Avoiding Probate in NJ - Updated Feb 2024 (2024)

Probate is the legal process by which a deceased person’s estate is settled, including validating their will, paying debts, and distributing assets to beneficiaries according to the terms of the will. It’s important to note that the probate process can take time and may involve significant legal fees and court costs. Additionally, individuals may be able to avoid probate, such as setting up a trust or using joint ownership arrangements. In New Jersey, the probate process is guided by the state’s laws and regulations.

If you need a probate lawyer, the team at Matus Law Group is here to help. Our experienced attorneys are well-versed in New Jersey’s probate laws and can guide you through the entire process of probate. We understand that losing a loved one can be difficult and emotional, and dealing with the legalities of probate can be overwhelming. We are committed to providing compassionate and personalized support to our clients. To speak with an experienced New Jersey probate lawyer, call (732) 281-0060 to schedule a consultation.

What is Probate?

Probate is a court-supervised legal process initiated after an individual’s death to settle their estate. The process aims to:

1. Prove the validity of a deceased person’s last will and testament and confirm that it accurately reflects their wishes.
2. Take inventory of the deceased person’s assets.
3. Determine and satisfy any debts or liabilities (e.g., unpaid taxes or debts to creditors).
4. Distribute the remaining assets to the heirs, beneficiaries, or legatees according to the terms of the will.

In cases where there is no will, the probate court will distribute the deceased person’s assets according to New Jersey’s intestacy laws, which provide a distribution scheme based on the deceased person’s marital status, children, and other surviving family members.

Probate Process in New Jersey

In New Jersey, the probate process is initiated when the executor (named in the will) or administrator (appointed by the court if there is no will or executor assigned in the will) submits an application for probate to the Surrogate’s Court in the county where the decedent resided.

The probate process involves several steps:

1. Initiating the probate process: The executor submits the original will (if any), a certified copy of the death certificate, and a completed probate application to the appropriate Surrogate’s Court. The court then reviews and authenticates the will, after which the executor will be appointed and granted letters of testamentary, allowing them to act legally on behalf of the estate. If there is no will or no named executor, an administrator would be appointed and provided letters of administration.
2. Notifying interested parties: The personal representative (either the executor or administrator) must notify beneficiaries, heirs-at-law, and other interested parties, such as creditors, of the probate proceedings.
3. Gathering and managing assets: The personal representative must locate and collect the deceased person’s assets, including bank accounts, real estate, investments, and personal belongings. The personal representative manages and preserves these assets until they are distributed to the beneficiaries.
4. Paying debts and taxes: The personal representative is responsible for paying any outstanding debts from the estate’s assets, including taxes. They may need to sell some assets to generate the necessary funds.
5. Distributing remaining assets: After all debts and expenses have been paid, the personal representative will distribute the remaining assets to the beneficiaries according to the terms of the will or according to the state’s intestacy laws if there is no will.

Duration and Costs of the Probate Process

How long the probate process takes depends on the estate’s complexity and size, the speed with which the personal representative works, and the responsiveness of interested parties. Generally, a straightforward estate can be settled within 9 to 12 months, while more complicated estates may take several years.

As for costs, the personal representative is entitled to a commission for their services, which may vary based on the size and complexity of the estate. In addition, there may be costs for attorney fees, accountants, appraisers, and other professionals who assist the personal representative throughout the process.

Other costs associated with the probate process include court fees, which vary by county but are generally modest; publication costs for legal notices in newspapers; and bond premiums, a form of insurance protecting the estate from potential financial loss due to the personal representative’s actions.

The New Jersey probate process can be lengthy and incur various costs, depending on the complexity of the deceased person’s estate. Executors/Administrators and beneficiaries should be prepared to engage in the tasks and responsibilities involved in probate to ensure a smooth and efficient process.

Reasons to Avoid Probate

While probate can be an essential procedure, individuals may want to avoid it for several reasons. These reasons include saving time and money, increasing privacy, reducing family conflict, and obtaining potential tax benefits.

Save Time and Money

One of the main reasons individuals may want to avoid probate is that it can be lengthy and expensive. The time it takes to complete probate depends on the size and complexity of the estate, but in most cases, it can take anywhere from a few months to several years. During this time, the estate must pay for any legal fees, court fees, and any other costs associated with probate. Probate can quickly become expensive and eat into the estate’s assets, leaving less for heirs to inherit.

Additionally, the longer the probate process takes, the longer it will be before the estate’s assets are distributed to its beneficiaries. This can cause financial strain and uncertainty for those relying on their inheritance for income or other needs. By avoiding probate, individuals can help ensure that their loved ones receive their inheritance more quickly and that costly legal and court fees do not diminish the estate’s assets.

Maintain Confidentiality and Privacy

Probate is a public process, meaning that the details of the deceased person’s estate and the distribution of its assets become part of the public record. This can be particularly concerning for those who value their privacy, as it allows anyone to access information about their assets, debts, and beneficiaries—additionally, making this information public can lead to unwanted attention or scams targeted at the deceased person’s family and heirs.

Avoiding probate allows individuals to maintain a higher level of privacy surrounding their estate and distribution. By using alternative estate planning tools, such as trusts, individuals can ensure that most of their assets are not subject to probate and, thus, not part of the public record. Knowing that their financial matters will remain private can provide peace of mind to both the individual and their loved ones.

Reduce Family Conflict

Unfortunately, the probate process can sometimes lead to family disputes and conflict, mainly when there are disagreements about the contents of a will or the distribution of assets. Because probate is a legal process, these disputes can ultimately be resolved by a judge, which can be both time-consuming and costly.

By avoiding probate and having a well-structured estate plan, individuals can help reduce the possibility of family conflict after their death. By clearly outlining their wishes and potentially using a trust to manage the distribution of assets, individuals can establish a clear plan for their estate that leaves little room for disagreement or interpretation. This can ultimately result in a smoother transition of assets and less stress for grieving family members.

Potential Tax Benefits

In some cases, individuals may obtain certain tax benefits by avoiding probate. For instance, assets that pass to beneficiaries through probate may be subject to estate taxes, depending on the estate’s value and the applicable tax laws in New Jersey. By using non-probate transfers, such as beneficiary designations on retirement accounts or payable-on-death designations on bank accounts, individuals can pass these assets to their heirs without subjecting them to estate taxes.

Additionally, the use of certain trusts can provide tax benefits as well. For example, establishing a revocable living trust can help avoid probate while providing income, gift, and estate tax benefits.

Several compelling reasons exist to avoid probate when planning an estate. Individuals can save time and money, increase privacy, reduce family conflict, and potentially obtain tax benefits. Proper estate planning with the assistance of legal professionals can help individuals navigate these complexities and ensure that their assets are distributed in a way that aligns with their wishes and best interests.

Creating a Revocable Living Trust

A revocable living trust is a legal entity created to hold ownership of an individual’s assets during their lifetime and distribute them after their death. As the name implies, this type of trust is revocable, meaning it can be changed or dissolved during the lifetime of the person who has created it (the grantor or trustor). This flexibility and control make revocable living trusts an attractive estate planning tool for many people.

Trust Basics and Terminology

Before diving into creating a revocable living trust, it’s essential to understand some basic trust terminology:

• Grantor (or Trustor): The person who creates the trust and whose assets will be placed into it.
• Trustee: The person or institution that manages the assets in the trust according to the grantor’s instructions. The grantor may also act as the trustee during their lifetime.
• Beneficiary: The person or entity that will receive the trust assets after the grantor’s death.
• Trust assets: The property and assets that are transferred into the trust and managed by the trustee.
• Revocable: The grantor retains the power to change or revoke the trust during their lifetime.

Setting up a Revocable Living Trust

To set up a revocable living trust, follow these basic steps:

1. Choose a Trustee: Select an individual or institution to manage the trust. Often, grantors act as trustees during their lifetime and designate a successor trustee to manage the trust after their death.
2. Draft the Trust Agreement: This legal document outlines the terms of the trust, including the powers and responsibilities of the trustee and how the trust assets will be managed and distributed. It’s advisable to consult with an experienced estate planning attorney to ensure that the trust agreement is drafted correctly and complies with your state’s laws.
3. Transfer Assets to the Trust: Once the trust is established, the grantor must transfer their assets into the trust. This typically involves re-titling assets such as real estate, bank accounts, and investments in the name of the trust. Certain assets, such as life insurance policies and retirement accounts, may require a change in beneficiary designations to reflect the trust as the new beneficiary.
4. Fund the Trust: The grantor must fund the trust by transferring their assets into the trust. This can be done by re-titling assets, transferring ownership, or changing beneficiary designations.

How Revocable Living Trusts Avoid Probate

One of the primary benefits of a revocable living trust is that it avoids probate – the court-supervised process of administering an individual’s estate after their death. Because the trust owns the assets, it eliminates the need for probate, ensuring a smoother and more efficient transfer of assets to the designated beneficiaries.

Maintaining and Updating Your Trust

A revocable living trust requires ongoing maintenance to ensure it continues to serve its purpose effectively. As a grantor’s life circ*mstances change, it may be necessary to update the trust document to reflect those changes, such as adding or removing beneficiaries or updating the terms of the trust.

Regular reviews of the trust and its assets are essential to ensure that newly acquired assets are properly titled in the name of the trust or that beneficiary designations reflect the trust as the recipient. This helps avoid potential complications and disputes after the grantor’s death.

In addition, if the grantor moves to a different state, they should consult with an estate planning attorney to ensure their trust remains valid and compliant under the new state’s laws.

A revocable living trust can be an effective estate planning tool that offers flexibility and control during a grantor’s lifetime while avoiding the potential headaches of probate after their death. Regular maintenance and periodic updates are crucial to ensure the trust continues to achieve its desired objectives. Consulting with an experienced estate planning attorney can be invaluable in setting up, updating, and maintaining a revocable living trust.

Joint Ownership of Assets

Joint ownership of assets is a legal arrangement in which two or more people share ownership of a particular property or asset. This can include real estate, bank accounts, investments, and personal property like cars.

Joint ownership offers several benefits, including sharing expenses related to the property, ease of transfer upon the death of one of the owners, and potential protection from creditors. Understanding the various types of joint ownership and how they work before entering into any agreement is essential.

The key feature of this arrangement, especially in probate matters, is the right of survivorship. When one spouse dies, the other spouse automatically assumes full and immediate control of the property. This automatic transfer is important as it effectively avoids the probate process, with the property not becoming part of the deceased spouse’s estate for probate but directly passing to the surviving partner.

Explore the intricacies of probate avoidance through tenancy by the entirety with the guidance of a seasoned New Jersey probate lawyer. At The Matus Law Group, our skilled lawyers are well-versed in New Jersey’s estate laws and can provide tailored advice to ensure a seamless transition of assets for you and your loved ones. Contact us to schedule a consultation and gain a deeper understanding of how tenancy by the entirety may align with your estate planning goals.

Advantages and Disadvantages of Joint Ownership

While joint ownership offers several advantages, it also has some disadvantages to consider.

Advantages of joint ownership include:

• Ease of Transfer: As previously mentioned, joint ownership comes with the right of survivorship, simplifying the transfer of assets upon the death of a co-owner and avoiding the need for probate.
• Shared Expenses: Co-ownership allows for the sharing of expenses related to the property, such as maintenance costs, mortgage payments, and taxes.
• Protection from Creditors: In cases of tenancy by the entirety, joint ownership can provide some protection from creditors seeking to collect on a judgment against one spouse.

Disadvantages of joint ownership include:

• Liability: Joint ownership exposes all co-owners to potential liability issues that may arise from the actions of one co-owner, such as failing to maintain the property or engaging in illegal activities.
• Loss of Control: Co-owners must consult and agree with each other regarding decisions related to the property or asset, potentially leading to disputes that may be difficult to resolve.
• Tax Implications: Depending on the type of asset or property involved, joint ownership could lead to increased tax liabilities for co-owners, especially for those in higher tax brackets, as they may be subject to gift taxes or capital gains taxes upon the transfer or sale of jointly owned property.

Before deciding to enter into a joint ownership agreement, it’s crucial to carefully consider the specific type of asset, the relationship between the co-owners, and the potential risks and benefits associated with joint ownership. Consulting an experienced attorney can provide valuable guidance in making this critical decision.

Designating Beneficiaries

Designating beneficiaries is essential to estate planning, ensuring your assets are distributed according to your wishes after your death. Beneficiary designations supersede wills and trusts, so you must ensure that you have the appropriate beneficiaries named on all accounts that allow for a designated beneficiary.

Payable-on-Death Accounts

Payable-on-death (POD) accounts are bank accounts, such as savings accounts or certificates of deposit, that transfer the funds to a named beneficiary upon the account holder’s death. This type of account allows for the immediate transfer of assets to a beneficiary without the need for probate, the legal process of administering a deceased person’s estate.

To establish a payable-on-death account, you must request a POD designation form from your bank or financial institution. Completing this form will allow you to designate one or more beneficiaries, providing their names, addresses, and social security numbers. Upon your death, your beneficiary(s) can claim the funds in your account by providing identification and a copy of your death certificate.

It is important to note that your account’s beneficiary will only have access to the funds in your account upon your death. You maintain full control over the account during your lifetime, including the ability to change beneficiaries, withdraw funds, or close the account.

Transfer-on-Death Registrations

Transfer-on-death (TOD) registrations apply to non-retirement investment accounts and some types of property, such as securities. TOD registration allows the assets to transfer directly to a named beneficiary upon the account owner’s death, bypassing the probate process, similar to a POD account.

You must request a TOD registration form from your brokerage firm to establish a transfer-on-death registration for an investment account. The form will require you to provide the beneficiary’s name, address, and social security number. New Jersey does not allow TOD registrations for real estate or vehicles.

A benefit of TOD registration is that it allows for the immediate transfer of assets to the named beneficiary, reducing the time and costs associated with probate. However, it is essential to consider the potential tax implications for the beneficiary.

Life Insurance and Retirement Accounts

Life insurance policies and retirement accounts, such as 401(k)s and IRAs, also allow for named beneficiaries. When you pass away, the funds are paid directly to the designated beneficiaries, bypassing the probate process.

It is essential to review the beneficiary designations on your life insurance policies and retirement accounts regularly and update them as needed, particularly after significant life events such as marriage, divorce, or childbirth.

It is also essential to consider the tax implications associated with these accounts, especially for beneficiaries who may be required to pay income taxes on the funds received from a retirement account.

Keeping Beneficiary Designations Up-to-Date

Regularly reviewing and updating your beneficiary designations is crucial to ensuring that your assets are distributed according to your wishes. Outdated beneficiary designations can lead to unintended consequences and disputes among family members.

It is essential to review your beneficiary designations after significant life events and consult with an estate planning attorney to ensure that your assets will be distributed according to your wishes upon your death.

Gifting Assets During Your Lifetime

Gifting assets during your lifetime can strategically reduce your taxable estate, help your family or friends, and provide financial support to your favorite organizations. The tax code allows individuals to make tax-free gifts up to a certain amount each year, known as the annual exclusion. There are also lifetime limits on how much a person can give away tax-free, known as lifetime exclusion. With careful planning, you can take advantage of these tax breaks and ensure the assets you wish to give away are transferred efficiently and effectively.

Gift Tax Exclusions and Limits

The Internal Revenue Service (IRS) allows individuals to make annual tax-free gifts up to a specific amount, known as the annual gift tax exclusion. For 2023, the annual exclusion is $17,000 per recipient, up from $16,000 in 2022. You can give up to $17,000 each to as many people as you want without incurring any gift tax liability.

Married couples can combine their annual exclusions and give away up to $30,000 per recipient without incurring gift tax. However, to take advantage of this more extensive exclusion, the couple must file a gift tax return, even if no tax is owed, to report their decision to “split” their gifts.

In addition to the annual exclusion, there is a lifetime exclusion called the federal estate and gift tax exemption. This exemption amount encompasses your lifetime gifts and your estate’s value at death. In 2023, the lifetime exemption is $12.92 million per individual and $25.84 million for married couples. If you exceed this lifetime exemption amount, the excess is subject to a 40% federal gift and estate tax.

Strategic Gifting to Reduce Estate Value

Gifting during your lifetime is a strategic way to reduce your taxable estate and lower the tax burden on your heirs. By taking full advantage of the annual gift tax exclusion and the lifetime exemption, you can reduce your estate’s value, which may help your beneficiaries avoid or minimize estate taxes.

One popular gifting strategy involves using the annual exclusion to give directly to family members and friends or even set up a 529 education savings plan for a child or grandchild. Another option is contributing to a trust, such as an irrevocable life insurance trust (ILIT), to reduce the death benefit proceeds that may be included in your estate.

Gifting appreciated assets, such as stocks, can also be a tax-advantageous strategy, as it can help you avoid paying capital gains tax if the asset’s value has grown significantly. It’s essential to consider the potential tax consequences of gifting these assets, as capital gains tax may be owed by the gift recipient when they sell the asset.

Protecting Your Interests with Lifetime Gifts

As you consider gifting assets during your lifetime, ensuring that you are sufficiently protected financially is crucial. It’s generally not advisable to give away so much of your wealth that it jeopardizes your financial security, particularly in your retirement years.

Before making sizable lifetime gifts, it’s essential to have a clear understanding of your financial needs and living expenses. This may involve working with a financial planner or estate planning attorney to carefully evaluate your current financial situation, calculate your anticipated expenses, and estimate the growth of your remaining assets.

In addition, it’s essential to consider the impact of your gifts on your eligibility for certain government benefits, such as Medicaid. Giving away a substantial amount of assets could impact your ability to qualify for these programs, should the need arise.

Finally, consult with a tax professional and an estate planning attorney to address any potential tax issues related to gifting assets during your lifetime. An attorney can help you navigate the complexities of gift tax regulations and develop a strategic plan to minimize tax liabilities while ensuring financial security.

Small Estate Procedures in New Jersey

In New Jersey, the legal process of administering the property and debts of a deceased person falls under probate, which can often be complex, costly, and time-consuming. To alleviate some of this burden on families in certain situations, New Jersey provides a streamlined process called small estate administration for estates that meet specific criteria.

Eligibility for Small Estate Administration

Determining if an estate meets the eligibility criteria for small estate administration in New Jersey is crucial. These qualifications are primarily based on the total value of the decedent’s assets, excluding real estate and the type of property involved. In New Jersey, small estate procedures can be used if the estate value does not exceed $50,000 for a surviving spouse, a partner in a civil union, or a domestic partner, or $20,000 for other heirs. This method can also only be used if the decedent did not leave behind a will.

It is important to note that joint assets with rights of survivorship, life insurance policies, and retirement accounts with designated beneficiaries do not pass through the probate process and are not included in the small estate value calculation.

How Small Estate Administration Works

Once it has been determined that an estate qualifies for small estate administration, the process begins with filing the appropriate documents with the Surrogate’s Court in the county where the decedent lived.

The following are the steps to undertake small estate administration in New Jersey:

1. Obtain an Affidavit of Surviving Spouse or Other Heir: The spouse or heir must complete and sign this affidavit stating that the estate meets the requirements for small estate administration. Supporting documents such as the decedent’s death certificate, a list of available assets, and identification are also required.
2. Pay the filing fee: A nominal filing fee is payable to the Surrogate’s Court when submitting the affidavit and supporting documents.
3. Obtain Letters of Administration: The Surrogate’s Court will review the submitted documents and, if approved, issue “Letters of Administration,” empowering the administrator to collect the decedent’s assets.
4. Collect and distribute the assets: Once in possession of the Letters of Administration, the administrator can use them as evidence of their authority to gather the decedent’s assets, pay their debts, and distribute the remaining balance to the proper heirs.
5. Close the estate: After distributing assets and paying debts, the administrator may close the small estate administration process. The final accounting is optional for small estates in New Jersey.

Potential Benefits of Using Small Estate Procedures

Small estate administration offers several benefits to those who qualify, such as:

• Cost savings: Small estate administration is generally less expensive than full probate, as there are fewer court fees and the reduced necessity for legal assistance.
• Efficiency: The small estate process is quicker than standard probate since less court oversight and documentation are required.
• Simplified procedures: Small estate administration is more straightforward and less complicated, often making it easier for family members to navigate without extensive legal support.

Small estate procedures in New Jersey provide a more accessible and less burdensome option for eligible decedents’ families, reducing the time and cost associated with probate. It’s essential to consider the estate’s value and requirements carefully before pursuing this option, as each situation is unique. Consultation with an experienced estate attorney or professional is recommended to ensure compliance and proper handling of the estate.

Seeking the Help of an Experienced New Jersey Probate Attorney

Estate planning ensures that your assets, belongings, and wishes are carried out after your death. Individuals possess the right to determine the distribution of their property after their passing without any external interference. However, in some cases, heirs and beneficiaries may harbor valid concerns regarding the disposition of assets. During such times, seeking legal guidance from an experienced New Jersey probate attorney is crucial.

At Matus Law Group, we have a team of skilled probate attorneys who possess a comprehensive understanding of the intricate laws associated with the New Jersey probate process and other estate planning matters, including wills and trusts, litigation, and disputes. For over twenty years, our law firm has been providing reliable probate administration and litigation services to the residents of New Jersey. If you need the assistance of a seasoned New Jersey probate attorney, contact Matus Law Group at (732) 281-0060 and take the first step toward settling your loved one’s estate with confidence.