Being the personal representative (executor or administrator) of an estate is a big undertaking.  The responsibility can be overwhelming at times so it’s important to know what you are getting into and take the time to make an informed decision.  If the deceased left a will (testate) then that will names the executor.  If you are named it does not mean you have to accept, but know that you were named because the decadent believed you were the right person for the job.  If the deceased did not leave a will (intestate), then the probate court will appoint an administrator.  Usually someone will petition to be the administrator and if nobody accepts the court could appoint a probate lawyer to act on the estates behalf.

What are the personal representatives duties?  Below is a list broken down into sections to help understand the process better.

Notify Next of Kin, Collect Debts and Record the Assets

  • Find all the documentation and papers (Will, death certificate, birth certificate, marriage certificate)
  • File the papers with the probate court (In New Jersey it is called the Surrogate Court)
  • Determine if there was any life insurance and if so file the appropriate claim forms (you may also need a statement from the doctors)
  • Obtain social security burial allowance if applicable.
  • Did the deceased have any benefits? (veteran’s, social security or pension)
  • Transfer any bank accounts to the estate
  • Collect all assets.  These things include stocks, bonds. automobiles, furniture, jewelry, status of any business, deeds, real estate owned, etc…
  • Locate names and addresses of all heirs, legatees, devisees and next of kin.  Notify all interested parties of the probate within 60 days: advising of the name & address of the Executor, the place & date of the probate, & that a copy of the will be furnished upon request. If there are charitable bequests, notice must be given to the Attorney General of NJ. A proof of mailing is filed with the Surrogate’s Court.

Determine all Debts and Claims against the Estate

  • What are the current bills owed (doctor, hospital, rent, utilities, etc.) and arrange to pay.
  • Discontinue services on charge accounts
  • Are there any outstanding debts such as mortgage, life insurance, car loan?
  • To determine if the beneficiary is a child support judgment debtor,obtain an identification certification from each beneficiary, and order a certified child support judgment search from a private judgment search company. Publish Death Notice about claims against the estate in newspaper
  • Review all claims for their validity, amount and correctness.
  • Oppose any false claims

Manage the Estate

  • Set up bookkeeping records and / or an estate account.
  • Re-register stocks, bonds; arrange for collection of dividends and interest.
  • Inventory all items of property and arrange for their appraisal.
  • Examine all real estate as to condition, adequacy of insurance, status of taxes and assessments.
  • Collects rents, make reports, obtain tenants, maintain necessary insurance in force, arrange for electricity, fuel, telephone, etc.
  • Review all investments as to safety and quality; make necessary changes as prudence indicates.
  • Examine books and records of any business interest. Have necessary audits and appraisals made.
  • Supervise the family owned business.
  • Request allowance from court for support of deceased’s family.

Determine and Pay all Taxes

  • Compute value of estate and probable state and federal taxes.
  • Select valuation date for federal estate tax.
  • Determine whether administrative expenses should be charged against income taxes or estate taxes.
  • Prepare estate’s income tax return also last income tax return of decedent.
  • Determine charitable and other deductions.
  • Determine how funds will be raised to pay taxes.
  • Prepare inheritance tax returns.
  • Prepare federal inheritance tax returns.
  • Pay personal property or real estate taxes, if any.

Distribute the Assets

  • Determine who is entitled to share in the estate.
  • Sell assets to raise cash for specific legacies.
  • Determine how assets will be distributed, which legatee and devisee is to get each item of property.
  • Pay all final costs.(Including any child support obligation).
  • Arrange for transfer and re-register of securities.
  • Prepare detailed informal or formal account for court.
  • Obtain release and refunding bonds from all beneficiaries and file with Surrogate’s Court.
 

How are taxes handled in New Jersey Probate?  When it comes to federal and state tax purposes, two events get set in motion: it puts an end to the decedent's last tax year when it comes to filing an income tax return, and it establishment of an estate occurs.  The estate itself is then taxed.

Federal Taxes

Let's separate the federal and state for a minute and breifly explain what has to be done in order to fullfil any tax burden.  For federal purposes, a few forms must be completed and filed, dependent on the decedent's income, the size of the estate and the income of the estate:

  • Final Form 1040 Federal income Tax Return
  • Form 1041 Federal Fiduciary Income Tax returns for the estate
  • Form 709 Federal Gift Tax return
  • Form 706 Federal Estate Tax return

The federal estate tax is based on the value of the estate's assets less liabilities.  It's not that easy however because you'll have to take into concideration any exceptions…

Exception #1: Unlimited Marital Deduction.  All of the assets left to a surviving spouse are exempt from federal estate tax

Exception #2: Estate and Gift Tax Exclusions. The estate tax applicable exclusion permits a transfer up to $3.5 million at your death to anyone without incurring an estate tax.  Note: in 2010 there will be a 1 year repeal on the estate tax.  In 2011 and beyond, estates will be subject to estate tax at a top rate of 55% with only a $1 million exemption available.

Exception #3: Qualified Charitable Donations. Assets passed to charity are exempt from estate tax.

Exception #4: Federal Gift Tax Applicable Exclusion.  Fixed at $1 million and permits a transfer to anyone during a lifetime without incurring a gift tax.  Any gift amount will then be subtracted from the allowable $3.5 million exemption at death.  Meaning, if you give a $1 million gift to your best friend, $2.5 million will remain of your exemption at death.

Now let's take a look at State Taxes.  The Personal representative must file the appropriate state income tax return for the deceased and any state income tax returns for the estate during the probate period.  That is not all however, the PR must also make sure to pay any local real estate tax, personal property tax, business tax and any unresolved tax issues related to prior year tax returns.

State Estate Tax

Under New Jersey Law, there is an estate tax on assets anything passed to someone other than a spouse in excess of $675,000.  The rates will vary from 4.8% to 16% with the first $52,174 taxed at 37%.  

State Inheritance tax

New Jersey inheritance tax is broken up depending on who the beneficiary is.  Below is an explanation of the rates at which someone will be taxed.

– Spouse, child, grandchild or parent.  Any inheritance passing to a spouse, child, grandchild or parent is completely exempt from the New Jersey inheritance tax.  These persons are considered “Class A” beneficiaries.

– Siblings.  Inheritances passing to a brother or sister are exempt for the first $25,000 to each such brother or sister.  These persons are considered “Class C” beneficiaries.   Thereafter, a tax of 11 percent is imposed.  After the total amount exceeds $1.1 million, the tax is 13 percent.

– Charities.  Anything left to a charity is exempt from New Jersey inheritance tax.  Charities are considered “Class E” beneficiaries.

– All others.  All other relatives, or to non-related persons are considered “Class D” beneficiaries, and their inheritances will be subject to a New Jersey tax of at least fifteen percent.  If the value of the inheritance is less than $100, no tax will be due.  However, for inheritances worth more than $100, there is no exemption.

If the beneficiaries are subject to New Jersey inheritance tax, they have to file an inheritance tax return.  The due date for New Jersey inheritance tax is 8 months from death. If the decedent was a resident of New Jersey, Form IT-R should be used, and if the decedent was not a resident, then Form IT-NR should be used. If the beneficiaries, being the immediate relatives, are exempted from the inheritance tax, they don't have to file an inheritance tax return. They will have to use Form L-8 in order to release bank accounts, stocks, bonds etc, and Form L-9 in order to release the State's lien on real property. Before transferring the assets like real estate or stocks, the beneficiary has to obtain a written consent from the Director of the New Jersey Division of Taxation. This waiver, which doesn't apply when Forms L-8 and L-9 are not applicable, is not granted until the beneficiary pays the inheritance tax. The due date to pay inheritance tax in New Jersey is 8 months after the death of the individual whose estate will be passed on to the heir. Tax debt, if any, after the due date will be subject to interest.

State Gift Tax

New Jersey does not impose a separate gift tax.

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Under New Jersey Probate Law, when someone dies testate (has a will),that will will appoint an executor.  The job of the executor is very important and comes with numerous responsibilities.  These obligations include probating the will, liquidating assets (selling a home or jewelery), pay all encumbrances and taxes as well as take care of all other court duties.  The executor may hire a lawyer to help make the proper decisions, but let’s face it, it’s a tough job that not every one can handle or just isn’t willing to do so.

Once the executor is declared, the court or surrogate’s office are not responsible for making sure the will is probated properly or in a timely manner.  If you are not happy with the way the executor is handling their duties because they are not following the instruction set forth by the will,you can, under New Jersey Probate Law, have an attorney file a complaint in Superior Court.  This complaint is called the Complaint for Accounting.  The complaint for accounting is filed to request the removal of the current executor and asks the court to assign a new person as an administrator of the will.

Removal is not easy in any sense of the word.  The beneficiaries must be able to prove that serious wrongdoing has occurred before the court will rule to replace the executor.  Such acts as moving to slowly, refusing to give out information or just being uncooperative are not grounds for removal. In successful removals, the beneficiaries where able to convince the court that the executor was incapable of performing his/her duties, was unsuitable for the position or has become disqualified.

Incapable: Must prove that the executor has some mental or physical illness that will prevent them from successfully acting in the role of an executor.

Disqualified:
This being the easiest to prove.  If the executor has committed a crime since being appointed and has gone to jail for the crime, then they are no longer eligible to be an executor.

Unsuitable: Because of the circumstantial evidence that must be interpreted, this is the most challenging to prove.  This involves either a conflict of interest or some form of serious misconduct.  Other misconduct, which may be grounds for removal must be fairly serious and actually damaging or threatening to damage the estate. Examples of such behavior might be:

  • Being a Drunk
  • Stealing from the estate
  • Not filing an inventory or accounting
  • Refusing to obey a court order
  • Neglecting to perform duties as executor

In conclusion you must have great cause in order to pursue a removal of an executor.  Costs are high and the risk of alienating everyone is great.  Money can easily come between family, so please exhaust all your options first before considering an executor removal.

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