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Estate Planning: One Size Doesn’t Fit All

The process of ensuring that assets pass to the intended beneficiaries upon one’s death is called an “estate plan” and it is rarely as simple as merely drafting and signing a Last Will & Testament. This exploration starts with identifying the assets an individual owns (or will own at the time of his or her death) with the understanding that some assets are customarily transferred upon death through a Will, while other assets are never mentioned in a Will, and yet, ultimately transfer to the intended beneficiary upon death.


The difference between how one plans their assets to be disposed of upon their death matters. This difference is often created based on how the asset was titled during the lifetime of the decedent. If the asset was the sole property of the decedent and the asset does not pass upon death through a beneficiary designation or some other automatic transfer upon death designation, then the asset is identified as a probate asset and will pass to the intended beneficiary through an estate and in accordance with the terms of the decedent’s Will. Common examples of probate assets include: personal belongings; vehicles; real estate owned solely by the decedent or owned as tenants-in-common with another individual; bank accounts in the decedent’s name (that do not have any transfer upon death designation). The transfer of ownership of probate assets is subject to the probate process. This process ensures that the decedent’s Will is admitted to probate in the Surrogate’s Court and the estate is properly administered in accordance with the terms of the decedent’s Will before any distributions are made to the beneficiaries.


Non-probate assets are assets that transfer outside of the Will, and such assets never become part of the probate process. Such assets have a mechanism for the decedent to follow prior to the decedent’s death to name the beneficiary of the asset upon the death of the decedent.  Such assets are often transferred to the intended recipient by the mere production of a death certificate demonstrating to the asset holder that the owner has died. Common examples of non-probate assets include jointly owned property; life insurance policies; retirement accounts (e.g., 401(k), 403(b), IRA); and any accounts that have a “payable on death” or “transfer on death” designation.


While there is no single correct way to draft an estate plan, there are advantages and disadvantages to utilizing a probate process versus a non-probate. For example, an estate administration customarily takes nearly a year (and can be longer if there is litigation involved) to complete and to pass the assets to their intended beneficiary. However, the probate administration process is regulated and supervised by the Surrogate’s Court, which has its advantages. The process ensures that the probate assets listed in the decedent’s Will are distributed as per the decedent’s instructions and intentions and provides a process to address any concerns about how the estate is being administered.


Although the utilization of non-probate assets bypasses the lengthy probate process, an estate plan utilizing non-probate assets can still be met with “hiccups” along the way. For instance, according to New York State’s banking laws, a joint owner of an account becomes the sole owner upon the co-owner’s death, thereby bypassing the probate process. However, applicable New York State case law dictates that the presumption of true “joint ownership” can be rebutted if it can be demonstrated that the deceased co-owner’s intention behind adding the joint owner to the account was for that added joint owner to have access to the account for convenience purposes only (e.g., to help pay the bills). In such cases the account would become property of the decedent’s estate and would pass through the probate process and in accordance with the decedent’s Will.


While non-probate assets are a great way to reduce the costs of the probate process, such assets are still considered part of the decedent’s estate for the purpose of calculating the decedent's taxable estate (i.e., even though non-probate assets do not pass through the same process as probate assets, one cannot hope to reduce their total taxable estate by moving assets outside of the probate process).


Once one dedicates some time towards his or her estate planning, it quickly becomes clear that an estate plan often has many moving parts, and that there definitely is not a “one size fits all” plan for everyone’s use. Depending on one’s existing and anticipated assets, personal goals, and the possible needs of their beneficiaries, the planned use of probate versus non-probate assets, or a combination of the two, to effectuate one’s estate plan can cause the legal process associated with a death a much smoother process. It is also imperative to discuss all of one’s assets with the attorney assisting in this process to ensure that the goals of the person creating the estate plan are achieved. 

 


 Our firm has extensive experience counseling individuals, businesses, and others on statutory requirements, as well as preparing and implementing applicable policies. If you have any questions related to this Legal Briefing, please contact any member of our firm at 585-730- 4773.




Estate Planning One Size Doesnt Fit All
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 This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2024 Law Offices of Pullano & Farrow PLLC

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