Under the version of N.J.S.A. 3B:3-3(b) prior to the February 27, 2005 amendments, a surviving spouse was entitled to $50,000, plus 50% of the balance if there are issue from the marriage.

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Surviving spouse originally appeared on NJ Family Issues on January 20, 2012.

The imposition of constructive trusts over assets are sometimes justified in matrimonial litigation, see, e.g., Painter v. Painter, 65 N.J. 196, 212-13 (1974); Lynn v. Lynn, 165 N.J. Super. 328, 342 (App. Div.), certif. denied, 81 N.J. 52 (1979).

NOTE: My legal and mediation services are offered to clients in Union, Middlesex, Somerset, Essex, Hudson, Bergen, and Morris counties in NJ.

The imposition of constructive trusts over assets are sometimes justified in matrimonial litigation originally appeared on NJ Family Issues on January 8, 2012.

Pursuant to N.J.S.A. 3B:2-2, the Superior Court has “full authority over the accounts of fiduciaries.” An action may be commenced by an interested person to compel a fiduciary to file an accounting and, in appropriate circumstances, to file an inventory and appraisement. Pressler, Current New Jersey Court Rules, comment to R. 4:87-1(b). “Unless for special cause shown, he shall not be required to account until after the expiration of one year after his appointment.” N.J.S.A. 3B:17-2. A creditor may be an interested party and may compel an accounting. In re Sycle’s Estate, 16 N.J. Misc. 23, 24-25 (Prerog. Ct. 1938).

Under N.J.S.A. 3B:22-4:

Creditors of the decedent shall present their claims to the personal representative of the decedent’s estate in writing and under oath, specifying the amount claimed and the particulars of the claim, within nine months from the date of the decedent’s death. If a claim is not so presented to the personal representative within nine months from the date of the decedent’s death, the personal representative shall not be liable to the creditor with respect to any assets which the personal representative may have delivered or paid in satisfaction of any lawful claims, devises or distributive shares, before the presentation of the claim.

“[T]he word ‘creditor’ is not used in the restricted sense of one to whom a debt is due, but includes a party entitled to prosecute a suit upon a tort of the deceased.” Hackensack Trust Co. v. Van Den Berg, 92 N.J.L. 412, 413-14 (E. & A. 1918); see Forwood v. Green’s Estate, 42 N.J. Super. 423 (Cty. Ct. 1956). “The statute itself has been said to contain ‘ample indicia of an intent to include all claims enforceable by suit terminating in a money judgment.’” Pitale v. Leroy Holding Co., 65 N.J. Super. 361, 365-66 (Ch. Div. 1961) (quoting Van Den Berg, 92 N.J.L. at 413).

One of the major purposes of probate is to see that the just debts of the decedent are paid from his or her estate. A creditor must present their written claim to the personal representative who may accept or deny the claim. The Probate Part does not adjudicate common creditor claims. A creditor whose claim is denied by a personal representative must initiate a Law Division action to reduce the claim to judgment. Once a creditor has reduced a claim to judgment, the creditor has standing to demand an accounting if the judgment is not satisfied.

N.J.S.A. 3B:22-10 states:

Where the assets of an estate exceed the amount needed to pay claims presented within the time limited pursuant to [N.J.S.A 3B:22-4], a claimant, who has failed to present his claim within the time so limited, may present the claim, in the form required by that section, to the personal representative at any time before the remaining assets of the estate shall have been distributed or paid over pursuant to law.

In essence, N.J.S.A. 3B:22-10 gives tardy creditors another chance to file a claim, up to the point where the assets are distributed from the estate.

N.J.S.A. 3B:22-15 states:

In an action by a creditor against a personal representative, for the payment of a ratable proportion of his debt, it shall be presumed that the assets of the estate due a devisee or heir have not been paid over to him, if no refunding bond from the devisee or heir is on file. However, the presumption may be rebutted by proof that the devise or distributive share was actually paid over to him.

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The Superior Court has full authority over the accounts of fiduciaries originally appeared on NJ Family Issues on November 14, 2011.

Where a matter concerns the administration of a trust, trial court should proceeded in a summary manner, as authorized by N.J.S.A. 3B:2-4, and in accordance with Rules 4:83-1 and 4:67.

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.

Where a matter concerns the administration of a trust, trial court should proceeded in a summary manner originally appeared on NJ Family Issues on November 14, 2011.

A plaintiff’s status as the father of a minor beneficiary of a trust provides standing under Rule 4:87-1(b) as “an interested person.” See also R. 4:87-2(a) (requiring that a complaint in an action for settlement of an account contain the names of parents of minors); N.J.S.A. 2A:16-55 (“[a] person interested as or through. . . an infant” has standing to bring a declaratory judgment action pertaining to an estate, will, or other writing).

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.

A person interested as or through an infant has standing to bring a declaratory judgment action pertaining to an estate, will, or other writing originally appeared on NJ Family Issues on November 9, 2011.

A QTIP trust allows property to pass from a decedent-spouse to designated residuary beneficiaries without triggering federal estate taxes so long as decedent’s surviving spouse has a qualifying income interest for life. 26 U.S.C.A. §§ 2056 (a) and (b)(7)(B). See also In re Will of Adair, 149 N.J. 591, 597-98 (1997). If a QTIP election is made by the decedent’s estate at the time estate taxes are paid, a marital deduction((“The marital deduction permits a testator to provide for his or her spouse, up to the limits set forth in the federal statute, without incurring federal tax liability[.]” In re Probate of Will of Lee, 389 N.J. Super. 22, 35 (App. Div. 2006) (citing Gesner v. Roberts, 48 N.J. 379, 381 (1967)).)) is permitted for the entire value of the QTIP trust corpus, even though distributions to the surviving spouse may be limited to income and only so much of the principal as determined by the ascertainable standard for the surviving spouses health, maintenance and support. 26 U.S.C.A. § 2056(b)(7)(B)(i). See also Estate of Shelfer v. C.I.R., 86 F.3d 1045, 1049 (11th Cir. 1996) (stating “the . . . QTIP trust provisions . . . liberalize[d] the marital deduction to cover trust instruments that provide ongoing income support for the surviving spouse while retaining the corpus for the children or other beneficiaries”). In this way, the value of the QTIP corpus is deducted from the decedent’s gross estate, and no estate taxes are due upon the death of the decedent.((“According to the House of Representatives Report, the QTIP trust was designed to prevent a decedent from being `forced to choose between surrendering control of the entire estate to avoid imposition of estate tax at his death or reducing his tax benefits at his death to insure inheritance by the children.’” Adair, supra, 149 N.J. at 597 (quoting Shelfer, supra, 86 F.3d at 1049) ).)) 26 U.S.C.A. § 2044. “Thus, a decedent can [] provide for a surviving spouse while controlling the ultimate disposition of the property after the surviving spouse’s death.” Adair, supra, 149 N.J. at 597.

As we noted, the value of QTIP property is deducted from the decedent-settlor’s gross estate, and no taxes are paid on it at the time of the decedent-settlor’s death. 26 U.S.C.A. § 2056(a). The tax attributable to the QTIP trust property is deferred until the death of the QTIP beneficiary-spouse, at which point the QTIP property is included within the surviving spouse’s gross estate. 26 U.S.C.A. § 2044. See Adair, supra, 149 N.J. at 598.

Federal estate taxes apply to the assets transferred upon the death of the QTIP beneficiary-spouse. Ibid. A decedent’s estate has the obligation to satisfy the federal estate tax imposed, including federal estate tax attributable to the QTIP assets. 26 U.S.C.A. § 2002; Treas. Reg. § 20.2002-1.

“[I]f the surviving spouse’s gross estate includes any QTIP property, the executor or administrator may recover the amount of estate tax attributable to the inclusion of that property from a `person receiving the property.’” Lee, supra, 389 N.J. Super. at 36 (quoting 26 U.S.C.A. § 2207A(a)(1)). There is no direct liability of the QTIP trust to pay the tax, but the QTIP spouse’s estate may seek recovery from the QTIP trust assets for the amount of the estate tax paid which exceeds the amount of tax “which would have been payable if the value of [the QTIP] property had not been included in the gross estate.” 26 U.S.C.A. § 2207A(a)(1)(B). The right to recover the taxes paid can be waived if the QTIP beneficiary spouse “specifically indicates an intent to waive any right of recovery under this subchapter . . . with respect to such property.” 26 U.S.C.A. § 2207A(a)(2).

With respect to federal estate taxation of QTIP trusts, federal law controls that subject. Lee, supra, 389 N.J. Super. at 37. As we noted, Congress extended the marital deduction to bequests made under the terms of a QTIP trust, so long as the decedent’s estate specifically elects QTIP treatment when the estate tax return is filed. 26 U.S.C.A. § 2056(b)(7).

The IRC recognizes the right to reimbursement of the taxes when they become due. 26 U.S.C.A. § 2207A. This can be waived only if the QTIP trust beneficiary “specifically indicates an intent to waive any right of recovery under this subchapter . . . with respect to such property.” 26 U.S.C.A. § 2207A(a)(2). Because the presumption created by 26 U.S.C.A. § 2207A is that the residuary beneficiaries of the QTIP trust, not the estate, will pay the tax, the majority view is that there must be a “clear and unequivocal,” or “clear and unambiguous,” intent expressed in a testamentary document to exonerate the QTIP residuary beneficiaries from reimbursing the excess estate taxes created by the inclusion of their interest in the QTIP trust. Adair, supra, 149 N.J. at 600; In re Estate of Klarner, 113 P.3d 150, 156 (Colo. 2005); In re Estate of Gordon, 510 N.Y.S.2d 815, 818 (N.Y. Sur. Ct. 1986) (noting presumption that most testators do not intend to apply a general tax exoneration clause to QTIP property).

State law controls the apportionment of state estate tax liability. Adair, supra, 149 N.J. at 598. See also Riggs v. Del Drago, 317 U.S. 95, 63 S. Ct. 109, 87 L. Ed. 106 (1942); In re Estate of Penney, 504 F.2d 37, 40 (6th Cir. 1974). New Jersey’s estate tax apportionment statute is found at N.J.S.A. 3B:24-1 to -8. Specifically, N.J.S.A. 3B:24-2 provides that whenever an estate is required to pay federal or state estate tax “the amount of the tax, except in a case where a testator otherwise directs in his will[,] . . . shall be apportioned among the [estate] and each of the transferees[.]” In the absence of directions to the contrary, the estate tax must be apportioned pro rata among the beneficiaries. N.J.S.A. 3B:24-4(a). See also Lee, 389 N.J. Super. at 37.

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.

QTIP trusts originally appeared on NJ Family Issues on November 9, 2011.

The reformation of a trust agreement in a probate action requires clear and convincing proof of the testator’s intent. See Pineck v. Beck, 326 N.J. Super. 474, 481 (App. Div. 1999), aff’d, 165 N.J. 670 (2000). See, e.g., Gabel v. Manetto, 177 N.J. Super. 460, 465 (App. Div. 1981) (party asserting oral revocation of express inter vivos trust of real property has the burden of proof, and such revocation must be proven by clear and convincing evidence.) “Reformation cannot be predicated upon sheer speculation as to what the parties would mutually have intended had the matter been brought to their attention” prior to their death. Brodzinski v. Pulek, 70 N.J. Super. 63, 71 (Ch. Div. 1961), rev’d in part, aff’d in part, 75 N.J. Super. 40 (App. Div. 1962).

The doctrine of reformation should be distinguished from doctrines of construction such as that of probable intent. A court is authorized to effectuate the probable intent of the testator through construction of a will, but has no power to reform the will on its own. See, e.g., In the Matter of the Estate of Branigan, 129 N.J. 324 (1992). In Fidelity Union Trust Co. v. Robert, 36 N.J. 561, 564 (1962), our Supreme Court stated, “in ascertaining the subjective intent of the testator, courts will give primary emphasis to his dominant plan and purpose as they appear from the entirety of his will when read and considered in the light of the surrounding facts and circumstances.”

However, this approach is not applied without restraint. First, “the concept of presumed probable intent must be applied sparingly and only where necessary to give effect to the intent of the will or trust without varying the terms of the document.” In re Estate of Gabrellian, 372 N.J. Super, 432, 441 (N.J. Super. Ct. App. Div. 2004), citing In the Matter of the Estate of Baker, 297 N.J. Super. 203, 209 (App. Div. 1997); In re Munger’s Estate, 63 N.J. 514, 521 (1973). In addition, the doctrine “cannot be used to ‘conjure up an interpretation or derive a missing testamentary provision out of whole cloth.’” Id., citing In re Estate of Burke, 48 N.J. 50, 64 (1966). Moreover, probable intent “cannot be used to write a will that the testator did not write.” Id., citing In re Estate of Cook, 44 N.J. 1, 12 (1965). The “overriding policy of the Statute of Wills prevents filling gaps or changing clear provisions.” Id. at 442. The doctrine has been applied, “only with caution and to clarify ambiguities in a will, usually where an unforeseen contingency occurred which might have resulted in unexpected intestacies,…or to achieve certain tax advantages without substantive changes in any substantive provisions of a will or trust.” Id.

The court has generally avoided making changes to a will or trust under the doctrine of probable intent if the will or trust alteration significantly modifies the beneficiary scheme. See Matter of Estate of Branigan, 129 N.J. 324, 336 (1992) (holding a change in the will in regard to its structural and administrative features may be allowed but a change to the substantive terms of a will which may potentially disinherit grandchildren whose fathers were living at the time of decedent’s death). Plaintiffs rely heavily on the Branigan case, because as here, the issue in that case involved trust modification in consideration of generation skipping tax concerns. In that case, the Supreme Court allowed the proposed modification, but only to the extent that the modification did not alter a substantive or structural provision, or change the disposition scheme. While acknowledging “a widely accepted intent on the part of most testators,” the Court held, “we cannot conclude that plaintiffs’ desire to evade taxes at the cost of the dispositary scheme and the possible disinheritance of some of the heirs effectuates the testamentary intent of the testator.
In Branigan, the parties were seeking to modify the trust to take advantage of the newly created generation skipping rules. In this case, Plaintiff seeks to amend the inter vivos Trust to delete the generation skipping tax language and to permit final Trust distributions to be made directly to Decedent’s children (Sean, William and Delaney McLellan) during their lifetime at age 25 (one-half of the principal) and the balance of the principal at age 30 (as is currently provided for in the Trust u/w) instead of passing the corpus through to the Decedent’s grandchildren. Plaintiff claims the intent behind the inclusion of the generation skipping tax language was to take advantage of a Federal estate tax exemption of $2,000,000.00 which was in place in 2006. However, the generation skipping tax language no longer serves a useful tax purpose now that the IRS has raised the exemption to $5,000,000.00.

Plaintiff’s request for amendment fails to meet the clear and convincing evidence standard required under the doctrine of probable intent. No evidence is offered to show the only reason the grandchildren were designated as beneficiaries is to take advantage of a Federal estate tax exemption. Many other reasons potentially exist as to why the grandchildren were specifically designated as beneficiaries and not Sean, William and Delaney McLellan. Amendment of the inter vivos trust does not adhere to the Court’s prior rationale towards modification of wills and trusts due to slight ambiguities or technicalities. The proposed amendment changes a substantive provision of the will which, if allowed, changes the beneficiary scheme to the detriment of future grandchildren. Moreover, the doctrine of probable intent cannot even reached by the court without a showing of ambiguity, confusing clause, or mistake.

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The reformation of a trust agreement in a probate action requires clear and convincing proof of the testator’s intent originally appeared on NJ Family Issues on September 28, 2011.

In this case, the court is asked to decide whether an irrevocable inter vivos life insurance trust can be modified to remove “generation-skipping” language to allow trust distributions to Decedent’s children; and who should serve as trustee. According to plaintiff, the generation skipping language was implemented when the Federal estate tax exemption was $2,000,000; however it no longer serves a useful tax purpose because the IRS has raised the exemption to $5,000,000. Plaintiff’s request for amendment fails to meet the clear and convincing evidence standard required under the doctrine of probable intent. No evidence is offered to show the only reason the grandchildren were designated as beneficiaries is to take advantage of a tax exemption. Moreover, as there are no ambiguities on the face of this trust, the Court cannot permit modification premised on probable intent. The court finds the grantor’s spouse is the trustee. Even though she has “died” for the purposes of taking as a beneficiary under the trust because she was living apart from the grantor and a divorce was pending, the grantor’s wife has not “died” for the purpose of serving as trustee.

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Even though a spouse has “died” for the purposes of taking as a beneficiary under the trust because she was living apart from the grantor and a divorce was pending, the grantor’s wife has not “died” for the purpose of serving as trustee originally appeared on NJ Family Issues on September 28, 2011.

Generally, there are three elements of a gift: delivery, donative intent, and acceptance. Pascale v. Pascale, 113 N.J. 20, 29 (1988); In re Dodge, 50 N.J. 192, 216 (1967); Hill v. Warner, Berman & Spitz, P.A., 197 N.J. Super. 152, 161 (App. Div. 1984). Unless it is impossible or impracticable, delivery of the property gifted is required. See Foster v. Reiss, 18 N.J. 41, 50 (1955) (quotations omitted) (“under New Jersey law actual delivery of the property is still required except where there can be no actual delivery or where the situation is incompatible with the performance of such ceremony”).

Gifts of stock generally require a showing of the same elements, but are also subject to statutory restrictions. Hill, supra, 197 N.J. Super. at 161. See also N.J.S.A. 14A:7-12(1). Prior to 1997, the New Jersey UCC permitted stock to be transferred by a separate written instrument. N.J.S.A. 12A:8-308(1), repealed by L. 1997, c. 252, § 1, eff. September 12, 1997.

[T]here may be a constructive delivery and acceptance unaccompanied by a manual delivery or actual change of custody resulting from the acts and conduct from dealing with stock when there has been a change in the relation of the parties to it. So, the delivery of a stock certificate may be constructive, rather than actual, provided it is accompanied by words showing donative intent, but either constructive or actual delivery must completely divest the donor of his property and completely invest the donee with it. In other words, as between the parties, both acceptance and receipt, and therefore delivery, may be inferred from the attendant circumstances.

In the absence of expressed provisions to the contrary, stock may be transferred by delivery of a separate written transfer, without delivery of any certificate where it is not in the possession of the transferee.

[Hill, supra, 197 N.J. Super. at 162.]

New Jersey courts presume that the transfer of stock from a parent to a child is a gift. Bankers’ Trust Co. v. Bank of Rockville Ctr. Trust. Co., 114 N.J. Eq. 391, 399 (E. & A. 1933). “To overcome such presumption of gift from a father to his son, the proof offered to accomplish it must be certain, definite, reliable and convincing, and leave no reasonable doubt as to the intention of the parties.” Ibid. Further, to rebut this presumption requires evidence that is antecedent to or contemporaneous with the transfer itself, or, at the very least, evidence originating immediately following the transfer. Ibid. But see Herbert v. Alvord, 75 N.J. Eq. 428, 429-30 (Ch. 1909) (emphasis added) (“The proofs, except as to acts or declarations of the party to be charged, must be of facts antecedent to or contemporaneous with the purchase, or so immediately afterwards as to form a part of the res gestae.”).

“‘It has been recognized that one’s state of mind is seldom capable of direct proof and ordinarily must be inferred from the circumstances . . . .’” Wilson v. Amerada Hess Corp., 168 N.J. 236, 254 (2001) (quoting Amerada Hess Corp. v. Quinn, 143 N.J. Super. 237, 249 (Law Div. 1976)). However, absent proof that leaves no doubt as to the parties’ intent, a transfer of stock from a parent to a child is presumed to be a gift. See Bankers’ Trust, supra, 114 N.J. Eq. at 399.

To rebut the presumption of donative intent, evidence must be presented sufficient to overcome the heightened standard of “certain, definite, reliable and convincing” proof that “leave[s] no reasonable doubt as to the intention of the parties,” Bankers’ Trust, supra, 114 N.J. Eq. at 399.

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.

Gifts of stock originally appeared on NJ Family Issues on April 30, 2011.

Under the previous incarnation of New Jersey’s Adoption law, N.J.S.A. §9:3-30(A), “The entry of a judgment of adoption shall terminate all relationships between the child and his parents, and shall terminate all rights, duties, and obligations of any person which are founded upon such relationships, including rights of inheritance under the intestate laws of this state; provided however that when the adopting parent is a stepfather or stepmother, and the adoption is consummated with the consent and approval of the mother or father, respectively, such adoption shall not affect or terminate any relationships between the child and such mother or father.” That statutory provision became effective January 1, 1954, and was later amended to include the provision, “. . . nor the rights of inheritance under the intestate laws of this State.”, effective July 21, 1966. The change to the law was applied prospectively. See In re Wolf, 93 N.J.Super. 83, 88 (Ch. Div. 1966). In 1977, N.J.S.A. §9:3-30 was repealed, and replaced with the current law, which reads in part, “The entry of a judgment of adoption shall: . . . (3) terminate all rights of inheritance under intestacy from or through the child which existed prior to the adoption.” N.J.S.A. § 9:3-50(c)(3).

NOTE: My legal and mediation services are offered to clients in Fanwood 07023; Garwood 07027; Kenilworth 07033; Mountainside 07092; New Providence 07974; Roselle Park 07204; Roselle 07203; Elizabeth 07201; Linden 07036; Plainfield 07060; Rahway 07065; Summit 07901; Westfield 07090; Berkeley Heights 07922; Clark 07066; Cranford 07016; Hillside 07205; Scotch Plains 07076; Springfield 07081; Union 07083; Winfield; Carteret 07008; Dunellen 08812; East Brunswick 08816; Edison 08817; Jamesburg 08831; Metuchen 08840; New Brunswick 08901; Old Bridge 08857; Perth Amboy 08861; Sayreville 08871; South Amboy 08878; South River 08877; Avenel 07001; Colonia 07067; Iselin 08830; Woodbridge 07095; Somerset 08873; Somerville 08876 and Watchung 07069, New Jersey.

The entry of a judgment of adoption terminates all rights of inheritance under intestacy from or through the child which existed prior to the adoption originally appeared on NJ Family Issues on April 13, 2011.