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If you are unavailable due to injury or illness, do you have an estate plan to protect your spouse and your family? Unfortunately, many people have not taken the necessary steps to prepare for these issues, and do not know how to answer this question. Serious problems can result from an inadequate or incomplete estate plan, including frozen assets, inability to access financial or medical information, and unintended beneficiaries. These problems often have lasting financial and emotional consequences for your loved ones that far outweigh the cost of creating an estate plan.

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A do-it-yourself estate plan can lead to a number of unintended consequences as demonstrated by a Florida Supreme Court case, Aldrich v. Basile. In this case, Ms. Ann Aldrich wrote her own Will on a pre-printed legal form. Ms. Aldrich specifically listed each item of her property in her Will, including the account numbers for her financial accounts. The Will left each item of property to Ms. Aldrich’s sister, Mary Jane Eaton; and, if Ms. Eaton did not survive, then Mr. James Aldrich (her brother) was designated as the alternate beneficiary.

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A valuable feature of an Individual Retirement Account (IRA) or a Qualified Retirement Plan (401k, 403b, etc.)(QRP) is the ability to invest without incurring contemporaneous taxes on the investments held in the account. This benefit is available to both the original owner of the account and to designated beneficiaries who inherit the account after the owner’s death. For this reason and others, it is very important to name appropriate beneficiaries for an IRA or a QRP account.

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Recently, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was enacted into law. The SECURE Act makes significant changes to the administration of Individual Retirement Account (“IRA”) and Qualified Retirement Plan (401k, 403b, etc.)(“QRP”), and was effective on January 1, 2020. For many people, an IRA or QRP is one of their most valuable assets. Because these assets result from hard work to create and maintain the account, owners should be aware of the changes found in the SECURE Act and how they may affect the owner’s estate plan.

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On Friday, September 30, 2016, New Jersey lawmakers held a press conference announcing significant changes affecting the New Jersey Estate Tax. The video and transcript of the conference can be accessed by clicking here.

The New Jersey Estate Tax applies to the estates of New Jersey residents and currently has an exemption of only $675,000. Under the proposal, the New Jersey Estate Tax exemption will be increased to $2.0 million per person on January 1, 2017; and effective January 1, 2018, the New Jersey Estate Tax will be eliminated entirely.

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If an Executor fails to properly administer an estate, it can have severe repercussions for the beneficiaries. An Executor has broad authority to control all aspects of an estate. When an Executor acts improperly, it can delay settlement of the estate and diminish the value of the estate’s assets. If you are a beneficiary of an estate that is being damaged by an Executor, you have rights and can take action to enforce the estate and the executor’s obligations.

Beneficiaries need to be aware that even simple problems, such as an Executor’s failure to take timely action, can substantially damage an estate. I will provide a hypothetical estate to help demonstrate these problems. Suppose an estate consists of the following assets: (i) a car; (ii) a house worth $650,000; and (iii) financial accounts worth $2,000,000. If the Executor fails to list the house for sale, the estate incurs unnecessary property taxes, utilities, and operating costs. The homeowners and automobile insurance policies have to be transferred into the name of the estate, and failure to properly update the insurance coverage may jeopardize coverage. The house and the automobile have to be secured and sold. Failure to take these basic actions places estate assets at risk and incurs unnecessary costs.

The Executor is responsible for filing and paying income taxes and paying property taxes on the house. If income and property taxes are not paid on time, they accumulate interest and penalties. In addition, New Jersey imposes a lien for the collection of New Jersey Estate and Inheritance Taxes.

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A recent Tax Court case highlights some of the issues faced by estates that own valuable artwork and the need to account for artwork as part of estate planning and estate administration. Artwork is an important aspect of estate planning and administration because artwork can affect the estate’s overall value, and can result in substantial estate or inheritance taxes. Artwork is a non-revenue producing asset that can make financing taxes more challenging, particularly when there is no advanced planning. Valuable artwork is subject to substantial changes in value, depending on market conditions.

This case involved a dispute over the value of fine artwork owned by a sophisticated art collector. The Estate owned three exquisite and valuable paintings: (1) “Tĕte de Femme (Jacqueline)” by Pablo Picasso; (2) an untitled piece by Robert Motherwell; and (3) “Elément Bleu XV” by Jean Dubuffet. The Picasso was by far the most valuable, selling at auction in 2010 for $12.9 million. On the Federal Estate Tax Return, the Estate reported the following values for each painting: (1) $5.0 million for the Picasso; (2) $800,000 for the Motherwell; and (3) $500,000 for the Dubuffet.

The IRS contested the Estate’s reported valuations and commissioned its own experts to value the paintings. The IRS’ experts determined the paintings had substantially higher values than those reported by the Estate: (1) $10.0 million for the Picasso; (2) $1.5 million for the Motherwell; and (3) $900,000 for the Dubuffet. Using these higher values, the IRS issued the Estate a Notice of Deficiency, and the dispute found its way into the U.S. Tax Court.

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If you are unavailable due to injury or illness, is there a plan in place to protect a surviving spouse or your family? Sadly, the answer to this question is often “no.” The lack of an effective estate plan can result in unnecessary delays and financial hardships for your spouse and family. Depending on the

In Part 1 of the blog series on joint accounts we examined tax issues that can result from joint accounts. In this article we discuss conflicts between the beneficiaries on a joint account and the estate plan under a will or trust. Although this article primarily references joint accounts, these problems apply equally to Payable on Death and Transfer on Death (TOD) designations. Conflicts between a Will and a joint account (or POD or TOD designation) create issues that are less technical than the tax issues we covered in Part I, but can actually be far more costly. In many situations, the emotions associated with an imbalanced estate result in bitter litigation that generates expensive attorney’s fees and depletes the estate.

Because joint account titles are often made without the benefit of estate planning counsel, with little analysis of the consequences, they can have profound effects on an estate. Joint account designations supersede a will or a trust. If I designate my daughter as the joint tenant of one account, but name my wife as sole beneficiary of my estate under my Will, my daughter will take the joint account. This may not make my wife very happy, particularly if the joint account represents a substantial portion of my assets. In some cases joint accounts can result in a grossly inconsistent or imbalanced estate and lawsuits.

Suppose for example, that we have a widower named “Jim.” Jim has no children and wants to leave his estate to various family and friends. Jim rents his apartment but has various financial accounts at the bank. In Jim’s Will, he divides his financial accounts as follows:


To a friend;


To a nephew;


To his sister; and,


To his brother.

Jim names his brother executor and provides in his Will that all taxes are to be paid from the residue of his estate.

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In this blog and in an upcoming blog, I am going to cover some of the tax and allocation problems created by joint accounts. The focus of this blog is on some tax related matters involving joint accounts.

Many clients believe that joint accounts make great estate planning tools. In reality, joint accounts often complicate the estate administration, cause delay, and result in unnecessary expenses. Joint accounts limit the estate’s ability to address estate taxes, and may create obstacles for effective estate tax planning. Problems result from the limited survivorship rights associated with joint accounts. If one of the joint owners dies the account passes to the surviving joint tenant(s) unless special action is taken. Furthermore, the surviving joint tenant takes the entire account, leaving limited options for passing the account to other beneficiaries. These issues are particularly acute for joint accounts between spouses. The amount of assets held in joint accounts should be limited, particularly for married couples who can hold their assets in separate accounts.

Joint accounts often encourage the surviving spouse to take the entire account, so it cannot be used to fund a credit shelter or other estate tax saving distribution. While transferring the entire account to a surviving spouse may sound like a good idea, it complicates effective use of the deceased spouse’s estate tax credits. In New Jersey the estate tax credit is only $675,000, and if the deceased spouse’s credit is not utilized, then it is lost.

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