|Assembly Actions - Lowercase
Senate Actions - UPPERCASE
|Oct 21, 2014||
|Oct 09, 2014||
delivered to governor
|Mar 20, 2014||
returned to assembly
3rd reading cal.81
substituted for s4952
|Mar 20, 2014||
substituted by a1185
|Feb 04, 2014||
advanced to third reading
|Feb 03, 2014||
2nd report cal.
|Jan 28, 2014||
1st report cal.81
|Jan 08, 2014||
referred to judiciary
|Jun 21, 2013||
committed to rules
|Jun 10, 2013||
advanced to third reading
|Jun 05, 2013||
2nd report cal.
|Jun 04, 2013||
1st report cal.1021
|May 01, 2013||
referred to judiciary
senate Bill S4952Signed By Governor
Establishes the formula for determining the interest payable on a delayed legacy; repealer
Archive: Last Bill Status Via A1185 - Signed by Governor
- In Committee
- On Floor Calendar
- Passed Senate
- Passed Assembly
- Delivered to Governor
- Signed by Governor
view actions (16)
Mar 20, 2014 - floor VoteA1185590floor59Aye0Nay0Absent2Excused0Abstained
show floor vote details
Floor Vote: Mar 20, 2014aye (59)
Jan 28, 2014 - Judiciary committee VoteS4952200committee20Aye0Nay2Aye with Reservations0Absent0Excused0Abstained
Jun 4, 2013 - Judiciary committee VoteS4952220committee22Aye0Nay1Aye with Reservations0Absent0Excused0Abstained
- show floor vote details
S4952 - Bill Details
S4952 - Bill Texts
Establishes the formula for determining the interest payable on a delayed legacy.
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TITLE OF BILL: An act to amend the estates, powers and trusts law, in
relation to the payment of interest on delayed legacies; and to repeal
paragraphs (d) and (e) of section 11-1.5 of the estates, powers and
trusts law and subdivision 7 of section 2102 of the surrogate's court
procedure act relating thereto
PURPOSE OF BILL: The purpose of the bill is to change the law
regarding the payment of interest on a delayed pecuniary legacy. In
addition, this bill proposes to change the interest rate paid on
legacies from the statutory rate of six percent, to an interest rate
based on the Federal Funds Rate. This way, the beneficiary is
compensated according to the time value of money for the delay in
payment of their legacy.
JUSTIFICATION: EPTL 11-1.5 currently provides that interest is not
payable unless a demand is made upon the fiduciary prior to commencing
a proceeding in Surrogate's Court to compel payment of the legacy. The
current statute fixes interest at 6% starting seven months from the
time that letters testamentary, including preliminary letters
testamentary, are granted and permits the Court to award interest at
the legal or judgment rate set forth in the CPLR if the delay in
paying legacies was unreasonable.
I. CURRENT STATUTORY 6% INTEREST RATE IS UNREASONABLE The statutory
default interest rate should reflect the time value of money where the
delay is not unreasonable and the interest is paid by the estate or
trust. Paying interest at too high a rate is unfair to the residuary
beneficiaries whose share of the estate is diminished. Likewise,
paying interest at too low a rate unfairly enriches the residuary
beneficiaries at the expense of the legatee who is not compensated for
the delay in payment. The current fixed rate of 6% is far too high
based on current market interest rates and imposes a significant
economic burden on the residuary beneficiaries. In 1985, when the 6%
interest was fixed by statute, estates typically earned in excess of
6% on deposits. In situations where the Court finds the fiduciary's
delay in paying beneficiaries unreasonable, the Surrogate should
retain the power to surcharge the fiduciary, as this bill allows.
Penalty interest should be paid by the errant fiduciary and not the
estate or trust, as there is no justification in these situations to
impose an economic burden on residuary beneficiaries; yet, the current
statute allows for just that.
II. CURRENT LAW IS UNCLEAR The current statute encourages disputes and
unnecessary litigation. The courts have added greatly to the
uncertainty of how the statute applies when there is a delay in the
payment of a legacy. Some courts have allowed payment of interest even
when a legatee did not bring a proceeding for payment of interest.
Some courts require a legatee to make a demand upon fiduciary for the
payment of interest prior to bringing a proceeding for payment of
interest. Still other courts say that the demand is not necessary.
Adding to the uncertainty, some courts hold that interest may be
awarded, while other courts deem it mandatory. The cases also disagree
whether the residuary beneficiaries or fiduciary pay the cost of
interest to the legatee. The existing New York law requires each leg
of the triangle -the fiduciary, the legatee, and the residuary
beneficiary - to safeguard his or her interests which may result in
expensive legal proceedings. In the majority of situations where
judicial proceedings do not take place, there is a lack of uniformity
of practice and outcome. This is not desirable and therefore, the
statute should be revised to provide predictability.
III. ACCRUAL OF RIGHT TO INTEREST Unless the governing instrument
provides otherwise, interest should be paid starting seven months from
the date of issuance of letters, or if letters are not required, seven
months from the date of death or other date a beneficiary is entitled
to receive a legacy. The legatee should not be required to make a
formal demand or institute a judicial proceeding. It is unfair to
require a legatee to institute a judicial proceeding in order to
collect interest on a delayed payment of a legacy. If the law requires
a judicial proceeding, then, as a practical matter, only the legatees
who are the most aggrieved will institute a proceeding and collect
interest. Most likely, larger sums will be involved. If interest can
only be awarded at the discretion of the Court, then most legatees
will never receive interest because someone must institute a
proceeding in order to get the Court involved. In New York, many
estates - large or small, upstate or downstate - have no Court
involvement following the probate of the will.
IV: APPLICABLE INTEREST RATE The interest rate on delayed legacies
should not be permanently fixed by statute, but should fluctuate
depending on current economic conditions. This is critical to the
fairness of this proposed statutory reform. There is no one correct
interest rate to use as a reference. This proposal requires the
interest rate be set on the first business day of each calendar year
and fixed for that calendar year at the Federal funds rate less 1%,
but in no event less than 1/2 of 1%. By having the rate reset once
each year, fiduciaries can easily comply with the statute and do the
necessary computation. It should not be necessary to engage an
accountant or other professional to compute the interest. Moreover,
the legatee will receive a competitive interest rate based on current
economic conditions in light with what the estate should be earning.
There will be no need for the Surrogate's Court to compute or verify
interest, absent formal objections to the computation within an
accounting or other proceeding.
V. DEDUCTIBILITY OF INTEREST FOR ESTATE INCOME TAX PURPOSES Under
current income tax law, the legatee must report the interest as
interest income on Schedule B (Form 1099 INT issued by the estate),
but the estate cannot deduct the interest as an expense due to
limitations on deductions for personal interest. Therefore, the
current New York statutory scheme is not tax efficient. To be tax
efficient, the interest paid on delayed payment of a legacy should be
characterized under the New York Principal and Income Act (EPTL 11-A)
as accounting income, so that its payment will carry out the
distributable net income ("DNI") in the same manner that the share of
income due a pecuniary legacy in trust carries out DNI.
LEGISLATIVE HISTORY: S.7228-A of 2012: Died on Senate Floor Calendar,
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE: This act shall take effect sixty days after having
become a law and shall apply only to the estates of decedents who
shall have died on or after such effective date.
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S T A T E O F N E W Y O R K ________________________________________________________________________ 4952 2013-2014 Regular Sessions I N S E N A T E May 1, 2013 ___________ Introduced by Sen. BONACIC -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary AN ACT to amend the estates, powers and trusts law, in relation to the payment of interest on delayed legacies; and to repeal paragraphs (d) and (e) of section 11-1.5 of the estates, powers and trusts law and subdivision 7 of section 2102 of the surrogate's court procedure act relating thereto THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraphs (d) and (e) of section 11-1.5 of the estates, powers and trusts law are REPEALED. S 2. Paragraph 3 of section 11-A-2.1 of the estates, powers and trusts law, as added by chapter 243 of the laws of 2001, is amended to read as follows: (3) [A] UNLESS OTHERWISE PROVIDED BY THE TERMS OF THE WILL OR TRUST, COMMENCING (A) SEVEN MONTHS FROM EITHER THE DATE OF DEATH OR OTHER DATE A BENEFICIARY IS TO RECEIVE A PECUNIARY AMOUNT OUTRIGHT IF LETTERS ARE NOT REQUIRED, OR (B) SEVEN MONTHS FROM THE TIME LETTERS, INCLUDING PRELIMINARY OR TEMPORARY LETTERS, ARE GRANTED IF LETTERS ARE REQUIRED, A fiduciary shall distribute INCOME to a beneficiary who receives a pecu- niary amount outright [the interest or any other amount provided by the will, the terms of the trust, or applicable law], from net income deter- mined under paragraph (2) or from principal to the extent that net income is insufficient[. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends and no inter- est or other amount is provided for by the terms of the trust or appli- cable law, the fiduciary shall distribute the interest or other amount to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will], OF AN AMOUNT EQUAL TO THE PECUNIARY AMOUNT MULTIPLIED BY AN INCOME FACTOR, WHICH SHALL BE SET (OR RESET) ON THE FIRST BUSINESS DAY OF EACH CALENDAR YEAR EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03692-01-3 S. 4952 2 AND FIXED FOR THAT CALENDAR YEAR AT THE TARGET FEDERAL FUNDS RATE AS ANNOUNCED BY THE FEDERAL RESERVE BOARD (OR IN THE EVENT THE TARGET FEDERAL FUNDS RATE IS A RANGE OF RATES, THE HIGH OF THAT RANGE) LESS ONE PERCENT, BUT IN NO EVENT LESS THAN ONE-HALF OF ONE PERCENT. S 3. Subdivision 7 of section 2102 of the surrogate's court procedure act is REPEALED. S 4. This act shall take effect on the sixtieth day after it shall have become a law and shall apply to the estates of decedents who shall have died on or after such date.
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