What is an Estate. What are the Different Types of Estates. What is the Context of Using the Word Estate.

“Estate” has been defined in New York’s 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

New York law makes it sound like an estate refers to a person’s property. But in common usage, estate typically refers to property of someone who died or property in the context of planning for death and succession.

The meaning of estate is different depending on the context but typically refers to property of someone who died

When you are asking what is an estate, the answer depends on the context. Typically, the word estate means someone’s property at death or planning for the succession of property at death. But an estate can also be referring to a number of things:

• When people say estate, they are  usually referring to real and personal property someone left or is planning to leave to their heirs after their death
• An estate can also be referring to someone’s real property and its surrounding land (such as “country estate”), but that is not the definition we are focusing on here
• An estate can be referring to someone’s body of work
• A probate estate is assets that are subject to the supervision of the probate court
• A non-probate estate are assets that are usually not subject to the supervision of the probate court
• A trust estate is property that has been transferred to a trust and is held by that trust

In most situations, an estate means property that someone left to their heirs after their death. An estate can also be referring to someone’s house and its surroundings, such as in the phrase “their country estate.” Or, it can refer to someone’s body of work, but that’s typically a part of the probate estate anyway – an artist’s probate estate or a trust can hold the rights to their work, so when an artist is deceased, we say that their work is handled by their estate. Similarly, an estate sale can be had to sell a property of a probate estate, non-probate estate or a trust, but we still call it an estate sale without specifying what kind of estate is conducting the sale.

Different types of estates of someone who died

What is an estate depends on what you are asking about, but 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.

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
• non-probate estate
• trust estate
• small estate

Probate estate

What is a probate estate? An estate that includes assets owned by the decedent individually at the time of death, to which the owner did not designate a beneficiary. In New York, a probate estate may include the following types of personal and/or real property:

• The primary residence, second home, vacation property and/or investment real estate (if no one else is on the title)
• Automobiles, other motor vehicles and vessels
• Cash in separate bank accounts or safe deposit box contents, stocks, bonds and other investment holdings
• Collectibles such as artwork, books or coins
• Jewelry
• Household furnishings and clothing and other personal items
• Royalties
• Sale of business assets and interests
• Wrongful death proceeds
• Medical malpractice proceeds

Non-probate estate

What is a non-probate estate? An estate that includes assets that are either owned jointly with someone else or have a designated beneficiary. The following are considered non-probate assets that don’t need to be included in the probate estate and don’t require probate court approval for being collected and disbursed.

• Pension accounts
• 401(k), profit sharing
• life insurance, annuities
• joint bank accounts and community
• property assets such as your home that you own jointly with your spouse
• assets that you own jointly with other family members, friends, associates or business partners
• and assets placed in a living trust

“Small estate”

What is a small estate? An estate that qualifies for a simplified probate proceeding. In New York, an estate is considered to be a small estate if it meets the following requirements:

1. has less than $50,000 of personal property
2. does not have real property
3. 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.

More on how to tell what is a probate estate and what is a non-probate estate

A probate estate refers to the total property of a deceased person that has to pass through probate proceedings. Unless property is a part of non-probate estate, it’s part of a probate estate. So, in determining whether the property is part of the probate estate, it is easier to remember the exclusions. The following property is excluded from the probate estate:

1. trust assets
2. assets with a designated beneficiary
3. assets that are held jointly with rights of survivorship
4. assets that are held under tenancy by the entirety
5. assets that are designated “payable on death” or “transfer on death”

Above is not an exhaustive list of non-probate assets, but it’s pretty close.

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.

Trust estate

What is a trust estate? Any property placed in a trust, whether it be a lifetime trust (also known as a living trust or by its Latin name, inter vivos trust) or a testamentary trust.

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. A trust estate can also be referring to the estate of someone who is alive.

Each trust can have many characteristics and sub-characteristics. A trust can be revocable or irrevocable. Simple of Complex. Grantor or non-grantor. Lifetime or testamentary. And it may or may not have one or more specific set-ups, such as a GRAT, GRUT, Generation-Skipping, Life Insurance, A/B Trust, Credit Shelter Trust, Medicaid Asset Protection Trust, Pooled Trust etc. An attorney or accountant would be  the best person to explain all the nuances of a trust estate.

As you can see, the answer to what is an estate depends on a number of factors and can have more than one answer depending on the context. 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. We at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

References:

Estates, Powers and Trusts Law § 1-2.6

SCPA 1310

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