Probate In New Jersey - When There Is A Will

One of the questions I frequently get is: What is involved with probate in New Jersey?

In some jurisdictions, I know attorneys go out of their way to help their clients avoid the probate process by creating trusts and titling assets so that they can be transferred automatically on death.  In New Jersey, probate usually is not that costly or difficult - at least compared to places like California, New York, Pennsylvania and Florida.

Part of the reason for this is that New Jersey requires attorneys to charge a reasonable fee, and not a percentage of the estate.  Additionally, the New Jersey does not charge much for filing a Will or for any other administration fees.  Moreover, in almost every county that I've had to deal with, the local Surrogate has been tremendously helpful in trying to assist us through the process.  I know I frequently call the Mercer County Surrogate's Office, which is a wealth of information.

So, going back to what is involved, each estate is highly unique.  However, here are some good steps to take:

1)  Deal with the family and make funeral arrangements.  An executor does not have to pay for the funeral.  Whoever pays can be reimbursed by the Estate later on.

2)  Identify valuable assets and the Will and secure them for safe keeping.  (This may include searching the house and possibly even changing locks if you think that someone may access the property unlawfully.)

3)  Identify the decedent's next of kin and obtain contact information for them.  You will need this when applying to be executor.

4)  After the Original Will has been found, identify who the Executor is. If the Executor is not alive or not willing to serve, steps must be taken so that a backup can be named.  If the Original Will cannot be found, there is a process for a having a copy approved by the Court.

5)  Take the Will to the Surrogate in the County where the Decedent resided.  Be aware that no Will can be probated in New Jersey until ten (10) days have passed since the Testator has died.  An Executor can go down to the Surrogate with all the paperwork within the first ten days, but the Letters Testamentary won't be released until that time frame has expired.

6)  Once the Executor receives Letters Testamentary (also known as Short Certificates), he can transfer assets from the name of the Decedent into estate accounts for the Decedent.  New Jersey automatically puts a lien on a Decedent's bank accounts, brokerage assets and real estate when a person passes away.  Banks will only release 50% of the assets to pay bills of the estate until they receive a tax waiver from the New Jersey Division of Tax.

7)  Shortly after qualifying as Executor, you must mail out a notice of probate to all people named in the Will AND all immediate next of kin, regardless of whether they are named in the Will or not.  This can be problematic if you wish to cut an heir out or cannot locate an heir.  I would also be a good reason to create an estate plan that will avoid probate.  If a charity is named as a beneficiary, then a notice must be sent to the Attorney General's office.

8) If the Executor did not already have access to a safe deposit box, he can do so at this point. 

9)  Within eight (8) month of the Decedent's date of death, the Executor must file a New Jersey Inheritance Tax Return and pay any taxes due.  Typically an inheritance tax return must be filed if assets are transferred to someone other than a spouse, civil union partner, child, grandchild, parent or charity.  There is a 3 year lookback.

10)  Within nine (9) months of the Decedent's date of death, the Executor must file a New Jersey Estate Tax Return and pay any taxes due.  A New Jersey Estate Tax Return must be filed if the TAXABLE estate is in excess of $675,000.  Note, the taxable estate can be different from the probate estate because the taxble estate may also include life insurance, retirement benefits, and joint accounts.  If the taxable estate is above $5,000,000 (indexed for inflation), a federal estate tax return must also be filed.  (It might be advisable to file this return in most situations on the death of the first spouse to pass on the Deceased Spouses unused tax exemption.) 

11)  The Executor must arrange for income tax returns to be filed and pay any taxes due. 

12)  The house must be cleaned and potentially sold or transferred.

13)  If there is real estate located in other jurisdictions, the Executor must do an ancillary probate.

14)  Other duties could include dealing with any business interests or intellectual property rights, assisting beneficiaries with any claims they might have for life insurance or retirement benefits, investigating the validity of claims against the estate and researching the proper title to assets.

15)  The executor should prepare an accounting for the estate.  This includes what the assets of the estate are, income, expenditures and distributions.  Unless the matter is contested, an informal accounting will usually suffice.

16)  Conduct child support searches on all beneficiaries.

17)  After the tax returns are filed and the estate receives tax waivers and all bills are paid, the Executor can transfer the assets of the estate as directed in the Will.

18)  Simultaneous with the transfers from the estate, an Executor should obtain a release and refunding bond.  This acts as a waiver to release the Executor from liability and a means by which the executor can retrieve the inheritance back in the event that new bills arise for the estate.

An executor is not required to hire an attorney to help out with an estate admistration, but it can make the process much smoother. 

Top Ten Reasons to Have a Will

1. To determine who gets your money (Naming beneficiaries)

2. To determine guardianship (Saying who will take care of you children)

3. To determine who controls the money (Naming of executors and trustees)

4. To minimize estate or inheritance taxes

5. To avoid the cost of an insurance bond (If you do not allow for an executor or administrator to serve without paying for an insurance bond, the court will require one. In New Jersey, this can cost your heirs $500 for each $100,000 of assets you leave them)

6. To develop a trust for your heirs (This controls the timing of payout to beneficiaries)

7. To specify the authority of the Executor and Trustees (E.g. should they run a business, sell your property, or keep certain stocks?)

8. To determine who pays estate taxes (you can actually specify this and frequently should)

9. It provides for a quicker probate process

10. It clarifies your living intentions after your death (in other words, it maximizes the chance that your heirs will respect your wishes)

Everything You Ever Wanted to Know About Ancillary Probate in NJ

If you have a loved one who dies owning real property in New Jersey, what do you do? The answer is - an ancillary probate. Generally, this means you will conduct a second probate action in New Jersey after you have done one in the state where the Decedent was domiciled. (If there is no reason to conduct a probate proceeding in the state where the Decedent was domiciled, you can contact the Surrogate on ways to skip steps 1 and 2.)

For most, the process is as follows:

1) If the Decedent had a Will, the named Personal Representative probates the Will in the jurisdiction where the Decedent was domiciled (if there was no Will, someone will likely have to file a complaint to declare an intestacy and request to become Administrator for the estate).

2) The Personal Representative obtains an "Exemplified Copy" of the Will and Letters Testamentary (or Letters of Administration for an intestacy action). Letters Testamentary and Letters of Administration are the documents that the Surrogate gives you to show that you have legal authority to act on behalf of the Estate.

3) You take these documents to the Surrogate of each county where the Decedent owned property and tell them that you want to conduct an ancillary probate. (The fee is nominal, currently only about $5 per page plus $5 for the backing page.)

4) The local NJ Surrogate then gives you Letters Testamentary for NJ, and you can transfer this property legally to the new owner according to the county.

5) BUT WAIT, don't transfer the property yet! You have to know who the property is going to. If all or a part the property (or money from the sale of the property) goes to someone other than a spouse, lineal descendant or lineal ascendant, it is subject to a NJ Inheritance tax! That's right, there is a 11-16% tax on this property which must be paid within 8 months from the date of the Decedent's passing. Failure to do so will result in very large interest and penalty charges which you, as the Personal Representative, may be responsible for. At least there is no NJ Estate tax on the estate of a non-resident.

6) Once the Personal Representative has determined what is owed to the State of New Jersey, he or she should pay the tax, if any, and obtain an inheritance tax waiver from the Estate and Inheritance Bureau. Forms can be found here: http://www.state.nj.us/treasury/taxation/index.html?estatetax.htm~mainFrame

7) Now can the Personal Representative can transfer the property? Probably. Again, if the property was devised to a specific party, it should either be transferred to such party or sold with the explicit consent of that party. If the property was part of the residuary of the estate, then the Personal Representative generally will have the power to transfer the property unless it is denied by the language in the Will - so make sure you check this. Few Wills that I have run into ever limit this, but frequently you do see a right of first refusal which must be honored.

Obviously a knowledgeable probate attorney can help you through these steps.