New York: Revocable Trusts are Not Subject to the Family Allowance

Question: In New York, does a living trust have to pay the family exemption to a surviving spouse and minor children after the trusts's grantor dies?

Answer: In New York, assets that are transferred to a revocable trust are not subject to the family allowance under EPTL 5-3.1.

Explanation:

A family allowance is a statutory amount of money that a surviving spouse and minor children are entitled to and do not become part of a decedent's administrable estate. EPTL 5-3.1(a). The purpose of the family allowance is to provide for the immediate needs of the surviving family members while the estate is being settled.

Family exempt property is exempt from the claims of the decedent's creditors. However, it is limited by EPTL 5-3.1 to personal property that would otherwise be in the decedent's estate. It does not include other personal property of the decedent that is generally not in the decedent's estate but is otherwise subject to claims of the decedent's creditors, such as Totten bank accounts, transfer on death securities, and property placed in a living trust.

There are always exceptions: Assets in a trust could become subject to the family allowance if the trust provides that the property goes to the decedent's estate or the decedent failed to treat the trust as a separate entity so that the trust would be disregarded.