a commission in excess of the statutory fee. An executor that behaves badly can be removed by the court. If an executor or administrator is removed from office, he or she may be required by a judge to forfeit his commissions. This is not automatic though.
Finally, as discussed in back in May of 2013, an attorney who is serving as an executor may be entitled to a fee for legal services AND a commission.
Thursday, February 13, 2014
Gifting to Parents to Save on Capital Gains Taxes
As I gaze outside at yet another major snowstorm here in Mercer County, NJ and contemplate how nice it would be if I were visiting my folks near my Boca Raton, Florida office, I am reminded of a tax savings idea that I heard was gaining traction amongst wealthy children whose parents are still living.
With the federal estate tax exemption up to $5,340,000 after its most recent adjustment for inflation, children that own highly appreciated assets (such as stock or real estate) can simply gift these assets to their parents now. When the parent passes away, the children can receive these assets back with a stepped up basis, potentially saving hundred of thousands of dollars in capital gains taxes when the assets are finally sold.
While at first blush this seems like an incredibly easy strategy to save money on taxes, there are actually many pitfalls. In particular, the strategy will not work well if:
1) the parent is receiving Medicaid or government benefits;
2) the parent lives in a state or jurisdiction that has a state estate tax or inheritance tax;
3) the parent has remarried;
4) the parent has significant wealth and has their own estate tax problems; or
5) MOST IMPORTANTLY, the gift must be made to the parents at least one year prior to the parent's death to avoid triggering Section 1014(e) of the Internal Revenue Code.*
Additionally, there could be problems if you have siblings or step siblings as the child who originally owned the assets would obviously want to ensure their return. Here is the final catch, the IRS will not like it if you prearrange this plan. In other words, the parent can't immediately promise/guarantee that they will redirect the asset to the child.
Finally, gifts of certain assets will require an appraisal for the federal gift tax return that would be required (Form 709), potentially making this a costly transaction.
Please contact our attorneys if you would like to learn more about this type of gift planning or any other estate planning.
*Updated on 5/22/14 to reflect the need to make the gift at least one year prior to parent's death.
With the federal estate tax exemption up to $5,340,000 after its most recent adjustment for inflation, children that own highly appreciated assets (such as stock or real estate) can simply gift these assets to their parents now. When the parent passes away, the children can receive these assets back with a stepped up basis, potentially saving hundred of thousands of dollars in capital gains taxes when the assets are finally sold.
While at first blush this seems like an incredibly easy strategy to save money on taxes, there are actually many pitfalls. In particular, the strategy will not work well if:
1) the parent is receiving Medicaid or government benefits;
2) the parent lives in a state or jurisdiction that has a state estate tax or inheritance tax;
3) the parent has remarried;
4) the parent has significant wealth and has their own estate tax problems; or
5) MOST IMPORTANTLY, the gift must be made to the parents at least one year prior to the parent's death to avoid triggering Section 1014(e) of the Internal Revenue Code.*
Additionally, there could be problems if you have siblings or step siblings as the child who originally owned the assets would obviously want to ensure their return. Here is the final catch, the IRS will not like it if you prearrange this plan. In other words, the parent can't immediately promise/guarantee that they will redirect the asset to the child.
Finally, gifts of certain assets will require an appraisal for the federal gift tax return that would be required (Form 709), potentially making this a costly transaction.
Please contact our attorneys if you would like to learn more about this type of gift planning or any other estate planning.
*Updated on 5/22/14 to reflect the need to make the gift at least one year prior to parent's death.
Friday, January 3, 2014
One Does Not Simply Inherit Assets in New York
I am in the midst of one my of my more difficult estate administrations in New York, and I thought it would be worthwhile to remind everyone how important it can be to set up a revocable trust in situations where you are leaving your estate to someone other than your next of kin.
In the matter I am working on now, the decedent (let's call her Jane) passed away leaving everything to her long time boyfriend and one other person. Jane was not married and had no children, but she did have many siblings and nieces and nephews. Even though Jane had a Will, the State of New York is requiring that we get each of Jane's surviving siblings to sign an affidavit approving of the probate of the Will. (This is known as a Waiver of Process; Consent to Probate Form.)
Jane also had one sibling (Fred) who died before her. So we have to get this form signed by all of Fred's children as well. Should I bother mentioning that everyone has lost contact with one of Fred's sons?
Unless EVERY one of Jane's next of kin signs this form, the proposed executor has to go through extra steps to start his or her job. This means the bills don't get paid, real estate can't get sold, and money can't be transferred to the people named in Jane's Will.
The need to have this form signed will wind up costing the estate a lot of time and money as the Executor must make diligent effort to track down this missing nephew. It will also complicate matters if any of Jane's siblings or Fred's children does not sign and notarize the form required by New York. Other than doing the right thing, none of Jane's relatives has any incentive to sign this form. In fact, if any of Jane's relatives believe that Jane's boyfriend shouldn't inherit, they can certainly make it a difficult and expensive process.
If Jane had properly titled her assets in the name of a revocable trust and named beneficiaries on her IRA and life insurance policies, she could have helped her loved ones avoid the probate process. By avoiding probate, all of these steps become unnecessary and would have saved everyone time, trouble and money.
In the matter I am working on now, the decedent (let's call her Jane) passed away leaving everything to her long time boyfriend and one other person. Jane was not married and had no children, but she did have many siblings and nieces and nephews. Even though Jane had a Will, the State of New York is requiring that we get each of Jane's surviving siblings to sign an affidavit approving of the probate of the Will. (This is known as a Waiver of Process; Consent to Probate Form.)
Jane also had one sibling (Fred) who died before her. So we have to get this form signed by all of Fred's children as well. Should I bother mentioning that everyone has lost contact with one of Fred's sons?
Unless EVERY one of Jane's next of kin signs this form, the proposed executor has to go through extra steps to start his or her job. This means the bills don't get paid, real estate can't get sold, and money can't be transferred to the people named in Jane's Will.
The need to have this form signed will wind up costing the estate a lot of time and money as the Executor must make diligent effort to track down this missing nephew. It will also complicate matters if any of Jane's siblings or Fred's children does not sign and notarize the form required by New York. Other than doing the right thing, none of Jane's relatives has any incentive to sign this form. In fact, if any of Jane's relatives believe that Jane's boyfriend shouldn't inherit, they can certainly make it a difficult and expensive process.
If Jane had properly titled her assets in the name of a revocable trust and named beneficiaries on her IRA and life insurance policies, she could have helped her loved ones avoid the probate process. By avoiding probate, all of these steps become unnecessary and would have saved everyone time, trouble and money.
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