Residents of New York who have recently lost a loved one may wonder what debts they could be liable for repaying. The first question to be answered is who is responsible for the financial administration of an estate. If there is a will, an executor should be named. If there is no executor, the state will appoint someone to oversee a deceased person’s financial affairs. This person is called the administrator and is chosen in part by their relationship to the person who has died. Generally, the surviving spouse and children are the first ones asked.
In general, debts must be paid with what remains of the estate. However, the debts do not always pass to anyone else if they cannot be paid. In these cases, creditors simply have to write off the debts of the deceased as losses most of the time.
There are a few exceptions to avoiding the inheritance of someone’s debts. Some states require the surviving spouse to pay some types of debt, but these tend to be debts related to Medicaid and health care and not credit cards. Community property laws could leave spouses liable for more debts, but New York does not have those laws. Technically, the adult child of a parent who could not pay for long-term care may be liable for that bill in some states, but that law is rarely invoked. Finally, executors or administrators who do not act within certain legal boundaries may be responsible for debts.
Individuals should be aware of their rights if collection agencies try to make them pay for the debts of the deceased. Furthermore, collection agencies discussing debts with anyone except a spouse or the parents of a deceased minor is illegal, and the Federal Trade Commission should be notified in such circumstances. If there is a question of whether or not someone’s debt is inheritable, an estate planning attorney may be able to assist in determining the answer.
Source: The Motley Fool, ” What Happens to Credit Card Debt When Someone Dies “, Peter Andrew , July 19, 2014
The will of actor Philip Seymour Hoffman, currently in probate in New York, leaves everything to the mother of his three children. According to those close to him, Hoffman did not want his children to be trust fund children. While Hoffman and his children’s mother were not married, their relationship was described as being like a marriage. Hoffman wrote the will in 2004 when he had only a one-year-old son, but according to his accountant, as recently as one year ago, he reinforced his belief that he did not want to set aside a trust for his children.
His will did contain a provision for a trust for the oldest son in the event that his son’s mother was also deceased. Hoffman’s will contained another provision in the event of his children losing both their parents. He left instructions that if a guardian were appointed, his son should be raised in an atmosphere of arts and culture. He specified Manhattan, Chicago and San Francisco as his choice of cities where his son should ideally be brought up. Barring this possibility, Hoffman requested that his son visit those places at least twice a year.
According to a report filed by the lawyer appointed to represent the children’s interests, Hoffman’s lawyer and accountant repeatedly recommended that he create a trust, but Hoffman declined to do so. The children’s lawyer recommended acceptance of the will.
Hoffman’s case indicates the importance for an individual of making sure that any unusual decisions such as cutting out heirs or declining a trust when it makes logical financial sense should be backed up with explicit expressions of one’s wishes. In this case, Hoffman’s statements made his intentions clear and may serve to expedite the probate process.
Source: CNN, ” Philip Seymour Hoffman didn’t want ‘trust fund kids,’ court docs show “, Alan Duke, July 22, 2014
When New York musician Lou Reed died in 2013, he left a 34-page will behind. For some people, a will is sufficient, but for someone of Reed’s financial worth and ongoing income, a revocable trust would have been a more appropriate approach to estate planning.
Reed’s estate was worth a minimum of $30 million at his death and perhaps more. Moreover, it continues to earn money. The co-executors have asked for fees of $220,000. Reed left assets of around $10 million to his wife and sister. He also left property worth about $9 million to his wife along with 75 percent of the residuals of the estate. The other 25 percent went to his sister. An additional $500,000 was set aside for the care of his elderly mother.
These facts have been widely reported in the press, but had Reed left behind a revocable trust rather than a will, they would have remained private. Unlike a trust, a will must pass through a probate court, and that is a public process. The probate process can be expensive, and it also may exacerbate conflict. Challenging a will is a simpler process than challenging a trust, and with all the information in the will open to everyone, heirs can see which assets are going to what individuals. This may lead to infighting that a private trust may avoid.
Another advantage of a revocable living trust is that it can explain how assets should be handled if a person is still alive but unable to take care of themselves. Reed knew he was suffering from cancer, so it is unclear why he did not plan his estate differently. Even individuals who are not wealthy may benefit from a trust instead of a will.
Source: Forbes, ” Lou Reed Walked On The Wild Side With His Estate Planning “, Danielle and Andy Mayoras, July 10, 2014
Baby boomers are estimated to receive a median amount of $64,000 from their parents as they pass away. With so much wealth being passed on from parents to adult children, fights over who should get what from their parents are becoming more common in New York and around the country. While many of these battles are continuations of sibling rivalries that have lasted for years, some of the conflict stems from the fact that many people are going through tough financial times.
According to a New York trusts and estates lawyer, people are willing to fight for whatever money that they can get and are not necessarily ashamed about making their intentions public or taking their siblings to court. While it was once considered shameful to fight over a will in court, more and more people are willing to contest a will if they feel they didn’t get their fair share from their parents.
Another reason why heirs may be willing to fight family members for their parents’ assets is because there is more wealth to share. Unlike previous generations, many middle class individuals owned a home, had a retirement account and had other valuable assets at the time of their death. In some cases, a parent may have passed down ownership of a profitable family business to one sibling but not others.
Timely estate planning and good communication between parents and children may make the passing of assets easier. It may also be worth looking into creating a trust with specific instructions that may be tougher to challenge when the person who created that trust passes. Many challenges to wills or trusts may be settled outside of the courtroom, and it may be worthwhile to talk to an probate attorney to come to a resolution.
Source: Insurance News, “Inheritance conflicts pit relatives against one another “, Tim Grant, July 04, 2014
Putting final wishes and bequests in writing through the form of an official will is one of the best ways to ensure that a New York resident’s estate is properly dsitributed. However, there are many reasons a court will invalidate a will after death. There are common mistakes that people make which allow heirs to contest the will and force the courts to make changes that the deceased may not have wanted.
The first step to protecting assets in an estate is to choose unbiased witnesses. Someone with another agenda may be called upon later to claim that the deceased was not of sound mind at the time the will was signed. It makes it easier for heirs and people who are unhappy with the distribution of assets to call the validity into question and challenge how the estate is handled.
Some people will disinherit certain family members for one reason or another. This is well within the rights of an individual, but the courts normally presume that family members will be treated equally. If one person is not receiving an equal amount or is being excluded entirely, the reasons for that should be included in the documentation. It is also wise to at least acknowledge that these individuals exist by specifically stating that there are no provisions for them in the will. Taking these steps makes the will more difficult to contest later.
When people wait until they are dealing with an illness before creating a will, heirs may be able to argue that they did not have the mental capacity to sign such a document. Courts expect that the individual will understand what property he or she owns, who their potential heirs are, the fact that the personal property will be turned over to those selected as beneficiaries and the overall plan for estate distribution.
Source: The Motley Fool, ” 3 Reasons Your Will Won’t Hold Up in Court “, Dan Caplinger, June 28, 2014