Can I Disinherit My Child in My NJ Will?

In New Jersey, as in most other states, a parent is permitted to legally disinherit a child, provided this intention is clearly stated in a valid will. What follows are the steps you must take to ensure that your wishes are fulfilled with regards to your estate, as well as a few caveats you should be aware of.
In New Jersey, if a person dies without having created a will, any property not disposed of in life will be governed by intestate succession rules. These rules are laid out in N.J.S.3B:5-3 through N.J.S.3B:5-14.

Can I choose to simply leave my child out of my will?
Though it might seem to be the most tactful way to handle this delicate matter, you must clearly state that you wish to disinherit your child in a valid will. Otherwise, the child will be protected by Section 3B:5-16 of New Jersey’s statutes, which protects children from accidentally being left out of a parent’s will.

Include a clause that mentions your child by their full name; this will attest to your having been of a sound mind when the will was drafted. You may keep it simple, saying only, “I have intentionally made no provision for my youngest child, John Doe.”

Do I have to state the reason I wish to disinherit my child?

The reason for disinheritance does not need to be included in your will, though whether or not to do so depends on the circumstances. If no ill will is intended, and there is no acrimony in the parent-child relationship, it is probably advisable to include a clause saying so. “I have adequately provided for my beloved son, John Doe, throughout his life; he is now a successful, independent man. I have therefore made no provision for him.”
There may, however, be good reason to remain silent on the cause for disinheritance. If including the motivation could give the child ammunition for challenging the will, or questioning your state of mind, it would be prudent to refrain from doing so. For similar reasons, it is advised that parents do not speak harshly of their child in a will. The disinheritance is most likely an adequately sharp gesture; there is no need to further attack the child after you have passed away.

Keep in mind that a disinherited child will likely attempt to contest the will. However, if you’ve followed the advice laid out here, your assets will be protected.
The Takeaway:

Here are the steps you must follow to protect your assets:

1. You must create a legally binding will.

2. Update this will any time there is a change in the family: birth, marriage, adoption, or death.

3. Clearly state your intention to disinherit your child in your NJ will, and use your child’s full name when you do so.

4. Include the reason if it will help your child feel more positively about the omission, but exclude it if it will give a hostile child more ammunition to contest your will.
Image: “footsteps” by Catrin Austin – licensed under CC 2.0

Estate Planning for Blended Families

As of 2016, blended families outnumbered traditional families in the United States. In fact, the very definition of what constitutes a family has expanded so exponentially that we may wonder what a “traditional” family even looks like anymore. For our purposes in this article, a blended family is one wherein at least one spouse has previously been married. We will also focus on those spouses who bring children of their own to a new marriage.

Blended families are increasing in number due to several factors. Higher divorce rates mean there are more opportunities for single parents to remarry someone who may potentially also be a single parent. Although rising divorce rates may seem like a bad thing, the good news is that less people are staying in unhappy marriages – choosing instead to strive for happiness, which ultimately should have a positive effect on any children in the family.

With the expanded definition of what makes up a family in today’s society, any number of homes contain a new mixture of children – both hers, his, and “theirs.” Additionally, more and more divorces are amicable, with ex-spouses remaining friendly in order to co-parent. With the addition of a step-parent into the equation, the ex-spouse may wonder if their biological child(ren) will continue to be provided for in the other parent’s will.

Estate planning becomes more challenging with the addition of more family members, regardless of how happy everyone is at the time of the wedding. The hard truth about estate planning for blended (or “step”) families is that planning for the well-being of two sets of children can easily escalate into an argument between the new spouses.

It’s critical to remind clients who have recently become part of a blended family to make sure that they make the necessary changes to the beneficiaries listed on their insurance policies and retirement accounts. No matter what a will says, the named beneficiary will take precedence over the will. Failure to remove a former spouse as beneficiary can prove quickly disastrous to a new marriage. Arguments aside, if you pass away while your ex-spouse is still named as beneficiary on your retirement account(s), guess who’s going to get all of that money?

In order to ensure that you’re not missing any crucial components of a solid estate plan after you’ve grown into a blended family, you’ll need to work with a New Jersey attorney who has significant experience working with complex estate plans. Your attorney will be able to advise you on:

  • Reciprocal wills (and how they can be problematic for blended families)
  • Non-reciprocal wills
  • Life insurance in addition to a will to provide for everyone in question
  • Testamentary trusts
  • QTIP trusts
  • Pre-marital agreements
  • Health care power of attorney
  • Living wills
  • Support obligations
  • Real property

The ultimate goal when working to set up an estate plan as a blended family is open communication between everyone involved. By maintaining open conversations about the details of your estate plan, no one will be left with an unexpected outcome.

 

Image: “Mike & Carla’s Wedding” by Jason Meredith – licensed under CC by 2.0

For SSI Recipients, Does Inheritance Spell Disaster?

3403773374_01dce76548_z

What is SSI?

SSI stands for Supplemental Security Income, and it is a financial assistance program offered by the US government to low-income United States citizens who are blind, over the age of 65, or otherwise disabled. SSI benefits are available to children who are blind or disabled, as well.

SSI is not to be confused with SSDI (Social Security Disability Insurance), which is available to people who have been working for a significant number of years and have paid “their dues,” so to speak, in the form of Social Security taxes that are deducted from an employee’s paycheck. SSDI can be received by anyone who becomes disabled and is no longer able to work, regardless of their current assets. In comparison, SSI funds are provided by the US Treasury, and recipients must have limited incomes and assets along with specific disabilities.

Can an inheritance affect Supplemental Security Income?

If a family member or loved one bequeaths money to you when they pass away, it’s important to know the possible ramifications so that your financial stability remains intact. Receiving an inheritance does not affect SSDI, as it is based on your earnings as an employee in this country. SSI, however, is distributed on a needs-based system, and because of this, anyone who receives an inheritance can become ineligible for SSI benefits.

Those receiving SSI must be intimately familiar with the strict rules that surround Supplemental Security Income so they don’t risk losing their benefits, which not only provides them with much needed financial assistance, but may also provide them with health care coverage through Medicaid.

Although an inheritance is usually viewed as a positive financial windfall, if it causes you to lose your only steady income and health care coverage, it can definitely spell disaster.

Should all SSI recipients refuse an inheritance in order to avoid losing their benefits?

It would seem unfair to exclude SSI recipients from accepting any inheritance money. After all, people who receive Supplemental Security Income are by definition financially distressed and living with a disability.

In order to help SSI beneficiaries from losing their benefits in order to accept the financial windfall of an inheritance, a Special Needs Trust can be established.

What is a Special Needs Trust?

A Special Needs Trust allows a person with disabilities or special needs to accept their rightful inheritance without jeopardizing their government benefits. Typically, parents or caregivers of a disabled person will create a Special Needs Trust when they are establishing their estate plan (will), although one can also be set up after a person dies.

Instead of inheriting their portion of their parent’s money directly, a person with a Special Needs Trust in place will have a trustee to manage the trust for them. In this way, no (or limited) SSI benefits will be lost due to accepting the money that was left to them.

Special Needs Trusts are complex and have many intricate timing details that must be followed to the letter for them to work as they were intended. Also, each family’s financial situation will determine the type of Special Needs Trust that will best meet their needs.

In order to ensure that your special needs loved one receives their rightful portion of their inheritance, you must work closely with an estate planning attorney who is familiar with all of the details surrounding Special Needs Trusts.

 

Image credit: Chris Dlugosz

Keeping the Peace When Estate Conflicts Arise

1247663055_67074e2844_z

If you have been named Executor in one or both of your parents’ will(s), there are probably a multitude of reasons why you were selected for the duty. Undoubtedly, your parents (and likely the rest of your family) recognized that you possess certain personality traits that make you an ideal candidate for the job. Most people name executors who exhibit the following qualities:

Honesty
Resourcefulness
Book smarts
Responsibility
Reliability
Solid organizational skills
Confidence
Control
Ability to be impartial
Fairness
Authenticity
Loyalty
Safety
Trustworthiness
Sound-mindedness

Naturally, when establishing an estate plan, every decision is taken very seriously, especially when it comes to appointing the executor. If conflicts arise after their passing, the decedent can rest peacefully knowing that you were left in charge of their estate.

Unfortunately, there are entirely too many cases that make their way through the NJ probate system wherein at least one of the beneficiaries (heirs) is unhappy with all or part of the details of the will. This understandably can lead to irreparable damage within a family. Because you are the chosen executor, you must now live up to your reputation that got you the job.

As negotiation may be one of your natural instincts, you may make attempts to reason with the disagreeable beneficiary, hoping that they will come to their senses. However, as these issues tend to date back to unresolved feelings of “favoritism” or other familial conflict, it can often be next to impossible to talk sense into your sibling, especially when emotions are already running high so soon after the death of a parent.

Your best plan of action as estate executor is to follow your legal duties to the letter of the law. Become as familiar as possible with what is expected of you as executor. If your parent worked with an estate planning attorney when they established their will, get in touch with that attorney and bring him up to speed on the current difficulties you are facing.

Even if your parent(s) didn’t work directly with a New Jersey estate planning lawyer, it’s a good idea to reach out to one early in the probate process if it looks like you’ll be dealing with ongoing conflict from one or more of the heirs. As executor, you’ll be able to use funds from the estate to pay the legal fees you incur on behalf of the estate (assuming that the decedent possessed sufficient funds/assets when they passed away.) Even if you don’t retain the services of an attorney immediately, it’s in your best interest to bring your attorney up to speed in case you need to retain him later on in the probate process.

The best way to approach an estate conflict as executor is to be kind but firm to the beneficiary who is being difficult. Resist bending any rules and instead remind them about the laws and timelines that surround the distribution of any assets.

By sticking strictly to your duties as estate executor, you will fulfill the duty that you were so chosen for. It is extremely difficult to satisfy someone who feels they’ve been “wronged” by a decedent, as the deceased is no longer around to explain him or herself. If someone is unhappy with the content of the will, they may take issue with your every move. Stay within the law, and refer to your attorney for help if the disgruntled beneficiary becomes more than you can handle.

Image credit: Hans Vandenberg

NJ Wills: What is Probate?

5420063467_61e2f0afbd_z

Most people go to great lengths to avoid even thinking about their own mortality and that of their closest loved ones. Admittedly, processing the fact that you or someone very near and dear to you will inevitably pass away can be overwhelming and sad.

Our best advice to those who are struggling with the concept of dying is to face it matter-of-factly. Being prepared for all of the details surrounding someone’s passing certainly won’t make it any easier in terms of missing them, but it will put your mind at ease regarding their estate.

What is an estate?

After someone dies, their estate consists of any and all assets (property of value) that they owned. Assets include things like real estate, vehicles, personal items, life insurance proceeds (in some cases) and money. If the deceased person owed any debts, the money in their estate will be used to pay these debts before anything can be dispersed to beneficiaries.

How do I start the process of sorting through my loved one’s estate?

If you were named as the executor of an estate that has assets, you’ll need to visit the surrogate court in the New Jersey county in which the decedent lived. This will start the NJ legal process known as probate, and it can be initiated 10 days after someone passes away.

What happens in probate?

In New Jersey, probate is necessary only if the deceased had assets in his or her name only. Official appointment of the executor will occur in probate court with the production of the will and death certificate.

If there was no will, an administrator will be assigned to the estate in probate court. As long as there are no protests of the will, surrogate court will then give full authority to either the estate executor or administrator. You can find a full list of the executor’s duties here.

Does an estate executor get paid?

In New Jersey, estate executors or administrators can be paid for their duties, which can, in certain cases, be quite time consuming. The amount they can receive is limited to 6% of any income to the estate, plus 5% of the total gross value of the estate.*

How long does it take to probate a will?

The length of time it will take for anyone’s estate to move through the probate process is dependent on how large and complicated the estate may be. On average, moderately sized estates typically make it through to the end of NJ probate within a year. More extensive and complex estates can languish in probate for up to a decade.

For more information about New Jersey probate laws call or contact our office today. In addition, take this time to make an appointment with us to draft your own estate plan.

Image credit: Bosc d’Anjou

Do My Brother’s Creditors Have a Claim to My Inheritance?

6679444993_9c4afa41e8_z

 

If you have recently learned that you are to be the recipient of an inheritance, you may very well have a number of questions. After all, it’s not every day that one must make sense of the confusing rules and laws regarding NJ estates.

Oftentimes, you will find that the deceased has divided their estate among several of their closest relatives and/or friends. Everyone who is named in the deceased’s will is known as an heir or beneficiary. Frequently, when a parent passes away, they will leave at least part of their estate to their adult child(ren).

A question that we encountered recently involved a New Jersey estate wherein the decedent left her entire estate, including her home to be divided among her three children. The home was to be sold and the proceeds also then split between the three heirs. The rest of her estate included a moderate amount of money along with some additional valuable assets that would, again, be liquidated and divided equally.

It was discovered that one of the three beneficiaries was in over his head in debt. He had debt collectors calling him constantly, and liens were placed on any money that he may receive via judgements or inheritance. This made the other two heirs extremely nervous about the security of their own portions of the estate.

They wondered, “Will our brother’s creditors have a claim to the entire estate?”

This is a very legitimate fear, but luckily one beneficiary’s poor financial decisions will almost never affect his co-beneficiaries. While it’s true that his creditors do indeed have a cause of action against his portion of the inheritance, they have no claim whatsoever to anything that was willed to any other beneficiaries.

The exception here would be if one of the other beneficiaries was the spouse of the indebted heir, and even then, creditors would only be able to take the spouse’s portion of the inheritance in community property states, which are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska leaves the decision about community property up to the couple.

In New Jersey, debts that were incurred (by the beneficiary in question) jointly with a spouse who is also named as a beneficiary of the estate at hand may leave the spouse responsible for debt repayment.

Additionally, even if the debtor/beneficiary incurred his debts without his spouse as a co-signer, his spouse may still be held responsible if some or all of the debts were acquired for family necessities.

Other than those nuanced situations, an indebted beneficiary’s creditors will not be able to come after any assets willed to other heirs of the same estate. If any property is left to the indebted beneficiary with the intent that he share the physical property with you and/or one of the other heirs (where the property is not to be sold and divided), it’s in your best interest to work with an estate planning attorney in New Jersey so that your interests are protected.

Image credit: thethreesisters

How is a Spendthrift Trust Affected by Bankruptcy in NJ?

466709245_fdae5ac84c_z

If someone close to you has passed away and made you the beneficiary of a spendthrift trust, you may be wondering exactly what this means. First and foremost: your loved one cared enough to think about and plan for your financial future after they were gone.

A spendthrift trust is typically left to a beneficiary who is dealing with one or more of the following:

  • Past or present financial difficulties
  • Addiction(s) that may lead to irresponsible spending
  • Significant debt(s) that may entitle creditors to the beneficiary’s assets

Spendthrift trusts are set up with a trustee in place. The trustee is in charge of distributing funds from the spendthrift trust to the beneficiary on a set schedule. This type of spendthrift trust acts as a form of income for the beneficiary, and prevents them from wasteful spending behaviors that may occur if they were to be granted the full amount in one lump sum.

Sometimes spendthrift trusts are set up so that the trustee does not distribute any money to the beneficiary. Instead the trustee will be directed to provide the beneficiary with goods and services that are paid for by the spendthrift trust. This type of situation is called for when the beneficiary is extremely irresponsible with money. The trustee typically uses the trust money to purchase groceries, clothing, and other monthly living expenses encountered by the beneficiary.

I want to file for bankruptcy. Will my creditors take my spendthrift trust money?

As we’ve talked about before, New Jersey bankruptcy law states that if a debtor files for bankruptcy in NJ, they are subject to a 180 day “look back” period with regard to inheritance money, life insurance funds and a number of legal settlements.

The 180 day look back period was instated to reduce abuse of the bankruptcy system. Essentially, if a loved one dies within 180 days of when you filed for bankruptcy, your creditors are technically allowed to take any financial windfall you may experience as payment on your defaulted debts.

A spendthrift trust does not allow even the beneficiary to have direct access to the funds, let alone the beneficiary’s creditors. Only the trustee has access to the money while it is in the spendthrift trust. However, once the trustee disperses any of the funds to the beneficiary, those funds become subject to creditors’ claims if the bankruptcy has been filed within the 180 day look back period.

Language can be inserted into anyone’s estate plan to prevent creditors from getting any of the spendthrift money. This will, of course, require you to engage in a difficult and uncomfortable conversation with the person whose will in which you are named as a beneficiary.

The language used must specifically state that if you (the beneficiary) file for bankruptcy during the 180 day look back period, that you are not entitled to any money in the spendthrift trust until 181 days after the date of death.

If you or a loved one need help setting up a spendthrift clause in your estate planning paperwork, seek assistance from a New Jersey estate planning attorney to ensure that the correct language is used. Estate planning is a significant life event that must be taken seriously as it can have a powerful effect on the lives of the beneficiaries.

 

Image credit: Terry Johnston

What are Creditors Entitled to After my Bankruptcy Discharge?

27283212996_13a9320f35_z

You received your bankruptcy discharge – congratulations on a fresh financial start! Ridding yourself of the debts that were weighing you down can be extremely liberating and is cause for a gigantic sigh of relief.

After your debts are discharged,  there are still certain protocols to follow so that you don’t make an expensive mistake. These rules were created to prevent bankruptcy fraud. For example, a debtor cannot give someone a large sum of money that they will then retrieve after the case is over. The reason for this would be to hide money from the trustee so that it cannot be used to pay creditors. That is a blatant example of bankruptcy fraud, and any debtor who attempts to outsmart the bankruptcy court in this manner has little chance of “getting away with it.” Punishment for bankruptcy fraud is harsh.

There are certainly situations that arise naturally, are totally unplanned, and involve a (former) debtor legally coming into money after their bankruptcy has been discharged. In this case, there are some time limits set to further prevent foul play:

  • Inheritance – If someone close to you passes away within 180 days of the date on your bankruptcy petition, you are obligated to alert the bankruptcy court and that money will then go to your creditors. This rule was instated to prevent people from filing for bankruptcy when they knew someone close to them was on their death bed. By filing for bankruptcy before their death, the inheritance money would be protected and the debtor would have essentially scammed the system. Creepy and illegal.
  • Insurance proceeds – The same rules apply to life insurance proceeds that you become entitled to within 180 days of filing for bankruptcy. It is imperative that you keep careful track of the specific dates of important events surrounding your case. The important date in this case is when your family member or loved one passed away and you became entitled to any life insurance proceeds. If the date of death is within 180 days of the date that you filed for bankruptcy, the life insurance money will go to paying off your debts.
  • Lawsuit settlements – All of your legal claims and lawsuits pending must be listed in your bankruptcy paperwork. If you receive a payout from a lawsuit you initiated before you filed for bankruptcy, that money will generally become part of your bankruptcy estate and will go towards paying your creditors. In New Jersey bankruptcy cases, you can choose to follow either NJ or federal exemption guidelines. NJ exemptions allow you to keep $1000 of any money received via lawsuit. Federal exemptions regarding lawsuit settlements during bankruptcy can be found here.
  • Divorce settlements – While child and marital support obligations will not be affected by a bankruptcy (filed by either spouse), part or all of the marital property settlement, if established within the 180 days following the initial bankruptcy petition, may be liquidated and used to pay your (or your spouse’s) creditors. Your divorce lawyer should discuss the specifics of this with your bankruptcy attorney to ensure that you and your ex-spouse are able to keep as much of your marital assets as possible.

Always consult with your bankruptcy lawyer if you have any questions about the rules following your bankruptcy discharge to ensure that you make wise decisions that won’t end up costing you a significant amount of money.

Image credit: Investment Total