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PROTECTING THE INHERITANCE OF CHILDREN FROM A PREVIOUS MARRIAGE

Estate Planning

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Many people fear that a spouse from a second marriage will not leave assets to the children of a previous marriage. If you leave all of your assets to your spouse in a simple will, this is a real concern. The second spouse is under no obligation to leave assets to your children from a previous marriage in his or her own will. Even if you and your spouse create joint wills that leave assets to all of your children, nothing prevents your spouse from changing his or her mind after you pass away.

With proper estate planning, however, you can avoid this problem and leave assets to your children from a previous marriage. In New York, an attorney can assess your situation and find the best option for you. For example, if your spouse lives in a home that you individually own and would eventually like to see pass to the children of your first marriage, you might want to give your spouse a life estate in the property and have it automatically pass to your children when your spouse passes away. In other situations, setting up a trust or leaving your children assets in your will might be better options. A qualified estate planning attorney can determine the best options for your family situation.

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In most situations, a stepchild will not inherit property from a step-parent after the step-parent dies. The step-child does stand to inherit from his or her biological parents, but all inheritances are dependent on the laws of the state in which you live. Talk to a your estate planning attorney for more detailed information.

  • Intestacy: When you die without will, your stepchildren are very unlikely to inherit anything at all. In some states, step-children have no intestacy rights, while in others, a step-child is the last person who stands to inherit from a step-parent before the state does. This essentially means that if there is no spouse or biological relatives of the step-parent that survives him or her, the step-child inherits. If there is no step-child, or offspring of that child, the property goes to the state.
  • Wills and Trusts: If you create a Will you can choose to leave as much property to your stepchildren as you like. Similarly, if you create a trust you can choose to name your stepchildren as beneficiaries so they can receive the benefit of the property you transfer to that trust. A person creating a Will can also choose not to leave anything to his or her children, including step-children.
  • Adoption: While a step-child’s rights to inherit from a step-parent are much more limited than the parent’s children, a step-child that a step-parent adopts has the same right to inherit as any other child. State inheritance laws do not differentiate between children and adopted children, even if the adopted children are former step children.

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Few phrases that include the word “fatal” ever promise a positive outcome, and “fatal errors in execution” is no different. When you’re developing an estate plan, a fatal error in execution can throw significant problems in your estate’s way when it comes time to distributing estate property. Let’s take a look at the term in more detail.

  • Execution: The execution of a Will is the formal signing of the document. This signing must comply with state laws and includes various elements in order to be successful. For example, all states require that both the testator and two competent witnesses sign the document. But does the testator sign first? What if the witnesses sign first? Do the witnesses have to sign in each other’s presence or in the presence of the testator? All of these questions can impact the validity of the execution and, if not properly accounted for, can lead to a fatal execution error.
  • Fatal Error: A fatal execution error is an error during the execution process that invalidates the will. This means that even if you’ve created a Will and stated in detail all of your preferences, if a court later finds a fatal execution error it will determine the Will is invalid. It will then disregard your Will and your choices will have no impact on how your estate is distributed.

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As discussed in the previous blog entry, the New York Estates, Powers and Trust Law (EPTL) establishes the statutory procedures that personal representatives, administrators and executors must follow when filing wrongful death lawsuits.

The EPTL provides mandatory statutes of limitations or time limits in which a personal representative can sue someone on a decedent’s behalf for wrongfully causing his death. Section 5-4.1 of the EPTL sets the statute of limitations at two years. Your personal representative or executor of your estate must file a wrongful death lawsuit within two years of death. However, the EPTL contains an exception to the two-year statute of limitations for the Sept. 11, 2001, terrorist stacks. In this case, a lawsuit alleging a wrongful death caused by the Sept. 11, 2001, terrorist attacks are subject to limitations period of two years and six months from the date of the decedent’s death.

If the decedent’s death was caused by a criminal action and not just a wrongful or negligent act or failure to act, the EPTL allows the personal representative or executor of the decedent’s estate to maintain a wrongful death lawsuit within one-year from the date the criminal action terminates or ends. Thus, if the state maintains a criminal action against an individual or company for your death, your personal representative, administrator or executor has another year from the date the criminal action terminates to commence a wrongful death proceeding.

Check out our blog tomorrow to read Part 3 of How Can an Estate Maintain a Wrongful Death Lawsuit on a Decedent’s Behalf?

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Continuing the discussion from the first two blogs in this three-part blog series covering the important duties that executors have in New York, this last blog covers the executor’s final duties.

Under New York law, an executor can become personally liable for repaying creditors if they distribute a decedent’s assets before properly accounting for all of the decedent’s creditors. As an executor, you should make sure you receive a written agreement from each beneficiary promising to return any property if you are unable to repay creditors or other debts the decedent was responsible for paying. You must also prepare a written inventory or accounting of the earned assets within the estate and the distributions you’ve made during your administration of the decedent’s estate. However, beneficiaries can waive a formal judicial accounting as long as they are of legal age to make those waivers.

It may be in your best interest as an executor of a decedent’s estate to conduct a formal judicial accounting to obtain a formal discharge from the Surrogate’s Court. Your formal accounting will contain your total commissions earned under the decedent’s will or pursuant to statute unless you waived your commissions. Typically, your formal accounting should be done by your estate planning attorney.

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Continuing the discussion from the first blog of this three-part series, executors should understand their legal duties. An executor has very significant legal obligations. Under New York law, executors must inventory a decedent’s assets, pay debts and funeral costs, and pay taxes and administration costs. An executor may be liable for several years until they wind up the entire estate and receive a formal discharge of their fiduciary responsibilities. New York law requires executors to consider creditors’ claims within seven months of their formal appointment. The executor will also be responsible for making sure they file the decedent’s final personal tax return and the estate’s final tax return, if necessary.

After notifying potential creditors of the decedent’s death, paying taxes and other expenses, they must distribute the decedent’s assets to the named beneficiaries. If the decedent died without a valid Will, the personal representative or administrator is responsible for locating all of the decedent’s heirs and distributing their assets to their heirs pursuant to the state’s intestacy laws. The intestacy laws dictate which heirs are entitled to receive a decedent’s property if they died without a Will and the amount of each inheritance.

Check our blog tomorrow to read part 3 of New York Law and Executor’s Rights and Duties.

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An executor is the person or company responsible for administering a decedent’s Will. Sometimes referred to as a personal representative, the decedent has the discretion in appointing a trustworthy person or company to administer his or her last Will and Testament. If you die without a Will, a court will appoint one on your behalf.

Your executor is entitled to receive a reasonable compensation based on the gross value of your estate. However, they may waive their compensation or commissions. Typically, banks and other financial institutions that offer professional services as executors will require the statutory amount for commissions.

Your spouse can serve as your executor and remain a beneficiary under your Will. If you want to appoint your spouse as the executor of your estate, and your spouse is also the sole beneficiary, your spouse can perform their own distribution of your estate as the sole surviving beneficiary and surviving spouse before paying all of your creditors because of their continuing personal liability to remain responsible for paying your creditors. Furthermore, they may not have to conduct a formal judicial accounting as the sole beneficiary and executor of your estate.

Check in with us tomorrow to read Part 2 of New York Law and Executor’s Rights and Duties.

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Federal gift tax laws play an integral role in reducing an estate’s income tax liabilities. As a taxpayer, making lifetime gifts can reduce your estate’s gross tax liabilities since these gifts are not included as part of your gross estate at your death in most cases. According to the federal Internal Revenue Code, a gift is one in which real or personal property, cash or any other type of property is given away without consideration or payment in return. A lifetime gift is one in which you retain no other control and is complete at the time of your death.

Each taxpayer is able to exclude up to $13,000 in annual gift taxes. This means that neither the gift recipient nor the gift donor pays federal income taxes for gifts of up to $13,000. The annual gift exclusion applies to gifts of up to $13,000 made to each done. This means that if you have three children, you can give each child a cash or property gift of up to $13,000 per year without paying federal income taxes. As you can see, making a lifetime gift may make sense since it will reduce your federal estate taxes, which is important in estate planning. Your beneficiaries will not have to pay federal income taxes on property given away while you were alive. By giving your children money now, you can help them save money on estate income taxes after your death.

This blog is part 1 of 3 on how Federal Gift Taxes cab reduce an estate’s tax liability. Tune in to our blog tomorrow to read Part 2.

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To create a valid will in New York, you must comply with the New York Estates, Powers, and Trusts Law or “EPTL.” The New York EPTL governs all wills and trusts drafted by New York residents. Once your executor or custodian probates your will, the New York Surrogate’s Court Procedure Act or “SCPA” govern the procedural parts of your estate administration. Other various state, federal and common laws may apply to your will. Generally, the state statute governs most aspects of wills and estates in New York.

What do you need to do to create a valid will in New York? At a minimum, your will must be in writing, and you must comply with the statutory testamentary formalities established by the New York EPTL. In very limited situations, an oral will may be valid, but because of the limitations, we recommend drafting a written will. You must also sign your will in front of two independent witnesses who will also sign your written will. You and your witnesses will include addresses in your will and participate in a “will signing ceremony.” During the ceremony, you will state that you are signing your will. According to the NY EPTL, you must be at least 18 years old and legally competent to sign a contract or will. This means that you are of sound mind and legally capable of understanding that the document that you are signing is your will.

Check out our blog tomorrow to read Part 2 of What are the Necessary Ingredients of a Valid Will.