Wills, Trusts & Estates Insights — Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events

Inheriting & Bequeathing Firearms in New Jersey: How to Lawfully and Responsibly Transfer Possession

Published on: October 19, 2022 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

According to the Giffords Law Center to Prevent Gun Violence, New Jersey has the second strictest gun laws in the nation behind California. As demonstrated this past summer, that legal landscape is ever-changing. While much attention was paid to the U.S. Supreme Court’s June 23rd ruling expanding the right to carry concealed handguns outside the home, many families have given little thought to the implications raised by the transfer of a firearm following a death. This article will discuss the appropriate way to bequeath and inherit firearms in New Jersey and help current gun owners continue their legacy of responsible ownership beyond their passing.

Is a Firearms ID Card or Handgun Purchase Permit required?

Under typical firearm transfers, the receiving party must be a federally licensed dealer (“FFL”) or have a valid Firearms Purchaser Identification Card (“FPID”) and the parties must complete a Certificate of Eligibility. In the case of handgun transfers, the receiving party must obtain a Handgun Purchase Permit (“HPP”). These requirements exist even in transfers between family members.

Can a Last Will and Testament Require that Beneficiaries Arbitrate their Disputes?: In a case of First Impression, New Jersey Court says No.

Published on: October 18, 2022 | by Elizabeth Engert Manzo

Whether a Testator can compel beneficiaries of an Estate to arbitrate potential disputes regarding the enforcement, interpretation, and administration of a Last Will and Testament by including a mandatory arbitration provision is a novel legal issue which, until recently, had not been considered by the courts in New Jersey. For those hoping that an arbitration provision could be used when drafting a Last Will and Testament to bar litigation in court and thereby reduce the possible time and expense of estate disputes, a recent New Jersey decision dashed such hopes and held that arbitration provisions in a will are unenforceable.

In the case of In Re Estate of Hekemian, the plaintiff, Richard E. Hekemian, one of the Decedent’s four sons and a beneficiary of his Estate, filed a lawsuit seeking compensation from two of his brothers, Peter S. Hekemian and Edward G. Imperatore, in their capacities as Co-Executors of their late father’s Estate. Upon notice of the litigation, the defendants filed a motion to compel arbitration based on an arbitration provision in the Decedent’s Will. In turn, the plaintiff opposed the motion claiming that the arbitration provision in the will is invalid under New Jersey.

While noting that the State of New Jersey, as a matter of public policy, generally favors arbitration as a dispute resolution mechanism, the New Jersey Superior Court determined that an arbitration provision in a Decedent’s Last Will and Testament was unenforceable. The court began its analysis by noting the hallmark principle that a testator’s intent should be honored and upheld. To wit, the court cited to the statute at N.J.S.A. 3B:3-33.1 which states that “the intention of a testator as expressed in his will controls the legal effects of his dispositions”.

Advantages of a Revocable Living Trust for Residents of NJ

Published on: June 7, 2022 | by Mary Patricia Magee

It has been a routinely held belief among estate planners that a Revocable Living Trust is not necessary for New Jersey residents. The purpose of this article is to identify those situations in which a Revocable Living Trust can be beneficial for residents of New Jersey.

Most commonly, we hear that assets held in a Revocable Living Trust during one’s lifetime, will, at the time of death, avoid probate. Fortunately for New Jersey residents, probate is not an onerous, time-consuming, or expensive prospect. The probate process in New Jersey, which gives legal significance to the will and clothes the executor with court-approved authority, is a straightforward process often costing less than $300 and requiring little paperwork. It takes about two to three weeks to obtain Letters Testamentary, which formally authorize the executor to transact business on behalf of the estate. Other reasons often cited as benefits of a Revocable Living Trust (RLT) are privacy regarding one’s estate, and the elimination of death taxes. These reasons do not apply in New Jersey, because our probate process does not require an inventory disclosing estate assets, nor an accounting with the court listing estate income, expenses, and distributions to the beneficiaries. As for the assertion that RLTs save death taxes, this is simply not true, as all assets in an RLT are considered to be in the control of the grantor (the person who created the trust), and therefore includible in the grantor’s taxable estate.

There are, however, circumstances where an RLT is appropriate for a New Jersey resident. For example, an RLT can be a better way to:

A Basic Introduction To Charitable Giving

Published on: June 7, 2022 | by David G. Hardin

A number of firm clients are interested in charitable giving, whether made during lifetime or upon death. The reasons behind the differing approaches are varied.

One of the benefits of a lifetime gift to charity is the immediate income tax deduction that may be available.¹ Unlike lifetime gifts to charity, deathtime gifts are not deductible for income tax purposes, although they may be deductible for estate tax purposes.² The federal estate tax is applicable to taxable estates in excess of $12.06-million, and as a result, generally taxpayers will benefit more from a lifetime gift to charity than a deathtime transfer.

Despite the potential tax benefits available to taxpayers through life gifts, there is a reason why taxpayers might prefer to make a gift at death rather than during lifetime. During lifetime it is difficult for an individual to predict how much they will need to support themselves. For that reason alone, many clients opt to provide their charitable gifts after death.

The Impact of Divorce on Estate Planning and Wealth Management – Webinar

Published on: March 17, 2022 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Smaldino v. Commissioner, an Estate Planning Cautionary Tale

Published on: February 22, 2022 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

A recent Tax Court case, Smaldino v. Commissioner, T.C. Memo. 2021-127 (November 10, 2021) emphasizes the need to ensure that the phases of transactions are completed properly, and certain formalities are observed in order for an estate planning strategy to be successful. It is important to be careful even (and perhaps especially) in the case of emergency planning (i.e., planning because of health scares or impending tax law changes).

In the Smaldino case, rushed planning caused a tax deficiency that may have been avoided with a team of advisors working together to ensure that Mr. and Mrs. Smaldino’s plan was properly implemented.

Mr. and Mrs. Smaldino were married in 2006. Mr. Smaldino had 6 children from a prior marriage and 10 grandchildren. Mr. Smaldino was a CPA turned real estate investor, with a real estate portfolio worth approximately $80 million. Mrs. Smaldino held a master’s degree in economics and had worked in her husband’s business for many years.

Increased Tax Exemptions for 2022

Published on: February 22, 2022 | by Anne Marie Robbins

The federal estate and gift tax exemption (known as the “basic exclusion amount”) has increased to $12.06 million per taxpayer in 2022. The exemption in 2021 had been $11.7 million. The increase means that in 2022, an individual can make gifts during life or at death totaling $12,060,000 without incurring gift or estate tax; a married couple can transfer $24,120,000 of assets. The annual gift tax exclusion has also increased, to $16,000 per donee (or $32,000 if spouses elect gift-splitting).

The gift tax annual exclusion for gifts to non-citizen spouses has also increased in 2022, to $164,000.

Note that the estate and gift tax exemption is slated to be reduced to $5 million, indexed for inflation, as of January 1, 2026. With this known reduction in the exemption approaching, we recommend consulting with your estate planning attorney to discuss possible strategies to take advantage of the large exemption presently available.

Disability Planning with ABLE Accounts Made More Attractive in 2022

Published on: February 22, 2022 | by Elizabeth Engert Manzo

While many may be familiar with Special Needs Trusts, some are still not familiar with tax-free Achieving a Better Life Experience (ABLE) savings accounts which were created under a 2014 federal law and currently available in New Jersey (and 46 other states). Funded correctly, ABLE accounts permit disabled individuals and their families to save money for disability-related expenses without compromising eligibility for needs-based benefits such as SSI, Medicaid, and other education, housing, health and food stamp benefits (such as FAFSA and SNAP). To establish an account, the designated beneficiary (and owner) of an ABLE account must be legally blind or have a medical disability that occurred prior to age 26. While interest earned on the account is tax-free, ABLE accounts with assets up to and including $100,000 are disregarded as a resource for SSI purposes. Distributions from the ABLE account may be made only to or for the benefit of the disabled individual for “qualified disability expenses,” which broadly include education, housing, transportation, assistive technology, health and wellness, legal and funeral expenses, etc. Starting in 2022, and for the first time in four years, annual contributions to an ABLE account increased to $16,000 (matching the 2022 annual gift tax exclusion amount). While ABLE account balances are subject to Medicaid estate recovery upon the death of the disabled beneficiary, in certain disability planning circumstances the utilization of an ABLE account, either alone or in conjunction with a Special Needs Trust, may be an integral part of smart disability planning.

The Impact of Divorce on Estate Planning and Wealth Management

Published on: December 27, 2021 | by Nicole A. Kobis and Elizabeth Candido Petite

Births, deaths, marriages and divorces reshape the definition of “family” for individuals on a constant basis. It’s no wonder, then, that family law and estate planning often go hand in hand. Estate planners and divorce attorneys alike are often presented with “what if” questions that span both areas of law. Here, we explore a few common questions clients may have when faced with these life transitions. The goal of this article, is to help clients make decisions that protect their loved ones and their assets.

Changing a Will

Can I change my will while getting divorced and should I? Although the last thing that many clients want to do once the divorce action has begun is to engage another attorney, it’s actually a good idea for them to review their estate plan this time.

When is Money from Family Considered a Loan Versus a Gift?

Published on: October 20, 2021 | by James K. Estabrook

It is very common for parents to provide funds to their children over their lifetime, but are these transfers gifts or loans? A recent ruling in the Tax Court, Estate of Bolles v. Commissioner, T.C. Memo. 2020-71, 119 T.C.M. (CCH) 1502 (June 1, 2020), highlights the importance in estate planning of differentiating between loans and gifts.

Mary Bolles was a loving mother of five children whom she tried to treat equally. Her practice was to keep a record of her advances to and the occasional repayments from each child. Based on her intent and the advice of tax counsel, she treated the advances as loans. She forgave the “debt” account of each child every year to the extent of the annual gift tax exclusion amount. According to the Tax Court, her practice would have been noncontroversial had she not advanced substantial funds to one son, Peter.

When Peter ran into financial difficulties with his architectural business, Mary supported him and between 1985 and 2007 she transferred $1,063,333 to Peter or for his benefit.