New Jersey may have high taxes and crowded highways, but one thing it does have going for it is relatively simple probate process. Even though the process is straightforward, here are some common pitfalls to avoid:
- Send Out the Notice of Probate. Whether you are probating a written will as a named executor, or are opening an estate administration for someone who died without a will (intestate), you need to send a notice of probate to all interested parties, which generally means the immediate family members and, if there is a will, to the named beneficiaries. If the will included a charity as a beneficiary, you must also notify the NJ Attorney General. The notice can be simple, and samples can be found at the county surrogate’s office. You must send in proof of mailing of the notice to the surrogate.
- Determine Early On Whether Inheritance Tax Is Due. As of January 1. 2018, there is no longer an estate tax in NJ, but there is still an inheritance tax on any gift or bequest to someone other than a spouse, child, step child, parent, grandparent or grandchild. This includes assets that pass outside of the will, such as IRAs, 401ks, and pensions. The tax rates can be found here. If inheritance tax is owed, the estate is responsible for filing an inheritance tax return within 8 months from the date of death. Unless the will says otherwise, the beneficiary is responsible for paying the tax. Beware—even if no inheritance tax is owed, you will still need to obtain inheritance tax waiver to sell real property owned by the decedent. You do this by filing an L-9 form.
- Know What the Decedent Actually Owned. This one seems like a no-brainer. But occasionally the house or the business or the stock that you thought mom owned turns out is still in the name of a long deceased relative, or a step-parent. Or the asset was jointly owned with another party, and at the decedent’s death, the asset passes to the joint owner. You can only distribute what the decedent actually owned, so don’t make assumptions about ownership.
- Don’t Make Distributions Too Early. Creditors have 9 months from the date of death to file a claim against the estate with the surrogate. If you’ve made distributions before the 9 month mark, and then get hit with a claim, you may not have enough in the estate to pay the claim. You are then in the unenviable position of having to get the distribution back from the beneficiary.
- Make Sure to Get Signed, Notarized Release and Refunding Bonds. Release and Refunding Bonds are documents that are signed by each beneficiary, each time they receive a distribution from the estate. The document lists what asset was distributed, acting as a kind of written receipt of distribution. Even more importantly, the Release and Refunding Bond has a promise that the beneficiary will give the asset back to the estate, if required in order to settle a claim or debt (see Mistake No. 4). Release and Refunding Bond forms are available at the county surrogate or on their website, and should be filed with the surrogate at the conclusion of the administration.