Jun 2017 AFR: 2.4%
Gift Annuity State Regulations

New York


Intestacy


General Definition

The property of a decedent not disposed of by will is distributed by intestate succession. Sec. 4-1.1


Order of Distribution

If the decedent leaves a surviving spouse and no descendant's, the surviving spouse is entitled to 100% of the estate after payment of debts, administration and funeral expenses. Sec. 4-1.1(a)(3). If the decedent leaves descendants, the surviving spouse is entitled to $50,000 and 1/2 of the residue with the balance to the decedent's issue by representation. Sec. 4-1.1(a)(1).

If there is no spouse but there is surviving issue of the decedent, the entire estate is left to them by representation. Sec. 4-1.1(a)(3). If there is a surviving parent(s) and no spouse and no issue, the whole estate is left to the surviving parent(s). Sec. 4-1.1(a)(4). If there is surviving issue of parents but no spouse, issue or parent, the whole estate passed to the issue of the parents, by representation. Sec. 4-1.1(a)(5). If there is no surviving descendant, parent, or siblings,1/2 of the estate passes to the paternal grandparents or the descendants of the paternal grandparents by representation; and the other 1/2 to the maternal relatives in the same manner as the paternal. Sec. 4-1.1(a)(6).

If no takers are found, 100% of the estate escheats to the state of New York. Sec. 4-1.5


Will Qualifications


Common Law or Community Property

New York is a common law, elective share state.


Capacity

Every person eighteen years of age or over, of sound mind and memory, may make a will that disposes of real and personal property. Sec. 3-1.1.


Drafting

Every will, other than nuncupative and holographic wills, must be in writing and signed at the end by the testator or, in the name of the testator, by another person in his/her presence and by his/her direction. Sec. 3-2.1. The will must be signed by at least two competent witnesses within 30 days of one another in the presence of the testator. Sec. 3-2.1(a)(4).

A nuncupative or holographic will is only valid if drafted by a member of the armed forces in a time of war or by a mariner while at sea. In any event, a nuncupative or holographic will is not valid after one year from the time the service member retires from duty or three years after the mariner returns home. Sec. 3-2.2(b). A will is holographic when it is written entirely in the handwriting of the testator and is not executed and attested with the formalities required of a formal will. Sec. 3-2.2(a)(2).


Modifications

To revoke or amend a valid will, the testator may create a new will, draft a writing clearly indicating an intention to revoke or alter a will or commit a revocatory act. A revocatory act is an act of burning, tearing, cutting, canceling, obliterating or other mutilation or destruction performed by the testator or another person, in the presence and direction of the testator. Sec. 3-4.1(a)(1).


Probate Process


Naming of Personal Representative

In an intestate proceeding, letters of administration will be granted to the persons who are distributees of an intestate and who are eligible and qualify, in the following order:

  1. The surviving spouse,
  2. The children,
  3. The grandchildren,
  4. The father or mother,
  5. Siblings,
  6. Any other distributees and who are eligible and qualify, preference being given to the person entitled to the largest share in the estate. Surrogate's Court Procecure Sec. 1001(1).

Submission of Will

Upon the court's own motion or by the petition of a person authorized to present a petition for the probate of a will, that there is reasonable ground to believe that any person has knowledge of the whereabouts or destruction of a will of a decedent, the court may require the production and filing of the will. The court may impose attorney's fees of the petitioner against the respondent when the court determines the respondent did not have good cause to withhold production of the will. Sec. 1401.

Notifications

Before granting letters of administration, the court may require the petitioner to serve by a written notice by mail of the application to every distributee of the intestate who has not been required to be served with process and who has not appeared in the proceeding or waived service of process. The notice will state:

  1. The name of the intestate;
  2. The fact that letters of administration on the estate have been applied for by petitioner;
  3. that a decree will be made granting letters and to whom
  4. The name and address of the petitioner and of each and every distributee set forth in the petition,
  5. That no other distributees are known to exist,
  6. That letters will issue on or after the date fixed in the notice. Surrogate's Court Procedure Sec. 1005.

Before letters are issued notice must be filed stating the name of the testator, the name and address of the proponent and that the will of the testator has been offered for probate. The notice must set forth the name and address of each person named or referred to in the petition who has not been served or has not appeared or waived service of process and will state whether such person is named or referred to in the will as legatee, devisee, trustee, guardian, substitute or successor executor, trustee or guardian. The notice must list the name and address of the attorney general of the state of New York if the will contains a charitable bequest which is either to an unnamed charitable organization or is in an unspecified amount, including a bequest of all or part of the residuary estate. Surrogate's Court Procedure Sec. 1409.

In a proceeding for probate notice must issue to the following persons if not petitioners:

  1. The distributees of the testator.
  2. The person or persons designated in the will as executor.
  3. Any person designated in the will as beneficiary.
  4. Any persons designated in the will as having any power of appointment.
  5. The state tax commission. Surrogate's Court Procedure Sec. 1403.

Inventory

The fiduciary must turn over to the court a list of assets constituting the gross estate. The inventory must separately list:

  1. Assets that either were owned by the decedent individually including those in which the decedent has a partial interest, or were payable or transferrable to the decedent's estate; and
  2. those assets held in trust, those assets over which the decedent had the power to designate a beneficiary, jointly owned property and all other nonprobate property of the decedent.

This list of assets shall be filed with the court by the latter to occur of the following events:

  1. If the estate is required to file a Form 706 Federal Estate Tax Return, the due date for the filing of such return, including any extensions of time received;
  2. If the estate is not required to file a Form 706, the due date for the filing of the New York State Estate Tax Return, including any extension of time received for the filing;
  3. If the estate is not required to file a New York State Estate Tax Return, six months from the issuance of letters. Uniform Rules for Surrogate's Court Sec. 207.20.

Elective Share, Exempt Property and the Homestead

A surviving spouse has a right to an elective share. The surving spouse may elect to take up to $50,000 or 1/3 of the estate, which ever is greater. Sec. 5-1.1-A(a)(2). If made, written notice of the election must be delivered to the surrogate's court within six months of the issuance of Letters of Administration. Sec. 5-1.1-A(d)(1).

If a person dies, leaving a surviving spouse or child under the age of 21, the following items of property are set aside for the surviving spouse or the decedent's children under the age of 21:

  1. All housekeeping utensils, musical instruments, sewing machine, household furniture and appliances not exceeding a value of $20,000.
  2. The family bible, pictures, tapes, discs and software and books, not exceeding $2,500.
  3. Domestic animals with their necessary food for sixty days, farm machinery, one tractor and one lawn tractor, not exceeding a value of $20,000.
  4. One motor vehicle not exceeding a value of $25,000.
  5. Money or other personal property not exceeding a value of $25,000. Sec. 5-3.1(a).

A claim of homestead continues after the death of the person in whose favor the property was exempted for the benefit of the surviving spouse and surviving children until the youngest surviving child reaches the age of majority and until the death of the surviving spouse. Sec. 5206.

Debts and Distributions

New York lists the preference for the payment of debts according to the following order:

  1. Funeral and estate administration expenses.
  2. Debts entitled to a preference under the laws of the United States and the state of New York.
  3. Taxes assessed on property of the deceased previous to death.
  4. Decrees entered against the decedent according to their priority.
  5. All recognizances, bonds, sealed instruments, notes, bills and unliquidated demands and accounts. Surrogate's Court Procedure Sec.1811.

Estate/Inheritance Tax


An estate is required to file a New York State estate tax return if the amount of the federal gross estate plus the federal adjusted taxable gifts and specific exemption exceeds $4,187,500 if decedent dies on or after April 1, 2016 and before April 1, 2017 or $5,250,000 if decedent dies on or after April 1, 2017 and before December 31, 2018. Above the basic exclusion amount, the estate tax is a graduated tax with a top rate of 16%. N.Y. Tax Law Sec. 952.

Income Tax Charitable Deductions and/or Credits


New York generally allows a taxpaying resident to deduct itemized charitable gifts in the same manner as the IRS. N.Y. Tax Law §615.

For taxable years from 2010 through 2017, if a taxpayer's adjusted gross income is over $1,000,000 up to $10,000,000, the amount of charitable itemized deductions on the taxpayer's federal return must be reduced by 50% when filing the New York return. All other itemized deductions are reduced to zero. If the taxpayer's adjusted gross income is over $10,000,000, the amount of charitable itemized deductions on the taxpayer's federal return must be reduced to 25% when filing the New York return. All other itemized deductions are reduced to zero. N.Y. Tax Law §615.

For taxable years after 2017, if a taxpayer's adjusted gross income is over $1,000,000 the amount of charitable itemized deductions on the taxpayer's federal return must be reduced by 50% when filing the New York return. All other itemized deductions are reduced to zero. N.Y. Tax Law §615.

Gift Annuity Requirements


New York, a "registration" state, regulates the issuance of charitable gift annuities under NEW YORK INSURANCE LAW SEC. 1110 (search phrase 'insurance law 1110'). Before issuing a gift annuity in New York, a charity must (a) apply for and obtain a Permit to issue gift annuities from the New York Insurance Department which will then necessitate annual filings or (b) qualify for and obtain a Certificate of Exemption from that department which will not require annual filings. Failure to comply with statutory filing requirements in Sections 307 and 308 may result in fines of up to $250 per day.

To qualify, the charity must have been in continuous operation for at least 10 years and maintain a segregated annuity fund.

Note that New York law prohibits issuing both college/term annuities and gift annuities funded by real property with a retained life estate in the donor (as stated in Office of General Counsel Opinion issued May 9, 2005).

Application Process

To obtain a permit or a certificate of exemption, the charity must submit an application including: an IRS statement of tax-exempt status, corporate documents (bylaw, charter, constitution, certificate of incorporation and/or articles of incorporation), board resolution containing the full and complete name of the segregated trust, current financial statement showing segregation of assets, summary of the financial report, reserves report (certificate of valuation of present value of all gift annuities), maximum annuity rates used (based on NY valuation of future obligations and returning a residuum of at least 50% to charity), copies of all gift annuity agreements and a detailed list of investments. Information on the detailed requirements for gift annuity agreements can be found in Product Outline, Charitable Gift Annuities. Some of these gift annuity agreement requirements include: distinct alphanumeric form numbers in the lower left-hand corner (which, if changed, must be resubmitted to the state for approval), annuitants' age and/or birth date, a statement that NY law governs, a misstatement provision, specified provision for non-resident annuitants, use of unisex language and use of brackets for information which changes with the donor.

A charity with a more modest gift annuity program, (whose reserves requirement does not exceed $500,000 under the methodology detailed in (a) above) may choose instead to obtain a (b) Certificate of Exemption in order to avoid the annual filings that are required of a permit-holding charity. But, it would need to maintain assets that are at least 125% of the higher reserve requirement described in (a) above. See "Important Notice Regarding Reserves." The reserve requirements for charities seeking a Certificate of Exemption, then, are therefore as follows: (i) in 2008, 131.25% of the reserves (125% x 105%); (ii) in 2009, 137.5% of the reserves (125% x 110%); and (iii) in 2010 and beyond, 143.75% (125% x 115%).

2010 Certificate of Exemption Example: A charity with $100,000 of annuity liabilities in 2010 would be $100,000 x 143.75% = $143,750. The long calculation is as follows: $100,000 x 125% (the original reserves requirement) = $125,000, and then $125,000 x 115% = $143,750.

Note that New York law prohibits issuing both college/term annuities and gift annuities funded with a real property with a retained life estate (as stated in Office of General Counsel Opinion issued May 9, 2005).

Disclosure Language

New York has not specified specific disclosure language, although the Department does provide acceptable sample language for annuity agreements issued to annuitants who are not New York state residents.

Reserve Requirements

Prior to 2008 under Sec. 1110(b), the charity was required to maintain at least the greater of: (1) 110% of the amount of the actuarially-determined reserves (liabilities of all existing gift annuity agreements in all states); or (2) $100,000. Now, in addition to meeting Sec. 1110(b) surplus requirements, the charity must either submit an Actuarial opinion and Memorandum based on asset adequacy as stated in 11 NYCRR 95 (Regulation 126) or meet a higher reserve minimum standard as described in 11 NYCRR 99 (151) per Sec. 95.11(b) of Regulation 126 which incrementally increases the required minimum amount in Sec. 1110(b) each year until 2010 as follows: 105% in 2008; 110% in 2009; 115% in 2010. See "Important Notice Regarding Reserves." In situations where the Sec. 1110(b) permit reserve requirement is 110% (rather than $100,000) without an Actuarial Opinion, the total required minimum is therefore calculated as follows: (i) in 2008, 115.5% of the reserves (110% x 105%); (ii) in 2009, 121% of the reserves (110% x 110%); and (iii) in 2010 and beyond, 126.5% (110% x 115%).

2010 Permit Example: A charity with $100,000 of annuity liabilities in 2010 would be required to maintain 126,500 ($100,000 x 126.5%). The long calculation would be: $100,000 x 110% (the original reserves requirement under Sec. 110(b)) = $110,000, and then $110,000 x 115% (the new surplus requirement) = $126,500.

Assets must be invested in accordance with the prudent investor standard, which is defined in Estates, Powers and Trusts Law Sec. 11-2.3 and no longer prohibits real estate investments as of July 20, 2004.

Annual Filing Requirements

Once a permit is granted, New York requires that annual filings be submitted by March 1 of each year.

State Contact Information

New York State Department of Financial Services
Life Bureau
25 Beaver Street, 3rd Floor
New York, NY 10004-2319
(212) 480-4659

New York State Department of Financial Services
Office of General Counsel
One Commerce Plaza
Albany, NY 12257-0001
(518) 474-6623

State Forms

For more information on state-specific form requirements, please contact Crescendo at 800-858-9154.
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