The Phone call
One of the worst phone calls to receive is a phone call regarding the death of a loved one. The sad news may come from a hospital, a nursing home, or even the police department. It is a difficult, emotional time whether there has been a long sickness or a sudden accident. The purpose of this webpage is not to deal with those emotional issues, but to provide some practical information that will be useful in a situation where it would be difficult to think clearly.
Funeral Arrangements: One of the first things that needs to be done is to contact a funeral director regarding funeral arrangements. If the deceased was foresighted, perhaps the deceased already made such funeral arrangements. The cost ofthe funeral is usually borne by the decedent's "Estate" if the Estate is sufficient. If the deceased died without any assets, the funeral director should be informed immediately and the necessary public programs should be accessed. After the funeral, the funeral director can provide a "death certificate". This is the first important document in the Administration of the Estate.
The Will: Once the death certificate is obtained, an individual can take the death certificate to the safety deposit box of the deceased and search the box, for the sole purpose of determining whether or not there was a Will. Otherwise, the contents of the box will not be available until an Administrator or an Executor is named
What is an Estate?
When someone dies, their property does not pass directly to their heirs or the beneficiaries named in their Will. First, it goes into an Estate. An Estate is a legal entity created when someone dies. When an estate is created, it takes on a life of its own. An Estate must file for a Federal Tax I.D. number, separate from the deceased's Social Security number. Although an Estate is treated as a new entity, the Estate needs to act through someone. That individual is the personal representative of the Estate. In cases where the deceased dies with a valid Will, the personal representative is called an Executor. In the case where a person dies without a Will, the personal representative is called an Administrator.
If there is a Will, after 10 days have passed, the Executor of the Will should bring the Will and an original death certificate to the County Surrogate's Office. This process is called "offering the Will for probate".
The Surrogate: The Surrogate's Office will review the Will to see if it is in proper form. Depending upon how the Will was executed, the Surrogate's Office may require the witnesses to the Will to come to the Surrogate's Office or sign certain other documents. If the Will was self-proving, it is not necessary to locate the witnesses to the Will.
Bond: When the Will is offered for Probate, the Surrogate's Office will ask about the assets held by the deceased. Based upon the amount of those assets, the Surrogate's Office may require that the Executor obtain a bond as a condition for "qualifying" to act. The Executor obtains a bonding form from the Surrogate's Office, goes to an insurance carrier who writes bonds for Executors, completes a bond application, pays a premium and obtains the bond, which must be filed with the Surrogate's Office.
Qualification: Once all these steps are accomplished, the Executor has "qualified" and will receive "Letters" from the Surrogate's Office identifying him as the valid Executor, and certificates showing that, on the date they were issued, he remained the Executor.
Solemn Form If there is a snag in any of these steps, it may be necessary to probate the Will in solemn form. That means that the Executor may have to go before a Judge of the Superior Court of New Jersey to prove that the Will is valid. This could be necessary if the Will is not in proper form, if witnesses to the Will are not available, if the original Will cannot be located and only a copy is offered for probate, or if there is a question as to whether the deceased was competent or under undue influence when the Will was signed.
No Will: On the other hand, if a thorough search has been made for a Will and no Will has been located, any of the close relatives can go to the Surrogate's Office after 10 days from the date of death and apply to be Administrator. This type of administration is callet an intestacy and the estate is an intestate estate.
Renunciations: The law establishes that certain relatives have a greater right to be Administrator of an intestate estate than others. Therefore, the spouse of the deceased has the first right to act. The children of the deceased and the other heirs have a lesser right to act as Administrator. Only if the spouse and the other heirs will not act as Administrator can another person act as Administrator. Accordingly, if the person who goes to the Surrogate's Office is not a spouse, they will have to obtain "renunciations" of the right to act as Administrator from all the individuals having a prior or equal right to be Administrator under the statute. After an Administrator has established his right to act, the Surrogate will ask for information regarding the amount of the assets in the Estate and may determine that a bond is necessary. If a bond is necessary, the person wishing to act as Administrator will have to take the Surrogate's bonding form to an insurance agency and obtain the bond. Once the bond is obtained, the Surrogate will give the Administrator Letters of Administration, showing that they have been appointed the Administrator of the Estate. The Surrogate will also provide Surrogate's Certificates showing that, on the date the Certificate was issued, the Administrator will still qualified to act as Administrator.
Marshal the assets: Whether one is named an Executor or an Administrator, one of the first items of business to undertake is to "marshal the assets". That means to determine all things of value that the deceased owned at the time of his death and to gain control of each. One of the first steps in marshaling the assets is to determine the bank accounts and stocks the deceased owned. One of the best sources for this information are Federal tax returns. The deceased's accountant should be contacted and copies of the tax returns should be obtained. The Administrator or Executor can go to the banks in which the deceased held accounts, and withdraw up to 1/2 of the property in each account. The second half of the property is "frozen" until transfer inheritance tax waivers are obtained. If the deceased owned stock, that stock should be transferred to the name of the Estate. If the corporation whose stock is owned is not a New Jersey corporation, the stock broker can transfer the stock when presented with the Surrogate's Certificate and a sworn statement that the deceased was a resident of the State of New Jersey, called an "Affidavit of Domicile". The state law of the deceased stockholder governs whether the stock can be transferred without taking additional steps. For example, if the deceased owned stock in a corporation formed in New Jersey, that stock cannot be transferred until the Transfer Inheritance Tax Bureau issues a waiver.
Distribution For his work, the Administrator or Executor of the Estate is entitled to a commission. Generally, the commission equals 5% of the total amount of assets held by the Estate, plus 6% of income on the assets each year and 0.5% of the assets held each year. After the Administrator or Executor and the attorney for the Estate are paid, the Estate must also pay the creditors of the deceased. Only then can the beneficiaries of the deceased receive their inheritance.
Refunding bond When a bequest is sent to each beneficiary, the beneficiary should be required to sign a Refunding Bond and Release. This is a document in which the beneficiary agrees to pay back a portion of the bequest if a debt is found, which the Estate must pay, that was not known at the time of distribution. One way to avoid later debts is to request that the Surrogate publish a notice to limit creditors in the newspapers, which requires creditors to make their claims within six months.
Death and taxes
Eight months after the date of death, the transfer inheritance tax return must be filed, and the transfer inheritance tax must be paid. The amount of the tax ranges from no tax for a spouse and children, to a 15% to 18% tax to individuals who are unrelated or distantly related to the deceased. The New Jersey Legislature has devised an effective way of ensuring the tax will be paid. Half of the assets in each bank, all the stock in New Jersey corporations and all the New Jersey Real Estate owned by the deceased cannot be transferred without a waiver form from the Transfer Inheritance Tax Bureau.
In addition, New Jersey now taxes estates greater than $675,000.00 (not including the value of assets transferred to a spouse). This is called the New Jersey Estate Tax. A NJ Estate Tax return is due nine months from the date of death. Generally, if the Estate has assets worth more than $1.5 million, a Federal Estate tax return (Form 706) must also be filed nine months from the date of death and Federal Estate taxes must be paid.
