2009 update Wills and Estate Planning- Program Materials January 28, 2009 SPEAKER: Kenneth Vercammen, Esq. (Author- Answers to Questions About Probate) The new NJ Probate Law and court decisions made a number of substantial changes in Probate and the administration of estates and trusts in New Jersey. Main Topics: 1. The New Probate Law and preparation of Wills 2. 2009 increases in Federal Estate and Gift Tax exemption 3. NJ Inheritance tax 4. Power of Attorney 5. Living Will 6. Administering the Estate/ Probate/Surrogate 7. Question and Answer 1. Preparation of Wills When there is a confidential relationship coupled with suspicious circumstances, undue influence is presumed and the burden of proof shifts to the Will proponent to overcome the presumption. If there is undue influence in making of Will and transfer by Deed of a house by persons in Confidential relationship, this could subject those persons to punitive damages in some instances, plus voiding of the Will. In the Matter of the Estate of Madeleine Stockdale, Deceased (A-121-06) Decided July 22, 2008 The New Probate Law SENATE Law No. 708 made a number of substantial changes to the provisions governing the administration of estates and trusts in New Jersey and makes the affected provisions gender neutral. The Uniform Probate Code attempted to bring greater uniformity to the rules governing testamentary and non-testamentary transfers in response to the significant number of non-testamentary transfers that occur at the time of the decedent's death. For example, a new term, "governing instrument" has been incorporated as a definition in the substitute to include deeds, trusts, insurance
1
and annuity policies, POD (pay on death) accounts, securities registered in beneficiary form (TOD), pension, profit sharing, retirement and similar benefit plans, and other wealth transfer instruments. 1.
Wills. A Testator now means both male and female individuals, removing the term
“Testatrix”. Will forms used by attorneys will need to be revised.
Almost Wills. The law expands situations where writings that are intended as Wills would be allowed, but requires that the burden of proof on the proponent would be by clear and convincing evidence. Possibly a Christmas card with handwritten notes could be presented as a Will or Codicil. To present a non formal Will or writing requires an expensive Complaint and Order to Show Cause to be filed in the Superior Court, and a hearing in front of a Superior Court Judge. Be careful, have a Will done properly by an experienced attorney.
The recommendation for Self- Proving Wills An old New Jersey Probate law required one of the two witnesses to a Will to travel and appear in the Surrogate’s office and sign an affidavit to certify they were a witness. This often created problems when the witness was deceased, moved away, or simply could not be located. Some witnesses would require a $500 fee to simply sign a surrogate paper. My Grandmother’s Will was not self- proving, and the witness to Will extorted a $500 fee. The New Jersey Legislature later passed a law to create a type of Will called a
2
“Self-Proving Will.” In such a Will, the person for whom the Will is made must sign. Then two witnesses sign. Then the attorney or notary must sign; with certain statutory language to indicate the Will is self proving. When done properly, the executor does not have to locate any witnesses. This usually saves time and money. If your Will is not “self-proving” or if you are unsure, schedule an appointment with an elder law attorney. Some law offices ignore the revised law, and fail to prepare self proving Wills. The elective share provisions of the present Code has not been changed yet. Currently, a spouse who is not given money in a Will can challenge the terms of the Will. This is called "electing against the Will by a spouse". A spouse could receive up to 1/3 of the estate, even if only married for 2 weeks. The spouse must file a caveat or lawsuit in Superior Court. We suggest a formal prenuptial agreement in 2 nd marriage situations.
2.
No Will? Who gets? Prior to 2005, when a decedent leaves only a spouse and children by that spouse,
the spouse got $50,000, then the spouse and children split the rest 50-50. The 2005 law makes substantial revisions to the laws governing intestate succession. For example, the new law provides that the intestate share of a surviving spouse would be 100% of the intestate estate where all of the surviving descendants of the decedent are also the descendants of the surviving spouse and the surviving spouse has no other descendants. Previously, such a surviving spouse received the first $50,000, plus 50% of the intestate estate. The surviving spouse is now be entitled to a larger share of the estate in the event that either a parent of the decedent survives
a
decedent
who
has
no
descendants,
or
there
are
3
descendants of the surviving spouse who are not descendants of the decedent. WHEN THERE IS NO WILL
INTESTACY PROVISIONS
Spouse & Children of the Decedent, all of who are also children of the spouse (and spouse has no Children by any other relationship).
Spouse: 100% of the estate
Spouse and children of the Decedent some of who are not children of the Spouse.
Spouse: the first 25% (but not less than $50,000.00 nor more than $200.000.00) plus one half of the balance.
Children: nothing
Children of the Decedent: All other estate assets. [less than 50%] Spouse and children of Decedent, all of who are also children of spouse and spouse has children by another relationship.
Spouse: the first 25% (but not less than $50,000.00 nor more than $200,000.00) plus one half of the balance. Children of the Decedent: All other estate assets. [less than 50%]
Spouse & Parents No Children
Spouse: the first 25% (but not less than $50,000.00 nor more than $200,000.00) plus three fourths of the balance. Parents: All other estate assets. [less than 25%]
Spouse and step-children (children of spouse who are not Decedent’s Children).
Spouse: 100% of the estate
Children of spouse (step-children), but no descendants, parents, descendants of parents or descendants of grandparents
4
If the spouse is an Administrator, no bond is required. If the children or another family member is Administrator when no Will, a formal bond will be required to be purchased. If you get married, have a Will prepared. You could be married 25 years, have no children, but if you die your spouse may not receive the entire estate. 25% could go to a parent in a nursing home. 3.
Effect of divorce The new statute expanded the present law that a divorce nullifies Will provisions
to the ex-spouse. The law provided that divorce or annulment of a marriage, under certain circumstances, would revoke not only provisions of the former spouse's will, but also non-probate transfers occurring by reason of the decedent's death to the former spouse. However, separated or divorced persons should not a new Will anyway. The law provides a statute of limitations with respect to creditor claims against a decedent's estate. There is no longer a need to publish a Notice Limiting Creditors. The law clarified the definitions of "descendant," "heirs," "incapacitated individual," "joint tenants with right of survivorship," "per capita distribution," "per stripes" distribution and distribution of estates "by representation." The law expanded the provisions requiring survival of a beneficiary by 120 hours to succeed to an interest of a decedent in non-probate transfers. Murderers are penalized‌. The law expanded the law with respect to disinheritance of a person who criminally and intentionally kills the decedent to include revocation of non-testamentary dispositions.
5
The law consolidated the law concerning disclaimers of probate and non-probate property. The law clarified that a fiduciary may, with court approval, disclaim any power or discretion held by such fiduciary, and may disclaim without court approval if the governing instrument so permits. This law also made some changes with regard to small estates. Under current prior, upon filing an affidavit with the surrogate the surviving spouse is entitled to the assets of an estate without administration if the assets do not exceed $10,000; similarly, in situations where there is no surviving spouse and the assets of the estate do not exceed $5,000, the heirs are entitled to the assets without administration if one of the heirs files an affidavit with the consent of the remaining heirs. The new Probate stated amended N.J.S.A. 3B:10-3 and 3B:10-4 to increase these amounts to $20,000 and to $10,000, respectively. Finally, the law expanded the rules of construction formerly applicable only to Wills to other donative transfers. 2. 2009 increases in Federal Estate and Gift Tax exemption The amount to leave without Federal Estate Tax is increased to 3,500,000 for 2009. 2009 $ 3,500,000 45% 2010 No estate tax if person dies in 2010 only, but 35% (gift taxes only) [2010 is best year for your rich uncle to pass away] 2011 $1,000,000 55% 2012 -??? Waiting for Congress to decide Gift permitted without Federal Estate & Gift tax was increased to $12,000. The amount permitted for Medicaid transfers is zero. FEDERAL ESTATE TAX RETURN New Jersey law requires that a copy of the Federal estate tax return be filed with the NJ Inheritance Tax Branch within 30 days after the filing of the original with the Federal government. Also, the Branch must receive a copy of any communication
6
from the Federal government making any final change in the return, or confirming, increasing or reducing the tax shown to be due. New Jersey has an Estate Tax on amounts over $675,000. So, even if no Federal Estate Tax due, the estate must still file a Federal Estate Tax Return, plus NJ Estate Tax Return. 3. NJ Inheritance tax The NJ Inheritance Tax Return instructions were revised in 2008. The L-9 Resident Decedent Affidavit Requesting Real Property Tax Waiver Form was revised in 2007. Throw out your old forms. Even if no inheritance tax due, a Tax Waiver on a house must be obtained and filed if the house was not co-owned by the spouse. 4. Power of Attorney Do not use a form purchased online, unless it contains reference to the NJ statute requiring banks to honor the Power of Attorney. Section 2 of P.L. 1991, c. 95 (c. 46:2B11). Federal Health Privacy Law (HIPAA) A federal regulation known as the Health Insurance Portability and Accountability Act (HIPAA) was adopted regarding disclosure of individually identifiable health information. This necessitated the addition of a special release and consent authority to all healthcare providers before medical information will be released to agents and interested persons of the patients. The effects of HIPAA are far reaching, and can render previously executed estate planning documents useless, without properly executed amendments, specifically addressing these issues. As HIPAA affects not only new documents, any previously executed documents are affected as well. Any previously executed Powers of Attorney, Living Wills, Revocable Living Trusts, and certainly all Medical Directives now require HIPAA amendments. Powers of attorneys and Living Wills should be updated to reference this New law.
7
More information on the HIPAA law at http://www.njlaws.com/hipaa.htm
5. Living Wills After you sign the Living Will in your attorney’s office, provide a copy to your doctor and family. 6. Administering the Estate/ Probate/Surrogate Under United States Supreme Court Case, Tulsa Professional Collection Services, Inc., v. Joanne Pope, Executrix of the Estate of H. Everett Pope, Jr., Deceased, the Executor or Personal Representative in every estate is personally responsible to provide actual notice to all known or "readily ascertainable" creditors of the decedent.
This means that is your responsibility to diligently search for any
"readily ascertainable" creditors. Other Duties/ Executor To Do: Certain Duties of Executor and attorney: Bring Will to Surrogate – attorney will prepare Fact Sheet Notice of Probate to Beneficiaries (Attorney can handle) If charity, notice to Atty General (Attorney can handle) File notice of Probate with Surrogate (Attorney can handle) Apply for Federal Tax ID # Set up Estate Account at bank Pay bills from estate account Prepare Inheritance Tax Return within 8 months and obtain Tax Waivers (Attorney can handle) File Inheritance Tax waivers upon receipt (Attorney can handle) File first Federal and State Income Tax Return [CPA ] Prepare Informal Accounting
8
Obtain Child Support Judgment clearance (Attorney will handle) Prepare Release and Refunding Bond (Attorney can handle) Sources: ABA Elder Law Newsletter, GP Solo Division and MCBA Newsletter, New Probate Law
Contact a Probate Attorney for an in office consultation KENNETH VERCAMMEN & ASSOCIATES, PC ATTORNEY AT LAW 2053 Woodbridge Ave. Edison, NJ 08817 (Phone) 732-572-0500 (Fax) 732-572-0030 More information at www.CentralJerseyElderLaw.com Free Wills, Trusts, & Estate Planning Forms available online at http://www.jdsupra.com/profile/KennethVercammen_docs/
9