Adoption and Inheritance in New York, Part 1. A Brief History of the Issue

As a young girl, I was fascinated by the stories of Anne of Green Gables (1908), Pollyana (1913), and the comic strip Little Orphan Annie (1924).  These stories of adoption spoke to me of acceptance and of intergenerational care.  What I did not realize at the time was that these stories also reflected a new trend in the history of adoption and of family construction, a shift from an emphasis on strict bloodlines for the purpose of inheritance to the acceptance of adoption to create or expand a family.  

As in other jurisdictions, adoption in New York is, strictly speaking, a creature of the law.  The law in New York concerning inheritance rights of adopted children would also change as a result of changes in society, creating a uniquely legal concept of the family through the expansion of inheritance rights to include the adopted child.  Literature and the law would walk hand in hand to bring about change.

The story of Anne Shirley in Anne of Green Gables represents a transitional phase in the history of adoption.  Marilla and Matthew Cuthbert, sister and brother, had decided to adopt a boy to help them out on the farm because they were getting too old to take care of the chores themselves.  Orphanages in the 19th century regularly adopted out children as a form of cheap farm labor.  Through a series of mishaps, the Cuthberts received precocious Anne instead.  With her flaming red hair and freckles, Anne's cheery disposition soon warmed the heart of Matthew and even crusty Marilla, exemplifying the more desired kind of adoption based on sentiment rather than work.  This desired kind of adoption would progressively finds its way into the spirit and language of the law.

Anne's flaming red hair is also the dominant characteristic of Little Orphan Annie.  Based upon Indiana poet Charles Whitcomb Riley's poem Little Orphant Annie (1885) written in the Hoosier dialect, Riley's Annie is adopted out to be a household servant. 

Little Orphant Annie's come to our house to stay,

An' wash the cups an' saucers up, an' brush the crumbs away,

An' shoo the chickens off the porch, an' dust the hearth, an' sweep,

An' make the fire, an' bake the bread, an' earn her board-an'-keep;

But Annie also had an unusual gift:  she could spin goblin stories for the children after the evening meal, morality tales where the children are exhorted to obey their parents.  The poem focused on the beneficial moral effects of the adopted child, in contrast with real orphans who often were associated with disorderly conduct, ignorance and poverty.

Annie would not have ridden out on an orphan train, a particularly painful part of the history of adoption in New York from 1854-1929.  The orphan train was the brainchild of New York Protestant reformer Charles Loring Brace, author of The Best Method of Disposing of Our Pauper and Vagrant Children (1859).  Alarmed at the growing number of homeless and disorderly children in New York, particularly Irish Catholic immigrant children who had arrived during the Irish Potato Famine, Brace feared that crime would increase in the city as a result.  His Children's Aid Society placed out only boys to rural regions of America, in what was in large part a contractual arrangement.   

Riley's Annie became the prototype for Harold Gray's syndicated cartoon Little Orphan Annie (1924), which appeared at the height of the Progressive Movement in the United States.  The Progressives Movement in New York would make significant inroads in adoption reform in the United States. 

Massachusetts had passed the first adoption law in 1851, the first law .  Section 6 dealt with the issue of inheritance.

"A child so adopted, as aforesaid, shall be deemed, for the purposes of inheritance and succession by such child, custody of the person and right of obedience by such parent or parents by adoption, and all other legal consequences and incidents of the natural relation of parents and children, the same to all intents and purposes as if such child had been born in lawful wedlock of such parents or parent by adoption, saving only that such child shall not be deemed capable of taking property expressly limited to the heirs of the body or bodies of such petitioner or petitioners."

If the adopting couple was childless, then the adopted child could inherit freely from the adoptive parents.  However, if the couple already had natural children, the law prohibited the adopted child from inheriting from the adoptive parents.  Under the law, adopted children were not considered to be the equals of natural children with respect to inheritance rights. 

New York began amending its adoption laws beginning in 1873.  One feature of New York's early adoption law with respect to inheritance was a provision that allowed adopted-out children to inherit from their natural parents (In re Landers’ Estate, 100 Misc. 635, 166 N.Y.S. 1036 (Sur. Ct., Oneida Co. 1917)).  In 1963, New York amended its adoption statute Domestic Relations Law (DRL) § 117 with respect to inheritance.   For the purpose of inheritance, the amended law ended the adopted-out child's right to inherit from the biological parents, but at the same time gave the adopted child the right to inherit from the adoptive parents.

The law was amended in 1966, giving the biological parent the right to provide a bequest to an adopted-out child by last will and testament.  For the first time, the law also addressed the issue of a child who was adopted by a step-parent, an acknowledgement that new family relationships were also being forged by remarriage.

In 1986, as a result of a Court of Appeals decision in In re Best, 66 N.Y.2d 151 (1985), the law was amended to state that the adopted-out child was deemed a "stranger" with respect to the biological parents.  The adopted-out child may not inherit from the natural parents through a class gift in a will or a trust, or through intestacy.  However, the adopted-out child can still inherit from the biological parents if the adopted-out child is specifically named in the biological parent's will or trust.  In the case of a class gift, the adopted-out child must be specifically named as belonging to that class.

However, the new law created particular issues with respect to step-families and with respect to inheritances from grandparents.  The law was quickly changed in 1987 to provide for inheritance rights if  (1) the child’s adoptive parent is (a) married to the child’s birth parent, (b) the child’s birth grandparent or (c) a descendant of such grandparent; and (2) the testator or creator is the child’s grandparent or a descendant of such grandparent (DRL § 117(2)(b)).  This remains the law in New York with respect to inheritance rights of adoptees.

This brief history into the the inheritance rights of adopted children in New York is yet another reason as to why you should have an attorney draft your Will instead of relying on boilerplate forms that are not tailored to your unique situation. After all, no person’s estate and family situation is like any other, and your uniqueness should be reflected in the way that your Will is prepared: a Will that is specifically drafted for you. Your Will is, after all, one of the most important documents of your life and you should have the benefit of expert legal assistance in drafting it.

In the next segment of this series, I will look at some specific and fascinating New York cases involving adopted-out children and inheritance rights.  I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.

What Constitutes a Valid Will in New York? Part 4: The Absence of Undue Influence

For a Will to be valid in New York, there must be an absence of undue influence.   Undue influence is an issue that arises in the context of a Will contest.  The person challenging the admission of the Will to probate may assert that the person making the Will (testator) did not have free will at the time that the Will was drafted. 

Undue influence implies that the testator was being advised to make certain property dispositions to the advisor who exercised power over the testator.  That power over could have been through psychological domination, or through a special relationship of trust such as one that would exist between long-time friends or siblings.  An allegation of undue influence may only arise in a Will contest when the advisor is receiving a direct benefit as a result of specific acts.  If the advisor is receiving an indirect benefit, then the proper charge is one of fraud.

What is the definition of undue influence with respect to the drafting of a Will?  The New York Court of Appeals defined the term in a case decided in 1877 called Children's Aid Society v. Loveridge 70 N.Y. 387 (1877).   The definition has been used to determine the presence or absence of undue influence since that time:

"It must be shown that the influence exercised amounted to a moral coercion, which restrained independent action and destroyed free agency, or which, by importunity which could not be resisted, constrained the testator to do that which was against his free will and desire, but which he was unable to refuse or too weak to resist. It must not be the promptings of affection; the desire of gratifying the wishes of another; the ties of attachment arising from consanguinity, or the memory of kind acts and friendly offices, but a coercion produced by importunity, or by a silent resistless power which the strong will often exercises over the weak and infirm, and which could not be resisted, so that the motive was tantamount to force or fear lawful influences which arise from the claims of kindred and family or other intimate personal relations are proper subjects for consideration in the disposition of estates, and if allowed to influence a testator in his last will, cannot be regarded as illegitimate or as furnishing cause for legal condemnation" (Children's Aid Soc. v. Loveridge, 70 N.Y. 387, 394-395).

There are certain confidential relationships where, absent an explanation, the inference of undue influence arises when the advisor is a named beneficiary in a Will.  The first such relationship to receive scrutiny is when the attorney drafting the Will is a named beneficiary in the Will.  "Such wills, when made to the exclusion of the natural objects of the testator's bounty, are viewed with great suspicion by the law, and some proof should be required beside the factum of the will before the will can be sustained."  (Marx v. McGlynn, 88 N.Y. 357, 371.).  In Matter of Putnam  257 N.Y. 140 (1931), the New York Court of Appeals held that there is a rebuttable inference of undue influence when an attorney is a named beneficiary in a Will that he or she drafted.  This is known as the Putnam rule. 

Lower courts in New York have since applied the Putnam rule to other confidential relationships, such as doctor and patient (Matter of Satterlee 119 N.Y.S.2d 309 (1953)); nurses and patients (Hazel v. Sacco, 52 A.D.2d 1042 [4th Dept 1976]); clergy and parishioner (Matter of Eckert 93 Misc 2d 677 (1978)); and accountant and client (Matter of Collins, 124 AD2d 48 (1987)).

To prove undue influence, the person objecting to the admission of the Will to probate must prove three elements: (1) motive, (2) opportunity and (3) actual acts of undue influence.  The standard of proof is by a preponderance of the evidence, meaning that it is more likely than not that the evidence presented is true.  Circumstantial evidence may be used, but this evidence must lead to a necessary conclusion of undue evidence.  The modest standard of proof, by a preponderance of the evidence, is used because the State has an interest in ensuring that estates are distributed in an orderly manner and according to the decedent's wishes.  The person contesting the Will bears the burden of proof throughout the proceedings.

The issue of who bears the burden of proof is a Wills contest case is very important.  We have to distinguish between a claim of undue influence in a contracts dispute and a claim of undue influence in a Will contest. In a contract dispute, when the vulnerable party in a special relationship makes a claim of undue influence, the burden of proof shifts to the more powerful party to disprove the allegation. If the vulnerable party prevails, then the contract is voidable, meaning that the vulnerable party can elect to enforce the contract but the contract cannot be enforced against him or her. But in a Will contest where the issue of undue influence has been raised, the burden of proof never shifts from the person contesting the admission of the Will to probate.

How do these three elements play out in cases involving undue influence?  In a recent case decided in January 2010, Matter of Feller 2010 NY Slip Op 50001(U) [26 Misc 3d 1205(A)], the issue of undue influence arose in the context of funeral plans and the choice of a funeral home.  The attorney who had drafted the Will was also the executor of the estate and the proponent of the Will before the Surrogate Court.  But because the attorney was not a named beneficiary in the Will, the Putnam rule did not apply.   

The objectants to the admission of the Will to probate claimed that the attorney had used his influence to have the decedent change her funeral home.  The attorney had the opportunity to exert undue influence regarding the choice of a funeral home, and he did have a potential motive:  he represented a competitor funeral home.  But the record clearly showed that the decedent had selected a funeral home not represented by the attorney, eliminating any motive.  Moreover, the attorney had on several occasions advised his client that she should choose someone other than himself as executor.

Because the objectants failed to prove all three required elements to make a showing of undue influence, the court found an absence of undue influence.  The court also found that the testator had testamentary capacity and that the formalities for the Will execution ceremony had been properly followed.   The Will was, therefore, admitted to probate.

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What Constitutes a Valid Will in New York? Part 3: The Witnesses

By definition, a witness is one who provides evidence.  In the context of a Will attestation, witnesses are the persons who, by their presence, can provide a first-hand account of what they saw, heard or experienced during the Will execution ceremony.  By signing the document, they affirm that the maker of the Will (testator) has testamentary capacity and that the testator's signature is authentic.

New York's EPTL § 3-2.1 sets out the statutory requirements as to witnesses.   New York requires two attesting witnesses.  There are no statutory requirements regarding the qualifications of witnesses.  At the request of the testator, each witness must sign the Will and thereby affirm that the testator knows that he or she is making a Will, and that the testator has declared the document being signed as his or her last Will.  In New York, this is referred to as the publication requirement, and it is part of the Will execution ceremony.

The testator must sign the Will in the presence of the witnesses, but the witnesses need not sign in each others' presence.  If the testator sign in the presence of only one witness, then the testator must acknowledge his or her signature to the other attesting witness.  In this case, the witnesses must sign within 30 days of each other.  In New York, there is a rebuttable presumption that the Will was signed by each witness within the 30-day window.  The presumption goes to due execution.  It is a rebuttable presumption because it can be challenged in a Wills contest and possibly overcome if proven otherwise.  The 30-day clock starts to run when the first witness signs the Will attesting the testator's signature.

Each witness is asked to provide a current address, though failure to do so will not render the Will invalid.  The purpose for providing the address is that, should there be a Wills contest, the witness may be asked to provide testimony regarding the facts surrounding the Wills execution ceremony, such as the testamentary capacity of the testator or the authenticity of the testator's signature.  The witnesses will need to be located in order to make an appearance in Surrogate Court.

Suppose that at the time of the Wills contest, one of the witnesses is dead or legally incompetent to testify.  What result?  In this case, the testimony of the other witness is sufficient.  Now suppose that neither witness is able to testify.  What result?  The Will proponent (the person presenting the Will in a probate proceeding before the Surrogate Court) must provide proof of the testator's signature and of one witness.

Of course, problems associated with due execution may be overcome with a self-proving affidavit.  Unlike an attestation clause, which only acts to corroborate the witness's testimony once called to testify or else to prove the witness's signature, the self-proving affidavit acts as a substitute for the witness's live testimony.  The affidavit has the same force and function as a deposition or interrogatory:  it is evidence of personal knowledge, and because the witness swears an oath, the affidavit is presumed to be truthful.   The affidavit will be notarized by a Notary Public (in many cases, the attorney overseeing the Wills execution ceremony is also a notary public).  A self-proving affidavit should be prepared by an attorney in order to make sure that it conforms with the State statute.

In a self-proving affidavit, each witness swears an oath and signs an affidavit that recites all of the statements that they would make in court were they called to testify.  These statements refer to the testamentary capacity of the testator, and the signature requirements.  As a result, the affidavit is usually signed at the time of the execution of the Will.

What happens if one of the witnesses is also a beneficiary under the Will?  This is known as an interested witness.  New York's interested witness statute is EPTL § 3-3.2 (a).  The signature of an interested witness does not make the Will invalid.  But it does make the bequest to the interested witness void.  This can have dramatic and unintended consequences.

Consider the case of the Matter of the Estate of Cynthia R. Wu (877 N.Y.S. 2d 886).  A provision of Wu's Will provided for the following:  "All estate and inheritance taxes payable by reason of my death, in respect of all items included in the computation of such taxes, whether passing under this Will or otherwise, shall be paid by my Personal Representative or Trustee as of [sic] such taxes were my debts, without recovery if [sic] any part of such tax payments from anyone who receives any item included in such computation" (emphasis added).  Wu's brother, Harry Wu, was the beneficiary of two life insurance policies totaling $3,314,215.   The problem was that Harry was also one of Cynthia Wu's attesting witnesses at her Will execution ceremony, and therefore an interested witness. 

At issue was whether Harry Wu would be absolved from paying his ratable share of the estate taxes as provided for under the terms of the Will, or whether the fact that he was an interested witness made the provision in the Will void, making him subject to paying his share of the estate taxes.  Calling the rule about an interested witness "absolute," the Surrogate Court, relying on a clear legislative intent to prevent fraud or undue influence, found against Harry Wu.  He was required to pay his ratable share of estate taxes from the proceeds of the life insurance policies.

Harry Wu's bequest could have been saved by the supernumerary rule, that there were three witnesses and two were disinterested.  Wu attempted to claim this rule in his defense by claiming that the notary was the third witness.  And even though the notary knew that this was Cynthia Wu's Will, she had not asked the notary to be a witness, a requirement under the statute.

Harry Wu's bequest could have also been saved by an exception in the law.   Where the interested witness (in this case Harry) would have been a distributee had Cynthia died without a will (intestate), then the law allows the interested witness to take the bequest to the extent of the interested witness's intestate share in the estate .  However, Cynthia was survived by her husband and two children, so Harry did not qualify as an intestate distributee (see my prior posting on the difference between an heir and a beneficiary).

The Wu case is a cautionary tale as to why you should have an attorney draft your Will instead of relying on boilerplate forms that are not tailored to your unique situation.  After all, no person's estate and family situation is like any other, and your uniqueness should be reflected in the way that your Will is prepared:  a Will that is specifically drafted for you.  Your Will is, after all, one of the most important documents of your life and you should have the benefit of expert legal assistance in drafting it. 

The Surrogate Court in Wu was forceful in this regard:  "Any forfeiture resulting from unwitting use of a nontestamentary beneficiary as an attesting witness will most likely arise, as here, in the context of a tax nonapportionment clause covering assets passing outside of the will. It behooves any drafter using such clause to be fully informed of the testator's nonprobate assets to avoid unintended consequences, some of which may have even greater potential for frustrating the testator's intent."

In the next blog post, I will examine what constitutes undue influence with respect to a Will in New York. I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.

What Constitutes a Valid Will in New York? Part 2: The Signature

One of the most controverted aspects of the Brooke Astor will contest case was whether the signature that followed the last of three amendments (also known as a codicil) to the wealthy socialite's 3 March 2004 Will was forged.   At stake were millions of dollars that would potentially be redirected to her son Anthony D. Marshall.  A forensic expert hired by Mrs. Astor's court-appointed lawyer concluded that Astor, who was 101 years old at the time and suffering from Alzheimer's, was too frail to have signed the codicil herself.

A signature on a Will attests to the testator's intentions as expressed in the provisions of the Will.  A forged signature on a Will or on a codicil is of grave concern because it acts to circumvent or to counterman the specific intentions of the testator and replace them with the forger's directives.  New York, therefore, imposes very tight restrictions on the signature at the end of a Will or a codicil.

In general, New York's statute on the execution of Wills (EPTL § 3-2.1) does not allow a holographic Will, that is a Will handwritten and signed by the testator without the presence of attesting witnesses.  The purpose of the witness rule is to verify that the testator actually created the Will instrument, and that the testator had testamentary capacity.  There are several emergency exceptions to the statute concerning holographic Will found in EPTL § 3-2.2.  These include armed forces personnel on active duty and mariners at sea.  However, these holographic Wills will expire one year following discharge from the armed forces.  The law presumes that within one year after discharge the individual has enough time to create and sign a properly witnessed Will.

A Will is usually signed during a Wills execution ceremony.  At that time, the testator signs the Will in the presence of the attesting witnesses.  The testator's signature need not be legible.  New York even allows for an "X" as a signature.  If the testator is physically unable to sign without assistance, a guiding hand is allowed, so long as it is the testator's intent that assistance be provided to sign the document.  If the testator is completely unable to sign the document, then another person may sign in the testator's stead so long as it is done under his or her director and in the testator's presence.   This is known as a proxy signature.  The proxy must also sign his or her name, and will not be included as one of the two necessary attesting witnesses.  In such circumstances, it is wise to videotape the Wills ceremony in anticipation of a potential Wills contest.

The testator's signature must be placed at the end of the Will or the codicil.  Any words that follow the signature will be ignored.  However, if the words that follow the testator's signature are material to the completion of the distribution plan, then the entire Will is invalid.  The person would die intestate, and his or her estate would be subject to New York's default intestate statute (EPTL § 4-1.1).

New York requires two attesting witnesses to the testator's signature.  The testator must sign the Will in the presence of each witness.  But each witness need not sign in the presence of the other.  The execution ceremony must be completed within 30 days of the time when the first witness signs, not when the testator signs.

In the case of a codicil (an amendment or supplement to the Will), it must also be executed with the same formalities as a Will.  For a codicil, however, New York does not require that the witnesses sign in each other's presence or that they sign in the presence of the testator.

Though a self-proving affidavit is not required for a valid Will in New York, it is nonetheless a very good idea.  Your attorney can prepare this form for you as part of your Wills package.  The purpose of the self-proving affidavit is to certify the validity of the testator's signature in the event of a Wills contest.  The testator and three witnesses must sign the affidavit together in the presence of a Notary Public (many attorneys are also notaries public).  The Notary will require that the testator and the witnesses swear an oath as to the authenticity of the signature, and may require photo identification of the testator and the witnesses.  The self-proving affidavit will then be affixed to your Will.

In the next blog post, I will examine the requirements for the witnesses, and the role that the witnesses play in assuring the validity of a Will in New York.  I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published.  Thank you.

What Constitutes a Valid Will in New York? Part 1: Who Can Make a Will?

Some people may be under the impression that, by writing their final wishes on paper, they have created a valid Will.  And while that may be true in part, the writing of a valid Will is an issue of public concern because the State has an interest in making sure that property is passed on to subsequent generation in an orderly manner.  In New York, the validity of a Will is governed by statute, in this case EPTL § 3-2.1.  In the first part of this series, we are going to consider the issue of testamentary capacity, or who can make a Will in New York.

To create a valid Will, a person must be 18 years of age and be of sound mind, what is called testamentary capacity.  The standard for testamentary capacity, or soundness of mind,  is lower than for the capacity to contract.  Note that this important because in the event that a person is creating a Will and a prenuptial agreement (a contract) at the same time, then the standard for soundness of mind is not the same for each document.  The documents should be drafted with these different standards in mind to withstand any future challenges.

There are four ways to prove that the individual creating the will (testator) had testamentary capacity.  First, the person must understand what he or she is doing, that the person is signing a Will.  This goes to intent, that it is the testator's intention to create a Will.  In addition, the person must understand that a Will transfers property at the time of death and not while the person is still alive.  Finally, the person must understand that making a Will is a solemn legal act that will be executed with statutory Wills formalities.

Secondly, the testator must know the nature and extent of his or her property.  If a testator stipulates in a Will the donation of property that the person has never owned or does not currently own, this may later be used as an indication that the person did not have testamentary capacity at the time of making the Will.  A person of sound mind is presumed to know the extent of what he or she owns.

Thirdly, the testator is expected to know "the natural object of his bounty," meaning the people in the testator's life to whom the property will be transferred.  For example, leaving property to fictional characters or notable persons who have already passed away may be an indication of a lack of testamentary capacity.

Of special note here are pets.  Though the owner may consider a pet to be a "best friend" and may grant to the pet some human qualities, the law considers a pet to be property.  Therefore, it is better to find and appoint a caregiver for your pet in your Will, and to create a trust to take care of the pet's expenses, such as veterinary care, pet insurance, grooming, food, and equipment.  You can stipulate in the trust document how you wish your pet to be cared for.  The trustee can then make sure that your caregiver abides by your instructions.  If not, then a new caregiver can be appointed.

Finally, the testator must have a plan to distribute the property to actual persons.  Here, the plan must be coherent.  It does not matter if the plan is eccentric so long as it is logical and consistent.  The test for rationality is that the plan holds together logically.

What about the mental state of the testator?  Suppose the person cannot take care of his or her own affairs and cannot legally make a contract.  Let's even assume that the person has a court-appointed guardian to manage his or her property. Can that person still make a Will?

The answer is yes.  The legal definition of "sound mind" with regard to making a Will has nothing to do with intelligence.  So long as the five-factor test above has been met, then the test for soundness of mind has been met.  Even if a person has been adjudicated to lack mental capacity, such as a mental illness, a jury could still find that the person drafted the Will during a lucid interval.  The issue of a lucid interval is a question of fact for a jury to decide in the event of a Wills contest.

Courts have upheld Wills drafted by persons who abused drugs and alcohol, suffered from old age or illness, or were under a physician's care.  Even a person who suffers from an insane delusion, such as a belief that he or she is the ruler of Atlantis, may make a Will.  The parts of the Will affected by the delusion will be invalidated.  So the gift of the palace in Atlantis will be invalid, but other gifts may survive.  Because psychiatrists are often called to provide expert testimony in such Wills contest cases, the profession has developed a set of guidelines and protocols to assess testamentary capacity.

Attorneys may choose to videotape the Will execution formalities, during which time they will ask the testator about the disposition of property in the document, and ask that the testator affirm that he or she understands that they are signing a Will.  Such precautions may be necessary in anticipation of a Wills contest.  If your attorney wishes to take these precautions, he or she is acting in your best interest so that your property is distributed according to your wishes.

In the next installment of this series, we will look at the issue of the testator's signature.  As we look at these discreet point, my goal is to provide you with a complete understanding of what it takes to create a valid Will.  This information, in conjunction with the prior information found on past posts, should assist you as you prepare for your conference with your attorney.

For a downloadable mp3 version of this blog post, please visit my website at http://sites.google.com/site/richardsesq/. Under Resources, you will find the link to download this episode to your iPod or mp3 player.

I invite you to join my list of subscribers to this blog by clicking on "Subscribe to" on the left-hand side of the page so that you can receive a notification when the next installment has been published. Thank you.

Beneficiaries Not Controlled by a Will: Understanding the Fine Print

In previous blog posts, I have discussed default rules that impact your estate. For instance, if you do not have a Will, then the State statute governing the distribution of your estate will go into operation. In New York, that statute is EPTL § 4-1.1. Your wishes expressed in a valid Will overcome the default rules expressed in the statute, however. Today we are going to discuss assets that are not impacted by either a valid Will or a State statutory schema, and how your selection of a beneficiary distribution scheme will impact who can receive these assets.

If you have an IRA, 401(k), 403(b), an employer-sponsored retirement plan, a life insurance policy, or an annuity contract, then each of these allows for a beneficiary designation.  These types of accounts are called "payable on death" (POD) or "transfer on death" (TOD) accounts because they pass directly to your named beneficiaries outside of probate on the event of your death.  You may change your beneficiary designations on a POD account at any time, and it is a good habit to review your beneficiary designations on these accounts at least once a year to account for any changes in your life or your family's life.

POD accounts are not controlled by the beneficiary stipulations in your Will, or by the distribution scheme you have selected in your Will, or even by the default provisions in a State statute.  They are contracts that you sign with a provider.  As such, you are bound by the provisions of the contract and the distribution system found in that contract. We discussed in a prior post the differences between the per capita at each generation distribution system, which is New York's default system if you die without a Will, or a per stirpes distribution system, which you can elect in a valid Will.  Each contract that you have signed has a provision that details which distribution system governs that contract.  The trick is to understand the distribution provision in your contract(s), and to adjust your estate planning to account for this variable.

Why does this matter?  Let's look at an example.  Let's imagine that you are a single parent with three children.  Your eldest child is also the parent of two children.  You have an IRA contract, a POD with beneficiary designations. 

Let say that the POD contract's default beneficiary distribution schema is a per capita distribution.  Now let's assume that your eldest child predeceases you.  What result with a per capita distribution?

With a per capita distribution, so long as you have living children, none of your assets will be distributed to your grandchildren.  If Child 2 also predeceases you, Child 3 will receive 100% of the assets.

Now suppose that your POD contract allows you to select a per stirpes distribution.  What result?

With a per stirpes distribution, the 1/3 share that Child 1 would have received is distributed to that child's lineal descendants.  Your grandchildren may now receive a portion of your assets.

Reading and understanding the fine print in all of your POD contracts is the first step towards providing for your family's long-term needs.  The next step is to reconcile any variations between and among your various POD contracts.  To offset these variations in beneficiary distribution schemes, you way wish to consult your attorney to discuss the advantages or disadvantages of naming your estate as the beneficiary on your POD accounts, assuming that you have a valid Will, or a trust that would receive the proceeds of your POD accounts and then distribute these proceeds according to the language of the trust.

In any case, this topic illustrates the need to meet with your attorney on a yearly basis to review your estate plan, including changes in your family, your Will, your POD accounts, and any trust instruments that you may have drafted.  These are complex matters that require professional knowledge and attention to detail.  This is a yearly appointment that you don't want to miss because it will ensure the continued welfare and well-being of your loved ones.

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What is the Difference between an Heir and a Beneficiary?

In everyday life, you will often hear people speak about their hope for an inheritance from a family member or relative.  However, this commonplace use of the term "inheritance" often masks a misunderstanding of the law and can lead to unintended consequences when misplaced assumptions are not addressed.  Today we are going to examine exactly what the term "inheritance" means from a legal standpoint, and how having a Will takes uncertainty out of the equation.

What defines an "heir"?  Strictly speaking, one is not an "heir" of a living person.  That is because the exact identity of an "heir" is determined at the time of the decedent's death.  The determination is made by the laws of the jurisdiction, and not by the decedent.  An "heir," then, is a legal creation and its terms are defined by a State.  One becomes an heir by virtue of satisfying the definition in a statute.  In New York, that statute is EPTL § 4-1.1. That is because New York  has an interest in the smooth transfer of property from one generation to the next.  As such, an "heir" is the statutory recipient of property from a decedent who dies without a Will (intestate).  The State is also the final "heir" in most statutory schemes.  If there are no statutory heir, then the property will go to the State (escheat).  In New York, a person who inherits property under intestate succession is called a distributee.

New York also has a "laughing heir" statute (EPTL §4-1.1(6)).  A "laughing heir" is someone entitled to inherit by law who is so remotely connected to the deceased that he or she would not feel any sorrow at hearing of the death.  To prevent this occurrence, New York cuts off heirs at the grandchildren of the deceased:  "For the purposes of this subparagraph, issue of grandparents shall not include issue more remote than grandchildren of such grandparents."  No one more remote, such as a great-grandchild, may inherit.  After that, the property of the deceased escheats to the State.

When a person dies without a Will, New York uses as its default an intestate distribution system called per capita ("each head") at each generation.  In this system, each person is weighed equally.  By virtue of their presence on the family tree, no one can be disinherited.  The first thing we have to do is determine the number of surviving distributees. To illustrate: Beth is a single person who dies without a Will.  She had two sons named Luke and Dick, and a daughter named Nancy.  Luke had two children, Bill and Jane, and Nancy had one child named Jim, and Dick had two children named Sandy and Sam.

At the time of Beth's death, Luke had already predeceased her.  Had Luke been alive, he, Nancy and Dick would have each received 1/3 of the estate.  Because Luke has already died, Nancy and Dick each receive their 1/3 share, and Luke's children divided what would have been their father's share equally between them.  So Nancy receives 1/3, Dick receives 1/3 , and Bill and Jane each receive 1/6.   

Depending upon your family situation, the New York default system of distribution may not suit your needs.  In that case, you may want to draft a Will stipulating that you want your estate distributed per stirpes ("by each branch") to give you more control over the outcome.  In New York, a person who receives under a Will is called a beneficiary.  Let's say that you want your great-grandchild to receive something from your estate.  Drafting a Will eliminates the "laughing heir" statute and allows you to leave something to your great-grandchildren.  A Will also allows you to distribute your estate to a class of beneficiaries, such as "to all my children" or "to all of my grandchildren" to cover any issue born or adopted after the execution the Will (pretermitted child).  The class closes at the time of the death of the testator.

Finally, instead of having your estate possibly escheat to the State, you can name a person unrelated to you or a charity as a beneficiary of your residuary estate.  Your property can then be used in a way that is consistent with your life and beliefs.  You should seek the advice on an attorney in drafting a Will so that your wishes are reflected in the resulting document.

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Single Parents and Wills: The Appointment of a Guardian for Your Child

One of the most important decisions that a single parent can make regarding the care of a minor child is the appointment of a testamentary guardian in the event of the parent's death.  The appointment of a testamentary guardian is done in a Will.  In essence, a guardianship clause in a Will determines who will get custody of the child upon the parent's passing.

If you are divorced, then it is very important that you have a Will.  While the remaining parent will likely become the guardian of your child, unless that parent has been declared unfit, the Will of the last parent to die will determine the guardianship of any minor child.  To illustrate:  if a divorced mother with a Will predeceases her divorced husband who later dies without a Will,  the mother's designation of a testamentary guardian will prevail.

How should you choose a testamentary guardian for your minor child?  There are several factors to be considered, such as:

• the health of the guardian;
• the person's values;
• whether the proposed guardian has children already and, if so, whether their ideas on parenting are in agreement with yours;
• if religious upbringing is important to you, whether the proposed guardian shares your beliefs;
• whether the proposed guardian shares your educational values; 
• whether the person is willing to comply with all of the court procedures on a yearly basis;

You should consider appointing an alternate guardian who will also meet the same criteria as the designated guardian in case the designated guardian cannot take on the duties in the event of your death. Note that, depending upon the age of the minor child at the time of the parent's death, any designated guardian or alternate may have to serve for quite a long time.  Therefore, a designated guardian should reflect carefully upon the duties involved before making the commitment.

Regardless of the presence of an ex-spouse,  a single parent will want to assure the unencumbered transfer and management of non-probate assets for any minor child through a Will.   If your minor child is named as a beneficiary of your life insurance policy or retirement plan, then that property will pass outside of probate directly to your child.  In your Will, you may want to consider either appointing a separate guardian for your child's property or establishing a testamentary trust.    

If there are multiple children, provision may be made in the testamentary trust to pool the assets in order to afford the trustee discretion in caring for differing needs of the children.  This is especially important if there is a special needs child.   Without a Will, each child will receive equal shares without any regard to the different care needs of each child. 

In the case of a testamentary trust, the parent (grantor) will want to designate a trustee to manage the proceeds of the trust until the child reaches majority.  The designated trustee must agree to meet annually with the probate court and show that the trust assets are being dispersed responsibly. 

A single person should consult with an attorney to draft a Will that will provide for the proper care of minor children in the event of the parent's death.  The attorney will assess each individual situation and provide guidance as to how best to protect the minor children and their assets.

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The Stuff of Your Life: Singles and the Special Power of Appointment

Space is decidedly the "final frontier" for New Yorkers.  We measure ourselves by the sum total of our square feet of space, and that may include a self-storage unit somewhere in New Jersey.  In our precious space, we store the stuff of our lives.  Some of us get very creative and use our kitchens for extra storage space!

While we are busy collecting stuff, we rarely have time to reflect upon the unintended consequences of this accumulation.  When we die, who will dispose of our stuff?  And to whom will it go?  These questions are particularly significant for singles who do not have a Will.  In New York, the statute that governs the distribution of the estate of a person who dies without a Will is EPTL § 4-1.1. For example, if you are single with no children and you die without a Will, New York State will award your property to your parents. If your parents are deceased, then your property will be divided among your siblings and their heirs. If you have no siblings, your property will go to the State of New York.

With a Will, a single person can create a special power of appointment that will allow him or her to control the disposition of his or her belongings.  For instance, you may give a special power of appointment to a close friend or relative to distribute your belongings to your then surviving family members, with any remainder going to a charity named by you.  The person holding the special power of appointment then has the discretion to choose who gets what. 

There are two benefits associated with a special power of appointment.  First, it prevents family squabbles over the division of your belongings.  The person holding the special power of appointment makes that determination.  Secondly, if a beneficiary refuses a gift for any reason, the gift reverts back to the estate to be distributed to other surviving family members.  And your book collection or your collection of porcelain statuettes can be kept intact and given to a family member who will cherish it.

Having a Will with a special power of appointment will provide a single person with peace of mind, knowing that there will be a smoother distribution of their belongings lovingly acquired during their lifetime.  An attorney can assist you with drafting a special power of appointment in a Will to suit your specific needs.

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I am Single: Do I Need a Will?

If you are currently single, you are not alone.  Over 40% of all adults 18 years and older are single.  And if you live in Manhattan, you live in the borough with the most singles in New York City (61.4%).  Chances are that you are working, have a 401(k), some assets, and maybe a pet or two.  Chances also are that you don't have a Will.

Why is this an important issue?  Because the percentage of single people in this country is rising faster than the percentage of married persons. According to a 2008 U.S. Census Bureau report, singles in this country break down statistically into the following groups:

95.9 million:  Number of unmarried Americans 18 and older in 2008. This group comprised 43 percent of all U.S. residents 18 and older.

53%:  Percentage of unmarried Americans 18 and older who were women.

61%:  Percentage of unmarried Americans 18 and older who had never been married. Another 24 percent were divorced, and 15 percent were widowed.

15.8 million: Number of unmarried Americans 65 and older. These older Americans comprised 16 percent of all unmarried and single people 18 and older.

87:  Number of unmarried men 18 and older for every 100 unmarried women in the United States.

52.9 million:  Number of households maintained by unmarried men or women. These households comprised 45 percent of households nationwide.

32.2 million:  Number of people who lived alone. They comprised 28 percent of all households, up from 17 percent in 1970.

Source for statements in this section: America’s Families and Living Arrangements: 2008

In an article titled "Single New Yorkers, Ahead of the Pack," the New York Times tacked the issue of what "single" means today (it is an especially relevant term as we all fill out our Census forms).  In New York City according to the American Community Survey conducted between 2005 and 2007, the Times reported the following numbers of singles by borough:

• 
  
  Staten Island is 41.0 percent single with 26.5 percent never married.
• 
  
  Queens is 46.3 percent single with 30.9 percent never married.
• 
  
  Brooklyn is 52.4 percent single with 37.0 percent never married.
• 
  
  The Bronx is 57.6 percent single with 41.6 percent never married.
• 
  
  Manhattan is 61.4 percent single with 45.9 percent never married.

Many single people do not have a Will. That may be because they believe that their worldly possessions will go to their families; that one should draft a Will only if there is a spouse or a child involved; or that they do not have enough assets to make a difference. And while these assumptions may be true in many cases, many singles have not considered the consequences of dying without a Will (intestate) on their families. Writing a Will may be one of the kindest acts that one can do for one's family.

So why is it so important for a single person to have a Will?   In New York, the statute that governs the distribution of the estate of a person who dies without a Will is EPTL § 4-1.1.   For example, if you are single with no children and you die without a Will, New York State will award your property to your parents.  If your parents are deceased, then your property will be divided among your siblings and their heirs.  If you have no siblings, your property will go to the State of New York.

But is that always the best result?  Let's imagine some scenarios for Client X, a single person living in New York, with two siblings and both parents living.  Let's say that one of Client X's parents becomes seriously ill requiring nursing home care.  The ailing parent meets the Medicaid income eligibility standards for nursing home care.  The non-ailing parent goes to live with Client X's eldest sibling.  Client X dies without a Will, leaving behind substantial savings that get awarded to Client X's parents.  As a result, Client X's ailing parent may now be required to contribute towards the nursing home costs.  Instead, Client X could have left his savings to his siblings in his Will,  with a greater share to the sibling taking care of the non-ailing parent.

Client Y is single and an only child whose parents have predeceased her.  Client Y owns her home.  If she dies intestate, the home will escheat to the State of New York.  But Client Y is a loyal alum of Education University (EU) and attends every alumni function.   Instead of her home going to the State after her death, she can gift her home to EU as a charitable bequest in her Will, and designate that any proceeds from the sale of her home after her death be used for student scholarships.

As these two scenarios illustrate, a single person should draft a Will with the assistance of an attorney to take into account the best interests of loved ones left behind.  Your attorney will assess your individual needs and draft a document that will suit your interests and the interests of those who remain after your passing.

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