Here’s What Happens in the State of New York If You Don’t Have an Estate Plan

Your family means everything to you, but it’s easy with  the hectic pace of life to forget about setting up important legal mechanisms that can protect their futures.

In our experience, there are few people who are busier than parents raising young kids in New York City. Between long work hours, commutes and family time, you’re making every moment count! 

Estate planning can be a sensitive topic.  To be honest, it’s something people often think they’ll “get around to later.” The problem is, for some people, later just doesn’t happen. And of course, no one can predict what their future holds.

What does an estate plan encompass?

If you are a parent, estate planning includes mechanisms to protect your children should you both pass away. This is especially important while they are still minors – who will look after them and how will your estate be distributed?

Estate planning covers everything from how your assets are to be treated to instructions for designated guardians with regard to your key wishes. For example, you might like to provide guidance about education, religion or your family traditions. Maybe you have specific schools in mind that you’d like your children to attend – all good information to include in your estate plan.

Some specific documents that may be part of your estate plan include:

  • Will – A Will provides directions for who will receive your assets. This document also  designates an executor of your estate and names guardians for your children.
  • Power of Attorney – This authorizes a person you trust to take care of your affairs if you become incapacitated.
  • Irrevocable Trust – An Irrevocable trust helps to reduce or eliminate estate taxes by transferring assets to the trust during your lifetime.
  • Standby Guardian Designation – This authorizes someone you trust to take immediate custody of your children until the court can appoint a guardian.
  • Testamentary Trust – If you’re worried about your children having unrestricted access to their inheritance once they turn 18, a Testamentary Trust allows you to specify an older age when control of the assets is handed over to them.  This type of trust also allows the person responsible for managing the money to allocate the funds fairly among your children to ensure that one child isn’t disadvantaged if they have greater expenses as a result of an illness or accident that can result in high medical bills.
  • Letter to Trustee – Provides guidance on how you’d like your assets to be used for your children. For example, this letter can explain your priorities such as education, travel, etc.
  • Letter to Guardian – How do you want your children raised? What important things would you tell a new guardian about each child?  You can address these issues in the  letter to your guardian.
Estate Plan

What can happen if you don’t have an estate plan? 

Intestate succession

If you pass away without an estate plan, also known as “dying intestate,” your assets will be distributed under the terms of New York law.  How the assets are distributed and what happens to your children will be decided without regard to your wishes.

Effectively, the State of New York has a written plan to deal with intestate succession. Here’s what happens:

Minor children without a named guardian

If there is a surviving spouse, then most of the time children will stay with them. However, another consideration is if parents are estranged or perhaps a surviving parent has no contact. What would be in the best interests of the child in terms of guardianship?

If you pass away without having designated a guardian, the court will appoint a “guardian ad litum,” which is a person appointed to investigate which solutions will be in the best interests of the child. (See the section of the law that deals with guardianship here).

Meanwhile, any of your relatives or friends may petition the Surrogate’s Court, requesting to be appointed guardian. You probably have some strong feelings about how you want your children raised and by whom, but if you haven’t named anyone, you have absolutely no say over who comes forward to petition the court or how the court makes its decision.

Without a designated guardian named, the situation could devolve to messy, family disputes in court. This can often play out publicly and add to the stress of what will be a traumatic time for your children. Ultimately, the court will end up deciding who gets guardianship, and this may be after a protracted period and considerable costs to your estate.

It’s also worth noting that estate planning isn’t just about what happens should you pass away, you should also consider what happens if you become incapacitated. If you were to be involved in an accident and unable to look after your children, a standby-guardianship document allows your designated person to immediately act as guardian. A worst-case scenario is that your children could end up in state care, rather than with people you know and trust. You can avoid this by planning ahead.

Having an estate plan ensures your wishes for your children are respected Click To Tweet

Distribution of assets without an estate plan

Section 4-1.1 of The Laws of New York governs what happens with intestate succession. Your estate will go through the Estate Administration process, whereby the court decides what happens to it. In terms of asset distribution, below is how they are prioritized:

If you have …then…
A spouse, but no childrenYour spouse inherits everything
Children, but no spouseYour children inherit everything. (If a child has passed away before the parent and has surviving children of their own, those children take the place of the deceased child).
A spouse and childrenYour spouse inherits the first $50,000 plus half of the remaining estate. Your children inherit everything else.
Parents, but no spouse or childrenYour parents inherit everything
Siblings, but no spouse, children or parentsYour siblings inherit everything

Here are some people to consider who aren’t included under the law, for example:

  • Long-term partners to whom you aren’t married
  • Foster children or step-children whom you never legally adopted

The bottom line is that without an estate plan in place, there’s no guarantee your assets will be distributed as you would have wished. You can also leave the door open to lengthy court proceedings, which can be a costly drain on your estate. 

Estate Plan

Inheritance for minor children

Are you confident that your kids could handle receiving a large sum of money the day they turn 18?  If you would be concerned that this could lead to irresponsible spending and the possible squandering of the inheritance, you’re in good company.

If you were to pass away without an estate plan, the law says that your children will inherit their share at 18. They will be unsupervised and potential targets for con artists or predators. They may think that it’s perfectly reasonable to purchase a new Ferrari with their inheritance rather than invest wisely or go to college.  Even the most responsible 18 year old can be misled or make questionable financial decisions.

You can prevent this by including a trust as part of your estate plan, where a trustee you designate manages the money and makes distributions for the benefit of your child, up until an age you specify. This helps to protect your estate from unwise decisions and from any predators who may try to take advantage of your children. It can also help to ensure that the estate remains with your direct descendants, rather than a new partner of your child laying a claim.

Estate planning also helps to ensure the fair distribution of your estate to your children. If you passed away without one, your estate is divided evenly between them. Consider the scenario where one child had already gone through college and had it paid for while you were alive, while a younger child had yet to go to college. The younger child would end up having to pay for college out of their share of your estate, while the older child receives the same share and doesn’t have the expense of college.  A good estate plan can ensure that your assets would be allocated fairly.

Privacy issues for minor children who inherit

Another major issue to consider is the privacy of your children and the details of their inheritance. If you pass away without a will, the court will appoint an administrator for the inheritance of anyone under 18. Each year, that person is required to file a report accounting for those assets and how they are being invested or spent. This puts your child’s name and estate details on public record for anyone to find, possibly leaving them open to predators or identity thieves.

If you leave an estate plan that includes a trust or administration by a custodian, you can prevent details of your children’s inheritance and spending from becoming part of the public record.

Final thoughts

Passing away or becoming incapacitated without an estate plan in place is problematic on many levels, but for parents, the most pressing concern will be how it can impact their children. 

Court costs can run to tens of thousands of dollars, while protracted proceedings can add further distress at an already difficult time for your children. Estate planning is about your family’s safety and security. Every child needs to know they are safe, even if they no longer have their beloved parent.

Estate planning is for your peace of mind and to protect the positions of your kids. Our book, The Complete Guide to Legal Planning for New York Parents provides a step-by-step, practical guide.

About the Author