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ESTATE PLANNING TERMS: FATAL ERRORS IN EXECUTION

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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 last two blogs, the New York Estates, Powers and Trusts Law sets forth the statutory procedures for personal representatives and executors when suing other parties for wrongfully causing a decedent’s death. If your estate’s personal representative files a wrongful death lawsuit on your behalf, the EPTL sets forth specific defenses that a defendant charged with wrongfully causing your death may use.

Pursuant to the EPTL, a defendant can use a contributory negligence defense as a legal defense to a wrongful death lawsuit alleging negligence. Contributory negligence is a legal claim asserting you were also negligent in causing your own death. However, contributory negligence is an absolute defense only for suits that arose before Sept. 1, 1975. For cases arising on or after Sept. 1, 1975, contributory negligence is no longer an absolute defense.

If your personal representative refuses to bring a wrongful death action on a decedent’s behalf, the EPTL allows the beneficiaries or distributes of a decedent’s estate to request an appointment of a substitute administrator or personal representative who will maintain the action. To further understand your legal rights to sue for wrongful death on an estate’s behalf, contact us today.

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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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Unfortunately, quite often a decedent’s death does not occur because of natural causes. Natural causes include dying of old age, dying from a terminal illness or life-ending illness or from a preexisting medical condition. If you die from a wrongful act, a family member, spouse or your personal representative has the right to sue someone on your behalf. This blog series covers your personal representative’s right to sue on your estate’s behalf.

According to Section 5-4.1 of the New York Estates, Powers and Trusts Law or “EPTL,” a personal representative can maintain an action on the decedent’s behalf for a wrongful death claim. This Section of the EPTL allows a personal representative appointed in New York or in another state to sue another individual or company for the decedent’s wrongful death. A personal representative can maintain an action for monetary damages against someone else whose neglect, willful or wrongful act or intentional act caused your death. Typically, the standard of care is that the individual or business owed you a duty of care and but for its wrongful act, you would still be alive.

If you are the personal representative, executor or an administrator appointed to administer a decedent’s estate, you have a legal right to maintain a wrongful death lawsuit on the decedent’s behalf pursuant to the EPTL. To understand your legal rights, you can contact our office today.

Join our blog tomorrow to read Part 2 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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A living trust allows the person creating the trust to set aside money or property within the trust for the benefit of others by appointing a trustee to administer the trust and ensure the trust property is distributed to the beneficiaries. If you are the person creating a living trust, you are known as the grantor, owner or settlor of the living trust. A living trust is also known as a revocable inter vivos trust.

A testamentary trust, on the other hand, becomes operative after your death, pursuant to your will. Testamentary trusts typically go through probate. Aliving trust earns its name from the fact that you as the grantor of the trust created it while you were alive and it becomes effective before your death. After your death, your living trust may continue to operate as long as you comply with the New York Estates, Trusts and Powers Law when creating one.

Your attorney may also decide to create a “pour-over” will that allows any other property to pour-over into your trust after your death. However, the property that may pour-over from your will into your living trust will still have to go through probate. It typically becomes public record as soon as your personal representative or trustee submits it for probate. In this case, your living trust and your will become part of the New York Surrogate Court’s public records accessible by public request.

Check in with us tomorrow to read Part 2 of An Insider’s Guide to Living Trusts in New York.

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After reading the first part of this three-part series, you now have a basic understanding of why a lifetime gift may reduce an estate’s federal income tax liabilities. Now, I will cover how you can further reduce your estate’s tax liabilities. The Internal Revenue Service (IRS) gives each donor (gift giver) a tax exemption of $13,000 annually for a lifetime gift made to each donee (gift recipient). However, the IRS allows spouses to make gifts together and add their exclusions together. In other words, if you are married, you and your spouse can make an annual gift of up to $26,000 to each donee by combining your annual gift exclusion. Thus, if you have three children, you and your spouse can give each of your children up to $26,000 without triggering federal gift taxes for gifts made on or after Jan. 1, 2009. You can see how this will have the effect of reducing your income tax liabilities imposed on your estate after you die. Furthermore, your children may benefit more from a current gift than they would a future gift.

According to the IRS, donors are typically responsible for paying federal gift taxes. Thus, if you gave someone a gift that exceeded the amount of the annual gift tax exclusion, the person receiving the gift is not responsible for paying the income taxes on the value of his gift. Instead, you are responsible for paying the income taxes absent a special written agreement between you and the recipient.

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