The Documents You Need for Your Estate Plan

The Documents You Need for Your Estate Plan

Whether you are thinking about creating an estate plan or already have one in place, it is important to ensure you have the proper documentation. Unless you have a law degree, understanding estate planning can be confusing.

In this DIY age, you may be inclined to try and create your estate plan on your own via the internet. Don’t. In fact, without an effective estate plan and proper documentation, your future heirs may suffer and your last wishes may not be upheld.

Following are the documents you need to ensure your legacy is preserved:

1. A will — For many people, this is the be all/end all of estate planning – the holiest of holy documents and the only one seen as worth having. A will is indeed vital to your estate plan as it provides instructions on how your property and assets should be disposed of and who your beneficiaries should be. In your will, you may describe how you wish to be buried, what charities you wish to donate to, who should care for your pets, and more. Additionally, your will allows you to name an executor to handle the administration of your estate after your death. Without this document, your estate is subject to New Jersey’s intestacy laws.

2. A health care proxy — A health care proxy is a document that names a trusted individual to make decisions about your health should you become unconscious or mentally disabled. No one wants to imagine what might happen to their loved ones if they should fall into a vegetative state or suffer from a terrible illness like dementia. Yet considering such possibilities and setting up a health care proxy is important to ensure your family knows your wishes should something happen to you.

3. Durable Power of attorney — Unfortunately, many estate planners stop at their will. While your will is extremely important to your estate plan, the buck doesn’t stop there. What if you should become incapacitated via accident, injury or illness? Who will handle decisions about your healthcare and finances? With a durable power of attorney, you name a trusted person who takes care of things like paying your bills, making medical decisions or handling your investments.

No two estate plans are the same. Your estate plan reflects your life, your estate, your assets and the legacy you wish to leave behind. Depending on your unique situation, your plan may be more or less complicated.

For more information about estate planning in Union or Hunterdon County, consult with Alec Borenstein, Esq., a partner with the firm at alec@bmcestateplanning.com or call 908-236-6457 today.

More Help for Modest Estates in New Jersey

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For people of modest means, the estate administration process often adds legal and administrative expenses that serve only to reduce the amount of the estate that passes onto heirs. In addition to these hard costs, a lot of the heirs’ time and energy can be lost at a time when they are likely already grieving the loss of a loved one. It hardly seems worth it to process these modest estates.

Fortunately, the State of New Jersey recognizes the burden that estate administration can place on people of modest means and thus always allowed intestate estates valued at less than $20,000.00 to pass to a surviving spouse or partner without the need for administration. An intestate estate is an estate where there is no Will.

Recently, the New Jersey State Legislature passed two new laws which expand upon this policy. First, the amount that can be transferred to a surviving spouse or partner has been increased to $50,000.00. This adjustment will allow a much larger number of estates to pass without administration and should serve to alleviate unnecessary stress on many New Jersey families.

If the decedent does not have a surviving spouse or partner, the maximum amount that could pass was previously $10,000.00, but that amount has also been increased and is now $20,000.00.

The second law assists some of the State’s least financially secure individuals — nursing home patients. Under this new law, nursing homes are required to work with residents to help them designate a beneficiary who will be entitled to any personal needs allowance funds that amount to $1,000.00 or less. The named beneficiary will usually be able to take these monies without administration.

If you have questions regarding your eligibility, or the eligibility of a loved one, under the provisions of either of these laws, consult with a lawyer as soon as possible. For residents of New York and New Jersey seeking estate planning assistance, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com, or call 908-236-6457.

Understanding “I Love You Wills” in New Jersey

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If you are married and creating or updating your estate plan, you may be considering “I love you Wills.” Essentially, this type of Will leaves all your personal belongings to your spouse in the event of your death, and vice versa.

For many married couples, “I love you Wills” present a more straightforward approach to estate planning — you love your spouse, you leave everything you have to him or her and that’s that.

Yet clients considering “I love you Wills” often wonder, what happens to my Will if my spouse and I get divorced? First of all, you should update your Will during any major life event — births, deaths, new jobs and divorce just to name a few. However, what if you fail to update your Will after divorce? Does your ex still get everything? Fortunately, the State of New Jersey has laws in place to protect divorcees who previously had an “I love you Will” in place.

According to N.J.S.A. § 3B:3-14, there is a revocation of probate and non-probate transfers by divorce or annulment. So, let’s say you are happily married and have an “I love you Will” in place. Then, at some point down the road, you and your spouse get divorced but you forget to update your “I love you Will”. New Jersey law revokes any bequests made to your former spouse and they automatically pass on to your next beneficiaries.

In addition, if your ex-spouse was named the primary executor of your “I love you Will”, worry not — your Will would be probated by the next person you named as executor of your Will. There are only a few ways to “revive” the bequests to spouses in “I love you Wills” after divorce in New Jersey and they are as follows:

  1. Remarriage;
  2. Revocation or nullification of the divorce; or
  3. The execution of a Will or Codicil after divorce.

The statute also revokes any survivorship claims either spouse has in a joint asset. This means that if you and your ex-spouse owned a piece of real estate together, your stake in the property would pass to your other beneficiaries and not to your surviving spouse. N.J.S.A. § 3B:3-14 also revokes the beneficiary rights of your former spouse to your life insurance policy unless otherwise specified in your divorce agreement.

There is no perfect Will for married couples — every relationship is different and requires its own custom tailored estate plan. Whether you are considering an “I love you Will” or need help updating your current estate plan, it is in your best interest to contact an estate planning attorney.

To discuss your NJ estate planning matter today, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com, or call 908-236-6457.

What are Your Responsibilities as an Estate Administrator in New York State?

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Contrary to what you may have heard, an administrator is not the same as an executor. An executor is a person named in a will to carry out the descendant’s last wishes. The job of the administrator, on the other hand, is to ensure the estate of the descendant is processed in accordance with the state’s intestacy laws. In addition, an administrator is appointed by the Surrogate Court in the event that no will exists.

If you are appointed administrator of an estate in New York, your first move should be to contact your attorney. Your lawyer can explain the process and guide you through the necessary steps. Following is a basic checklist of tasks you’ll want to take care of immediately:

  1. Identify and list out the decedent’s assets.
  2. Contact financial institutions and notify them of the death and that you have been appointed administrator of the estate.
  3. Have real and personal property, including furniture, jewelry, art, collectibles, automobiles, etc., professionally appraised.
  4. Open an estate checking account.
  5. Find out if there are creditors of the estate and if their claims are valid. If their claims are valid, consult with your lawyer on how to proceed.
  6. Pay off all estate expenses including court fees, appraisal costs, funeral expenses, attorney fees, etc.
  7. Create a journal and record all financial transactions related to the administration of the estate.
  8. If required, be sure to have the decedent’s last income tax return and estate income tax returns organized and filed.
  9. Distribute the balance of estate funds to the surviving beneficiaries.

It is important to remember that you are appointed by the court and you should take your responsibilities as an estate administrator seriously. If state or federal taxes are owed on the estate, be sure to file them correctly and on time. A failure to do so may result in penalties against you.

Recently appointed executor/administrator of an estate in NY or New Jersey? Without proper legal guidance, you could find yourself in over your head. An experienced estate planning lawyer can assist you in obtaining and filling out paper work, understanding the probate process and creating an estate plan of your own. For estate planning help in Union and Hunterdon Counties, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457 today.

New Jersey has an Inheritance Tax, too?

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As we the New Year begins to take hold – it’s time for us to circle back to a few basic estate planning concepts. If you live in New Jersey, or know someone who does, there’s nothing more ominous than New Jersey Estate & Inheritance Taxes. I recently wrote an article here about the NJ Inheritance Tax and I’m publishing it below:

As an estate planner, I often feel as though I’m the bearer of bad news. Especially since every time you turn around it seems like the government is taxing you for something, especially in New Jersey.

This is how some of my client sessions go:

“You want to give everything to your kids – got it. And you have life insurance – fantastic. Just know that life insurance is includable in your estate for estate tax purposes and New Jersey has the worst estate tax in the country.”

Or how about this one:

“You need a Will, great. But you want to give $100,000 to your nephew. No problem. Just know that New Jersey also has an inheritance tax. Yes, New Jersey has inheritance taxes also. While many of my clients may be familiar with and troubled by the state’s property taxes and estate taxes, you may be unaware of New Jersey’s inheritance tax. Please don’t hurt me.”

So what, exactly, is an inheritance tax? It’s a tax you must pay after you receive assets or property from a decedent (i.e., the one who died) unless the decedent makes other arrangements to pay the tax under her Will. The NJ inheritance tax should not be confused with the NJ (or federal) estate tax, which is usually satisfied from the estate of the decedent.

Currently, there are only six states in the Union that still have an inheritance tax — Nebraska, Iowa, Pennsylvania, Kentucky, Maryland and New Jersey. Additionally, New Jersey and Maryland have both an estate tax and an inheritance tax — a double whammy.

How does the NJ inheritance tax affect you?

How you are affected by the inheritance tax in New Jersey depends on your relationship to the decedent. If you are a Class A beneficiary (father, mother, grandparent, descendant, spouse, civil union partner, or domestic partner), no tax is imposed. Therefore, if you want to leave everything to your spouse and then your kids (or grandkids) – I can give you some good news – there is no NJ inheritance tax!

For Class C beneficiaries, the first $25,000 received is exempt and a tax of 11% is imposed on the rest of the inheritance. If you are a brother or sister of the decedent, or the husband, wife, or widow(er) of a child of the decedent, civil union partner or surviving civil union partner of a child of the decedent then you are a Class C beneficiary.

Class D beneficiaries (i.e., everyone else who is not Class A or C) are taxed 15-16%.

(In case you noticed, there are no Class B beneficiaries. Just A, C & D.)

Are there exemptions to the NJ transfer inheritance tax?

As a result of the combined inheritance tax and estate tax, many New Jersey residents are looking to states in the South and West as retirement age approaches. However, depending on your situation, a New Jersey resident may be able to claim certain exemptions from the state’s inheritance tax. According to the New Jersey Department of Treasury Division of Taxation, the following exemptions are available from the transfer inheritance tax:

  • All transfers with a total value under $500;
  • Transfers for public purposes made to New Jersey or any political subdivision thereof;
  • Federal civil service retirement benefits payable to a beneficiary other than the estate, executor, or administrator;
  • Any life insurance that has been paid to a named beneficiary (but not the decedent’s estate);
  • Charitable donations for the use of any educational institution, church, hospital, orphan asylum, public library, etc;
  • Annuities payable to survivors of military retirees;
  • Qualified employment annuities paid to a surviving spouse, civil union partner, or domestic partner.

I know – a very exciting list! But important to note, there are no inheritance taxes for: gifts that are less than $500 and life insurance proceeds payable to designated beneficiaries. Therefore, if you wanted to leave your $100,000 life insurance proceeds to your nephew, there would be no inheritance tax (but there could potentially be estate tax).

Yes, lots of bad news. But I would like to end on a positive note: any inheritance taxes that are paid to New Jersey are counted as a credit toward the overall estate taxes given to New Jersey. Thus, if there is $45,000 due in inheritance taxes, and the estate tax bill is $50,000, your estate would only owe $5,000 in estate taxes because $45,000 was paid in inheritance taxes. New Jersey will not tax your estate twice.

As you consider gift giving throughout this New Year, perhaps give your nephew a little more. It will save on inheritance taxes down the road!

If you have any estate planning questions, please feel free to call us at (908) 236-6457, or email me at alec@bmcestateplanning.com.

Thanks for reading!

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