Non-Probate Assets/Elective Share Flashcards
What are probate assets?
What are non-probate assets?
Probate assets are property that the testator owned solely in his name at the time of his death, which is disposed of pursuant to the terms of his will or passes by intestacy.
Non-probate assets: Interests in property that are not subject to disposition under the will or via intestacy.
What are the categories of non-probate assets?
- Property passing by right of survivorship [joint stuff]
- Property passing by contract [ex. life insurance policy or employee benefits that are payable to a beneficiary other than the decedent or decedent’s estate]
- Property held in trust [the terms of the trust govern the disposition of the assets].
- Property over which the decedent held a power of appointment
Example:
Toby has a $500,000 life insurance policy that names his wife Whoopi as beneficiary. Toby, still married to Whoppi, dies, leaving a will that provides “I direct that the proceeds of my life insurance policy be paid to my brother boris.”
Who gets the life insurance?
Whoppi. It passes to the designated beneficiary in the contract.
What is the purpose of the elective share statute?
To protect surviving spouse and give them a minimum amount.
It applies even if the testator tried to specifically write them out (negative bequest)
What is the elective share?
How is it calculated?
$50,000 or 1/3 of the estate.
The “estate” is the net probate estate [the value f the estate after the payment of debts but before payment of estate taxes]
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Testimentary substitutes
What are testamentary substitutes?
Name them
T subs are added into the elective share estate. They protect against the testator hiding his assets in stuff like jointly held property.
Testamentary Substitutes need a LEG UP
- T: Totten Trusts
- S: Survivorship Estates [joint things, tenancy by entirety]
- L: Lifetime transfers with strings attached [where testator retains the power to revoke, invade, consume, or dispose of the principal, or name new beneficiaries- including life estates granted during marriage]
- E: Employee pension, profit-sharing, and deferred compensation plans [if called a qualified plan, only HALF is a T sub regardless of beneficiary]
- G: Gifts made within 1 year of death [the amount in excess of $14,000 for inter vivos, and all of the amt of gifts causa mortis]
- U: US government bonds and other P.O.D. arrangements
- P: Powers of Appointment: When the testator’s power is a presently exercisable general power of appointment.
What things are NOT testamentary substitutes?
LOGPIT
Rule of thumb: If testator does not have an interest, it is not a T sub.
- L: Life insurance **** Life insurance is NOT a testamentary substitute, whether paying to surviving spouse or to a third party
- O: One half of qualified pension or profit-sharing plan
- G: Gifts of less than $14,000 made within one year of death (except those made within one year of death)
- P: Pre-marriage irrevocable transfers (a gift to a friend prior to marriage)
- I: Irrevocable transfers made more than one year before death* :
- T: Transfers (irrevocable) made during the marriage where the testator retains a lfie estate (if transferred before 1992)
How much of a T sub goes into the elective share estate calculation?
The full value goes in, UNLESS it is a survivorship estate. These rules apply:
1) Survivorship estates involving the testator and a third party, made AFTER marriage: The consideration furnished test applies: The amount is the amount of consideration the testator contributed to the survivorship estate. Burden of proof of amount furnished is on the surviving spouse.
2) Survivorship estates involving the testator and a third party, made BEFORE marriage: Consideration Furnished test applies, but only HALF the amount of the property’s value can be a T sub. (it will be all or nothing). Note this same thing applies to joint bank accounts, and the deposits made prior to marriage.
3) Survivorship estates involving the testator and the surviving spouse: Half is a T sub, period. ADD THE OTHER HALF ONTO THE AMT SURVIVING SPOUSE HAS “RECEIVED”
Steps for doing an elective share problem:
1) Add probate estate to T subs [look out for survivorship estates, and whether theyare pre or post marriage]
2) Divide by 3.
3) Determine if elective share has been satisfied by taking this number and subtracting anything surviving spouse has received, and also subtracting the HALF of any survivorship estates. This value is how much the surviving spouse is owed from the rest of the beneficiaries, pro rata.
4) If surviving spouse is exercising right of election, this is how you do pro rata sharing:
Amount ower / Remaining assets in estate = ratio from which each beneficiary pays.
What happens when a surviving spouse doesn’t get enough to satisfy the elective share amount but DID get a trust in life estate? [income for life from a trust]
If the TESTATOR DIED BEFORE SEP 1, 1994:
As long as surviving spouse was given at least $50,000 outright and the $50,000 plus the principal of the trust was more than elective share, no right of election.
If Testator died AFTER SEPTEMBER 1, 1994:
If the surviving spouse has not gotten the elective share amount, we act as if the surviving spouse predeceased the testator (kill the trust), accelerate the trust to the remainderman, and pay out like normal pro rata after that.
Can a surviving spouse’s heirs claim the right of election?
No, it is specific to the surviving spouse.
Therefore, although an executor or administrator cannot elect, the guardian or conservator of an incapacitated spouse may elect (with court approval)
Can the right of election be waived?
Yes, with or without consideration, before or after marriage, if:
1) In a writing
2) Signed and acknowledged before a notary public (e.g. in a premarital agreement)
can do this before OR after marriage; and as to a particular will or testamentary substitute, or as to asll wills and testamentary subs in general
Remember: You can waive elective share by a waiver of all rights, this doesn’t waive specific gifts. Specific gifts always must be waived individually.
How does jurisdiction work with elective share?
General Rule:
Only a spouse of a decedent domiciled in NY at the time of death has a right of election.**
Exception: The surviving spouse can claim an elective share with a regard to the testator’s real property tin New York, if the testator expressly states in his will thtat the disposition of that property is to be governed by New York law.
Otherwise, thetestator’s will is admitted to probate and administered in the state of his domicile, and “ancillary administration proceedings” will be required in NY to clear title to NY property [take the foreign judgment to NY court].
What is exempt property?
What does it include?
Exempt Property is items which the surviving spouse gets first, or “off the top,” before anything else is done with the property.
It includes:
Exempt personal property up to $92,500 in value, including:
- One car (up to $25,000 in value, with excess going to the estate)
- Furniture, aplliances, electronics (up to $20,000 in value)
- Cash Allowances (up to $25,000) [note cash allowances are not subject to creditor’s claims, except for funeral expenses]
- Animals, farm machinery (up to $20,000), AND
- Books, DVDs, software, etc (up to $2,500)
NOTE: In any question involving a surviving spouse, MENTION THE EXEMPT PERSONAL PROPERTY SET ASIDE.
Note: If no survivng spouse, it goes to the children under 21.
What circumstances disqualify a spouse from taking elective share (and exempt personal property?)
DISMAL [same as preventing taking of an intestate share]
With NOTE that a marriage procured by fraud is voidable but not void, meaning the surviving spouse can still get elective share unless court voided it.
D: Divorce [final decree of divorce or annulment recognized under NY law] I: Invalid Divorce [The surviving spouse procured a divorce or annulment not recognized under NY law. One way] S: Separation Decree: A final decree of separation was rendered against the surviving spouse. A separation decree is not enough unless it specifically waives surviving spouse's rights under the EPTL. [Surviving spouse not disqualified if final decree of separation was rendered against the deceased spouse]. M: Marriage is Void.[Incestuous or bigamous, or fraud] AL: Abandonment or Lack of Support [Surviving spouse abandoned or refused to support deceased spouse] ONE WAY.
