Articles Posted in Estate Administration and Probate

Published on:

The New Jersey Estate Tax is being phased out beginning with residents dying on or after January 1, 2017.  Governor Christie signed a new law calculator-385506__340[1], the new tax laws reduce the estate tax for resident decedent’s dying in 2017 by increasing the exemption amount to $2,000,000.00, and then eliminating the New Jersey Estate Tax altogether for resident decedents dying on or after January 1, 2018.  New Jersey is no longer one of the worst states in which to die, and New Jersey resident seniors may no longer feel the need to establish domicile elsewhere. Those New Jersey decedents dying in 2016 with estates exceeding $675,000 will remain subject to New Jersey estate tax. Further, the federal estate tax will continue to apply to estates greater than the federal exemption amount, currently $5,450,000, which increases annually based on inflation.  And, after the recent elections, we need to keep an eye out for new laws enacting changes to the tax code.

However, while the New Jersey Estate Tax is being phased out, the Inheritance Tax will remain.  New Jersey is one of only six states which impose an inheritance tax on transfers from a decedent to a beneficiary.   Whether an estate is subject to inheritance tax is determined by the relationship between the decedent and the beneficiary.  Bequests to “Class A” beneficiaries (i.e. spouses/domestic partners, parents, children) are not subject to inheritance tax.  The tax rate on transfers to non Class A beneficiaries depends on the “Class” of the beneficiary and the value of the asset transferred to that beneficiary.  Likewise, non-resident decedents who own New Jersey real estate or tangible personal property will continue to be subjected to the New Jersey Inheritance Tax.  Additionally, New Jersey Inheritance Tax Waivers will still be required in order to transfer title to real estate, brokerage accounts, securities and bank accounts.

Please call or e-mail the attorneys at McLaughlin & Nardi, LLC to create an estate plan or  review and update an existing plan.

Published on:

This is called dying intestate and if you die without a Last Will and Testament as a resident of the the State of New Jersey your estate will be distributed according to the New Jersey laws of intestacyhand-229777__180   Since there is no will to probate, your nearest living relative who is willing to do so will need to be appointed as administrator of your estate by the surrogate’s court.

However, not all of your assets will be distributed through the process of estate administration.  There are many assets which, through contract law, pass automatically to a designated beneficiary.  Examples of assets that pass automatically are:

  • Real estate owned with another person as joint tenants
Published on:

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Will.jpgWhen you discover that you are named as the executor of an estate, it can be overwhelming. The executor of an estate has a fiduciary obligation under New Jersey estate law to administer the estate and collect and distribute the assets in accordance with the last person’s will.

The first step is to probate the will. The executor must appear before the surrogate in the county where the person resided at the time of their death and provide the surrogate with the original will and a certified death certificate. In New Jersey you must wait ten days after the date of death to probate the will. If the will was properly executed and no caveats were filed objecting to the will, then the surrogate will admit the will and issue letters testamentary appointing the executor. The executor will then have the power to act. New Jersey probate law requires that the executor must act in the best interests of the estate and the beneficiaries. After the will is probated, the executor must provide formal notice of the probate to the beneficiaries named in the will and the deceased person’s next of kin.

Then the executor must gather the deceased person’s assets. This can be difficult as you must conduct a search to find all accounts, businesses, physical property and real estate. Appraisals of certain property must be obtained by the executor. The executor must apply to the Internal Revenue Service to obtain a federal tax identification number. Additionally, the executor must pay all of the decedents legitimate debts. One of the executor’s responsibilities is to confirm that the debts are actually owed by the estate. All uncontested bills must be paid, and the questionable bills, debts and obligations must be researched and resolved. Also, there may be statutory liens and liabilities which should be researched and paid. If legitimate debts of the estate are not paid the executor may become personally responsible for them.

The executor is responsible for preparing, filing and paying any applicable federal New Jersey estate and inheritance tax return and filing the estate tax return and the final income tax returns for the decedent. Each of these tax returns has filing and payment deadlines which must be met or the estate will be subject to interest and penalties for the late filings and/or payments. An executor may be personal liable for interest and penalties which are the result of the executor’s unexcused failure to act in a timely manner. After payment in full of any New Jersey estate or inheritance taxes, the state of New Jersey will issue inheritance tax waivers which are required to transfer assets to the estate and/or the beneficiaries. Tax waivers for real property must be recorded.
Continue reading

Published on:

What happens if you believe that a loved one’s last will and testament is not valid? Under New Jersey probate law, if there is a last will and testament, it must be probated (filed) with the surrogate in the county where the decedent resided. The will’s terms control the distribution of the decedent’s assets. However, there are a number of reasons why a will can be challenged. If the challenge is successful, then the will is voided and the probate assets will be distributed either by a previously executed will or the laws of intestacy.

The simplest way to challenge a will is before it is probated. In New Jersey, you cannot probate a will until at least ten days following the date of death. Any time before the will is probated a caveat can be filed with the court and this will prevent probate of the will. Then any disputes regarding the will’s validity will be resolved before the court permits it to be probated.

The will’s validity can also be challenged after it has been probated. To challenge a will under New Jersey probate law you must be able to prove one of the statutory reasons which include undue influence, lack of capacity, fraud, forgery, revocation and mistake. There is a short time period to challenge a will, if you are seeking to challenge a will and you reside in New Jersey the statute of limitation is four months and if you are an out of state resident the statute of limitation is six months. The most often encountered bases of a will challenge are undue influence and lack of capacity.

To challenge a will based upon undue influence, you must show “coercion exerted [which] may be mental, moral or physical, or all three, but it must be such as to pre-empt the testator from following the dictates of his own mind and will and accepting instead the domination and influence of another.” Essentially the question here is whether the person who signed the will did so of his own free will without influence or pressure from someone who benefitted from the terms of the will. The person challenging the will must prove that a person in a “confidential relationship” with the testator unduly influenced the terms of the will, and that there were “suspicious circumstances” surrounding the execution of the will. To determine whether there was undue influence the courts will look at many factors, including: if the terms of this will are a significant change to a prior existing will; the age and health of the testator at the time the will was signed; if the testator lived with or under the supervision of the person benefitting from the will; if the person in the confidential relationship with the testator is benefitting from the terms of the will; and if the person benefitting from the will hired the lawyer to prepare the will.
Will challenges are also frequently based upon the testator’s lack of capacity to make the will. To successfully challenge a will for lack of capacity under New Jersey estate law, it must be shown that at the time the will was executed, the testator did understand: 1) the nature and value of the property he owned; 2) the identity of the “natural objects of his bounty” (the family members would receive his property upon his death if he did not have a will); and 3) the effect of the terms of his will.
Continue reading

Published on:

stock-photo-6126140-bank-sign-on-building.jpgIt is a fairly common practice for people to open joint bank accounts. Often joint accounts are held by spouses, and the funds do actually belong to both individuals. However, sometimes these accounts are opened for the convenience of allowing a child or to access funds and write checks to pay bills, or as a way to have ownership of the funds pass to the surviving joint account holder upon death. While this is an effective and simple way to give someone else control of your assets of have the funds pass to another upon death, there are problems associated with joint accounts which should be considered before opening a joint account.

1) The joint account holder has unfettered access to the funds in the account. There is no oversight over the way the funds are used. Both joint account holders can utilize the funds for any reason; there is no need for permission – either account holder can withdraw of any portion or all of the money in the account for any purpose.

2) A joint bank account is at risk from legal actions by the creditors of either account holder. If the joint account holder has a judgment entered against her, all the funds in the joint bank account can be attached and used to pay the judgment. For example, a one account holder gets divorced and his spouse claims a right to some of the funds in the account, then the account holder who deposited the funds in the joint account would need to go to court to prove that the money does not belong to the divorcing account holder. Another example is if the other joint account holder is sued, loses and does not pay the resulting judgment.

3) Upon the death of either account holder, the money would indeed pass to the surviving joint account holder. However, the money remains subject to estate and inheritance taxes. If the individual who passes is not the individual who contributed the funds to the account, the account would nonetheless be taxed as part of the deceased account holder’s estate. In other words, the survivor would have to pay inheritance tax even if she deposited the funds in the first place. Depending on the amount of assets in the account, the relationship between the two joint account holders, and the value of the decedent’s total estate, this can result in a significant death tax burden which could have been avoided.
Continue reading

Published on:

estate sale.jpgIn addition to the usual issues which come up when you are purchasing real estate, such as the contract review, home inspections, negotiations, and applying for a mortgage if necessary, when you purchase real estate from an estate there are some additional concerns.

When the owner of the property has died prior to entering into a contract of sale, and the property is being sold by an estate, the first question is: Who has the power to sell the property?

The person who has the power to enter into a contract for sale is usually the executor. If the deceased owner had a will and the property is passing with the residuary estate, (the residuary estate is what is left after specific bequests), the executor can do everything needed to effectuate the sale. It will be necessary during the contract period to obtain the death certificate, a copy of the will and the letters testamentary (the document from the surrogate’s court appointing the executor). The buyer’s attorney should insist that these documents are provided within a short time period after the contract is finalized.

However, if you obtain a copy of the will and see that the property passes by specific bequest to specific named beneficiaries, then not only does the executor need to be involved in the sale, but also under the New Jersey Real Estate law the beneficiaries must join in the sale. This can only be determined by seeing a copy of the probated will. When real estate is devised by specific bequest, it can create significant delays as the beneficiaries may be scattered throughout country, or even out of the country. In this case, the beneficiaries must all agree to sell real property on the terms and conditions in the contract, they must all agree to the resolution of any issues throughout the contract period, including home inspection negotiations. The seller’s attorney will need to seek the consent of each beneficiary for attorney review changes, home inspection repairs requests, etc. Each of the specific bequest beneficiaries must also execute the closing documents. Clearly, a purchase is more difficult if there is a specific bequest of real estate. However, if the buyer is represented by an attorney who understands the issues involved, these issues can be effectively managed.
Continue reading

Published on:

393096_old_couple.jpgNew Jersey imposes an estate tax on assets passing to any beneficiary other than a surviving spouse. The New Jersey exemption amount is $675,000, meaning that a decedent whose estate exceeds $675,000, and whose assets are to be inherited by any individual other than a surviving spouse, is subject to New Jersey State estate tax. While both spouses are entitled to an exemption amount of $675,000, careful planning is required to take full advantage of both spouses’ exemption amount and shield $1,350,000 from taxes when it is passed to the next generation.

A disclaimer trust is an excellent vehicle for married couples to ensure that their heirs can maximize their exemptions. This trust can be included as a provision in both spouses’ wills. It provides that the trust will on be funded upon the death of first spouse if the surviving spouse executes and files a valid and proper disclaimer within nine months of the spouse’s death. It is important that the surviving spouse does not exercise any control over the assets being disclaimed after the decedent’s death. There are a number of factors to consider when deciding whether to disclaim assets and thereby fund the disclaimer trust, including the value of the estate, the age of the surviving spouse, the health of the surviving spouse and the current status of estate tax law. A disclaimer trust provision in a will is flexible and allows the surviving spouse to decide whether or not to fund the trust. However, if the decedent’s will does not contain the necessary provisions, the surviving spouse does not have the option to fund the trust and minimize future New Jersey estate taxes for the next generation.

The terms of the disclaimer trust are usually that the surviving spouse is entitled to all of the income from the trust during her lifetime, and the surviving spouse also has the right to access the trust principal for her health, education, support and maintenance. Distributions in excess of that are not automatic and require the agreement of the co-trustee. Typically, upon the surviving spouse’s death, the couple’s children become the trust beneficiaries.
Continue reading

Published on:

facebook.jpgNJ Assembly Bill A-2943 will ease access to Online Accounts after a persons death.

The New Jersey State Assembly has approved legislation allowing an executor or administrator of an estate to assume control of a person’s online accounts in the event of her death. If the bill is approved by Congress, the executor or administrator will be able to conduct, continue or terminate the social networking website, micro-blogging, and e-mail websites.

Currently the executor or administrator must research, navigate and wade through the protocols in place for each separate website. For example, Yahoo! Mail will not allow access to an executor or administrator, or anyone else, unless it is court ordered while G-mail and Hotmail will allow access upon providing proof that the executor or administration has been authorized to access these accounts.

Social media websites each have their own rules. Facebook will not allow access to a deceased person’s account. They do however, provide a memorial status for the deceased person’s account. They require a copy of the death certificate to close the account, but will not grant access.
Continue reading

Published on:

Thumbnail image for Thumbnail image for 1221950_to_sign_a_contract_1.jpgUnder New Jersey estate planning law, a living will, which is legally called an advanced directive, allows a person to give instructions for what care she is to receive her health is extremis. A living will must be in writing, signed and dated before two adult witnesses who attest that the person signing the advanced directive is of sound mind, and is not under duress or undue influence. Alternatively, it may be signed, dated and acknowledged before a New Jersey notary public or a New Jersey attorney.

Under law New Jersey law, a living will becomes effective when it is provided to the physician who has determined that the patient does not have the capacity to make her own health care decision. If at any point the patient regains the ability to make her own health care decisions, the patient regains the legal authority to direct her own care.

The main purposes of the living will are to allow a person to give her instructions or her wishes for when she is unable to do so herself and to appoint an agent to make decisions when she is unable to make her own decisions. The living will may direct that certain life-sustaining treatments be withheld. If, for example, the patient has an incurable or irreversible, severe mental or severe physical condition; is in a state of permanent unconsciousness or profound dementia; is severely injured; and in any of these cases there is no reasonable expectation of recovering and regaining any meaningful quality of life, then the living will may direct that life-sustaining treatments be withheld. New Jersey law provides that the attending physician, if it is consistent with the terms of the advance directive, may issue a “Do Not Resuscitate” order.

There are two types of advanced directives: an instruction directive and a proxy directive. These can be combined into one document. A person can chose to execute both types or either one standing alone.
Continue reading

Published on:

POA123.JPGAttorneys often focus on the importance of an estate plan and having a will to minimize costs and conflicts when a person dies. But it is just as important to plan for problems that may occur during people’s lives if they are unable to manage their own affairs, particularly the serious problems that can occur as the result of illness or incapacity.

A durable power of attorney can be invaluable in such situations. A durable power of attorney authorizes one person to handle all non-medical matters for another. It can also be limited as desired by the principal (the person who is signing the power of attorney, the grantor of the power). It is a durable power of attorney because it remains in effect even if the grantor becomes incapacitated. The durable power of attorney can be revoked at any time as long as the grantor has not become incapacitated.

In the event a person becomes incapacitated, the agent appointed in the durable power of attorney can take care of their affairs. The durable power of attorney thus eliminates the need to apply to a court to declare a person incapacitated so that a guardian can be appointed. The application for guardianship is a costly, time consuming and emotionally draining experience. One simple document, the durable power of attorney, properly drafted and executed saves the principal and their loved ones from this difficult and expensive proceeding. It also ensures that the principal gets to chose who will act on her behalf if she becomes incapacitated, rather than having the existing laws and a court make that determination. It is also recommended that the principal designate a successor agent, someone who will take over as the agent if the first named agent is unwilling or unable to fulfill that role.
Continue reading