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The Importance of Estate Planning

by Robert S. Lewis, Esq. and Yasmeen S. Khaleel, Esq.

This article was prepared by Robert S. Lewis, Esq. and Yasmeen S. Khaleel, Esq.(pictured), a Shareholder in Capehart Scatchard‘s Business and Trust & Estate Group, and a member of Samaritan’s Planned Giving Committee, a volunteer group of the region’s leading financial professionals, lending their time and expertise to guide the charitable estate planning efforts.

The essence of estate planning is to pre-plan your affairs so that upon disability your affairs can be effectively handled without interruption or court supervision; and that upon your death the fruits of your lifetime of effort can pass to your intended beneficiaries with minimum inconvenience, taxes and cost. At least three documents are recommended to accomplish these objectives –

  • a Will,
  • a Durable General Power of Attorney
  • and a Durable Health Care Power of Attorney (also called a Medical Directive or a Living Will).

In an attempt to impress upon you the reader the importance of planning your estate now, before death or disability force you and your family to react without having a plan in place and under emotional stress, we offer the following to illustrate the “plan” which New Jersey law would impose. We call it . . .

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THE NO-PLAN ESTATE PLAN

I, JOHN DOE, am healthy and believe myself invincible; it is incomprehensible to me that I will be seriously injured or be stricken with a serious or life-threatening illness or medical emergency, let alone that I will ever die. By virtue of this philosophy I make no plans for such eventualities, being certain that neither a Will, nor a Durable General Power of Attorney nor a Living Will (medical directive) will ever be needed. I therefore do not have to concern myself with the possible consequences of such inactivity, that is to say:

  1. If I become disabled no one will have access to my individually-owned assets to pay my bills or to handle my financial or business affairs, nor will anyone be able to sell or mortgage my jointly-held real estate, or make decisions regarding my retirement benefits, without first obtaining a Court guardianship and periodically accounting to the Court as to the manner in which my affairs were handled during my incapacity. The Probate Court costs, guardianship fees and legal fees incurred in such proceedings are an excellent way for me to “fuel” the economy, and my loved ones won’t really need that money anyway.
  2. If I should suffer an injury or disease certified by my physicians (a) to be terminal, or (b) to render me permanently unconscious, or (c)to be such that the application of life-sustaining procedures would merely prolong my dying, I do not want to leave instructions to my loved ones as to my wishes on such issues as removal of life support systems and the appointment of an agent to make medical decisions on my behalf. Better to have a judge decide such “quality of life issues,” based on my family’s ability to convince the Court as to what I would have wanted had I been able to make my wishes known.
  3. If I die I adopt the following as my “No Will” Will:
ARTICLE I.

Upon my death, my all my probate assets, whether composed of personal property or real estate, shall be distributed in the following manner:

    1. I give my wife my full estate if neither of my parents are living and I have no descendants (children and grandchildren)
    2. I give my wife my whole estate even if I have descendants provided all of my descendants are also my wife’s descendants.
    3. If I am married when I die and either of my parents are living and I have no children, then I give my wife the first twenty-five percent of my estate (not less than $50,000 and no more than $200,000) and then seventy-five percent of the balance of my estate. My parents will get the balance of my estate. It’s high time my wife took care of my parents.
    4. If either I or my wife have children from outside my marriage, then my wife can have the first twenty-five percent of my probate estate (not less than $50,000 and no more than $200,000) and then my other children get half of the balance of my probate estate and she can have the rest. If my wife can’t live on her share, that’s her problem. Maybe she can get my other children to support her.
    5. If my wife is not living at the time of my death, then all of my probate assets should pass outright to my children regardless of their age, creditor or marital troubles.
ARTICLE II.

I appoint my wife as guardian of the property passing under Article I above to my minor children if she survives me, but, as a safeguard, I require that:

    1. My wife periodically account to the Probate Court, explaining exactly how and why she spent the money necessary for the proper care of our children.
    2. My wife file a performance bond, with sureties, to be approved by the Probate Court, to guarantee that she will properly handle our children’s money.
    3. When our children become adults, my wife must file a complete, itemized, written account of everything she has done with their money.
    4. When our children become age 18, they can do whatsoever they please with their share of my money and property, and no one, including my wife, shall have the right to question the way our children spend their share of my estate.
ARTICLE III.

If my wife does not survive me, or if she dies while any of our children are minors, I do not care to nominate the guardian of our children, but hope that our relatives and friends may mutually agree on someone appropriate. If they cannot agree, the Probate Court may appoint any guardian it likes, including a stranger.

ARTICLE IV.

I do not care to appoint the executor of my estate, and hope the Probate Court appoints someone I would approve of to administer my estate. If I am divorced and leave minor children, then my former spouse can take care of things — even if she is remarried and will likely spend the money for herself. As a safeguard I require that the administrator appointed by the Court file a performance bond. See Article II (b) above.

ARTICLE V.

If my wife remarries, her next husband shall be given the following rights:

    1. He shall receive the same proportion of my wife’s probate assets as my wife received from me. See Article I above.
    2. He need not spend any of his share of my wife’s estate on our children, even if they need support.
    3. He can give his share to anyone he chooses, without giving a penny to our children.
ARTICLE VI.

I do not care to learn whether there are ways to lower death taxes or to reduce administration expenses. As much of my money and property as possible should go to pay probate fees, legal fees, administration expenses and death taxes (both federal and state), rather than to my family.

IN WITNESS WHEREOF, I have completely failed to make a different Will of my own choice, with the advice of my attorney, because I really do not care to go to all that bother. I adopt this, by default, as my “Will”.

[No signature required]

The “No-Will” Will might have included two other paragraphs for people in different family circumstances:

“Since I am not married, and have no children, I want all my property to go to my parents. I have no interest in leaving anything to my brothers and sisters, or to my friends.”

Several facts are inescapable:

  1. You do own property (for example, real estate, personal effects, securities, life insurance, pension and retirement benefits, IRA’s, bank accounts, etc.).
  2. Statistics show that increased life expectancy and advances in medical science result in an increased risk of an individual becoming disabled at least one time during his or her life.
  3. Statistics also show that 100% of the population will die.
  4. Someone is going to have to manage your affairs if you do become disabled; someone will receive your assets upon your death.
  5. In most cases the costs of planning are substantially less than the ultimate costs of relying on the “No Plan Estate Plan”.

From a tax perspective, recent changes to the federal tax law changes create more opportunities to minimize or eliminate federal estate taxes. However, you need to also be mindful of your state’s estate and/or inheritance taxes. New Jersey residents, for example, must be aware of both the estate and inheritance taxes that can apply to them. With proper planning you can reduce or eliminate that tax obligation.

Even if you can’t eliminate the tax obligation, you can make certain that your family will have enough estate liquidity, avoiding the need for a forced sale of assets to pay estate taxes. Moreover, a well-considered estate plan will ensure that your assets wind up where you would like them to be; either helping to minimize future family strains or assisting a charity with its philanthropic goals. Preservation of your estate – after taxes – is certainly worth all of the attention, effort and business acumen which you used to create an estate in the first place.

Hopefully this article will have given you food for thought, and you will consult with your attorney to initiate an estate plan to accomplish your personal objectives. If you do, and depending upon your circumstances, proper planning may consider a myriad of issues such as: the size of your estate and the manner in which assets are titled; advantages and disadvantages of joint ownership; inheritance and estate tax issues; advantages and disadvantages of living trusts; use of testamentary trusts for estate tax savings as well as asset management; tax advantages of lifetime gifting programs; elder law considerations such as planning for nursing home admission and Medicaid eligibility; asset management trusts for minor beneficiaries or disabled beneficiaries; and selection of executors, trustees and guardians, to name but a few.

Isn’t it better that you decide how your affairs are to be handled during disability through either a Power of Attorney or a more formal Trust relationship, rather than through a court-appointed and court-supervised guardian or conservator?

Isn’t it better that you decide who is to handle the administrative details of your estate upon your death, and who is to receive the assets of your estate, rather than to have those issues decided by a court-appointed administrator in accordance with the New Jersey Intestate Statute?

HAVING RAISED THE QUESTION, THE ANSWER IS UP TO YOU. 

To learn more about how to include Samaritan in your will or estate plan, special donor recognition accorded through membership in The Legacy Society, and the potential advantages of charitable estate planning, please contact Samaritan’s Chief Development Officer, Chris Rollins, CFRE, at (856) 552-3287 or CRollins@SamaritanNJ.org.

This article is designed to provide general information on the importance of estate planning, and is provided with the understanding that the author is not rendering any legal or professional services or advice. This article is not a substitute for such legal or advice. If such services are required, you should retain competent legal counsel.The essence of estate planning is to pre-plan your affairs so that upon disability your affairs can be effectively handled without interruption or court supervision; and that upon your death the fruits of your lifetime of effort can pass to your intended beneficiaries with minimum inconvenience, taxes and cost.