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Q: What is a Will and why do I need one?

A will is a written declaration of a person’s wishes as to the disposition of his or her property to take effect after his or her death. It is important to have a Will to guarantee your assets are distributed according to your wishes.

A Will also names an executor, who is the individual responsible for carrying out the terms of your Will. If you have minor children, your Will can designate guardians for those children in the event both you and your spouse die

Q: What is “Probate”?

Probate is the legal term for the process in which a Will is proven to the satisfaction of the Surrogate’s Court to be the valid Last Will and Testament of the decedent and the person named in the Will as executor is appointed. During the probate process, the formal appointment of any trustees or guardians named in the will can also be accomplished.

Q: What do I need to consider when formulating my Will and Estate plan?

Proper planning in the drafting of your Will and Estate plan ensures that your wishes are followed after your death. There are several factors which you should give consideration to, including:

a) Choice of an Executor (s) and Successor Executor;
b) Choice of guardian for underage children;
c) Whom you want to receive your property;
d) Naming of charitable organization (s) as a beneficiary (ies)
e) Bequests of specific items of personal property or specific cash bequests to individuals or Organizations; and
f) Inclusion of trust language for the benefit of minor beneficiaries or those with special needs.
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Q: When can a will be challenged?

Generally speaking, it is quite difficult to successfully challenge a decedent’s Will which has been offered for probate. There are several legal grounds for contesting the probate of a Will, which include:
a) Defective Execution- the formalities and requirements of the Will signing “ceremony” were not adhered to;
b) Valid Revocation- the will being offered for Probate was validly revoked by the “testator”, i.e., the person who made the Will;
c) Lack of Testamentary Capacity- the testator was not of sound mind when the Will was executed;
d) Undue Influence- the testator was coerced by another person to draft a Will according to that person’s wishes;
e) Fraud- the Will being offered for Probate resulted from a purposeful misrepresentation to the Testator; and
f) Mistake- signing of the wrong Will, mistaken omission or inclusion of a provision, etc. A person who wishes to challenge a Will must have a legal standing to object to the probate of the Will, meaning that they must have an economic interest which is adversely affected by the Will being offered for Probate. (Back to Top)

Q: What happens if I die without a Will?

A person who dies leaving a Will is said to die “testate” and a person who dies without leaving a Will is said to die “intestate”. If you die without a Will, an “administrator” is appointed by the court (who performs the same duties as an executor), and your estate is distributed to your heirs as specified under New York State Law. For example, if you die leaving a surviving spouse and children, your surviving spouse would receive $50,000 plus one-half of the balance of the estate. The other one-half would be distributed equally to your children.
This distribution pursuant to the New York State Law applies only to the assets owned individually by the decedent or payable to the estate as beneficiary. It does not apply to assets which pass immediately upon the decedent’s death, such as assets with a named beneficiary other than the estate, assets held jointly between the decedent and another individual as joint tenants, and assets with “payable upon death” provisions. (Back to Top)

Q: I am named as the Executor in someone’s will who has died. When can I start performing my duties?

A person named or nominated in a will as Executor has no legal authority to act as Executor until he or she has been officially appointed as such by the Surrogates Court having jurisdiction over the decedent’s estate. This appointment by the Court gives the Executor full authority to administer the probate assets in the decedent’s estate.

Q: Is it always necessary to probate a person’s will once the person dies?

No. The main purpose of probating a decedent’s will is to allow for the legal transfer of the probate assets to the beneficiaries named in the will. The probate assets consist of any assets owned individually by the decedent, in addition to any assets owned by the decedent naming his or her estate as the beneficiary. Other assets, such as assets with a named beneficiary other than the estate assets held jointly between the decedent and another individual as joint tenants, and assets with “payable upon death” provisions are non-probate assets. These non-probate assets pass immediately upon the person’s death by operation of law. If all of the assets owned by the decedent at the time of death are non-probate assets, it is not necessary to probate that person’s will.

Q: What are the duties of an Executor or Administrator?

The primary duties of both an executor and administrator, once formally appointed by the Surrogate’s Court, are to collect and liquidate the estate assets, pay all of the legitimate expenses and debts of the estate and distribute the remaining assets to the beneficiaries according to the decedent’s Will, or to the heirs entitled to inherit if there is no will.

Q: What are my obligations and liabilities as an Executor or an Administrator?

A court-appointed Executor acts as a “fiduciary” of the Estate, and has a fiduciary relationship to the estate beneficiaries. Likewise, a court-appointed Administrator (if the decedent dies without a will) has those same fiduciary obligations.
The Executor or Administrator has a duty to utilize his or her best judgement and efforts in acting on behalf of the Estate beneficiaries. If the fiduciary violates this duty, resulting in a loss of estate assets, he or she could be held personally liable.

Q: What assets of the decedent do I have control over as an executor or administrator?

Assets owned by the decedent can be characterized as either “probate” assets or “non-probate” assets. Generally speaking, probate assets are those assets owned individually by the decedent and titled to the decedent alone, and assets specifically designating the estate as beneficiary.
Probate assets become part of the decedent’s estate and are distributed by the executor to the beneficiaries named in the Will, or by the administrator to the decedent’s heirs at law.
Non-probate assets include certain assets that pass by operation of law immediately upon the decedent’s death, such as assets held jointly between the decedent and another individual with right of survivorship and Totten Trust accounts held in trust by the decedent for a named beneficiary. Other non-probate assets include those that pass to a named beneficiary other than the estate, such as life insurance policies, retirement benefits and United States Savings Bonds payable upon death. An executor or administrator has no control over the non-probate assets.

Q: Am I entitled to collect any fees if I serve as an executor or administrator?

Both executors and administrators are entitled to collect commissions for serving as the personal representative of the estate. The commissions are set forth by statute and are based upon the size of the probate assets in the estate as follows:
5% of the first $100,000 in assets;
4% of the amount between $100,000 and $200,000;
3% of the amount between $200,000 and $700,000;
2 1/2% of the amount between $700,000 and $4 million;
2% for amounts above $5 million.
For example, if the size of the estate is $140,000, the commissions would be $6,600 computed as follows:
.05 x $100,000 = $ 5,000.00
.04 x $ 40,000 = 1,600.00
_____________$ 6,600.00
It is important to note that all personal representatives must include in their gross income all commissions paid to them from an estate.
Those commissions, however, can be claimed as a deduction on either the Estate tax return for the Estate, or on the fiduciary income tax return for the Estate.

Q: Do I need to pay personal income taxes on my inheritance from an estate?

Generally speaking, property received as a gift, bequest or inheritance is not included in your income for tax purposes. However, if property you receive in that manner later produces income, such as interest, dividends, rental, etc., that income is taxable to you.
In addition. There may be taxable consequences relating to amounts you inherit from retirement accounts Owned by the decedent, such as Individual Retirement Accounts (IRA’s) and Annuities. Consequently, if you are a beneficiary of such an account, it is prudent to consult with your tax or financial advisor to discuss your distribution options.
With such retirement accounts, any amounts which are withdrawn (distributed) are subject to ordinary income tax. As a beneficiary on the account, it is possible to take only the minimum distributions required by law and therefore maximize the income-tax deferred growth of the funds.

Q: What are the income tax consequences of any capital assets (real estate, shares of stock, etc) which I inherit from an estate?

Property received by inheritance currently receives a “stepped-up” basis to its date of death value. Therefore, if that property is subsequently sold by you, any capital gain (or loss) to be reported on your personal income tax return is calculated as the difference between the sale price and the date of death value. The appreciation in value of that capital asset which occurred during the decedent’s ownership of the asset avoids capital gains taxation.

Q: Are there any taxes which must be paid by an estate?

It is the executor’s or administrator’s duty to file the following tax returns on behalf of the decedent and/or the estate:
1. Final personal income tax returns for the decedent: The personal representative must file the appropriate final income tax returns for the decedent for the year of death and any returns not filed for preceding years. If the decedent left a surviving spouse, the fiduciary (executor or administrator) and the surviving spouse can generally file a joint return for the decedent and the surviving spouse.
2. Federal and State Fiduciary Income Tax Returns for the estate: Generally speaking, any income generated on a decedent’s assets (such as interest, dividends, rentals, capital gains and losses) after the date of death is required to be reported on a federal and state fiduciary income tax return for the estate. When an individual dies, their estate becomes a separate entity for taxation purposes. It exists until the final distribution of its assets to the beneficiary.
The fiduciary income tax returns are required to be filed when the estate generates $600 or more of gross income during a tax year. On the returns, the estate is allowed an annual exemption deduction of $600 in figuring its taxable income. In addition, the expenses of administering an estate, such as attorney fees and fiduciary commissions, can be deducted on the return.
3. Federal (United States) and State Estate Tax Returns: It is necessary to file a Federal estate tax return for the estate of every U.S. citizen or resident whose “gross estate” plus adjusted taxable gifts made during the decedent’s lifetime, is more than $3.5 million (for deaths in 2009).
Each state has its own Estate Tax law. Currently, for New York State residents dying in 2010, it is necessary to file a New York State estate tax return if the total “gross estate” plus adjusted taxable gifts made during the decedent’s lifetime, exceeds $1,000,000.
The gross estate of a decedent include both the probate assets owned individually by the decedent, in addition to the non-probate assets, such as assets owned jointly by the decedent and another individual, assets payable to a named beneficiary, etc. Also included are any gifts or transfers made during the decedent’s lifetime for which a gift tax return was required to be filed. Currently, an individual can gift or transfer up to $13,000 each to any number of individuals per taxable year without any gift tax consequences.