The short answer is yes. Your will ensures that:
• your assets are given to those whom you want to receive them;
• you can control the way in the which your assets are distributed (for example, establishing a trust for the protection of a beneficiary, and designating the trustees);
• the guardians you choose will be entrusted with raising your children;
• your estate will be administered by someone you trust;
• your estate will not be reduced by the cost of an administration bond; and • estate taxes are minimized.
In your will, you choose who will receive your assets (beneficiaries) and what they will receive (bequests). If you do not have a will, your estate will pass through the laws of intestacy. Many people believe the laws of intestacy will align with their wishes for distribution of their estate. However, many times that is not the case. For example, if you are married, have no children, and do not have a will, people assume that the surviving spouse will inherit the entire estate. However, under New Jersey intestacy law , your surviving spouse is entitled to the first twenty five percent of your estate (not less than $50,000 nor more than $200,000) and seventy five percent of the remaining portion. The balance will go to your parents. So, for example, if you have a $1,000,000 estate your surviving spouse will receive a total of $800,000 and your parents would receive $200,000. In another example of unintended consequences in intestacy, if you have no living relatives and no will, your entire estate will be given to the State of New Jersey. There are many other scenarios under the laws of intestacy which would distribute your property in ways that you may not intend. Having a will ensures that your estate is distributed to people or charities that you have chosen.
Without a will, your assets are distributed under the laws of intestacy directly to the people designated by New Jersey law. In some circumstances, it may be wise to put the money in a trust for some of your beneficiaries so that you can direct when and for what purposes the money will be distributed. This is particularly useful if there are potential beneficiaries with special needs whose governmental benefits need to be protected.
A will designates your children’s guardians – a will is the only way to appoint guardians. This is an important choice. You should discuss this choice with the people you choose beforehand because you will be placing a great responsibility upon them.
You will also select executors and trustees. Executors are responsible for probating your will, paying expenses, and collecting and distributing the assets to the beneficiaries. Trustees manage assets placed in trust for designated beneficiaries. By New Jersey law, if there is no will, or a will that does not waive the bond, fiduciaries (such as executors and trustees) must post a bond with the surrogate’s court. The cost of the bond varies with the value of the estate’s assets, and can become very costly. To ensure that your assets are not diminished by the bonding requirement, you can waive it in your will.
The federal estate tax exemption is now $5,000,000 (indexed for inflation in 2012), and the top federal rate is now thirty five percent. This means the value of an estate in excess of $5,000,000 will be taxed by the federal government at a rate of thirty five percent. As the law currently stands, the exemption will decrease to $1,000,000 in 2013, and the top tax rate will once again be fifty five percent. There are ways to minimize the amount of taxes paid by your estate, from complicated to simple: from irrevocable intervivos trusts, to irrevocable life insurance trusts, to disclaimer trusts, to simple gifts during life. Which method suits your needs is based upon many factors including your estate’s value and your relationship with the beneficiaries.
New Jersey also imposes an estate tax. The New Jersey exemption is $675,000, significantly lower than the federal exemption. Thus, New Jersey decedents whose estates exceed $675,000 are subject to New Jersey state estate tax. The same tools can lower New Jersey estate tax.
Proper estate planning can ensure that your assets are received by the people you chose, in the way you intended, with significant estate tax savings. We strongly recommend that you make sure that you protect your assets so that you do not have an otherwise avoidable estate tax liability.
McLaughlin & Nardi’s attorneys are experienced in estate planning and administration, and can create estate plans to maximize the assets passed down to the next generation. We are available to help you plan for your family’s future, review documents you may already have, administer estates, or assist you with any questions. For more information call one of our attorneys at 973-890-0004 or visit our website.