A sound estate plan rests on a few core documents. Each one does a different job, and together they cover both what happens during your lifetime if you cannot manage your own affairs and what happens to your property after you pass away. Below is a plain-language overview of the basics for New Jersey families.
Wills
A will directs how your probate assets are distributed and names an executor to carry out your instructions. If you have minor children, a will is also the customary way to name the guardian who would raise them; under N.J.S.A. 3B:12-13, a parent may appoint a guardian for a minor child.
If you die without a valid will, New Jersey’s intestacy statutes decide who inherits, N.J.S.A. 3B:5-1 et seq. Those default rules set a fixed order of inheritance — the share passing to a surviving spouse is governed by N.J.S.A. 3B:5-3, and the shares of other heirs by N.J.S.A. 3B:5-4 — and the result may not reflect your wishes.
Trusts
A trust holds and manages assets for the benefit of the people you choose. Trusts can keep assets out of probate (a public, court-supervised process in New Jersey), provide for minor children or a family member with special needs, and give you control over how and when beneficiaries receive their inheritance. A trust only controls the assets actually transferred into it, so funding the trust is as important as creating it.
Powers of Attorney
A power of attorney lets you name an agent to handle your financial affairs if you cannot. New Jersey recognizes durable powers of attorney — ones that stay effective after the principal becomes disabled — under the Revised Durable Power of Attorney Act, N.J.S.A. 46:2B-8.1 et seq. Without one, your family may have to ask a court to appoint a guardian before anyone can manage your finances.
Healthcare Directives
Under New Jersey’s Advance Directives for Health Care Act, N.J.S.A. 26:2H-53 et seq., you can prepare an advance directive for medical decisions. A proxy directive names a health care representative to decide for you if you lose the capacity to decide for yourself, and an instruction directive (often called a living will) records your treatment wishes. These documents speak for you when you cannot speak for yourself.
A Note on New Jersey Taxes
New Jersey repealed its separate estate tax effective January 1, 2018, so no New Jersey estate tax applies to residents who died on or after that date. The New Jersey inheritance tax remains in effect and depends on the beneficiary’s relationship to the person who died. Class A beneficiaries — 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., while transfers to more distant or unrelated beneficiaries may be taxed. A separate federal estate tax can apply to larger estates.
Keeping the Plan Current
An estate plan is not a one-time task. It is worth reviewing your documents after a 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.
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