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Articles Posted in Estate administration & probate

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Except in the case of spouses, civil union partners and domestic partners, when a New Jersey resident dies owning a jointly held asset, whether it is real estate, stocks, bank accounts, etc.,  the entire value of the asset will be taxed as if it belonged to the decedent.  If the surviving joint tenant can prove that a portion of it actually belongs to the surviving joint tenant and not the decedent, the New Jersey Division of Taxation may grant an exemption from taxation for that portion of1387291_decorative_house_in_sunlight-thumb-170x127-52807 the value of the asset.  This makes selecting an estate administration and tax planning attorney extremely important.

In order to prove that a portion of the asset actually belonged to the surviving joint tenant, you must be able to show the surviving joint tenant’s financial contribution to the asset or that the surviving joint tenant inherited their portion of the asset from another.  Depending upon the relationship between the decedent and the surviving joint tenant, the asset will be subject to inheritance tax at a rate between 11 percent and 16 percent.   Class A Beneficiaries (which include spouses, civil union partners, registered domestic partners, parents, grandparents, and children) do not pay any tax on inheritances.  Class C Beneficiaries (which include siblings of the decedent and spouses/civil union partners of a child of the decedent)  receive $25,000 free from inheritance tax, are taxed at a rate of 11 percent on the next $1,075,000 of inherited assets and the rate increases as the amount inherited increases – up to 16 percent.  While bequests to charities are not taxed, inheritances received by all other non-charitable beneficiaries not included in Class A or C are Class D beneficiaries and their inheritances are taxed at a rate of 16 percent for the first $700,000 and 17 percent for the remaining balance of the inheritance.

Many people list another person as a joint owner on an account or an asset because they believe it simplifies the estate administration and probate of the estate.  But, it actually can result in a significant tax burden which might not have been due or would have been significantly lower if assets were not jointly held.  Moreover, in New Jersey probate and estate administration are not difficult or expensive so it is not usually necessary to attempt to avoid it.

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supreme-administrative-court-3565618_960_720-300x200A holographic will is a will that is handwritten, signed and dated by the testator (the person whose will it is).  Under New Jersey estate planning Law, holographic wills can be probated and will serve to ensure that the Testator’s assets are bequeathed according to the Testator’s wishes.  In fact, a holographic will is valid even in the absence of witnesses.   While a formal, written will with witnesses prepared by an experienced estate planning attorney is always preferable, a holographic will can be used in an emergency.

During the current health crisis, particularly for those who have tested positive for COVID-19 or those who are at particular risk, it may be better to have a holographic will than to have no will at all.  However, it is important to know the requirements as well as the risks and downsides to using such a handwritten will.   If at all possible, it is certainly better for everyone involved, from the testator to the executor and beneficiaries, for there to be a properly executed traditional will.

The crucial requirement under New Jersey wills and estate law,  for a handwritten will to be admitted to probate in New Jersey is that the will was written by hand, signed and dated by the decedent and that the signature and key provisions are clearly written by the same hand and that the handwriting is identifiable as that of the decedent.   To prove that in court usually requires testimony by a handwriting expert and/or witnesses who are familiar with the decedent’s handwriting.   The holographic will must be presented to the Superior Court by an order to show cause in order to be probated, even if all interested parties agree that the will is valid and represents the decedent’s wishes and intentions about their estate.

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Senior, Elderly, People, Couple, PersonsMany financial accounts provide the account holder with the option to designate beneficiaries.  If a beneficiary is designated on a financial account, upon the death of the account holder, the assets to the account do not pass according to the provisions of the decedent’s Last Will and Testament, but instead will pass to the designated beneficiary.   Therefore, such designations are a crucial part of estate planning, and can significantly change the distribution of an estate.  Yet beneficiary designations are over overlooked during the estate planning process.  Accounts with designated beneficiaries must be considered when structuring your estate plan and when estate planning documents are being drafted.  You must ensure your beneficiary designations are consistent with the rest of your estate plan and together with your estate planning documents accomplish your estate planning goals.   I have met with many clients who needed significant revisions to their Will because their beneficiary designations were not considered when the Will was drafted.  Beneficiary designations which are not considered during the consultations and drafting of estate planning documents often skew or even completely override the intent of the decedent.

Often, people do not consider the effect a beneficiary designation will have on their estate plan.  Instead, believing it to be a simple decision, they just pick someone when asked by a financial advisor or when completing account paperwork.   Sometimes, they don’t want to “bother” their attorney with questions about their accounts, which people often think of as separate from their estate plan.   It is routine and expected for a life insurance agent or retirement account professional to ask for beneficiary designations, but it is also a common option now for brokerage and bank accounts.  Clients often think they “named the same beneficiaries” on all of their accounts, but when documentation is obtained and reviewed, the beneficiaries designated often undermine their estate planning intentions.

It is always a good idea to consult with your various professionals – you lawyer, financial advisor, and insurance broker – to confirm that you have named beneficiaries where necessary, and that these designations are carefully considered to effectuate your estate plan.

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