A person is deemed to have died “testate” when that person passes away with a validly executed Last Will and Testament. If at the time of its execution, the testator and the witnesses swore to the authenticity of the Will (thereby making it “self-proving” and not requiring Proof of Witness forms), the Will can be admitted to probate. In New Jersey, the probating of a person’s Last Will and Testament is not complicated. The person designated in the Will to serve as the Executor (male) or Executrix (female) of the estate presents the original Will to the Surrogate’s Court in the County in which the decedent resided. The executor/executrix (also known as the personal representative of the estate) is issued Letters Testamentary that authorizes the personal representative to act. Presumably, the Will provides that the personal representative may serve in this fiduciary capacity without the posting of a surety bond. (A surety bond is an insurance policy purchased by the estate to insure that the personal representative will administer the estate properly and not misappropriate estate assets.)
When a person dies without a Will, he or she is deemed to have died “intestate.” In that event, the Laws of the State of New Jersey determine who is to serve as the Administrator (male) or Administratrix (female) of the estate based upon the degree of kinship to the decedent. For example, a surviving spouse is the first person eligible to qualify as the personal representative of an estate if a decedent was married at the time of death. However, in the event there is more than one person of equal kinship, such as when there is no surviving spouse and there are two or more surviving children (or in the event that the person designated by law does not wish to serve as the personal representative), a Renunciation must be filed with the Surrogate’s Court for each individual in order to “renounce” their right to serve. If the family members of equal kinship don’t all agree, litigation can ensue.
In addition, because it is the Court that appoints the Administrator or Administratrix of the estate, a surety bond will be required, thereby resulting in unnecessary costs. The personal representative of an estate (whether as an Executor or Administrator) has a wide range of responsibilities as a fiduciary. He or she is responsible for collecting, appraising and liquidating all of the assets of the estate; paying, negotiating and/or defending the estate from all creditors’ claims; properly managing estate funds; filing a Form SS-4 Application for an Employer Identification Number or (“EIN”) to obtain a tax identification number for the estate; preparing and filing the New Jersey Estate Tax (“IT-Estate”) and/or Inheritance Tax Returns (“IT-R”) as well as a federal estate tax return (when applicable); determining whether Tax Waivers for the transfer of real property (“L-9”) or financial accounts (“L-8”) are applicable; preparing decedent and/or estate income tax returns; and distributing the proceeds of the estate to the beneficiaries (and documenting that distribution by issuing Refunding Bonds and Releases for execution by the beneficiaries.)
In addition, a formal Accounting of these activities may be required to be filed if that right is not waived by the beneficiaries. What many people fail to realize is that a decedent’s assets may pass outside the Last Will and Testament controlled by the personal representative. For example, jointly held real property (either designated as “joint tenants” or “tenants by the entireties”; joint accounts (“joint tenancy with rights of survivorship” or “JTWROS”); retirement accounts such as Traditional IRAs, Roth IRAs, 401Ks, 403Bs, etc.; annuities and life insurance policies; as well as payable on death (“POD”) or transfer on death (“TOD”) accounts; all have designations setting forth who inherits them. These assets are referred to as “non-probate” assets. Only accounts that are individually held by the decedent (in the decedent’s name alone) or assets with beneficiary designations stating that they are payable to the decedent’s estate are controlled by the Last Will and Testament. These assets are known as “probate assets.”
Together, both probate and non-probate assets comprise the decedent’s “augmented estate.” It is the decedent’s augmented estate that is generally considered in determining New Jersey and Federal inheritance and estate taxes. This can create difficulties sometimes when non-probate assets generate tax liabilities but there are insufficient probate assets in the estate to pay for those taxes. It also can result in unforeseen and unfair distributions which were unintended, forcing beneficiaries under a decedent’s Will to pay the taxes for other beneficiaries who receive non-probate assets.
Please see our section entitled Last Will and Testament. The Law Office of Richard M. Cohen will assist individuals to qualify as the personal representative of a decedent’s estate and provide advice as to properly handle the administration of the estate as a fiduciary, settling all the debts and liabilities of the decedent and making appropriate distribution of the estate’s assets to the decedent’s beneficiaries.