WRITTEN BY PHILLIP VACCHIO, ESQ., PARTNER
Most of you reading this article have likely heard this word many times before, but what does it actually mean? In New York, probate is the process of formally petitioning the local Surrogate’s Court to accept a deceased person’s Last Will and Testament and officially appoint an executor for the estate. Depending on the situation, the complexity and cost of probate proceedings can range from fairly simple and inexpensive to extremely complicated and costly. In this article I will list some common red flags that may foreshadow a difficult probate, and I will describe some planning methods to avoid the need to probate.
One of the most common misconceptions I hear when I first meet with a client who was named as executor in a Will is that he or she has automatic authority to act according to the instructions contained in the Will. This is not true. An executor has no authority to act when the Will creator dies until such Will is admitted by Surrogate’s Court and the Court issues a document referred to as “Letters Testamentary” officially appointing the Executor. This is the probate process. Before a Court accepts the Will and issues Letters Testamentary, the following requirements must be satisfied:
A formal signed Petition must be submitted to the Court by the individual(s) requesting to be appointed as Executor under the Will, along with the original copy of the valid Will and an original death certificate. If the original copy of the Will cannot be located, the process to convince the Court to accept a photocopy can be very difficult and many times unsuccessful, which could in turn lead to an unintended distribution of estate assets.
A group of individuals referred to as “distributees” must either sign waivers stating that they waive their right to contest the Will and consent to the appointment of the Executor, or if they refuse to sign such Waiver, the Court will issue a citation to be served on each such individual, which is basically an invitation to contest the Will by a certain date. The “distributees” are the class of individuals who are the closest living relatives of the deceased person according to state law. In New York, the priority of these classes is (i) Spouse and/or children, (ii) parents, (iii) siblings or issue of predeceased children, (iv) grandparents, (v) aunts and/or uncles and issue of predeceased aunts or uncles, and finally (vi) first cousins once removed. The more remote the class of “distributees” is, the more difficult it will be for the executor to identify and locate such individuals.
These are the general requirements but depending on the situation and local rules there may be other requirements as well.
As you can begin to imagine, the probate process can be very expensive, lengthy, and difficult in certain situations. The following is a list of common situations where the probate process may be particularly complicated:
The complete class of closest living heirs is unknown and/or so remote that names and contact information for all members is unknown and/or very difficult to ascertain. Sometimes the available information can be so scarce that a genealogist may need to be hired to recreate the family tree and locate all members of the class of closest living heirs. This can be lengthy and expensive.
The Will creator intends to disinherit a member of the class of closest living heirs or designate unequal distributions among such group of individuals. Even if a member of the class of closest heirs is left out of the Will or explicitly disinherited, NY law still requires that such person receive a copy of the Will and the opportunity to contest it by simply appearing in Court in person or by written notice.
The deceased individual owned real estate in multiple states. The Court in one state does not have jurisdiction over property in another state, so the executor must commence separate probate proceedings in each state where the decedent owned property.
The deceased person was a small business owner and a delay in operations would be detrimental to the business. As noted above, the probate process can be lengthy, and the named Executor may not have authority to continue management and operation of the business until the Surrogate’s Court issues the order officially appointing the Executor.
Instead of subjecting your executor and beneficiaries to a potentially drawn out, stressful, and expensive probate proceeding, there are certain planning opportunities you can take advantage of to likely avoid the necessity of probate when you pass away. One easy way to avoid probate for financial accounts is to name beneficiaries on each account or make the account payable on death to your intended beneficiaries. This can be done by simply contacting the financial institution and following their procedure to designate beneficiaries.
Another way to avoid probate is to create and fund a living trust. A living trust, also known as an “inter vivos” trust, is a legal entity that you create by written document while you are alive. The trust only controls assets which you transfer ownership of to the trust, commonly referred to as “funding” the trust. There are different kinds of trusts depending on your goals, but one common benefit of all living trusts is that the assets owned by the trust do not need to go through the probate process when you die. The individual(s) or entity that you designate as trustee has the automatic and immediate authority to carry out the instructions set forth in the trust document upon your death. This makes a trust much more difficult to contest than a Will because the trustee is not required to notify all members of the class of closest living heirs before making distributions to the beneficiaries.
An advantage of using a trust to avoid probate for financial accounts rather than naming beneficiaries on each account is that in a trust you can include language to control the distribution of assets beyond death. For example, you can restrict a beneficiary’s control of his or her inheritance until he or she reaches a certain age specified in the trust. This feature may appeal to small business owners as a way to maintain a degree of control over what happens to the business in the event of death. Trusts are also one of the only ways to avoid probate for real estate other than adding your intended beneficiaries as joint owners on the deed for the property.
Every person’s situation is unique. Be prudent and meet with an experienced estate planning attorney to determine the type of planning that is best suited for you. Your family and friends will thank you for it.
Phillip Vacchio, Esq. is a partner at the Shivers Law Group and of Counsel to Ianniello Anderson, P.C. www.ialawny.com.