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Estate Planning Terms

Estate Planning Terms

  • Revocable Living Trust

    The gold standard for personal estate planning. Revocable Living Trusts are “active” during your lifetime, such that your assets can be transferred there during your lifetime. Why? If you become incapacitated, a trusted family member can act as Trustee and manage assets for you, keeping out scammers and predators and protecting you from yourself by making unwise investment or spending decisions. Revocable Living Trusts are also private and not filed in court. This becomes very important if you are leaving different shares to different beneficiaries or disinheriting a family member.

    Revocable living trusts are also beneficial where we are creating lifetime trusts for adult children because your trustees will never need court approval for a change of Trustee down the road.

    Right now during COVID-19 the probate courts in both New Jersey and New York are extremely backed up trying to handle probate proceedings for thousands of people who have died, many of whom without a Will, creating complex intestacy proceedings. What does this mean for you if you currently have a Will and it needed to be probated in the coming months? There would likely be significant delays in your Executor being appointed to begin the administration of your estate. With a fully-funded Revocable Living Trust, this can be avoided.

  • Last Will and Testament

    This is the most common way for people to leave their assets after death to their beneficiaries. It is simple in the sense that it says who gets what, when and how. Wills work very well where all beneficiaries are taking distributions outright versus in trust or for very small estates or for states that have a straightforward probate process. Historically, Bergen County New Jersey has had a very straightforward probate process; however, we have been extremely hard hit with COVID-19 deaths, which has created an unprecedented delay in the probate court system. For these reasons, we are recommending more funded revocable living trusts in 2020 and going forward.

  • Personal Property Memos

    New Jersey allows testators to make a side list of tangible personal property items, such as jewelry, paintings, china, silver, crystal, stamp collections, antique cars, or anything else you can physically touch, to certain named individuals without having to change your Will. This is especially convenient as these lists tend to change over time as clients give items away or have a change of heart about who should receive a particular sentimental item.

  • Ademption

    If a specific item you have left to someone (e.g., a diamond ring) is lost, stolen, destroyed or otherwise missing, we have language that states it “adeems” or lapses such that the beneficiary of that item does not sue your estate for the item or cash equivalent of that item.

  • Probate

    Probate is simply the court process for authenticating a Will. Without this process, anyone could write a Will, claim it was the decedent’s and abscond with an inheritance. Instead, the local probate court inspects the original Will to be sure it appears valid, has two witnesses and a notary. If an original Will has handwritten edits it will delay the process significantly. If the original Will was not notarized, the witnesses may have to come forth to court. It is essential to properly execute your Will so that probate is a smooth process. Our local probate court is the Bergen County Surrogate’s Court in Hackensack, NJ. During the COVID-19 crisis, the court has been offering electronic probate but there are significant delays.

    Please visit for information about current probate procedures.

  • Estate Tax

    A death tax on wealth. Right now, New Jersey has repealed its estate tax on residents and the Federal Estate Tax thresholds are over $11 million per person. Very few people face estate tax in New Jersey in 2020.

  • Inheritance Tax

    A death tax on certain inheritors. New Jersey is one of the few remaining states with an Inheritance Tax. It applies to siblings, nieces, nephews, friends, life partners, etc. but not to spouses, children, step-children, grandchildren, or charities. This means that even people of modest means who have no immediate family and instead leave their estate to others may face a death tax of up to 16%.

  • Payable on Death / POD

    This is a bank account designation that allows you to name direct death beneficiaries of just that account. Sometimes also called a “Transfer on Death /TOD” designation or an “In Trust For / ITF” designation. This allows a beneficiary to collect the account with just a death certificate and no probate. For small accounts this often makes sense.

  • Funding

    This is the process of transferring assets to a trust. It usually requires bank transfer forms signed by the owner and /or Trustee. We provide a Certification of Trust and Funding Instructions to simplify the funding process.

  • Asset

    Anything you own. A house, bank account, brokerage account, IRA, 401(k), 403(b), life insurance policy, cars, boats, timeshares.

  • Estate

    All of your assets. An estate is not large or small per se, but rather what assets you own at death. This is what your Executor or Trustee becomes in charge of after your death and the value of which forms the basis of any estate tax valuation.

  • Retirement Plans

    These include IRA's, 401(k)'s, 403(b)'s, and other related plans that pass to beneficiaries as a lump sum or, most often, as a cash flow. They must have beneficiary designations and they are now subject to 10-year SECURE Act payout rules in many cases.

  • Life Insurance

    These policies payout at the death of an individual. They must have beneficiary designations. The proceeds are income tax-free. If held in an Irrevocable Life Insurance Trust, they are also estate tax-free (if estate tax is applicable). Life insurance policies are also not subject to the New Jersey Inheritance Tax, nor are they subject to estate creditors if passing directly to named beneficiaries. Very useful tools for wealth transfer, leverage, and tax minimization.

  • Power of Attorney

    This allows another person to handle your finances in the event you are alive, but incapacitated. It confers broad powers on an “agent” – your chosen person – over the “principal” – you and your assets. You should only name the most trusted persons as agent. The power of attorney should be “General” conferring a long list of broad powers on the theory that you don’t know which power will be needed and “Durable” meaning it survives your incapacity when it is needed most. Our “General Durable Powers of Attorney” are extremely detailed and contain enhanced elder powers not found in generic legal documents. Once a person loses mental capacity it is too late for them to execute a Power of Attorney and a costly, lengthy court Guardianship might become necessary.

  • Health Care Proxy

    This allows another person – a “health care representative” to make medical decisions on your behalf should you become unable to do so. You should chose a person aligned with your health values and with sufficient “tough love” to make difficult decisions. You must name one person at a time for this role. We suggest a primary with two alternates.

  • Living Will

    This pre-authorizes the withholding or withdrawal of life support under certain end of life conditions. For example, you may wish to refuse life support if you are at the end stage of a terminal illness or are deemed permanently unconscious (e.g. in a coma) by two physicians. Your health care representative will be able to use your Living Will to act on your behalf with your medical team to act in the way you would have wanted were you able to speak for yourself. Our Living Wills have custom Covid-19 provisions, as well as a section for customized guidance.

  • Organ Donation

    Sometimes also referred to as “anatomical gifts” allow you to donate organs at death to another person for transplant. Your health care representative may not know your wishes in this regard or may be too distraught to discuss them so we include them in our Health Care Directives.

  • Life Care Wishes

    This document allows you to leave instructions on your care that are not strictly medical, legal, or financial. They are more personal in nature and include your preferences on visitors, food, favorite activities, and other quality of life preferences you have but may not be able to articulate if incapacitated. These are extremely important to aging well and offer much needed guidance to your family and fiduciaries.

  • Funeral Wishes

    This document allows you to leave instructions for your own cremation, burial, services, memorials, notifications etc. on one page. During a time of extreme emotional distress, it allows family members to simply follow your written wishes rather than guess at what you wanted. Family members report feeling relieved to have guidance and avoiding confusion and guilt.

  • Fiduciary

    This is a global term to include Executors, Trustees, Powers of Attorney (Agents), Guardians or others charged with the care of another person’s assets. A fiduciary has a heightened duty of care, loyalty, and competence toward the principal. When choosing family, friends, or others for a fiduciary role, trust is key.

  • Financial Advisor

    This is a person or firm that helps you grow and preserve assets, create an investment portfolio, act as a sounding board for major financial life decisions and provide key support in both down and up markets by being experienced and rational (versus emotional) about the long term. We work closely with your financial advisors in the estate planning process to be sure there is open communication and coordination of things like beneficiary designations and funding of trusts where appropriate.

  • Beneficiary

    A person who receives an inheritance either under a Will, Trust or via retirement or life insurance beneficiary designation. A primary beneficiary is first in line, followed by “contingent” or “alternate” beneficiaries. Often these are stated in percentages or fractional shares.

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