Estate Administration When there is no Will

What do you do if a person passes away without a Last Will and Testament?

A Last Will and Testament designates an Executor who has legal authority to handle the estate assets. The Will also specifies who receives what, and in what way. The estate of someone who dies without a Will is called “intestacy” or “an intestate estate,” which is Latin for “without a Will.” If a person owns assets that are not jointly owned or assets that don’t have a named beneficiary, they are “in limbo” upon death and cannot be handled until the County Surrogate appoints an Administrator.

The process begins with an application to the County Surrogate where the deceased was living at time of death (this is written on the death certificate). Call the Surrogate or look on their website to find out the exact procedures. It will be necessary to submit an original death certificate and the names and addresses of the next of kin, as well as an estimate of the estate assets (if known). State law gives priority to the next of kin to be appointed as Administrator, but notice has to be given to similarly-situated kin (such as siblings of the person who is applying) so that they can renounce their right to be appointed to this job. Generally the Administrator has to obtain an insurance bond to protect the assets. If the estate is large, this can require a significant cash outlay — yet another reason to sign a Will, in which you appoint an Executor who can serve without bond. Once the Administrator is appointed, s/he has legal authority to handle he estate assets. There will still be many procedures to take care of before the estate can, finally, be given out to the heirs.

The next steps involve obtaining an EIN# from the IRS (because an estate is an independent entity); setting up an Estate checking account; collecting the bills; dealing with personal property; identifying all of the assets and determining whether any of them have a named beneficiary or co-owner; making decisions about liquidations of assets; and dealing with real estate (to name a few). There will often be a need to file the final income tax returns as well.

Many unusual issues pop up in estates, and getting early legal advice can help the Administrator avoid some of the pitfalls and quicksand that create greater problems later.

Call us for advice about estate administration ……  732-382-6070

Estate Recovery Bill Limits Medicaid Services That Can Be Recovered

New Jersey expanded Medicaid under the Affordable Care Act, (ACA, also called Obamacare) causing terrific health coverage gains for its residents.  One unfortunate byproduct of Medicaid expansion is Estate Recovery, which can be assessed against any Medicaid recipient over the age of 55.  The purpose of estate recovery is to reimburse the State for Medicaid benefits provided, and typically the recovery is against assets that were excluded from consideration during the beneficiary’s lifetime (such as a residence)

For MLTSS recipients, the recovery is limited to nursing home or home and community-based services (HCBS) and ancillary services, but for ACA Medicaid recipients, all services, including hospital and doctor coverage, could be recoverable. The lien is placed against the assets in the estate of the deceased Medicaid recipient. The Executor of the Estate would need to pay back the lien from estate assets before distributing the remainder to the heirs of the deceased person. This can create an encumbrance against real property, for example.

Sen. Cryan has proposed a bill to conform ACA Medicaid Estate Recovery to MLTSS Estate Recovery.  This is a welcome revision.  People age 55 or older looking for coverage won’t have to think twice about being Medicaid eligible and using Medicaid for their basic healthcare needs.  The New Jersey Chapter of the National Academy of Elder Law a Attorneys (NAELA) wrote in support of this bill and we look forward to its passage.

If this legislation is of interest to you, contact your legislators.

For legal advice concerning estate administration and problems with Medicaid liens, call us at 732-382-6070

Don’t be the Executor if you can’t do the Job

When you create an estate plan, you are selecting people whom you trust to perform various jobs for you and your beneficiaries. You may be selecting an agent to act as your Power of Attorney. You may select a medical decision-maker in case you become mentally incapacitated. You may have a Trust and select the Trustee who will manage the money for the beneficiaries. And you may be selecting an Executor who will handle your estate after you pass away

People often feel that being named as Executor is a big honor. Disputes have erupted within families when one child rather than another was named as Executor. Sometimes the person who was named as Executor wants the power and control that come along with the title of Executor, but ignores the responsibilities that come with it. Other times, the Executor has financial troubles of their own, starts “borrowing” funds from the estate, and just lets the estate lie around for years without paying the bills, paying the inheritance taxes or selling the property.

The Executor is a fiduciary — entrusted by law to handle “other people’s money” — and has duties to the funeral home, the tax authorities, the estate’s creditors, and ultimately, to the beneficiaries. Although an Executor is not obligated to reveal every step and every action to the beneficiaries, at some point, the beneficiaries will want to see an accounting so that they know that the amount of their distribution is correct. Reconstructing an accounting after several haphazard years of erratic management of estate assets can be a nightmare that leads to lawsuits brought by beneficiaries.

Managing an estate can be very time consuming. Dealing with third parties to obtain date-of-death values and payoff amounts for debts, tracking down missing assets, and selling real estate can turn into big chores. But the Executor has those duties and obligations.

Ideally, every Will has a list of successors written into it in case the Executor refuses to accept the appointment or decides to resign. But turning over an estate to a successor can create problems of its own, and a process must be initiated through the Surrogate or Court to be discharged as Executor.. Better to think carefully before stepping up to the plate and taking on the responsibility in the first place if you have any doubt of your ability to complete the task.

Call us for advice and assistance with estate administration, and ask about the fiduciary services we provide .. 732-382-6070

 

Questions the Executor should ask the Estate’s Accountant

The house is sold, the estate’s debts and bills have all been paid, the accounting has been presented to the beneficiaries, they have signed off on the Release & Refunding Bonds, and now it’s time for the estate’s Executor or Administrator to distribute the estate to the beneficiaries according to the Will or according to the requirements of the law. The estate may have acquired dividends or interest or rents on which income tax must be paid. An income tax return has to be filed for the Estate if more than $600 in gross income was received, and in fulfilling his/her fiduciary duty, the Executor/ Administrator wants to be sure to investigate all available income-tax saving opportunities.

Here are a few of the questions to ask when you call the estate’s accountant: :

  1. What is the estate’s expected marginal tax bracket?
  2. Is it beneficial to pass the estate’s income and losses (if there is a loss on sale of assets such as stock or real property) through to the beneficiaries?
  3. Can income or loss be passed through in a year that the property isn’t actually distributed?
  4. If assets have to be distributed out in order to pass thru the tax liability, which plan saves the most taxes — distributing or holding?
  5. Is there any limit on the amount of losses that can be passed through to the beneficiaries?

Serving as Executor or Administrator is a job with many responsibilities. It’s vital that the fiduciary get advice on all of the steps required so that the interests of the beneficiaries are protected, and so that the fiduciary can be protected as well.

Call us for complete advice “A to Z” about the estate administration for decedents’ estates … 732-382-6070

Watch out for Transfer Inheritance Tax when you do your estate planning

Most of the publicity in the news concerning changes to New Jersey’s “death tax” has focused on its raising of the estate tax thresholds. Now, if a person dies and has less than two million dollars in his or her estate, there will be no estate tax regardless of who is receiving that bounty. Not so for the Transfer Inheritance tax, which is based on the relationship of the recipient to the deceased person.  Inheritance by a lineal ancestor or descendant — parent, child, grandchild, even a step-child — incurs no inheritance tax. Same goes for inheritance by the spouse. All of these people are considered to be “Class A Beneficiaries.” However, tax will be imposed to some extent on inheritance by others — brothers & sisters (“Class C”), nieces, nephews, cousins, friends, aunts, uncles, and even the grandchildren of step-children (“Class D”). This means that careful planning must be done.

To avoid delays in estate administration, the executor may need cash to pay the inheritance tax when some of the folks inheriting under a Will or through a non-probate arrangement such as a Pay on Death account are not Class A beneficiaries. If all of the assets are tied up in a non-probate format [either/or accounts, joint accounts, pay on death, or other beneficiary designations) this will cause obvious problems. Delay in payment of tax can cause interest and penalties to accrue. The recipient of the “joint” account may not cooperate to provide cash to the estate for the tax.

If the non-Class A recipient is receiving his/her inheritance pursuant to the Will, the Will should specify whether the tax is to be drawn out of that bequest or should be just rolled into the taxes and expenses that are paid from the residue of the estate. Precise drafting of the Will is so important, so that the intentions of the deceased are known.  We always say that “careful planning can prevent a crisis,” and careful drafting can avoid time, expense, and battles when it comes to estate administration.

Call for advice concerning estate planning and estate administration ….

732-382-6070