Why Florida Probate Can Be Difficult

When deciding whether or not to do a Will package or a Revocable Trust package, many of my Boca Raton, Florida clients will ask why choose one over the other.  Among the many benefits that a Revocable Trust has over a Will is the ability to minimize or even avoid probate.  This leads to the obvious question of:

Why should I avoid probate in Florida?

The reason many people wish to avoid probate in Florida because it can bypass the restrictions on who can serve as the person in charge of your affairs, make things more simple for the person in charge of your affairs, keeps costs down, speeds up the process of getting money to your intended beneficiaries, and allows you to have greater privacy.

How does avoiding probate avoid the restrictions in Florida with respect to who can manage your affairs?

Avoiding probate makes it easier for the person you want to manage your affairs after death to qualify as the person in charge because not everyone can serve as an Executor of Administrator in Florida.  For example, a nonresident person may not serve as an executor unless they are related to you by blood, marriage, or adoption (See FL Statute Section 733.304)  So, if you want to name a family friend to be an executor, they are not permitted to serve as executor unless that friend lives in Florida.

Additionally, there is often a bonding requirement for anyone who wants to serve as an administrator of an estate when the decedent died without a Will.  If the proposed administrator does not have good credit, they likely will not qualify for a bond, and therefore would be ineligible to serve as administrator.

How does avoiding probate in Florida make things more simple?

Avoiding probate in Florida makes things more simple because instead of the person in charge of your affairs having to go through a three step process to transfer your assets, he or she only has to do a two step process.  Specifically, if you die in a manner that requires probate, then your Executor or Administrator (if you die without a Will), needs to file a Petition with the Court to be officially named in charge of the estate.  (This is step one)

Once your executor or administrator qualifies, he or she must gather up the estate assets, set up an estate account, and pay the bills and taxes.  (This second step is often the longest step.)

The third step is to pay the beneficiaries and close down the estate.  When you use a revocable trust (which is fully and properly funded before death), the first step can be avoided.  Needless to say, when you don't have to go to Court and file a Petition, that speeds up the estate administration process and reduces the overall costs.

Other reasons to avoid probate.

I would also like to point out that another benefit to avoiding probate is that some counties have a routine practice of requiring executors and administrators to put all of the funds of an estate into a restricted depository account that can only be released by Court order.  This also has the negative effect of making the administration process take longer and more expensive (because you need another Court order).  However, I do understand that this practice is being challenged.  If you would like to learn more about that, Boca Raton, Florida Attorney Chuck Rubin has written a nice piece called: Mandatory Restricted Depository Arrangements in Probate Questioned.


Kevin A. Pollock, Esq., LL.M. is an attorney licensed to practice in NJ, NY, PA and FL.  Kevin meets with clients in Boca Raton, FL office located at 5499 N. Federal Highway, Suite K, Boca Raton, FL 33487 by appointment only.  Kevin may be reached at (561) 247-1557.

What is the first thing an executor of a Will should do?

I am happy to announce that we have finally finished creating a series of short videos regarding the estate planning and estate administration process.  Here is our second video in which Elizabeth Ketterson, Esq., the Director of our estate administration department, is being interviewed by Kevin A. Pollock, Esq., LL.M. regarding the first things a person who is in charge of an estate should do.

If the person is named under a Will, that person is known as the executor.  If there is no Will, that person can apply to the court to be appointed as an administrator of the estate.

We recommend that you meet with an attorney that your are comfortable with to help you prepare the paperwork necessary to be appointed as Executor or Administrator.  The Court will then give you the necessary paperwork to speak with banks, set up an account, and make any claim for funds owed to the estate.  Once you have started collecting assets, then you can arrange to pay the estate's bills.

We strongly recommend that you do NOT distribute money to any beneficiaries until all the bills have been paid and you have received a waiver or release from the beneficiaries stating that they approve of your actions as executor.

To learn more about estate administration or hiring a probate Attorney, please visit us at: https://pollockfirm.com/estate-administration-2/

Requirement of Executors to Report Basis of Assets When Administering an Estate - FollowUp

The IRS has released new regulations that have extended the due date for filing Form 8971 to March 31, 2016.  Executors and administrators of estates that are required to file a federal Form 706 Estate Tax Return are now also required to file Form 8971 and report the basis of the assets included in the estate to the beneficiaries of the estate.

As discussed in my post on February 7, 2016, the IRS is trying to consistently tax assets for estate tax and capital gains tax purposes.  Requiring executors to supply this information to beneficiaries and the government is their attempt to better track this information.  

Additionally, there was an open question as to whether all estates had to file the Form 8971 or just those that were over the federal estate tax exemption threshold.  According to this publication from Bessemer Trust, the IRS has issued regulations that state that if you are filing a form 706 merely to elect portability, you do not also need to file form 8971. 

Thanks again to Abby Moller for bringing this to my attention 

Trouble with Probate

Sometimes probate can be a simple process.  Sometimes it can be a royal nightmare... and sometimes it can be an expensive royal nightmare.

I'm not sure if it is a sign of the times or just a coincidence, but our office has had numerous estates where the probate has not been very easy.  To give an example of some of the problems we have run into recently:
1) An estate where even though there was a Will, the beneficiaries were not the next of kin.  While there was nothing untowards going on as the next of kin were very remote, we had to spend a lot of time and money tracking them down because state law required us to give notice to all next of kin, regardless of whether they are a beneficiary in the Will or not.
2) An estate where the decedent owned worthless land in another state.  This was an estate that was otherwise taxable, so we needed to get a valuation for this property and figure out how to dispose of it because no one wanted the headache.
3) Preparing a last minute amended estate tax return before the time to amend lapsed.  A bad return was prepared by an accountant and when the client came to us to review it, we had to stop all other work to prepare a revised return in order to save our client over $100,000.
4) An estate where the original Will could not be found, so we requested that the Court probate a copy of the Will.
5) An estate where the Will is unclear and requires judicial interpretation on who the beneficiaries are.
6) An estate where the client had many different types of assets and assets located in more than one country.
7) An estate where the executor is unable to travel, so our office is handling all the affairs of the estate and assisting in finding other professionals to value and sell local assets at a fair value.
8) An estate where the beneficiary has contacted us to obtain information from an executor who is refusing to disclose information.
9) An estate where the decedent, rather than formally update his Will, wrote a side letter saying where he wanted some of his assets to go - begging the question of how to handle that letter.

In most of these situations, considerable time and expense could have been saved if the decedent had consulted with an estate planning attorney on a regular basis.  While having a Will and trust can certainly make the estate administration process easier and less expensive, the benefit of hiring an experienced professional is not just that we can draft the routine paperwork.  An attorney that focuses on tax and estate planning can also make sure that you title assets in such a way as to make things smoother and more cost efficient.

Non-residents Non-citizens of the US Should Be Careful of How they Invest in American Assets

Many individuals who live outside of America like to purchase real estate in America or invest in the U.S. Stock Market.  It can be much safer than in investing in other parts of the world and often times the individual has children who have moved to America to live or study.

Florida and New York are particularly attractive locations for foreigners to buy vacation homes or rental properties, so I will focus on those jurisdictions a bit.

From a tax perspective, Florida is relatively easy to deal with as there is no estate tax. The transfer taxes are small and the process is pretty quick if you need to transfer the property during your lifetime. New York recently changed its estate tax laws, so that individuals can soon transfer over $5,000,000 before there is a state estate tax.  Transfer taxes are a bit higher and the process is a bit slower, but it is not terrible.

On death, it is a different story, both Florida and New York can be a royal nightmare and you should avoid probate.  Probate is the process of transferring assets on death and is typically quite expensive. It is also very easy to avoid by setting up a simple trust that is invisible for taxing purposes. A trust can also be set up to avoid the US federal estate tax, and I strongly recommend this.

With respect to the US taxes, a foreign investor must worry about both income taxes AND estate taxes.  While owning stock or real estate outright may be easiest and perhaps even best to minimize income taxes, it can be the worst thing to do for estate taxes.

The United States is not very friendly when it comes to foreign individuals who wish to transfer property in America. While a US citizen or resident alien may transfer $5,340,000 before there is a gift or estate tax, the threshold for non-resident is $14,000 for gifts (per person per year) and only $60,000 (total) on death.  A person may gift $145,000 (annually indexed for inflation) to a non-citizen spouse before there is a US gift tax.

For transfers in excess of the limits above, there is an 18%-40% tax depending upon the amount of the transfer.  You can defer the tax on a transfers to a spouse by setting up a Qualified Domestic Trust (QDOT).

Additionally, the rules are very complicated because some assets are taxed on death or gift and some assets are not.  The general rule is that if something can be considered a U.S. Situs asset, it is subject to the US Federal Estate Tax when the owner dies.  Examples of U.S. Situs assets include: real estate located in the U.S., cash or jewelry in the U.S., ownership in a US based REIT, and ownership of a US based Annuity.  Examples of Non-U.S. Situs assets include: real estate in foreign countries and stock in foreign corporations.  Less obviously, this also includes life insurance and debt obligations (such as bonds).

This is further confused by the fact that some assets considered non-U.S. situs for gift tax purposes differ from the assets that are non-U.S. situs for estate tax purposes.  Specifically, intangible property such as stock in a U.S. corporation or an interest in a US partnership or limited liability company are considered U.S. Situs assets for the estate tax, but not the gift tax. Additionally, cash on deposit in a checking or savings account at a U.S. Banking institution is a U.S. situs asset for gift tax purposes, but not for estate tax purposes.

To restate this another way, a gift in excess of $14,000 of cash on deposit in a U.S. bank is subject to a gift tax.   However, regardless how much cash is there when you pass away, it is not subject to the U.S. Estate tax.  Conversely, a gift of U.S. stock (regardless of how much), is not subject to the U.S. Gift Tax, but if you die owning the stock, anything in excess of $60,000 is subject to the estate tax.

(NOTE: a person must be really careful of that cash in a money market account is treated as an intangible asset so it is considered a U.S. Situs asset for estate tax purposes, but not gift tax purposes.) Please see this link to the IRS website which details assets that are subject to the US estate tax and those which are exempt.

If you are a non-resident, non US citizen who owns stock and real estate in the United States, your options include:
1) Paying the estate tax on your death;
2) Setting up a foreign corporation to own a local business entity (this will cause more income taxes now though, but save money on estate/gift taxes);
3) Sell the stock and property before you die and put the money into non-US situs assets until afterwards (this can be tough to time though).
4) Transfer the house to an LLC and then transfer the stock and the LLC to your children or to a trust for your children. As long as you survive for 3 years after the transfer, this should not be an issue for estate tax purposes.
5) Sell the assets and invest the money inside of a life insurance policy. That will be free of income tax and estate tax. The question is whether you can find someone to write the policy on a non-resident.

I generally recommend that if a person can afford it, you establish a US based trust in a state that doesn't have an income tax (like Florida) to own assets. Ideally you should transfer money into the trust from a non-US bank account. If you do not need the income from the trust, you can make the trust strictly for the benefit of your heirs. This will avoid an estate tax on the assets owned by the trust REGARDLESS OF WHAT ASSETS ARE NOW IN THE TRUST. This is how you can invest in the market or in real estate without worrying about an estate tax. As mentioned above trust will also help with administration and managing the funds by avoiding probate.

Remember a gift or transfer of assets may require the need to file an informational return with the IRS.  Also, the United States has tax treaties with several countries which may affect your need to do planning, so please confer with a competent international estate planning attorney before buying any assets in America.

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. 

Dangers of Specific Bequests and General Bequests

WHAT ARE SPECIFIC GIFTS AND GENERAL GIFTS?
A specific bequest is a gift of a specific piece of property to a specific person. Three examples of this are:

1. I give my real estate, located at 1 Main Street, Anytown, State, to my son, Jake Smith.


2. I give my 500 shares of stock of XYZ Corporation to my nephew, Jordan Smith.


3. I give all of my money in Bank Account number #1 at Big Bank, to my daughter, Samantha Smith.

A general bequest is a gift of a specific amount, made to a specific person. This is considered a general bequest because only the value of the property is relevant, not its source. An example of a general bequest is: I leave $10,000 to my niece, Jody Smith. (It is not important from where the $10,000 comes from.)

If the testator states the source of the funds, this is a general bequest known as a demonstrative gift. An example of this is: I give $10,000 to my cousin, Jamie Smith, from my account number #1 at Big Bank. The gift amount is general, but the source of the funds is specific.

If you just leave everything to a specific person or persons, this is known as a residuary gift. I will not be discussing them in detail here.

HOW CAN THERE BE A DANGER IN MAKING A GIFT?
Some of the dangers that can arise from an improperly drafted specific bequest include ademption, confusion, an unequal sharing of taxes and an unequal sharing of expenses.

ADEMPTION
Ademption is the term used when the decedent no longer owns the property that he or she is giving away. For example, if the decedent in the example above sold 1 Main Street shortly before his death and purchased 2 Main Street, then Jake Smith will get nothing. Because the decedent does not own 1 Main Street at the time of his death, he cannot possibly give it to Jake and the property is considered to be adeemed.

Another huge problem with ademption occurs when an agent under a power of attorney sells the property. Then, it will depend upon the state whether the beneficiary gets something or not as some states require that the beneficiary receive an amount equal to the fair market value of the property. I prefer not to specifically name anyone as the beneficiary of real estate or other large ticket items, and if the client insists, I require that they tell me what they would want to do if the property is sold before they die.

CONFUSION
Confusion can result in a number of different ways. One way it can result is if one of the people named as beneficiaries dies - what happens to the bequest? It may depend upon the state. Some states say that the gift goes to the children of the deceased beneficiary. Some states say that the gift lapses. I prefer to explain what happens in all cases and not rely on state law. I will add one of the following in every case: "If Jody Smith does not survive me, this gift shall lapse." or ""If Jody Smith does not survive me, this gift shall be distributed to..."

Another cause of confusion can arise from gifts of stock. What happens if the stock splits or the company creates a subsidiary or is bought out? The answer to this can vary by state. Unless the testator is the owner of a small business and we are engaged in business succession planning, I usually advise clients not to make specific gifts of stock.

AN UNEQUAL SHARING OF TAXES
Making a specific or a general gift can result in an unequal tax burden because in many states, like New Jersey and Pennsylvania, there is an inheritance tax. Beneficiaries will be taxed differently depending upon their relationship to the decedent. So, if a New Jersey decedent left $10,000 to his son and $10,000 to his nephew, the nephew's gift would result in a 15% tax, but there would not be any tax on the bequest to his son.

If a Pennsylvania decedent left $10,000 to his daughter and $10,000 to his brother, the bequest to his daughter would result in a 4.5% tax and the bequest to his brother would result in an 12% inheritance tax. For a full range of all the different tax rates, please review this inheritance tax chart.

So, who should pay the tax in these situations? You can have three results:

1. Each person who receives money pays their own taxes at their own rate.


2. They split the taxes equally.


3. The residuary beneficiaries (possible a third party) can be required to pay the taxes.

Each state has a different requirement, but the testator can override state law by stating who should pay the taxes. A good attorney will help you identify when this might be an issue and help you decide how the taxes should be paid.

AN UNEQUAL SHARING OF EXPENSES
A similar analysis can be made for the unequal sharing of expenses. If you leave $90,000 to your daughter in a specific bequest and leave everything else to your son, most Wills require that the expenses of the estate administration be paid out of the residuary. This may be fine if your son is getting more than your daughter, but what if it's the same or less? These kind of issues must be dealt with in the estate planning stage, not after a person's death.

Estate Administration can be a bit complex, so make sure you contact an an experienced probate attorney if you even have the slightest doubt about how to handle any of these issues.

Titling of Assets

The way you hold title to your assets is key to any comprehensive estate plan. The greatest Will in the world is going to be ineffective if you have survivorship assets, IRAs or life insurance benefits going to people you don't want them going to. In short, how you own your property determines where it goes when you die. Additionally, how you own your property can affect how it is used if you become disabled.

There are many different ways to own property. You can:

1. own it outright, solely in your own name (these assets pass by your Will);
2. own it outright with another as joint tenants in common (your share of these assets pass by your Will);
3. own it outright with a spouse (this asset passes to your spouse on death regardless of what your Will says);
4. own it outright with another as joint tenants with rights of survivorship (this asset passes to the other person on death regardless of what your Will says);
5. own it outright, but have it be payable on death to another. This includes: Life Insurance, Annuities, Retirement Accounts, 529 Accounts and POD Accounts or TOD Accounts. (These assets pass to the named beneficiary regardless of what your Will says.);
6. own it through a business (Many businesses that are owned with other parties will have an agreement that says where the business will go when you die. Accordingly, this will trump what you have in your Will.);
7. own it through a revocable living trust (Assets in the trust will usually pass according to the terms of the trust);
8. be a beneficiary of a trust (Assets in the trust will usually pass according to the terms of the trust - but this trust was not a trust established by you, so you may not have control over where it goes); and
9. be a third party beneficiary. (This is basically a trust without a written trust document. This scenario often occurs when there is a contract between two people that benefits a third party. For example, a divorce agreement between a husband and wife might require the husband to leave $100,000 to his children. This will trump whatever the husband puts in his Will if rights a Will cutting out his children.)

A good estate planning attorney will make sure to review the title of all of your assets. By doing so, he can help you:

1. ensure that your money goes where you want it to go;
2. advise changes that should be made to the title of assets (particularly for married couples) to maximize estate tax exemptions and minimize taxes;
3. avoid the risk of litigation; and
4. reduce probate costs.

Estate and Trust Litigation

Unfortunately I have been given another reminder of how important it is to select appropriate executors for your Will, trustees for your trusts and agents in your financial powers of attorney.

No matter how good an attorney does in drafting your estate planning documents, if there is a person in charge of the money who is not honorable, a large portion can be easily stolen. The person who you put in control of such money is known as a fiduciary.

When you name someone as a fiduciary, you must realize that while they are legally forbidden from taken this money for their own personal benefit, mechanically it is very easy to do. For this reason I always recommend that when deciding on who should be in charge of your finances you always choose someone who is trustworthy rather than someone who is good with money. A trustworthy person can always hire others to help who are good with money. You would be hard pressed to discover the money from someone who is smart and sneaky.

For people who want to do everything they can to avoid probate - just realize that by avoiding probate you are also avoiding oversight. So if you have named a bad trustee, it will just be that much harder to prove that they in fact stole the money.

If your heirs find themselves in a situation where they think that money has been stolen from an estate or trust, the first remedy is an accounting. Unfortunately there is very little satisfaction in this because it can take years and can be very costly. It is not uncommon for this type of litigation to start at about $40,000.

The best way to avoid estate and trust litigation after you are gone is to really think about the people you name as fiduciaries. If you can't trust anyone, there are plenty of independent fiduciaries that you can hire.

Choosing an Attorney to Help Probate an Estate

Did you know that if you are an executor or personal representative of an estate that you do not have to hire the attorney that drafted the Will to handle the probate of the estate?

Many times, attorneys will do a simple will as a favor to a neighbor or relative. This is all fine and dandy as long as all that is needed is a simply Will. However, frequently, many tax forms must be filed when administering an estate and clients need advise on when NOT to accept money. A good attorney should also be able to act as the "bad guy" when an executor must deliver bad news to the beneficiaries. An attorney that does not focus on estate administration may not be able to help.

I'm often amazed at the number of times that I meet with a client who was unhappy with the attorney that administered a parent's estate. I ask why they didn't switch and I am told that they did not realize they could. Remember this - you always have the choice of who you wish to represent you. It may not be cost efficient to change if you are too far along, but you always have the right to change.

My best advise is that before you start the process of estate planning or estate administration, make sure you hire someone who practices frequently in the field. You are far less likely to encounter problems.

What Happens When a Bond Holder Dies?

I just came across this useful web site by the US Treasury Department, so I thought I'd pass along the information: US Treasury- Death of a Bond Holder

The important thing that you should know is as follows:

• If only one person is named on a savings bond, and that person is deceased, the bond becomes the property of their estate.
• If both people named on a bond are deceased, the bond is the property of the estate of the person who died last.
• If one of two people named on a bond is deceased, the surviving person is automatically the owner as if that survivor had been the sole owner from the time the bond was issued.

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.

Estate Planning When Contemplating Divorce

Once a divorce is final, your former spouse, and relatives of your former spouse, are generally not entitled to inherit any money from you upon your death. But what should you do during the lengthy time of your separation leading up to your divorce?

Ripping up a Will that gave everything to your surviving spouse does not solve your problems. New Jersey’s newest probate law (N.J.S.A. 3B:5-3), enacted in 2005, states that you are married and die without a Will a large portion of your assets, possibly all your assets, will pass to your surviving spouse. Accordingly, if you die before your divorce is final, your surviving spouse may still be entitled to all your assets (marital and non-marital). Additionally, your surviving spouse will be entitled to be the Administrator of your estate. This may be completely contrary to your real wishes.

If you do not want the person you are divorcing to receive all your assets, creating a new Will gives you greater control over where your assets go and allows you to pick your own Executor.

When drafting a new Will, keep in mind that any persons that you name under your Will to act as trustee or guardian for your children might be affected by your divorce. Accordingly, if you name a relative of your former spouse as a trustee, he or she may be ineligible to serve as a trustee of any trusts for your children unless clear instructions are given. You should also revisit your guardianship designations to make sure they are still appropriate given your current circumstances.

However, even with a new Will, you usually cannot completely cut out your spouse. Depending upon how far along you are in the process of your divorce, New Jersey’s Elective Share Statute may allow your surviving spouse to claim up to 1/3 of your estate. However, even if your surviving spouse is unable to collect his or her elective share, the Court may intervene if it thinks it would be inequitable to completely cut out your surviving spouse. In 1990, the New Jersey Supreme Court utilized its equitable powers to grant a surviving spouse an equitable share of the marital assets.

In addition to writing a new Will, to further protect yourself, your divorce attorney should consider provisions in your separation agreement whereby you and your spouse waive your right to claim the elective share of your spouse. Your divorce attorney may also wish to consider submitting a motion to the Court to prevent your spouse from making beneficiary changes to his or her life insurance, retirement plans and educational savings accounts.

Finally, do not forget to speak with your parents and siblings about their estate planning documents. If they have money passing to your spouse under the terms of their Wills, or if you or your spouse is named as a guardian, they may wish to update their Wills as well.

Revocable Inter Vivos Trust (a/k/a the Grantor Trust)

The Revocable Grantor Trust is a favorite of practitioners who wish to help their clients avoid probate. The other advantage to the trust is that for individuals who wish to keep their family secrets out of the public domain, it provides a means to keep their estate planning wishes private.

1. The major benefit of the Grantor Trust is that it provides a method for managing the Grantor’s assets, which is particularly useful in the event of incapacity.
2. It is valuable for clients who are not sure if they plan to stay domiciled in New Jersey and may move to a part of the country where avoiding probate is of utmost importance.
3. Planning considerations

a. When transferring real property into any trust, there is a cost associated with the transfer. Additionally, there may be real estate transfer fees and if there is a mortgage on the property, the mortgage company may have an issue with the transfer.
b. Under Revenue Ruling 85-45, the sale of a person’s principal residence held in trust qualified for the I.R.C. §121 capital gains tax exclusion provided the person and trust otherwise qualified for the exclusion.
c. Probate of property in New Jersey is not as expensive or time consuming as in other jurisdictions, so the cost of establishing the trust may not always be justified.

4. Tax aspects

a. While the Grantor is alive, this trust will be ignored for tax purposes and taxed to the Grantor. The trust may also use the Grantor’s social security number until this time.
b. Upon the death of the Grantor, the taxation of the trust will be dependent upon the terms of the trust. A new tax ID number will usually be appropriate.

5. Administration

a. During the life of the Grantor.

1) The administration of Grantor trusts is quite simple while the Grantor is alive as the Grantor who acts as his own Trustee generally has complete control over all the assets as if he owned the assets outright.
2) At any time a Grantor may terminate (or revoke) the trust and receive all of his assets back. This may be especially useful if there is a third party Trustee who is not doing what the Grantor wants.
3) All bank accounts and titling of assets should be made as follows: “[Trustee Name], as Trustee of the [Trust Name]”.
4) To avoid confusion, a Trustee should always indicate when he or she is acting on behalf of the trust rather than in an individual capacity. Accordingly, checks, letters and any other documents should be signed as Trustee.

b. Upon the death of the grantor, the trust turns into an irrevocable trust. The administration will be dependent upon the actual terms of the trust instrument.

1) Unlike trusts created under a Will, the Trustee does not need to acquire Letters of Trusteeship from the Surrogate. This is both a time saver and a small cost saver.
2) Summaries of various common irrevocable trusts to be discussed later.