Sayreville Wills & Power of Attorney Seminar

 Sayreville Wills & Power of Attorney Seminar 

Sayreville Public Library via zoom

 September 23, 2021 at 6pm

Open to the public. You do not need to be a resident.

SPEAKER: Kenneth Vercammen, Esq. Edison, (Author- ABA’s “Wills and Estate Administration book”)

Here is the virtual link for the program

To register go to:

http://engagedpatrons.org/EventsExtended.cfm?SiteID=1717&EventID=438393

 

New Main Topics:

1.   Handling Probate during Covid and while Government offices closed

2.   Dangers If You Have No Will or documents invalid

3.   Getting your Estate Planning Documents done when you can’t go into a law office

4.   What goes into a Will

1. Power of Attorneys recommendations
2. Living Will & Advance Directive for Medical Care
3. Administering the Estate/Probate /Surrogate
4. NJ Estate Tax eliminated and Inheritance Tax reduced
5. Avoiding unnecessary expenses and saving your family money

       

WILLS & ESTATE ADMINISTRATION-PROTECT YOUR FAMILY AND MAKE PLANNING

This event is free & open to the public.

Registration at sayrevillelibrary.org

or 732.727.0212 is suggested. Sayreville Public Library  

Sayreville Library "Aziza Haque (Sayreville)" <ahaque@lmxac.org>

1050 Washington Road

Parlin NJ 08859

(732) 553-0776

Can’t attend?  We can email you materials. Send email to VercammenLaw@Njlaws.com

https://www.facebook.com/events/989877978467004

     Free Will Seminars and Speakers Bureau for Groups

SPEAKERS BUREAU

         At the request of senior citizen groups, unions, and Middlesex County companies and organizations, the " Speakers Bureau " is a service designed to educate citizens about how laws affect their lives and how the judicial system operates.  We have attorneys available to speak to businesspersons, educational, civic and social organizations on a wide range of topics during business hours.  If your organization in Central NJ would like to schedule a Will & Estates seminar, call Kenneth Vercammen’s Law Office at 732-572-0500 or email Vercammenlaw@njlaws.com

 

     10 years ago the AARP Network Attorneys of the Edison/Metuchen/Woodbridge area several years ago established a community Speakers Bureau to provide educational programs to AARP and senior clubs, Unions and Middlesex County companies. Now, Ken Vercammen, Esq. and volunteer attorneys of the Middlesex County Estate Planning Council have provided Legal Rights Seminars to hundreds of seniors, business owners and their employees, unions, clubs and non-profit groups 

Details on free programs available

    These quality daytime educational programs will educate and even entertain. Clubs and companies are invited to schedule a free seminar. The following Seminars are now available: 

1. WILLS & ESTATE ADMINISTRATION-PROTECT YOUR FAMILY AND 

MAKE PLANNING EASY 

2. POWER OF ATTORNEY to permit family to pay your bills if you are temporarily disabled and permit doctors to talk with family 

       All instructors are licensed attorneys who have been in practice at least 25 years. All instructors are members of the American Bar Association, New Jersey 

State Bar Association, and Middlesex County Bar Association. All programs include free written materials. 

    You don't have to be wealthy or near death to do some thinking about a Will. Here is your opportunity to listen to an experienced attorney who will discuss how to distribute your property as you wish and avoid many rigid provisions of state law. 

   Topics discussed include: Who needs a Will?; What if you die without a Will (intestacy)?; Mechanics of a Will; "Living Will"; Powers of Attorney; Selecting an executor, trustee, and guardian; Proper Will execution; Inheritance Taxes, Estate Taxes $14,000 annual gift tax exclusion,  Bequests to charity, Why you need a "Self-Proving" Will and Estate Administration/ Probate.

 

       Sample materials: Hand-outs on Wills, Living Wills/Medical Advance Directive, Power of Attorney, Probate and Administration of an Estate, Real Estate, Working with your Attorney, Consumers Guide to New Jersey Laws, and Senior Citizen Rights. 

 

SPEAKERS BUREAU 

     At the request of senior citizen groups, unions, and Middlesex County companies and organizations, the " Speakers Bureau " is a service designed to educate citizens about how laws affect their lives and how the judicial system operates. We have attorneys available to speak to businesspersons, educational, civic and social organizations on a wide range of topics during business hours.

     In today's complex world, few people can function successfully and safely without competent legal advice. In order to insure your estate plans are legally set up, you need to know exactly where you stand so that you can avoid possibly catastrophic mistakes impacting both you and your family. 

 

       About the speaker: Kenneth A. Vercammen is a trial attorney in Edison, NJ. We is the author of the American Bar Association’s book “Wills and Estate Administration”

He is co-chair of the ABA Probate & Estate Planning Law Committee of the American Bar Association Solo Small Firm Division.  He is a speaker for the NJ State Bar Association at the annual Nuts & Bolts of Elder Law & Estate Administration program. 

He was Editor of the ABA Estate Planning Probate Committee Newsletter. Mr. Vercammen has published over 150 legal articles in national and New Jersey publications on litigation, elder law, probate and trial topics. He is a highly regarded lecturer on litigation and probate law for the American Bar Association, NJ ICLE, New Jersey State Bar Association and Middlesex County Bar Association. His articles have been published in noted publications included New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer. He established the NJlaws website www.njlaws.com which includes many articles on Estate Planning, Probate and Wills. He is a member of the AARP and often lectures to groups on the importance of an up to date Will, Power of Attorney and Living Will.

 KENNETH  VERCAMMEN & ASSOCIATES, PC

ATTORNEY AT LAW

2053 Woodbridge Ave.

Edison, NJ 08817

(Phone) 732-572-0500

 (Fax)    732-572-0030

www.njlaws.com 

Full net value of injury taxed under estate tax here MICHAEL J. MORLEY , III, : EXECUTOR OF ESTATE OF : LINDA A. CERRITELLI, : Plaintiff, : v. : DIRECTOR, DIVISION OF TAXATION

Full net value of injury taxed under estate tax here  MICHAEL J. MORLEY , III, : EXECUTOR OF ESTATE OF : LINDA A. CERRITELLI, :

Plaintiff, :

v. : DIRECTOR, DIVISION OF TAXATION, :

Defendant. : _______________________________________ :

Decided: June 7, 2021

TAX COURT OF NEW JERSEY DOCKET NO. 007443-2020

SUNDAR, P.J.T.C.
This opinion decides the parties’ respective summary judgment motions as to the amount

includible in the above captioned estate for purposes of the New Jersey Estate Tax laws regarding plaintiff’s survival claim action litigation. Under New Jersey law, a decedent’s wrongful death provides two separate causes of action: one on behalf of the beneficiaries (a wrongful death claim action) under N.J.S.A. 2A:31-1 to -6, and one on behalf of the estate (a survival claim action) under N.J.S.A. 2A:15-3. The parties agree that the wrongful death claim action is not includible in the decedent’s gross estate, whereas the survival claim action is an asset of the decedent and includible in the estate. Therefore, the former is not subject to the New Jersey estate tax, but the latter is so subject.

*

Approved for Publication In the New Jersey Tax Court Reports

New Jersey’s precedent has consistently held that under the New Jersey Estate Tax statute, N.J.S.A. 54:38-1 to -16, the amount includible in, and taxed to, a decedent’s estate is the “value” of an asset as of the decedent’s date of death. This standard is the same under the New Jersey Transfer Inheritance Tax statute, N.J.S.A. 54:34-1 to 37-8 which unlike the estate tax, imposes the tax on the beneficiaries. Per plaintiff, therefore, the amount includible for estate tax purposes is the date of death value of the decedent’s interest in her survival claim action, which, as opined by a third-party appraiser, is $2,690,600. Per defendant, the amount includible is $6,709,231.08, the net proceeds received by the decedent’s estate from settlement of the survival claim action, because the plain language of N.J.A.C. 18:26-5.3(a), a Transfer Inheritance Tax regulation, requires that “any sum recovered under the New Jersey Death Act representing damages sustained by a decedent between the date of injury and date of decedent’s death” must be “included in the decedent’s estate.”

The court finds that the Estate Tax and Transfer Inheritance Tax statutes can and should be read in pari materia because both laws address the same subject: the corpus or the taxable estate of a decedent, and because assets includible in the estate for estate tax purposes are those which are transferred to a beneficiary for inheritance tax purposes. The Legislature has, under the Transfer Inheritance Tax statute, determined that the taxable date-of-death value of a survival claim action is the amount actually recovered for such claim. Consequently, the amounts includible in the decedent’s gross estate is the amount recovered by the estate (here, through settlement) for the survival claim action pursuant to N.J.A.C. 18:26-5.3. Therefore, the court grants defendant’s cross-motion for summary judgment and denies plaintiff’s motion for summary judgment.

2

FACTS AND PROCEDURAL HISTORY

Decedent, a New Jersey resident, died testate on March 4, 2014 from a natural gas explosion which occurred when a utility company struck a gas line while performing underground electrical work in front of her home.

Sometime in 2015, plaintiff filed a wrongful death claim action and a survival claim action lawsuit in the New Jersey Superior Court, as executor of decedent’s estate. See N.J.S.A. 2A:31- 4; 2A:15-3. These are two separate causes of action arising from the same triggering event, the death of the decedent, however the beneficiaries of the wrongful death claim action are the decedent’s survivors whereas the beneficiaries of the survival claim action are the estate and creditors of the decedent. See Soden v. Trenton & Mercer County Traction Corp., 101 N.J.L. 393, 398 (E & A 1925) (in a wrongful death action, the “recovery goes, not to the estate of the deceased person, but to certain designated persons or next of kin” and the recovery amount “is not liable to the debts of the deceased, nor is it subject to disposition by will”); Alfone v. Sarno, 87 N.J. 99, 107-08 (1981) (“[u]nlike an action for wrongful death, the survival action inheres in the estate and is therefore subject to devise and the claims of creditors”); Smith v. Whitaker, 160 N.J. 221, 231 (1999).1

1 In 1848, our Legislature enacted “the Wrongful Death Act, now codified as N.J.S.A. 2A:31-1 to -6” and in 1855 enacted “the Survivor’s Act, now codified as N.J.S.A. 2A:15-3.” Smith, 160 N.J. at 231 (citations omitted). While “both types of actions arise from” the death of the plaintiff “they serve different purposes and are designed to provide a remedy to different parties.” Ibid. The Wrongful Death Act is to “compensate survivors for the pecuniary losses they suffer” due to another’s “tortious conduct.” Ibid. The Survivor’s Act permits “a decedent’s representatives the right to bring an action for trespass to person or property in the same manner as if the decedent had been living.” Id. at 233 (citations omitted). See also Alfone, 89 N.J. at 108, n.4 (“The survival action . . . seeks to compensate the estate for the pain and suffering of the deceased and the loss of earnings by him prior to his death” and permits claim “for “funeral and burial expenses,” while “[h]ospital, medical and funeral expenses may alternatively be sought in a death action” under N.J.S.A. 2A:31-5).

     

3

The lawsuit eventually settled on November 30, 2017 for $20,000,000. The Superior Court entered an Order Directing Disbursement of Funds whereby the settlement proceeds be first offset by counsel fees and expenses, and the balance $13,418,462.15 be distributed 50% towards the wrongful death claim action ($6,709,231.08 payable to Michael Morley) and 50% towards the survival claim action ($6,709,231.08 payable 50% to Michael Morley and 25% each to his two sons in a settlement trust, but after deduction for all estate taxes and expenses). The estate received $6,709,231.08 on December 5, 2017.

In August 2015, the estate filed a New Jersey estate tax return which did not reference the value of the survival claim action.2 After the settlement proceeds were received, plaintiff filed an amended estate tax return on January 25, 2018 to include receipt of the survival claim action proceeds in the decedent’s gross estate. Plaintiff also paid the consequent estate tax of $720,933.

On August 7, 2019, plaintiff filed a second amended estate tax return to change the includible amount of the survival claim action to $2,690,600 as being its “value” as of the decedent’s date of death. The valuation was based on the conclusion of a third-party appraiser, Management Planning, Inc., which produced a report in this regard. The report outlined the methodology, assumptions, and data used to support the appraiser’s value conclusion. Based on this valuation, plaintiff requested an estate tax refund of $484,504.

By letter of September 6, 2019, defendant (Taxation) denied the refund claim. It rejected the proffered valuation report because it determined that “tax is on the sum actually received.” The valuation report “reflect[ed] a potential reward” which, per Taxation, “does not apply.”

Plaintiff timely protested this denial to Taxation’s Conference and Appeals branch contending that under N.J.A.C. 18:26-8.8 (titled “Valuation”), “the operative valuation date” for

2 Counsel for plaintiff in this matter was not involved in the preparation and filing of this return. 4

New Jersey’s estate tax was the decedent’s date of death, therefore, valuation of any estate asset must only be as of this date. This was, plaintiff contended, in conformance with the federal estate tax law (citing Treas. Reg. §20.2031-1(b) which provides that the value of property includible in the estate is its fair market value at the time of decedent’s death).

By final determination letter dated February 28, 2020, Taxation upheld its refund denial relying upon N.J.A.C. 18:26-5.3(a). It noted that “a survival action claim is includible but, any sum recovered under the New Jersey Death Act as compensation for wrongful death of a decedent is not includible in the decedent’s estate.” Such inclusion, it further noted, is in conformance with the federal estate tax law that “wrongful death proceeds are not includible in the decedent’s gross estate . . . because the wrongful death action cannot exist until the decedent has died,” however, “to the extent that any recoverable damages are for the pain and suffering of the decedent, the value thereof is includible in the gross estate.” (citing Rev. Rul. 75-127, 1975-1 C.B. 297). Taxation concluded “to the extent that any recoverable damages are for the pain and suffering of the decedent, the value thereof is includible in the gross estate.”
ANALYSIS
(1) Appropriateness of Summary Judgment

Summary judgment will be granted “if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.” R. 4:46-2(c); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). Here, the parties agree that the survival claim action is an asset of the estate and must be included in the gross estate for New Jersey’s estate tax purposes. The sole issue is the amount

 

5

to be included, the resolution of which entails pure statutory interpretation. Therefore, summary judgment is an appropriate method to dispose the matter.
(2) Assets Includible in Gross Estate for New Jersey Estate Tax Purposes

In Rev. Rul. 75-127, 1975-1 C.B. 297, the Internal Revenue Service (IRS) explained whether and what is includible in an estate vis-à-vis a wrongful death action as follows:

At common law, no recovery was available for damages resulting from a wrongful act after the death of the injured party. Any cause of action for personal injury abated at the death of the injured party. To abrogate this rule, the various states have enacted what are commonly called “wrongful death acts.” Generally, these acts take one of two forms: “death acts” or “survival acts.” “Death acts” include the type discussed in Rev. Rul. 54-19, 1954-1 C.B. 179, (involving New Jersey law) where the statute creates a new cause of action, after the death of the injured party, for the benefit of certain beneficiaries. Under a “survival act,” the cause of action for personal injury resulting in death survives the victim’s death and passes to his personal representative to be pursued as an asset of the probate estate.

The IRS concluded that it

will no longer take the position under . . . the law of any State having a wrongful death statute . . . that the value of wrongful death proceeds is includible in the decedent’s gross estate. However, where it can be established that such proceeds represent damages to which the decedent had become entitled during his lifetime (such as for pain and suffering and medical expenses) rather than damages for his premature death, the value of these amounts will be includible in the decedent’s gross estate.

[Ibid.]
The cross-referenced revenue ruling addressing New Jersey law stated that the “[a]mounts

receivable in settlement of claims under the New Jersey ‘Death by Wrongful Act’ statute . . . are not includible in the decedent’s gross estate for Federal estate tax purposes” because the statute created the cause of action and determined “distribution of the proceeds of the recovery.” Rev. Rul. 54-19, 1954-1 C.B. 179 (emphasis added). This means that “the decedent had no right of

 

6

action or interest in the proceeds at the time of his death,” therefore, “nothing ‘passed’ from the decedent to the beneficiaries.” Ibid. Cf. Alfone, 87 N.J. at 108 (“The survival action merely perpetuat[es] the right of action which the deceased himself would have had, to redress his own injuries, but for his death.”) (citation and internal quotation marks omitted).

Here, the parties agree that the wrongful death claim action is not includible in the decedent’s gross estate. They also agree that the survival claim action is an asset of the estate and is includible in the decedent’ gross estate for New Jersey estate tax purposes.
(3) Amounts Includible for New Jersey Estate Tax Purposes

The Estate Tax statute, N.J.S.A. 54:38-1 to 38-16, imposes an “estate or transfer tax” upon the “transfer of” the estate of any New Jersey resident which would have been subject to the federal estate tax in effect on December 31, 2001. N.J.S.A. 54:38-1(a)(2)(i). This means that if the estate was subject to federal estate tax as of December 31, 2001, then it would be taxed by New Jersey also. The tax is imposed upon and paid by the estate of the decedent. See N.J.S.A. 54:38-11 (estate tax “shall be paid out of the same funds as those from which federal estate taxes are payable”). The tax is “due at the date of death of the decedent.” N.J.S.A. 54:38-5.3

There are no specific provisions in the estate tax statute explicating the computation or methodology as to the amount of the assets includible in an estate. Nor is there any specific statutory provision addressing a survival claim action. Plaintiff is correct that precedent requires inclusion of an asset’s fair market value as of the date of death in a decedent’s gross estate. See Estate of Warshaw v. Dir., Div. of Taxation, 27 N.J. Tax 287, 292 (App. Div. 2013) (value of gross estate is the value of “all property in the estate at the time of death,” and such value is determined under a willing buyer-willing seller test) (citing Internal Revenue Code (I.R.C.) §2036; Treas. Reg.

3 There is no New Jersey estate tax for estates of decedents dying on or after January 1, 2018. 7

  

§20.2031-1(b)4). In Estate of Warshaw, the court agreed with Taxation that the reported value of the asset (an Individual Retirement Account or IRA) at the time of the decedent’s death cannot be changed even if it was later found to be worthless being part of Madoff’s Ponzi scheme because “events subsequent to death are not considered in fixing fair market value of a decedent’s gross estate.” 27 N.J. Tax at 292 (citation omitted). Rather, “[b]ecause property is valued as of the date of death, the only relevant facts are those that this hypothetical buyer and seller could reasonably have been expected to know at that time.” Ibid. (citation omitted).

In contrast, the State’s Transfer Inheritance Tax statutes, N.J.S.A. 54:34-1 to 37-8, address these issues. See N.J.S.A. 54:34-1(a) (tax is imposed upon the “transfer of property, real or personal, of the value of $500.00 or over, or of any interest therein or income therefrom, in trust or otherwise, to or for the use of any transferee, distributee or beneficiary”); N.J.S.A. 54:34-5 (transfer inheritance tax “shall be computed upon the clear market value of the property transferred”). This tax is in addition to the estate tax but is imposed upon certain classes of beneficiaries or transferees of the decedent. See N.J.S.A. 54:38-1(a); N.J.A.C. 18:26-3.1(a).5

As to damages received from wrongful death actions, the Transfer Inheritance Tax statute provides that the tax is normally “due and payable at the death” of the decedent, “but with respect to any sum recovered as compensation for death of a person caused by a wrongful act, neglect or

4 I.R.C. §2031(a) provides that “[t]he value of the gross estate of the decedent shall be determined by including. . . the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.” Treas. Reg. §20.2031-1(b) provides that “every item of property includible in a decedent’s gross estate” is valued at “its fair market value at the time of the decedent’s death” unless the estate selects an alternate valuation. The fair market value is “theprice at which

5 Thus, the same event (death) can trigger two separate taxes: an estate tax imposed on the estate and a transfer inheritance tax imposed upon the transferees or beneficiaries (with a credit for inheritance tax paid, see N.J.S.A. 54:38-1(c)).

 

the property would change hands between a willing buyer and a willing seller,

neither being under any compulsion to buy or to sell and both having reasonable knowledge of

relevant facts.” Ibid.

8

default, whether by award of damages or settlement of compromise, taxes thereon shall be due and payable on the date of said award or settlement.” See N.J.S.A. 54:35-1 (titled “Date when tax due”). This exception was included by L. 1978, c. 172, which was titled as an Act “providing for the date on which certain property is includible in the estate of a decedent for transfer inheritance tax purposes, and amending sections 54:35-1, 54:35-3 and 54:35-4 of the Revised Statutes.”6 The Sponsor’s Statement to Senate No. 348 notes that “[t]his bill redefines the date on which certain property is includible as a decedents estate for transfer inheritance tax purposes.” See also Sen. Rev., Fin. and Approp. Comm. Statement to Senate, No. 348 (Jan 26, 1978) (law amended “with respect to sums recovered under the Death By Wrongful Act Statute” so that “taxes shall become due and payable on the date of the award of damages or settlement of compromise, rather than the date of death of the decedent”).

This same law also enacted N.J.S.A. 54:35-4.1, which provides that as to “any sum recovered as compensation for death of a person caused by a wrongful act, neglect or default, interest shall accrue at the rates and in the manner provided . . . if the [transfer inheritance] tax is not paid within 30 days of the receipt of an award or settlement therefor.” The law was to “remove an inequity” which was that “persons entitled to the amount recovered under the” wrongful death statute had “not only to pay inheritance tax but also pay interest on the tax on a decedent’s estate when that estate was settled after the” time to file an inheritance tax return post-death had expired. Sen. Rev., Fin. and Approp. Comm. Statement to Senate, No. 348.

Taxation promulgated an inheritance tax regulation on inclusion in the decedent’s estate, sums “recovered under the New Jersey Death Act” as follows:

6 The enacted law deleted the proposed law’s reference to “N.J.S.A. 2A:31-1 et seq.” and the phrase “wrongful death of a decedent.” See Senate No. 348 (Second Official Reprint).

    

9

(a) Moneys recovered under New Jersey Death Act (N.J.S.A. 2A:31-1 et seq.). Any sum recovered under the New Jersey Death Act representing damages sustained by a decedent between the date of injury and date of decedent’s death (such as the expenses of care, nursing, medical attendance, hospital, and other charges incident to the injury), including loss of earnings and pain and suffering are to be included in the decedent’s estate.

1. Where an action is instituted under the New Jersey Death Act and terminates through settlement by a compromise payment without designating the amount to be paid under each count, the amount so recovered is first applied toward the payment of funeral expenses, the expenses of care, nursing, medical attendance, hospital, and other proper charges incident to the injury and is fully includible in the estate of the decedent.

[N.J.A.C. 18:26-5.3(a).] 7
Taxation also provided that other than the above, no other amounts recovered are taxable. See

N.J.A.C. 18:26-6.6 (“[a]ny sum recovered under sections 1, 2, 3, and 4 of the New Jersey Death Act (N.J.S.A. 2A:31-1 et seq.) as compensation for the wrongful death of a decedent is not subject to” inheritance tax “except as provided in N.J.A.C. 18:26-5.3(a)”).

Plaintiff contends that the law is “well settled” that an estate is to be valued at the death of the decedent, see Estate of Warshaw, therefore, it is the “value” of the survival claim action as of decedent’s death that is includible in the estate, which here is $2,690,600, as per the third-party appraiser’s opinion. Plaintiff maintains that Taxation’s resort to N.J.A.C. 18:26-5.3(a) to tax the actual amount of the net damages received is arbitrary and capricious since it is contrary to estate tax law, and that the regulation is inapplicable since it pertains to the transfer inheritance tax.

7 The authority for this regulation is stated to be N.J.S.A. 54:34-1a, the inheritance tax statute. See Supplement to Title 18 (March 31, 1972). In the 1972 version of the regulation, subsection (a) simply introduced the asset and thus read: “(a) Moneys recovered under New Jersey Death Act (N.J.S.A. 2A:31-1 et seq.).” Subparagraph 1 was what is now contained in subsection (a) except for the word “decedent’s” and without the ellipses. Paragraph 2 was what is now contained in paragraph 1.

 

10

Taxation agrees that under the estate tax law, what is includible in an estate, and thus subject to estate tax, is the value of an asset as of the date of the decedent’s death. However, it claims, Estate of Warshaw is inapplicable because in a survival claim action the decedent has no interest as of the date of death, whereas in the cited case, the decedent had such interest in the IRA. Taxation also argues that the precedent on including an asset’s date-of-death value does not apply here since the survival claim action is a “different” type of an asset. This “different” asset is addressed in N.J.A.C. 18:26-5.3(a) which plainly states that the “sum recovered” is includible in the estate, which Taxation contends can only mean that amounts actually received are included and taxed regardless of when received.

The court initially dismisses as illogical Taxation’s argument that Estate of Warshaw is inapplicable. In its final determination, Taxation stated that “a survival act claim is includible” in the decedent’s estate. This means Taxation agreed that the survival claim action is property of the estate, and that the decedent had an interest in the same as of the date of her death. To now argue to the contrary should then vitiate Taxation’s final determination and require a refund of the entire amount of estate tax paid by plaintiff. Instead, Taxation filed a cross-motion for summary judgment seeking affirmance of its refund denial.

As to the substantive contention of when and how much are includible in an estate where the asset is a survival claim action, there are no estate (or transfer inheritance) tax cases on this issue in New Jersey. The IRS’ revenue rulings state what is and what is not includible in gross estate. However, they do not analyze or reconcile their conclusions with our transfer inheritance tax regulations or law (which is entirely reasonable because inheritance taxes are a matter of pure state law). Therefore, they are do not assist in resolving the instant inquiry.

 

11

It is appropriate to apply the State’s Transfer Inheritance Tax statute to determine the inclusion amount of a survival action claim for estate tax purposes. Both the New Jersey Estate tax laws and the New Jersey Transfer Inheritance Tax address the same subject for purposes of imposing the respective taxes: the corpus or estate of a decedent. Bothe are “transfer” taxes, i.e., the tax is due to, and upon the transfer of an asset of, the decedent’s death. See e.g. Jiwungkul v. Dir., Div. of Taxation, 30 N.J. Tax 70, 75 (Tax 2016) (the “[t]ransfer inheritance tax and the estate tax are separate assessments occasioned by a person’s death,” with the former being a tax upon “succession to property transferred . . . through a will or by intestacy” and the latter being a tax on the “transfer of the estate . . . which would have been subject to” a federal estate tax), aff’d, 450 N.J. Super. 257 (App. Div. 2017). The assets comprising the taxable estate and subject to estate tax, are also those which pass to beneficiaries (designated by a will or intestacy laws) for transfer inheritance tax purposes.

Taxation’s regulations recognize the interdependence between the two transfer taxes. The definitional section, Subchapter 1 of Chapter 26 of Title 18, is titled as applying to both estate and inheritance taxes and specifies that the regulatory reference to the “Act” or “Law” or “Tax Act” means “Chapters 33 through 38 of Title 54.” See N.J.A.C 18:26-1.1. Thus, for instance, the definition of the term “estate and property” (the “interest of the testator” which passes to a specific person, ibid.), or “gross estate” (“the value as of the date of a decedent’s death of all property wherever situated, which is included in the decedent’s estate for inheritance tax purposes,” ibid.), applies to both taxes. So does the defined term “[m]arket value--date determined” (the “value of property as of the date of death of the transferor, whether or not the transfer was made during the lifetime of the transferor.” Ibid.).

  

12

The court therefore finds that the Estate Tax statute and the Transfer Inheritance Tax statute can and should be read in pari materia as to what and how much is includible in a decedent’s estate. See Milltown Indus. Sites v. Borough of Milltown, 12 N.J. Tax 581, 585 (Tax 1992) (“statutes relating to the same or similar subject matter – statutes in pari materia – are to be construed together”) (citation and internal quotation marks omitted), aff’d, 15 N.J. Tax 144 (App. Div. 1993); Richard’s Auto City, Inc. v. Dir., Div. of Taxation, 140 N.J. 523, 540 (1995) (statutes are in pari materia when they have “the same purpose or object”) (citations omitted). See also Estate of Dieleman v. Dep’t. of Revenue, 222 N.W.2d 459, 461 (Iowa 1974) (holding that estate tax and inheritance tax statute “should be construed in pari materia” in determining whether a claim for wrongful death is an asset of the estate, i.e., whether the decedent had an interest in such claim on his death).

Here, the transfer inheritance tax laws dictate what is included in the estate (“any sum recovered as compensation for death of a person caused by a wrongful act, neglect or default, whether by award of damages or settlement of compromise”), and when (date of recovery of the “award or settlement”). N.J.S.A. 54:35-1; N.J.A.C. 18:26-5.3(a). The regulations also indicate what is not taxable, and therefore, what is not includible in an estate. N.J.A.C. 18:26-5.3; 18:26- 6.6.8 Therefore, construing the statutes in pari materia, the court finds that the legislative intent

8 While N.J.S.A. 18:26-5.3 (a) cites to “N.J.S.A. 2A:31-1 et seq.” as the “New Jersey Death Act,” the includible amounts pertain to damages “sustained between the date of injury and date of decedent’s death . . . including loss of earnings and pain and suffering.” These are damages allowable in a survival action claim. See Smith, 160 N.J. at 234, 236 (“The Survivor’s Act was intended to” provide a remedy “to the estates of those who” suffered “injuries causing death . . . by allowing the decedent’s estate to recover any loss to the decedent that accrued between injury and death,” and the “the primary damages recoverable in a survival action sounding in tort are for the decedent’s pain and suffering between the time of injury and death”) (internal citation and quotation marks omitted). See also Senate No. 348, supra, n.6.

      

13

was to include in the decedent’s estate, the sums recovered pursuant to the survival claim action, whether the recovery resulted from a trial or a settlement.

Thus, the sums actually recovered by the decedent’s estate in the survival claim action represents the value of that claim, which here is $6,709,231.08. Although received or recovered later, this amount is deemed to be the value of the survival action claim as of the decedent’s date of death. The legislative changes implemented by L. 1978, c. 172, while noting that it was as to the “date on which certain property is includible in the estate of a decedent for transfer inheritance tax purposes,” sought to address the inequity as to timing of the payment of the tax so that “taxes shall become due and payable on the date of the award of damages or settlement of compromise, rather than the date of death of the decedent.” Even if some ambiguity exists whether this law addresses the timing of the tax payment or the date on which an asset is to be valued, it is resolved by the unambiguous intent that (1) the “property” to be included in the decedent’s estate are the “sums recovered under the Death By Wrongful Act Statute,” and (2) the date such “property” is includible in the estate (and therefore subject to tax) is “the date of the award of damages or settlement” and not the date of death. Sen. Rev. Fin. and Approp. Comm. Statement to Senate, No. 348.

It would be counterintuitive to maintain that the same asset (survival claim action) is to be included in the same estate (decedent’s) but argue that the tax base, i.e., amount subject to tax, should be different for each type of tax: for the estate tax, it should be an amount based on an appraiser’s value conclusion (what is the asset’s alleged market value as of the date of death), but for transfer inheritance tax purposes it is the amount recovered under N.J.A.C. 18:26-5.3. Construing the Estate Tax and Transfer Inheritance Tax statues in pari materia will avoid this absurdity. The court’s conclusion does not sidestep the ruling in Estate of Warshaw because there

  

14

the asset at issue was not a survival action claim and the case did not involve applicability of the Transfer Inheritance Tax laws.

The court also finds that although the inheritance tax regulations concerning survival claim actions (N.J.A.C. 18:26-5.3; N.J.A.C. 26-6.6) appear to be promulgated prior to the 1978 amendments to N.J.S.A. 54:35-1 and enactment of 35-4.1, they are not arbitrary, capricious, or unreasonable. Rather, the authority for the regulations arose under the Transfer Inheritance Tax statute, and although the nomenclature differs (alluding to sums recovered under the New Jersey Death Act, N.J.S.A. 2A:31-1et seq.,) their substance accord with the existing well-established law on survival claim actions and their includability in a decedent’s estate. See Smith, 160 N.J. at 231, 234, 236; Rev. Rul. 54-19, 1954-1 C.B. 179.

In sum, based on the court’s pari materia analysis, the court finds that amounts to be included for New Jersey’s estate tax purposes are the sums actually recovered for a survival claim action, whether by settlement or jury verdict, because this is what the Legislature intended. Such sums are deemed to be the value of the claim as of the decedent’s date of death. Therefore, application of N.J.A.C. 18:26-5.3(a) to require inclusion of the amounts actually recovered for this claim in the decedent’s gross estate for New Jersey estate tax purposes is reasonable and within the intendment of the Legislature.
CONCLUSION

For the aforementioned reasons, the court denies plaintiff’s summary judgment motion and grants Taxation’s cross-motion for summary judgment.9

9 Taxation notes that should this court decide in favor of plaintiff, it does not contest plaintiff’s appraiser’s “value” conclusion of the survival claim action. This concession does not mean that the court (1) also accepts plaintiff’s appraiser’s value conclusion, or (2) agrees with plaintiff that survival actions can be credibly subject to valuation under a market-value theory or any other valuation theory.

 

15

Child charged with house occupancy rent after death of Mom here IN THE MATTER OF THE ESTATE OF CECIL FARAG, DECEASED

 Child charged with house occupancy rent after death of Mom here IN THE MATTER OF THE ESTATE OF CECIL FARAG, DECEASED _________________________

ROBERT FARAG, Plaintiff-Appellant,

and
CAROLYN FARAG,

Plaintiff, v.

BASEM FARAG,

Defendant-Respondent. _________________________

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION
DOCKET NO. A-3204-19

Submitted May 17, 2021 – Decided June 7, 2021

Before Judges Sabatino and DeAlmeida.

On appeal from the Superior Court of New Jersey, Middlesex County, Chancery Division, Docket Nos. 239681 and C-000127-14.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

PER CURIAM

This appeal arises out of probate litigation that spanned a total of about

six years. The case was presided over by two successive Chancery judges, both of whom are now retired.1

For the reasons that follow, we dismiss in part and affirm in part. I.

The facts may be summarized as follows. The parties are three adult siblings: Basem Farag, Robert Farag, and Carolyn Samuel (née Farag).2 Their mother was predeceased by their father.

After the father died, the mother made an inter vivos transfer of $228,000 to Basem in June 2011, with instructions to hold those funds in trust and disperse them evenly to the three children after the mother died. However, Basem used

1 For ease of reference, we denote the judge who initially handled the case as "the first judge" and the successor as "the second judge."

2 For clarity and ease of reference, the siblings will be referred to by their first names. We intend no disrespect in doing so.

2

A-3204-19

a large portion of that money (about $135,000 or more) to pay his own mortgage and other personal expenses.

In April 2012, the mother also conveyed, through an inter vivos deed, equal shares of her house in East Brunswick to the three children. Basem proposed to replenish the amount he spent by selling the East Brunswick residence, applying his share to the debt, and transferring additional funds from abroad.

The mother died intestate in November 2012. The parties' dispute largely centers upon the East Brunswick residence, which is outside of the estate.

Robert and Basem made competing applications to be appointed Administrator of the estate. The first judge instead appointed Michael Keefe, a New Brunswick lawyer, as Administrator.

Robert moved into the house in May 2014 and lived there for about twenty-two months until it was sold in 2016. While he was living there, Robert paid the majority of the taxes and spent approximately $69,000 in improvements.

Robert and his sister Carolyn brought a partition action against Basem in July 2014 to compel the sale of the house and the division of the proceeds. This action was later consolidated with the probate action.

3

A-3204-19

Robert negotiated a right to purchase the house, but he did not come up with the funds to do so. The house, which was originally estimated to be worth $250,000 before the improvements, was put on the market and ultimately sold for $369,900 in April 2016. A court action by the Administrator Keefe needed to be brought to eject Robert from the premises, and Robert failed in an emergent application before this court to stay the ejectment.

Robert requested to be paid $69,000 for the home improvements, but the Administrator recommended a lower sum of $42,000. The Administrator also recommended that Robert be charged an occupancy fee of $50,490 for the twenty-two months he resided in the house (equating to monthly rent of $2,295), although Robert advocated for a lower charge.

The Administrator charged for his services a 5% statutory commission of $5,361, plus a $99,575 attorney fee calibrated at $350 per hour (with 284 total hours billed). Basem's attorney requested an award of fees totaling $87,086.75, with an hourly billing rate of $400. Robert's and Carolyn's attorneys each incurred fees totaling approximately $20,000, with hourly billing rates of $300 and $250, respectively.

Both Chancery judges adopted the Administrator's recommendations and approved his fee without reduction. Each party was initially ordered to bear his

4

A-3204-19

or her own legal fees, although the second judge ultimately approved $26,115 in fees Basem's attorney incurred in the partition action.

The final order in the estate was not issued until March 2020 when a lien was removed.

Thereafter, Robert filed this appeal, contesting many of the various decisions issued during the litigation. His Notice of Appeal only mentions the final order of March 31, 2020, although his brief identifies seven orders dated July 21, 2015, December 18, 2015, February 24, 2016, March 3, 2016, March 29, 2017, May 19, 2017, and December 10, 2019. He did not address the March 31, 2020 order in his brief. The appeal is opposed solely by Basem; Carolyn and the Administrator did not participate.

II.
In evaluating this appeal, we are guided by the time-honored substantial

deference afforded to Chancery judges. "In fashioning relief, [a] Chancery judge has broad discretionary power to adapt equitable remedies to the particular circumstances of a given case." Marioni v. Roxy Garments Delivery Co., Inc., 417 N.J. Super. 269, 275 (App. Div. 2010) (citing Salorio v. Glaser, 93 N.J. 447, 469 (1983); Mitchell v. Oksienik, 380 N.J. Super. 119, 130-31 (App. Div. 2005)). In such equitable contexts, we will not set aside the judge's

  

5

A-3204-19

determination unless it is shown to be arbitrary or capricious or an abuse of discretion. See In re Queiro, 374 N.J. Super. 299, 307 (App. Div. 2005) (affording "great deference" to a Chancery judge's findings) (citations omitted); Lohmann v. Lohmann, 50 N.J. Super. 37, 44-45 (App. Div. 1958) (finding that a trial court's factual determinations should not be lightly disturbed on appeal).

We first address Robert's attempt to challenge the Administrator's fees as excessive. We are constrained to dismiss that portion of the appeal because of Robert's unexplained failure to order a transcript of the June 4, 2019 proceeding at which the second judge heard arguments about the fees and considered Robert's objections. In his December 10, 2019 order, the second judge stated he was granting the Administrator's fee in its entirety based on his review of "all relevant papers submitted," including the Administrator Keefe's Affidavit of Services; consideration of "argument made in connection therewith"; and "for the reasons set forth in the [c]ourt record dated June 4, 2019."

Point II of Basem's respondent brief argues that we must dismiss the fee appeal for lack of a transcript, and Robert filed no reply brief, nor did he obtain the omitted transcript. Without such a transcript and briefs discussing its contents, we cannot perform our review function meaningfully. It is too late to do so now. Consequently, we dismiss this aspect of the appeal. See Rule 2:5-

 

6

A-3204-19

3(a) (requiring that "if a verbatim record was made of the proceedings before the court . . . from which the appeal is taken, the appellant shall, no later than the time of the filing and service of the notice of appeal, serve a request for preparation of an original and copy of the transcript"); see also Cipala v. Lincoln Tech. Inst., 179 N.J. 45, 55 (2004) (declining to address the appellant's LAD claim based on a failure to submit either a final order dismissing her LAD claim or a transcript of the trial proceedings); In re Guardianship of Dotson, 72 N.J. 112, 116-17 (1976) (noting that "ordinarily the transcript is an integral part of the record on appeal" pursuant to Rule 2:5-4(a), as it "gives the reviewing court a basis for a complete and proper analysis of all the issues before it").

We briefly address Robert's remaining arguments, none of which have merit.

Robert's argument that this matter should be remanded due to the first judge's failure to support his March 29, 2017 order with a statement of reasons as mandated by Rule 1:7-4 is moot, because the second judge already conducted a remand hearing on the March 29, 2017 order on June 4, 2019, after the first judge retired.

Robert's assertion that Basem's counsel should not have been awarded attorney's fees based on a failure to submit a certification of services during oral

   

7

A-3204-19

argument is also moot, as Basem's counsel twice submitted an Affidavit of Services, once to Robert's former counsel on March 16, 2016, and again to Robert's current attorney on December 6, 2018, before the remand hearing before the second judge on June 4, 2019.

Robert's claim that the Administrator breached his fiduciary duties is also unavailing. The record reflects the Administrator frequently took reasonable actions to preserve the disputed assets, attempt to resolve the parties' disagreements, and deal with Robert's repeated actions that delayed a timely resolution of the matter. Although Robert is not solely to blame for the disputes among the siblings, the record bespeaks the Administrator's many attempts to find middle ground. Indeed, the Administrator made several concessions throughout the proceedings, such as unilaterally lowering Robert's occupancy fee from the appraiser's estimate and granting reimbursement credit to Robert for the home renovations despite the latter's failure to substantiate an increase in the residence's market value despite the trial court's July 21, 2015 order mandating such substantiation.

The trial court did not abuse its discretion in granting the Administrator's application for emergent ex parte relief on December 18, 2015. The Administrator's application conformed with a previous July 21, 2015 order,

8

A-3204-19

which afforded Robert twenty-four hours to match the offer on the residence or waive his right to purchase it. It was Robert's own delay and refusal to address the signed Contract of Sale that reasonably prompted the Administrator to make the emergent application.

Robert further argues that he should be awarded a dollar-for-dollar reimbursement of $69,000 for the improvements on the East Brunswick home. This argument is equally unavailing. Paragraphs 5 and 6 of the trial court's July 21, 2015 order placed the burden of proof on the sibling seeking reimbursement to "establish[] any claimed increase in value of the [East Brunswick residence]." Despite this, Robert failed to present evidence that the expenses he incurred actually increased the value of the house, and if so, by how much. Given the shortcomings of Robert's proofs, the Administrator was lenient in reimbursing the amount of $42,000 for Robert's expenses.

Robert's assertion the Administrator "was merely required to determine if the renovations increased the value of the property, not the specific amount of the increase in value" is frivolous. Such an unquantified principle would give home renovators, in essence, blank checks to pour money into "improvements," even if such changes represented small increases to the home's value but were astronomically expensive.

9

A-3204-19

Lastly, we deem Basem's request for appellate counsel fees mentioned in his brief as procedurally improper without a cross-appeal and premature. Basem can timely file a motion under Rule 2:11-4 upon the issuance of this opinion. We express no views as to whether such a motion, if filed, would be granted after due consideration of any opposition.

We have considered all other points raised by appellant, and they lack sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).

Dismissed in part, affirmed in part.

10

A-3204-19