Estate Planning New Jersey by AshelyBritz


									         Estate Planning 101
                       - New Jersey -

 This brochure supplies legal information. It does not give legal
      advice and is not meant to take the place of a lawyer

                    Delaware Valley Legacy Fund
                     The Philadelphia Foundation
                   1234 Market Street, Suite 1800
                       Philadelphia, PA 19107
                  P: 215-563-6417 F: 215-563-6882

                           What is DVLF?

The Delaware Valley Legacy Fund’s mission is to increase philanthropy
and grant making to support needs in the gay, lesbian, bisexual and
transgender (LGBT) communities. Housed in The Philadelphia Foundation,
DVLF has helped leverage resources for health and social service
agencies –for over 70 LGBT organization.
       2008 Sponsors:

Platinum - $20,000 & above:

  Gold - $10,000 & above:

  Silver - $5,000 & above:

City of Philadelphia Employees

 Rainbow-$2,500 & above:
Dericom Enterprises

            Lavender-$1,000 & above:

                                     Mike McCann

    Lauren Nassau

                    Media Sponsors

                   Table of Contents

What is Estate Planning? . . . . . . . . . . . 5

New Jersey Civil Union Act . . . . . . . . . .     5
Property Dispositions . . . . . . . . . . . . 6

Gifts During Lifetime . . . . . . . . . . . . . 8

Joint Ownership & Co-ownership . . . . . . . . 9

Beneficiary Designations . . . . . . . . . . . 9

Inter-Vivos or “Living” Trusts   . . . . . . . . . 10

Executors . . . . . . . . . . . . . . . . . 11

Placing Property in a Trust . . . . . . . . . . 11

Co-ownership Agreement . . . . . . . . . . . 12

General Powers of Attorney . . . . . . . . . . 13

Advance Medical Directives . . . . . . . . . . 13

Medical Powers of Attorney . . . . . . . . . . 14

Living Wills . . . . . . . . . . . . . . . . 14

Funeral and Burial Instructions . . . . . . . . . 15

What is Estate Planning?

You likely own or will own more material goods (property,
money, etc.) than you will use up in your lifetime. “Estate
planning” essentially is deciding what should happen to the
excess belongings: Who should get what?

While you are alive and healthy, it may seem that you do not
need a “plan.” If there is some person or organization you want
to assist, and if you are financially able to do so, you can simply
make gifts on an ad hoc basis.

However, without written, legally enforceable instructions you will
lose control of your property if you become incapacitated or
when you die. Without a plan, your closest living relative will
likely have the right to manage your property and your person
during any period of incapacity, and the same relative(s) will
inherit your property at your death. For example, if you are
legally single with no children, and your parents are deceased,
your brothers and sisters have the right to make all medical
decisions for you if you become incompetent. This includes
whether or not to place you on life-support. Absent a power-of-
attorney or other written instructions from you, no one would
automatically have authority take care of your financial affairs,
including simple things such as depositing your checks and
paying your monthly bills. Upon your death, all your property
would go first to your parents and then to your siblings or their

New Jersey Civil Union Act

The New Jersey Civil Union Act became effective February 19,
2007. In the context of estate planning, it affords civil union
partners the same rights as spouses under New Jersey law with
respect to:

       Property ownership (i.e., may hold property as tenants by
       the entirety)
       Laws relating to insurance, health, and pensions
       Emergency and non-emergency medical care and
       treatment, hospital visitation and notification
       Advance directives and designation as a health care
       Laws relating to taxes imposed by NJ or a municipality
       Home ownership rights of a surviving spouse
       Laws relating to the making of, revoking and objecting to
       anatomical gifts
       Right to enter into a pre-civil union agreement, and
       Right to divorce, alimony, equitable distribution.

Note that the Act’s application is limited to New Jersey only. In
other words, the Act does not, and cannot, make the rights,
benefits, and privileges accorded a spouse at the federal level
applicable to a civil union partner.

Property Dispositions

In planning your estate you need to look at two main issues:

First, you need to determine what and how much you own (what
you are worth) and also estimate how much you are likely to own
in the future and at the time of your death. You need not list
every single item, but you should have a clear idea of your
overall worth.

Secondly, you need to decide whom you wish to provide for (and
what, specifically, each such beneficiary is to receive). You
should also think about back-up beneficiaries, in the event one of
your beneficiaries dies before he or she receives the property
from your estate.

Some estate plans include large gifts to be made during lifetime.
However, most plans do not take effect until death, simply
because most people can not be sure before that time that they
will not need all of their assets during their lifetimes.

How simple or complicated your estate plan will be depends on
your particular assets and wishes. You may be able to take care
of your entire estate through straightforward, unconditional
bequests in a Will. Example:

     •      I leave my house to my partner, Jane Doe.

     •      I leave $10,000 to my niece.

     •      I leave all my other property 50% to Jane Doe and
         50% to Charity X.

However, there may be situations in which, although you wish to
provide for someone, you want to do so only for a given period of
time, under certain conditions, or for a specific purpose, and thus
do not want to make an outright bequest of a specific piece of
property or sum of money to that person. The following are
some examples:

     •       An uncle wants to make sure his niece has enough
         money to cover college expenses if she chooses to go,
         but does not want to give her more than this.

     •        A man wants his partner to be able to continue to live
         in his house after his death, for the rest of the partner’s
         life, but wants the house to go a charity, rather than to the

         partner’s relatives or new boyfriend, after the partner’s

     •       An individual wants to supplement his mother’s
         income, but only if and to the extent necessary to provide
         her with a comfortable lifestyle.

The law generally allows you to make these more limited types
of gifts, although they require greater care in drafting, and often
require choosing a trustee.

A “Will” is the most commonly thought of means for transferring
property in an estate plan. However, there are several others,
including: gifts during lifetime; joint-ownership; inter-vivos trusts;
and “pay on death” beneficiary designations. It may be more
appropriate to use one of these for certain types of property.

Gifts During Lifetime

For personal or tax reasons, it may make sense for you to make
gifts of some of your property during your lifetime.         An
inheritance paid to an unrelated person is taxed by the State of
New Jersey as follows: 15% on any amount up to $700,000, and
16% on any amount in excess of $700,000. Under the New
Jersey Civil Union Act, which in to effect on February 19, 2007,
an inheritance paid to a civil union partner is exempt from New
Jersey Inheritance Tax. This is the same treatment that is
accorded to a surviving spouse. Note that effective July 10,
2004, an inheritance paid to a domestic partner is exempt from
New Jersey Inheritance Tax. Domestic partners are same-sex
couples (or opposite-sex couples who are at least age 62) who
register with a local registrar and receives a Certificate of
Domestic Partnership. The Civil Union Act does not effect the
treatment of domestic partners.

The drawback to making lifetime gifts is that you must actually
give up ownership of the property. Thus, if you later need the
resources you have given away, they may not be available to

you. For example, if you have a falling out with the person you
gave your house to, you could be homeless. Additionally, if the
person you gave the house to dies before you, you will have to
pay the inheritance tax on your own house if that person leaves
the house to you.

Joint Ownership & Co-ownership

Most states allow property to be owned “jointly with right of
survivorship.”  Under this arrangement, any jointly owned
property automatically becomes the sole property of the survivor
upon the death of the other joint owner.1

However, if you simply “co-own” property with another person,
each owner’s share goes to his heirs or legatees at this death,
not to the other owner. Moreover, merely adding another
person's name to your bank account or to the title of your
property does not necessarily give that person any ownership
interest and does not guarantee access to that property after
your death. Thus co-ownership, as opposed to joint ownership
with right of survivorship, does not eliminate the need for a Will.

Beneficiary Designations

For life insurance proceeds and pension and retirement
accounts, you typically designate a beneficiary on forms
provided by the insurance company or account holder. This has

  Property which passes under joint ownership rules is still subject to death taxes. Under
New Jersey law, jointly owned property is treated as owned entirely by the deceased
owner and its full value and the surviving owner is treated as inheriting the entire
property. However, if the surviving owner can prove that he or she contributed to the
property, his or her contribution is exempt from New Jersey Inheritance Tax. In addition,
if the surviving owner is a civil union partner or a domestic partner, the full value will not
be subject to New Jersey Inheritance Tax.
several advantages over having these assets pass to your estate
and be distributed under your Will: if the account or insurance
proceeds pass under your Will, they will be tied up in court until
the estate is settled; and they may have to be used to pay off
your debts. Your heirs or the people named in your Will will only
receive what is left over. If you have named a beneficiary,
however, the account or insurance proceeds go directly to that

Therefore, you should periodically check whom you have listed
as the beneficiaries for your life insurance and pension and
retirement accounts. If the person you have designated has died
or if you have designated your estate as the beneficiary, you
should think about designating another beneficiary.

Inter-Vivos or “Living” Trusts

Another way to pass property at your death is to place it in a
“Living Trust.” Under this arrangement, the trust becomes the
legal owner of any property you place in it, but you (as
beneficiary and trustee) retain full rights to use and control the
property. Upon your death, the person(s) or organization(s) that
you have named in the trust document automatically become the
beneficiaries of the trust. Because there is no change in legal
ownership of the underlying property (it is still owned by the trust)
there is no need for any court proceeding to transfer the
property, as there is under a Will.

There are no tax advantages to setting up a Living Trust: your
beneficiaries are taxed exactly as if you had left your property to
them in a Will. There is little financial advantage either:
essentially, you are trading the time and expense of probating a
Will at some point in the future for the time and expense of
setting up a trust now. Additionally, even with a Living Trust, you
should still have a Will in case you have any property outside the
trust at the time of your death.

A Living Trust can be useful if you do not want the world to know

what you owned when you died and who your beneficiaries are.
Moreover, if you become incapacitated and can no longer
administer your assets, assets in your Living Trust can be
administered by your trustee.


The executor's job is to gather your assets, pay your debts, and
distribute the balance according to the Will. The executor should
(but need not) live in New Jersey, be at least 18 years of age,
and should be somebody close to you, so you feel comfortable
about him or her going through your things; somebody whom
you trust to carry out the spirit as well as the letter of the Will;
and somebody with enough business experience to handle the
estate's bank accounts efficiently and carefully. You should
name an alternate in case the person you name cannot serve.

Placing Property in a Trust

If you wish to leave a substantial amount of money or other
property to a child, to someone who is incapacitated, or to
someone who has or may acquire large debts, you should
consider placing the property “in trust.” If placed in trust, a
trustee will manage the property on behalf of the child or
incapacitated person. Property placed in trust will be better
protected from a recipient’s creditors.

To establish a trust, you need to decide on a trustee and on a
successor trustee in case your first choice can't serve. You also
need to decide what the trust assets can be used for: may they
be used for any purpose which benefits the recipient, or limited
to something specific, such as medical or educational expenses?

And again, you should decide on a backup beneficiary of the
trust property, in case the original beneficiary dies before all the
trust assets are used.

Co-ownership Agreement
It is presumed that the co-owners of a piece of property own it in
equal shares. For example, if there are two co-owners, the law
presumes that each owns one-half (except in the case of the
Inheritance Tax). A co-owner can challenge this presumption by
showing that he has contributed more toward the purchase or
improvement of the property, but this usually becomes a legal
mess, requiring detailed financial and expense records.
Therefore, if either of you is contributing more towards the
purchase price, or if either of you may later contribute more
toward monthly expenses such as mortgage payments or
household expenses, you should have an agreement stating
whether and how this will affect your ownership interests.

You should also be aware that paying a partner’s share of a
mortgage or other expenses make constitute a “gift,” and subject
you to federal gift taxes if the value of the gift exceeds $12,000 in
any one year. Note also that it may be unwise to shift assets if
the recipient has or is likely to experience financial difficulties.

The agreement should also expressly state the mechanics of
what is to happen to your home in the event of a breakup.
Specifically, who has the right to “buy-out” the other, how is the
value of the property to be determined, how much time does the
buying partner have to make payment, and whether the selling
partner is entitled to be removed from the mortgage.

In addition to the considerations explained so far, there are
a few other documents that you may want to consider
when planning your estate:

General Powers of Attorney

In a document called a "power-of-attorney" you can authorize a
trusted friend or family member to take care of your personal and
financial affairs. The authority granted in the power-of-attorney
can be as broad or as narrow as you want it to be. It can include
such things as banking, paying bills, opening and answering
mail, taking care of property, and dealing with insurance
companies. The power can be for a limited period of time or
indefinitely. By signing a power-of-attorney you do not lose the
right to do any of these things for yourself: you are merely
authorizing the other person to act as your agent. You may
revoke the power-of-attorney at anytime.

In your power-of-attorney, you may also wish to nominate a
curator. In the event that you become mentally incapacitated, a
court could place a curator in charge of your affairs. Generally,
you have nominated a curator ahead of time, the court will
almost certainly appoint that person. While a sufficiently broad
power-of-attorney should make it unnecessary for a court to
appoint a curator, nominating a curator will help assure that a
person of your choosing will be in charge of your affairs if you
become incompetent.

Advance Medical Directives

You have the right to control your medical care. However, if you
should become ill, you may be unable to make decisions or
communicate those decisions to your health care providers. By
putting your wishes in writing ahead of time, you can maintain
control over your medical care in the event you are unable to
meaningfully participate in the decision-making process.

Medical Powers of Attorney

Through a medical power-of-attorney, you can give authority
over your medical care to the person of your choice. (You, of
course, retain control over your medical care as long as you are
able to make decisions: the authority granted in the Medical
Power-of-Attorney only becomes effective if you are unable to
meaningfully participate in the decision-making process.) If you
do not execute a Medical Power-of-Attorney, your next-of-kin,
usually a parent or sibling, will have control of your medical care
to the exclusion of a partner, for example. Through a Medical
Power-of-Attorney, you can also guarantee that a friend or
partner will have access to you and your medical records if you
are hospitalized. If you want someone other than a family
member to make important medical decisions for you and to be
with you when you are ill, you should execute this document.

Living Wills

In this document you can spell out any limitations you wish
placed on your medical treatment at the end-stage of a fatal
illness or if you are in a persistent coma. Generally, a Living Will
becomes effective when the following conditions are met:

    1)   You have an incurable illness that is likely to cause
         death in the near future, or you are in a comatose state
         from which you are unlikely to recover, regardless of the
         medical treatment you receive; and

    2)   The life-sustaining treatment will not improve your
         condition, but will only prolong the dying process.

In the Living Will you may specify which medical procedures you
want withheld or provided or you may simply state you want no
medical care other than that necessary to make you comfortable.
You also have the option of designating another person to make
these decisions for you.

Funeral and Burial Instructions

It is not a good idea to leave instructions for funeral or burial
arrangements in a Will. A Will is often not looked at until after
the funeral. In fact, in New Jersey, a will cannot be admitted to
probate within 10 days of death. Additionally, a court must find
the Will is authentic before its provisions are legally enforceable.
As a result, the wishes of the family concerning burial rituals
often prevail, even if those preferences conflict with those of the

It is also inadvisable to give an agent named in a power-of-
attorney authority over your funeral or burial: a power-of-attorney
is not valid after your death. (However, you can grant your agent
the authority to make pre-need funeral and burial arrangements
exercisable while you are still alive.)

However, a specific declaration of your wishes made before a
notary is enforceable. In addition, the declaration can provide
strong moral pressure for your relatives to follow the wishes that
you expressed in the declaration. Such a declaration can
include, among other things, your designation of a person to
make arrangements and your wishes concerning burial,
memorial or funeral services, and obituary notices. You may
also make pre-need funeral and burial arrangements while you
are still alive.

If you do not leave a declaration, your next-of-kin will have
control over these matters


To top