Wills

A Will is a legal document which allows you to determine who received your assets, and when, or in what manner the beneficiaries may receive their share. A Will also permits you to choose fiduciaries such as Executors (who will manage the estate), Trustees (who manage trusts under your Will) and, in the event there are minor children, who shall serve as their guardian. Without a Will, the State of New Jersey will determine who receives your assets based on State law (the laws of intestacy). In addition, without a Will the Surrogate's Court, based on the law, will appoint the guardian of your minor children and the Administrator of your estate.

Requirements

Any person who is at least 18 years old and of sound mind may make a Will. In order to be valid in New Jersey, a Will must be in writing, signed by the person making the Will (testator or testatrix) and the signing must be witnessed by at least two people over the age of 18. A handwritten Will, known as a holographic Will, may be valid if it can be proved that the signature and the important provisions are in the same handwriting and the handwriting is that of the testator or testatrix. This handwritten document, if accepted by the Superior Court as the decedent's Last Will, must be probated in Superior Court rather than Surrogate's Court. Accordingly, this is a very expensive document to probate and a typewritten, formally signed Will, is always preferable.

General Considerations

Self Help

Computer software programs and web sites now offer "do-it-yourself" Will kits. Many of these programs are not specific to individual states, or to any persons personal or family circumstances. Instead, these programs offer general Will language which may or may not create a valid Will in New Jersey. Even those programs which claim to customize the document to individual states may create an invalid Will if there is a mistake in the preparation or in the circumstances surrounding the signing of the document. While self-help programs and web sites can educate you, and thereby help you save professional fees, they are rarely a substitute for professional guidance.

Updates

It is important to review your Will about every three years, as well as any time there is a significant change in your circumstances, in order to insure that it continues to reflect your wishes and complies with current law. Even though the laws can automatically make some changes for you, it is really best to keep your documents current. For example, if you should divorce and not change a Will that leaves the assets to your ex-spouse, those assets will be distributed as if your ex-spouse predeceased you, under the laws of intestacy. This may, or may not, be what you want.

Care of Your Will

It is also important never to mark up, change or even unstaple a signed Will because this may compromise its validity. If you wish to change any provisions of your Will it should be done through a properly executed amendment ("Codicil"), if it is a simple change, or through a new Will, if there are significant changes. With the common use of computer programs, signing a new Will can often be as inexpensive as signing a Codicil, and it avoids any risks of inconsistencies between the various documents.

An original Will should be kept in a safe, fireproof place. A photocopy of the Will should also be kept among your important papers with instructions as to where the original has been stored. A safe deposit box is an appropriate place to keep a Will. A bank employee should be present as the box is opened. If the Will is contained in the box, it will be released to the named Executor. An alternative is to have the named Executor and the successors sign the signature card for the safe deposit box. Because a Will may not be located immediately after a death, it is best not to rely on a Will for burial instructions. This information can be contained in a private letter and/or Living Will. As explained above, a Will cannot be probated until ten (10) days after death.

The Need for a Will

Many people have the mistaken notion that if they die without a Will, their spouse will inherit their estate. Under New Jersey law, however, if there are surviving children of the marriage or parents of the decedent, the spouse is only entitled to the first $50,000, plus one-half of the balance of the intestate estate.

If there are children of the decedent's from a prior marriage, the surviving spouse is only entitled to one-half or the estate. All the children in both cases above, receive the balance in equal shares.

If there are special considerations for you or your family, such as a family member who receives government benefits (e.g. a special needs child) which may be compromised or eliminated if he or she receives an inheritance outright, provisions can be made in your Will to protect that family member's government benefits (such as SSI and Medicaid) while still allowing them to benefit under your Will.

Tax Planning

Why a Will is Important - Taxes and More!

Tax planning is another important area of concern that can be dealt with through the provisions of the Will. For example, if a married couple has combined assets including jointly owned assets in excess of $1 million (the amount currently sheltered from federal estate taxes -- see discussion above) and there is no Will, then most of the assets will pass to the surviving spouse without any tax burden upon the death of the first spouse to die because of a federal estate tax unlimited marital deduction. However, upon the death of the surviving spouse all property in excess of $1 million (or whatever the exclusion amount is in the year of death) will be subject to federal estate taxes. A properly drafted pair of spousal Wills, together with asset restructuring, can allow the couple to pass $2 million in assets estate tax-free to their designated beneficiaries. Since the federal estate tax rate begins at 37% and reaches as high as 50% (scheduled to decrease to 45% in 2009, be eliminated in 2010 and reinstated in 2011), these savings can be significant. Given the uncertainty over the future state of the estate tax system, planning remains essential, and flexibility a key objective (so both you and your heirs will be prepared for a range of possible future tax situations).

Who Should Pay the Taxes

A Will can also allow the testator or testatrix to decide whether any taxes owing should be paid from the assets of the estate before distribution to the beneficiaries or whether the tax should be paid proportionally from each beneficiary's share. This is particularly important for those individuals who are leaving property to brothers and sisters and/or nieces and nephews.

Tangible Personal Property

A Will may make separate provisions for tangible personal property. Tangible personal property is comprised of assets like jewelry, furniture and art. Cash, currency stocks and bonds are not considered tangible personal property. Pursuant to New Jersey law, the Will may state that you will leave a list of instructions as to how tangible personal property that is not required to be registered should be distributed. Registered tangible personal property such as automobiles, cannot be disposed of on such a list. This list, which should be kept with your Will, may be changed as often as you like without an attorney or witnesses. To avoid confusion, discuss with an attorney how the list should be handled to assure that the most current list is the one used, assets which you sell or give away before death on the list don't become problems for your heirs, and other issues which may arise.

Assets Passing Under a Will

Any property passing under a Will is called a probate asset. Not all assets are controlled by a Will. Property held in joint name with the right of survivorship, as well as bank accounts held in joint names, will automatically pass to the surviving joint name. In addition, property held by married couples as tenants by the entirely will automatically pass to the surviving spouse. Life insurance policies, IRA's, annuities and 401(k)s are examples of assets that designate beneficiaries through a contract and are, therefore, not controlled by a Will. Many brokerage firms have created forms to designate a beneficiary for a regular brokerage account. Only assets held in your sole name or jointly with another as a "tenant in common" and which do not pass under a contract will pass under the terms of your last Will. This fact must be addressed in planning to assure that your wishes are carried out even though your will may only control the distribution of some of your property.

Settling The Estate

The process of settling an estate in New Jersey is similar whether a person dies with or without a Will. A personal representative must go to the Surrogate's Court of the county in which the decedent resided to take charge of the estate. If there is a Will, the Executor named in the Will is the personal representative. If there is no Will, the personal representative, usually a family member, is called an Administrator. Under New Jersey law, if there is a surviving spouse then he or she is the first person in line to serve as Administrator, followed by children, grandchildren, parents and siblings. This may lead to family quarrels, as more than one person may have equal right to serve as Administrator. For example, all children of a decedent have an equal right to serve in the capacity and renunciations must be obtained from all those who will not be serving. This is yet another reason why it is always advisable to take the time to have a properly and professional prepared Will.

The Surrogate must qualify the Administrator. While a Will may provide that no "surety bond" be required for the Executor, an Administrator may be required to purchase a surety bond. A surety bond is a financial arrangement in which the Executor or Administrator pays a fee to a company specializing in these arrangements which company then insures the heirs against certain wrongful acts of the Executor or Administrator. It is yet another way the Surrogate and State law endeavor to protect heirs. The cost of the bond premium, which can be hundreds of dollars, is determined by the size of the estate. The bond premium often costs more than the cost of having a Will prepared. The bond must remain in effect until the estate is settled. Providing that no bond is necessary ("waiving" the bond requirement) for an Executor may be a major advantage to having a Will.

There are many good reasons to have a Will, including tax planning, sparing your personal representative the cost of a bond premium, and planning for a family member who is entitled to government benefits. The best reason for having a Will is the peace of mind that comes with the knowledge that you have provided for your loved ones and that your planning will make the distribution of your estate a smoother, easier process for them.