Transfer Inheritance Tax Bureau Cover letter

 

Transfer Inheritance Tax Bureau Cover letter

 

                                                  RE: Estate of _____

 

To Transfer Inheritance Tax Bureau:

      

     Please find enclosed the following:

 

     1) State of __ Inheritance Tax Return  

      -Summary Page                      

       -Schedule "A" Real Property

     -Schedule "B" Closely Held "Businesses"

     -Schedule "B (1)" All Other Personal Property

     -Schedule "C" Transfers

     -Schedule "D" Deductions Claimed

     -Schedule "E" Beneficiaries

 

         2 Copy of Last Will and Testament

     3. Copy of last year Tax return

 

         Please issue a waiver on the house immediately.  The house will be sold.

 

Enclosure: Inheritance Tax Return with Schedules A-E

Last Will and Testament

cc: Executor 

Tenancy by Entirety of houses- House goes to surviving spouse

 Tenancy by Entirety of houses- House goes to surviving spouse

     Under NJ law If the two people are married, unless otherwise expressly provided, they typically acquire the real property as “tenants by the entirety”. The NJ statute states 46:3-17.2. Tenancy by entirety A tenancy by entirety shall be created when: a. A husband and wife together take title to an interest in real property or personal property under a written instrument designating both of their names as husband and wife; or b. A husband and wife become the lessees of real property or personal property under a written instrument containing an option to purchase designating both of their names as husband and wife; or c. An owner spouse conveys or transfers an interest in real property or personal property to the non-owner spouse and the owner spouse jointly under written instrument designating both of their names as husband and wife. Language which states "....... and ......., his wife" or "........ and ........, her husband" shall be deemed to create a tenancy by the entirety. Upon the death of either spouse, the surviving spouse shall be deemed to have owned the whole of all rights under the original instrument of purchase, conveyance, or transfer from its inception. Upon the death of one spouse, the entire estate and interest belongs to the other spouse, not by virtue of survivorship but by reason of the title vested under the original limitation. . A Will cannot change who receives assets under Tenancy by Entirety. A creditor cannot force the sale of a property owned by one spouse that has a judgment against them. Current law presumes that, unless otherwise expressly provided, two or more people unmarried who acquire undivided interests in real property take ownership of the property as tenants-in-common (rather than joint tenants). Joint tenancy is when the Deed states the property goes to the survivor.

  

 There is no need for a new Deed if the spouse dies.

Assets which pass by Title, not Will

 Assets which pass by Title, not Will

A Will cannot change who receives assets if a beneficiary is already listed or property owned by Tenancy by Entirety or Joint tenancy.

 

House- husband and wife is owned by Tenancy by Entirety, the house goes to surviving spouse

 

Bank Accounts- If POD, JT property goes to surviving person

 

    Assets which pass by Contract

IRA- property goes to whoever is listed as beneficiary

401K- property goes to whoever is listed as beneficiary

Life insurance - property goes to whoever is listed as beneficiary

Annuity- property goes to whoever is listed as beneficiary

Pension plans- property goes to whoever is listed as beneficiary

-other items which set forth a beneficiary

 

 

      The Bergen Surrogate provided helpful information to citizens:

 

What are Probate Assets and What are Not

Not all assets must go through probate to be transferred to a beneficiary. Some assets pass automatically (by operation of law) to other persons (beneficiaries) without the need for probate. Whether a particular asset to be transferred must go through probate or not depends on how ownership (title) to the asset is held.

If Title to an Asset is Held in the Testator’s Name Alone

Real estate and personal property, such as bank accounts, stocks, bonds, motor vehicles, etc. held in the testator’s name alone, and monies owed to the testator, are “probate property” which are transferred in accordance with the testator’s Last Will & Testament. These assets cannot generally be transferred without going through the probate process. However, some brokerage firms provide beneficiary designation forms which may transfer these accounts without probate.

If Title to an Asset is Held by the Testator Jointly with a Right of Survivorship

Assets held by the testator and another person jointly, with a right of survivorship, are said to be held as “Joint Tenants with Right of Survivorship” (JTWROS); and pass by operation of law at the testator’s death to the surviving joint tenant. Bank accounts, securities and real estate are often held in joint tenancy. Assets that are titled this way are not subject to probate. The name on the bank or securities account application and the deed for real estate may read: “John Smith and Jane Doe, as Joint Tenants with Right of Survivorship.” Be careful changing title to existing assets because there can be tax and other consequences.

If an Asset Provides for a Beneficiary Designation

“Beneficiary designation property” is generally non-probate property which passes in accordance with beneficiary designations assigned by the testator. Life insurance proceeds, 401(k) plans, IRA’s, employee death benefits (e.g., pension, profit-sharing, etc.) and accounts titled “Payable on Death” (POD) and/or “In Trust For” (ITF) are typical beneficiary designation property. Generally, the insurance company, pension plan administrator, or employer will have the beneficiary’s name in their records, or a copy of a form signed by the owner of the property indicating the beneficiaries. Language in the policy or plan may also be important.

How we handle Probate and what we advise to Clients

How we handle Probate and what we advise to Clients

Probate is the process where after death the instructions of the Will are carried out. Will is admitted to “Probate” in the County Surrogate. In some states, this is called Register of Wills. Some people refer to the Surrogate as the Will Clerk. Upon the death of the Testator (maker of the Will), the Probate procedure can begin. This is the legal process, which establishes the genuineness of the Will. It is done by the Surrogate in the county where the Testator resided at the time of death.  

       FILING A PROBATE APPLICATION 

     Upon the death of a person, a Probate proceeding may be commenced by offering the decedent's (the dead person's) last Will for Probate in the Surrogate's Court of the county in which the decedent was domiciled at death.  Generally, the Executor nominated in the Will brings the proceeding by filing a verified application with the Court.

 

     When the applicant files the original Will for Probate, the applicant must also file a death certificate (an original with a raised seal). A filing fee of approximately $150 must be paid. Once the Will, application and death certificate are filed, the Surrogate will review the papers, and if there are no irregularities or objections, admit the Will to Probate. Although New Jersey law prohibits admission of a Will to Probate within 10 days of the testator's death, an applicant may submit the application prior to expiration of the 10-day period. If the Will is filed after the 10-day waiting period, many Surrogates will issue a judgment for Probate contemporaneously with the filing of the Probate papers.

    The Probate application will usually contain the following information:

1. the applicant's residence;


2. the name, domicile and date of death of the decedent;


3. the names and addresses of the decedent's spouse, heirs (those entitled to take under the laws of interstate succession), and any person named to serve as Executor;


4. the ages of any minor heirs; and


5. the names of the testator's children when the Will was made and the names of children born and adopted after the Will was made, or their children, if any.

To minimize time spent in the Surrogate office, it is recommended, and in some states required, that before an Executor submits the Will for Probate the executor’s attorney or executor sends to the Surrogate Court:

1) a "data sheet" (referred to in some counties as an "information sheet" or a "fact sheet") containing the information needed by the Surrogate to complete the application;

2) a copy of the Will; and

3) a copy of the death certificate.

Qualifying the Executor

     Once the Will is admitted to Probate, the Court will issue Letters Testamentary to an Executor who has properly qualified to serve. An Executor named in a Will qualifies to serve by filing a form affidavit in which the Executor agrees to perform his or her duties. The nominated Executor must also provide a Power of Attorney to the Surrogate empowering the Surrogate to accept service of process of claims against the estate. Once the Executor qualifies, the Court then issues letters testamentary.

Mailing Probate Notices

After a Will is admitted to Probate in NJ, the Executor’s Attorney or Executor must mail within 60 days a notice of Probate to the decedent's spouse, heirs and all beneficiaries under the Will. The notice of Probate should contain the executor's name and address, place and date that the Will was Probated, and an offer to furnish a copy of the Will upon request. Within 10 days of mailing the notice the Executor’s Attorney or Executor should file proof of service of the notice with the Surrogate's Court. 

      Unlike in some other states, the Surrogate's filing fee in New Jersey is the same regardless of the size of the estate. See Zimiles "Probate is not a Dirty word in New Jersey" N.J. Lawyer pg. 14 ( July/August 1992)

Frequently Asked Probate Questions and Answers

How does the Executor begin the Probate procedure?

     The Executor or personal representative can be appointed and the Will admitted to Probate in most cases by going to the Surrogate's Court with the original Will, certified death certificate, and, if the Will is not self-proven, at least one of the witnesses who signed the Will must prove the signature on the Will.

How is an Administrator selected when there is no Will?

     When there is no Will, an administrator, or personal representative is appointed by the Surrogate's Court. The surviving spouse has the first right to apply for the position of administrator; however, any heir of the decedent may be appointed. When one of several heirs seeks to be appointed administrator, all other heirs must renounce their right to be appointed administrator. Otherwise a more complicated process in the Superior Court must be filed. In most cases if there is not a Will, a surety bond must be furnished to cover the value of the real and personal property in the estate.

What kind of information should the Executor collect?

The decedent's personal representative should make a list of all of the next of kin of the person who died, along with their degree of relationship, addresses and ages.

What if the Will is not properly executed?

     The Surrogate will advise the personal representative as to the proper procedure in order to allow the Will to be admitted to Probate. This procedure normally involves a formal hearing before a Judge of the Superior Court.

Are unpaid inheritance taxes a lien on property?

     Yes, to sell real estate, in NJ the attorney for the Estate will need to obtain "tax waivers" from the NJ State Transfer Inheritance 'Tax Bureau, and the waivers must be filed with the County Clerk in the county where the land is located. Land held by husband and wife as "tenants by the entirety" need not be reported and may be transferred without a waiver. Other property may be subject to a lien for unpaid inheritance taxes such as bank accounts and certificates of deposit.

     There is also an unlimited federal marital deduction, which means unlimited amounts of property can be transferred between spouses without estate of gift taxes.

How many Surrogate's Certificates ("Shorts") Will I need?

     A list of all of the assets of the estate should also be prepared to help determine the number of Surrogate's Certificates that must be issued by the Probate clerk in the Surrogate's Office.

When is the Will admitted to Probate?

     After all the proper forms are filed with the Probate clerk, the clerk will prepare a judgment, which admits the Will to Probate. The Surrogate then signs the judgment and issues "Letters Testamentary."

What are Surrogate's Certificates used for?

     Surrogate's Certificates act as evidence of the authority of the personal representative ( Executor, Administrator, Trustee ) to act. These certificates are necessary to accomplish certain tasks such as transferring stocks, closing bank accounts, etc.

Is it necessary to send copies of the Will to the beneficiaries?

     From the time the Will is probated, the Executer has 60 days to mail all beneficiaries a notice that they can be provided with a copy of the Will, along with a notice giving the specific date and place the Will was entered into Probate. See Zimiles "Probate is not a Dirty word in New Jersey" N.J. Lawyer supra

Is an attorney necessary in estate administration when there is no Will?

     As a practical matter, it is very difficult for a nonlawyer to correctly follow the required procedures in administering an estate without the assistance of an attorney. The personal representative selects the attorney for the estate. 

Where does the Executor/Administrator obtain the funds to pay debts?

     The Executor may, in most cases, withdraw up to one-half of the funds in the decedent's New Jersey bank accounts. Generally, the Executor should open an estate checking account, which can be used to receive and disburse funds.

Is the Executor or Administrator entitled to compensation?

     In New Jersey an Executor or Administrator is entitled to corpus commissions of 5% of the first $200,000.00 of estate assets subject to administration, 3-1/2% on the excess over $200,000.00 up to $1,000,000.00 and 2% or such other percentage as the Court may determine on the excess over $1,000,000.00. Fees depend on the state of domicile.

      A commission is taxed as income and must be put on the executor’s income tax return. I often recommend executors NOT take a commission in easy cases because it often causes anger and problems with the beneficiaries.

What about a safe deposit box in the name of the decedent?

     Individuals sometimes keep their Will in their safe deposit box. The personal representative is permitted to remove the original Will, as well as a Deed to a cemetery plot and certain life insurance policies from the decedent's safe deposit box before Probate.

How does the estate Executor handle joint bank accounts or certificates of deposit?

     Certain bank accounts and certificates may be owned with rights of survivorship, which means that upon the death of one party to the account, the surviving party (or parties) becomes the sole owner (or owners). If the decedent maintained such an account, the survivor Will be able to withdraw one half of the funds in the account by giving the bank a Death Certificate and without the need to provide anything from the Surrogate. The other half will not be released until the NJ Transfer Inheritance Tax Bureau issues a tax waiver, normally after the tax is paid and the return is filed. Again, this varies from state to state.

Is all this paperwork necessary even on small estates?

     There is a procedure whereby the assets of small estates can be transferred to the surviving spouse without the necessity of administration. The spouse files an affidavit stating, among other things, that the decedent had no Will and that all of the real and personal assets of the decedent do not exceed $10,000.

How do I prove that legacies were paid?

     The Executor has a duty to pay the legacies or distribute shares as provided for under the Will; however, when he /she does so, he/she must take a Release and Refunding Bond from the person taking the share. The Refunding Bond is then forwarded to the Surrogate for filing and recording.

What is a Disclaimer- When a beneficiary renounces their right to inherit

       A disclaimer is a formal legal process by which a beneficiary (heir) states that they do not wish to accept a bequest under a Will. It is also called a renunciation. For example, if you are named as a beneficiary under your uncle's Will and your uncle dies and you are in the midst of a major lawsuit you might prefer not to accept the inheritance and instead let it pass to another family member. To do this you must meet the legal requirements of a disclaimer in your state. This may consist of filing a formal notice with the executor (person in charge of your uncle's Will) and the court. To qualify as a disclaimer for federal estate tax purposes (so that your disclaimer won't be treated as a gift made by you) it must be done within nine months of your uncle's death. Importantly, you cannot accept any benefit from the property you are disclaiming. For example, you cannot cash a dividend check on the stock your uncle left you and then disclaim. Disclaimers are a powerful estate tax planning tool as well. More info at https://law.justia.com/codes/new-jersey/2019/title-3b/section-3b-9-6/

 

Items that the Executor of a Will should bring for the initial meeting with the attorney if you have them, or eventually should look for :

 Items that the Executor of a Will should bring for the initial meeting with the attorney if you have them, or eventually should look for :

1. Original Death Certificates; 

2. Original Wills and Codicils;

3. Completed Probate/Estate Administration interview sheet;

4. Any Trusts established by the decedent;

         After retained, the attorney will often suggest the client locate and complete the following:

5. All bankbooks, certificates of deposit, check books, money markets, and the most recent back statements for any accounts that listed the decedent's name, including IRA or other qualified accounts;

6. Copies of all of the decedent's brokerage accounts, treasury direct accounts, book entry accounts, dividend reinvestment accounts and annuities that list the decedent's name including IRA or other qualified accounts;

7. Original certificates of stock or original bonds that list the decedent's name;

8. Information and documentation regarding all Life Insurance Policies owned by or insuring the life of the decedent;

9. A copy of any health insurance policy of the decedent;

10. Copies of any bills in the decedent's name or the estate's name for expenses and debts owed by the decedent or the estate including the last illness, funeral, repast, burial, monuments, etc. These bills should continue to be provided by the client as received;

11. A copy or list of any expenses paid by the client or any other individuals on behalf of the decedent or estate in connection with the decedent's funeral or last illness including telephone bills, stamps for cards, luncheons, travel expenses, etc.;

12. A copy of all credit cards in the decedent's name along with the most recent statement for each;

13. A copy of the title, registration, automobile insurance and any lease information for any vehicle owned by the decedent;

14. A copy of the homeowner's insurance policy for the decedent's Real Estate;

15. A copy of the Deed and Tax bill for any real property in the decedent's name;

16. A copy of any leases or contracts that the deceased was a party to at the time of  his or her death;

17. The location of any Safe Deposit Box that includes the decedent's name along with an inventory of its contents;

18. A copy of the decedent's last Federal Income Tax Returns;

19. A copy of any Notes or Mortgages that include the decedent's name;

20. Any information concerning the decedent's pension or benefits from employment; 

and

22. An inventory of all the decedent's personal property

NOTICE OF PROBATE TO BENEFICIARIES

NOTICE OF PROBATE TO BENEFICIARIES 

Dear Beneficiaries:

      The Last Will and Testament of w1 was admitted to Probate on ___________.  You have been included as a beneficiary.

      Pursuant to Rule 4:80-6, this serves as a Notice of Probate.

      The place of the Probate is the ___ County Surrogate, ____

      The Executor/ Executrix of the Will is e1

      The address of the Executor/ Executrix is _______

 

      A copy of the Will is attached. A copy of the Will can also be obtained from the Surrogate for a small copy fee. If individuals other than Class A beneficiaries are inheriting money or property, in most cases a _____ Inheritance Tax Return must be filed and Tax Waivers obtained. This will take several months. Class A beneficiaries include immediate family members such as children, grand- children, parents and step- children. Additional information on Inheritance Taxes can be obtained from the NJ Division of Taxation.

      Under NJ Probate Law, this notice must be sent to all individuals who would receive a portion of the estate if there was no Will. Also, prior to individuals receiving money Federal law requires a child support lien search so each beneficiary will need to provide their Social Security number prior to inheritance.

 

                                                  

cc: e1, Executor

 

Notice to Executor to Pay and Notify Creditors and Other Duties

 

Letter to Executor to Pay and Notify Creditors and Other Duties

 

      RE:  The Estate of _______________

Dear :

     

     It is our recommendation that Executors undertake the following measures:

 

     1. Conduct a thorough search of the decedent's personal papers and effects for any evidence, which might point you in the direction of a potential creditor;

     2. Carefully examine the decedent's checkbook and check register for recurring payments, as these may indicate an existing debt;

     3. Contact the issuer of each credit card that the decedent had in his/her possession at the time of his/ her death;

     4. Contact all parties who provided medical care, treatment, or assistance to the decedent prior to his/her death;

 

      Law office will not be able to file the NJ inheritance tax return until it is clear as to the amounts of the medical bills. Medical expenses can be deducted on the inheritance tax return.  

 

     Since you will be involved as the Personal Representative of this Estate, you should be aware that, pursuant to the United States Supreme Court Case, Tulsa Professional Collection Services, Inc., v. Joanne Pope, Executrix of the Estate of H. Everett Pope, Jr., Deceased, 108 S. Ct. 1340 (1988) the Personal Representative can be personally responsible to provide actual notice to all known or "readily ascertainable" creditors of the decedent.  This means that it is your responsibility to diligently search for any "readily ascertainable" creditors.  

 

Other upcoming duties/ Executor to Do

 

Bring Will to Surrogate 

 

Apply for Federal Tax ID #

 

Set up Estate Account at bank (pay all bills from estate account)

Pay Bills  

 

Notice of Probate to Beneficiaries  (Attorney will handle)

If charity, notice to Atty General

 

File notice of Probate with Surrogate (Attorney will handle)

 

File first Federal and State Income Tax Return [CPA- ex Marc Kane]

 

Prepare Inheritance Tax Return and obtain Tax Waivers (Attorney will handle)

 

File waivers within 8 months upon receipt (Attorney will handle)

 

Prepare Informal Accounting 

 

Prepare Release and Refunding Bond (Attorney will handle)

   

Obtain Child Support Judgment clearance (Attorney will handle)

A checklist is attached

 

         Let's review the major duties involved, which we've set out below.

 

In General. The executor's job is to (1) administer the estate--i.e., collect and manage assets, file tax returns and pay taxes and debts--and (2) distribute any assets or make any distributions of bequests, whether personal or charitable in nature, as the deceased directed (under the provisions of the Will). Let's take a look at some of the specific steps involved and what these responsibilities can mean. Chronological order of the various duties may vary.

 

 Probate. The executor must "Probate" the Will. Probate is a process by which a Will is admitted.  This means that the court gives the Will legal effect.  The court's decision that the Will was validly executed under state law gives the executor the power to perform his or her duties under the provisions of the Will.

 

     An employer identification number ("EIN") should be obtained for the estate; this number must be included on all returns and other tax documents having to do with the estate.  The executor should also file a written notice with the IRS that he/she is serving as the fiduciary of the estate.  This gives the executor the authority to deal with the IRS on the estate's behalf.

 

  Pay the Debts.  The claims of the estate's creditors must be paid.  Sometimes a claim must be litigated to determine if it is valid.  Any estate administration expenses, such as attorneys', accountants' and appraisers' fees, must also be paid.

 

  Manage the Estate. The executor takes legal title to the assets in the Probate estate. The Probate court will sometimes require a public accounting of the estate assets. The assets of the estate must be found and may have to be collected. As part of the asset management function, the executor may have to liquidate or run a business or manage a securities portfolio. To sell marketable securities or real estate, the executor will have to obtain stock power, tax waivers, file affidavits, and so on.   

 

  Take Care of Tax Matters. The executor is legally responsible for filing necessary income and estate-tax returns (federal and state) and for paying all death taxes (i.e., estate and inheritance). The executor can, in some cases be held personally liable for unpaid taxes of the estate. Tax returns that will need to be filed can include the estate's income tax return (both federal and state), the federal estate-tax return, the state death tax return (estate and/or inheritance), and the deceased's final income tax return (federal and state). Taxes usually must be paid before other debts. In many instances, federal estate-tax returns are not needed as the size of the estate will be under the amount for which a federal estate-tax return is required.

 

     Sometimes it is necessary to hire an appraiser to value certain assets of the estate, such as a business, pension, or real estate, since estate taxes are based on the "fair market" value of the assets.  After the filing of the returns and payment of taxes, the Internal Revenue Service will generally send some type of estate closing letter accepting the return.  Occasionally, the return will be audited.

 

Distribute the Assets.  Prior to individuals receiving money Federal law requires a child support lien search so each beneficiary will need to provide their Social Security number prior to inheritance. Your attorney can handle this, upon request. If child support is owed, and not deducted from the person's inheritance, the executor can be personally liable. Each beneficiary must sign a "Release and Refunding Bond". Otherwise, formal Court approval is required to finalize the estate. After all debts and expenses have been paid, the executor will distribute the assets. Frequently, beneficiaries can receive partial distributions of their inheritance without having to wait for the closing of the estate.   However, the Executor should still have the beneficiaries sign a partial Release and Refunding Bond.

 

 

     Duties of an Executor

Collect Assets and Information:

                        Locate Will and file and/or Probate in the Surrogate's office

                        Locate and inventory all of the assets of the Estate including:

                                              Veteran's benefits social security benefits, pension benefits, stocks and bonds, automobiles, furniture, jewelry, and other possessions.

                        Obtain Death Certificate, life insurance claim forms, social security burial allowance (if applicable).

                   Send notices of the person’s death to the post office, utilities, banks and credit card companies 

                        Assemble deeds, lease, contracts, and insurance policies for each piece of real estate.

                        Locate names and addresses of all heirs, legatees, devisees and next of kin

Determine Debts and other Claims against the Estate:

      Determine current bills owed, doctor, hospital, rent etc.

      Check decedent's charge accounts

Research other debts that exist, mortgage, life insurance loans, bank loans etc.

      Obtain receipts for every bill paid and keep a record of payments

      

Check with the deceased’s employer for unpaid salary, insurance and other employee benefits for Social Security, civil service or veteran benefits  

Manage the Estate:

      Set up an estate account

File for life insurance and other benefits

      Register stocks, bonds; arrange for collection of dividends and interest

      Have items of property appraised

          File City, state and/or federal tax returns 

     File state death and federal estate tax returns  

      Determine and Pay all necessary Taxes:

      Calculate value of estate and probable state and federal taxes

Determine if administrative expenses should be charged against income taxes or estate taxes

Prepare estate's income tax return in addition to the last income tax return  of decedent

      Decide how funds will be raised to pay taxes

      Prepare inheritance tax returns

      Prepare federal inheritance tax forms

      Pay personal property or real estate taxes if necessary

Distribute the Estate:

      Determine who is entitled to share in the estate

      Determine how the assets will be distributed

      Pay all final bills etc.

      Transfer and reregister securities

     Prepare detailed informal or formal account for court