Refusing an Inheritance

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Being named as a beneficiary or being an heir at law does not mean that you have to accept what is designated to go to you. It is possible to decline to receive your inheritance. A disclaimer is the form that would be executed to refuse receipt of what was left to you. The result of a disclaimer is that you are treated as if you predeceased the decedent. A will or the laws of intestacy would dictate how your share would be distributed among other beneficiaries.

There are a number of requirements for a valid disclaimer. The disclaimer must be in writing. It must adequately identify the decedent and the asset or amount being disclaimed. It is possible to do a full disclaimer or a partial disclaimer where you only refuse certain assets or a certain amount. The disclaimer has to be served on the person handling the estate, such as the executor or administrator, and/or filed with the court. You may elect to refuse an inheritance to avoid tax consequences or to attempt to carry out the intentions of the decedent if they hadn’t drafted a will or you knew of other intentions. A disclaimer is irrevocable so be sure of your decision prior to executing the document.

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Refunding Bond and Release

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New Jersey requires that a refunding bond and release be executed by a beneficiary to receive what was lef to them in the estate. This document serves two key functions. First, the beneficiary acknowledges their responsibility to return what was received if additional debts of the estate are uncovered and there are no other means to pay the debts. Second, the beneficiary releases the executor/administrator from their estate administration role. The form should not be executed before nine (9) months from date of death.

To complete the form you will need the beneficiary’s name and address as well as total value of cash and property received by the beneficiary from the estate. The executor or administrator of the estate must also be identified on the form. The form should be signed before a witness and a notary public.  A guardian appointed by the court can sign on behalf of a minor or incapacitated person. The trustee can sign for any assets passing to a trust. The executor or administrator should file the original signed, witnessed and notarized Refunding Bond and Release to the Surrogate’s Court with required filing fees.  Include a self-addressed, stamped envelope if you would like to receive a filed coy of the Refunding Bond and Release for your records.

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Notice of Estate Administration

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If you are the executor or administrator of an estate, one of the first things you will need to do is provide notice that the estate has been opened to all individuals who stand to inherit from the decedent. This list may include individuals listed in the will as well as individuals who would inherit if the decedent died without a will. Pennsylvania Orphans Court Rule 10.5 requires that a certification be filed with the court confirming the required notice was given.  The certification requires you to list the names and addresses for all persons receiving notice of the estate.

New Jersey requires similar notice. Rule 4:80-6 requires the executor or administrator of an estate to mail Notice of Probate to all beneficiaries and the next-of-kin of the decedent within 60 days of the probate of the will. Proof of mailing must then be filed with the Surrogates office. If you do not have an address, notice of probate can be published. Sanctions can be imposed for failure to timely provide the required notice. Consult with an experienced estate attorney to make sure you complete the necessary notice requirements when serving as executor or administrator.

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PA Inheritance Tax Return

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Pennsylvania does apply a tax on assets passed through probate or intestacy. The amount of tax depends on the net value of the estate as well as the relationship of the beneficiaries to the decedent. The first step is to add up all the assets of the estate. The next step is to subtract permissible deductions including costs of administration of the estate and debts of the decedent. There is no tax imposed for assets passing to a surviving spouse or to a child under 21 years old. There is a 4.5% tax for assets passing to children over 21, parents or grandparents. There is a 12% tax for assets passing to siblings. There is a 15% tax for all other transfers including to aunts, uncles, nieces, nephews, cousins or persons of no relation. There are some institutions exempt from the inheritance tax including certain government entities and charitable organizations.

Inheritance taxes are to be paid within nine months from the date of death of the decedent to avoid any penalty. A 5% discount on the tax is extended for returns filed within three months from date of death. Penalties and interest can begin to accrue for taxes that are not paid within nine (9) months of the decedent’s death. It is possible to request an extension in certain circumstances. Assets passing outside of the will or the rules of intestacy are generally not subject to the inheritance tax. Examples of assets that pass outside of the will are life insurance policies, retirement plans and other assets with a designated beneficiary. Additionally, assets jointly owned with rights of survivorship will automatically pass to the surviving owner as a matter of law.

 

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Real Estate Ownership

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A deed is the document that reflects ownership in real property. A deed should be recorded with the appropriate county office that maintains records for all real property. You may need to change your deed for a variety of reasons. Any changes to a deed require that a new deed is created and recorded to replace the prior deed.  If a home was purchased prior to marriage in only one name, you may want to add your spouse’s name to the deed. If property was owned jointly during the marriage and only one party is retaining the property in a divorce, you will need a new deed recorded. Please note a deed is separate from a mortgage and additional steps may be needed to address financial liability for a property pursuant to a mortgage.

You may consider adding a child to your deed as part of your estate plan. You may also find yourself in a position where a new deed is needed during the probate of an estate to pass the property from the decedent to designated heir. Each county assesses a fee for recording a new deed. There may also be a realty transfer tax depending on the relationship between the grantor(s) and grantee(s) and the circumstances warranting the transfer. Transfers between spouses are exempt as are transfers to children. Transfers pursuant to a will are also exempt from a realty transfer tax however are subject to inheritance tax depending on the relationship of the decedent to the beneficiary or heir.

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Custody Exchanges during Emergency

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Life is unpredictable and from time to time circumstances may arise that disrupt your normal routine. If you share a child with a former partner, part of your normal routine likely involves a custody schedule. The question then becomes what happens to my custody schedule in an emergency situation. Presently, our country is battling the spread of a new virus and with that, new directives for individuals to remain home as much as possible to lessen the rate of infection. What should you do about your custody order?

We are stressing the following steps to guide parents during this time:

Be prepared to discuss and model good behavior for your children in both homes including hand washing, wiping down surfaces, and social distancing.

Be compliant with the Order to the extent possible; if exact compliance is not reasonable or more stringent shelter at home directives are put in place, be creative in finding other ways to sustain the relationship (i.e. facetime, skype, etc.)

Be transparent and provide honest information with respect to any suspected or confirmed exposure to the virus and try to agree on what steps you will take to protect your children from exposure.

These are a starting point. We certainly encourage productive communication beyond these listed issues. Remember to act within reason for circumstances beyond what has been described, show empathy and keep in mind how you would feel if the shoe was on the other foot.

Stay well!

 

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Railroad Pensions

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Retirement benefits are one of the assets that may be up for division in a divorce action. If you or your spouse was a railroad employee, there are a few things to keep in mind with respect to equitable distribution of a railroad retirement benefit. First, railroad retirement is comprised of two components: Tier I and Tier II. Tier I s comparable to a social security benefit. This benefit is not divisible as part of a divorce. Tier II is more akin to a traditional pension. The Tier II portion of the benefit is subject to division with proper court order.  Some companies may also offer supplemental pension benefits. All non-Tier I benefits can be divided in a divorce.

As indicated above, to divide non-Tier I benefits, an appropriate court order is required. The order needs to be specific about the request for division of benefits under the Railroad Retirement Act and include a fixed dollar amount or percentage as to the amount to be paid directly to the former spouse. It is important to work with an expert to ensure the court order concerning division of the retirement benefits meets all requirements established by the Railroad Retirement Board. In addition to division of non-Tier I benefits, former spouses might also be eligible for a separate annuity from the Railroad Retirement Board. Receipt of this separate annuity does not impact the amount of any annuity due to the employee. There are a list of requirements that must be met in order to qualify for the separate former spouse annuity.

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What Must I Do as Executor or Administrator of NJ Estate?

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The first step is to appear before the county surrogate to probate the will. The earliest you can initiate probate is after at least ten (10) days have passed since the date of death.  The original will is required along with death certificate. You should also have an idea of the estimated value of the estate and list of all beneficiaries or heirs at law with addresses and ages.

Once you are authorized to handle the estate by the surrogate, you need to send notice to all beneficiaries and heirs at law to put them on notice of where the probate has been initiated and your role as the executor or administrator. You will need to file proof of notice with the surrogate. This notice should be provided within sixty (60) days from your appointment.

Next, you can begin managing the assets and debts of the estate. You should open an estate account to collect all the assets. Where there is real property, you may need to arrange for sale. Debts of the estate can include tax liabilities as well. An individual tax return should be filed for decedent. Explore if an inheritance tax return needs to be filed as well. The will may direct that any inheritance  tax assessed is paid out of the estate prior to distribution to beneficiaries. An inheritance tax return should be filed within eight months of death to avoid penalties and interest.

Distribution of the net estate can begin as soon as practical following reconciliation of all debt and collection of all assets. If beneficiaries agree with proposed distribution, have them sign a refunding bond and release to receive their bequest. The release should then be filed with the court. If there is any dispute about administration of the estate and proposed distributions, you may need to complete an accounting demonstrating all steps taking during administration and all funds in and out.  By April M. Townsend

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Estate Liability

As the executor or administrator of a decedent’s estate, you’ll need to review any outstanding debts or liabilities owed by the decedent. These expenses should be paid out of the estate prior to making distributions of assets to intended beneficiaries. One way of identifying any debts owed is to monitor the decedent’s mail for statements that come in. In an increasingly digital world, it may be even more productive to have log-in information to review online statements for accounts. Finally, notice of the estate can be published in the newspaper. Any creditors would have one year to submit their claim against the estate for outstanding debts.

 

Medical expenses must also be considered. This is especially important if the decedent was in-patient at a facility prior to their death. To the extent their long-term care was subsidized by the government funds, a claim may be assessed against the estate for the costs of the care. Both Pennsylvania and New Jersey have an Estate Recovery Program permits the state to pursue compensation for medical assistance provided to the decedent. As executor or administrator, you should also check that no outstanding funds are due if the decedent utilized subsidized long-term care. Certain expenses of estate administration can also be paid by the estate. This may include fees paid to the court of the estate process, fees paid to an attorney to handle the estate, or even fees paid to an accountant for preparing tax returns. Work with an experienced estate attorney to understand your obligation to manage the debts of the decedent if appointed as executor or administrator. by April M. Townsend

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Ancillary Probate

Ancillary probate is the probate process that occurs in a different jurisdiction that the primary probate because the decedent owns  real estate that is located outside of their state of residence. Ancillary probate may also be necessary to address tangible property that is registered and titled outside the home state, or livestock, oil, gas or mineral rights that are attached to real estate located outside of the home state. The same individual that was appointed to handle the initial estate administration is the individual who must handle ancillary probate.

To initiate ancillary probate you will need to present a copy of the will and/or proof of probate proceedings from home state, certified copy of the death certificate, copy of the deed for real estate or or proof of other tangible property that is the subject of the ancillary probate. There are often additional fees assessed by the jurisdiction where the ancillary probate is filed.  by April M. Townsend

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