Thursday, September 29, 2005

Selling Real Property from an Estate

Category: Probate and Estate Administration

A client recently called me under the misconception that she could not sell her deceased sister's condominium until that estate was finalized and all taxes were paid. She had found a buyer for the real estate and wanted to sell it as soon as possible.

Where an estate owns real property, the State of New Jersey has a lien on that property for any potentially unpaid inheritance or estate taxes. This lien may be removed by the issuance of Real Property Tax Waiver by the State, which is then filed by the County Clerk in county in which the property is located.

A Real Property Tax Waiver can be issued by one of two ways:

1 - If (a) all the estate beneficiaries are Class A (lineal ascendant and descendants, and your spouse), and (b) no New Jersey Estate Tax is due, then a Form L-9 can be filed affirming to the New Jersey Inheritance Tax Division that no tax is due. Upon processing, and Real Property Tax Waiver will be issued to be filed with the County Clerk.

2 - If an Inheritance Tax or Estate Tax is due, then the Real Property Tax Waivers will be issued together with a letter from New Jersey that it has accepted as correct all Inheritance and Estate Tax returns filed and payments made. This normally takes well over a year from the date of death, due to the time necessary to prepare and file the returns, and then have them reviewed by New Jersey.

What happens if there is a tax due and you want to sell the property before the Real Property Tax Waiver has been issued? As a practical matter, the buyer's title company will require that some percentage of the sale proceeds be held in escrow until the Real Property Tax Waiver has been issued. This does not prevent the sale, but instead creates a fund from which to pay the taxes. The escrow can be released either (1) to New Jersey or the IRS to pay taxes due, or (2) upon presentation of Real Property Tax Waiver.

Bookmark and Share

Wednesday, September 28, 2005

Move over .com - .eu is on the way

Category: Business Law and Planning

From CSC Flash: ".EU is a new domain extension that has been designed to provide a European identity for European Internet users in the domain name system. It was created to for use by European Trademark Holders, companies, public bodies, and individuals and is expected to bring many new opportunities for companies doing business throughout Europe. The demand for .EU is likely to exceed that of all previous new domain extension releases and is anticipated to become the second largest domain extension behind .com."

The article goes on to explain the pre-registration and registration process.

Bookmark and Share

Tuesday, September 27, 2005

Ideas for Health Insurance Reform in New Jersey

Category: Business Law and Planning

Any employer or employee in New Jersey knows that health insurance costs are on the rise.

From the New Jersey Business & Industry Association:

NJBIA - Capitol Memo: "According to the Kaiser Foundation's annual Employer Health Benefits Survey, average health insurance premiums increased by 9.2 percent in 2005. The survey also found that the percentage of all firms offering health benefits to their employees had dropped to 60 percent from 69 percent in the last five years. Here in New Jersey, employers responding to NJBIA's Health Benefits Survey (released April 2005) reported an 11 percent increase in the cost of providing health insurance to their employees in 2004. "

The NJBIA Capitol Memo goes on to describe some reform measures currently under consideration in the NJ Legislature.

Bookmark and Share

Monday, September 26, 2005

Annual Credit Check

Category: Financial Planning

Under Federal Law, you are entitled to one free credit report every year. In the age of identity theft, it is critical that you are aware of the extent of your credit and history of use. You can download your free credit report at , the website established by the three national credit agencies (Equifax, Experian, and Trans Union) to satisfy this law.

Bookmark and Share

Thursday, September 22, 2005

Annual Gift Tax Exclusion rising to $12,000 in 2006

Category: Estate Planning, Estate and Inheritance Tax

The amount that you can give to a person without using any of your lifetime annual exclusion will increase from $11,000 to $12,000 in 2006. Between a couple, they will be able to give away $24,000 to any person with no gift tax consequences. This increase will obviously increase the effectively of any estate tax minimization strategies such as an insurance trust; children's or grandchildren's trusts; family limited partnership or family LLC transfers; etc.

Bookmark and Share

Wednesday, September 21, 2005

Single and Don't Have a Will? New Jersey has one for you.

Category: Estate Planning, Probate and Estate Administration

In a follow-up post to Married and Don't have a Will? New Jersey has one for you, another reminder that "Surprise! If you don't make your own Will, the State of New Jersey has one for you. While this might seem like a generous thing, the question is whether the Wwill that New Jersey made for you matches what you would like done with your assets."

If you don't have a Will and aren't married, your estate will be divided as follows:

1. To your lineal descendants (your blood descendents) by representation (generally equally among your children; however, if one or more children have died, all of the grandchildren whose parents have died will share equally in what all the deceased children would have received);

2. If there are no surviving descendants, to your parents, or the survivor among them;

3. If there are no surviving descendants or parents, to your parents' descendants by representation (your siblings and their children);

4. If there are no surviving descendants, parents or descendants of a parent, but you are survived by one or more grandparents:

* 50% to: first, your paternal grandparents or the survivor; next, to the descendants of your paternal grandparents (your aunts, uncles and cousins on your father's side)

* 50% to: first, your maternal grandparents or the survivor; next, to the descendants of your maternal grandparents (your aunts, uncles and cousins on your mother's side)

5. If there are no surviving descendants of grandparents, then to your step-children or their descendants by representation.

6. If there is no such person, everything to the State of New Jersey (the ultimate beneficiary if you don't have a Will)

Bookmark and Share

Tuesday, September 20, 2005

AMT - What is it and should you care?

Category: Tax Law and Planning

A client came in yesterday and his questions turned to concern about the Alternative Minimum Tax or AMT. My first response - see your accountant. On further thought, I was considering how misunderstood and under-publicized the AMT is and looked for some resources for a better understanding. I found this Guide to the AMT as a sort of AMT for Dummies. It has helpful subtopics like Alternative Minimum Tax 101 and Top 10 Things that Cause AMT Liability.

As to why you should know about and care about the AMT? The fact is that the number of taxpayers that the AMT reaches is growing each year due to the reach of the AMT expanding downward to taxpayers with lower incomes. Many taxpayers who don't owe AMT still need to go through the calculation, at additional time and expense. Also, if you find yourself owing AMT, some traditional tax strategies that work in a non-AMT environment may not benefit you in an AMT environment.

The Guide to the AMT explains the AMT as follows:

"The alternative minimum tax (or AMT) is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. But for various reasons the AMT reaches more people each year, including some people who don't have very high income and some people who don't have lots of special tax benefits. Congress is studying ways to correct this problem, but until it does, almost anyone is a potential target for this tax.

The name comes from the way the tax works. The AMT provides an alternative set of rules for calculating your income tax. In theory these rules determine minimum amount of tax that someone with your income should be required to pay. If you're already paying at least that much because of the 'regular' income tax, you don't have to pay AMT. But if your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax."

Bookmark and Share

Friday, September 16, 2005

American Bar Association gives Judge Roberts its Highest Rating

Category: Miscellaneous Musings

The American Bar Association traditionally vets candidates for the Supreme Court by reviewing their judicial history and cataloging interviews with associates, colleagues and opposing counsel. In doing so for Judge Roberts, the ABA Journal reports that "The ABA Standing Committee on Federal Judiciary found John Roberts 'well-qualified,' its highest rating, in his nomination to be chief justice of the United States, the committee chair testified Thursday.
In prepared testimony before the Senate Judiciary Committee, chair Stephen L. Tober said Roberts meets the highest standards required not only of a justice but also of a chief justice." See ROBERTS GETS ABA'S HIGHEST RATING

Bookmark and Share

Thursday, September 15, 2005

5 (Early) Year-End Estate and Financial Planning Tips

Category: Estate Planning, Estate and Inheritance Tax, Financial Planning,
Some tips to think about now to put your estate plan and finances in a better position come 2006:

1. If over 701/2, convert from traditional IRA to Roth IRA
2. Name a charity as beneficiary of an IRA
3. Take more than Required Minimum Distribution from IRA and buy life insurance
4. Give gifts/fund 529 plans
5. Review your assets and domicile

Robert Powell: Top 5 (early) year-end estate-planning tips - General News - Personal Finance describes each of these tips in detail.

Bookmark and Share

Tuesday, September 13, 2005

Medicare - A Primer and Resource Guide

Category: Elder Law,

Medicare is the government's primary insurance program for people over age 65. Unfortunately, the benefits that Medicare provides, as opposed to other federal benefit programs, and the limits of those benefits are not well understood. Medicare is a health insurance program that Americans pay into by working during their lifetimes. Like all health insurance programs, it is not all-encompassing, and may be combined with other health insurance programs to provide optimal coverage. A key misunderstood point is that Medicare does not cover long-term care needs (ie: assisted living or nursing home). You will need private funds, long-term care insurance, or Medicaid to meet those needs.

From is an excellent in-depth article on the breadth and limits of Medicare coverage, as well as Medigap insurance, appealing Medicare Decisions, and new Prescription Drug Coverage, located at Medicare - ElderLaw Articles.

If you have the background on Medicare and have specific questions, the single best resource for detailed information is "The Official U.S. Government Site for People with Medicare "

Bookmark and Share

Monday, September 12, 2005

Grandma's Got A Boyfriend, Now What?

Category: Estate Planning, Financial Planning

Grandma's Got A Boyfriend, Now What? - takes a look at some financial and estate planning issues facing older adults who are combining households but have grown families. A person in this situation needs to consider the competing desires of providing for their new spouse, or their children or other descendents. These can be incredibly difficult decisions to make, from who is going to get what to who will be the fiduciary to make medical or financial decisions, or to act as Executor or Trustee. Being that these are situations where there are two factions (new spouse and existing children) that have economically opposed interests, these are also situations ripe for litigation. Furthermore, the cost of long term care becomes an issue as each spouse is responsible under the law of most states to provide care for the other spouse, a potentially financially draining issue.

While the issues facing older adults as they combine households are not easy ones, they can be minimized with some honest conversations and pro-active planning. Some questions to consider:

* Who is being named on the Living Will/Health Care Proxy to make medical decisions? Consider the Schiavo case where there were two warring factions over health care decisions.

* Who is being named on the Power of Attorney? You need to consider that you will have ongoing joint expenses with your spouse, but that your children will be concerned if they cannot participate in your finances if you are incapacitated. You may want to consider naming your spouse and child together.

* Who is a joint owner of assets? Joint assets pass to the surviving owner on death, regardless of what the Will says. So, if you have a joint account with a child, that child receives those assets, not your spouse. Similarly, if you own your house jointly with your spouse, it passes to your spouse on death, regardless of who paid for it.

* Who receives your assets at death? You will need to balance the welfare of the surviving spouse versus that of your children. Also, there may be tax considerations in that assets passing to a trust for your spouse may be able to defer the eventual taxation of those assets. Some people get paralyzed by this decisions between two camps of loved ones - you need to remember that if you don't make a will, the state will divide your assets as it sees fit.

* How will long-term health care costs be paid? In most states, a person is responsible for the health care and support costs of a spouse. This can be a considerable issue for seniors, as long-term care costs can bankrupt a person. Also, a wealthier spouse's assets would be at risk due to the health care of a less wealthy spouse. Once answer for this is to purchase and maintain long-term care insurance. Where one spouse is wealthier then the other, it might even make sense for that spouse to foot the bill.

Bookmark and Share

Friday, September 09, 2005

Savings Bonds (Part 2) - What Happens when the Bond Owner Dies?

Category: Estate and Inheritance Tax, Tax Law and Planning, Probate and Estate Administration, Financial Planning

Savings bonds are a ubiquitous asset. However, dealing with savings bonds as part of an estate can in many ways be more complicated then dealing with other investment assets, such as mutual funds, stocks and bonds, where a broker can coordinate transfer and liquidation efforts. In a prior post Saving Bonds (Part 1) - Learning More about those Bonds - I discussed resources to learn more about the value of any bonds. Here, we are looking at what to do with the bonds as part of an estate, or if you inherit bonds as a result of a person's death.

A few general rules, regardless of what series of bonds (E/EE, H/HH or I):

  • Single Ownership: If the savings bonds are owned by one person, and that person dies, the bonds are now owned by the person's estate. The executor, personal representative, or administrator, as the case may be, is the only person authorized to deal with the bonds after a person's death. This means that a probate proceeding will need to be opened so that a person is named by the court to liquidate or transfer title to the bonds.

  • Joint Ownership: If the bonds have co-owners, and one owner dies, the bond now belongs entirely to the co-owner. The co-owner may now liquidate the bond, change title to his or her own name, or change title to the surviving owner and another person of the owner's choosing.

  • Named Beneficiary: If the bond owner named a beneficiary to the bonds on the bonds (not through her will) then upon the bond owner's death, the bond ownership is automatically transferred to the beneficiary. The named beneficiary may now liquidate the bond, change title to his or her own name, or change title to the named beneficiary and another person of the beneficiary's choosing.

  • Estate Tax Consequences: Where the bonds are owned by one person (or by one person who names a beneficiary), 100% of the value of the bonds as of date of death is includible in a person's taxable estate. Where the bonds are owned by more then one person, there is a presumption that 100% of the value of the bonds is includible in the taxable estate of the first person to die. This presumption can be rebutted if the surviving co-owner actually contributed money to buy the bonds. The more likely scenario is that grandma bought a bond naming grandchild as co-owner with grandma's money. In this situation, 100% of the value of the bond on the date of grandma's death is included in her estate, even though she had a co-owner.

  • Income Tax Consequences: Interest income on bonds is generally reported only when the bonds are cashed, disposed of (note: a change of ownership is considered a "disposition" of the bonds and interest accrued to that date must be reported at that time), or reach final maturity. Unlike other types of investments, there is no "step up in basis" for savings bonds, and the accrued, but as yet untaxed income, must be reported as some point by the estate or the beneficiaries.

    If a person owned bonds in their own name with no beneficiary, reporting the interest on those bonds for federal income tax purposes is the responsibility of either (a) the estate if the executor, personal representative, or administrator as the case may be, redeems the bonds; or (b) the beneficiaries of the estate if the bonds are transferred to them as new owners, in the year in which they redeem bonds or the bonds reach final maturity.

    Where there is a co-owner or beneficiary named, the co-owner or beneficiary is the new owner and as such is required to include on his or her return interest earned on the bonds for the year the bonds are redeemed or disposed of (including re-registration by substituting a new owner for the original living owner) or the bonds reach final maturity, whichever occurs first. Alternatively, even when there is a surviving co-owner or beneficiary, the person filing the decedent's final 1040 has the option of reporting on that return all interest earned on the bonds to the date of death. This option might be used where a person on a low income tax bracket has died, leaving the bonds to a person in a higher tax bracket.

The Bureau of Public Debt, on the Treasury Direct website, has detailed articles specifically outlining how savings bonds are to be treated in the event of the death of a bond holder.

Bookmark and Share

Thursday, September 08, 2005

Disaster Strikes - Do you have a Plan? Business Continuity and Disaster Recovery Planning

Category: Business Law and Planning

With the anniversary of 9/11 coming up and the mess of Katrina in our minds and hearts, business owners need to ask themselves the question of how their business might survive a disaster. What immediate contingencies are in place? How soon could you be up and running? Where would that be? Has the plan ever been tested?

A disaster does not need to be of the scale of a terrorist attack attack or hurricane to damage your business. It could be a fire, structural issues with the building, a highway accident that closes a major roadway, electrical outages, flooding, or a myriad of items that you see on the news every night happening to "other people"

Preparing a disaster recovery plan does not have to be expensive and complicated. It is mostly of process of gathering and organizing information. The costly aspect of the planning is how you are backing up and protecting your data.

A Disaster Recovery Plan will consist of:

1 - Emergency contact information for all employees and key vendors, with a plan of how to contact people (phone tree, call in number, web-site) and what information will be needed to given to or received from vendors.

2 - A hierarchy of who will do what in the event of an emergency to make sure all functions are covered.

3 - Equipment lists, so you can replace what you need to function.

4 - Data backup that is frequently tested for integrity.

5 - Copies of the plan distributed to key employees and stored off-site.

6 - An annual reivew and updating.

One resource is The Disaster Recovery Guide: "This guide to Disaster Recovery Planning is intended to be a launch pad for those seeking help with the business continuity planning process. It offers information, guidance, tips, and links to a range of resources. "

Bookmark and Share

Wednesday, September 07, 2005

Time to Get Serious about 2005 Tax Planning

Category: Tax Law and Planning

From James Jimenez, CPA of Fass & Associates, P.C.. James can be reached at


Interested in saving taxes? Now’s the time to act. Reviewing your business or personal situation before year-end can help lower your 2005 tax bill. Here are some strategies to consider.

Keep an eye on your tax bracket. Moving upward from bracket to bracket costs you at least two percent higher tax on the additional income. Knowing when to take — or delay — earnings such as bonuses or commissions allows you to control your tax bracket. If you’re a business owner, think about adjusting your salary between years.

Boost contributions to your 401(k) or other retirement plan. The benefits are two-fold: current taxable income is reduced, and you enjoy tax deferral on the plan growth.

Delay sales to qualify for long-term rates. The tax rate for most long-term capital gain assets is 15% (5% for those in the lower two tax brackets). Short-term gains are taxed at ordinary income rates, which can be as high as 35%. Consider holding assets long enough (more than 12 months) to qualify for the lower rates.

Elect the installment method. If delaying an asset sale is not an option, you still might be able to defer the income and related tax. For sales of certain property, you can choose installment reporting.

Regulate your investment income. Delay interest income until 2006 by purchasing a certificate of deposit (CD) or other security that matures after year-end.

If you’ve made a loan that you’re now unable to collect, you may be entitled to a bad debt deduction. It’s important to be able to show that you tried to collect, so take the necessary steps before year-end.

More tax-saving strategies to implement before year-end include transferring assets to children, making charitable contributions, bunching itemized deductions, and taking advantage of increased business asset expensing amounts."

Bookmark and Share

Tuesday, September 06, 2005

New Priorities - Estate Tax Legislation on hold

Category: Estate and Inheritance Tax

I have been away for a week that has seen devastation and destruction, as well as the passing of a brilliant jurist. Those things that were a priority 10 days ago now pale in comparison to real issue of life, death, health and welfare.

Congress's agenda reflects this change. Senate Majority Leader Bill Frist, R-Tenn., has indicated that much of the planned items of the agenda, including legislation on the estate tax, are now on hold.

The destruction of the Gulf States has given rise to many questions and concerns, which unfortunately have been overshadowing acts of heroism, community and graciousness. Take an opportunity to not just think, but act. Go to the American Red Cross and give what you can to help those who have lost family, homes, possessions, jobs, and all sense of security. And remember to count your blessings and value your real priorities.

Bookmark and Share