Wills, Trusts & Estates Insights — Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events

When Should Estate Planning Documents Be Reviewed?

Published on: February 16, 2020 | by David G. Hardin

As estate planning attorneys, we are frequently asked by clients how often they should review their estate planning documents. Should it be every three years … every five years … every ten years? Rather than consider the response in terms of time, we prefer to advise clients to think in terms of need or life stage. On occasion, reviewing estate planning documents after a specified period of time has passed will be prudent, but more often other factors will weigh more heavily. This article will provide guidance to individuals who might wonder whether their estate planning documents are due for review.

The first consideration should be whether there is a need to change a document. For example, after a move to a new state, the estate planning documents should be reviewed by an attorney licensed to practice in that state. Further, if the executor named in a will has died, moved out of state, or is no longer the appropriate person to serve, then the will should be updated to substitute another executor for the one who will no longer serve. Similarly, if a guardian for a minor child is no longer appropriate because he or she has relocated to another state, or because the guardian’s personal circumstances have changed, it may be necessary to revise the will to name a new guardian. A change in the tax laws may also suggest a need for revision of a will or trust.

New life stages may also provide reasons to update estate planning documents. For example, when children are minors, it is oftentimes appropriate to establish a trust to hold a child’s inheritance until a child reaches a specific age in order to safeguard the funds and minimize potential waste. As a child grows up, the need for a trust may be eliminated, or the terms of a trust might warrant a change to give a child different benefits or more control. Similarly, when a child becomes an adult, it may be appropriate to name the child to a position of responsibility, as perhaps appointing the child as an executor.

The SECURE Act: Significant Changes to Retirement Account Rules

Published on: February 16, 2020 | by Anne Marie Robbins

On December 20, 2019, President Trump signed into law the SECURE (Setting Every Community Up for Retirement Enhancement) Act (the “Act”), which significantly affects the law regarding taxable retirement accounts such as traditional IRAs and 401(k) plans.[1]

Benefits of the Act. The following are among the pertinent beneficial provisions of the Act effective for calendar year 2020 and beyond:

The age at which a plan participant[2] must take annual required minimum distributions (RMDs) has been raised to age 72 from 70 ½, in recognition of longer life expectancies. Note that the new rule applies only to persons who are over age 70 ½ in 2020 and following.

The Importance of Beneficiary Designations in Estate Planning

Published on: October 4, 2019 | by Anne Marie Robbins

When a person signs a will (or a will coupled with a revocable trust) in order to set forth a plan for the distribution of his or her estate following death, he or she often believes the estate plan is complete. But if the person has failed to carefully consider the beneficiary designations on life insurance policies, retirement accounts, and other assets, and coordinate those designations with the estate plan, the result following death may be quite different from what was intended.

Wills do not override beneficiary designations; rather, beneficiary designations ordinarily take precedence over wills. For example, if a will leaves everything a testator owns at the time of death to the spouse, and testator has a $1 million life insurance policy on which the couple’s three children have been designated as equal beneficiaries, the life insurance passes to the children at testator’s death, not to the spouse. This result arises because the language of the will works only to distribute the assets that are part of the testator’s “probate estate,” meaning those assets in testator’s sole name without beneficiary designations.

Examples of assets not part of the probate estate are assets with beneficiary designations (usually life insurance and retirement accounts, and sometimes bank and brokerage accounts), any assets with a “POD” (pay on death) or “TOD” (transfer on death) designation, and any assets titled in the names of two or more people as “joint tenants with right of survivorship” or “tenants by the entireties.”

New Jersey’s New Death with Dignity Act Explained

Published on: September 16, 2019 | by Elizabeth Candido Petite

New Jersey’s passage of the “Aid in Dying for the Terminally Ill Act” makes it the eighth state in the nation to allow terminally ill patients to request medication to end their lives. The bill was signed into law by Governor Murphy on April 12, 2019, and became effective on August 1, 2019.

In brief, the new law allows New Jersey residents who are terminally ill to obtain medication from their physician that will likely result in death a few hours after it is ingested. Specifically, the law requires:

The person must be a “qualified terminally ill patient,” which is defined as a capable adult who is in the terminal stage of an irreversibly fatal illness, disease, or condition with a prognosis, based upon reasonable medical certainty, of a life expectancy of six months or less. This status must be determined by the person’s attending physician and confirmed by a consulting physician.

Basic Estate Planning Terminology

Published on: June 19, 2019 | by David G. Hardin

One of the hallmarks of estate planning is the use of terms of art in legal documents. Terms of art are often encountered in a will or revocable trust. This article will discuss the Latin phrase “per stirpes” and related concepts in the context of estate distributions to beneficiaries.

A. Per Stirpes. The term “per stirpes” literally means “by roots or stocks.” In the context of a disposition in a will or trust, the term is frequently used, for example, as part of a distribution to “surviving descendants, per stirpes.” The term is defined in New Jersey law as follows:

If a governing instrument requires property to be distributed “per stirpes,” the property is divided into as many equal shares as there are: (1) surviving children of the designated ancestor; and (2) deceased children who left surviving descendants. Each surviving child is allocated one share. The share of each deceased child with surviving descendants is allocated in the same manner, with subdivision repeating at each succeeding generation until the property is fully allocated among surviving descendants.

Funeral and Disposition Representative – In Re: Estate of Travers

Published on: June 19, 2019 | by Mary Patricia Magee

A recent decision from the Morris County Chancery Division, Probate Part, serves as an important reminder to not only think about the final disposition of your remains, but to communicate those thoughts to the significant people in your life. In an unpublished opinion, In the Matter of the Estate of John E. Travers, Jr. (New Jersey Superior Court, Morris County, Docket No. P-2253-2017, 2/19/2019) (hereinafter “Travers”), the Court addressed the question of who may control the disposition of a decedent’s remains when the decedent has not expressed his intentions in this regard. The Travers case contained no significant legal principles, nor did it break new ground in the estate planning field. It did, however, highlight the importance of specifying the person who should be in charge of your final arrangements and the disposition of your remains.

In this case, Mr. Travers was 22, single and had no children. He had no will and had made no direction regarding his funeral or the disposition of his remains. He was survived by his mother and father, his closest blood relations. His parents were divorced. His father felt strongly that Mr. Travers should be buried, and his mother thought he should be cremated. This disagreement took them to the Superior Court of New Jersey, where the Chancery Judge was called upon to decide the question.

The Court began its inquiry with an examination of the New Jersey law that allows for the appointment of a funeral and disposition representative. New Jersey Statute 45:27-22 provides that a decedent may specify who is to be entrusted with funeral arrangements and the disposition of bodily remains. See N.J.S. 45:27-22.a. This direction must be in a will. Id. If the decedent has not left a will that includes such an appointment, the statute sets forth the order of priority of the persons entitled to control the funeral and the disposition of remains as follows: (1) the surviving spouse or civil union or domestic partner; (2) a majority of the surviving adult children; (3) the surviving parent or parents; (4) a majority of the brothers and sisters; (5) other next of kin according to the degree of relationship with the decedent; and (6) if no next of kin, any other person acting on a decedent’s behalf. Id.

Recognize Red Flags in Estate Planning to Avoid Litigation

Published on: May 15, 2019 | by Elizabeth Candido Petite

Most clients do not want their lawyers to inherit their property. Yet sometimes the plans they desire to put into place are simply asking for that to happen. Litigation is expensive, and many states permit the attorneys’ fees to be paid from the trust or estate assets before anything is distributed to the beneficiaries. In addition, these proceedings are often lengthy and emotional, something that few wish to ever endure, and especially not after the death of a loved one.

Often trust and estate litigation can be avoided by careful planning. Thus, it is important for practitioners to recognize “red flags” during the planning process and to know how to advise their clients so that their estates are not settled in the courtroom, with the lawyers being the only ones walking away with full pockets.

Unequal distribution of assets amongst children

Elizabeth Candido Petite Interviewed for Princeton TV’s “Discover a New Future” (part 1 of 2)

Published on: April 3, 2019 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Elizabeth Candido Petite, a member of Lindabury’s Wills, Trusts & Estates practice group was interviewed by Faith Saunders of Princeton TV for her series; “Discover a New Future.” Elizabeth discusses some common issues concerning wills, trusts, and what happens to one’s property upon death. Among the questions Elizabeth answers are:

Who gets my property if I die and do not have a will?
Who can write a legally binding will?

Elizabeth Candido Petite Interviewed for Princeton TV’s “Discover a New Future” (part 2 of 2)

Published on: April 3, 2019 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Elizabeth Candido Petite, a member of Lindabury’s Wills, Trusts & Estates practice group was interviewed by Faith Saunders of Princeton TV for her series; “Discover a New Future.” Elizabeth and Faith discuss powers of attorney, advance directives for health care, and the consequences of not planning for incapacity during one’s lifetime. Among the questions Elizabeth answers are:

What is a power of attorney?
Why do I need one?

Tax Updates from Washington (February 2019)

Published on: February 13, 2019 | by Elizabeth Candido Petite

Increased exemptions for 2019. The IRS has announced that the gift and estate exemption has increased to $11.4 million per person in 2019. The exemption amount in 2018 was $11.18 million. This means that in 2019, an individual can make gifts during life or at death totaling $11.4 million without incurring gift or estate tax. In addition, a married couple can now transfer $22.8 million worth of assets during life or at death tax-free. The annual gift tax exclusion amount remains at $15,000 per recipient ($30,000 if spouses elect gift-splitting).

IRS addresses estate and gift tax exemption “clawback.” The Tax Cuts and Jobs Act (“TCJA”), which was signed into law in December 2017, increased the gift and estate tax exemption from $5 million to $10 million, indexed for inflation (see current rates above). The TCJA also provides that the exemption amount will revert to $5 million in 2026. This led many practitioners to wonder: what happens if an individual makes a gift in excess of $5 million now, and dies in or after 2026 when the exemption amount is only $5 million? Because the gift and estate tax exemption is unified, this could mean that estate tax would be due since the individual’s gross estate, which includes the prior gift made, would exceed the applicable exemption at the time of death.

However, in November 2018, the Treasury issued proposed Regulations addressing this “clawback” of the exemption amount (Prop. Reg. Sec. 20.2010-1(c)). The Regulations provide that in the situation described above, the applicable estate tax credit will be based on the greater of the two amounts. For example, if an individual makes a gift of $9 million in 2019 when the exemption amount is $11.4 million and then dies in 2026 when the exemption is $5 million, the individual’s estate may use the higher exemption of $11.4 million to ensure that tax will not be due on the amount in excess of $5 million. Thus, if you are considering make a large gift (or a series of gifts), now is the time to do it, when the exemption amount is the greatest it has ever been.