Great Reasons to Update your Will Once in a While

The years really fly by. I can’t tell you how many times some one has come in to meet with me who signed a Will 25 years before and never updated it. When major changes occur in your life, it’s important to see your lawyer for a “check up” to make sure that your old Plan is still a good Plan for you. Here are samples of situations I have encountered, which required an updated Last Will and Testament and updated beneficiary designations on assets such as life insurance or tax-deferred accounts:

  1. Grandchild has severe disabilities, will be unable to support himself, and depends on programs that require Medicaid eligibility. An outright inheritance could be disastrous.
  2. Child has acquired substantial debt or is in the midst of a divorce.
  3. Beneficiary turns out to be a major spendthrift  and should have somebody controlling and managing his inheritance.
  4. You no longer have a relationship with the people you listed as your Executors.
  5. Your designated Executor or Trustee has passed away.
  6. You want to guarantee that certain charitable bequests will be made.
  7. You want to leave money to your grandchildren as “something special,” even though the rest of your estate will go to your children (their parents).
  8. You have a Will from the 1990’s that left the “credit shelter amount” locked up in a trust for your surviving spouse to minimize estate tax in the estate of the 2nd spouse to die, yet now, there is no NJ estate tax and no federal estate tax for almost everyone
  9. You left a beneficiary’s share in a Trust under your Will, but now she is older and fully capable of managing her own assets.
  10. Your spouse is going into a nursing home and you want to limit the amount s/he inherits if you pass away first.
  11. You got married, gave birth or adopted a child, or you want to leave some assets to your step-children.

Whatever has changed, family estate planning should be an ongoing process throughout your life, starting at age 18 and moving on from there.

Call us to set up a plan that works for you …… 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

NJ Tax Court again confirms – inheritance tax is based on what the Will said

Transfer Inheritance Tax must be paid in NJ when wealth is transferred at death to certain categories of recipients. There is no tax on transfer to charities or to “Class A” beneficiaries – these are spouses, lineal descendants and lineal ancestors as well as step children. However there is a tax of 11% on everything above $25,000 per person that passes to a sibling of the deceased (“Class C’s) and a tax of 15% on everything that passes to anyone else (“Class D’s”). In some cases, the Will that is probated at the Surrogate specifies a certain set of distributions, and a beneficiary sues to set it aside, alleging that the deceased lacked mental capacity to make the Will (“lacked testamentary capacity”) or that someone unduly influenced the deceased to make that Will. These are often referred to as “Will contests.” If the lawsuit is settled, the distribution to the heirs may be different than what the Will specified.

Last year, the NJ Tax Court ruled that when it comes to calculating the amount of Transfer Inheritance Tax due, the terms of the Will control, not the terms of the settlement. http://caselaw.findlaw.com/nj-tax-court/1674005.html

The Executor evidently had underpaid the tax, and the treasury imposed interest on the underpaid amount. In this redux of the case, on January 22nd, the Tax Court confirms  the underlying rule, and denies a reduction in the interest.35-5-5621 De Rosa v. Dir., Div. of Taxation, Tax Ct. (Bianco, J.T.C.) (13pp).11413-11opn

NJ Tax Court confirms necessity to follow procedures to get tax benefits under Domestic Partnership Act

On May 28, 2014 the NJ tax Court  decided the case of Claudette Lugano v NJ Division of Taxation.http://caselaw.findlaw.com/nj-tax-court/1668800.html . Ms. Lugano and the decedent, Mr. Lovi, had neither married nor registered as domestic partners, and inheritance tax was imposed on her receipt of his retirement plan benefits upon his death. The Court held, among other things, that the failure to either marry or register was fatal to the claim for exemption from the inheritance tax. A similar decision was issued in Estate of Frappoli v. Director, Division of Taxationon on June 5th. http://www.njlawarchive.com/20140606102512629069187/

There is no “common law marriage” in New Jersey. Certain estate tax exemptions at the death of one member of a couple are only available when the couple had either been married or registered as couples under other NJ laws.  When it comes to NJ estate and inheritance taxes, there is no tax on the transfer of wealth at death to a spouse or to a member of a couple who had actually registered as Domestic Partners http://www.state.nj.us/treasury/taxation/domparttax.shtmlor or as a civil union. http://www.state.nj.us/treasury/taxation/civilunionact.shtml.

When the State enacted its Civil Union law in 2007 in response to the decision in  Lewis vs. Harris, 188 N.J. 415 (2006), providing identical benefits to same sex committed couples as to married couples, the Domestic Partnership Law remained available to same sex couples and heterosexual couples who were 62 years of age and olderhttp://www.state.nj.us/treasury/pensions/civil-unions.shtml. . The statute required the couple to sign a specific form of Affidavit of Domestic Partnership and file it with the local registrar, who then files it with the State.

Evidently the couples in the Lugano and Frappoli cases never availed themselves of either mechanism. They may have had their reasons for not doing so, but ultimately the court held that failure to register the relationship was fatal to her claim for tax exemption.

 

Call us for review and update of your estate plan and for advice on post-retirement planning …… 732-382-6070