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Estate Assets

My own layman’s guide, born of my own experience and observations – Part 3

Everything that the deceased owned is an ASSET.

Some assets are easy to identify:  house, vacation house, rental property, furnishings inside the various houses, vehicle, antiques, gold bars, silver coins, “fine” jewelry/watches, “fine” artwork, “fine” china, etc.

Some assets are financial:  cash, bank account, annuity, 401K, IRA, mutual fund, bonds, etc.

Some assets are valuable, and need to be listed individually:  everything above.

Some assets only have sentimental value:  old worn slippers, costume jewelry, photos, framed jigsaw puzzles, ancient lawnmower, broken recliner, chipped dishes and glassware, stacks of magazines, drawers of letters, unfinished afghans, etc.

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Estate Terminology

My own layman’s guide, born of my own experience and observations – Part 2

Terminology. Jargon.  Legalese.  Ordinary words with “special” meaning.  If you are working with an estate, it will help to know the vocabulary.

Estate – While you are alive, you, personally own all of your “stuff.”  The minute you pass away, all of your “stuff” immediately belongs to your estate.  In other words, upon your death, the immediate, (albeit temporary) owner of your “stuff” … is your estate.  In this context, “stuff” includes tangible assets, financial assets, real estate, debts, etc.

Will – Legal document that basically tells the world how to dispose of your “stuff.”

Something every adult ought to have.  Yes:  every adult.  And, yes, while it’s probably more likely that a 99-year-old great granny will pass away than an 18-year-old high school honor student, both need wills.

It is not mandatory that a will be written by a lawyer, but genuine legal advice is always a good idea.

If you insist on doing it yourself, get it witnessed.  A document written on the back of an envelope can have all the wherewiths and heretofors imaginable, but if it is not properly witnessed, it probably won’t be acceptable in NJ.  Most banks have notary services for their clients.

Heir – Person legally entitled to your stuff, upon your death.  If you have a will, you get to determine who it is.  If you do not have a will, NJ (and most other states) will defer to your next of kin.

Next of kin – Your closest living blood relative.  Especially important if you do not have a will.  In this order:  spouse, children, parents, siblings, grandchildren, grandparents, nieces/nephews, aunts/uncles, etc.  Within any group, priority is given by age.

Disinherited Person – Very sad, but best explained in context.  Let’s say I have an alcoholic brother who lives on the streets.  My mother might decide my alcoholic brother should get nothing because she is fairly confident he will just drink it away, while I might use the money wisely.  In her will, it would be a good idea for her to specifically recognize my brother (her son,) and that he gets nothing.  No reasons are necessary.  Check with your attorney!  See also, Contest.

Executor/Executrix – The lucky person who is in charge of taking care of your estate.  When you write a will, you get to pick this person.  This person is expected to follow the instructions of your will, pay your last bills, liquidate your assets, and distribute your “stuff.”

Probate – This is a process to establish the validity of a will.

Surrogate’s Office – In NJ, this is where you go to establish the validity of a will.  Every county has a Surrogate.  The office is usually at the county office complex.  Take a copy of the will.  Take a checkbook.  (Yes, there are fees.)  Take tissues.

Death Certificate – Legal document stating that a person has died.  It probably includes much additional information, and can be very long, and on special paper.  It frequently has a raised seal.  A death certificate is sometimes required in order to liquidate certain assets.  Generally, you can get them from your county office, but it is easier to just order them through your funeral director.  Yes, there is a fee.

Short Certificate – This is a legal document showing the decedent’s name, date of death, and the name of the person authorized to handle the affairs of the estate.  The Surrogate’s office will provide as many of these as you like…for yet another small fee.  It is easier to order more than you think you need than to go back for one more.

Testate – If a person dies with a valid will in place, it is said that the person died testate.

Intestate  – If a person dies without a will, it is said that the person died intestate.

Administrator/Administratrix – If you don’t have a will, NJ will appoint someone to this position.  This person does everything the executor/executrix would have done.  With a small estate, or few heirs, this might be handled through the Surrogate’s office.  With a large estate, or a contentious estate, it might be accomplished by a court proceeding, in which case, (in my opinion,) there ought to be lawyers.

Bond – Essentially, this is an insurance policy on the assets of the estate.  It could cost thousands of dollars, and it has to be renewed every 12 months until the estate is closed.  It can get very complicated.  From what I have seen, a good will states that no bond is necessary.  When there is no will, the Surrogate’s office will tell you how much of a bond you need to acquire.  The price of the bond can depend on the size of the estate as well as the credit rating of the administrator/administratrix.

Contest – This is the process by which a person challenges the handling of the estate and/or the distribution of assets.  Let’s say my mother did not specifically mention my supposed alcoholic brother and did not specifically give him nothing.  In a moment of sobriety, he might pull himself together and find a lawyer to fight the will.  A battle of attorneys will begin, and it will be costly.

Taxes – Income tax is not to be confused with the so-called death taxes.

Income tax is on income produced by the assets of the estate.  An example would be interest on a million dollar savings account, or gain from the sale of the vacation home.  As long as the estate remains open, it is appropriate to file income tax for the estate.  Form 1041 is due on the traditional Tax Day, April 15, adjusted as necessary for weekends and holidays.

The so-called death taxes are on the underlying income-producing assets, that is, the aforementioned actual million dollars in the savings account, or the actual vacation home.  The so-called death taxes are only filed once.  In NJ, the forms are due 8 months after the date of death, and in this case, the IRS follows the state, and so Federal Form 706 is also due 8 months after the date of death for NJ estates.

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NJ Estate Tax – 2017 Update

My own layman’s guide, born of my own experience and observations – Part 1

Everybody knows NJ has long been one of the most onerous states to die in, but on October 14, 2016, this began to change.*

First of all, only 18 states (plus DC) impose death taxes. Secondly, NJ is one of only two states with two layers of death taxes. (Maryland is the other.) Finally, until this year, NJ’s threshold for estate tax was only $675,000.

Now, for NJ residents dying between January 1, 2017 and December 31, 2017, the estate tax threshold has been raised to $2,000,000. Then, beginning January 1, 2018, it will be eliminated entirely. That’s right: Zero.

But before you get too excited, don’t forget: there are still 2 types of death taxes!

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If you are in one of those highly mobile professions (ie, not an accountant chained to the desk,) you will love Hubdoc. Running from appointment to appointment, doing lunch after lunch, maybe even travelling… All those receipts…  Yeah, you need all those receipts! Your credit card statement won’t cut it in an audit.

Then, there’s tracking down all your statements – each bank account, each credit card. And these days, invoices come by email, too. You might even still get some in by regular snail mail.

Put it all together, and you just might have a giant mess. Hubdoc to the rescue!

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Let’s not leave out this player from across the Pacific! Xero hails from New Zealand, by way of Australia. They landed here in California in 2011 and are steadily working their way into our consciousness.

Xero is 100% in the cloud. It has no pretty graphics when you sign in, and you need to wear your glasses to see the words. Some of the terminology is native kiwi, so you might not be able to find what you are looking for right away. Still, it works. As with QBO, it’s definitely better if you know what you are doing. If you need help, you can get a Xero certified partner to take over, fix, or share tasks with.

The folks who most like Xero tend to be tech-savvy millennials, and people who are tired of dealing with the behemoth of Intuit. I don’t have any problem with this. I don’t like behemoths, either.

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Hosted QB

If you really can’t decide between your deep and meaningful relationship with QB desktop and your growing need for professional bookkeeping intervention, you might be a candidate for hosted QB.

This means your file sits in yet another cloud, and everybody just signs in when they need to. It’s a good compromise. Of course, you do incur additional monthly charges for hosting, and your desktop QB will probably be upgraded annually. But if you are this big, this could be the smallest of your concerns.

There are so many companies offering QB hosting that a list, with or without rates, would be useless. Again, consult your CPA or QB Proadvisor who might be able to add you to their bulk license program.

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QBO – aka QuickBooks ® Online

There are 2 reasons to use QB Online instead of QB desktop.

First, you need that invoice-as-you-go feature. QBO has a nifty app that allows you to invoice from your cell phone or tablet. Imagine standing there, talking to your customer, casually tapping on your phone or tablet, and then sending the invoice on the spot. Your customer receives it almost simultaneously (depending on the internet, of course.) Wild.

Second, you know nothing about QB, or accounting, and your accountant is probably going to need to interact with your data more often than not. Using QB Online allows you to do the invoicing, and leave the bookkeeping to the pros. You should then have or quarterly meetings with your financial people and learn to read the reports. If and when your business gets too complicated for QBO, you can switch to desktop. However, I expect they will expand the online capacity as time goes by. Once you get used to the anytime, anywhere flexibility, it is hard to give up.

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QuickBooks® – the Desktop version

There are 2 reasons to use QB desktop instead of an online software package for your business.

First, you need the advanced functionality. But this goes hand in hand with a caveat: you know what you’re doing. If you run into trouble using desktop, it will be harder to get help. You might have to send a copy of your file to your accountant and wait for it to be returned. You might have to call in the QB paramedics. Or they might be able to remote in. And so on.

Second, you don’t have reliable internet. I don’t care what the internet or the phone people say, large swaths of this great country are still struggling to get – and maintain – a reliable internet connection. (And cell phone service, but we won’t go there.) Your business productivity goes way down if you work in the cloud but can’t get online.

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