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What is an Estate Plan and Why Do You Need One?  (Part I – The Will)

Posted by Paul D. Mitchell | Jun 17, 2022 | 0 Comments

Many people have heard the term Estate Plan, but they may not know what it means.  Some people may have been told by their family or friends that they need to get an Estate Plan.  This is generally good advice, but it does not help one understand what an Estate Plan is or why it is needed.  Depending on your specific needs, Estate Plans can range from relatively simple to extraordinarily complex.  The focus of this series of articles will be the basic Estate Plan.  However, you should not confuse “basic” with “unnecessary.”  Even a basic Estate Plan is a powerful tool which can protect you, your family, and your wishes.

The common elements of most Estate Plans are three documents, also known as instruments.  These instruments include a Last Will and Testament (“Will”), an Advance Directive, and a Durable Power of Attorney.  The Will is the cornerstone of any Estate Plan, and it is the first topic of this series.  In its most basic form, your Will is essentially a set of instructions that you leave for your family and loved ones.  The Will tells them what to do with your “stuff” after you die.  If you do not leave these “instructions,” then the State of New Jersey will decide who gets your stuff.

Anyone who dies without leaving a valid Will is said to have died intestate.  If you do not have a valid Will when you die, then the State of New Jersey will use its Statutes to determine which of your heirs are entitled to your intestate estate assets.  The fancy language for this process is called intestate succession.  Fortunately, with a few exceptions, you can take a few easy steps to make sure you get to decide!

New Jersey Statute § 3B:5-2 states that “[a]ny part of the decedent's estate not effectively disposed of by his will passes by intestate succession to the decedent's heirs as prescribed in N.J.S. 3B:5-3 through N.J.S. 3B:5-14, except as modified by the decedent's will.”  If you do not have a valid Will, then you are unable to modify how your assets are passed on to the people you want to have them (“disposed of” in the statutory language). 

The New Jersey intestacy statutes, N.J.S.A. § 3B:5-3 through N.J.S.A. § 3B:5-14, determine how your intestate estate will be distributed if you do not have a valid Will.  In some cases, the distribution is straightforward.  If you die without a valid Will and you leave behind a spouse/domestic partner, but you have no living descendants or living parents, then your spouse/domestic partner inherits the entire intestate estate (N.J.S.A. § 3B:5-3a(1)).  In a different example, the distribution of your intestate estate is more complex.  Suppose you die without a valid Will and you leave behind a spouse/domestic partner, you have no living descendants, but one or both of your parents are living.  In this case, your spouse/domestic partner inherits the first 25% of your intestate estate, but not less than $50,000.00 nor more than $200,000.00, plus three-fourths of any balance of the intestate estate.  Your parent(s) would inherit the remaining intestate estate (N.J.S.A. § 3B:5-3b).

As these two examples demonstrate, it can get quite tricky trying to determine who inherits your intestate estate.  The New Jersey intestacy statutes attempt to deal with most scenarios in which people die without a valid Will.  However, the statutes are not perfect and may leave your beneficiaries in a less than ideal situation.  In some cases, without a valid Will, you could wind up leaving part, or all, of your estate to people you did not want to receive it.  In the unlikely scenario where you die without a valid Will, and you have no descendants or legal heirs, then State of New Jersey will control your estate property.  “Escheat” is legal term for this process where the State gets your intestate estate property.

In its simplest form, your Will states who you leave your estate to.  Your Will, informs your executor about who you want to receive what, after you die.  The executor is the person or persons (you can name multiple executors) who is in charge of managing your estate and distributing its assets.  Many people name their spouse or domestic partner or their children as their executor(s).  However, you are not limited to naming relatives as executors; you can name a close friend or even an institution, such as a bank, to be the executor of your estate.

As part of your Will, you can direct that you leave your entire estate to your spouse or domestic partner.  You can leave your estate to all of your children; in equal shares or whatever percentages you decide.  You could leave your estate to only some of your children or to none of them.  You could pass your estate to other relatives, or friends, or even to your favorite charity.  The possibilities are almost limitless.

There are, however, some exceptions to how you may distribute your estate after you die.  If you are married, you cannot exclude your spouse or domestic partner from inheriting at least a portion of your estate.  N.J.S.A. § 3B:8-1 provides that even if you exclude your spouse or domestic partner from your Will, they are entitled to take an elective share of one-third or your augmented estate.  Your augmented estate is your gross (total) estate minus funeral and administrative expenses but with the added value of any property you transferred at any time during the marriage (N.J.S.A. § 3B:8-3).  Of course, your spouse or domestic partner can waive their right to this elective share.  The waiver must be in writing and your spouse or domestic partner must have full disclosure and knowledge of what they are waiving.

Other exceptions to how you distribute your estate include an exclusion on the distribution of non-probate assets through your Will.  Non-probate assets are assets which pass outside of your Will and the estate probate process.  Non-probate assets include assets with named beneficiaries, such as your pension, life insurance policies, annuities, your 401(k), IRA, or other retirement plans.  They also include any real property (real estate) or jointly owned bank accounts.  For example, your Will cannot direct your executor to distribute your life insurance benefits to anyone other than the person(s) named on the life insurance policy.  Nor can your Will direct your executor to give your marital home to someone other than your spouse or domestic partner.

Drafting a Will can be as simple or complex as you decide.  While you do not need an attorney to draft your Will, it is highly recommended.  Your attorney will work with you to ensure your Will is both valid under the laws of this State and that it distributes your estate assets according to your goals.  The experienced Estate attorneys with Lavery, Selvaggi, Abromitis & Cohen, P.C. are ready to assist you with all your estate planning needs.

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