Preneed
Preplanning
Advance Funeral Planning
Terms
Prearranged vs. Prefunded
Guaranteed vs. Nonguaranteed
Revocable vs. Irrevocable
Funding Methods
Trust Accounts:
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P.O.D. account
Pooled Trust
100 % Trusting
Less than 100% Trusting
Commingling:
NJ 13:36-11.12
PA 13.266
Funding Methods (cont’d)
Insurance Products:
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Whole Life
Newly Issued Funeral Insurance
Qualifications of Provider
SSI vs. Medicaid
Co-ownership of Real
Property
Tenancy by the Entirety
Joint Tenancy
Tenancy in Common
Tenancy by the Entirety
Held only by a husband and wife.
Husband and wife are regarded as one.
Surviving spouse owns the entire estate.
Does not require probate.
Divorce: tenancy by the entirety no longer
exists.
Joint Tenancy
2 or more persons own real property
Single estate with multiple ownership.
Each tenant owns the entire estate.
All joint tenants’ interests in the property
are equal.
Upon death, ownership does not pass to
the heirs or devisees of deceased tenant.
Does not require probate.
Tenancy in Common
2 or more persons own real property
Each person owns an undivided share.
Upon cotenant’s death, share passes to
the heirs of the cotenant.
No right of survivorship.
Probate required.
Insurance Policies
Named beneficiaries: primary and contingent
Upon death, beneficiary receives the benefit
without a need for probate.
Insurance company will require:
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1) death certificate
2) completed claim form
3) insurance policy
If beneficiary(ies) is/are dead, policy must go
through the estate.
Gifts
May avoid probate: Gifts in Causa Mortis
( Gift in Contemplation of Death)
May avoid NJ Transfer Inheritance Taxes
May avoid Federal Estate Taxes
Trust
May be created by an agreement or a Will.
Subject matter is given to a third person
(trustee) for the benefit of the beneficiary.
Beneficiary is not the sole and absolute
owner.
The ownership is divided into 2 parts:
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1) trustee is the legal owner
2) beneficiary is the beneficial owner
Reasons to Establish a Trust
1) mental/physical incapacitation
2) beneficiary is a minor
3) subject matter
4) save estate and/or income taxes
Creator of the trust determines how the
trust will be managed. (income & principal)
Probate may not be necessary.
Intestate Succession
Statutes provide for the distribution of property.
Separately owned property:
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1) surviving spouse and children (of that union) and
their descendants
2) surviving spouse and children (not all of the union)
and their descendants
3) surviving spouse and no other descendents
4) surviving spouse and mother and father
5) no surviving spouse, but lineal descendents
NJ Inheritance Taxes
Gifts greater than $500.
Subtracted from the gift before it is
received.
State Tax that ranges from 11-16%
Classes of Beneficiaries
Class A: totally exempt from tax
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father, mother, grandparents, spouse, child or
children of the decedent, adopted child or
children of the decedent, issue of any child or
legally adopted child of the decedent and
step-child of the decedent
Class B was eliminated 07/1/63
Class C Beneficiaries
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Brother or sister of decedent, including half
brother and half sister, wife or widow of a son
of the decedent, or husband or widower of a
daughter of the decedent
Class D Beneficiaries
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All others who are not included in A,C, or E
Stepbrother, or stepsister of the decedent,
wife or widow of a stepchild of the decedent,
husband or widower of a step-child of the
decedent, wife or widow of a mutually
acknowledged child of the decedent, and
husband or widower of a mutually
acknowledged child of the decedent
Class E Beneficiaries
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The State of New Jersey or any political
subdivision thereof, any educational
institution, church, hospital, orphan asylum,
public library etc…..basically “nonprofit”
institutions
Estate (Transfer ) Tax
June 7, 2001, President Bush signed the
repeal of the federal estate tax
a phased-in repeal of the estate tax
Timeline for Repeal of Estate Tax
2002: exemption increased to $1 million and
estate tax rate lowered to 50%
2003: estate tax rate lowered to 49%
2004: exemption increased to $1.5 million and
estate tax rate lowered to 48%
2005: estate tax rate lowered to 47%
2006: exemption increased to $2 million and
estate tax rate lowered to 46%
2007-2008: estate tax rate lowered to 45%
2009: exemption increased to $3.5 million
2010: estate tax is repealed
Personal Representatives
Executor/ix or Administrator/ix
Commissions paid from the corpus of the
estate
If 2 reps. 2% can be added to corpus
commissions.
Personal representative must send
beneficiaries a copy of the will within 60
days from the date of probate.
Claims must be made within 6 months.
Duties of the Personal
Representatives
Safeguard assets.
Inventory assets.
Payment of taxes, claims and debts.
Reasonable Funeral Expenses
Cost of funeral in relation to the value of
the total estate.
Allowable items:
Disallowed items:
Liability for Payment of Funeral
Expenses
In common law, an estate is primarily
liable for funeral expenses.
In common law a husband/father is
responsible to provide necessities for a
spouse and children.
Anyone can volunteer to pay the funeral
expenses.
Prepaid arrangements are not impacted.
Divorce decrees:
Safety Deposit Boxes
Automatically sealed upon a person’s
death.
PR may obtain will, life insurance policies
etc. in presence of bank officer.
Contents may only be released after they
are inventoried in the presence of the PR,
bank officer and rep. from NJIT Bureau.
Probate
“the process where the estate of a
decedent is administered”
Not always necessary.
It is a crime to conceal a valid Will.
Adopted children have equal rights to
biological children.
Step-children must be written into the Will.
Illegitimate children will inherit from their
mother.