By Clayton Himstedt, CPA, MBA
The passing of a loved one is often a very difficult time in an individual’s life. In the case of a long term illness, the loved one has the time to inform family members of the estate assets and the proper distribution of those assets. Unfortunately, there is not always an opportunity to inform family members about the estate. In the cases where a loved one passes suddenly, family members are often left to scramble to locate the deceased’s assets and the will, if one exists. This first part of this article will focus on some steps that all individuals should put in place to assist their family members.
An updated will is the first step to assure assets are distributed based upon your wishes. Without a will, the laws of the state of residence will direct the distribution of the estate, which may not be in line with your wishes. A will should be updated any time there is a change in family members or a major shift in assets.
You should prepare some additional documents to ensure your final wishes are honored: a financial power of attorney, a medical power of attorney and an advanced directive. A financial power of attorney will allow your designated representative to make financial decisions on your behalf if you become incapacitated. A medical power of attorney will allow your chosen representative to make medical decisions on your behalf. An advanced directive will make your preferences known for certain aspects of end of life care if you become incapacitated.
The following is a list of some additional information that will assist your executor in handling the collection and distribution of your estate:
- Burial instructions
- Bank accounts (which banks and account numbers) and safe deposit box locations
- Investments (brokerage accounts, IRAs, 401ks, etc.)
- Death benefits and life insurance policies
- A listing of utility, cell phone and cable companies (so your executor can shut them down)
- A listing of other major assets, including titles
Your loved ones will already be grieving the loss; you don’t want to add to their grief searching for your assets. The above information will assist them with administering your estate and give your final wishes a better chance of being honored.
Now that your executor has gathered all of your assets and liabilities, (s)he will have to determine if your estate needs to file an estate and/or an inheritance tax return. The filing requirements vary from state to state and your state’s requirements may differ from the IRS’s. The professionals at our firm can assist your executor with making this determination and also assist with preparing the required forms. Even if it is determined that your estate is below the filing threshold and a New Jersey Inheritance return is not required, your executor may still have certain filing requirements to transfer assets to your beneficiaries.
In the state of New Jersey, your executor may have to obtain waivers from the state to transfer certain assets to your beneficiaries. These waivers can be obtained by filing an estate or inheritance return with the NJ Division of Taxation. If an estate or inheritance tax return is not required, your executor may file:
- An Affidavit and Self Executing Waiver, Form L-8, with each financial institution to secure the release of bank accounts and brokerage accounts.
- An Affidavit for Resident Decedent Requesting Real Property Tax Waiver(s), Form L-9, with the New Jersey Division of Taxation to request the release of the State’s lien on real property.
A non-New Jersey resident who is not required to file an Inheritance Tax Non Resident return but requires a waiver for real property must file:
- An Affidavit for Non- Resident Decedent Requesting Real Property Tax Waiver(s), Form L-9NR, with the New Jersey Division of Taxation to request the release of the State’s Lien on real property located in New Jersey which was owned by the non-resident decedent.
Following the above suggestions will assist your loved ones in carrying out your final wishes upon your death. This information is a good starting point but should not be relied upon to replace a professionally prepared estate plan. A professionally prepared estate plan should be considered for more complex family situations or when a family- owned business is involved. Please refer to the companion article “Estate Planning as Important as Ever” for additional information regarding the needs for a properly prepared estate plan.