Answering Questions About Estate Administration
Do I need the original will?
Yes, the Surrogate will only accept an original, valid Will (there are certain formalities that must be adhered to) to probate. However, if the original cannot be found, there is a process for submitting a copy of the Will or defective Will to the Superior Court of New Jersey/Chancery Division/Probate Part and requesting that it be admitted to probate.
What if there is no will?
Then the estate assets will pass by the laws of intestacy. A Personal Representative will be appointed by the Surrogate and a bond will have to be posted. The process will then proceed as with an estate having a Will, except that the assets will be distributed to the next of kin. The following present typical scenarios: (1) Decedent has a surviving spouse, no surviving children and surviving parent(s) – the surviving spouse will receive 25% of the intestate; however, this amount cannot less than $50,000 nor more than $200,000, plus 75% of the balance of the intestate estate. The surviving parent(s) will receive 25% of the remaining balance of the intestate estate; (2) Decedent has a surviving spouse and surviving children all of whom are in common with the surviving spouse – the surviving spouse will inherit the entire intestate estate; (3) Decedent has a surviving spouse and children from another relationship – The surviving spouse will inherit the first 25% of the intestate estate in an amount not less than $50,000 nor more than $200,000, plus 50% of the remaining intestate estate. The decedent’s surviving children shall inherit 50% of the remaining intestate estate. (4) There is no surviving spouse and surviving children – the children shall inherit the entire intestate estate; (5) There is no surviving spouse and no surviving children – surviving parents will inherit the entire intestate estate; (6) If there is no surviving spouse, no surviving children, and no surviving parents – then the decedent’s siblings will inherit the intestate estate.
What if there are very few or no assets?
If there are no assets, then there is nothing that has to be done with regard to probate. If there is a surviving spouse and the assets are less than $20,000 or if there is no surviving spouse and the estate is less than $10,000, then there is a simplified process for obtaining an Affidavit from the Surrogate to transfer the assets.
What about joint accounts or payable on death accounts?
If the joint account is with rights of survivorship, which most are, the joint owner will be entitled to the proceeds of the account. The named beneficiary on a payable on death account is entitled to the proceeds of the account. If an account is a joint account, then the other beneficiaries under the Will may claim that the decedent did not intend for the co-owner of the account to have the proceeds, but that it was merely for convenience. In any event, this does not mean; that the account is not subject to estate and/or inheritance tax.
Why is there a lien on the bank account of the decedent and how do I get rid of it?
In New Jersey, banks will freeze 50% of the bank account upon the death of the owner of the account. This is New Jersey’s way of assuring that any estate or inheritance tax that might be due gets paid. To lift the freeze, you must obtain a waiver. The executor/personal representative may only need to complete an L-8 waiver form for estates less than $675,000 with only Class A beneficiaries. Otherwise, you must file the estate and/or inheritance tax return, pay any tax due, and at that time the New Jersey Division of Taxation will issue you a waiver.
Will the estate owe taxes?
Estate Taxes: For the estates of residents dying on or after January 1, 2017, if the gross estate is over $2 million, then an estate tax return must be filed; however, there may not be taxes due if the deductions bring the taxable estate below this amount. As a result of legislation signed into law on October 14, 2016, any residents dying on or after January 1, 2018 will no longer have a New Jersey Estate Tax imposed on their estates; regardless of the amount of the estate. There is, however, an inheritance tax (below) that remains, despite the new legislation.
Inheritance Taxes: There is inheritance tax due for all non-Class A beneficiaries, who include spouses, children, grandchildren, stepchildren, parents, and grandparents. Charities are also exempt from inheritance tax (As a Class E beneficiary). Class C Beneficiaries, who include siblings (including half-siblings) and spouses of deceased children– the first $25,000 is exempt. $25,000 to $1,100,000 is taxed at 11%; $1,100,000 to $1,400,000 is taxed at 13%; $1,400,000 to $1,700,000 is taxed at 14%; and $1,700,000 and up is taxed at 16%. Class D Beneficiaries – if the distribution is $500 or less there is no inheritance tax; for distributions greater than $500.00, the first $700,000 is taxed at 15% and distributions over $700,000 are taxed at 16%.
What is the taxable estate?
All assets held in the name of the decedent at the time of death, including probate and non-probate assets.
As an executor, am I entitled to commissions?
Yes. If you are the only executor, you would be entitled to 5% of the first $200,000 of the probate estate, 3.5% for the probate estate over $200,000 (up to $1 million), then 2% of the probate estate over $1 million.
As a Personal Representative or Executor of an estate do I need the assistance of an attorney?
It is not necessary; however, many people would prefer to have legal guidance and advice, particularly if an estate and/or inheritance tax return is required. The attorney can also assist you in completing an informal accounting and preparing the required release and refunding bonds for all beneficiaries to sign upon receipt of their distributions. You can handle some responsibilities yourself and allow the attorney to handle others in order to save on fees.
Who pays the attorney?
The attorney fees are paid by the estate and are a deductible expense.
What about debts of the estate?
Any legitimate debts of the decedent must be paid by the estate and it is the Personal Representative/Executor’s responsibility to pay these debts. There is a priority, based upon the statute, of the order in which debts get paid in the event the estate is insolvent, as below.
What if there are more debts than assets in the estate?
The estate is considered insolvent. Creditors have nine months to come forward and are then generally foreclosed from collecting. If necessary, there is a process of petitioning the court to have the estate declared insolvent.