WILLS

Who needs a Will ?

You need a will if you own property. Most people acquire some amount of property during their lifetime, such as a home or perhaps a vacation home, bank accounts, stocks, bonds, mutual funds or other investments, motor vehicles, boats and recreation vehicles, firearms, jewelry, collectibles, and a myriad of other types of real and personal property. Some property may transfer outside of the will, such as life insurance or a retirement account payable to a named beneficiary. In New Jersey, real estate owned by a husband and wife as tenants by the entirety automatically vests in the survivor if one spouse dies. Sometimes bank accounts held in joint names may be payable on death to the survivor, which may lead to unintended consequences. Marital assets are often held in some form of joint ownership, so the will may or may not be of great importance in determining ownership when the first spouse dies. However, when the second spouse dies the will becomes of paramount importance.

Thinking About Wills

As someone who has been preparing wills for over 40 years, I feel I know them well. Clients usually come into the office with a rough idea of what they want in their will. Their idea may be simple or more complicated. Sometimes they have a concept or a plan that is based upon a misunderstanding of the value of their estate, or how it should be distributed, or in whose hands it may ultimately wind up. Sometimes there have emotional conflicts with relatives that have built up over the years, which further complicates the planning process. Sometimes I am a little amazed at some of the notions people have about what they want to put in their wills. However, when we take the time to sit down and discuss what the client is really trying to accomplish, I can usually help them formulate an estate plan that accomplishes their goals.

"Simple" Wills 

Some lawyers might say that there is no such thing as a "simple will.” That is because what the client sees as simple may not be as straightforward to the lawyer. Lawyers are trained to think about unforeseen circumstances – the "what if's." An example would be if the intended beneficiary happens to die before the maker of the will (the “testator”). Or the intended beneficiary lives long enough to inherit and then dies shortly thereafter, with his or her estate then passing to an unintended (or undesired) beneficiary. Your circumstances may or may not be “simple.” The best solution is to meet with an attorney to determine which is which. If the lawyer isn’t willing take the time to sit down with you and discuss your personal situation in detail, or if you are trying to make out your will on the internet, you may not really understand whether all you need is a “simple will.”

What if I die without a Will ?

If you die without a will your property will be distributed to your legal relatives according to the laws of descent and distribution of the State of New Jersey. Obviously, this may not be as you would have wished. Furthermore, since no one is named as the personal representative of the estate, application will have to be made to the court to appoint an administrator of the estate, which can lead to disagreement and even litigation if the heirs cannot agree. Also, the administrator will most likely be required to post an administration bond, which can be costly. Incidentally, if you have no relatives and leave no will, your property will escheat (be forfeited) to the State of New Jersey.

How can I change my Will ?

Sometimes clients come into my office having marked up their original will, crossing out certain provisions and adding additional writing, and being under the mistaken impression that this has “amended” their will. At that point I have to advise them that they have probably invalidated the entire document; however, I can quickly repair the situation by preparing a new will with the desired changes. (I sometimes wonder if any clients have marked up their wills without coming in to see me.) A will can also be amended by preparing a formal "codicil" or amendment to the original will. If the original will is still intact, I will discuss with the client the pros and cons of preparing a codicil versus a new will. 

Estate planning in New Jersey

Until recently, for many New Jersey residents estate planning revolved around the issue of death taxes. The three types of taxes that affected many estates in New Jersey were federal estate tax, the New Jersey estate tax, and the New Jersey inheritance tax. Federal and New Jersey estate taxes were rather draconian. Federal estate taxes often applied to estates over $600,000, not a very large amount when you consider that some residents in New Jersey have that much equity just in their homes, not to mention savings, retirement accounts, stocks and bonds, personal property and other assets. The federal estate tax rate was a staggering 55%. However, as a result of changes enacted by Congress the amount every individual can give or bequeath before or after death has been increased to $11,580,000 as of 2020, an amount most of us are not likely to approach unless we win the lottery. Also, the annual exclusion for tax-free gifts is currently $15,000 per person as of 2020 and this exclusion will continue to be indexed for inflation.

The New Jersey estate tax was also quite severe, being levied on any estates exceeding $675,000 with a tax rate as high as 16%. The New Jersey estate tax threshold was particularly onerous, having stayed $675,000 long after the federal exemption amount had increased substantially. This led to the unfortunate result of many older New Jersey residents moving their residence to other states, such as Florida, which does not have an estate or inheritance tax. Finally, in 2016 when the gas tax was increased, the state legislature eliminated New Jersey estate tax, effective in 2018.

The New Jersey inheritance tax is a tax upon residents receiving an inheritance. Prior to 1985, the inheritance tax applied to all beneficiaries of estates, subject to limited exemption amounts. This also led to older New Jersey residents fleeing the state for places such as Florida which lacked an inheritance tax. The law was amended in the 1980's to exempt all "Class A" lineal beneficiaries, including children, stepchildren, grandchildren, parents and grandparents. This eliminated another reason that had been prompting senior citizens to leave New Jersey. However, it should be remembered that the inheritance tax continues to apply to other classes of beneficiaries, such as brothers, sisters, nieces, nephews, or other relatives and non-related persons, with a rate as high as 16%, so in some cases the inheritance tax still needs to be taken into account in estate planning.

Thus, previous estate planning primarily revolved around various legal contortions designed to minimize federal and state estate taxes, such as bypass trusts intended to minimize estate taxes upon the death of the decedent's spouse. Now, with the New Jersey estate tax eliminated, and the federal estate tax and New Jersey inheritance tax not applicable to the vast majority of estates, death taxes have been eliminated as the primary focus of most estate planning. This leaves clients and their attorneys free to focus on what should have always been the primary goal of estate planning: making sure that the client's lifetime assets get to the proper beneficiaries. The estate plan should also seek to ensure that assets are not dissipated or misdirected in the event of unanticipated circumstances or events. That's the lawyer's job! 

What about Living Trusts?

In the past, "living" or revocable trusts have sometimes been heavily marketed in parts of New Jersey. A revocable trust is established by a person during his or her lifetime and property is titled in the name of the trust. Upon death, the decedent's property either continues in trust for the benefit of descendants, or is distributed outright to designated beneficiaries. Living trusts have been popular in some states, such as Florida, which has a more complex and expensive probate process than New Jersey. In response to the questionable marketing of living trusts in the 1990s, the New Jersey Supreme Court Committee on Attorney Advertising issued Living Trusts Opinion No. 25 on September 21, 1998, concluding that living trusts can be oversold because they do not avoid probate disputes, do not guarantee privacy, do not necessarily minimize attorneys fees, do not guarantee tax savings, and do not necessarily guarantee continued management of the trust assets any differently than a well-designed estate plan. Also, ownership by a trust of a principal residence may adversely affect eligibility for reduced realty transfer taxes upon the sale of the property. There may be cases where revocable or living trusts provide significant benefits, but they are not a panacea.

What about Trusts for Children?

I always make my clients promise not to die until their children are at least 25, and they always agree! The death of one or both parents is always a tragedy; without a properly prepared estate plan it can also be a financial and social disaster for the surviving children. A properly prepared will for parents with children should always provide for the appointment of a guardian for any minor children in the event of the death of both parents. It should also establish one or more testamentary trusts for the benefit of the children in the event both parents die, and appoint a trustee to administer the trusts. The death of both parents is thankfully a very rare occurrence, but  if there were no provision for the care and maintenance of surviving children, it would compound the tragedy. In those unfortunate circumstances, relatives, if any, would have to turn to the courts for legal authority to administer the estate and care for the minor children, a costly and uncertain process. Furthermore, assets would presumably be turned over to children at 18, an age when many young people are still immature and not ready to handle large sums of money.

POWERS OF ATTORNEY

What is a power of attorney?

‍ A power of attorney (POA) is a document that allows you (the "principal") to appoint an agent ("attorney-in-fact"} to act on your behalf in personal, business and legal matters. 

Who needs a power of attorney ?

The short answer is: everybody. Powers of attorney are especially important for the elderly and the infirm, because if they become too sick or mentally incapacitated to conduct their own affairs, it is essential to have someone who is authorized to handle their personal or business needs. However, even young and healthy persons can experience illness or an accident which can temporarily or permanently render them incapable of handling their own affairs. If no person has been designated with power of attorney the only alternative may be to apply to the Superior Court to have a guardian appointed, a process which can be complicated, costly, time consuming and fraught with uncertainty.

What is the difference between a limited and a broad form power of attorney?

A limited power of attorney enables your agent to act on certain specific matters as specified in the document, such as the sale of a particular property. The powers of the agent are limited to those matters specified. A broad form or general power of attorney confers upon the agent broad powers to conduct a wide range of personal, business and legal matters as enumerated in the document. Frequently broad form powers of attorney authorize the agent to exercise or perform virtually any power or function that the person could do for him or herself.

What is a durable power of attorney?

One of the quirks in the law is that when a person becomes disabled or incapacitated any power of attorney executed by that person is automatically revoked. This is rather ironic since the main reason most people sign a power of attorney is to provide for an agent to be available in case they become incapacitated or disabled. Fortunately the law provides a solution to this problem with the so-called "durable" power of attorney. Under New Jersey law, if the power of attorney contains a provision stating that it shall remain in effect notwithstanding the subsequent incapacity or disability of the principal, the POA will remain in full force and effect and not be revoked. Accordingly, virtually all broad form powers of attorney prepared today contain a clause making them "durable."

How long does a power of attorney last?

. New Jersey law states that unless the instrument contains a time of termination, the power is exercisable notwithstanding the lapse of time since the execution of the document.   Broad form powers of attorney generally do not contain an expiration date. However, some states or banking institutions may not recognize powers of attorney past certain dates, such as a POA that is more than 10 years old. You should always check the requirements of a particular state, bank or investment company if you plan to rely upon a POA. Also, in real estate transactions involving a power of attorney, title companies generally require the POA to be recorded in the Registry of Deeds either before, or contemporaneously with, the deed or other instrument affecting title. In such cases, the POA must conform to the requirements of the recording agency.

Can a power of attorney be revoked?

A power of attorney, whether limited or general, durable or not, may be revoked at any time by the principal. Upon revocation, the agent no longer has power of attorney to act on behalf of the principal. It should also be noted that a POA is automatically void and of no effect upon the death of the principal, and the agent’s powers cease. At that point the executor or administrator of the principal's estate assumes legal responsibility for the management of the decedent’s personal and business affairs.

LIVING WILLS / HEALTHCARE PROXIES

What is a Living Will? 

‍ "Living Wills" - Advance Directives for Healthcare - are governed in New Jersey by statute and interpreting caselaw. Advance directives have become of increasing concern to the average person following a string of heavily publicized cases beginning with the Karen Ann Quinlan matter in 1976 in New Jersey and other cases continuing through the much publicized 2005 case of Terri Schiavo in Florida. Many of these heart-wrenching cases concerning terminally ill patients resulted from the lack of an advance directive or the lack of a "healthcare proxy" or medical decision power of attorney. While even a properly executed living will may not be able to cover every circumstance in an increasingly complex at medical world, it should provide valuable guidance to the healthcare proxy, family members, medical providers and, ultimately if necessary, to the courts in the event of a dilemma or dispute regarding medical care. First, an advance directive should contain at least general instructions as to the providing or withholding of medical treatment in the event of serious or terminal illness, especially if the person has been rendered unconscious or otherwise unable to make rational medical decisions. Second, the document should name a "proxy," or person having power of attorney to make medical decisions on behalf of the maker of the advance directive. In my experience, most hospitals and medical providers sincerely attempt to work with designated individuals and family members to reach a consensus as to end-of-life treatment options for the patient. The advance directive is now universally recognized as a valuable tool in attempting to facilitate that process.

HIPPA

The federal Health Insurance Portability and Accountability Act of 1996 ("HIPPA") contains stringent requirements for the security and confidentiality of patient's medical records. The act is strictly enforced and is binding upon all medical providers. Accordingly, it is essential to have a HIPPA release in the client's living will/advance healthcare directive and healthcare proxy, in order to ensure that those charged with making healthcare decisions are provided with the necessary medical information. All the living wills/advance directives/proxy directives prepared by my office contain an appropriate HIPPA release to the designated proxy. Also, all general durable powers of attorney I prepare contain a similar HIPPA release running to the designated attorney-in-fact (agent).

What do Wills, Powers of Attorney and Living Wills cost? 

The cost of wills and other documents varies according to individual circumstances, the time necessary for the attorney to spend, and the complexity of the situation. For many simple wills I am able to quote a flat price based upon my estimate of how much time and effort it will take. With more complex wills I will generally quote an hourly rate and may require a deposit or retainer prior to beginning work.. In the case of powers of attorney and living wills/advance directives, it is generally most economical and efficient to prepare these documents as a "package" at the same time as the will is prepared. Please feel free to discuss anticipated fees with me.