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In my post last week, I started to tell you about an interesting estate administration case involving an heir who had legally adopted the decedent a number of years before the decedent died.  This was an adult adoption in which the adopted parent was only 10 years older than the adopted child.  As I stated last week,the primary motivation was to permit the parent to leave his estate to the adopted child and avoid inheritance tax because a child as a Class A beneficiary is exempt from inheritance tax. Except that the child died first.  While he chose to leave a portion of his estate to the parent by adoption, he left the rest to his child and his sibling.  The adoption had an affect not only on the parent’s heirs but it also affected the adopted child’s heirs. Just as a child is a Class A beneficiary, exempt from inheritance tax, so is a parent.  No problem there, however, the adult adoption also changed some of the decedent’s other relationships.  The New Jersey statute concerning adult adoption states that the effect of the adult adoption is that the rights, privileges and obligations due from the adopted child to the natural parents and all relations existing between them

In this week’s post I’ll tell you about an interesting issue that came to our office involving an estate administration matter.  The decedent left a portion of his estate to his friend.  What I also learned is that the friend who was 10 or so years older than the decedent, legally adopted the decedent.  While I do not know for certain, a reason for the adult adoption may have been avoidance of inheritance tax. A parent is a Class A beneficiary and anything inherited is free of inheritance tax.  The same is the case for a child who also inherits free of the tax.  A non related heir, on the other hand, is a Class D beneficiary.  The tax paid by Class D heirs is 15% of the first $700,000 received and then 16% of anything received above that amount.  By going ahead with the adoption, which must be accomplished  by a court order, the inheritance tax can be avoided for both the parent and the child.  But, there are also unintended consequences. For one thing, because the friend did not have any children and was older than the decedent, I expect that a primary motivation was probably to avoid inheritance tax when the friend died.  Because the friend was older than

My post last week was about a call we received from someone named as executor in a sibling’s will.  While the decedent was a New Jersey resident and U.S. citizen, the executor was not.  As I explained last week, there is no New Jersey statute or rule requiring it, however, there are very practical reasons for choosing a resident/citizen. First there is a language barrier to consider.  Choosing an executor who does not speak English makes the process that much more involved because an interpreter will be necessary for all verbal and written communication written documents. Many US banks are reluctant to deal with non U.S. citizens.  Opening an estate account may prove difficult if not impossible.  The Executor will need to close out accounts in the decedent’s name and transfer them to an estate account first to pay bills and taxes before disbursing to the heirs.  A foreign executor may find it difficult to open an estate account in a local non US bank.  The executor will need to hire an accountant and/or an attorney to deal with income tax, estate and/or inheritance taxes and communicate with each one. Many of the documents that the executor will need to complete and sign are required to be notarized.  Others require a

We received a call the other day regarding an estate administration matter.  A New Jersey resident died leaving a home and other assets in her name.  She named her her sibling as the sole heir as well as her executor.  Sounded pretty straight forward.    An inheritance tax return would need to be filed and inheritance tax paid in order to complete the estate administration process but since the executor would be the sole heir no accounting would be necessary. There was, however, one potential wrinkle.  The executor is neither a New Jersey resident nor a  U.S. citizen.  In fact, the executor does not speak English.  The caller wanted to know whether that would prevent her from serving as executor.   New Jersey does not have a specific requirement that an executor named in a will be a New Jersey resident or even a United State citizen.  Where there is no will and an administrator needs to be appointed, court rules establish a preference for a New Jersey resident unless there is a compelling reason otherwise.  There is no such rule that even suggests a preference for the choice of a non resident or non citizen as executor of a will. I did tell the caller that as a practical matter, however, there are

In last week’s post I wrote about a bill introduced in New York that we may eventually see in New Jersey.  Modeled after a Washington state law, if passed it would mandate a payroll tax on all employees to cover an insurance policy that will provide coverage for their long term care.  As I noted last week, the Washington law has flaws in it that the draft of the New York law attempts to fix. The New York law provides for an exemption from the tax as long as you have a long term care insurance policy in place as of January 1 of whatever year the new law becomes effective.  It does not appear likely that this will happen in 2022 but if it does occur any time in 2023 one would need to have policy in place by the end of this year. The policy benefits are small, $100 a day for 1 year.  The total of $36,500 will not be enough for many people, since the average cost of nursing home level care can approach $168,000 or more a year, however, the feeling is that with the oldest baby boomers starting to turn 80 in 2026, any attempt to ease the increasing burden

A bill introduced in the New York Senate may be something to pay attention to here in New Jersey.  The law is titled the “New York Long Term Care Trust Act” and is modeled after a similar law passed in the State of Washington last year, although attempting to avoid that law’s negative aspects. The law in Washington provides limited long term care coverage to its residents funded by a mandatory payroll tax.  Many, however, considered that law to have some serious flaws.  For one thing, it contained an exemption from the payroll deduction as long as residents had a long term care insurance policy in place by November 1, 2021.  This deadline threw the insurance industry into a bit of a crisis, causing such a high demand in requests for policies that some insurance companies stopped selling new policies.  Secondly, the law did not specifically provide that any private policy purchased must be kept in force to maintain the exemption, a pretty big gap that Washington legislators failed to see. New York is considering passing a similar law, but with an effort to improve on Washington’s flaws.  While the proposed New York law would obviously only apply to New York residents it is worth paying attention because