An Overlooked Reason To Have A Last Will And Testament

By Author: Mr projects
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The following is a short article on an often overlooked but important reason to have a last will and testament.

If you reside in New York and die without a last will and testament, and you own assets at your death, someone (usually a spouse or adult child, or perhaps a brother or sister or a friend) will need to apply to the Surrogate’s Court to be appointed the administrator of your estate, in order to collect assets, to pay debts and claims, to pay expenses, and to distribute the remainder to the heirs.

The general rule in New York is that an administrator will need to furnish a bond. The bond is called an administrator’s bond or a fiduciary bond. All of the additional work and expense and delay (discussed below) associated with having to obtain a bond may be avoided by having a last will and testament and naming an executor of your will.

The purpose of the bond is to protect creditors and beneficiaries, to be sure that creditors are paid and to be sure that the remaining assets are properly distributed to the estate beneficiaries.

The required amount of the bond is usually equal to the ...
... value of all of the personal property that may come into the hands of the administrator, plus the value of the estimated gross rents of real property that may be received by the administrator for a period of 18 months.

The cost of a bond is not insignificant. A bond in the amount of, say, $200,000.00 - $500,000.00 may cost several thousand dollars. In addition, the person applying to be administrator will need to go through the process (some would say hassle) of applying for the bond. Also, on the bond application, frequently the applicant will be asked to disclose personal assets as well as other personal information.

Also, when the estate administration is completed and creditors have been paid and the property distributed, the Court may require a formal accounting before issuing an order discharging the bond. A formal accounting will incur an additional expense, including additional legal fees for the estate attorney.

But, you may ask, what if all of the estate beneficiaries consent to the administrator serving without providing a bond? The answer is, while the Court may use such consents as a basis for reducing the amount of the bond required, the Court likely will nonetheless require a bond in an amount sufficient to protect creditors, or contingent creditors, or creditors who may as yet be unknown. And, if the estate is subject to New York estate tax, there would be at least one known creditor – the New York State Department of Taxation and Finance.

What if the administrator is also the only beneficiary, that is, the sole heir of the estate? The answer is, some of the considerations mentioned above still apply, that is, the Court will still want to protect creditors, including the New York State Department of Taxation and Finance if the estate is subject to New York estate tax.

What about real property – if the decedent owned real property at his or her death, will the Court want a bond to cover the value of the real property? The answer here is probably no. However, if the administrator sells the property, the Court will frequently require a bond or an additional amount on the existing bond to cover the administrator receiving the sale proceeds.

Another possible expense to the estate would be as follows: The Court may require that the amount of possible claims of creditors be determined by publishing a notice to creditors once a week for four consecutive weeks in one or more newspapers. The notice would direct that creditors of the estate file their claims in writing with the clerk of the Court on or before a day set in the notice. If no claims are filed, this would be one indication to the Court that there may be few or no claims. If claims are filed, the amounts of the claims would help determine the amount of the bond.

The requirements for a bond and all of the additional work and expense that such requirement entails may be easily avoided by executing a last will and testament and, in the will, saying that the executor of the will shall serve without a bond or other security. By doing so, the Court will not require a bond.

Wayne Burton has been practicing law in the Albany, New York area since 1978. Wayne Burton practice areas include estate planning & estate administration. For living wills & trusts in NY, visit our website today!