Cameron Miranda
New Jersey's probate system is generally efficient, but there are certain steps that cannot be avoided, such as filing tax returns. The state imposes an inheritance tax on resident decedents, which is based on where the person legally lived when they passed away. In addition, until 2017, New Jersey also imposed an estate tax. Probate is a court-supervised legal process that may be required after someone dies, and it usually involves a surviving spouse or close family member. While probate in New Jersey is not always necessary, it is a good idea to have a will checked by an attorney when moving to another state.
| Characteristics | Values |
|---|---|
| Inheritance and estate tax | There are two types of inheritance tax: resident and non-resident. The New Jersey Estate Tax, based on the size of the entire estate, was phased out in two parts. The first part was capped at $675,000 for individuals who died on or before December 31, 2016. The second part removed the tax for individuals who died on or after January 1, 2018. |
| Probate | Probate is a court-supervised legal process that might be required after someone dies. It gives someone, usually the surviving spouse or another close family member, the authority to gather the deceased person's assets, pay debts and taxes, and eventually transfer assets to the people who inherit them. |
| Will | A will can be changed by adding a codicil, which must be signed and witnessed in the same way as the will. Children born or adopted after a will is written will receive the share of the property they would have received if there was no will. |
| Executor | An executor is named in a will and is responsible for disposing of assets and paying taxes and other legal requirements. A substitute executor should also be named in case something happens to the first executor. |
| No will | If the decedent dies without a will, state law determines who has the right to administer the estate and provides the manner for distribution of the assets. The administration must be done in the county where the decedent resided at the time of death. |
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What You'll Learn
New Jersey's probate system
The next step is to appoint an executor or administrator to manage the deceased's estate. Typically, the deceased would have designated an executor in their will, someone they trusted for estate management. The executor or administrator is responsible for notifying all heirs and beneficiaries of the estate. They must also file the final New Jersey and federal income tax returns for the deceased, which can include a final 1040 to the IRS and a final NJ40 to the New Jersey Department of the Treasury.
The executor or administrator must also pay all debts and ensure that all taxes are paid and other legal requirements are met. This includes paying funeral expenses, the costs of probate (court filing fees, lawyers' fees, etc.), taxes, and expenses of the last illness, in that order. Once the court approves the final accounting, the estate is officially closed, and the executor or administrator is relieved of their responsibilities.
It is important to note that probate in New Jersey is not always required. If the deceased person did not leave a will or a lot of valuable property, surviving family members can take advantage of simplified probate procedures. Additionally, certain assets, such as real estate, bank accounts, and securities held in the name of the deceased alone, are considered probate property and are subject to probate. However, assets owned jointly with someone else, such as a spouse or domestic partner, will go to the other surviving owner, regardless of what the will says.
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Inheritance and estate tax
On the other hand, distributions to Class C and D beneficiaries are taxed at different rates. Class C beneficiaries include siblings, half-siblings, in-laws, and widows/widowers of deceased children. Class D beneficiaries are those who do not fall into Classes A, C, or E, such as nephews, nieces, cousins, friends, and non-civil union partners. The state previously imposed an estate tax, but it was phased out in two parts, with the tax exemption capped at $675,000 for deaths on or before December 31, 2016, and the tax no longer imposed for individuals dying on or after January 1, 2018.
In New Jersey, certain tax returns must be filed, and specific forms may not be available until the year following the death. The estate may contain assets that are challenging to sell, such as real estate or an art collection, which will require the estate to remain open until these assets are liquidated. The deceased's final income tax return must also be filed, which may include a final 1040 to the IRS and a final NJ40 to the New Jersey Department of the Treasury. It is recommended to name an executor in one's will to ensure assets are properly disposed of and taxes are paid.
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Wills and codicils
A will is a legal document that outlines how a person's property should be distributed after their death. In New Jersey, certain steps must be followed, including filing tax returns and dealing with hard-to-sell assets such as real estate or art collections. While there is no set time limit for probate, it is recommended that executors inform heirs that the estate will be open for at least a year.
Wills can be handwritten or typed, and individuals over the age of 18 and of sound mind can create their own will without an attorney. However, it is advisable to seek legal assistance, especially if the estate is large and tax advice is necessary. It is also important to name an executor in the will to ensure assets are properly disposed of and taxes are paid.
A codicil is a legal document attached to a will that allows for modifications or changes to be made without rewriting the entire document. It can be used to remove or add beneficiaries, adjust property or assets, change the executor, or reflect family changes. Codicils are especially useful when minor adjustments are needed, helping to keep the will up-to-date and accurate. They are generally straightforward, but clarity and enforceability are crucial, and legal assistance can be beneficial.
To be valid, codicils must be properly witnessed, requiring two unbiased witnesses over the age of 18 who can attest that the codicil was created while the testator was of sound mind. While a notary is not required in most states, some testators may opt for one for added security. Codicils should be kept with the will and distributed to relevant parties.
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Executor duties
An executor is responsible for ensuring that the deceased's assets are properly disposed of, that all taxes are paid, and that other legal requirements are met. This includes filing tax returns and obtaining appraisals. Certain tax returns need to be filed, and the forms may not be available until the year following the death. The executor must also ensure that any assets that are hard to sell, such as an art collection or real estate, are sold before the estate can be closed.
In New Jersey, the executor must also obtain the written consent of the Director of the Division of Taxation before transferring certain property belonging to the deceased. This consent, commonly known as a "waiver," will not be granted until any tax due has been paid or provided for. The executor should also be aware that the estate might have to remain open for at least a year, depending on the assets and taxes involved.
It is important to name an executor in your will and to choose someone who lives near you, as they will need to handle the estate administration, which requires time. You should also name a substitute executor in case something happens to the first choice. The executor can be a relative, friend, or lawyer, and their role is to ensure that your wishes are carried out and that your assets are distributed according to your will.
Additionally, the executor should be aware of any specific laws or procedures in New Jersey that may impact their duties. For example, understanding the state's probate system and any applicable taxes, such as the estate tax that was applicable for deaths before 2018, is essential. Seeking legal advice from an attorney or a probate team can help ensure that the executor is aware of their responsibilities and can carry out their duties effectively. Overall, the executor's role is crucial in ensuring that the deceased's estate is administered and distributed according to their wishes and in compliance with the law.
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Estate administration without a will
Estate administration can be a complex process, and it is advisable to seek legal advice to ensure compliance with the relevant laws. In New Jersey, if a person dies without a will, the state's laws determine the distribution of their assets and who has the right to administer the estate. Here are the key considerations and steps for estate administration when there is no will:
- Understanding Intestacy Laws: Intestacy laws outline how a person's property is distributed when they die without a will. In New Jersey, the laws of the state dictate how the decedent's real and personal property will be distributed. These laws provide a standard formula for distributing assets among surviving family members, including the spouse, children, and other next of kin.
- Ascertaining Information: Before initiating the administration process, it is necessary to gather essential information. This includes checking the death certificate to identify the county Surrogate's Court with jurisdiction and determining the county where the decedent resided at the time of death.
- Listing Next of Kin: Create a comprehensive list of the decedent's next of kin, including their names, addresses, and ages if they are minors. If there are any deceased next of kin, their issue (descendants) must also be named.
- Determining Right of Administration: The next step is to determine who has the first right to apply for administration or act as the administrator of the estate. In New Jersey, if the decedent was married, the surviving spouse usually has the first right to apply for Letters of Administration. If there is no surviving spouse, the order of priority may include children or other close relatives.
- Valuing Assets and Securing Surety Bonds: It is important to determine the value of the assets held solely in the decedent's name. This valuation is crucial for securing a surety bond, if required. Surety bonds protect the estate and ensure proper distribution to beneficiaries. The need for a bond depends on the value of the estate and the family structure, as outlined in New Jersey's laws.
- Filing Tax Returns and Handling Estate Taxes: Estate administration often involves filing tax returns, including final income tax returns for the decedent. Additionally, there may be estate taxes imposed by the state of New Jersey, and certain tax filings may be necessary for asset transfers. It is important to consult with tax professionals or legal advisors to ensure compliance with tax laws.
- Distributing Assets: The administrator of the estate is responsible for distributing the assets according to the state's laws. This distribution process should follow the standard formula outlined in New Jersey's intestacy laws, ensuring that each beneficiary receives their rightful share.
- Obtaining Release and Refunding Bonds: Before distributing assets, it is customary for the administrator to obtain Release and Refunding Bonds from the beneficiaries. These bonds protect the administrator and ensure beneficiary cooperation in resolving potential tax issues or claims against the estate.
- Finalising Estate Administration: Even after distributing assets, the administrator may have additional responsibilities, such as filing a final estate income tax return. It is important to be diligent during this finalisation process to avoid potential legal or financial issues in the future.
It is important to note that the above steps provide a general framework, and each case may have unique considerations. Consulting with legal professionals experienced in estate administration in New Jersey is highly recommended to ensure a smooth and compliant process.
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Frequently asked questions
Probate is a court-supervised legal process that might be required after someone dies. Probate gives someone—usually the surviving spouse or other close family member—authority to gather the deceased person's assets, pay debts and taxes, and eventually transfer assets to the people who inherit them.
The New Jersey Estate Tax originated in 1934 and was based on the size of the entire estate. The New Jersey Estate Tax was phased out in two parts. If the resident decedent died on or after January 1, 2017, the Estate Tax exemption was capped at $675,000. The New Jersey Estate Tax no longer exists for individuals who died after 2017.
A will caveat is when someone contests a will in court.
You may change your will without writing a new one by adding a codicil to your existing will. This is a provision stating the changes you want to make in the original will without including all the provisions that are still in effect. A codicil must be signed and witnessed in the same way as the will.
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