Estates Update 2015

Queens Bar Bulletin, 2015 View/Download PDF

By David N. Adler

ESTATES UPDATE

by David Adler

The year in Trusts and Estates was highlighted by expanded fiduciary obligations and options, prospective inheritance rights of posthumously conceived children, and ongoing state estate tax rule changes

DISCLAIMER

One of the more effective post death planning techniques consist of one’s right to disclaim or renounce their inherited testate or intestate share. Said renunciation, having Federal and State implications, is codified in New York State at EPTL§ 2-1.11. All traditional facets of the statute remain in effect-the renunciation must be in writing, signed and acknowledged by the person renouncing, duly served and led, accompanied by an Affidavit that no consideration was received for said renunciation, and effected within (9) nine months after the date of disposition. The net effect of a renunciation is that the property passes as if the renouncing party predeceased, essentially bypassing him or her.

A renunciation may be made by, among others, the personal representative of a decedent, but historically only with Court authorization. As of late last year, the requirement of prior Court approval was eliminated. As such, a fiduciary may unilaterally renounce, subject to the other parameters of the statute.

INTEREST ON LEGACIES

Traditionally, interest payable on delayed testamentary pecuniary legacies (unless the will provided otherwise) was at the rate of 6%. Further, said interest charge was only payable if the beneficiary made a demand for the interest before initiating a judicial proceeding. This is referenced in EPTL§ 11-1.5.(c)(d)

Said law has now been amended to make interest automatically payable on a pecuniary legacy unpaid within (7) seven months from the issuance of letters. Yet, the interest charge will now be tied to the federal funds rate, not set at a fixed 6%.

That is a legislative acknowledgement of current market conditions, and the reality of fluctuating rates. The Court retains authority to disallow interest and, levy surcharge. The application of this law, enacted late last year, and yet to be more formally qualified by judicial scrutiny, targets the removal of a fixed 6% interest rate, and the removal of the requirement of beneficiary demand for said interest.

INHERITANCE BY POSTHUMOUSLY CONCEIVED CHILDREN

Traditionally, pursuant to EPTL§ 4-1.1, distributee children maintain the right to inherit only if natural, conceived before the decedent’s death and born alive thereafter, or if adopted. The possibility of a child being conceived after the death of his genetic parents was not anticipated by this statute. As a result of certain scientific advances, this option is now a reality. It has been addressed by new statute EPTL § 4-1.3, which incorporates new definitions of terms genetic parent, genetic material, and genetic child. These (3) three new terms are geared to the acknowledgement of an individual providing physical specimens that will be subsequently used to “conceive a child after the death of the man or the woman”.

Further, beyond the new statutory definitions, there are (4) four conditions that must be met in order to qualify a genetic child for inheritance purposes, as noted in EPTL§ 4-1.3 (b) (1) (2) (3) (4). They are briefly summarized, as follows:

  1. A writing signed not more than (7) seven years before the parent’s death, must expressly consent to the use of genetic material for posthumous reproduction, and designate a person to decide how said genetic material is to be used.
  2. The designated representative, noted above, must within (7) seven months of the issuance of letters (testamentary or administration), give notice of the existence of genetic material to the fiduciary of the genetic parent’s estate.
  3. The designated representative, noted above, must record the above referenced writing in Surrogate’s Court within (7) seven months of the issuance of letters.
  4. The genetic child must be in utero within 24 months or actually born within 33 months of the genetic parent’s death
  5. In the event that the definitions are properly applied and all conditions satis ed (writing, notice, ling, timing), said child will qualify as a distributee of the genetic parent for all inheritance and succession purposes, including class gifts. The statute further contains a printed form reflecting and satisfying the writing requirement. This statute, highly controversial for a variety of reasons, was enacted in late November last year, and also awaits the test of judicial scrutiny

NEW YORK ESTATE TAXATION

Again, as will be the case until 2019, the basic New York exclusion amount (amount exempt from any tax) changed during the year. Until March 31,2015, it was $2,062,500; from April 1, 2015 to March 31, 2016 it is $3,125,000; and as of April 1, 2016 it increases to $4,187,500. These threshold numbers provide exemption from tax for any taxable estate beneath them. Yet, any taxable estate exceeding the exclusion amount, maintains estate tax consequences. Further, any taxable estate greater than 5% of the threshold amount is fully subject to estate taxation, with no credit whatsoever allowed.

Kindly bear in mind that the federal concept of portability still does not apply to New York State.

As such, the surviving spouse may not automatically acquire the first spouse to die’s unused exclusion amount, (by election on a federal return). That may still be accomplished by utilization of the credit shelter trust.

QUEENS COUNTY

Our seminar last year focused on the Role of the Fiduciary in Estate Proceedings and incorporated a discussion of fiduciary duties, fiduciary powers, the Prudent Investor Rule, the role of the Public Administrator, and special problems fiduciaries face. We thank moderator and Surrogate Peter J. Kelly, and speakers Public Administrator Lois Rosenblatt, Scott G. Kaufman, Esq. and Gerard J. Sweeney, Esq., for their outstanding efforts and presentations.

Further, our Spring meeting included an update by Surrogate Kelly on the State of the Court, and a presentation by Louis M. Laurino, Esq. regarding the changing parameters of SCPA 1404 examinations. Wishing you all a happy and healthy year!

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