Tax Consequences
Although beyond the scope of this article, "a quandary lurks in the issue of how much of a joint brokerage or joint bank account may be disclaimed in New York." H. Esterces, "Disclaimer of Jointly Held Real Estate, Bank and Brokerage Accounts," NYSBA Trusts and Estates Section Newsletter, Winter 2010 (Vol. 43 No. 4) at p. 19. That same quandary exists in regard to how much of the joint asset will be includible in the decedent's estate. Another dilemma is often presented to executors of taxable estates with a tax apportionment clause who is responsible for filing a tax return and satisfying the tax liability when a non-probate beneficiary is unwilling to voluntarily contribute his or her fair share of the tax liability. The executor or person acting as executor may be held personally liable for unpaid estate tax if he or she distributes assets to a beneficiary of the estate before payment in full of the New York state estate tax.
Conclusion
Non-probate assets are often created for convenience but prove to be anything but convenient when disputes arise. Inconsistencies in the law can only embolden the litigious to advance what are tenuous positions. It is prudent to discuss these issues with clients. Doing so can help illuminate the clients' true intent and objective in opening and maintaining their non-probate assets.
Alison Arden Besunder, of Arden Besunder P.C. in Manhattan, is of counsel to Bracken Margolin Besunder in Islandia.
Endnotes:
1. The Ferrara case precipitated the changes to the power of attorney law in New York in 2009 as amended in 2010, with specific authority required to allow the agent the scope of authority to make gifts.
2. GOL §5-1514 states that the principal may authorize the agent to "make gifts in any of the following ways: […] (3) opening, modifying or terminating a bank account in trust form as described in [EPTL §7-5.1] and designate or change the beneficiary or beneficiaries of such account." GOL §5-1514(c)(3). Even before the Sept. 1, 2009 amendments, the statute construed transfers made "either outright or to a trust for the sole benefit of one or more of said persons" to be a gift when made pursuant to a power of attorney; such gifts could not exceed $10,000 absent a special rider. GOL §5-1502M (2009).
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