A Brooklyn Surrogate judge rejected a petition of an heir who sought to disclaim her infant daughter’s interest in a deceased grandparent’s estate for the purpose of avoiding a large estate tax liability.
The infant’s grandmother, Sharon Lindsay, passed away with approximately $6M in assets to be divided among her heirs – but no will. Under New York Law, with no will in place her assets were to be divided between her husband, son and daughter. However, the children's portion was liable for $200,000 in New York estate taxes.
In an effort to avoid those taxes, the son and daughter disclaimed the inheritance. That would have given their share of the inheritance to their father. It would not be subject to the estate tax because of New York's spousal inheritance.
However, the flaw in their plan was that the daughter, Kimberly Friedman, had an infant child who stood to inherit her mother's share under New York law. Friedman attempted to disclaim the infant's share. Nevertheless, a Brooklyn judge disallowed the disclaimer.
The infant will inherit a share of Lindsay's estate and will have to pay state estate taxes.
The Brooklyn Daily Eagle has more on the story in "Brooklyn judge blocks heir's attempt to avoid N.Y. tax on $6M estate."
The judge reasoned that it was not in the infant's best interests to allow the disclaimer. According to the judge, the infant was better off receiving the inheritance subject to the estate tax than possibly never receiving it at all. The problem: there was no agreement between the children and their father that they would someday inherit the estate through him.
This case highlights the importance of estate planning. Lindsay had not done any estate planning and it is possible the entire issue could have been avoided if she had an estate plan.
Do not delay what is your own personal responsibility. Meet with an experienced estate planning attorney to get your legal house in order.
Cases such as Lindsay's make the importance of estate planning clear, no matter how much, or little, you have. To learn more about planning your estate, attend one of Heritage's free workshops.
Reference: Brooklyn Daily Eagle (February 20, 2015) "Brooklyn judge blocks heir's attempt to avoid N.Y. tax on $6M estate."