The beneficiary / petitioner must demonstrate that the distribution is required for his education or support for him and his family. Thus, the law recognizes the importance of estate beneficiaries maintaining financial stability during a long period of estate settlement.

New York Trusts and Estates Attorney Robert Adler has helped many clients resolve issues relating to probate and estate administration matters in Manhattan, Queens, Brooklyn, the Bronx, Nassau County, Suffolk County, Westchester County, Rockland County and Orange County. If you have any questions regarding these matters, please contact Attorney Robert Adler at (212) 843-4059 or (646) 946=8327.

1 – the preservation of estate assets;

2 – the collection of income due the estate;

3 – the payment of the debts of the decedent and the administration expenses of the estate;

4 – preparing the required income and estate tax returns;

5 – submitting an accounting of his or her actions so that the court may approve the distribution of estate assets to the ultimate beneficiaries of the estate.

The initial step in executor record keeping is the preparation of an inventory of the assets and liabilities of the decedent as of the date of death. This inventory will be used to prepare the estate tax returns, the executor’s accounting, and the determination of gain or loss for income tax purposes upon the sale of any of the assets of the estate. Probate and non-probate assets should be listed separately. Non-probate property includes:

• Joint Tenancy with Right of Survivorship (JTWROS) property.
• Tenancy by the Entirety property.
• Life Insurance policy death benefits payable to a designated beneficiary other than “estate of the insured.”
• IRAs, 401(k)s, and other retirement plans payable to named beneficiaries.
• Payable-on-death (POD) Bank Accounts.
• Transfer-on-death (TOD) Securities Accounts.
• Property transferred to a Living Trust during your lifetime.

In non-complex small estates a record of the transactions of the estate may be maintained through the estate’s checkbook. Deposits should be identified by date and source of funds. Payments should identify the payee and purpose of the payment. If a check is voided it should be so recorded in the checkbook in order to keep track of every sequential check.

All estate transactions should be made through the estate checking account or estate custody account. If a small cash expenditures is made personally by the executor the amount and purpose of the expenditure should be documented and receipted. The receipt should be kept with the records of the estate and referenced when the executor reimburses himself or herself.

(a) It is established that the will has not been revoked; and

(b) Execution of the will is proved in the manner required for the probate of an existing will; and

(c) All of the provisions of the will are proved by at least two credible witnesses or by a copy or draft of the will proved to be true and complete.

In the normal probate of an original will, where the will itself is produced, the will itself is sufficient. However, in a lost will proceeding, this essential element is missing. Thus, the Court will look to a substantial equivalent in the statements of the petition and evidene presented to the Court of that which would have been apparent to the Court had the original will been available to the Court in the first instance.

Original wills should be kept in a secure, fireproof location and your nominated executor should be informed of the documents’ whereabouts. If key people cannot locate your will, they will not be able to assist you in the manner you wish. See: The Safekeeping of Wills in New York State.

The executor named in the decedent’s Will must offer the Will for probate in the Surrogate’s Court in the county in which the Decedent was domiciled at the time of his death. All of the decedent’s distributees (in effect their “next of kin”), irrespective of whether or not they are named in the Will as beneficiaries of the decedent’s estate, are entitled to notice that the decedent’s Will is being offered for probate. After jurisdiction has been obtained over all of the interested parties and the executor nominated in the Will has been granted Letters Testamentary, the executor is charged with collecting and marshalling the decedent’s estate in accordance with the terms of the Decedent’s Will.

If a decedent died without leaving a valid Will, the decedent is said to have died intestate, and the decedent’s estate passes through intestacy to the decedent’s distributees.

The distributees of a decedent’s estate are set by statute. See: EPTL § 4-1.1. Eligibility to serve as the administrator of a decedent’s intestate estate is set by SCPA § § 1001-1002.

Important Terms

Intestate: When a person dies without a will.

Testate: When a person dies with a will.

Administration Proceeding: A proceeding to appoint a legal representative, known as an

administrator, to administer the estate of a person who dies without a Will.

Probate Proceeding: A surrogate court proceeding to administer the property of a person who dies with a will. The legal representative of the estate here is called the Executor. See also: How is a Will Probated?

Probate Assets: Assets held in the decedent’s name alone that do not pass by operation of law and that which the Executor administers in accordance with the decedent’s Will. See also: The Probate Estate.

Operation of Law: Property that passes automatically because of the way title is held in the

property and is not affected by intestacy rules or by a Will. See also: How Property is Transferred at Death.

See also: Die without a will in New York? What happens?

There are three different kinds of estate proceedings in Surrogate’s Court.

Small Estate: This is also called a voluntary administration. If a person died with less than $50,000 worth of personal property, then a small estate can be filed. It doesn’t matter if there was a Will or not.

Probate: If a person dies with a Will, then the kind of proceeding filed is called probate and the property is divided according to the Will.

Administration: If a person dies without a Will, then the proceeding filed is called administration and the property is divided according to New York State law.

If you’ve recently lost a loved one, or are helping someone who has, we know this is a challenging time. We are here to help you with estate administration, New York probate and the inheritance process: Probate and Estate Administration

New York Estates Powers and Trust Law (EPTL) Section 5-1.1-A provides a right of election for the surviving spouse to take a share of his or her spouse’s estate, no matter what the will provides. The right of election provides that the elective share of the surviving spouse is the greater of one-third of the net estate, as augmented by so called “testamentary substitutes,” or Fifty Thousand Dollars ($50,000).

Testamentary substitutes include gifts causa mortis, gifts made in the year prior to the decedent’s death, Totten trust accounts, joint bank accounts, property held jointly or payable to another upon death, assets transferred by the decedent in which she retained the right to income for life, retirement accounts, assets in which the decedent held a general power of appointment and transfer-on-death (TOD) or payable-on-death (POD) accounts or securities. These testamentary substitutes are added back into the net estate for purposes of calculating right of election of the surviving spouse.

Tenants In Common

Tenancy in common is a form of co-ownership in which two or more parties own specified fractional interests in the entire property. For example, two people could each own a one-half interest or one could own a 5/6 interest and the other a 1/6 interest. Four tenants in common could each own a 1/4 interest or each could own a different fractional share. If any tenant in common dies his fractional interest in the property passes as part of his probate estate to his heirs, the surviving tenant(s) in common having no rights to the deceased’s share. In the case of a tenancy in common the gross estate of the deceased co-owner will include the value of his fractional ownership share in the property, applying the general rule of I.R.C. §2033 not I.R.C. §2040.

Joint Tenants With Right of Survivorship (JTWROS)

Joint tenancy with right of survivorship involves two or more co-owners who each own equal shares. In the event of the death of a joint tenant, his share automatically passes to the surviving joint tenant or tenants by operation of law; it does not pass through the decedent’s probate estate (Will), as would be the case with a tenancy in common. In the case of a joint tenancy (except where husband and wife are the sole joint tenants, as discussed below), the gross estate of the deceased joint tenant includes a portion of the value of the entire property which corresponds with the portion of the cost of the property which had been provided by the decedent.

Example: If A and B acquire real estate as joint tenants, with A paying $100,000 of the purchase price and B paying $200,000, and A later dies when the property has a market value of $450,000, A’s gross estate will include $150,000 (1/3 of the value, based upon his 1/3 contribution ($100,000/$300,000) to the acquisition costs); B would accede to full ownership of the property.

It should be noted that the taxpayer estate has the burden of proof in establishing the proportionate contributions to the cost of the property. Thus, under I.R.C. §2040(a) the entire value of the property is includable in the gross estate, except to the extent that the taxpayer can show a portion attributable to cost contributions by the other joint tenant(s). In the case of joint tenancy property acquired by gift or inheritance, the gross estate of a deceased joint tenant will include the decedent’s fractional ownership share.

Special Rules For Co-Ownership of Survivorship Property By Husband and Wife: The Qualified Joint interest Rule

A special rule applies when co-owners are married to each other. Fifty percent (50%) of the value of the jointly held property (or property held as tenants by the entireties) is included in the estate of the first of the spouses to die. Includability is determined without regard to the spouses’ respective contributions at the time of the joint tenancy’s creation. (Two Circuit Court decisions have held that the cost-contribution ratio rule remains applicable with respect to husband and wife joint tenancies formed prior to 1977. Gallenstein v. U.S., 92-2 USTC 60,114 (6th Cir. 1992) and Patten v. U.S., 116 F.3d 1029 (4th Cir. 1997).)

It should be noted that even though the gross estate of a married decedent will include a portion of the value of property jointly owned with the surviving spouse, to the extent that such portion passes to the surviving spouse upon decedent’s death (as would occur automatically in the case of joint tenancy and tenancy by the entirety), the amount includable in the gross estate would be offset by an equivalent marital deduction. While these “in-and-out” mechanics may have no net estate tax consequences, there is an important income tax consequence. To the extent that an interest in property is included in a decedent’s gross estate, the then-current market value at which it is included in the gross estate becomes its income tax basis. Thus, a surviving spouse who takes over a decedent’s share of jointly owned property may benefit from an increase in the income tax basis of the property, without estate tax consequences.

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In addition to the property owned outright at the date of death the gross estate for federal estate tax purposes includes certain other property with which the decedent was connected, as discussed in the following blog posts:

Property Transferred With Retained Life Estate – I.R.C. §2036

Transfers Taking Effect at Death – I.R.C. §2037

Revocable Transfers – I.R.C. §2038

Annuities – I.R.C. §2039

Jointly Owned Property – I.R.C. §2040

Property Subject to General Power of Appointment – I.R.C. §2041

Proceeds of Life Insurance – I.R.C. §2042

Gifts Made Within Three Years of Death – I.R.C. §2035

As part of the measures adopted by the NYS Unified Court System to combat the spread of COVID-19, the following actions are being implemented by the New York County Surrogate’s Court effective April 13, 2020:

At this time, the court is addressing all essential matters as well as certain non-essential matters.  Most operations are being handled virtually or remotely. All urgent and essential matters, as well as all uncontested matters (in which waivers and consents have been fully executed and for which no citation need be issued), are being accepted for filing.  

Parties with urgent matters may contact the Chief Clerk’s Office at , or at (917) 509-7218, or they may contact the court attorney-referee to whom the matter has been assigned, if any.

Only essential personnel will be in the courthouse.  No person should visit the courthouse without first contacting the Chief Clerk’s Office at (917) 509-7218, or at .

Until further notice, petitions and other papers must be filed by mail (USPS or any express mail service) or, if authorized by court personnel, by electronic mail at .  Please provide your contact information, including an email address, with your filing. If papers are brought to the courthouse in person after consultation with the Chief Clerk’s Office, they are to be left in a box outside Room 303.

Court personnel may contact petitioners or their counsel as needed once filed papers are reviewed.

Court attorney-referees may contact the parties in a matter for a conference, which will be conducted virtually.

All matters scheduled to be heard at calendars through May 31, 2020, have been or will adjourned administratively.  Parties must not appear in court.  Notices of future dates for court appearances will be sent by mail.

No trials or hearings will commence until further notice.  This includes 17-A Guardianships and finalizations of adoptions, unless there is urgency to the application. Trials or hearings that had been adjourned to a date in April, May or June 2020 will be adjourned again.

No citations are being issued until further notice.

The terms of this notice are subject to modification as the need arises.

• Decedent was a citizen or resident of the United States on the date of death.
• The value of the decedent’s interest in a closely held business must exceed 35 percent of the adjusted gross estate.
• A timely filed return including a timely IRC 6166 election request was filed.

An interest in a closely held business is defined as:

• A proprietorship that carries on a trade or business.
• An interest in a partnership that carries on a trade or business. Deceased partner’s interest must be 20% or more of the total capital interest in the partnership or the partnership has 45 or fewer partners.
• Stock in a corporation carrying on a trade or business if 20% or more of the value of voting stock of the corporation is included in the gross estate or the corporation has 45 or fewer shareholders.

Estates with an approved Internal Revenue Code Section 6166 installment, must certify each year that the assets associated with the closely held business are intact, or explain the changes, to ensure the qualification for installment still exists. This is called a Certification of Unchanged Status. This certification is sent with the annual bill and must be signed under penalty of perjury. In order for an estate to qualify to make an election under section 6166, the business interest at issue must be an active “trade or business” within the meaning of section 6166(b)(1)(C). A question that often arises is whether real property interests qualify for a deferral under section 6166. Revenue Ruling 2006-34 provides guidance as to whether real property interests qualify for a deferral under section 6166 by analyzing criteria to determine whether the business is an active “trade or business.” The trade or business must be active, as section 6166 does not apply to passive assets which are distinguished as “mere management of investment assets.” In order to determine whether the interest in the business qualifies as an active interest, the decedent must have conducted an active trade or business or held an interest in a partnership, LLC, or corporation that carries on an active trade or business. In order to determine whether a trade or business is active or passive, the activities of the decedent and decedent’s agents and employees and the activities of the corporation must be taken into account. Key factors in determining whether actions are active or passive: – the amount of time devoted to the business; – whether an office was set up for the business and whether regular hours were kept at the office; – the extent to which the decedent, or the decedent’s agent’s or employees were involved in finding new tenants and completing leases; – whether landscaping and ground care were provided by the decedent or the decedent’s agents or employees; – whether decedent or the decedent’s agents or employees were involved in repairs and maintenance of the properties; and – whether the decedent, or the decedent’s agents or employees, were involved in tenant’s requests for repairs or tenant complaints.

So for example if the day-to-day activities of the corporation includes negotiating leases, managing tenant requests and concerns, and maintenance of the properties are overseen or performed by corporate employees; and the corporation also maintains a business office with regular hours, the IRS would probably view the corporation is an active business, not just an entity managing assets. Revenue Ruling 2006-34 gives several examples. In example two, the decedent owned an office park and hired an unrelated property manager to handle most day-to-day activities relating to the management of the real estate. The contractor and its employees provided all necessary services for the decedent’s office park. In the example, the IRS determined that, because the decedent, who owned no interest in the independent contractor, was not involved in the management or oversight of the property, the office park did not meet muster as an active trade or business. In example four, strip malls were owned and managed through a limited partnership (decedent was a limited partner). The partnership, through its general partner, handled the day-to-day operations and management of the strip malls including (either personally or with the assistance of employees or agents) performing daily maintenance of and repairs to the strip malls (or hiring, reviewing and approving the work of third party independent contractors for such work), collecting rental payments, negotiating leases, and making decisions regarding periodic renovations. The IRS reasoned that because the partnership owned the real estate, the activities of the limited partnership must be evaluated to determine whether the limited partnership was carrying on an active trade or business. The IRS found that the limited partnership, acting through its general partner, carried on an active trade or business.

When someone dies, their individual assets become part of their estate. Any income those assets generate also becomes part of their estate. IRS Form 1041, “U.S. Income Tax Return for Estates and Trusts”, is required if the estate produces more than $600 in annual gross income.

The decedent and their estate are separate taxable entities. Thus, before filing Form 1041, the fiduciary (usually the executor) will need to obtain a Tax ID number for the estate.

Deductions and credits typically allowed to individuals are also allowed to estates. But, there is one big difference. A decedent’s estate is allowed an income tax deduction for distributions to beneficiaries. And, those income distributions are reported to beneficiaries and the IRS on Schedules K-1 (Form 1041).

For calendar year estates and trusts, Form 1041 and Schedule(s) K-1 must be filed on or before April 15 of the following year. For fiscal year estates and trusts, Form 1041 must be filed by the 15th day of the 4th month following the close of the tax year. If more time is needed to file the estate income tax return an automatic 5 month extension of time is available.

See also: Federal Income Tax and Trusts

Robert Adler, Esq. is an attorney who focuses his practice on wills, trusts and estates. He can be reached at 212-843-4059 or 646-946-8327.

The Surrogate’s Court handles, among other matters, the probate of Wills and appointment of Executors, the appointment of Administrators who serve in the role of Executors 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 trust or a decedent’s estate. The Surrogate’s Court Clerk can provide an Executor with many forms necessary for an estate administration and can be a valuable source of information for a first time Executor. For information on Surrogate’s Court procedures an Executor may contact the Surrogate’s Court in the borough or county in which the deceased person last resided.

Bronx County:

Chief Clerk – Surrogate’s Court

851 Grand Concourse

Bronx, NY 10451

(718) 590-3625

Kings County (Brooklyn):

Chief Clerk – Surrogate’s Court

2 Johnson Street

Brooklyn, NY 11201

(718) 643-4336

New York County: (Manhattan)

Chief Clerk – Surrogate’s Court

31 Chambers Street

New York, NY 10007

(212) 374-8236

Queens County:

Chief Clerk – Surrogate’s Court

88-11 Sutphin Blvd.

Jamaica, NY 11435

(718) 520-3132

Richmond County: (Staten Island):

Chief Clerk – Surrogate’s Court

County Court House

St. George, NY 10301

(718) 390-5400

Nassau County:

Chief Clerk – Surrogate’s Court

Supreme Court Building

Mineola, NY 11501

(516) 571-2082

Suffolk County:

Chief Clerk – Surrogate’s Court

320 Center Drive

Riverhead, NY 11901

(516) 852-1745

Westchester County:

Chief Clerk – Surrogate’s Court

140 Grand Street

White Plains, NY 10602

(914) 285-3725

Robert Adler, Esq. is an attorney who focuses his practice on wills, trusts and estates. He can be reached at 212-843-4059 or 646-946-8327.

Estate assets include bank accounts, 401(k) plans, IRAs, pension plans, stocks, bonds, brokerage accounts, real estate, co-ops, partnership interests, intellectual property, life insurance, social security payments, jewelry, artwork, furniture, automobiles and any other real, personal, tangible or intangible property.

The location of assets may be easily determined from the decedent’s records. Unfortunately that’s not always the case. The Executor must locate all assets, even so-called “non-probate assets” since the Executor is responsible for including information about such non-probate property on the estate tax returns or on the inventory filed with the New York Surrogates Court. Examples of non-probate assets include joint tenant with right of survivorship property (JTWROS) or life insurance policies payable directly to beneficiaries.

The inventory of assets is required to be filed by the Executor in the Surrogate’s Court on the later of (a) six months from the date the Executor is appointed, or (b) the date that the federal or state estate tax return is due (or would have been due had a return been required), including the time granted for any extension(s). The inventory must contain the value of all of the decedent’s property as of the date of death. Alternatively, the federal or state estate tax return can be filed instead of a separate inventory.

If the estate contains hard to value assets the Executor will need to hire appraisers to prepare valuation reports.

Attorney Robert Adler focuses his practice on wills, trusts and estates. He can be reached at 212-843-4059 or 646-946-8327.

This new requirement, recently announced by the IRS, will provide greater security to the EIN process by requiring an individual to be the responsible party and will also improve transparency.

An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax-filing and reporting purposes.

The change prohibits entities from using their own EINs to obtain additional EINs. The new requirement applies to both the paper Form SS-4, Application for Employer Identification Number, and online EIN applications.

IRAs and Other Qualified Plan Accounts

When a participant in a qualified retirement plan, including a traditional IRA, dies, his or her undistributed account balance becomes payable to the account’s designated beneficiary. Because the account would have been ordinary income if distributed to the account owner prior to death (except to the extent of any unrecovered basis resulting from non-deductible contributions), it is income in respect of a decedent when received by the beneficiary.

If the account owner’s estate is the beneficiary (whether by designation or because there is no other beneficiary), the income in respect of the decedent must be reported as taxable income of the estate.

Robert Adler, Esq. is an attorney who focuses his practice on wills, trusts and estates. He can be reached at 212-843-4059 or 646-946-8327.

New York State does not have a gift tax. But, since April 1, 2014, gifts made by N.Y. residents, within three years of death are “clawed back” (that is, they are brought back into the New York taxable estate and subjected to New York State estate tax).

The purpose of the claw-back is to prevent the making of gifts, shortly before death, as a device to avoid New York State estate tax.

The rule was originally set to expire on January 1, 2019, but on April 12, 2019, New York extended the claw-back to gifts made through December 31, 2025.

The claw back does not apply to gifts made before April 1, 2014 or to gifts made at a time the decedent was not a N.Y. resident. Also, the claw back does not apply to gifts made of real or tangible property located outside of New York. (Due to a legislative quirk the rule does not apply to gifts made between January 1, 2019, and January 15, 2019).

See also: New Yorkers are Falling off a Cliff

Robert Adler, Esq. is an attorney who focuses his practice on wills, trusts and estates. He can be reached at 212-843-4059 or 646-946-8327.