Changes to the Estates Powers and Trusts Law

Article excerpt

On July 24, 1992, New York Governor Mario Cuomo signed into law a bill which made major changes to the NYS Estates, Powers, and Trusts Law ("EPTL"). The changes reflect the work of a legislative advisory committee that set out to review and update the EPTL with respect to intestacy and will provisions and the surviving spouse's right of election. The new law has also introduced the concept of "by representation" which will replace the old per stirpes method of distribution. These changes took effect September 1, 1992.

The most sweeping change has eliminated the use of a trust to satisfy the right of election. Due to the huge impact this will have on many estate plans, this provision will not be effective until September 1, 1994, leaving a two year period to review prior estate plans, wills, and trust documents.

INTESTACY AND WILL PROVISIONS

"By Representation" Distribution. EPTL Sec. 12.16 provides for a new method of distribution known as "by representation," which applies to distributions made to persons who take as issue of a predeceased ancestor. The rule provides that the surviving as well as the predeceased issue of the closest generation to the decedent each take a share. The share(s) of the predeceased issue is divided equally among all the surviving issue of the predeceased issue.

Example: Decedent A had three children, X, Y, and Z. X and Y predeceased A. X was survived by X-1. Y was survived by Y-1, Y-2, and Y-3. If A's estate is distributed by representation, then Z will receive 1/3 of the estate. The other 2/3 of the estate will be divided equally among the four survivors of X and Y. Thus, all four survivors will receive 2/3 x 1/4 of the estate or 1/6 each. By contrast, per stirpes distribution would result in X-1 receiving a 1/3 share and Y's children each receiving a 1/9 share (1/3 dividend among three children).

New "Per Stirpes" Definitions. EPTL Sec. 1-2.14 has been revised to reflect the situation where the decedent is not survived by children. The statute provides that the estate is divided equally among surviving issue of the next immediate generation of issue and the deceased issue in the same generation who left surviving issue. The share of each deceased issue is distributed to his survivors similarly.

Example: Decedent A had a son X who predeceased him. X was survived by his children D and E and the issue of deceased child F (F-1 and F-2). D and E each take 1/3 of A's estate and F-1 and F-2 each take 1/6.

Distribution to Issue. EPTL Sec. 2-1.2 now provides that for wills executed on or after September 1, 1992, dispositions to "issue" will be deemed to be made by representation unless the testator explicitly provides otherwise.

Lapse. EPTL Sec. 3-3.3 has added another paragraph which provides that for wills executed on or after September 1, 1992, dispositions to brothers and sisters or issue of the testator who have predeceased the testator vest in the surviving issue of the deceased sibling or child by representation. For pre-September 1, 1992 instruments, vesting in the surviving issue remains per stirpes.

Intestate Distribution. EPTL Sec 4-1.1 has been revised to effect several changes as follows:

* Intestate distribution is computed after deducting debts, administration expenses, and reasonable funeral expenses. Previously, estate taxes were deducted in addition to these items. The intestate distributees will however be responsible for their apportioned share of taxes.

* When a decedent is survived by a spouse and a child or children, the spouse receives $50,000 plus one-half of the residue and the child or children receive the remainder. If a child has predeceased the decedent, distribution to the issue is by representation. Previously, the $50,000 amount was $4,000 and there was a distinction between families with one child and those with more than one child. …