Testamentary Substitutes PDF

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New York Trust and Estates EPTL Lecture...

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Trust and Estates Notes Spring 2020 TESTAMENTARY SUBSTITUTES o (1) When decedent dies after 1992, spouse gets to elect against the estate PLUS testamentary substitutes (add test. subs. to estate), including (but not including these if they were PRIOR to the marriage): o So these are things that get added into the pot of money that the Spouse can then elect on. ▪ NOTE: Insurance is NOT a testamentary substitute ▪ (A) Gifts causa mortis (in contemplation of death) ▪ (B) Gifts given within 1 year of death, PROVIDED that it is above the amount that is tax free ($13k per donee per year = this amount is excluded from gift tax and it is NOT included in the net estate) • Ie, T gives $15k to child then dies within 1 yr. $13k was tax free, so spouse can only elect against $2k of that. • NOTE!!!!!!!! ADVANCEMENTS!!!! in 2-1.5(e) says that nothing in advancements shall increase or decrease the elective share of surviving spouse BUT if you do it within the last year of a life!gets included in the pot of what the spouse can elect on. o If you did it 3 years before death!spouse out of luck ▪ So an advancement can be considered a testamentary substitute if its done within one year of death. ▪ (C) Totten Trust ▪ (D) Joint Bank Account, but you only include the amount that was contributed by decedent ! survivor can elect against that • EXCEPTION: If the other party is the spouse ! then it is presumed that it was 50/50

▪ (E) Jointly held property, but you only include the amount that was contributed by decedent ! survivor can elect against that • EXCEPTION: If the other party is the spouse ! then it is presumed that is was 50/50 • INCLUDES US Bonds and other US obligations ▪ (F) Property or contractual arrangement (lifetime transfers with retained powers)….that decedent gave something to someone with right to income or enjoyment, OR kept right to revoke the transfer, invade or consume the principle (think of this as a life time transfers.) o ex- you give away your house to children subject to a life estate to yourself for the rest for your life. You retain powers. • EXCEPTION: If decedent got consideration from this transfer ! not included b/c the consideratio450n he received is already included in the estate. ▪ (G) Plans, like retirement, pension, deferred compensation, death benefits o EXCEPTION: If constitutes a qualified plan under federal law ! only ½ is a testamentary substitute ! other ½ will go automatically to W, like a joint bank account (assume not qualified unless told otherwise) ▪ (H) Generally exercisable power of appointment ▪ (I) Transfer of security to a beneficiary ! brokerage account that is payable to someone upon death (TOD). (like Totten trust but with stocks and bonds) o (2) adds to the joint property-(D) (joint bank account) and (E) (jointly held property) above are treated as testamentary substitutes ONLY in proportion that funds were contributed the decedent’s. Surviving spouse has burden to establish proportions, but if H&W are joint owners, then there is a presumption that they each contributed ½

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▪ When held with another, amounts are traced ▪ When held with spouse = 50/50 (3) Property in (E) (jointly owned property other than bank accounts) INCLUDES US bonds and other US obligations (4) Banks are not held liable if they make a pay out to a joint owner WITHOUT having received notice of election (5) Creditors’ rights ALWAYS come first, even with right of election (6) don’t worry (7) If any part of this is preempted by federal law ! the federal law will be honored, BUT when property goes into another person’s hands, spouse has a right to go after it. Basically a run-around of the preemption clause of the US Constitution...