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

Distributing an Estate? Watch out for child support judgment liens

The Executor of an Estate (named under the Last Will and Testament) or Administrator of an Estate (appointed by the Court because there was no Will or the Executor couldn’t serve) has an obligation to take care of all of the bona fide creditors of the estate before distributing the rest and remainder to the beneficiaries or heirs according to what the Will specifies or the law requires.  However, they also have a duty to pay a beneficiary’s share to probation if the beneficiary owes child support.

During the first six months or so after the beginning of the estate administration process, the bills are arriving and the Executor/Administrator is gathering the assets, selling property, and figuring how what is due. The process sometimes takes longer. But then there comes the point when it is apparent that all assets have been identified and accessed, all taxes have been paid, all outstanding debts of the deceased person have been paid, and the Executor/Administrator is ready to make the distribution that the beneficiaries are waiting for.

Since 2000, New Jersey law has required the Executor/Administrator to do a child support judgment search on every single person before distributing  their inheritance. NJSA 2A:17-56.23b. The search can be limited to judgments and liens against the person that were entered in the State of New Jersey. See Strickland v. 212 Corp. of N.J.. Even if the Executor/Administrator is planning to do a partial distribution mid-stream, the search must be run.

The Executor/Administrator asks each beneficiary to certify their social security number, date of birth, complete name, and mailing address. The search is then ordered through an independent search firm. If there is a child support judgment, a call should be placed to the relevant agency to get a written statement of the amount of the lien. Then the Executor/Administrator must transmit the appropriate amount of dollars from the debtor/beneficiary’s share of the estate to the Probate Division of Superior Court, with  notice to the beneficiary. If the payment fully satisfies the judgment, a Warrant of Satisfaction will be sent to the Executor/Administrator. After that, any remaining dollars can be distributed to the estate beneficiary.

The statute doesn’t specify that searches have to be done again after there has been a partial distribution. But if the final distribution is being made more than 30 days later (see Strickland, above), prudent practice dictates that another search be run.

This procedure is very important, because an Executor/Administrator can be held personally liable if they distribute an inheritance without making a search for the lien.

For legal advice and assistance on probate and estate administration, call us at 732-382-6070

Tell your Executor where you’re keeping your Will

Recently I got a call from the child of a client of mine who had just recently passed away. The child was panicky because they could not locate Mom’s Last Will and Testament. Mind you, this particular Mom was a very organized person. Bills were always paid on time; the house was meticulous; papers were looked at, dealt with, and either filed, scanned  or discarded. The Mom had reviewed and updated her estate plan just two years ago, and had informed the children just what the plan was. But they couldn’t find the original document.

I’ve gotten plenty of calls like that over the years. The problem is that only the original Will can be brought to the Surrogate for probate. Until the Last Will and Testament is probated at the county Surrogate, the probate Estate — which is all the assets owned by the deceased person that aren’t co-owned, and have no beneficiary — is in limbo. The person named as executor cannot act. A house can’t be listed for sale, bank accounts can’t be touched, stocks can’t be sold. The probate process is a quick and easy process in New Jersey,  but without an original Will, the plan so carefully crafted can’t be implemented without a court proceeding. Most legal problems have a remedy, and there are some interesting published cases concerning Wills that were lost, such as the Estate of Erlich. But these cases can consume a lot of time, and all the heirs have to be given notice. That means that if there is dissension in the family,  the situation invites a fight.

This same principle applies to other estate plan papers — we had a case once where the Deed said the property was titled in the name of a Trust, but no one could find any trust documents! We couldn’t even tell from the deed whether it was a revocable or irrevocable trust.

So pick a safe and sensible place to store your original Will, and make sure your Executor knows where to look for it when the time comes.

Call us to review or update your estate plan, and for trust and elder care planning … 732-382-6070

“Keep it Simple” by signing a Last Will and Testament

Countless times, clients have told me they just want things kept “simple” if they die. Yet they never signed any Last Will and Testament. Why? “too complicated.” I’ve had meetings with panicky children who are dealing with a health crisis or death of a parent, who have just learned that in mom or dad’s quest for “simplicity,” they had never signed any Will (or power of attorney for financial and health care, for that matter). If a person dies without a Will, the law dictates what will occur, as a court cannot create a Will for a person who never signed one. The necessary legal procedures and administrative red tape that are caused by the absence of a Will can certainly destroy that hoped-for “simplicity,” and cause great delay and expense. And “simply” putting everything in joint names  can create problems of its own. The N J probate process itself is simple … but only if there is a Will.

Here are some suggestions to help you prepare for the meeting with your attorney about a Will. First, choose your Executor and a few successors (as life is uncertain). Appointing Co-Executors can be fine as long as they get along with each other and both of them are responsible, willing to be accountable, understand the job to be done, and are able to work cooperatively with the other Executor. Once I had a situation in which a parent had several children who  had been bitter enemies for years. This parent appointed them as co-Executors, in essence saying : “if you don’t work together now, no one will ever be able to receive a dime from the estate.” Unfortunately, this set of co-Executors couldn’t even agree on who should be hired to appraise the house. It took years to finish that estate.

Next, identify specific bequests such as to grandchildren, charities or friends. Unless you write these into your Will, you cannot assume that those gifts will ever be given. You can’t assume that the beneficiary of your estate will share their new-found wealth with someone else you had asked them to give some to, and sometimes, legal problems intervene that make it impossible for your beneficiary to honor such a request.

Consider if a bequest should be placed in a trust. You may want to protect that bequest if a beneficiary is young, has special needs and receives government benefits, or is in the midst of a divorce, a binge, a lawsuit, or has addictions or debtor-creditor problems. But make sure to pick a trustee who is up to the task, as they could have a relationship with this beneficiary that will go on for many years.

Next, you’ll need to specify how the estate is to be divided. If you are leaving one person “the house,” does it matter that its value could skew the overall distribution? Specify who receives each shae if the beneficiary predeceases you. Will there be estate and inheritance tax? Talk to the attorney about how to make sure here is enough cash in the estate to pay the tax.

Finally — Safeguard the original Will! If it’s lost or misplaced, someone will have to go to court. Let the Executor know where you are keeping it. Some people choose to leave their Wills with their attorneys.

Believe me — estates without WIklls can be anything but simple to administer, and often the outcome is not what the person would have preferred.

 Call for advice on the estate planning that’s right for you … 732-382-6070