Varian Law LLC

Myths and Realities of Estate Planning in New Jersey

Myths are spread from person to person and by the Internet. Correcting the myths is not an easy task.

The world of Wills and Trusts has created many estate planning myths through the years.  However, they can be corrected, according to TC Palm in "Common misconceptions about Wills and Trusts."

Examples of some notable myths include:

• Myth #1 - Probate is awful and should be avoided. Truth - First of all, the “probate process” is just one step in an overall estate administration and it is designed to allow those interacting with an estate to confirm that they are in fact working with the estate’s authorized representative.  In some States, the probate process is administratively complex, expensive and something you would want to try to avoid.  However, the probate process in New Jersey is relatively simple and inexpensive.  Once an Estate’s “personal representative” is appointed by the applicable Surrogate, further probate Court supervision of the overall estate administration process is not required in New Jersey.  But in light of the complexities encountered in other States’ probate systems, and the inaccurate portrayals of the probate process by many unscrupulous people here in New Jersey, many people in New Jersey mistakenly believe that they must design estate plans to avoid probate.
• Myth #2 - If you do not have enough assets for your estate to pay the Federal Estate Tax, an estate plan is not needed. Truth - EVERYONE, yes EVERYONE, needs some level of estate planning.  “Estate planning” is not just for the uber-wealthy (or even just for the moderately wealthy).  Federal Gift, Estate, and Generation Skipping Transfer taxes are not, and never have been, the only (or even the main) reasons why everyone should engage in some degree of estate planning.  Estate planning is an ongoing process that involves the creation, preservation and distribution of one’s assets by implementing various techniques and strategies designed to manage one’s assets while they are alive, protect one’s assets for the benefit of their loved ones, provide for the management of one’s assets and their own personal care in the event of an incapacity, and distribute one’s assets upon their death to the people that they want to receive them in a manner which effectively accomplishes both their objectives. 
• Myth #3 - You should transfer your house to your children for a dollar in order to protect it. Truth - This is one of the most damaging myths that exist.  This “strategy”, which is usually passed on from one uninformed neighbor or relative to another, can have numerous adverse consequences, including, but not limited to, the loss of a stepped-up income tax cost basis, the creation of a very lengthy penalty period for Medicaid qualification purposes, and a distortion of a parent’s distributive desires.  

An experienced estate planning and elder law attorney can answer any of your questions regarding Estate Planning, Wills and Trusts, and can advise you on creating an estate plan that fits your unique circumstances.

Reference: TC Palm (May 1, 2018) "Common misconceptions about wills and trusts."

Do You Need A Revocable Living Trust in New Jersey?

A Revocable Living Trust can be an appropriate estate planning tool; however, it is not necessarily for everyone.

Despite extensive advertising by both attorneys and non-attorneys selling Revocable Living Trusts, the reality is that not everyone needs one.  However, there are some times when Revocable Living Trusts are the best option, according to the Wills, Trusts & Estates Prof Blog discusses in "Estate Planning, Is a Trust Beneficial?"

Revocable Living Trusts are often recommended as a means of avoiding probate.  In light of the complexities encountered in other States’ probate systems, and the inaccurate portrayals of the probate process by many unscrupulous people here in New Jersey, many people in New Jersey mistakenly believe that they must implement Revocable Living Trusts that are designed solely to “avoid probate.”  However, the probate process in New Jersey is relatively inexpensive and easy, and while there may be other valid reasons for implementing Revocable Living Trusts, probate avoidance is not necessarily needed in New Jersey. 

However, there are situations where a Revocable Living Trust may be a useful estate planning strategy/technique.

An experienced elder law and/or estate planning attorney can advise you on whether a Revocable Living Trust is right for you.

Reference: Wills, Trusts & Estates Prof Blog (March 28, 2018) "Estate Planning, Is a Trust Beneficial?"

Avoiding Probate When You Own Real Estate Outside of New Jersey

Unlike several other States where the probate process can be very cumbersome and expensive, the probate process in New Jersey is a relatively simple and inexpensive process.  However, in light of the complexities encountered in other States’ probate systems, if you own real estate outside of New Jersey, you may want to avoid probate in those States.

One way to avoid real estate going through probate is to put someone else’s name on the ownership of the property.  However, joint ownership of real estate is fraught with potential problems, according to the Daily Republic in "All Things Real Estate: Living trust best way to pass house to children."  Among the problems with adding someone else’s name to your real estate Deed is that it makes the real estate available to that person’s creditors. That does not always become a problem; however, when it does, it is normally a big one.

A much better way to avoid having real estate go through probate is to create a Revocable Living Trust. The real estate can be transferred into the Trust and then it will not have to go through probate after the owner passes away.

An experienced estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can set up the most favorable way to distribute your assets.

Reference: Daily Republic (March 3, 2018) "All Things Real Estate: Living trust best way to pass house to children."

Wills And Revocable Living Trusts Are Not Alternative Estate Planning Options

Wills and Trusts often go hand-in-hand when it comes to estate planning.

Even if you established a Revocable Living Trust while you are alive, it is likely that when you pass away you will have some assets that for one reason or another were never put into your Trust.  Those assets may need to be distributed by your estate.  To do so, you need a Will.

That type of Will is called a “pour-over Will” and it usually directs that everything you own should be transferred to your Trust. However, there are other things you might also need to accomplish with a Will, such as directing who should be appointed as a proper guardian for your minor children.  You also might have some assets that you do not want to go through a Trust for other reasons.

An experienced estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, which may or may not include a Will and a Revocable Living Trust.

Reference: Lake County News (Feb. 24, 2018) "The difference between a trust and a will."

Get Yourself a Will but Don’t Stop There

An estate plan is more than a Will and can solve many problems for you and your family.

Some recent statistics point out the importance of Americans not only creating a Will, but learning about the options of an estate plan, according to the AARP in "Haven't Done A Will Yet?"

A new survey reveals that 58% of American adults do not have Wills. The survey also found that it was even worse for parents of minor children.  A total of 64% of them do not have Wills. They have more reasons than anyone else to have a Will.

But estate planning should not stop with just a Will.

A Will is only one of the documents you can get by going to an experienced estate planning attorney. For example, you might learn that a Trust is a better primary estate planning tool for you to use in your particular situation. Through an attorney, you can also get other important legal documents, including a health care power of attorney, a general durable power of attorney and a living will.

These and other legal documents will make sure that your financial affairs are managed properly if you ever become unable to handle your own affairs.

An estate planning attorney can help you to prepare your Will as well as informing you about the options of an estate plan.

Reference: AARP (Feb. 24, 2017) "Haven't Done A Will Yet?"

There Are Many Types of Trusts

Living Trusts are common, but there are other types of Trusts.

While living trusts (a.k.a. inter vivos trusts) are used frequently, there are also testamentary trusts. Many people have the documents that create one, but they are not aware of it, according to NWI Times in "Wills can create trusts."

The revocable living trust is very common, so it is often assumed that all trusts are revocable living trusts.  However, there are many different types of trusts.

For example, it is very common for a Will to create a testamentary trust for the decedent's beneficiaries.  

Whether your estate plan creates a trust for your beneficiaries under a revocable living trust or a Will, make sure you understand what it will do (and not do) to protect and manage your estate.

A qualified estate planning attorney can help you create the estate plan that meets the unique circumstances of you and your family.

Reference: NWI Times (Feb. 19, 2017) "Wills can create trusts."

Scams Can Get You a Worthless Estate Plan

When preparing an Estate Plan, it is wiser to deal with an Estate Planning attorney.

My San Antonio recently published the article "'Trust mill' scam hits elderly hard" explaining why the elderly need to be on the lookout for scams.

According to the article, a reader wrote in to ask questions about an Estate Plan his parents had purchased from what they thought was an attorney in Dallas.

When the man's father passed away, his mother could not find the original documents.  However, she was able to receive copies of a Will, Revocable Trust and General Durable Power of Attorney from the party that sold them to the couple.  The reader wanted to know if the copies could be used in place of the originals.

What happened next is all too common.

The columnist consulted with the State bar association and learned quickly that there was no such Dallas attorney. The person who sold the couple the documents had never been an attorney. It was actually a salesperson hired by a company to sell elderly people so-called Estate Plans.

Companies commonly called "Trust Mills" sell people boiler-plate form Estate Planning documents, which leave the victims thinking that they have good Estate Plans.  

But they do not.

They have a one-size-does-not-fit-all set of documents that are often worth less than the paper they are printed on.

Reference: My San Antonio (Dec. 15, 2016) "'Trust mill' scam hits elderly hard."

Investment Accounts Belong in Your Revocable Living Trust (if you have one)

When it comes to investment accounts, the answer is usually pretty simple. They belong in your Revocable Living Trust (if you have one).

Properly implemented Revocable Living Trusts are useful Estate Planning strategies in jurisdictions where the probate process is cumbersome and expensive.  In such jurisdictions, properly drafted and implemented Revocable Living Trusts may simplify the probate process and reduce expenses by excluding assets placed in the Trust from the probate process (although they are still included in the gross estate for Estate Tax purposes and are also still subject to Income Tax). 

Revocable Living Trusts may also provide a client with privacy regarding his estate because the Trust document, unlike a Will, does not become part of the public record.  Revocable Living Trusts may also be useful in situations where a client may become incapacitated and they do not want their assets to fall under the control of an estranged child.  In order to work properly, however, Revocable Living Trusts must be properly funded.

Investment accounts are the one class of asset that should almost always go into your Revocable Living Trust, according to The Herald Bulletin in "If you have a trust, that's where your investments should go."

When an Estate Planning attorney drafts you a proper Revocable Living Trust, you need to fund it with your assets (an experienced and qualified attorney should assist you with the funding process).  That can sometimes be difficult depending on the asset.  Also, your Estate Plan might be created in such a way to keep certain assets out of the Trust for various reasons. 

However, any non-qualified investments that you have should almost always go into your Revocable Living Trust.

An Estate Planning attorney can guide you in setting up a Revocable Living Trust that fits your unique circumstances.

Reference: The Herald Bulletin (Dec. 17, 2016) "If you have a trust, that's where your investments should go."