New York State Probate Procedure
Property located in the State of New York
If, in the course of the estate process, it is discovered that the decedent had property within the State of New York, one may wonder what procedures need to be followed. This includes both the question of what procedures are required under New York State law and the question of whether estate taxes must be paid in the United States.
Property Physically Located in New York State
In relation to U.S. inheritance procedures and estate taxes, it must first be determined whether the property left by the deceased can be said to be located within the State of New York. In this regard, real property and tangible personal property that is physically located in New York State at the time of the decedent’s death is considered property within New York State. Real property includes single-family homes, condominiums, and apartments. Tangible personal property includes furniture, cars, artwork, and antiques. Since these are property located in New York State, a New York State Supplemental Probate or Supplemental Estate Administration proceeding should be followed for the succession of these assets.
Tax Treatment of Property Physically Located in New York State
Property physically located in New York State is considered New York property for both federal estate tax purposes and New York State estate tax purposes, and is therefore subject to the respective taxes.
Succession Procedures for Bank Deposits, Stocks, and Other Securities
In relation to succession procedures, including whether or not probate procedures are required, bank deposits, stocks, and other securities (such as partnership interests, investment units, and partnership interests) are considered property located in the home country (or Japan in the case of Japanese nationals) of the foreign nationals who own such property. Therefore, bank deposits in a New York bank, shares in a New York company, and other securities invested in a New York partnership are not considered property located in New York and are not subject to the New York probate procedure. The principle is that they are not subject to New York State probate procedures. Therefore, the executor of the decedent’s will or the legal heirs who will carry out the inheritance procedures for the decedent should directly contact the financial institutions, issuers of stocks, general managers of funds, etc. located in New York State and request a transfer of title due to the inheritance. However, for the cancellation of bank deposits, the financial institution will often require a certificate of the administrator of the estate, and in most cases, except for small deposits, will require a supplemental probate procedure or supplemental estate administration procedure, which will eventually force you to take the supplemental probate procedure or supplemental estate administration procedure, In contrast, shares, investment units, and other securities do not require auxiliary probate or auxiliary estate administration procedures, and thus, a transfer request can be made directly.
Tax Treatment of Bank Deposits, Shares, and Other Securities
If a foreign resident owns New York State bank deposits, stocks, or other securities, and keeps stock certificates and other securities in a safe deposit box in his or her home country, they are considered property located in the U.S. for U.S. federal tax purposes and are therefore subject to U.S. federal estate tax. In contrast, for New York State estate tax purposes, they are not considered property located in the U.S. and therefore are not subject to New York State estate tax.
Succession Procedures for Corporation Apartments
A cooperative apartment is a form of real estate in which the investor does not directly own the real estate, but rather the investor owns shares in the company that owns the real estate, which are then leased (leased) by the real estate owning company to the shareholders. The stock and lease rights are intangible assets. From the standpoint of succession of property, auxiliary proceedings are initiated only for property located in New York State and held in the name of the deceased, whereas shares and lease interests are considered to be property originally located in the investor’s home state, and no auxiliary probate or auxiliary estate administration proceedings are required for their succession. However, the management company of the cooperative apartment will often request the consent of the court-appointed administrator of the property when changing the name of the property, which will eventually force the investor to follow the auxiliary probate or auxiliary estate administration procedures.
Tax Treatment of Corporation Apartments
Because the federal government considers intangible property to reside where the underlying property resides, stock or lease interests in a cooperative apartment located in New York State are subject to federal estate tax. In contrast, in New York State, stock and lease interests are intangible property and are considered to be located in the foreign person’s home state and are therefore not subject to New York State estate tax.
Succession Proceedings for Property Located in New York
If a Japanese person dies leaving property in New York State, what procedures are required in New York State will depend on whether the deceased Japanese person left a will.
Ancillary Probate Proceedings
If there is a will of the decedent, the first step is to have the will probated at a family court in Japan. If an executor is appointed in the will, the executor has the authority to administer the estate, and if no executor is appointed, the heirs have the authority to administer the estate. The heirs and executors are to prepare an inventory of property and proceed with procedures such as transfer of title so that the heirs can succeed not only to property in Japan but also to property overseas in accordance with the will and the agreement on partition of the estate. In countries other than those with probate procedures such as the U.S., Hong Kong, and Singapore, the heir or executor can directly transfer title to local property by showing authority to manage the inherited property with a death certificate, family register, or will. In contrast, for property located in New York, it is necessary to hire an attorney in New York State and appoint an ancillary executor to administer the New York estate before the New York court. Ancillary means ancillary or incidental. Even if the decedent’s will provides for a Japanese executor, a separate New York executor must be appointed in the New York probate process. Therefore, the executor in New York State is usually an attorney who has an address in New York State and is an agent for the petition for probate proceedings. In some cases, both a Japanese executor and a New York attorney may be appointed as the executor of a New York probate proceeding.
If there is no will of the foreign decedent, a procedure called ancillary administration is used, which differs from an ancillary probate in name, but differs from an ancillary probate in that it appoints an administrator of the estate in New York State, who pays the debts and distributes the estate. The name “ancillary probate” is different from that of “ancillary administration.
Ancillary probate and ancillary administration together are called an ancillary proceeding. The New York State court verifies the documents confirmed in Japan to confirm whether the will is valid and whether the estate division procedure is proper. Documents to be verified include the death certificate, will, estate division agreement, family register, seal registration certificate, and an opinion letter from a Japanese lawyer. All of these documents must be prepared in English or have an English translation. If the New York State court finds all documents valid, it will order the administrator of the estate in New York State to convert the assets into cash and pay the debts, federal and state taxes, and estate administration fees within New York State. After paying the debts, the estate administrator will remit the remaining assets to the heirs, as authorized by the court. The remittance may be by check or by bank transfer.
Small Estate Proceedings
If the amount of property located in New York State is $50,000 or less, a voluntary estate administration procedure called SMALL ESTATE is available.
If you own real property in more than one state
If the decedent has estates in more than one state in the U.S., the Japanese heirs or executors will need to file a supplemental probate or supplemental estate administration in each state.
Owning Real Property in Corporate Form
The ancillary procedure is required above for tangible property such as real estate, artifacts, and personal property located within the State of New York. However, if the property in New York State is not owned by the decedent personally, but by an LLC, trust, or corporation, no ancillary proceedings are required for the property in New York State. If the New York real estate is owned by X Corporation located in New York, and the stock of X Corporation is owned by Y Corporation incorporated in Japan, and the stock of Y Corporation is owned by the decedent as an individual, the ancillary proceedings in New York State can be completely avoided. However, whether federal estate tax is imposed on New York State real property owned in the name of an LLC, trust, or corporation may vary depending on whether pass-through taxation has been elected and whether the use of the property is for personal or corporate use, so when considering estate planning you should check carefully.
Gifts of New York State Property
If a Japanese person gives shares or securities (intangible property) of a company located in New York State to a third party (including relatives), it is a gift of intangible property by a foreign person. In this case, it is treated as neither federal nor state taxable, so no gift tax is imposed in the U.S. Even if the person who made the gift subsequently dies, no federal or state tax will be imposed because there is no property owned by the deceased at the time of death. However, the possibility of a gift tax being imposed in Japan must be considered separately.
In a living trust, a trustee transfers a portion of his/her property to a trust bank or other trust property administrator and acquires the right (beneficiary right) to receive future monetary payments from the trust property administrator. In the trust agreement, it is also possible to specify who will succeed to the trust beneficiary rights when you (the trust settlor) die. A living trust also has the same effect as a gift in that it separates certain property from the inheritance during the decedent’s lifetime. In addition, in the case of a living trust, not only can the probate procedure be avoided, but also the payment of gift tax in Japan may be avoided.
Joint Tenancy and Tenancy by the Entirety
Joint tenancy is a form of ownership of real estate in common ownership. Joint tenancy is used when a married couple owns a condominium. In this case, if one spouse dies, the property of the deceased becomes the property of the surviving spouse without any legal proceedings. The rights of the surviving spouse will automatically increase from 50% to 100% without any procedure. Joint tenancy rights in the State of New York are not subject to the ancillary procedures. If the decedent is Japanese, the heirs are unlimited taxpayers and are subject to Japanese inheritance tax even on property located in the United States. For purposes of inheritance tax, joint tenancy is considered a gift upon death or a bequest, and is considered a transfer of title from the deceased to another joint owner (usually the spouse) upon death. The decedent’s interest in the property is considered to have been transferred upon death to the other joint owners (usually the spouse). The decedent’s interest in the property is considered to have transferred to the remaining joint owners (spouses) upon the decedent’s death, and is subject to Japanese inheritance and gift taxes.
Columns on Estate Planning Around the World
We are pleased to introduce columns we have written about estate planning in countries around the world in addition to New York State. Please click on the titles of the columns below to read more about estate planning procedures in each country.
- ・Inheritance in California
- ・Inheritance in Hawaii
- ・Inheritance in England
- ・Inheritance in Switzerland
- ・Inheritance in Hong Kong
- ・Inheritance in Singapore
- ・Inheritance for Koreans in Japan
Services We Can Provide
We can assist you in all aspects of international inheritance procedures in cooperation with local attorneys, including preparation of legal opinions (affidavits) regarding the scope of heirs, etc., collection and translation into English of family registers and other necessary documents, and authentication procedures at embassies and the Ministry of Foreign Affairs.
If you have any questions about international inheritance, please feel free to call us at 03-5357-1750 (office hours: 9:00-18:00) or contact us via e-mail form(“https://kslaw.jp/contact/”).