Set up Trusts Within Wills to Protect Assets of Children Under Age 30
Example The principal held in each child's share shall be distributed to him or her upon his or her attaining the age of thirty (30) years.
In the event either of my children have not attained the age of thirty (30) years, if he or she has attained or upon his or her attaining the age of twenty two (22) years, my Trustee shall distribute one-third (1/3) of the principal held in such child's share to him or her.
If either child has attained or upon attaining the age of twenty five (25) years, an additional one-half (1/2) of the balance of the principal held in such child's share shall be distributed to him or her. Upon attaining the age of thirty (30) years, the balance of the principal held in such child's share shall be distributed to him or her. More info at http://www.njlaws.com/wills_children_and_guardians.htm
There may come a time when a parent is unable, due to physical or mental incapacity, to take care of their minor children. In these circumstances, those caring for the children as well as the courts will need direction. By writing and executing a Will which includes instructions on guardianship one may select someone, either individually or jointly, with the legal authority to act for minor children and assume control over the assets of the children. Estate planning, which includes the execution of a Will, is just as important for young families with minor children as they are for senior citizens.
Guardians
Most individuals appoint their spouse to act as Guardian of the person and property of their minor children. It is suggested that your Will include a clause which provides that in the event your spouse predeceases you, or is unsuitable or ceases to act as Guardian of the person and property of your minor children, you appoint a trusted family member or close friend to act as successor Guardian of the person and property of your minor children.
Trustee
Select a trusted person, a close relative or friends, who will invest and hold your children's money. In your Will you can instruct the Trustee to apply amounts of income and principal as they, in their sole discretion, deem proper for the health, maintenance, education, welfare, or support of your children or other minors. Direct that the trustee shall accumulate any income not needed for the above purposes, paying and transferring the portion held in trust to the beneficiary upon his or her attaining the age of majority or whichever age you select.
As average Americans, we work 80,000 hours in a lifetime, or 45 to 55 years. In spite of all our resources and the assets we earn during our lifetime, the vast majority of Americans do not take the time to create the legal instructions to guide the court or a guardian. National statistics indicate that more than 50% of Americans die without leaving a will. In the absence of a will or other legal arrangement to distribute property at death, the State must step in to administer the estate and decide who gets custody of your children and handle their money. This process is called the law of intestacy. The result can be lengthy delays in the distribution of your estate, court battles between relatives and your children being raised by someone you do not favor. Without a Will, your family will have to pay substantial costs for accountants, attorneys, bonding companies and probate fees.
Children born after you sign the Will
Many people direct that the provisions of their Will also applies to afterborn children. Accordingly, if you have any additional children subsequent to the execution of this Will, then wherever you have designated only your named children, you intend that all of your children shall share equally in the relevant provisions of your Will.
In addition to having a formal Last Will and Testament individuals are encouraged to have a Power of Attorney and also Living Will. Moreover, we also recommend they plan ahead and write messages to their family and anticipated executor detailing their specific desires regarding funeral and burial. Written instructions to your family and executor containing information and guidance will minimize uncertainty, confusion, and possible oversights following your death.
In the absence of a Will or other legal arrangement to distribute property at death, problems arise. The result can be lengthy delays before the rightful heirs receive their property.
IF YOU HAVE NO WILL:
If you leave no Will or your Will is declared invalid because it was improperly prepared or is not admissible to probate:
* State law determines who gets assets, not you
* Additional expenses will be incurred and extra work will be required to qualify an administrator
* Judge determines who gets custody of your children
* Possible additional State inheritance taxes and Federal estate taxes cannot be reduced
* If you have no spouse or close relatives the State may take your property
* The procedure to distribute assets becomes more complicated-and the law makes no exceptions for persons in unusual need or for your own wishes.
* It usually cause fights and sometimes lawsuits within your family
When loved ones are grieving and dealing with death, they shouldn’t be overwhelmed with Financial concerns. Careful estate planning helps take care of that. Don’t try to do Estate Planning with a cheap form found online.
THE FOLLOWING IS A SAMPLE OF A VARIETY OF CLAUSES AND ITEMS WHICH YOUR ATTORNEY MAY INCLUDE IN A WILL:
1ST: DEBTS AND TAXES
2ND: SPECIFIC BEQUESTS
3RD: DISPOSITION TO SPOUSE
4TH: DISPOSITION OF REMAINDER OF ESTATE
5TH: CREATION OF TRUSTS FOR SPOUSE
6TH: CREATION OF TRUST FOR CHILDREN
7TH: OTHER BENEFICIARIES UNDER 21
8TH: EXECUTORS
9TH: TRUSTEES
10TH: GUARDIANS
11TH: SURETY OR BOND
12TH: POWERS
13TH: AFTERBORN CHILDREN
14TH: PRINCIPAL AND INCOME
15TH: NO ASSIGNMENT OF BEQUESTS
16TH: GENDER
17TH: CONSTRUCTION OF WILL
18TH: NO CONTEST CLAUSE
A Will must not only be prepared within the legal requirements of the New Jersey Statutes but should also be prepared so it leaves no questions regarding your intentions.
WHY PERIODIC REVIEW IS ESSENTIAL
Even if you have an existing Will, there are many events that occur which may necessitate changes in your Will. Some of these are:
* Marriage, death, birth, divorce or separation affecting either you or anyone named in your Will
*Significant changes in the value of your total assets or in any particular assets, which you own
* A change in your domicile
* Death or incapacity of a beneficiary, or death, incapacity or change in residence of a named executor, trustee or guardian of infants, or of one of the witnesses to the execution of the Will
*Annual changes in tax laws
MAY I CHANGE MY WILL?
Yes. A Will may be modified, added to, or entirely changed at any time before your death provided you are mentally and physically competent and desire to change your Will. You should consider revising your Will whenever there are changes in the size of your estate. For example, when your children are young, you may think it best to have a trust for them so they do not come into absolute ownership of property until they are mature. Beware, if you draw lines through items, erase or write over, or add notations to the original Will, it can be destroyed as a legal document. Either a new Will should be legally prepared or a Codicil signed to legally change portions of the Will.
Save money with proper planning
Your estate will be subject to probate whether or not you have a Will and in most cases, a Will reduces the cost by eliminating the requirements of a bond. With a well-drawn Will, you may also reduce death taxes and other expenses. Don’t pinch pennies now to the detriment of your beneficiaries.
The proper preparation of a Will should involve an analysis of the client’s assets, family and his/her desires.
Estate Planning is the process of examining what will happen to your property when you die and arranging for its distribution in such a manner as will accomplish your objectives.
The cost of a Will depends on the size and the complexity of the estate and the plans of the person who makes the Will. A properly drawn Simple Will without Trust costs approximately $200.00 to $600.00. It is one of the most important documents you will ever sign, and may be one of the best bargains you will ever have.
Be sure your Will takes into account the Federal Tax changes and New Jersey Inheritance Tax changes. Also, ascertain if your Will is “self-proving”, which would dispense with having to find the Will’s witnesses after death.
WHAT IS A WILL?
“A Will is a Legal written document which, after your death, directs how your individually owned property will be distributed, who will be in charge of your property until it is distributed and who will take care of your minor children if the other parent should die ". You should remember that the term “property” under the law includes "real estate as well as other possessions and rights to receive money or items of value.” Everyone who has at least $3,000 in assets should have a Will. You do not have to be wealthy, married, or near death to do some serious thinking about your Will.
Reducing the NJ Estate Tax on estates over $675,000.
A New Jersey estate tax return must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000.
Even if there is no NJ Inheritance Tax there can be a NJ Estate Tax if the estate exceeds $675,000 and the beneficiaries are children or grand children. There is a substantial tax that must be paid after the 2nd spouse dies on amounts over $675,000.
You can hire an attorney to set up Trusts or a Will with a Credit Shelter Trust to try to reduce NJ Estate taxes due. We charge a minimum fee of $400 for each Trust within a Will. A separate stand alone Trust has a minimum fee for $2,500.
Even if your net worth is well below the Federal threshold where the federal estate tax becomes an issue, the New Jersey Estate Tax may still be a problem. The New Jersey Estate Tax affects any person or married couple with net worth over $675,000. There is no exemption for assets you leave to your children; those assets are fully taxed, even if in joint names. There is also no exemption for the value of your home and life insurance, so it is easy to hit the $675,000 threshold very quickly.
If you have assets such as bank accounts in joint names, or bank accounts payable upon death, these go directly to the beneficiary. Your Will cannot change who the beneficiary is on a joint account, payable upon death accounts, or other assets such as Life Insurance policies. You would have to directly contact the bank or company where the assets are held and either direct that they change the beneficiary or not list any beneficiary at all other than your Estate. Therefore, if you have $1,200,000 in assets, you can change the beneficiary so the husband owns $600,000 and the wife owns the other $600,000.
WHAT IS CREDIT SHELTER TRUST and how can the attorney help Reduce NJ Estate Taxes and protect the surviving spouse and children?
"The Credit Shelter Trust (sometimes referred to as a “Bypass Trust” or an “A/B Trust”) is a popular estate planning technique used by married couples with combined assets in excess of $675,000. The purpose of the Credit Shelter Trust is 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, 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.
In a typical Credit Shelter 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 a trust department of a bank.
The amount, which funds a typical Credit Shelter Trust, varies according to a particular Client’s financial and family circumstances. For Federal Estate Tax purposes, a Credit Shelter Trust can be funded with the Decedent’s remaining federal estate tax exemption ($5.4 million as of 2015 if no prior gifts have been made). However, in New Jersey, since the state estate tax exemption is only $675,000, if the Credit Shelter Trust is funded with more than $675,000, this will cause some New Jersey Estate Tax to be paid. For example, if the $2 million is funded, the tax to the State of New Jersey is $99,600. Because of this, many Clients choose to fund the Credit Shelter Trust with only $675,000.
If the Credit Shelter 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 Credit Shelter Trust. We work with a tax attorney to help our clients." Source: http://www.davidkwhitlock.com/CM/FAQ/What-Is-Credit-Shelter-Trust.asp:
Examples of NJ Estate Tax due if no estate planning
Estate of $800,000 and no spouse
Your Estimated NJ Estate Tax: $22,799.60
If Estate Value: $900,000.00
Your Estimated NJ Estate Tax: $27,600.00
If Estate Value: $1,000,000.00
Your Estimated NJ Estate Tax: $33,200.00
If Estate Value: $1,100,000.00
Your Estimated NJ Estate Tax: $38,800.00
If Estate Value: $1,200,000.00
Your Estimated NJ Estate Tax: $45,200.00
If Estate Value: $1,300,000.00
Your Estimated NJ Estate Tax: $51,600.00
ADMINISTRATION OF AN ESTATE
If you are named the executor, you must visit the County Surrogate to probate the Will. You will need the following items:
1. The Death Certificate
2. The Original Will
3. Names and Addresses of decedent's, next of kin and list of beneficiaries
4. Minimum of $130.00 for Surrogate fees
A NJ state inheritance tax return must be filed if real estate is left and the tax may be required on the transfer of real or personal property within eight months after death. Copyright 2016 Vercammen Law
Call our office to schedule a "confidential" appointment 732-572-0500
Kenneth Vercammen & Associates.
2053 Woodbridge Avenue
Edison, NJ 08817
www.centraljerseyelderlaw.com
Kenneth A. Vercammen is a Middlesex County, NJ trial attorney who has published 125 articles in national and New Jersey publications on Probate and litigation topics. He often lectures to trial lawyers of the American Bar Association, New Jersey State Bar Association and Middlesex County Bar Association. He is Chair of the American Bar Association Estate Planning & Probate Committee.
He is a highly regarded lecturer on litigation issues for the American Bar Association, ICLE, New Jersey State Bar Association and Middlesex County Bar Association. His articles have been published by New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer. He is the Editor in Chief of the New Jersey Municipal Court Law Review. Mr. Vercammen is a recipient of the NJSBA- YLD Service to the Bar Award.
In his private practice, he has devoted a substantial portion of his professional time to the preparation and trial of litigated matters. He has appeared in Courts throughout New Jersey several times each week on contested Probate hearings, many personal injury matters, and Municipal Court trials.
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