Legal landscape note: This article was originally published in 2015 and describes the law as it stood at that time. New Jersey law changes frequently.
Estate Planning Is Not Just for the Wealthy
You own a home, have people who depend on you, or simply want a say in what happens if you cannot speak for yourself. That is the whole test. Estate planning is not reserved for the very wealthy -- it is for anyone who owns assets, has dependents, or wants their wishes respected in the event of incapacity or death.
Without an estate plan, New Jersey law makes critical decisions on your behalf. If you die without a valid will, your property is distributed under the state's intestacy statutes, N.J.S.A. 3B:5-1 et seq., rather than according to your wishes. Those default rules set a fixed order of inheritance -- for example, the share that passes to a surviving spouse versus children is governed by N.J.S.A. 3B:5-3, and the shares of other heirs are governed by N.J.S.A. 3B:5-4. The outcome may not match what you would have chosen for your family.
What a Sound Estate Plan Covers
The topics below are the foundational components that most adults should understand. A complete plan coordinates these documents so they work together rather than at cross-purposes.
Protecting and Directing Your Assets
A will directs how your probate assets are distributed and names the executor who will carry out your instructions. Trusts, beneficiary designations, and other planning tools can provide added control -- helping ensure that your assets reach the people you intend, in the manner you intend, and on the timeline you intend. Trusts can also keep assets out of probate, which in New Jersey is a public, court-supervised process.
Planning can also address transfer taxes. New Jersey repealed its separate estate tax effective January 1, 2018, so no New Jersey estate tax is imposed on the estates of residents who died on or after that date. New Jersey's inheritance tax, however, remains in effect. Unlike an estate tax, the inheritance tax depends on the beneficiary's relationship to the person who died. Class A beneficiaries -- including a spouse, civil union or domestic partner, children, grandchildren, parents, grandparents, and stepchildren -- are fully exempt under N.J.S.A. 54:34-1 et seq. Transfers to more distantly related or unrelated beneficiaries may be taxed. A separate federal estate tax can also apply to larger estates.
Planning for Incapacity
A power of attorney lets you name an agent to manage your financial affairs if you cannot. New Jersey recognizes durable powers of attorney -- ones that remain effective after the principal becomes disabled -- under the Revised Durable Power of Attorney Act, N.J.S.A. 46:2B-8.1 et seq.
For medical decisions, New Jersey's Advance Directives for Health Care Act, N.J.S.A. 26:2H-53 et seq., allows you to prepare an advance directive. A proxy directive names a health care representative to make decisions for you if you lose the capacity to make them yourself, and an instruction directive (commonly called a living will) records your wishes about treatment. Without these documents, your family may have to ask a court to appoint a guardian before anyone can act on your behalf.
Providing for Your Children
If you have minor children, your estate plan should name the guardian who would raise them if you could not. Under N.J.S.A. 3B:12-13, a parent may appoint a guardian for a minor child, and a will is the customary way to make that appointment. The plan should also establish a trust or other mechanism to manage any assets the children inherit until they are old enough to handle the money themselves.
Avoiding Common Mistakes
Many estate planning problems come from simple oversights rather than complex ones: failing to update beneficiary designations after a divorce or remarriage, signing a trust but never transferring assets into it (an unfunded trust controls nothing), or relying on a will alone without considering whether a trust would better serve your goals. Beneficiary designations on retirement accounts and life insurance generally pass outside the will, so they need to be coordinated with the rest of the plan.
Take the First Step
Whether you have no estate plan at all or need to update an existing one, understanding these building blocks will help you make informed decisions about protecting your family. It is worth reviewing an existing plan after any major life change -- marriage, divorce, the birth of a child, a move to or from New Jersey, or a significant change in your finances -- or after a change in the law.
The estate planning packages and options guide provides a current way to compare the documents discussed in this seminar overview.