Before attempting to answer the question: in a Surrogate's Court proceeding, what assets can a creditor reach, it's crucial to understand that, in all Surrogate's Court proceedings, there are two (2) categories of assets: Probate Assets and Non-Probate Assets.
Probate Assets: In a nut shell, Probate Assets are any assets the deceased person owned at the time of death which are titled solely in the deceased person's name. By way of example, if a deceased person had two (2) bank accounts, one with Bank X, which is a joint checking account with the deceased person's name on it and his son's name, and one with Bank Y, which is a checking account in the deceased person's name alone, only the account with Bank Y will be a Probate Asset.
Non-Probate Assets: In a nut shell, Non-Probate assets are assets the deceased person owned at the time of death which were joint with another person or which have a beneficiary designated on the account. In the example above, the account with Bank X is a Non-Probate asset, because it's a joint bank account. The same is true for "In Trust for," or ITF, accounts.
Note that all of a deceased person's assets, be they bank accounts, brokerage accounts, IRA accounts, life insurance policies, pension accounts, etc. will either fall into the category of Probate Assets or Non-Probate Assets.
So, to get back to the question: in a Surrogate's Court proceeding, what assets can a creditor reach, the first answer to this question is all Probate Assets, subject to certain set-offs for surviving spouses. Probate Assets, no matter what type of assets they may be, are fully reachable by creditors, even if this means that a creditor will end up taking 100% of the deceased person's estate.
So are Non-Probate assets protected from creditors? Well, the answer to this question is, it depends on the type of Non-Probate asset. Without getting into too much detail, the following Non-Probate assets tend to be protected from the claims of creditors:
1) Life insurance policies;
2) Pension benefits;
3) IRA accounts; and
4) Irrevocable trust assets.
While the following Non-Probate assets tend to be subject to the claims of creditors:
1) ITF accounts;
2) Revocable trust assets;
3) Joint accounts; and
4) POD accounts.
This blog is written to provide fellow New Yorkers with a small sampling of the rules, regulations and issues which predominate the fields of Trusts & Estates and Elder Law. This blog is not intended to provide individualized legal advice, as every matter is factually distinct, but is written to provide my friends, colleagues and clients with a very basic understanding of my primary practice areas. If you require individualized assistance, please contact C. Haner Law at (516) 833-7800.
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