Last year, New York State’s trusts and estates regime experienced several important developments, from landmark legislation and case law to significant regulatory guidance to several important decisions.
According to Sharon Klein, managing director of family office services and wealth strategies at Wilmington Trust, New York developments often frame similar issues in other states across the country.
Following are Klein’s picks of last year’s 10 top developments of interest to trusts and estates practitioners, which she set out in a recent New York Law Journal article, “Developments, Lessons and Reminders of 2014.”
1. Public access to surrogate’s court documents limited
New York Surrogate’s Court adopted a rule in February that limited public access to certain documents. According to Klein, only interested parties can view such items as guardianship proceedings filings, death certificates, tax returns, documents containing social security numbers, inventories of firearms and inventories of assets. Others can seek written permission of the surrogate or chief clerk to view these records. Not surprisingly, media groups oppose the new rule, asserting that court documents should be open to the public. The rule is currently under review.
2. Disposition of digital assets
The Uniform Fiduciary Access to Digital Assets Act was approved by the Uniform Law Commission, a national group that drafts laws for states’ use, on July 16. The goal of the act is to facilitate a fiduciary’s access to electronic records of a decedent on the premise that the fiduciary “steps into the shoes” of the account holder, Klein writes.
Now that the commission has approved the uniform act, state legislatures are in position to adopt it. Klein notes that several professional groups in New York are working on a New York version of the act to be introduced in the next legislative session.
3. Unitrust regime: a reminder
Under a unitrust regime, a trust can be converted to a unitrust, enabling an income beneficiary to receive a fixed 4 percent payout of the trust’s principal. Klein points out that in New York a unitrust regime can be applied retroactively, one of the few places this is possible. In most states, only prospective unitrust payments are allowed.
4. New way to calculate interest on delayed legacies
New York has enacted a law about how interest is computed on delayed legacy payments; it applies to estates of people who die on or after Dec. 20, 2014.
According to Klein, the new law says interest is automatically payable on a pecuniary legacy that is unpaid within seven months from the issuance of letters. In addition, the interest charge will be tied to the federal funds rate. And the interest charge will now be considered accounting income, meaning that its payment will carry out distributable net income and generate a deduction for the estate.
5. Divorce: lesson and reminder
New York’s Estates, Powers, and Trust Law provides that former spouses cannot receive bequests from a decedent’s estate or be nominated for fiduciary appointments, but this does not apply to the relatives of an ex-spouse. The Appellate Division affirmed this inMatter of Lewis. Klein reports that the decision has prompted professional groups to consider whether EPTL should be revised.
She writes that divorced spouses should immediately examine their planning documents to make sure they reflect their intent.
6. Note to charities: a pledge is not a contract
Public policy generally favors enforcement of charitable pledges, but in Estate of Kramer, the Kings County Surrogate’s Court in April declined to enforce a decedent’s pledge and promissory note. According to Klein, the court said a pledge was not a contract, but an offer to contract; only when the charity takes action by incurring liability does the offer become a binding obligation. The court found that the charity could not demonstrate that it had taken meaningful action relying on the pledge.