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Articles Tagged with wills

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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
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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.
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B&O_RR_common_stock.jpgA self-cancelling installment note (“SCIN”) can be used to sell a business interest, stocks, real estate or other types of assets, usually to a family member of the current owner. This is a variation of an installment sale where the remaining payments are cancelled upon the death of the note holder.

When using a SCIN, the person selling assets essentially serves as a bank. They transfer title to the asset to the buyer in exchange for installment payments, including interest, (at regular intervals, i.e. monthly, quarterly or annually) over a specified time period. The SCIN will contain a provision that the unpaid balance of the note is cancelled upon the seller’s death. If the seller lives beyond the term of the note, the cancellation provision has no meaning and is just ignored, because the entire balance will have been paid. However, if the seller dies before the term has expired, the buyer’s obligation to make the installment payment ends at the seller’s death.

The main purposes of utilizing a SCIN to transfer assets are: 1) minimizing estate taxes – the unpaid balance is not includable in the seller’s gross estate; 2) avoiding gift taxes; and 3) prorating capital gains on the increase in value.

Estate taxes are saved because the title to the asset was transferred to the purchaser for value before the seller’s death. This includes all appreciation which accumulated since the seller took possession of the asset. Additionally, any appreciation in value after the sale will be excluded from the seller’s taxable estate.
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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.
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An estate plan carries out a person’s wishes at the time of their death and appoints people to make decisions during life.

An estate plan commonly consists of three main documents:
• Last will and testament
• Durable power of attorney • Living will and health care proxy (medical power of attorney)

Last Will and Testament. The fundamental document is the last will and testament. The will takes effect upon death. The will must meet the formal requirements under New Jersey law in order to be effective in New Jersey
The will designates people and their roles:
• Beneficiaries – recipients of the decedent’s assets;
• Executors – the persons who will probate the Will, collect the estate assets
and distribute the estate assets to the beneficiaries;
• Trustees – the persons who will manage the assets placed in a Trust usually
for the benefit of either the surviving spouse or the children or both;
• Guardians – the persons who will care for minor children until they reach the
age of majority (which is age 18 in New Jersey).

Durable Power of Attorney. The power of attorney is in effect when a person is alive; it becomes effective when it is signed. When a power of attorney is “durable”, it remains in effect even if the person is incapacitated. The durable power of attorney authorizes the people selected to handle your financial matters. Common tasks include banking, including writing checks and paying bills, real estate, trading investments, communicating with social security, pension benefits departments, Medicaid/Medicare, and the IRS, hiring accountants, attorneys, and financial advisors, and any other related financial need.
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