Your Payable on Death Beneficiary Just May Surprise You (Part 1)
I have posted many times on this blog about the reasons why you should have a will. I have also written about certain types of assets that are not controlled by a last will. One such type is contract property, which is any account that has a payable upon death (POD) designation which overrides the will. It is important, therefore, to carefully plan whether to choose POD beneficiaries at all and if so, who they should be. In the case of retirement accounts which have income tax implications, because these tax deferred accounts will potentially trigger a large income tax when the plan participant dies, it is especially important to make a careful choice. A recent case in our office resulted in an interesting conversation about the line of succession to such an account. A wife died and 10 days later her husband died. They had no children and they left no wills. Wife had a large 401k thru her employment. She had completed a beneficiary form designating Husband as the beneficiary, but she did not designate a contingent (alternate) beneficiary. We received the paperwork required to liquidate the account and transfer it to the rightful recipients. Because the account is contract property, the POD designation takes precedence over New Jersey
How to Leave Personal Property (Part 4)
How to Leave Personal Property (Part 4) In my blog post last week discussing personal property, I explained that leaving a written list in your will can problematic for several reasons. This week I will tell you about one specific reason. The State of New Jersey may come calling. That’s because it periodically checks with the county surrogate offices to see what has been probated. If, for example, my will identifies a tangible item I wish to leave my niece or my friend, that also means there may be inheritance tax owing because that person is a Class D beneficiary. Anything I leave to that person with a value of more than $500 will be subject to tax at a 15% (or if the bequest is large enough a 16%) rate. The State typically sends a notice to the executor stating that no inheritance tax return has been filed and if one isn’t filed the State will impose an arbitrary assessment of tax. This arbitrary amount is more than what any tax is likely to be but it generates the State’s desired response. If the return is not filed the assessment becomes final regardless of whether it is accurate or not. It is simply designed to get the estate to file
How to Leave Personal Property (Part 3)
How to Leave Personal Property (Part 3) In this 3rd blog post on this topic I continue a discussion about how to leave personal property when one passes away. Last week I explained that when clients sign their wills, we also give them a personal property memorandum that they can complete at any time, designating to whom they wish to leave tangible items. They can also do this by making specific designations in the will, but there are reasons the memorandum may be a better option. When a will is probated, it becomes a matter of public record with the Surrogate. Creditors, heirs and family members who may not be heirs can obtain a copy. While the will does not include a list of everything the decedent (person who died leaving the last will) owned at the time of his or her death, including a list of tangible property and the person you intend to leave it to does create a record, at least as far as those items that the person owned at the time the will was signed. This does not mean, of course, that the decedent still owned them at the time of death but it could lead to headaches for the executor (estate
How to Leave Personal Property When You Die (Part 2)
In last week’s blog post, I talked about tangible personal property and more specifically how the sentimental value attached to this property can cause issues after death in terms of distributing this property. I explained that if you want to identify specific people to leave specific items to, making specific bequests (gifts) in your will is one way it can be done. Such a “laundry list” of items in your will is not, however, what we recommend. Rather, New Jersey law provides that if your will directs your executor to distribute tangible property by way of a written memorandum, should you choose to create one, then you can make such a list and leave it with your will. Very simply, the memorandum must identify the item and the person you wish to leave it to and must be signed and dated by you. After your passing, provided the will makes reference to such a list, your executor is instructed to follow it and distribute the items to the named persons. We also provide in the will that for any tangible item not on the list, or if no list exists, then these items are to be distributed per the residuary clause along with the rest of
How to Leave Your Personal Property When You Die (Part 1)
Some of the most contentious issues we see when guiding families with respect to estate administration involves tangible personal property. This is because of the emotional attachment to these items which may or may not also have financial value. New Jersey law provides a way to handle personal property which can alleviate many of the common issues. Before we discuss that, however, let’s identify what is and is not personal property. It’s often easier to start by identifying what is not considered personal property. Real estate is not considered personal property. Bank and investment accounts are not personal property. Even stock certificate shares are not personal property. Generally, tangible property includes items you would typically find in your home such as jewelry, clothing, furniture and collectibles. Motor vehicles are included. If you have prepared a will, you can include specific bequests (gifts) to specific recipients. The will always has, however, a “catch all” clause called the residuary clause. Whatever probate property not otherwise specifically covered by a specific bequest is distributed as part of the residuary estate. We do not recommend including tangible items as part of a specific bequest. Next week I’ll explain why.
2026 Estate and Gift Tax Changes
In this week’s blog post, I discuss changes to estate and gift taxes for 2026. As with Social Security and the Medicaid and VA programs which I have already detailed here in past weeks, inflation adjustments have changed some numbers applicable to estate and gift taxes. Estate tax is due on certain individual’s estates after they die. While New Jersey does not currently have an estate tax (we do still have an inheritance tax), federal estate tax still exists for estates over a certain size. For persons dying in 2026, only estates over $15,000,000 are subject to federal estate tax. This number is up from $13,990,00 last year. I should also note that the sunset provision of the current law was set to take effect in 2026 which would have cut the exemption in half. Congress, however, did eliminate that provision - that is unless Congress decides to change it again. The annual gift tax exclusion is also indexed for inflation but only is bumped up when the inflation adjustment pushes it over the next $1000 threshold. That hasn’t happened yet so In 2026 the annual gift tax exclusion will remain at $19,000. For married couples, because of what is called a “split gift”, they can gift as much as