What is Considered Property of Someone Who Died?

What is considered property of someone who died depends on who is asking and the purpose for asking.

For example, for a distributee (an heir-at-law) or a beneficiary of the residuary estate, the property of someone who died refers to the probate estate.

For spouses who have been omitted from the will or are receiving less than their spousal elective share, the property of their spouse who died includes testamentary substitutes.

For the Internal Revenue Service, the property of someone who died is the “gross estate”.

Because there can be different definitions of estate, it’s important to understand the reason for the question in order to be able to adequately answer the question, “what is considered property of someone who died?”

Internal Revenue Code’s Gross Estate

The best place to start when determining what is the property of someone who died is the Internal Revenue Code’s (IRC) definition of gross estate. This is because the IRC’s definition comes closest to a layperson’s basic concept of the property of someone who dies, which is, “all property, real or personal, tangible or intangible, whichever is situated.”

The IRS uses this definition of gross estate to determine whether a decedent’s estate is subject to estate tax. This includes real property, personal property, financial assets, business interests (such as stocks, partnership interests), life insurance proceeds, annuities, powers held by decedent at the time of death, property where decedent retained a life estate, property where decedent retained power to revoke or amend the transfers (i.e., revocable trusts), and property where decedent retained the power of appointment.

For jointly owned property as tenants in common, only the decedent’s fractional interest will be included in his gross estate if it can be proven that the other joint owners contributed to the acquisition of the property. For property owned under tenancy by the entirety or joint tenancy with rights of survivorship, the entire value of the property is included in the decedent’s gross estate.

Surviving Spouse’s Definition of Decedent’s Estate

For a surviving spouse, the definition of a decedent’s estate is important for determining the spousal elective share. In New York, the spousal elective share is $50,000 or one-third of the decedent’s net estate, whichever is higher. This net estate is different from the IRC’s definition of gross estate.

Under New York law, the spouse’s net estate for purposes of determining the spousal elective share is the decedent’s probate estate plus testamentary substitutes.

The decedent’s probate estate refers to property passing through will or intestacy. These are usually properties with no designated beneficiaries.

Testamentary substitutes, on the other hand, include:

• Gifts causa mortis
• Gifts made within one year prior to decedent’s death
• Totten trust accounts
• Joint bank accounts
• Property held jointly or payable to another on death
• Assets transferred by the decedent in which decedent retained the right to income for life
• Retirement accounts
• Assets in which decedent held a general power of appointment
• Pay-on-death or transfer-on-death accounts or securities.

Thus, when a spouse has been omitted from a will or is receiving substantially less than the spousal elective share, it is important for the spouse to determine the decedent’s property at the time of death by computing for the decedent’s net estate.

Probate Estate

For a distributee (an heir at law) or a beneficiary of the residuary estate in a will, the decedent’s property at the time of death is the probate estate.

The probate estate is generally property owned by the decedent solely in his own name without a designated beneficiary. This includes property owned under tenancy in common, but only the decedent’s fractional interest is included in the probate estate. It excludes property under joint tenancy with rights of survivorship, tenancy by the entirety, and bank or investments accounts that are payable or transferable on death, or in trust for another person.

For a residuary beneficiary or distributee, knowing the probate estate is important in determining their share.

As previously mentioned, what is considered the property of someone who dies depends on the person asking and the reason for the question. An estate planning and litigation lawyer can help you identify which properties constitutes the estate for purposes of your query. Should you need assistance in handling estate matters, 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].