- Importance of Titling and Designation Beneficiary Designations
Whether the will is the primary estate planning vehicle or a back-up to a revocable trust, it is important to consider the role of non-probate assets in an estate plan. Proper titling of assets and contractual benefits, such as bank accounts, brokerage accounts, certificates of deposit, life insurance policies, retirement accounts, and real estate, is imperative for an effective estate plan. Failure to consider and verify ownership and beneficiary designations may undermine the estate plan, which could lead to:
- Additional taxes.
- Family conflicts.
- Litigation.
- Bequests
One of the primary functions of a will is for the testator to name the beneficiaries to receive the testator’s assets when the testator dies. The testator may do this by making various types of bequests in the will. The will provisions only control the testator’s probate assets.
The testator typically makes gifts in the will that are either:
- Specific or general gifts of items, such as real property, tangible personal property, and cash.
- Residuary gifts.
Not all gifts that the testator makes by will are guaranteed to succeed. A gift may fail because the item gifted no longer exists, the beneficiary predeceases, or there are insufficient assets in the estate to make all gifts and to pay the estate’s debts and expenses.
- Specific and General Bequests
Specific gifts, commonly referred to as specific bequests, are gifts of specific items of property, such as “my diamond necklace.” Specific gifts include:
- Gifts of specific real and personal property.
- Gifts of cash in specified accounts.
General gifts:
- Do not direct delivery of any particular property.
- Can be of a certain dollar amount or value.
- May be satisfied out of the general assets of the testator’s estate.
Both specific gifts and general gifts have potential downsides. Specific gifts are limited to the item described in the will. If the testator no longer owns that item at death, the gift generally adeems, or fails, and the beneficiary does not receive the specific item or anything in its place. Some general gifts, including gifts of specific sums of money, reduce in value as years pass due to inflation.
If the testator wants gift of a specific dollar amount to keep up with inflation, they can include inflation-indexing language in the will.
- Disinheritance
If a person is not specifically provided for in a will, that person generally does not take under the will. However, notable exceptions may apply in the case of:
- Spouses
- Children under age 21.
- Disinheriting a Spouse
In New York, spouses cannot disinherit each other. When a decedent dies with a will, if the decedent’s surviving spouse receives less than a statutory elective share amount under the will, the surviving spouse can opt to receive an elective share of the net estate instead of adhering to the will’s terms. This right can be waived in a signed writing or in a prenuptial or postnuptial agreement.
- Disinheriting a Child
A child generally has no right under New York law to inherit from a parent, subject to a few exceptions. An individual can disinherit their children, but the New York legislature has enacted laws to protect children from unintentional omission in a will in certain circumstances when a child is born after the signing of the will. To avoid unintentional application of these laws, it is important that a testator make clear their intention to omit a child or children.
- No Contest Clauses
A no contest clause, sometimes called an in terrorem, penalty, or forfeiture clause, may be included in a will or trust agreement and is designed to help preserve the testator’s or settlor’s wishes and deter a beneficiary who may otherwise try to contest a will or trust provision. A no contest clause generally states that a beneficiary who contests the will or trust agreement forfeits their right to inherit under the instrument. Some clauses go further and provide that the beneficiary’s issue are also precluded from receiving anything under the will or trust agreement. When a no contest clause is included in a will, the beneficiary must choose to either accept the benefit as granted in the will, or challenge the document and risk losing the benefit entirely.
Although no contest clauses are valid in New York, courts disfavor them and construe them narrowly.