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On July 24, 2011, the Marriage Equality Act was signed into law, making New York the sixth state to allow same-sex marriages. While the Act affects a wide range of issues, such as spousal support, insurance coverage and health care, this article will focus on the effect of the Act on areas related to title insurance.
As of July 24, 2011, same-sex couples may now hold title as tenants by the entirety. To create the tenancy by the entirety, a deed should specify that the parties are taking title as tenant by the entirety, or as married persons. However, New York presumes that a deed that is conveyed to two individuals without stating the manner in which they are taking title will take as tenants by the entirety if they are in fact married at the time of the conveyance. Couples who own property but who are not married take title as tenants in common, and their subsequent marriage will not alter the manner in which they hold title.
Since the act is not retroactive in effect, same sex couples who acquired title prior to July 24, 2011 may want to consider recording a deed to change their ownership to a tenancy by the entirety. A change from a tenancy in common to a tenancy by the entirety will give each spouse survivorship rights. Upon the death of one spouse, the surviving spouse becomes the sole owner of the premises. Couples who held as joint tenants, and who therefore have survivorship rights, may want to convert their ownership to a tenancy by the entirety to take advantage of creditor protection rights unique to a tenancy by the entirety. Specifically, a tenancy by the entirety provides some protection for a judgment that is enforceable against only one of the spouses. In the event of enforcement, the interest of the debtor spouse can be sold under execution. However, the purchaser of that interest is only entitled to a share in the rents and profits, and is not entitled to occupancy of the premises. Furthermore, in the event that the debtor spouse does not survive the non-debtor spouse, the creditor’s interest in the premises is extinguished, and the non-debtor spouse becomes the sole owner of the property.
Same sex couples married on after July 24, 2011, now have the right to elect against their spouse’s will, as provided under section5-1.1-A of the NY Estates, Powers and Trusts Law. In the event that a surviving spouse is unsatisfied with the testamentary bequest provided under their spouse’s will, the surviving spouse may exercise their right to elect against the will. Should this right be exercised, the surviving spouse is entitled to the greater of (1) fifty thousand dollars; or (2) one-third of the spouse’s net estate. Of course, this right of election can be eliminated if the parties entered into a pre-nuptial agreement in which this right is explicitly surrendered.
If the same sex spouse died intestate, the surviving spouse is now an heir or distributee, provided the marriage was entered into on or after July 24, 2011. The surviving spouse is therefore entitled to their intestate share which is the entire estate if the decedent left no surviving issue, or if there are surviving issue, the first $50,000.00 of the estate plus one-half of the residue (with the remainder going to the issue).
For persons dying in 2011 or 2012, the Federal Estate Tax is due if the decedent’s estate is valued at more than $5,000,000.00; and the New York Estate Tax is due if the federal gross estate is more than $1,000,000.00. Estate taxes due against the estate of a married person can be minimized by transferring the decedent’s property to the surviving spouse. All property so transferred is exempt from estate tax provided the deceased spouse is a U.S. citizen and the marriage is recognized by the taxing authority.
While it might appear that the enactment of the Marriage Equality Act allows same sex spouses to take advantage of the marital deduction, such is not the case with respect to federal estate tax. The federal Defense of Marriage Act, enacted in 1996, limits the term “marriage” to legal unions between persons of the opposite gender, as it applied to all federal laws. As a result, same sex spouses cannot claim a marital deduction for purposes of federal estate tax.
New York has taken a different approach. The NYS Department of Taxation and Finance has issued a guidance with respect to this issue. It states as follows -
“For purposes of the estate tax, the New York taxable estate of a decedent in a same-sex marriage must be computed as if the decedent were married for federal estate tax purposes, and the surviving spouse is entitled to the same deductions and elections available to different-sex spouses. This means that the estate may claim a marital deduction equal to the deduction permitted under I.R.C. § 2056...”
On September 23, 2011, a law was enacted to allow the Electronic Signatures and Records Act (“ESRA”) to be applied to real property recordings. Although ESRA has been in effect since March 27, 2000, its original application was not extended to cover real property recordings. With the enactment of the recent ESRA amendment, recording offices in New York State will be allowed to accept for recording documents that are either “digitized paper documents” or “electronic records”, in addition to the traditional paper documents. The amendment takes affect September 23, 2012.
The ESRA amendment will therefore permit the following scenarios:
The following terms are defined under Act:
Digitized paper document – a digitized image of a paper document that accurately depicts the information on the paper document that cannot be altered without detection.
Electronic record – information evidencing any act, transaction, occurrence, event or other activity, produced or stored by electronic means and capable of being accurately reproduced in forms perceptible by human sensory capabilities.
Electronic signature - is an electronic sound, symbol or process attached to or logically associated with an electronic record and adopted by a person as their signature. (ESRA and its implementing regulation further define what will constitute an electronic signature in New York.)
Effective September 6, 2011, the City Register will no longer return UCC documents after they have been filed. The City Register states that copies of UCC documents will continue to be available by printing them from the ACRIS website. UCC documents that are rejected for filing will be returned to the presenter. Rejected UCC documents can be picked up in person or returned by mail. A self-addressed, stamped envelope must be included with the original UCC submission to have a rejected UCC returned by mail.
If you have any questions or would like further information regarding any of the articles in this newsletter, please contact Keith Eng, Esq. at (212) 651-1200 or keng@prestitle.com.
Also, if there are any topics that you would like us to include in future newsletters, please feel free to e-mail us with suggestions at info@prestitle.com.
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