New Jersey Probate court proceedings can be long, costly, and definitely confusing.  The good news is that you can take steps before death that can make the process go more smoothly.  These steps are state dependent so here are your options in New Jersey.

Living trusts

Living trust refers to a trust that may be revocable by the trust creator or settler (known by the IRS as the Grantor). Living trusts are often used because they may allow assets to be passed to heirs without going through the process of probate. Avoiding probate will normally save substantial costs (the probate courts, in some states, charge a fee based on a percentage net worth of the deceased), time, and maintain privacy (the probate records are available to the public, while distribution through a trust is private). Both living trusts and wills can also be utilized to plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee or executor of the will.

In New Jersey, you can make a living trust to avoid probate for virtually any asset you own — real estate, bank accounts, vehicles, and so on. You need to create a trust document (it’s similar to a will), naming a successor trustee which is someone to take over as trustee after your death. Then you must transfer ownership of your property to yourself as the trustee of the trust. Once all that’s done, the property will be controlled by the terms of the trust. At your death, your successor trustee will be able to transfer it to the trust beneficiaries without probate court proceedings.

Joint ownership

If you own property jointly with someone else, and this ownership includes the “right of survivorship,” then the surviving owner automatically owns the property when the other owner dies. No probate will be necessary to transfer the property, although of course it will take some paperwork to show that title to the property is held solely by the surviving owner.

In New Jersey, there are two types of ownership, joint tenancy and tenancy by the entirety.   Joint tenancy is property owned in joint tenancy automatically passes to the surviving owners when one owner dies. No probate is necessary. Joint tenancy often works well when couples (married or not) acquire real estate, vehicles, bank accounts or other valuable property together. In New Jersey, each owner, called a joint tenant, must own an equal share.  Tenancy by the entirety is like joint tenancy, but is allowed only for married couples and registered domestic partners in New Jersey.

Payable-on-death designations for bank accounts

Payable-on-death bank accounts offer one of the easiest ways to keep money — even large sums of it — out of probate. All you need to do is fill out a simple form, provided by the bank, naming the person you want to inherit the money in the account at your death.

As long as you are alive, the person you named to inherit the money in a payable-on-death (POD) account has no rights to it. You can spend the money, name a different beneficiary, or close the account. At your death, the beneficiary just goes to the bank, shows proof of the death and of his or her identity, and collects whatever funds are in the account. The probate court is never involved. If you and your spouse have a joint account, when the first spouse dies, the funds in the account will probably become the property of the survivor, without probate. If you add a POD designation, it will take effect only when the second spouse dies.

Transfer-on-death registration for securities

Almost every state has adopted a law (the Uniform Transfer-on-Death Securities Registration Act) that lets you name someone to inherit your stocks, bonds or brokerage accounts without probate. It works very much like a payable-on-death bank account. When you register your ownership, either with the stockbroker or the company itself, you make a request to take ownership in what’s called “beneficiary form.” When the papers that show your ownership are issued, they will also show the name of your beneficiary.  After you have registered ownership this way, the beneficiary has no rights to the stock as long as you are alive. But after your death, the beneficiary can claim the securities without probate, simply by providing proof of death and some identification to the broker or transfer agent. (A transfer agent is a business that is authorized by a corporation to transfer ownership of its stock from one person to another.)

Options that do not apply to New Jersey

Transfer-on-death deeds for real estate and Transfer-on-death registration for vehicles is not allowed in New Jersey.

Simplified New Jersey Probate procedures

New Jersey has a simplified probate process for small estates. To use it, an executor files a written request with the local probate court asking to use the simplified procedure. The court may authorize the executor to distribute the assets without having to jump through the hoops of regular New Jersey Probate probate.

You can use the simplified small estate process in New Jersey if:

1. There is no valid will and the value of all property doesn’t exceed $10,000. The surviving spouse or domestic partner is entitled to all of it without probate. N.J. Stat. Ann. § 3B:10-3.

or

2. There is no valid will, the value of all property doesn’t exceed $5,000, and there is no surviving spouse or domestic partner. One heir, with the written consent of the others, can file an affidavit with the court and receive all the assets. N.J. Stat. Ann. § 3B:10-4.

Isn’t It Illegal To Sell Property That Is Being Probated?

It’s commonly assumed that sales of real estate in probate are extremely difficult, if not impossible. The truth is that, in most cases, the Executor has the power to make a decision to sell – as long as he has the agreement of all the heirs to the estate. In some cases, he or she may also need the permission of the court, but even if that happens, the agreement of all the heirs will usually be all the judge needs to approve a sale of real estate. Research the laws in your state for any requirements – for instance, some require that the property be listed through a licensed realtor.

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 When inheriting a house in New Jersey through the probate process there are some taxes you'll have to pay.  The taxes that will be paid are called Capital Gains tax.  Before getting into the specific rules of capital gains when inheriting a property, let us go over what it is exactly.

From the New Jersey Department of the Treasury, Division of Taxation, a capital gain is the profit you realize when you sell or exchange property such as real estate or shares of stock.  If you are a New Jersey resident, all of your capital gains, except gains from the sale of exempt obligations, are subject to this State's income tax (http://www.state.nj.us/treasury/taxation/njit9.shtml).  

When an heir inherits a property, the IRS (Internal Revenue Service) determines their basis in the property on the date of the owners death.  A basis is the difference between the cash price and future price of the property.  The IRS will use the house's fair market value to determine what your capital gains are.  Lets compare an inherited property to one that you have purchased.

Your House:

Purchased For: 100k

Current Marekt Value: 150k

If you were to sell your house you would be profit a total of $50,000.  You would be taxed on this profit.

Inherited House:

Purchase For: 100k

Current Market Value upon Death of original owner: 135k  (this would be your new tax basis)

If you were to sell the house for 150k now, you would profit only $15,000 and that would be your taxable income.

Another item to consider is what the tax rate will be.  In New Jersey there are long-term capital gains and short-term capital gains.  If the house is sold within one year of obtaining ownership, then this is considered a short-term and are taxed at a rate of ordinary income (i.e. same tax rate that is used against income from a job).  This rate is generally higher then the rate of long-term capital gains taxes.  The rate of long-term capital gains taxes may be regulated by the fedral government and is different depending on your tax bracket.  Since 2003 the long-term capital gains tax is 15%, but only 5% for the lowest two brackets.

Be advised though that holding out for a year in order to pay less taxes may be more costly as maintenance, property taxes will ad up quickly.  Do your homework and make the best decision for your situation.

If you wish to sell an inherited house and don't want to go through the hassles of fixing it up in order to sell on the market, or just not being certain when it will sell send Scott from http://www.ScottyBuys.com/Probate and he can help you out.  There is no obligation or cost.

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Having to watch over a vacant home is a full time job and one that can get old really quick.  Most times when you inherit a house from a deceased relative
it is either in another town or even on the other side of the country. 
Have you ever been driving through a neighborhood that had a vacant
home?  It is usually very easy to spot, either by the unkempt lawn or
the news papers have piled up.  Even if some one is hired to mow the
lawn and pick up the papers, there are always signs and those signs
scream out to vandals and thieves that this house is vacant.  

There are steps you can take to best keep the house in order and in sellable condition. 
In the end getting the best possible price for the home is the goal,
but sometimes selling it quickly can save you a ton of money and
headaches.  Until the time comes when the house actually sells please
take the following actions in order to best protect yourself and the
vacant house.

1) Get Vacant Homeowners Insurance.  This is a MUST, as the regular
homeowners policy will most likely be dropped by the provider once the
home is vacant for 90 days.  This is not always true, but when there is
an accident or a claim, the policy will not cover what you think as it
assumes the house is occupied.  Call your insurance company and tell
them about the vacant house situation, not all companies will cover a
vacant house so finding one that will is paramount.  

2) You’ll need someone to look after the house.  Call a neighbor,
friend or relative that lives in the neighborhood to have them help
maintain the house.  They should go into the property about once every
week, it’s important to stay on a routine schedule in order to catch
possible hazards, water leaks or break-ins. Doing so will limit the
damage or even prevent it.  

3) Get an Alarm system.  This has two benefits, one it with prevent
break-ins and two your new vacant homeowners policy might give you a
discount for having one installed.  Not only that but it will give you
the peace of mind that the house is safe.

4) Do preventative maintenance by turning off water to the house and
drain the pipes to prevent them from freezing in the winter.  If you
can not drain the pipes then during winter months keep the house
temperature between 58 and 60 degrees.  Also have the walk ways,
driveways and front steps cleared of any snow or ice in the winter
months.  In the summer months have the lawn mowed, shrubs trimmed and
just keep the house generally looking good.  

Yes this is a lot of work, but can not be left undone.  Did you know
that if you are an executor of an estate, New Jersey Probate Law says you can be held liable for
accidents that occur on or in the vacant property?  If a pipe leaks and
nobody checks on the house for weeks at a time, the damage could be
more  then $100,000 and cause deadly mold to form.  Once a house
displays signs of mold it INSTANTLY becomes very hard to sell and
expensive for remediation. 

If you wish to sell the house now, contact Scott from http://www.ScottyBuys.com no obligations or cost.

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The assets in a New Jersey Probate case is usually broken up into two classes, real and personal property.  Real property consistes of mainly real estate, or houses, vacant land or commercial property.  While personal property is pretty much everything else, such as bank accounts, the family car or collection of rare stamps.  The distribution of the assets can be a contentious ordeal and can drag on for years if someone contests.  

The last will and testimate would normally contain the guidelines for what happens to the estate's personal property.  It is very common for those benefiting under the will to inherit items of particular sentimental or real value, while the remaining items be sold at auction or to a third party such as a consignment shop or an investor.  Any contents not sold and are of little value can be disposed of.

A house that passes through probate in New Jersey can be sold with the approval of the court before the probate process has been completed.  Sometimes this is needed in order to pay off taxes or liens on the property.  The house can also be sold if nobody is interested in taking care of the house and would rather divide the proceeds up between the beneficiaries.   Some situations can arise where there are multiple heirs inline to inherit the house.  If one of them wants to stay and live in the house and the other(s) would prefer to sell off the property a conflict can occur.  This however can be avoided with a properly written will the specifically dictates what should happen with the house and directs the beneficiaries how to handle the situation.  

To complicate the matter, sometimes the house will not have to go through the probate property.  If the house was jointly owned by a couple, in most circumstances, the surviving spous will become the sole owner.  This is called a tenancy by the Entirety.  Another type of ownership can supersede a will and that is a Joint Tenancy with rights of survivorship.  Sometimes an elderly parent will create a joint tenancy with a child of their family home.  This is done to avoid the probate process and allow ownership of the house to pass immediately to the child upon death.

In most cases the best course of action is to sell the house.  It helps avoid family battles and can be an easy way to put thousands of dollars into your pocket.  If you are looking to sell a house that has been through probate or is currently in probate please contact Scott at Scottybuys.com/probate

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Paul’s mother passed away recently and the will stipulates that he will inherit his mom’s house.  This is great news for Paul as he is in need of money, so he immediately puts the house up for sale and quickly finds a buyer.  Everything goes smoothly until it’s time to close on the property and the title search shows a cloud (a lien or claim against the house).

Why was there an encumbrance?  The reason is that in order for Paul to sell the house, the house and all other assets must pass through probate before it is devised and Paul gets put on title, becoming the official owner.  Not only can he not sell the house, but it could cost him a lot of money and jail time! Here’s how,a contract between a homeowner and a broker says that if the broker brings a buyer who is willing, able and financible, the broker is due a commission. That alone could cost Paul thousands of dollars.

Thatis not the worst of Paul’s situation however.  He can be sued for fraud, and that is a crime.  Paul does not own the home, so he may not try and sell it.

Selling the house is possible but getting money out of the estatebefore it’s probated is unlikely.  If Paul was the Executor of the Estate, he would be able to get a release from the court in order tosell the house.  In this situation though, the money recieved from the sale would go back into the estate until the estate has been settled.  Only at that time, can the money be distributed to the beneficiaries.

The one chance Paul would have is if the estate’s assets total value was smaller then $20,000.  In New Jersey probate,estate’s valuing less then $20,000 are not required to pass through probate. After the required procedures are followed and the heir has transferred title to himself/herself, the property can be sold.  This however is highly unlikely in New Jersey probate as having a house in an estate will surely have the value of the estate well over $20,000.

Insummary, the executor can sell a house out of theestate by getting the courts consent.  This is a good idea if you arein need of money to pay off the decedent’s outstanding taxes or liens.

Sometimes money is needed fast, if you need to sell quickly visit ScottyBuys.com.

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Probate is the legal process by which decedent’s estate is transferred to his/her heirs or beneficiaries.  If the deceased person created a will, then the person is said to have died testate.  When this is the case the probate court determines the validity of the Will.  There may have been multiple Wills created (for various reasons) and the courts job is to determine which is the legal one to use according to law.  The court will also hear any objections to the Will, makes sure the creditors are paid and assures that the property remaining is distributed according to the terms and conditions of the will.

The Will names the person (or sometimes the institution) that will carry out the wishes of the deceased.  This person is call the Executor.  The executor is in charge of the probate process and is accountable to the beneficiaries and must perform their duties in a legal and fair manner.  It is possible for the court to appoint a new administrator if it feels the executor is not capable.  The Executor or administrator is entitled to a fee or commission for doing the work.

A person who dies intestate, has passed on without leaving a will.  In this case the court will appoint an administrator to handle the estate.  The administrator will then distribute the estate according to state law.  This, however only happens once all debts, taxes and administration costs have been paid.

In the state of New Jersey all probate cases go through the county’s, in which the decedent died, Surrogate court.  The Surrogate court will distribute the required legal documents called either Letters of Testamentary for an executor or Letters of Administration for the administrator.

New Jersey Probate is the number one place for finding out about probate and estate planning.  Feel free to read all the articles on this site for free.

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