Many people are fearful of contemplating their own deaths. However, it is important to prepare an estate plan to control the disposition of your assets. If you do not to create an estate plan and die without a will, the disposition of your assets will be governed by the intestate laws of the state in which you live.
Many people believe that state intestacy laws will transfer all of their property to pass to a surviving spouse. However, this is not the case in Pennsylvania and New Jersey.
If you die while married with no children but a living parent or parents, your surviving spouse is entitled to the first $30,000 of your probate estate, plus one-half of the remainder, and then your parents receive the other one-half. If you have children from a prior relationship, the surviving spouse is only entitled to half of the probate estate and the remaining one-half will be divided among your children or their issue.
A surviving spouse is entitled to the entire probate estate if the decedent is not survived by parents or children. Additionally, the surviving spouse is entitled to the entire probate estate if the children of the decedent are also the only children of the surviving spouse. If there are surviving parents of the decedent or children born outside of the marriage of the decedent and surviving spouse, the amount the surviving spouse is entitled to will varies.
Apart from ensuring that your estate is distributed according to your wishes, a will is especially important if you have minor children. In a will, you can nominate a guardian for your children in the event there is no surviving parent of the children. You can also ensure that your children do not receive a lump sum of cash upon turning 18 years old. A will with trust provisions included can provide for distributions to your children for their health, education and support. Assets can be provided to your children not based on age of majority, but upon the children attaining certain ages. A will can also provide for a surviving spouse during his or her life time and leave the remainder to the children.
A surviving spouse may inherit from his deceased spouse’s estate even if there is a Will that leaves nothing to the surviving spouse. New Jersey laws enables a surviving spouse to inherit from his deceased spouse’s estate under the theory of the ‘elective share’ or the ‘omitted spouse share.’
Under New Jersey law, the surviving spouse is entitled to receive an elective share equal to one third of the deceased spouse’s augmented estate. The augmented estate is generally the deceased spouse’s probate estate including all assets passing under the decedent’s Will. The augmented estate also includes certain assets that the deceased spouse transferred during his lifetime if the deceased spouse had maintained some type of control over these assets. The augmented estate also includes certain transfers made within two years of the death of the decedent.
The augmented estate is reduced by funeral and administrative expenses as well as other enforceable claims that are made against the deceased’s estate.
The elective share is not automatic. Several conditions must be satisfied for a spouse to claim the elective share. These include:
(1) The husband and wife must be living together as spouses when a spouse passes away;
(2) The surviving spouse will need to timely file a complaint in court to claim the elective share; and
(3) If a person has property, either acquired independently or inherited from your spouse, that is equal to or in excess of the elective share amount, the elective share is deemed satisfied; a person will not be entitled to anything beyond what is provided under the Will.
Assume John has $300,000 in assets that pass under his Will. The beneficiaries under John’s Will are solely his children (he leaves nothing to his wife). The elective share amount is equal to one-third of the total assets of the estate or $100,000. However, assume that his wife already accumulated $120,000 of her own assets. Since wife has already inherited more than the elective share amount, the wife would not be entitled to the elective share.
Omitted Spouse Share
Assume that prior to marriage, a person writes a Will that makes no provision for a future spouse. Sometime later, this person marries. Next, this person dies. The surviving spouse may be entitled to an intestate share of the deceased spouse’s estate irrespective of how the Will has been written.
Intestate means that a person died without preparing a Will. Here, New Jersey law would define the manner in which the deceased person’s estate would be distributed. The distribution would depend on whether the deceased had children or living parents.
The omitted spouse will not receive the omitted spouse share if the contents of the Will demonstrate that the omission was intentional or if the deceased spouse explicitly provided for the surviving spouse outside of the Will.
Assume husband and wife get married but never get around to updating their Wills after their marriage. They have no children, and the husband’s parents are deceased. The husband passes away and his Will designates his siblings as sole beneficiaries of his estate. As an omitted spouse, his wife is entitled to the entire estate irrespective of the provisions of the Will.
If the husband’s parents are surviving, the wife will receive the first 25% of the estate, but not less than $50,000 nor more than $200,000, plus 75% of the balance (the parents receive the remaining 25%).
If the husband designates his daughter from a prior marriage as the beneficiary under his Will rather than his siblings, wife will be entitled to the first 25% of the estate but not less than $50,000 nor more than $200,000, plus one-half of the balance (husband’s daughter will receive the rest).
It is possible for either spouse to waive both the elective share and the omitted spouse share.
Planning for the care of your children may be at the center of your mindset during the COVID-19 pandemic. Who will care for your minor children if you become unavailable? This article explains the concepts of a guardian and a custodian.
For a parent with minor children, the most important issue in the estate plan is usually naming the person who will act as guardian for a person’s children. A will maybe utilized to nominate a guardian. In New Jersey, a minor is an unmarried person under 18 years of age. Guardianship gives legal custody of the minor child and/or the minor’s assets to the appointed guardian.
Selecting a Guardian
Although, a parent may appoint a guardian of the parent’s minor children in the parent’s will, the court may inquire into the custody of the minor and effectuate a guardianship order in the best interest of the minor. While a parent may want to appoint someone other than a child’s other parent as guardian in his will, that appointment will not be effective unless the surviving parent timely consents in writing.
Guardian of Person or Property
If a person dies with minor children and the surviving parent has predeceased or is otherwise unable to care for the child, a guardian of the person of a minor child is necessary. A guardian of the estate of a minor child is useful if the minor child receives funds outright. For example, the minor could receive funds via a will, from sources besides a parent, and by a beneficiary designation (i.e. joint bank account, life insurance, etc..).
A testator can select different guardians for a minor’s person and property. For example, a parent may want one person to have legal custody of a minor child and another person to manage finances of the minor child.
If a person does not want to create a guardianship for his minor children, but still wants to protect assets that may pass to his minor children, a person may nominate a custodian under the New Jersey Uniform Transfers to Minors Act.
A will may nominate a custodian to hold the minor’s property. If the will fails to nominate a custodian, the personal representative may designate a custodian. Custodial property includes real property, tangible personal property, investments, and life insurance policies. A custodial property will only be created once a person effectuates an irrevocable transfer of the property to the nominated custodian. A custodianship can be conditioned on the occurrence of a future event such as a parent’s death. A custodian is generally held to the prudent person standard in managing custodial property. The custodianship terminates when the minor reaches age 18 or 21 (depends on the type of property).
A discussion with the proposed guardian or custodian is necessary to ensure that this person will accept the role given to him. Age, location, and life expectancy are important considerations in choosing a guardian or custodian. A candid discussion with the party will ensure that this person will be a good fit for the assigned role.
ASSET PROTECTION STRATEGIES FOR BUSINESS PROFESSIONALS
Professionals providing services to others are at risk for liability claims. It is important to engage in asset protection strategies to protect wealth and minimize potential liability. Asset protection strategies include:
Gifting strategies are powerful wealth transfer tools. Gifts may be effectuated via (a) an outright gift of an asset, (b) use of an irrevocable trust for the benefit of others, (c) establishing a family limited partnership, or by creating an (d) irrevocable life insurance trust.
Domestic Asset Protection Trust
Under a fundamental Domestic Asset Protection Trust, a person may transfer assets to a trust while retaining the right to receive distributions from the trust. In comparison to gifting, the settlor continues to receive wealth from his assets.
Pre-Marital Asset Protection Planning
Preparing a prenuptial agreement will assist in sheltering assets during a divorce as well as against claims against the married couple.
Tenants by the Entirety Property
Instead of titling assets jointly, assets may be titled tenancy by the entirety. This property designation is recognized in New Jersey, however it only applies to married couples. It is difficult for creditors of only one spouse to reach assets held as tenancy by the entirety to satisfy claims.
Qualified Retirement Plans and IRAs
Qualified retirement plans and certain IRAs are protected from creditor claims to a certain extent. Maximizing contributions to these investment vehicles will enable a person to growth wealth and minimize claims from potential creditors.
Choice of Business Entity
Generally, forming a business entity for a professional services practice will not eradicate a professional’s personal liability from a malpractice claim related to his or her work, however, it will help shield the professional’s personal assets from claims arising from the workplace. Selecting the proper business entity is also important for business succession planning.
Segregation of Business and Investment Assets
It is not uncommon for professionals to own other business assets such as real estate, investments, equipment, collectibles, or land. It is important to consider shielding these assets in separate business entities and leasing these assets back to the operating entity. For instance, a physician may own an office building from which he operates his practice. This physician could create one entity as the operating entity for his practice. A separate entity could own the building from which the practice operates. The physician would remit rental payments to the entity that owns the building.
In addition to having business insurance, professionals should ensure that their home and auto insurance coverage is sufficient to protect against claims. An umbrella policy will cover gaps in other policies or policies in which the claims exceed the policy limits.
Irrespective of the size of your estate, an estate plan can help to take care of both you and your family. Below are some of the common estate planning documents:
Health Care Power of Attorney and Living Will. A Health Care Power of Attorney and Living Will document allows you to appoint an agent to make health care decisions on your behalf if you are incapacitated as well as to articulate health care decisions if certain conditions surmount.
General Durable Power of Attorney. A general durable power of attorney allows you to appoint an agent to effectuate financial decisions.
Last Will and Testament. A Last Will and Testament names your executor and provides what will happen to your property at your death. Executor refers to the person that will manage your estate upon your death.
Guardianship. A Last Will and Testament may be utilized to engage in planning for your minor kids. You may name the person you wish to serve as guardian for your child or children under your Will. If you fail to name a guardian, a court may appoint someone. Additionally, minor children cannot hold title to property in their own names. A Will enables you to create a testamentary trust and appoint a trustee to manage assets for the benefit of your children.
Revocable Trust. A Revocable Trust can be used to plan for incapacity as well as to avoid probate expenses. During your lifetime, you are the owner of any assets in your revocable trust. You can also manage these assets as a trustee during your lifetime. After your death, you can name a successor trustee to manage your assets. Assets already in a revocable trust are generally not subject to probate, which may be a cost and administrative savings for your estate.
It is important to review your estate plan periodically especially if you have had a major change in your family structure, such as a birth, death, divorce, or health issues.
A written document does not need to be signed by a testator (person writing a will) to admit the document into probate in New Jersey. Probate is the formal legal process to establish the validity of a decedent’s will.
Procedurally, a person desiring to admit a writing to probate must demonstrate by clear and convincing evidence that the decedent actually reviewed the document in question AND that the decedent assented to the substance of the document.
In a recent New Jersey court case, an heir challenged the validity of a will by asserting that the written document in question constituted the basis for a subsequent will that the decedent intended–but was unable to draft.
The court held that under New Jersey law the writing was sufficient to constitute a will because the substance of the writing demonstrated that the decedent desired to provide precise instructions for decedent’s estate. This included burial instructions, appointment of an executor, and liquidation/distribution of decedent’s assets.
Further the court held that under the harmless error doctrine the writing need not be signed to be admitted to probate under N.J.S.A. 3B:3-3. Additionally, the fact that the decedent signed the will at the beginning will not invalidate the will as long as the proponent of the will establishes by clear and convincing evidence that the decedent intended the writing to represent decedent’s signature.
The clear and convincing standard should produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established.
Under New Jersey law, a will must be: (1) in writing, (2) signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and at the testator’s direction; AND (3) signed by at least two individuals, each of whom signed within a reasonable time after each witnessed either the signing of the will as stated in (2) or the testator’s acknowledgement of that signature or acknowledgement of the will.
A will may be valid irrespective of whether it is witnessed if the signature and material portions of the document are in the testator’s handwriting.
After a New Jersey court has issued a judgment, prior to filing an appeal a party may ask the court reconsider its ruling. R. 4:49-2 governs the reconsideration process in the New Jersey Civil Courts. The motion for reconsideration must be filed with the court no later than 20 days after the service of the final order upon all parties. The service is effectuated by the party obtaining the order. The motion must concisely state the basis for reconsideration including a statement of matters or court decisions which the aggrieved party asserts the court overlooked or applied erroneously.
The reconsideration must be filed with the court that issued the judgment.
The Delaware Chancery Court recently held that directors in companies without classified boards may be moved from office without cause irrespective of the provisions of a company’s corporate charter. This ruling should encourage companies to review their bylaws and amend these bylaws as necessary.
A significant amount of Delaware companies have non-classified boards with bylaw provisions that only allow removal of directors ‘for cause.’ The Delaware Chancery Court reasoned that these provisions were not valid under Delaware law. In in re Vaalco Energy Shareholder Litigation, the court held that under Delaware General Corporation Law Section 141(k), a majority of stockholders have a right to remove directors without cause unless the corporation has a classified board or cumulative voting.
This ruling may present Delaware as a less friendly place to do business. However, this mandatory removal provision will not apply to limited liability companies or limited partnerships. Further, this ruling will not apply to companies that decide to adopt cumulative voting or companies that adopt a classified board.
1. Contact and retain a properly licensed attorney knowledgeable in the area of estates promptly after death. Work with the attorney to prepare a list of all legal deadlines to make claims. The attorney will commence any necessary court proceedings and coordinate the following activities with the personal representative in writing, the trustees (where a trust is involved) and/or other attorneys.
2. It is necessary to collect approximately multiple (at least 5) copies of the death certificate for legal purposes. These will be used to supply official proof of death to agencies such as the banks, insurance companies, social security administration, etc. All require certified copies. If you require additional copies in the future the funeral director may obtain them for you or you can go get them from the city or county clerk where the death certificate was originally filed. There may be additional charges to obtain copies of the death certificate at a later time.
3. Financial institutions where the deceased conducted business should be notified as to the fact and date of death of the deceased. These include banks, savings institutions or credit unions with which the deceased may have had accounts or safe deposit boxes. Replace the deceased’s name from any accounts with that of his or her estate as soon as possible.
4. The deceased’s employer or previous employer, if he or she was retired at the time of his or her death should be notified as to his/her death and the time thereof. Ask the personnel department whether or not there are any insurance policies in effect, as well as who owned the policies, what loans and claims are thereon, who the beneficiaries thereof are, what death benefits are available and to whom and what pension monies are due and other employee benefits are due to the deceased or any survivor. Have your attorney review and report upon them to you in writing.
5. Check for applicable automobile insurance. Obtain the policies and read them or have them read and reported upon to you by your attorney in writing. If the deceased was killed in an automobile accident, ascertain whether any insurance benefits exist concerning all parties, including both drivers and both vehicles owners, whether the policies were in effect with all premiums paid at the time of death and whether any unused portion of the insurance premium is refundable and to whom will it be payable.
6. If the deceased was a member of a union, fraternal organization, etc., notify those organizations. Benefits could be available to the surviving spouse or his or her children. Have your attorney review these benefits and report upon them to you in writing.
7. Inquire as to the existence of any health insurance coverage for you and your family, including what coverage was paid for and by whom and was in effect at the time of death or injury that gave rise to death. Find out when any benefit of this nature expires and whether they can be extended in certain events.
8. Go to a local Social Security office and survey any benefits due the surviving spouse or his or her children. Apply for them promptly to avoid expiration deadlines.
9. In the event that the deceased was a veteran, call the Veteran’s Administration and obtain instructions and forms listing their requirements to process, along with the location of the closest Veteran’s Administration or Soldiers and Sailors Relief Fund. Apply for them promptly to avoid expiration deadlines.
10. Keep an up-to-date accounting of all income and expenses pertaining to the deceased.
11. Review the relevant present financial circumstances pertaining to the deceased. Were any debts owed to the deceased? If so, make sure an effort is made to collect them as soon as possible. The longer you wait the harder it will be to collect them and the cost of collecting them will keep going up.
12. In a situation where no assets exist, and income or monies are due the deceased or you presently, you might also see if you or the deceased qualify for emergency aid from the Department of Social Services.
13. Prepare a brief chart showing any legal questions concerning the deceased with your attorney’s fees, including what must be done, by whom, and by when, expected resolutions, and costs thereof. This should ultimately designate who will deal with what matters in a written notice sent to him/her/it and keep a copy of the designation, which should state any deadlines or other significant facts to keep in mind in that regard.
14. Ascertain who owns the assets that were used or available to the deceased, and what money or obligations were owed by the deceased at death and where the source of funds to pay liabilities will come from after death.
15. Consistent with the requirements to probate the estate, devise a plan to pay all bills and expenses with your attorney as soon as possible ( e.g., funeral expenses, real estate maintenance, home mortgage bills, hospital bills, etc.) Review whether any credit life insurance policies that were current at death with your attorney which could have been carried against major loans. Arrange to collect on any insurance polices as soon as possible through your attorney.
16. When the deceased had been in a hospital or a hospice, obtain the statements of account from those institutions, investigate their requirements and ascertain what funds exist with which to pay them.
17. Retitle stocks, bonds and other securities in the appropriate names of the beneficiaries using probate court orders as necessary.
18. Ascertain whether any pre-arrangements of the decedent’s own funeral and proposed interment site exist.
19. Figure out whether any disclaimers of bequests or gifts are advisable after death and arrange to have them made.
20. Ascertain who owns the real estate of record and other property that was available to the deceased and who holds any mortgage thereon and the extent of any claims against the property. Make sure all real estate transactions are recorded in the Register of Deeds where the land is located. Obtain Probate Court orders therefor as necessary.
21. Retitle automobiles, recreational vehicles, water craft, motor vehicles of other types, etc. into the name of the successors thereto using Probate Court Orders as necessary (if the estate is probated through the Probate Court) and any other clearances through the local Secretary of State’s office or other officials.
It is wise to contact or call all parties concerned ahead before visiting their offices and taking their time to check on documents for you or that you will need. Where legal documents have to be given to anyone, make sure to keep a receipt therefor.
• Armed Services Discharge Papers, showing the final rank
• Automobile, and Other Vehicle Titles, including Boat, etc.
• Bank Deposit Books or Certificates of Deposit
• Certified Copies of the Death Certificate
• Certified Copy of the Marriage Certificate, and/or Court Order of Divorce
• Certified Copies of the Birth Certificate for each child
• Contracts to which the Deceased is a Party
• Deeds, Leases and Title to property, oil and gas wells and mines
• Durable Powers of Attorney
• Insurance Policies and Annuities
• Judgments and Injunctions Outstanding
• List of Intangible Assets
• List of Tangible Personal Property and its Location
• Living Wills
• Loan, Installment Payment Books or Contracts
• Patient Advocate Designations
• Stocks, Notes, Bonds, Debentures and Other Securities, Royalties, or Investment and Mortgages owned by the Deceased or his interests
• Veteran’s Administration Claim Number of the Veteran had one
• Wills and Trusts