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New Jersey Estate Planning and Probate Law Blog

What situations could cause a person to challenge a will?

When a person in New Jersey writes a will, they generally believe they are making clear their intentions for how they want their estate dispersed between their heirs after their death. And, for the most part, a properly executed will does just that. However, there could be times when an heir feels the will should not be followed and wants to contest it. This can lead to estate litigation.

It is important to note that challenging a will can be difficult. This is because it is presumed that if the will was executed with all proper formalities, it is valid and should be followed. However, there are circumstances that could provide grounds for challenging a will.

The basics of estate taxes versus inheritance taxes

As the saying goes, the only two guarantees in life are death and taxes. And, for some people, receiving an inheritance after a loved one dies means that either Uncle Sam will take his share before the estate is distributed, or the state may ask the heirs to pay up, depending where they live. Therefore, it is important to understand the basics of inheritance taxes and estate taxes, and when these taxes apply.

An inheritance tax is paid by the person who inherits the estate. For example, if your Aunt Edith passed away and left you $500,000 in her will, you may be personally liable for paying taxes on that $500,000. Only certain states have an inheritance tax. New Jersey is one of those states. The state inheritance tax in New Jersey depends on the size of the inheritance and the relationship between the heir and the decedent. There is no federal inheritance tax.

Avoid making these common estate planning mistakes

Most people in New Jersey execute an estate plan with the intention that it will meet their wishes and benefit their heirs. However, a poorly drafted estate plan or an outdated estate plan can lead to undesirable complications when it comes to enforcing your wishes.

The following are some common mistakes people make when estate planning.

What are some advantages to special needs trusts?

Parents of special needs children in New Jersey may have concerns about how their child will be cared, especially after the child is an adult and the parents pass away. While parents may want to ensure that their adult special needs child receives the government benefits they need, such as Medicaid and Supplemental Security Income, they may also want to leave some of their assets to their child for the child's care. However, this can be complicated, as most government benefits have low thresholds for the income a disabled adult can have to qualify for benefits. For this reason, some parents choose to execute a special needs trust for the care of their child.

In a special needs trust, the beneficiary can still receive an inheritance, be given gifts and receive other funds without losing their government benefits. This is because these assets will belong to the trust, not the beneficiary and will be managed by a trustee. Even a beneficiary's own assets can be included in a special needs trust, since they will also belong to the trust and be managed by a trustee. There are several types of special needs trusts.

Why is it prudent to review your estate plan from time-to-time?

Some people in Parsippany have executed a comprehensive estate plan, including a will, trust, living will, and power of attorney. However, it is a mistake to simply file that estate plan away allowing it to collect dust as the years pass on. In fact, there are several reasons why a person will want to update their estate plan.

First, state law varies on what is required to execute a will and who will inherit. There may be other specific details determined by state law as well. If a person has moved to a new state since executing their estate plan, they will want to make sure their estate plan complies with their new state's laws so that their wishes for asset distribution can be fully protected.

Why is estate planning important for blended families?

Families in New Jersey come in all shapes and sizes these days, and it is not unusual for a person to marry a second time either due to divorce or the death of their first spouse. Oftentimes there are children from a first marriage, resulting in a blended family with step-parents and step-children. In such situations, it is important to have a well-rounded estate plan that meets your wishes both for your new spouse and your children from your first marriage, especially if those children are now adults.

First, merely having a will may not be enough to meet your estate planning needs if you have a blended family. For example, if you leave everything to your new spouse in your will, once your new spouse passes away there is no guarantee that he or she will leave anything to the children from your first marriage, leaving them with nothing.

New Jersey residents do not have to face probate alone

Being selected as the executor of a loved one's estate is an honor, but it also comes with responsibilities. Even though the probate process in New Jersey is not as complex as the probate process is in other states, costly mistakes can be made by those who are unfamiliar with it.

For example, a deceased's will must be submitted to the surrogate in the deceased's county of residence. An inventory must be made of all the estate's assets, and creditors will be paid using these assets. Final taxes must be paid using estate assets, too. Also, a final accounting of the estate must be submitted so that the beneficiaries of the estate can approve or challenge these findings. Finally, the remaining assets of the estate will be distributed per the terms of the deceased's will or, absent a will, through the laws of intestate succession.

Plan now for the eventual sunset of the federal estate tax

When the Tax Cuts and Jobs Act raised the threshold for the amount of assets a person can hold before they are subjected to the federal estate tax, many people in New Jersey may have cheered. After all, now that a person can hold $11 million in assets as an individual or $22 million in assets as a married couple before being subjected to the federal estate tax, it may seem like most people do not have to worry that the federal government will take a sizable chunk of their estate upon their death.

And, for the most part, this is true. However, like many things in life, the good times do not last forever. Once 2025 rolls around, the threshold for the amount of assets a person can hold before they are subjected to the federal estate tax will plummet to around $5.5 million for individuals and around $11 million for married couples. This means that the estates of many of those who manage to survive to 2025 or beyond will be subjected to the federal estate tax whereas they wouldn't be had they died earlier.

Can you challenge a will simply because you think it's unfair?

When a person in New Jersey dies, he or she may have left behind a will that dictates who is to inherit his or her assets. While most of the time the terms of the person's will are followed, there are instances in which estate litigation is pursued by an heir who believes the will should be invalidated. In general, there are four grounds on which a person can challenge a will.

One ground for contesting a will is that the testator did not follow the necessary laws when signing the will. For example, there may not have been enough witnesses, or the witnesses may not have been in the presence of one another when signing the will.

Will my heirs be subject to the New Jersey inheritance tax?

While New Jersey no longer has an estate tax, as of right now it is one of only a handful of states that still imposes an inheritance tax. This tax applies to any transfers of assets to certain (but not all) heirs once you pass away. And while inheritances worth $500 or less won't be taxed, other inheritances will be subjected to the legally complex inheritance tax.

Whether the tax applied and how much is due depends on what "class" the heir falls under based on his or her relationship with the decedent. Class A heirs are exempt from the inheritance tax altogether. This includes spouses and children of the decedent, grandchildren and great-grandchildren of the decedent and parents and grandparents of the decedent. Class E heirs are also exempt from the inheritance tax. Class E heirs include charities, religious bodies, schools, hospitals, non-profit groups and the State of New Jersey itself.

J. Jeffrey Press, P.A.
8 Wood Hollow Road
Plaza Level - Suite 2A
Parsippany, NJ 07054

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