Under New York law, anyone can make a will and with the sole exception of completely disinheriting one’s spouse, is free to leave his or her estate to anyone. We call the one who makes the will a testator (fem. testatrix) and we say such a person dies testate, that is, leaving a will. Now, having this absolute right, if someone still chooses not to make a will, we say they die intestate. In that case, state laws known as descent and distribution statutes provide a default scheme of inheritance. These statues try to approximate what most people would want to see happen to their assets in a given number of situations. One thing is for sure: all the statute does is provide this safety-net scheme. The State has no interest in stepping in and administering anyone’s estate.
Before examining the actual provisions, let’s note that they will only affect assets which are left in the decedent’s name alone, so rarely will we have a case of complete intestacy. Real estate or bank accounts in joint names, trust accounts, life insurance, and pension benefits payable to named beneficiaries will pass directly to such beneficiaries without relying on intestacy statutes. But, as to those assets in the decedent’s own name, the provisions are as follows:
If there is a surviving spouse and children, then the first $50,000 of assets goes to the spouse and the rest equally to the spouse and to the children.
If there are no children, then all goes to the spouse; and if there is no spouse, but children, the children share.
If none of the above, but siblings (or their surviving children) the siblings or their children share, and if none of these survive then the distribution goes through one’s grandparents, to aunts and uncles, and cousins. It doesn’t go on forever—the statute now excludes those beyond whom we would commonly call “second cousins.”
So, the State is not after your estate after all and, at first blush, this scheme may seem reasonable until one considers that:
- Since the situation can only be determined at death who your heirs will actually be is a complete “coin toss.”
- Although I frequently hear people say they don’t need a will because they have a small estate, the reality is that especially in a small estate it is critical that all of the decedent’s assets be available to the spouse.
- It is likely that assets are going to vest directly in minor children. This creates
an awkward and costly situation where, for example, the spouse may have to petition a court to be appointed guardian of her own children’s property just to sell or re-finance the family home or to access assets considered part of the child’s share. Often, the child’s share is set aside in a court account and is unavailable until the child turns 18—at which time it is unconditionally released to the child.
The procedure in intestacy involves the closest kin filing a petition with the Surrogate’s Court asking to be named administrator. The priority to do so runs pretty much along the lines of inheritance—spouse, then children, and so forth. Once qualified by the Court and issued letters of administration, the administrator has pretty much the same powers and duties as the executor of a will. Unlike a named executor, however, he will generally have to post a bond (unless all the heirs waive that requirement) and he will not be able to do certain tasks like selling real property without Court permission. Otherwise, he collects the assets, pays the debts and expenses; files whatever estate tax returns are required and distributes the remainder of the estate to the heirs. He also is entitled to a commission just as an executor would. Speaking of estate taxes, intestate estates are subject to exactly the same tax rates as estates with wills, but lack the tax savings available such as maximizing benefits of the marital deduction and individual exemptions.
To be accurate, there are two situations where the state’s involvement is enlarged and anecdotes of these are probably the source of the “government steps in” fears. One is where the next of kin are no closer than cousins or where the kin cannot agree on who should serve as administrator. Then the Surrogate Court will name a public administrator. Large cities have an official who just does that. In Dutchess County and most upstate areas, it’s the County Commissioner of Finance. He administers the estate the same way, generally retaining the family’s attorney, receives a commission like any other, and the same distribution is made to the decedent’s heirs.
The other situation is called an escheat and I have only seen one in my practice. That is where a person dies not just without a will, but with no known kin in any degree. In that rare case, by default, the assets do go to the State of New York. Certainly, not a common hazard, but one more reason to make a will.
Please be in touch if we can answer any questions.
Kevin A. Denton, Esq.
*Kevin Denton serves as Counsel to the law firm of Berlandi Nussbaum & Reitzas LLP. He focuseson trusts & estates, real estate, mortgage banking and municipal law. He is a graduate of Harpur College and New England School of Law.