What do I do when someone dies in my family?
The answer to that question would fill volumes. I can better answer the question “What happens to the property of someone who dies?” There are three sets of statutes that govern how someone’s property pass as death. The simplest laws deal with property that is titled in two or more names as “joint with the right of survivorship” or “as tenants by the entirety.” These pass automatically to the surviving owner. Another set of laws deals with property that has a named beneficiary attached to it. Typically this is life insurance with a named beneficiary. Another kind of ownership is an “in trust for (ITF) account ” or a “payable-on-death (POD)” account. Many US treasury bonds are “POD.” These all are very self-explanatory. The real difficulties come when the property is owned in the decedent’s name only. Then we have to deal with the Estate Powers and Trust Law (EPTL) and the Surrogate Court Procedure Act. (SCPA).
The EPTL gives us all a will. Everyone who lives and dies in New York has this will. It is laid out in § 4-1.1. If I die, and I’m not married and I have no children, everything goes to my parents. So that’s what happens when a minor dies. Everything goes to his/her parent/s. If I have a wife, everything goes to her. If I have a wife and children, the first $50,000.00 goes to my wife, and the balance is shared equally between my wife and my children. If I have no wife, but I do have children or grandchildren, everything goes to them. The statute goes on to cover brothers and sisters, aunts and uncles, and cousins. A more complete description of the statute is laid out in an accompanying article you can read by clicking this link.
If I die with a will, it will establish the law of the case. In other words, the law of the state can be changed by the law of my will. The parties are bound to the terms of my will just as strongly as they are to the terms of the statute. To overcome the statute however, the law requires that the will be offered to the Surrogate Court Judge for him to decide whether or not the will was properly written and executed. Proving the validity of a will used to be called determining its probative value. ‘Probative’ meant believability. That’s why the process of proving the will is called a ‘probate’ proceeding. The purpose of probating the will is to get the will approved by the court and to get someone named by the court that can act on behalf of the deceased. Obviously I won’t be able to sign a deed when I’m dead, so I’ll have to have somebody appointed who can do it for me. That person is generally called my ‘executor’. He will carry out my directions contained in the will. He will ‘execute’ the orders in my will.
If I don’t have a will, then the person who will act on my behalf is called an ‘Administrator’ and he will administer my estate according to the statutes. While in years gone by, the powers of the two were quite different, the law in New York has evolved to make the jobs fairly equal. In Florida and other states this isn’t as true. Some states allow the ‘executor’ under a will to sell real estate without court approval, yet their laws require an administrator to petition the court for permission to sell real estate. This makes having a will a much simpler and easier process than going without one.
Then the question arises, even if I do have a will, does it need to be probated? The answer is that it depends on the size of the estate, and the relationship of the survivors to the decedent. There is a Small Estate Proceeding under the SCPA that works for estates that don’t contain realestate and have assets up to but not to exceed $30,000.00. It’s called A Voluntary Administration (VAA) There is an even simpler process if the assets are only bank accounts. That’s a small estate affidavit. That’s good for an estate of no more than $15,000.00. Yet, if there is a surviving spouse, the affidavit will work for assets up to $30,000.00. So the answer is that you should consult an experienced estate’s attorney to find out whether or not you need to go through the time and expense of a probate proceeding if a small estate proceeding might cover it all.
Before we go any further it is time to point out the family exemption statute. Found in EPTL § 5-3.1, a surviving spouse or children under the age of 21 get a special break in New York. The surviving spouse can pull out of the estate a significant amount of money and assets free of creditor claims. By that I mean if I died owing a lot of money, my wife could take some cash and certain property out of the estate and the creditors couldn’t object. For a more complete discussion of the family exemption click on this link.
Here is a major rule that you have to understand clearly. Except for the family exemption, except for things that are owned jointly with a right of survivorship and except for most things that have a named beneficiary, such as life insurance, everything else has to be used to pay down the debts of the decedent. So if I have a bank account with thirty thousand dollars in it, in my own name, my wife may be able to draw it out on a small estate affidavit. But and this is important, she couldn’t keep it all. She could only keep what the family exemption law allows her. The balance must be used first to pay down my bills.
The same is true of the terms of my will. If my will says everything to my beloved wife, the law says “yes, fine, but first, you have to satisfy all the creditors.” How does my wife know who they are? Don’t know! The statutes say you have to wait for seven months from the probate of the will to allow the creditors to find out about the death and to file a claim with the court. After the seven months are up, there is much less danger of paying out the money left on hand to my wife if the known creditors have been taken care of. That doesn’t mean they have been paid in full, but the creditors can compromise and accept a lesser amount as full satisfaction of my debts.
The big question is how much does all this cost. There are a number of costs involved in probate and administrations. The first is the filing fees. In order to open a case in Surrogate’s court, you must pay a filing fee. It ranges from $75.00 for an estate under $20,000 in value to $1,250.00 for an estate over $500,000 in value. That’s a great reason to try to avoid probate. A living trust is a time honored way of avoiding these costs. The answer lies in the fact that the decedent doesn’t own anything in his own name when he dies. It is all owned by his trust. The trust has a successor named that can sign that deed or do what ever the trust requires of him without court approval or permission.
The second function of cost is commissions and fees. In New York the executor is entitled to commissions set approximately at 5% of the first $100,000, 4% of the next $200,000, and 3% on the next $700,000. It tapers down to 2.5% and 2% for larger estates. So if I die owning a home worth $200,000, my executor would deserve a commission of $5,000 on the first $100,000 and $4,000 on the first $100,000 of the next $200,000 for a total of $9,000.00. Most surrogate courts would allow the estate’s attorney to receive a similar amount. $18,000.00 in fees and commissions. On top of that would be real estate commissions for the sale of the house at 6% or $12,000. So if I had no debts to pay the commissions and fees would be nine thousand to the executor, nine thousand to the attorney and twelve to the brokers or Thirty Thousand Dollars off the $200,000 selling price.
It is really worthwhile for the executor/administrator enters into a written contract with the estate attorney so that he knows what the fee will be. Personally, I find that the percentage fee for the attorney equal to the executor’s commissions is excessive. I generally negotiate a figure based on the nature of the estate, the cooperative attitude of the family, the amount of liquid assets vs. the non-liquid ones and come up with a flat fee. It generally is around three percent of the assets but it certainly could be more if there are lots of debts, or difficult issues or less if there are few assets and everyone is cooperating. Another way of dealing with the fees for the attorney is to agree to an hourly rate and have the attorney bill on a time spent basis. Some clients prefer one way over the other. I have come to the conclusion recently that I like the fixed fee contracts because we all know what the final cost will be. The payment schedule can be arranged in advance, and the sense is that I have will have to work smarter not longer to get the job done.
This kind of a contract has to have some protection for the attorney however so that he doesn’t get treated unfairly if there is an extra-ordinary amount of work involved in the estate that wasn’t apparent at the outset. Again, make sure you have a written contract before you go too far with an estate attorney.
Note also that most family members waive their commissions. They are taxable as ordinary income, and particularly in a small family or a one beneficiary situation, it’s better to take an inheritance without taxes than to take a commission and have to pay income taxes on it.
How do we probate a will? First we need a sworn affidavit from the witnesses saying that the will was properly signed and witnessed. Then we need to give a copy to everyone who would inherit from the decedent if he didn’t have a will. They have to accept the will or be served with a notice to show cause returnable at the surrogate’s court where they can voice their objections. Image the elderly lady who has seven children, five of whom are dead with an unknown number of grandchildren living who knows where. And worse perhaps she has two daughters who have been married and divorced three or four times and nobody knows their new married name. These kinds of estates are a real problem. The cost of tracing all these heirs is expensive. And you say, “well she has a will that leaves everything to the only child whoever stood by her. The only one that helped her in her old age. The rest of the SOBs don’t deserve anything. Why do we have to give them a copy of the will which will only rub their nose in the fact that their mother didn’t leave them anything. That’ll just cause more problems.” Yep, you’re right. But the law requires and insists that they be found and notified. You can’t probate a will without all the direct heirs being informed of it...
So once everyone has signed a consent form or has been given notice of the return date when the court will accept the will for probate, I attend court to see if anyone raises any issues. If no one shows, I move the probate of the will. If someone is there to object, the judge will talk tothem and sometimes even talking them into accepting the will. If not, there is usually a 1404 hearing. That is a time when the people objecting to the will can interview the witnesses to the will in open court. The judge usually has his law clerk and stenographer at the hearing. The witnesses are sworn, and the objectants ask about the mental competence of the decedent when the will was signed, and about undue force and influence by a close family member. Usually things settle out at that point. Either the will was good or it wasn’t. If there is a challenge, the whole thing goes into litigation and that’s beyond the scope of this website.
Once the will is accepted, the court issues its order and Letters of Appointment. Those ‘Letters’ give the executor/administrator his or her power to act. If I need to sell stock in an estate, the transfer agent always needs a current copy of the ‘Letters of Appointment.’ If we run out of them, the court will issue new ones for $6.00 a copy.
So we sell everything we have to, we decide which debts are valid and which we are going to pay or negotiate or which we are to contest. After the seven months are up, we account, share the accounting with the remainder beneficiaries, pay the specific gifts and if we get the full agreement of all the remaining beneficiaries, we pay out the estate, inform the court formally of our completion of our work, and with the court’s approval, the executor/administrator is paid his commission as pretty much the last act of the estate before it is closed.
So, sometime it can be easy, and somebody who has the time can do the work himself. The local court officials are nice people and will help where they can. More often than not, however, there isn’t enough time, and you don’t have the experience to handle all the details. If that’s the case, call us for help. We will conduct a free consultation to review the will and the estate, and come to an agreement with you before you are charged one penny,
CALL US AT 315-782-3600
So, here it is in a nutshell. If there is solely owned property owned by the decedent, only a court appointed executor or administrator can sign off on the title. Only the court-appointed person can sell the decedent’s property, and only he can give away the property to the beneficiaries when the estate is settled.
The last note might as well have come first. Whoever is appointed by the court has a very high legal duty to the creditors and the beneficiaries. He can’t put his own best interests ahead of the creditors and the other beneficiaries. In addition to this high standard of conduct, he also has to account for every penny he takes in and every penny he loses or spends. That accounting is mandatory in order for all parties to be treated fairly under the law. We can help with this process.
Give us a call at 315 782-3600
Remember, this is not legal advice. The laws change regularly and your conditions may not be applicable to the explanations set out above. You can’t rely upon these words of general introduction to a very complex area of the law. Pat Evans
|