When developing your estate plan, it is important to provide your lawyer with information on all of your financial assets. This is because executing a will is not sufficient to dispose of certain assets, known as “non-probate assets.” Such assets are not controlled by the terms of your will but must be considered in your estate planning to help ensure that everything you own is distributed according to your wishes. Non-probate assets include the following:
Accounts with beneficiary designations: Often, banks or investment institutions will have forms that permit you to designate a beneficiary of the account. This is most commonly done for life insurance policies and retirement accounts, such as 401(k)s or IRAs. However, it is also available with regular bank accounts or investment accounts by making a “transfer-on-death designation.”
Joint bank accounts: If a bank account has multiple account holders, at the death of one of the account holders, the balance generally passes to the other holder as a matter of law. However, there is an exception. Where a joint account was set up with the intent that it be a convenience account, rather than created with “donative intent,” the balance of the account will not go to the surviving account holder.
Real property held with “rights of survivorship:” Property that is held as joint tenants with rights of survivorship or “tenants by the entirety” when the two owners are married, goes to the survivor upon the death of the first owner.
Exempt personal items: Section 5-3.1 of the New York Estates, Powers & Trusts Law provides that certain personal items automatically vest in the surviving spouse or, if there is no surviving spouse, to any children under the age of 21, subject to a maximum designated value. These items transfer immediately without the need to wait for the appointment of an executor or administrator. Exempt personal items include:
- Housekeeping utensils, musical instruments, sewing machines, clothing, furniture, appliances, electronic devices and jewelry (except for jewelry specifically disposed of in the will as discussed further below) up to a maximum aggregate value of $20,000.
- Family bible or religious texts, family pictures, books, computer software, DVDs, CDs, record albums and videotapes up to a maximum aggregate value of $2,500.
- Domestic and farm animals with 60 days of feed, farm machinery and one tractor up to a maximum aggregate value of $20,000.
- Motor vehicle up to $25,000.
- Money/marketable securities up to an aggregate of $25,000.
Note that for the first three categories of personal items listed above, if the value of the items exceeds the maximum threshold, the spouse or children must pay the excess value to the estate or, if the item is left to a different beneficiary in the will, the excess value payment goes to that designated beneficiary. An exception to this exists for jewelry. If the will designates a different beneficiary for a specific piece of jewelry, the beneficiary does receive the jewelry.
With motor vehicles, if the decedent owned multiple vehicles, the spouse or children can pick one worth more than $25,000 and pay the excess to the estate. The spouse or children can also choose to take a cash payment for the value of the vehicle (up to $25,000), in lieu of accepting the vehicle.
Money and marketable securities must first be applied to pay funeral expenses before passing to the spouse or children.
It is important to work with an attorney to develop a comprehensive estate plan that takes into account all of your assets. If you need to create an estate plan or update an existing one, contact one of our attorneys for a consultation.