In addition to helping clients with their estate planning, we have a wealth of experience in estate administration. We handle the probate process, assist in valuing assets, prepare and file Federal and State estate and inheritance tax returns, prepare disclaimers and handle “postmortem” tax planning. We are experienced in working with families during periods of grief and strive to make the process as simple and comfortable as possible.
Settling an estate can often be a frustrating time for clients. Clients are emotionally drained from losing a loved one and are often overwhelmed by the burdensome paperwork required to settle an estate. Although many law firms offer estate administration, it is crucial that clients retain a law firm that specializes in estate administration and has expertise in the complexities of the estate. The law firm of Davidson, Sochor, Ragsdale & Cohen, LLC takes great care to settle all estates it is retained to administer. We file all required estate and inheritance tax returns in a timely, efficient and professional manner and make sure that the client pays the least amount of overall taxes required by law.
We place a particular emphasis on the importance of having an experienced attorney assist in settling an estate’s final affairs and we can help ensure that your responsibilities as an Executor are met. Additionally, we frequently represent non-resident clients with New Jersey estates and work with attorneys in other states for those estates that own property in other jurisdictions.
Probate is the process of passing assets titled in the name of a deceased person to his or her Estate, and ultimately to the beneficiaries named in his or her Last Will and Testament. For Decedents without a Will, assets will pass to that person’s family members in accordance with the intestacy statute of the State in which they are domiciled at the time of his or her death.
Probate in the State of New Jersey is relatively easy and inexpensive, especially when compared to probate in most other states. The filing fees are generally between $150 and $250 and are not based on a percentage of the value of estate assets.
The Surrogate’s Office in the County in which a person dies handles the paperwork to begin the probate process. The named Executor of the Estate informs the Surrogate about certain basic information. Within about a week the Surrogate issues a document known as “Letters Testamentary” which is the written authority for the Executor to administer the Estate.
A Disclaimer (also known as a renunciation) is a refusal to accept assets to which a person is otherwise entitled. The Law Office of Davidson, Sochor, Ragsdale & Cohen, LLC provides surviving spouses and other beneficiaries with expert tax advice in order to make this important decision.
A “Qualified Disclaimer” is one that, when properly done, allows the disclaimed asset(s) to pass to an alternate beneficiary without the imposition of a gift. By way of examples, a beneficiary may disclaim assets under a Will or Trust, or benefits from IRAs, retirement plans or life insurance. A Qualified Disclaimer must meet certain legal and filing requirements and the person disclaiming must not accept any benefits from the assets disclaimed before filing the Disclaimer. Soon after the death of a loved one, it is important to consult with an experienced estate planning attorney to see if a Disclaimer is advisable in achieving the desired result for the family.
Estate and Inheritance Tax Returns
A Federal Estate Tax return is required if the sum of the assets held at death plus the taxable gifts made during the life of the Decedent are more than the federal exemption equivalent, namely $5,250,000 as of January 1, 2013. The exemption is scheduled to increase annually based on an inflation adjustment. In the 2012 Tax Act (known as “ATRA”) Congress made the exemption “permanent” (although Congress continues to discuss whether, and how, to modify the law). Although a spouse can pass an unlimited amount to his or her spouse during life or at death, the assets passing to a spouse at death do not count towards the exemption equivalent.
The Tax Return is due and the taxes must be paid within nine (9) months of the date of death. A six (6) month extension may be obtained if timely and properly filed. The penalties for failure to comply with the filing requirements are substantial and special care should be taken to avoid their imposition by the Internal Revenue Service.
A deferral of the payment of estate taxes can be obtained under limited circumstances (e.g. lack of liquidity to pay tax). The permission to defer estate taxes requires tax expertise. The Law Firm of Davidson, Sochor, Ragsdale & Cohen, LLC can assist Clients in obtaining such tax deferral when necessary.
A New Jersey Estate Tax Return is required when the gross estate plus prior taxable gifts are in excess of $675,000. Even though a spouse can pass an unlimited amount to his or her spouse during life or at death, the assets left to a spouse at death do count as part of the gross estate and can therefore necessitate the filing of a New Jersey Estate Tax return even when all assets are left to a surviving spouse. Like its Federal counterpart, the New Jersey Estate Tax Return is due within nine (9) months after the date of death.
Both the Federal and New Jersey Estate Tax returns are based on the concept of a “gross estate”. By comparison, a New Jersey Inheritance Tax Return is required when assets pass to non-spouses who are not a Decedent’s lineal descendants (e.g. brothers, sisters, aunts, uncles, nieces, nephews, cousins and friends). If required, the New Jersey Inheritance Tax Return is due within eight (8) months of the date of death. Interest on any underpayment is charged at the rate of 10%.
Both the New Jersey Estate and Inheritance Tax Returns are needed to obtain tax “waivers” to release the State’s estate and inheritance tax lien on real estate and other assets, including stock in New Jersey Corporations, New Jersey bonds and New Jersey bank accounts. Self-Executing Waivers are available for use in some, but not all estates. They are called “self-executing” because they do not require the State of New Jersey to approve them before the assets are released. L-8 forms are used for intangible personal property (e.g. stocks, bonds and bank accounts), while the L-9 form is used for real estate. These forms cannot, however, be used in all instances. Among other things, they cannot be used if the taxable estate exceeds $675,000, if any assets are left to a Trust, or if any beneficiary is neither a spouse nor a lineal descendant. If this process cannot be employed, the Executor must instead file a New Jersey Estate Tax Return in order to get the tax waivers from the State of New Jersey.
If a self-executing tax waiver form cannot be used, New Jersey banking institutions will release one-half (1/2) of the date of death value of a bank account until a waiver can be obtained from the State of New Jersey. If real estate is sold by an Estate prior to a proper waiver being obtained, the Buyer’s title insurance company will most likely insist upon funds being held in escrow until the waiver is obtained.
When the Law Firm of Davidson, Sochor, Ragsdale & Cohen, LLC is retained to help an Executor administer an estate, proper attention is paid to the waiver law rules so the Estate can gain access to all of its assets as soon as reasonably possible.