1. NJ Estate Tax eliminated effective January 1, 2018 and changes to Federal Taxes. In NJ, there is no longer a NJ Estate tax, although there is still an inheritance tax for money that is not going to spouse, children, grandchildren, etc.
The basic Federal Estate Tax exclusion amount for 2018 is
$5,600,000. For our NJ clients, you can leave to a spouse $100,000,000 [One hundred million to your spouse without tax] This also means you can leave $5,600,000 to children, charity, family etc. without any estate tax with proper tax planning by your attorney.
In 2018, the annual Federal gift tax exclusion is $15,000.
2. New law permits Executor to be replaced if all parties consent
The new law provides for a voluntary discharge process for personal representatives overseeing the administration of estates, whether those personal representatives were appointed by the Surrogate’s Court or the Probate Part of the Superior Court, Chancery Division. One beneficiary must agree to serve as the new Personal Representative of the Estate.
The new law is NJSA 3B: 10-30.1 Voluntary discharge of personal representative for an estate.
3. NJ Inheritance Tax must still usually be paid if assets are going to persons other than spouse or children.
Separate from the Estate Tax, New Jersey imposes an Inheritance Tax on the estates of limited resident and nonresident decedents. P.L. 2016, c. 57 made no changes to the New Jersey Inheritance Tax.
Even if no inheritance tax due, a Tax Waiver on a house must still be obtained and filed if the house was not co-owned by the spouse.
INHERITANCE TAX BENEFICIARY CLASSES
Class A
No Tax
§Parent
§Grandparent
§Spouse
§Child of a decedent (includes legally adopted child)
§Grandchild, great-grandchild, etc. of a decedent
§Stepchild of a decedent
(does not include a step-grandchild or great-step grandchild)
§Mutually acknowledged child
§Civil union partner (after 2/19/2007)
§Domestic partner (after 7/10/2004)
Class C
§Brother or sister of a decedent
§Spouse or surviving spouse of a child of a decedent
§Civil union partner or surviving civil union partner (after 2/19/2007) of a child of a decedent
Class D
§Anyone not included in Classes A, C, or E
Class E
No Tax is due
Including, but not limited to:
§Qualified charities
§Religious institutions
§Educational and medical institutions
§Non-profit benevolent or scientific institutions
§The State of New Jersey or any of its political subdivisions
See exempt organizations Exempt Organizations:
"Class E transferee" means any of the following:
• The State of New Jersey or any political subdivision thereof;
Any educational institution, church, hospital, orphan asylum, public library or Bible and tract society or to, for the use of or in trust for any institution or organization organized and operated exclusively for religious, charitable, benevolent, scientific, literary or education purposes, including any institution instructing the blind in the use of dogs as guides, no part of the net earnings of which inures to the benefit of any private stockholder or other individual or corporation; provided, that the exemption does not extend to transfers of property to such education institutions and organizations of other states, the District of Columbia, territories and foreign countries which do not grant an equal and like exemption of transfers of property for the benefit of such institutions and organizations of this State.
2018 INHERITANCE TAX RATES
Class A- No tax is due
Class C
First $25,000.......................No tax is due
Next $1,075,000................ 11%
Next $300,000..................... 13%
Next $300,000..................... 14%
Over $1,700,000................... 16%
Class D [other people]
First $700,000......................... 15%*
Over $700,000......................... 16%
Class E- charities: No tax is due
4. Set up a testamentary trust in your Will for Protection for a second spouse to protect assets for children and grandchildren
The Credit Shelter Trust (sometimes referred to as a “Bypass Trust” or an “A/B Trust”) was a popular estate planning technique used by married couples with combined assets to avoid the NJ Estate Tax. A Testamentary Trust (sometimes referred to as a Will trust or trust under will) is a trust, which arises upon the death of the testator [person who signed the Will]. A Credit Shelter Trust is a type of Testamentary Trust.
The purpose of the Credit Shelter Trust was to avoid the wasting of federal and state exemptions on the death of the first spouse. Instead of leaving all assets to the surviving spouse and thereby exposing the surviving spouse’s estate to more tax, Nursing Home & Medicaid issues, plus elective share by a future spouse, both spouse’s Wills are drafted to establish a Credit Shelter Trust to come into existence and be funded on the first spouse’s death.
Even though NJ has eliminated the NJ Estate Tax, a Testamentary Trust within the Will is still a useful device to help ensure children and grandchildren with receive money down the road. Otherwise, the surviving spouse can spend all the money in Atlantic City. The surviving spouse could also get remarried and do a new Will leaving all assets to the new spouse. Also, if your spouse gets remarried and their new spouse has to go into a nursing home, your spouse may have to use some of your hard earned money to pay for the new spouse’s expensive nursing home. Many families want to protect at least some of the money from wasteful spending or a new spouse.
In a typical Will Testamentary Trust, the surviving spouse is entitled to receive all of the income from the Trust for his or her lifetime, and has the right to demand principal distributions for his or her health, education, support and maintenance in his or her accustomed manner of living. Distributions in excess of that standard require the cooperation of a Co-Trustee – often an adult child of the surviving spouse or another trusted family member or friend.
If the Will Testamentary Trust technique is implemented as part of a Client’s Estate Plan, you can hire the attorneys for a separate fee to assist the Client in re-titling his or her assets so that assets are available to fund the Credit Shelter Trust. Re-titling is necessary because most Clients tend to hold assets jointly with right of survivorship and assets must be titled individually in a person’s name in order to be eligible to fund a Testamentary Trust. We work with a tax attorney to help our clients. Protect your money if you pass away and your spouse gets re-married or has to go into a nursing home.
Some persons even hire an attorney to set up a personal residence trust or irrevocable trust and have the assets taken out of your name and put into a trust or given to children and grandchildren in the trust. Minimum fees for trust are $3,000. This is not something a non-attorney can do on their own. It is also illegal for a non-attorney to provide legal advice or prepare most legal documents.
Beware of the “Elective share” rights of a new spouse. Have a Prenuptial Agreement if entering into a 2nd marriage
Currently, the new 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 2nd marriage situations. If there is no Will, the new spouse receives 50% of the estate even if only married three days.
5. Always have proper Self- Proving Wills since witnesses often move or pass away, don’t rely on cheap online forms
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 “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. Beware of online documents not prepared by an attorney. Never use a cheap form on line. No one tries to do their own electrical work on their home anymore or change their own oil. Have a professional do it right.
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 estate planning attorney. Some law offices ignore the revised law, and fail to prepare self proving Wills. Do not use a law office that follows old methods and does not do a self-proving Will. Also make sure your Will includes a formal “no bond required” clause so the executor/ personal representative does not have to spend thousands of dollars being bonded.
8. Power of Attorney- Do not use a form purchased online.
A Power of Attorney should contain reference to the NJ statute requiring banks to honor the Power of Attorney. Section 2 of P.L. 1991, c. 95 (c. 46:2B-11). A NJ bank does not have honor a Power of Attorney without the NJ language. Also, if you or your representative move it is a good idea to have a new POA prepared since a bank may give your selected person a hard time if the address on their ID is different than the address on the POA.
9 Federal Health Privacy Law (HIPAA)- Have a new Living Will prepared
The 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.
Any previously executed Powers of Attorney, Living Wills, Revocable Living Trusts, and certainly all Medical Directives now require HIPAA amendments. After you sign the Living Will in your attorney’s office, provide a copy to your doctor and family.
Powers of attorneys and Living Wills should be updated to reference this Federal reg. More information on the HIPAA law at http://www.njlaws.com/hipaa.html
More information on Wills and Probate at http://njwillsprobatelaw.com
To schedule an appointment for Wills and Estate Planning
Contact KENNETH VERCAMMEN & ASSOCIATES, PC ATTORNEY AT LAW 2053 Woodbridge Ave. Edison, NJ 08817(Phone) 732-572-0500
If you or anyone you know needs an updated Will, Power of Attorney or Living Will, please have them fill out our confidential interview from and schedule a consult.
KENNETH VERCAMMEN & ASSOCIATES, PC ATTORNEY AT LAW
2053 Woodbridge Ave.,Edison, NJ 08817
(Phone) 732-572-0500 (Fax) 732-572-0030 website: www.njlaws.com
The basic Federal Estate Tax exclusion amount for 2018 is
$5,600,000. For our NJ clients, you can leave to a spouse $100,000,000 [One hundred million to your spouse without tax] This also means you can leave $5,600,000 to children, charity, family etc. without any estate tax with proper tax planning by your attorney.
In 2018, the annual Federal gift tax exclusion is $15,000.
2. New law permits Executor to be replaced if all parties consent
The new law provides for a voluntary discharge process for personal representatives overseeing the administration of estates, whether those personal representatives were appointed by the Surrogate’s Court or the Probate Part of the Superior Court, Chancery Division. One beneficiary must agree to serve as the new Personal Representative of the Estate.
The new law is NJSA 3B: 10-30.1 Voluntary discharge of personal representative for an estate.
3. NJ Inheritance Tax must still usually be paid if assets are going to persons other than spouse or children.
Separate from the Estate Tax, New Jersey imposes an Inheritance Tax on the estates of limited resident and nonresident decedents. P.L. 2016, c. 57 made no changes to the New Jersey Inheritance Tax.
Even if no inheritance tax due, a Tax Waiver on a house must still be obtained and filed if the house was not co-owned by the spouse.
INHERITANCE TAX BENEFICIARY CLASSES
Class A
No Tax
§Parent
§Grandparent
§Spouse
§Child of a decedent (includes legally adopted child)
§Grandchild, great-grandchild, etc. of a decedent
§Stepchild of a decedent
(does not include a step-grandchild or great-step grandchild)
§Mutually acknowledged child
§Civil union partner (after 2/19/2007)
§Domestic partner (after 7/10/2004)
Class C
§Brother or sister of a decedent
§Spouse or surviving spouse of a child of a decedent
§Civil union partner or surviving civil union partner (after 2/19/2007) of a child of a decedent
Class D
§Anyone not included in Classes A, C, or E
Class E
No Tax is due
Including, but not limited to:
§Qualified charities
§Religious institutions
§Educational and medical institutions
§Non-profit benevolent or scientific institutions
§The State of New Jersey or any of its political subdivisions
See exempt organizations Exempt Organizations:
"Class E transferee" means any of the following:
• The State of New Jersey or any political subdivision thereof;
Any educational institution, church, hospital, orphan asylum, public library or Bible and tract society or to, for the use of or in trust for any institution or organization organized and operated exclusively for religious, charitable, benevolent, scientific, literary or education purposes, including any institution instructing the blind in the use of dogs as guides, no part of the net earnings of which inures to the benefit of any private stockholder or other individual or corporation; provided, that the exemption does not extend to transfers of property to such education institutions and organizations of other states, the District of Columbia, territories and foreign countries which do not grant an equal and like exemption of transfers of property for the benefit of such institutions and organizations of this State.
2018 INHERITANCE TAX RATES
Class A- No tax is due
Class C
First $25,000.......................No tax is due
Next $1,075,000................ 11%
Next $300,000..................... 13%
Next $300,000..................... 14%
Over $1,700,000................... 16%
Class D [other people]
First $700,000......................... 15%*
Over $700,000......................... 16%
Class E- charities: No tax is due
4. Set up a testamentary trust in your Will for Protection for a second spouse to protect assets for children and grandchildren
The Credit Shelter Trust (sometimes referred to as a “Bypass Trust” or an “A/B Trust”) was a popular estate planning technique used by married couples with combined assets to avoid the NJ Estate Tax. A Testamentary Trust (sometimes referred to as a Will trust or trust under will) is a trust, which arises upon the death of the testator [person who signed the Will]. A Credit Shelter Trust is a type of Testamentary Trust.
The purpose of the Credit Shelter Trust was to avoid the wasting of federal and state exemptions on the death of the first spouse. Instead of leaving all assets to the surviving spouse and thereby exposing the surviving spouse’s estate to more tax, Nursing Home & Medicaid issues, plus elective share by a future spouse, both spouse’s Wills are drafted to establish a Credit Shelter Trust to come into existence and be funded on the first spouse’s death.
Even though NJ has eliminated the NJ Estate Tax, a Testamentary Trust within the Will is still a useful device to help ensure children and grandchildren with receive money down the road. Otherwise, the surviving spouse can spend all the money in Atlantic City. The surviving spouse could also get remarried and do a new Will leaving all assets to the new spouse. Also, if your spouse gets remarried and their new spouse has to go into a nursing home, your spouse may have to use some of your hard earned money to pay for the new spouse’s expensive nursing home. Many families want to protect at least some of the money from wasteful spending or a new spouse.
In a typical Will Testamentary Trust, the surviving spouse is entitled to receive all of the income from the Trust for his or her lifetime, and has the right to demand principal distributions for his or her health, education, support and maintenance in his or her accustomed manner of living. Distributions in excess of that standard require the cooperation of a Co-Trustee – often an adult child of the surviving spouse or another trusted family member or friend.
If the Will Testamentary Trust technique is implemented as part of a Client’s Estate Plan, you can hire the attorneys for a separate fee to assist the Client in re-titling his or her assets so that assets are available to fund the Credit Shelter Trust. Re-titling is necessary because most Clients tend to hold assets jointly with right of survivorship and assets must be titled individually in a person’s name in order to be eligible to fund a Testamentary Trust. We work with a tax attorney to help our clients. Protect your money if you pass away and your spouse gets re-married or has to go into a nursing home.
Some persons even hire an attorney to set up a personal residence trust or irrevocable trust and have the assets taken out of your name and put into a trust or given to children and grandchildren in the trust. Minimum fees for trust are $3,000. This is not something a non-attorney can do on their own. It is also illegal for a non-attorney to provide legal advice or prepare most legal documents.
Beware of the “Elective share” rights of a new spouse. Have a Prenuptial Agreement if entering into a 2nd marriage
Currently, the new 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 2nd marriage situations. If there is no Will, the new spouse receives 50% of the estate even if only married three days.
5. Always have proper Self- Proving Wills since witnesses often move or pass away, don’t rely on cheap online forms
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 “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. Beware of online documents not prepared by an attorney. Never use a cheap form on line. No one tries to do their own electrical work on their home anymore or change their own oil. Have a professional do it right.
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 estate planning attorney. Some law offices ignore the revised law, and fail to prepare self proving Wills. Do not use a law office that follows old methods and does not do a self-proving Will. Also make sure your Will includes a formal “no bond required” clause so the executor/ personal representative does not have to spend thousands of dollars being bonded.
8. Power of Attorney- Do not use a form purchased online.
A Power of Attorney should contain reference to the NJ statute requiring banks to honor the Power of Attorney. Section 2 of P.L. 1991, c. 95 (c. 46:2B-11). A NJ bank does not have honor a Power of Attorney without the NJ language. Also, if you or your representative move it is a good idea to have a new POA prepared since a bank may give your selected person a hard time if the address on their ID is different than the address on the POA.
9 Federal Health Privacy Law (HIPAA)- Have a new Living Will prepared
The 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.
Any previously executed Powers of Attorney, Living Wills, Revocable Living Trusts, and certainly all Medical Directives now require HIPAA amendments. After you sign the Living Will in your attorney’s office, provide a copy to your doctor and family.
Powers of attorneys and Living Wills should be updated to reference this Federal reg. More information on the HIPAA law at http://www.njlaws.com/hipaa.html
More information on Wills and Probate at http://njwillsprobatelaw.com
To schedule an appointment for Wills and Estate Planning
Contact KENNETH VERCAMMEN & ASSOCIATES, PC ATTORNEY AT LAW 2053 Woodbridge Ave. Edison, NJ 08817(Phone) 732-572-0500
If you or anyone you know needs an updated Will, Power of Attorney or Living Will, please have them fill out our confidential interview from and schedule a consult.
KENNETH VERCAMMEN & ASSOCIATES, PC ATTORNEY AT LAW
2053 Woodbridge Ave.,Edison, NJ 08817
(Phone) 732-572-0500 (Fax) 732-572-0030 website: www.njlaws.com
