PreneedPreneed

PreplanningPreplanning

Advance Funeral PlanningAdvance Funeral Planning

TermsTerms

Prearranged vs. PrefundedPrearranged vs. Prefunded

Guaranteed vs. NonguaranteedGuaranteed vs. Nonguaranteed

Revocable vs. IrrevocableRevocable vs. Irrevocable

Funding MethodsFunding Methods

Trust Accounts:Trust Accounts: P.O.D. accountP.O.D. account Pooled TrustPooled Trust 100 % Trusting100 % Trusting Less than 100% TrustingLess than 100% Trusting Commingling:Commingling: NJ 13:36-11.12NJ 13:36-11.12

PA 13.266PA 13.266

Funding Methods (cont’d)Funding Methods (cont’d)

Insurance Products:Insurance Products: Whole LifeWhole Life Newly Issued Funeral InsuranceNewly Issued Funeral Insurance

Qualifications of ProviderQualifications of Provider

SSI vs. MedicaidSSI vs. Medicaid

Co-ownership of Real Co-ownership of Real PropertyProperty

Tenancy by the EntiretyTenancy by the Entirety

Joint TenancyJoint Tenancy

Tenancy in CommonTenancy in Common

Tenancy by the EntiretyTenancy by the Entirety

Held only by a husband and wife.Held only by a husband and wife.

Husband and wife are regarded as one.Husband and wife are regarded as one.

Surviving spouse owns the entire estate.Surviving spouse owns the entire estate.

Does not require probate.Does not require probate.

Divorce: tenancy by the entirety no longer Divorce: tenancy by the entirety no longer exists.exists.

Joint TenancyJoint Tenancy

2 or more persons own real property2 or more persons own real property

Single estate with multiple ownership.Single estate with multiple ownership.

Each tenant owns the entire estate.Each tenant owns the entire estate.

All joint tenants’ interests in the property All joint tenants’ interests in the property are equal.are equal.

Upon death, ownership does not pass to Upon death, ownership does not pass to the heirs or devisees of deceased tenant.the heirs or devisees of deceased tenant.

Does not require probate.Does not require probate.

Tenancy in CommonTenancy in Common

2 or more persons own real property2 or more persons own real property

Each person owns an undivided share.Each person owns an undivided share.

Upon cotenant’s death, share passes to Upon cotenant’s death, share passes to the heirs of the cotenant.the heirs of the cotenant.

No right of survivorship.No right of survivorship.

Probate required.Probate required.

Insurance PoliciesInsurance Policies

Named beneficiaries: primary and contingentNamed beneficiaries: primary and contingentUpon death, beneficiary receives the benefit Upon death, beneficiary receives the benefit without a need for probate.without a need for probate.Insurance company will require:Insurance company will require: 1) death certificate1) death certificate 2) completed claim form2) completed claim form 3) insurance policy3) insurance policy

If beneficiary(ies) is/are dead, policy must go If beneficiary(ies) is/are dead, policy must go through the estate.through the estate.

GiftsGifts

May avoid probate: May avoid probate: Gifts in Causa Mortis Gifts in Causa Mortis ( Gift in Contemplation of Death)( Gift in Contemplation of Death)

May avoid NJ Transfer Inheritance TaxesMay avoid NJ Transfer Inheritance Taxes

May avoid Federal Estate TaxesMay avoid Federal Estate Taxes

TrustTrust

May be created by an agreement or a Will.May be created by an agreement or a Will.

Subject matter is given to a third person Subject matter is given to a third person (trustee) for the benefit of the beneficiary.(trustee) for the benefit of the beneficiary.

Beneficiary is not the sole and absolute Beneficiary is not the sole and absolute owner.owner.

The ownership is divided into 2 parts:The ownership is divided into 2 parts: 1) trustee is the legal owner1) trustee is the legal owner 2) beneficiary is the beneficial owner2) beneficiary is the beneficial owner

Reasons to Establish a TrustReasons to Establish a Trust

1) mental/physical incapacitation1) mental/physical incapacitation2) beneficiary is a minor2) beneficiary is a minor3) subject matter3) subject matter4) save estate and/or income taxes4) save estate and/or income taxes

Creator of the trust determines how the Creator of the trust determines how the trust will be managed. (income & principal)trust will be managed. (income & principal)Probate may not be necessary.Probate may not be necessary.

Intestate SuccessionIntestate Succession

Statutes provide for the distribution of property.Statutes provide for the distribution of property.

Separately owned property:Separately owned property: 1) surviving spouse and children (of that union) and 1) surviving spouse and children (of that union) and

their descendantstheir descendants 2) surviving spouse and children (not all of the union) 2) surviving spouse and children (not all of the union)

and their descendantsand their descendants 3) surviving spouse and no other descendents3) surviving spouse and no other descendents 4) surviving spouse and mother and father4) surviving spouse and mother and father 5) no surviving spouse, but lineal descendents5) no surviving spouse, but lineal descendents

NJ Inheritance TaxesNJ Inheritance Taxes

Gifts greater than $500.Gifts greater than $500.

Subtracted from the gift before it is Subtracted from the gift before it is received.received.

State Tax that ranges from 11-16%State Tax that ranges from 11-16%

Classes of BeneficiariesClasses of Beneficiaries

Class A: totally exempt from taxClass A: totally exempt from tax

father, mother, grandparents, spouse, child or father, mother, grandparents, spouse, child or children of the decedent, adopted child or children of the decedent, adopted child or children of the decedent, issue of any child or children of the decedent, issue of any child or legally adopted child of the decedent and legally adopted child of the decedent and step-child of the decedentstep-child of the decedent

Class B was eliminated 07/1/63Class B was eliminated 07/1/63

Class C BeneficiariesClass C Beneficiaries

Brother or sister of decedent, including half Brother or sister of decedent, including half brother and half sister, wife or widow of a son brother and half sister, wife or widow of a son of the decedent, or husband or widower of a of the decedent, or husband or widower of a daughter of the decedentdaughter of the decedent

Class D BeneficiariesClass D Beneficiaries

All others who are not included in A,C, or EAll others who are not included in A,C, or E Stepbrother, or stepsister of the decedent, Stepbrother, or stepsister of the decedent,

wife or widow of a stepchild of the decedent, wife or widow of a stepchild of the decedent, husband or widower of a step-child of the husband or widower of a step-child of the decedent, wife or widow of a mutually decedent, wife or widow of a mutually acknowledged child of the decedent, and acknowledged child of the decedent, and husband or widower of a mutually husband or widower of a mutually acknowledged child of the decedentacknowledged child of the decedent

Class E BeneficiariesClass E Beneficiaries

The State of New Jersey or any political The State of New Jersey or any political subdivision thereof, any educational subdivision thereof, any educational institution, church, hospital, orphan asylum, institution, church, hospital, orphan asylum, public library etc…..basically “nonprofit” public library etc…..basically “nonprofit” institutionsinstitutions

Estate (Transfer ) TaxEstate (Transfer ) Tax

June 7, 2001, President Bush signed the June 7, 2001, President Bush signed the repeal of the federal estate taxrepeal of the federal estate tax

a phased-in repeal of the estate taxa phased-in repeal of the estate tax

Timeline for Repeal of Estate TaxTimeline for Repeal of Estate Tax

2002: exemption increased to $1 million and 2002: exemption increased to $1 million and estate tax rate lowered to 50%estate tax rate lowered to 50%2003: estate tax rate lowered to 49%2003: estate tax rate lowered to 49%2004: exemption increased to $1.5 million and 2004: exemption increased to $1.5 million and estate tax rate lowered to 48%estate tax rate lowered to 48%2005: estate tax rate lowered to 47%2005: estate tax rate lowered to 47%2006: exemption increased to $2 million and 2006: exemption increased to $2 million and estate tax rate lowered to 46%estate tax rate lowered to 46%2007-2008: estate tax rate lowered to 45%2007-2008: estate tax rate lowered to 45%2009: exemption increased to $3.5 million2009: exemption increased to $3.5 million2010: estate tax is repealed2010: estate tax is repealed

Personal RepresentativesPersonal Representatives

Executor/ix or Administrator/ixExecutor/ix or Administrator/ixCommissions paid from the corpus of the Commissions paid from the corpus of the estateestateIf 2 reps. 2% can be added to corpus If 2 reps. 2% can be added to corpus commissions.commissions.Personal representative must send Personal representative must send beneficiaries a copy of the will within 60 beneficiaries a copy of the will within 60 days from the date of probate.days from the date of probate.Claims must be made within 6 months.Claims must be made within 6 months.

Duties of the Personal Duties of the Personal RepresentativesRepresentatives

Safeguard assets.Safeguard assets.

Inventory assets.Inventory assets.

Payment of taxes, claims and debts.Payment of taxes, claims and debts.

Reasonable Funeral ExpensesReasonable Funeral Expenses

Cost of funeral in relation to the value of Cost of funeral in relation to the value of the total estate.the total estate.

Allowable items:Allowable items:

Disallowed items:Disallowed items:

Liability for Payment of Funeral Liability for Payment of Funeral ExpensesExpenses

In common law, an estate is primarily In common law, an estate is primarily liable for funeral expenses.liable for funeral expenses.In common law a husband/father is In common law a husband/father is responsible to provide necessities for a responsible to provide necessities for a spouse and children.spouse and children.Anyone can volunteer to pay the funeral Anyone can volunteer to pay the funeral expenses.expenses.Prepaid arrangements are not impacted.Prepaid arrangements are not impacted.Divorce decrees: Divorce decrees:

Safety Deposit BoxesSafety Deposit Boxes

Automatically sealed upon a person’s Automatically sealed upon a person’s death.death.

PR may obtain will, life insurance policies PR may obtain will, life insurance policies etc. in presence of bank officer.etc. in presence of bank officer.

Contents may only be released after they Contents may only be released after they are inventoried in the presence of the PR, are inventoried in the presence of the PR, bank officer and rep. from NJIT Bureau.bank officer and rep. from NJIT Bureau.

ProbateProbate

““the process where the estate of a the process where the estate of a decedent is administered”decedent is administered”Not always necessary.Not always necessary.It is a crime to conceal a valid Will.It is a crime to conceal a valid Will.Adopted children have equal rights to Adopted children have equal rights to biological children.biological children.Step-children must be written into the Will.Step-children must be written into the Will.Illegitimate children will inherit from their Illegitimate children will inherit from their mother.mother.