What is considered property for someone who died would depend on what type of proceeding this question is being asked in.
- If you are in probate court, property of someone who died only constitutes his probate assets.
- If you are asking this question as a spouse who wants your elective share, the decedent’s property includes the probate assets plus testamentary substitutes.
- If you are asking this question for purposes of determining whether you have to pay estate tax, then all property of the decedent upon decedent’s death is considered his property, including property co-owned with others to the extent of decedent’s share.
Given these different concepts of what constitutes decedent’s property, it would appear that the most all-encompassing definition is decedent’s “gross estate” for purposes of computing estate tax.
Decedent’s property, gross estate
In New York, you have to file an estate tax return if the gross estate of the decedent is more than $6.11M (as of 2022). What constitutes the gross estate of decedent? It pretty much includes everything owned by the decedent, whether it is in an “in trust for,” “payable on death,” or “transfer on death” account. It includes decedent’s share in real property under tenancy by the entirety, joint tenancy, or tenancy in common. It includes both probate and non-probate assets. Decedent’s gross estate, however, excludes properties transferred to irrevocable trusts. This is the reason high net worth individuals use irrevocable trusts as a way to minimize estate taxes on their wealth.
Examples of properties that are classified as gross estate are the following properties held by the decedent in his own name: real property, bank and investment accounts, personal property, proceeds from life insurance policies on decedent’s life, business interests, properties held under revocable trusts, and co-owned property. Basically, everything that decedent owned is considered the decedent’s gross estate. The definition of gross estate is important because if its value is more than $6.11M, the executor or administrator of the decedent needs to file an estate tax return.
Decedent’s property, probate assets
Decedent’s property for purposes of computing the gross estate should not be confused with decedent’s property classified as probate assets. Probate assets are assets that will pass through the decedent’s heirs or beneficiaries in a probate proceeding. More often than not, decedent’s property that might be classified as part of gross estate will not be considered as a probate asset and it will not pass through decedent’s beneficiaries in a will or heirs in intestacy.
In probate proceedings, probate assets are those solely owned by the decedent and do not pass to another through a revocable trust or beneficiary designation. The definition of decedent’s property in a probate proceeding is more limited in scope than decedent’s property classified as gross estate in a tax proceeding.
For example, property in a revocable trust will not be considered as decedent’s property in a probate proceeding. In a tax proceeding to determine whether decedent’s estate should pay estate tax, however, property in a revocable trust will be considered as decedent’s property and part of his gross estate.
Another example would be property held by the decedent under tenancy by the entirety. This property is not considered decedent’s property in a probate proceeding because such property immediately passes to the surviving spouse under New York law. However, for purposes of determining decedent’s gross estate and computing whether decedent’s has to file an estate tax return, decedent’s share in the property held under tenancy by the entirety will be included in decedent’s gross estate for purposes of determining whether decedent’s personal representative has to file a New York estate tax return.
Thus, what constitutes decedent’s property when he dies is defined differently in a probate proceeding as opposed to a tax proceeding for purposes of computing estate tax.
Decedent’s property for purposes of computing spouse’s elective share
Under New York law, a spouse is entitled to $50,000 or 1/3 of the deceased spouse’s estate, whichever is higher.
If you are a spouse who wants to know how much your deceased spouse’s property is for purposes of computing how much you are entitled to as elective share, then the decedent’s property includes probate assets plus testamentary substitutes. This amount is slightly lower than the value of decedent’s gross estate (for purposes of computing estate tax), but substantially higher than the definition of decedent’s property in a probate proceeding.
Under EPTL § 5-1.1-A, the following are testamentary substitutes:
- Gifts made in contemplation of death
- Gifts made within one year from decedent’s death or transfers made to the extent that decedent did not receive adequate and full consideration for his property
- Totten trust accounts
- Joint bank accounts with rights of survivorship (to the extent of decedent’s share)
- Property held under joint tenancy with rights of survivorship or payable to another on death (to the extent of decedent’s share)
- Property transferred to another (including trust property) where decedent retained for himself a life estate (except those that were transferred with adequate consideration)
- Retirement accounts
- Property in which decedent held a general power of appointment
- Transfer of securities with transfer on death registration
So for example, if you transfer real property in your and your children’s names as joint tenants with rights of survivorship, your share in this property will be considered as part of your estate for purposes of computing the spouse’s elective share. You cannot disinherit your spouse or exclude your spouse from getting anything from your estate simply by transferring property to other people prior to your death. This will be clawed back into the estate and considered for purposes of computing the spouse’s elective share.
Property in a revocable trust, however, is not considered a testamentary substitute. For this reason, revocable trusts have been popular in estate planning to minimize the spouse’s elective share. In fact, revocable trusts have been typically used by blended families to direct a surviving spouse’s use and income of a particular property for such spouse’s lifetime, and upon such spouse’s death, to the decedent’s children (similar to a life estate).
What property is considered to be the decedent’s depends on who is asking and the purpose for the question. If you are confused on what to consider as decedent’s property, 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.