Do I need to file income tax returns as the Executor of a New York Estate?

Understandably I am often asked this question as April 15th approaches.  If a decedent’s estate has earned more than $600 in income during the tax year, the executor or administrator needs to file both Federal and New York State fiduciary income tax returns and pay any tax by April 15th.  The form for the Federal return is form 1041 and the New York State return is form IT-205. If an estate is open for more than one year, estimated New York State and Federal income tax  is due quarterly.

If the decedent died during the tax year, income from the commencement of the tax year until the date of death should be reported on the decedent’s final personal returns with the balance reported on the fiduciary returns.

These filing requirements are also applicable to irrevocable and testamentary trusts.  The filing threshold for trusts is $100 in income.  The same forms are used for trusts as are used for estates and estimated tax rules also apply.

Decedent’s estates and irrevocable trusts should have Federal ID numbers which should be used on the fiduciary returns.

There are no fiduciary filing requirements for revocable trusts, also known as “living trusts” as income is reported on the grantor/trustee’s personal income tax returns. Once the grantor/trustee dies, the living trust becomes irrevocable and a Federal ID number should be applied for.  Any income earned after the death of the grantor/trustee will then be subject to fiduciary income tax and reported on the fiduciary returns.

Failure to timely file and pay fiduciary income taxes can subject an estate or trust to interest and penalties.  An experienced attorney can help you comply with the various tax filing requirements.

Posted in Wills,Trusts and Probate | Leave a comment

How does an Executor or Administrator settle a New York Estate?

One of the first questions I hear from clients who have been appointed an executor or administrator is “How do I finalize or settle this estate?”  After the fiduciary, (i.e., an executor or administrator) of a New York estate has fulfilled their various responsibilities (see my blog post “What are the Duties of an Executor of a New York Will”) they should prepare to make final distributions of estate assets to the beneficiaries.  The fiduciary should not make such final distributions prior to seven months from the date of their appointment or they run the risk of being held personally liable for any unpaid debts of the estate that may arise after making said distributions.  Surrogates Court Procedure Act Section 1802 allows creditors this seven month period to present claims to the fiduciary.

After seven months have elapsed, the fiduciary should have their attorney prepare an  accounting which should set forth all assets received by the fiduciary, expenses paid and the proposed distribution of assets to the beneficiaries.  The accounting should be sent to the beneficiaries together with a document typically called a “Release, Receipt and Waiver” which they will be asked to sign if they agree with the accounting.  As its name implies, by signing this document the beneficiary acknowledges the amount of their distribution, releases the fiduciary from further liability and waives a formal judicial accounting. After receipt of all the releases, the fiduciary should send checks to the beneficiaries closing out the estate account(s). The signed releases are typically retained in the fiduciary’s  attorney’s file but they can be filed with the Surrogate’s Court.

If any beneficiary doesn’t approve the accounting and refuses to sign a receipt , release and waiver, the fiduciary will have to resort to a judicial accounting in which he/she petitions the Surrogates Court to approve their account. Such judicial accounting proceedings are quite complex and costly so if a beneficiary raises a minor objection to the accounting the fiduciary and beneficiary should attempt to resolve it without court involvement.

If the estate is liable for fiduciary income taxes for the tax year in which the final distributions are made, the final tax returns will include the distributions to the beneficiaries as a deduction. Due to this distribution deduction, no tax is payable by the estate but rather each beneficiary will receive a form K-1 setting forth their share of the estate’s income for the final year, which they will need to declare on their personal income tax returns and pay the appropriate tax.

As  you can see from the above, the assistance of experienced professionals is essential in properly settling an estate if the fiduciary wishes to be absolved from any future liability.


Posted in Wills,Trusts and Probate | Leave a comment

How can I administer a New York estate during a will contest?

In a proceeding to probate a will in New York State, all the heirs of the deceased testator must consent to the will being admitted to probate or be served with a citation.  The citation advises the heir that a last will and testament will be offered for probate on a certain date and if they or their attorney don’t appear at the court’s calendar call, it is deemed that they consent.  If heirs appear that have been disinherited or otherwise left less than their intestate share,  a will contest may ensue substantially delaying or even denying probate of the will.

During this time, a proposed executor may need to administer the estate, that is,  collect estate assets, pay bills, file tax returns and  manage estate assets that would otherwise be in jeopardy of decreasing in value.   In such a case a nominated executor can apply for “Preliminary Letters Testamentary.”  A petition for preliminary letters  and a preliminary executor’s bond must be filed with the court.  Upon the filing of the petition and bond, the nominated executor will be appointed a “preliminary executor” and issued preliminary letters testamentary.   A preliminary executor has the same powers that an executor would have to administer the estate but may not, however, make any distributions to beneficiaries under the will which is being contested and must instead take measures to preserve those assets.

If you are a nominated executor and anticipate a delay in probate due to a will contest or are already involved in a will contest,  you should discuss obtaining preliminary letters testamentary with your attorney.


Posted in Wills,Trusts and Probate | Leave a comment

What are the duties of an Executor of a New York Will?

One of the most important decisions you will make when preparing your last will and testament is your choice of an Executor. An Executor is the person(s) or entity such as a trust company, who is responsible for seeing that the provisions of your will are carried out.

Upon your death, your Executor will engage an attorney to probate your will, that is, prepare the probate petition and related documentation to file with the New York Surrogate’s Court of the county in which you had your principal residence. If there are no objections to probate, and your will meets the statutory requirements, the court will issue a document called “Letters Testamentary” which is evidence that the will has been admitted to probate and the person named in the will as Executor has been officially appointed.

Once appointed, the Executor has a duty to collect all your assets, and pay all valid debts. Estate assets must be deposited into an Estate account. An Executor must keep detailed records of all assets collected and debts paid as this will be needed to prepare a final accounting of the Executor’s actions. New York State law permits creditors of the estate up to seven (7) months after Letters Testamentary have been issued to file claims. Accordingly, a prudent Executor will keep sufficient estate assets on hand to pay any potential claims.

After seven months have elapsed, the Executor should prepare to make distribution of remaining estate assets to the beneficiaries pursuant to the directives in your will. Usually, prior to making distributions, an Executor will have prepared an informal accounting of all assets collected, debts paid and assets left to be distributed.

The above is only a broad outline of some of the most important duties of an Executor. Additionally, a New York Executor must file an inventory of assets with the court within six months of their appointment. Depending on the nature of the estate’s assets, appraisals of such assets may be necessary. Estate and fiduciary income tax returns may need to be filed. In such cases the advice of an attorney experienced in estate matters is indispensable.

Posted in Wills,Trusts and Probate | Leave a comment

Am I Entitled to a Fee for Being Appointed an Executor of a New York Will?

Executors of New York estates (and Administrators appointed when a person dies intestate, i.e. without a will) are entitled to receive a fee, called “commissions” to compensate them for their services provided to the estate. The law provides that commissions are based on a percentage of assets the executor collects and pays out during their administration of the estate. Commissions are based on a sliding scale of rates which decrease as the size of the estate increases.  The commission rates start at 5% for sums not exceeding $100,000.00 to 2% for sums exceeding $5,000,000.00.  NYS Surrogates Court Procedure Act Section 2307.

Generally, commissions are taken by the executor at the settlement of the estate, though in some cases the court may allow the advance payment of commissions.  Commissions are calculated by applying one-half of the applicable rate to assets received by the executor and one-half of the rate to assets paid out. For example, if an executor collected $100,000.00 in assets, his or her receiving commissions would be $2,500.00 (2.5% of $100,000.00.) If the estate’s assets, e.g., stocks, decreased in value during the administration of the estate to $95,000.00, once the stocks are sold and the proceeds distributed to the beneficiaries, the paying commissions would be $2,375.00 (2.5% of $95,000.00.)  The total commissions the executor would be entitled to receive would be $4,875.00 ($2,500.00 receiving commissions plus $2,375.00 paying commissions.)

There are certain rules which must be followed concerning which estate assets can be included in calculating an executor’s commissions.  Any items specifically left to a beneficiary are not included in calculating commissions.  Additionally, real estate is not included in the calculation of receiving commissions and can only be included in calculating paying commissions when it was sold to pay creditors or to make distributions to beneficiaries.  There are other rules which apply when there are multiple or corporate executors or when the executor is an attorney.

While an executor is entitled to commissions, there are situations when it would be beneficial for an executor to waive their commissions.  This typically arises when the executor is also a beneficiary of the estate.  Commissions received by an executor are considered ordinary income subject to local, state and federal income taxes. Sums received by an executor as a beneficiary of an estate are not considered income subject to tax.  It’s obvious that if the executor is also the sole beneficiary of an estate, it would make no sense to take commissions as the executor would be simply converting a portion of their tax free bequest into taxable income.  In cases where the executor shares the estate with other beneficiaries, a calculation must be done to see if taking commissions makes sense.

Needless to say it’s important to retain an an estate attorney familiar with the rules relating to executor’s commissions to ensure that you receive the benefits that you are entitled to as a New York State executor or administrator.


Posted in Wills,Trusts and Probate | Leave a comment

I am a Florida resident selling a home in New York. Will I have to pay New York State income tax?

I am often retained by out of state residents selling real property in New York who inquire about their tax liability in connection with the sale.  New York State does impose an income tax on non-residents selling New York real property when the seller realizes a taxable gain on the sale of the property.

The taxable gain is determined by subtracting your cost basis from your sale price.  There are many factors which go into determining your cost basis, such as whether you bought or inherited the property, the expenses you incurred in purchasing and selling the property and the cost of improvements to the property.  In addition, there are certain exclusions which apply which may offset or eliminate any gain.  The most common exclusion applies to individuals and married couples who occupied the property as their primary residence for two out of the past five years prior to the sale. In such a case there is a $250,000.00 exclusion for an individual and a $500,000.00 exclusion for a married couple.

If it is determined that there will be a taxable gain upon the sale of the real property, you will need to make an estimated payment of New York State tax at the closing by filing New York State tax form IT-2663 along with the deed and other documents.

If you plan on selling real property in New York State and are a non-resident you should consult with a professional well in advance of the closing in order to determine your New York State income tax liability,



Posted in Real Estate | Leave a comment

What is a Good Guy Guaranty of a New York Lease?

Whether you are just starting your business or are moving to a new location, leasing suitable space is one of the most important decisions you will be making.

In addition to signing a lease, if your business is in the form of a corporation or limited liability company,  you usually will be asked to sign a personal guaranty when you lease space in the name of your company.   Without such a guaranty, a landlord can only look to the assets of your company to satisfy claims which may arise under the terms of your lease.  A personal  guaranty will allow your landlord to  seek to enforce any claims arising under the terms of the lease against your personal assets.

A “Good Guy” clause in a personal guaranty of a lease will limit your personal  liability in the event you surrender the leased premises to the landlord prior to the expiration of the lease term.   In such a case  you would only be personally liable for money due to the landlord up to the surrender date.  While your company would remain liable, you would not be personally liable  for any future rent due your landlord for the remainder of the lease term.  Such liability could be considerable if you seek to surrender the premises early on during a long term lease.

A guaranty with a Good Guy clause will not absolve you of personal liability for any amounts due to the landlord under the lease prior to the date of your surrender of the premises and  requires that you voluntarily deliver the premises to the Landlord.

Needless to say, have your attorney  review your lease and any guaranty you are asked to sign in connection with leasing any commercial space as not all guaranties will contain a Good Guy clause.

Posted in Business - Buying-Selling-Starting, Real Estate | Leave a comment

How Can I Obtain Title to My Deceased Spouse’s Car in New York?

Many people are aware that a married couple’s joint bank accounts and jointly owned real property passes by operation of law to the survivor upon a spouse’s death .  In such cases, it is often unnecessary to probate a will or bring an administration proceeding unless there are other assets just in the deceased spouse’s name.  What many people don’t know, however,  is that there is other property solely in the deceased spouse’s name which  passes to a surviving spouse without the need to bring a proceeding in Surrogate’s Court.

Such property is set forth in New York State’s Estates Powers and Trusts Law Section 5-3.1  as “exempt” property when a deceased person is survived by a spouse or children under 21 years of age.  This property is exempt, that is, not part of the deceased person’s estate or subject to claims of creditors.  Included as exempt property is a motor vehicle worth up to $25,000.00, cash in bank accounts up to $25,000.00 and other property such as household appliances and furniture not exceeding $20,000.00 in value.

The New York State DMV will issue a new title to a surviving spouse, provided the vehicle is worth $25,000.00 or less, and the surviving spouse may continue to use the vehicle until the deceased spouse’s registration and/or insurance expires.  See the NYS DMV’s website for additional information.

If you have any questions concerning what property of your spouse’s may be exempt and whether you need to probate a will, be sure to consult with an attorney experienced in these matters.

Posted in Wills,Trusts and Probate | Leave a comment

Should I use a Quitclaim Deed to transfer a New York Home to a Family Member?

When I’m retained by clients to convey real property, such as a one-family home to a family member, I’m often asked if I will be preparing a quitclaim deed.  I tell my clients that in the New York Metropolitan area, the type of deed customarily used to convey real property, whether to a third party in an arm’s length transaction or to a family member, is a “Bargain and Sale Deed with Covenants against Grantor’s Acts.”  Why then do I commonly hear clients refer to “Quitclaim Deeds”?

The New York State Real Property Law recognizes several types of deeds to be used to convey real property. A quitclaim deed is among the recognized forms.  Nevertheless, the customary practice among local attorneys in New York will determine the appropriate deed to be used.  While there is no case law or statute prohibiting the use of a quitclaim deed to convey a home in the New York Metropolitan area, its use would be unusual and could raise questions down the road.

Other states do use the term “Quitclaim Deed” to describe the deed typically used to convey real property, which may partially explain people’s familiarity with the term.  The term “Quitclaim Deed” is also much easier to remember than  “Bargain and Sale Deed with Covenants against Grantor’s Acts” which is quite a mouth-full.  To borrow a phrase from the late Speaker of the House Tip O’Neil, who famously said “All politics is local,”  all real estate customs are local, especially the choice of a deed to use in conveying real property.


Posted in Real Estate | Leave a comment

Do I need an attorney to prepare my New York will?

With the proliferation of computer software and websites promising to save you money by assisting you in preparing legal documents, naturally people wonder whether they need an attorney to prepare their last will and testament.  Since you’re reading my legal blog, you probably already know my position on this matter.  In case you don’t, let me explain why using such  “do it yourself” software or websites may prove more costly in the long run and even result in your will being denied probate.

The preparation of your last will and testament is only the first step in assuring your will will be admitted to probate by the New York Surrogate’s Court upon your demise.  Your will must contain the necessary provisions to assure the appointment of your executor, and the disposition of your estate.  Assuming the contents of your “home-made” will pass muster, it is crucial that your will be signed before competent witnesses with the proper formalities required under New York State law.  If this is done under the supervision of an attorney, there is a  presumption that the legal formalities have been complied with.  This is not the case when an attorney is not involved.  Any failure in following these requirements can result in the will being denied probate and thus frustrating your wishes.

Not retaining an attorney to prepare and supervise the execution of one of the most important documents you will sign during your lifetime is definitely not something you should consider in order to save a small sum of money.  Doing so could cost your heirs or beneficiaries time and money in the long run and more importantly, could prevent your last wishes from being carried out.



Posted in Wills,Trusts and Probate | Leave a comment