What is an estate depends on what you are asking about. Typically people are asking about the estate of someone who died. Because someone dies is when you will probably hear the word “estate” the most, among loved ones, attorneys, and accountants.
In New York, “estate” has been defined in Estates, Powers and Trusts Law § 1-2.6 as either: (1) the interest which a person has in property or (2) the aggregate of property which a person owns.
The word “estate” when referring to property of a person who died can has be used in several ways, the most common of which are:
- probate estate
- trust estate
- small estate
What is a probate estate?
A probate estate refers to the total property of a deceased person that has to pass through probate proceedings. In determining whether the property is part of the probate estate, it is easier to remember the exclusions. The following property are excluded from the probate estate:
- trust assets
- assets with a designated beneficiary
- assets that are held jointly with rights of survivorship
- assets that are held under tenancy by the entirety
- assets that are designated “payable on death” or “transfer on death”
Above is not an exhaustive list of non-probate assets.
For example, if your husband died with a life insurance policy designating your children as beneficiaries, with a house that you purchased together, $20,000 in a joint bank account with rights of survivorship with you as his wife, and $30,000 in a bank account under his name only, would this qualify as a small estate? Can you as a surviving spouse withdraw the $30,000 using a small estates affidavit? Yes, it is considered a small estate.
Why? Because the insurance policy designates your children as beneficiaries, and therefore, they are non-probate assets and not part of the probate estate. The insurance policy proceeds transfer immediately to the children without the need of going through the probate process. The house purchased as husband and wife is acquired under tenancy by the entirety. It is also excluded from the probate estate, and your husband’s interest in the house automatically transfers to you as a surviving spouse upon your husband’s death without the need of going through probate proceedings. The joint bank account with your deceased husband is also excluded from the probate estate because it goes to you immediately upon his death. In the end, the only probate asset is the $30,000 bank account in your deceased husband’s name. Because this amount is less than $50,000, it is considered a small estate. You as a surviving spouse can use the SCPA 1310 affidavit to withdraw up to $30,000.
If you have issues determining whether property is part of the probate estate or not, a trust and estates lawyer like us can help you.
What is a trust estate?
A trust estate refers to the total property held under a particular trust. As previously mentioned, the trust estate is excluded from a deceased’s probate estate. In fact, many people use trusts to avoid a particular asset going through probate. Trusts have been used to leave property to children while giving a life estate to the second, third, or fourth spouse. Trusts have been used to defer capital gains taxes or minimize estate taxes. A deceased person can have several trust estates, depending on the number of trusts established. Each trust will have its own trust estate.
What is a small estate?
One way to describe an estate is a small estate vs. a non-small estate. Here, estate refers to the total property a person owns upon death. A small estate is an estate that:
- has less than $50,000 of personal property
- does not have real property
- does not have a cause of action for wrongful death or another lawsuit
The estate must have all three characteristics in order to be considered a small estate. For example, even if the estate has no personal property, but if the decedent has a wrongful death action against a third party, it can’t be considered a small estate. Or if the estate has no personal property but has real property in New York, then it cannot be considered a small estate.
Why is the distinction of being a small estate important? Because a small estate has a simplified court procedure. In fact, in a small estate where no executor, administrator or voluntary administrator is appointed, a surviving spouse can collect up to $30,000 of the decedent’s assets by simply executing a Small Estates Affidavit under SCPA 1310. Sometimes, banks may not accept your small estate affidavit and will request letters to be issued to you, but you can seek assistance from a lawyer like us to help you get that money with just a small estates affidavit.
If the estate is not small, on the other hand, then it has to go through regular probate proceedings. If there is a will, a petition for probate has to be filed where letters testamentary will be issued. If there is no will, a petition for administration must be filed where letters of administration are issued. In a non-small estate, it is recommended that you are represented by a lawyer like us when filing your petition for probate or administration.
When you are dealing with a loved one’s death and you want to know “what is an estate,” consult with a trust and estates lawyer who can advise and guide you through the process of managing the smooth transfer of assets from the deceased to you or your family. Should you need assistance, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at firstname.lastname@example.org.