Beware the Oft Spoken Line to Seniors: “Transfer Ownership of Your House to Your Kids!”

Should parents transfer their home into their adult children’s names, deeding the house to their kids? This is one of the most common questions that comes up when discussing estate planning with families.

In fact, oftentimes families assume that this preferred and correct handling based on the “advice” you or your adult kids have received from well-meaning friends and family—even the internet. The intention of a transfer is always the same. You and your family want to preserve your family home from a required spend down of your assets should you need extensive medical care in a nursing home or acute care facility.

The fact is, no two families are alike. Don’t sign a deed transferring your house to your kids without taking these important first steps: Have conversations about appropriately protecting your assets with your family and then post haste make an appointment with your estate attorney. Recognizing the potential risks of arbitrarily transferring ownership of your home to your kids will give you a clearer picture of why a willy-nilly transfer is a really bad idea.

Timing is Everything

It may be too late to consider a transfer if a diagnosis of an illness or condition has just been made. Medicaid looks back five years for major financial transactions. If the goal is to reduce your assets so you can qualify for Medicaid, remember that Medicaid will review financial transactions over the last five years. The transfer of a home within this 5-year window constitutes a red flag and may disqualify you from Medicaid nursing home coverage unless there are sufficient other assets to cover the costs during the 5-year period.

Emotional Decision-Making Won’t Do

Having your adult children help you with your financial needs late in life can be challenging. Your emotions do not always help you make the best decisions. A desire to keep the long-time family home in the family or, perhaps less charitably a sense of entitlement on the part of some or all of your children who believe that it should be the family legacy, do not typically lead to sound actions. There are many laws and rules to navigate, and time may not be on your side. Plus, the decision cannot be one-sided. If you are capable of sound decision-making, your wishes combined with the guidance of your estate attorney, financial advisor, or CPA must agree on the best course of action for you and your family.  Allowing your kids to be privy to these conversations and have a voice is also a good strategy for family harmony.

Uncle Sam Comes Calling

Transferring your principal residence to a family member may disqualify you from part or all of the capital gains tax exclusion on the sale of the residence and cause unnecessary income tax liability when the residence is sold in the future. Consider the hefty tax bill for either a parent or their children from a capital gains tax on any gain (e.g., profit) on the house sale if you lose the exclusion and your family decides to sell the house during your lifetime.

Is a Life Estate Deed the Answer?

Individuals often think they achieve the best of all worlds if they establish a transfer of real property through a life estate deed. A life estate deed permits a property owner to have full use and occupancy of their property until their death, at which time your home will be transferred to your children. Because life happens, there are any number of potential pitfalls:

Appropriate Transfer of Home. Get Guidance First.

Indeed, there are situations in which a transfer will work. For example, Medicaid sometimes recognizes a caregiver child exception that allows you to transfer ownership of your house, provided the adult child has lived in your home for at least two years and provided a level of care that prevented you from required nursing home care. That said, the transfer of the home through a life estate deed would cancel the caregiver exception.

A Trust is another—if not the best way—to transfer home ownership from you to your children. When the house is transferred to the Trust, you establish directions for the administration of the Trust and appoint a Trustee who is required to protect your interests.

Still in either of these situations, the counsel of your estate attorney in collaboration with your financial advisor, and CPA are the professionals best equipped to assist you with these specific situations.

At Phelan, Frantz, Ohlig, & Wegbreit, LLC, we are available to answer your questions, inform you of your options, and guide you in both your decision-making and the transfer implementation if all parties determine that a transfer is in your best interests.

Call us at 908- 232-2244 and enjoy the peace of mind of knowing that you are backed by support and knowledge in making informed decisions.

Is a Trust for You? It Depends on Your Specific Need.

If you’re looking to avoid probate, limit possible estate taxes, or assume greater control over how your estate is distributed after you pass, a trust may be for you. But making an appointment with your estate attorney and saying you want to establish a trust is like going into a bakery and saying you want to purchase a cake. The baker is likely to ask a number of questions: What’s the occasion? How many people are we feeding? Which flavors would you like?

Similarly, an estate planning attorney should ask a series of questions when clients request a trust because a trust is a uniquely drafted document that’s created to reflect the circumstances of your particular situation. As your legal advisors our first question must be “Why do you think you need one?” This allows us to determine whether a trust is an appropriate planning tool.

One of your biggest challenges is knowing how each type of trust differs and the goals a particular trust can help you accomplish. Even more, do you even need a trust in the first place?

To appropriately determine need, it is helpful to understand the 3 primary classes of trusts: revocable, irrevocable, or testamentary.

A Revocable Trust

A revocable trust, also known as a living trust, is beneficial because provisions of the trust may be changed during the creator’s lifetime. Assets may be placed in trust and removed, the creator (also called the grantor) is entitled to all the benefits and income of the assets that are owned by the trust, and, if they desire, they are empowered to terminate the trust as well.

Only after death do the terms of the trust become unchangeable and the property held in the trust transfers to your beneficiaries. At that time, your heirs benefit because a revocable trust allows them to avoid probate, the lengthy, often expensive, legal process that takes place when it’s time to distribute your estate.

A revocable trust can also be effective if you own property in multiple states and would therefore be subject to probate in several states. However, if those two properties are owned inside of a revocable trust, you’ll likely be able to avoid probate entirely, thus making the process of administering your estate quicker and less costly.

A revocable trust also should designate a successor trustee who is empowered to manage the assets held in the trust should you become incapacitated in any way. This is particularly useful as individuals age and require the assistance of adult children to help manage their finances and pay bills. Because the adult child may be named as the successor trustee of the trust, they are automatically empowered to take over if necessary, without the need for access through a power of attorney or guardian appointment.

Finally, a revocable trust offers families a degree of privacy in their estate planning. Because a Will becomes a publicly available document once probated, many individuals may choose to have the dispositive provisions of their estate plan contained within a trust, which is only available to the named beneficiaries after someone dies.

A revocable trust can be funded or unfunded. Funded means the assets are typically placed into the trust when you establish it. An unfunded trust, by contrast, is actually nothing more than the trust document itself. That said, it is not void but rather inoperative until it is funded.

Sometimes, for whatever reason, the originators of the trust neglect to fund it. This is essentially sub-optimal handling as indefinitely not funding or not having a plan to fund a trust essentially negates what the trust is intended to accomplish. In other circumstances, however, a trust can remain unfunded until you die at which time your Will provides that any assets in the estate be placed into the trust.

An Irrevocable Trust

In contrast to a revocable trust, assets in an irrevocable trust can’t be removed or amended after they’ve been placed in the trust. Essentially this means that you relinquish control of the assets you place in an irrevocable trust, and they are removed from your estate, protecting you from possible estate taxes. Because the IRS and some states tax estates that are above a certain value, you can use the trust to reduce the value of your estate.

By placing assets into the trust and naming your heirs as beneficiaries, you can try to reduce your estate to a level below the tax exemption amount. Keep in mind that this amount fluctuates each year. In 2021, the exemption is $11.7 for an individual or $23.4 for a married couple. For people who pass away in 2022, the exemption amount will be $12.06 million. For a married couple, that comes to a combined exemption of $24.12 million.

Many people also choose to create irrevocable trusts and gift assets into them during their lifetime to preserve those assets from being depleted by long term health care costs that may arise as they age.  There are a number of complex issues involved in gifting assets, however, which should be thoroughly evaluated with an experienced estate planning attorney.

A Testamentary Trust

A testamentary trust is established after you pass away and is created through a Will, in which case the terms of the trust are spelled out in the Will. Testamentary trusts are often used as a tool to help you create a trust for minor children. In addition, you can leave assets in trust for your adult children if you want to ensure that their inheritance ultimately passes to your grandchildren as opposed to your son or daughter’s spouse. A testamentary trust may in some cases shield your assets from your beneficiaries’ creditors or a divorce proceeding as well.

From the Grave

Despite the different types of trusts, 2 universal themes are huge motivators for establishing a trust: flexibility and control. You will have the flexibility to avoid probate and minimize estate taxes. Plus, you will have the control to ensure that your assets become a true financial legacy for your family. The terms you set up at the establishment of the trust or that you designate to go into effect upon your death will enable you to control—even from the grave—and dictate that your grandchildren and future generations of your family will benefit from the wealth you have accumulated during your lifetime.

That after all is the peace of mind that you derive from establishing and reassessing your estate plan early and periodically during your lifetime. At Phelan, Frantz, Ohlig & Wegbreit, we become your partners in providing the thoughtful guidance that will help you safeguard your legacy.

Call us at 908.232.2344 to develop a plan and determine the best wealth transfer vehicles personalized to your unique needs so that you can best provide for and protect your loved ones.



Finding Out What Family Really Means… Adult Adoption May Just Be the Answer

We thought it was time to write a feel-good story about estate planning which admittedly can be a mixed bag activity. On the one hand, creating a plan gives you comfort knowing that your loved ones will be taken care of when you’re gone. On the flip side, however, it requires that you contemplate your demise, which can make even the most matter of fact of us squirm.

An upcoming adoption hearing brought to mind some of the most heartwarming cases we’ve handled. These are not stories of orphans or babies being given a new home and a family by loving adults.  Rather, these are adult adoptions. According to Chuck Johnson, president and CEO of the National Council for Adoption, adult adoption seems to be on the rise in the United States. Admittedly, these most unique adoptions are those that legally unite adults who may have never shared a home or appear as babies together with their parents in the family photo album. These are later in life relationships that enable adoptees to unite with new parents and formalize a chosen familial relationship.

Why Would An Adult Want to Be Adopted?

Why would any adult want to be adopted? According to Johnson, the most common situations are stepparent and foster parent adoptions of adult children who have lost or are estranged from their biological parents. These new parents typically have played such meaningful roles in their adult children’s lives. Now the “kids” want to make the relationship legal so that together they can participate in milestone events like being walked down the aisle to the altar, sharing firsthand in the achievement of receiving an advanced degree, or being part of the family gathering welcoming a precious new grandchild into the world.

Therapists who specialize in adoption say that emotion seems to be at the heart of these new parent-child relationships. Adoption can provide stability, a feeling of permanence and belonging, and the gratitude of at last or again being able to experience unconditional parental love.

Many states allow adult adoptions, that is adoptions of people over the age of 18. Although state-to-state the requirements vary, generally the laws surrounding adult adoptions are much less restrictive than those governing the adoption of minor children. In New Jersey, for example, the law covering adult adoption says that the court shall allow a person or couple of full age to adopt an adult person if the court is satisfied that the adopting parent or parents are of “good moral character and of reputable standing in the community.” Also in New Jersey, the adopting parent or parents must be at least ten years older than the person being adopted. The law also states that the adoption must be to the “advantage and benefit” of the person being adopted.

Advantage and Benefit

It’s that last reference about advantage and benefit that may speak to the reason why adult adoptions in New Jersey may be even more prevalent than they are in other states: New Jersey is one of only a handful of states that have an inheritance tax, which imposes a tax on assets that pass to anyone other than a spouse or a child. Believe it or not, a story related to the New Jersey inheritance tax is one of our firm’s most touching adoption cases.

At the center of the story are an elderly couple who were both deaf. Our Partner Gretchan Ohlig handled the couple’s estate planning because she can communicate in American Sign Language and could effectively communicate with them. The husband and wife ultimately sought to adopt their neighbor, a woman with whom they had developed an incredibly close relationship over 25 years…so close that the woman was like a daughter to them and her daughter like a granddaughter.

They celebrated all holidays together and, when it came to their estate planning, they asked if she would be their Power of Attorney and Executor. She agreed and subsequently the couple decided to leave the neighbor all of their assets when they passed. We drafted the estate planning documents accordingly.

Adult Adoption. Why Not?

The husband and wife had no children or grandchildren and were in their late 80’s and 90’s respectively when they transitioned to an assisted living-skilled nursing home in the area. A couple of months before the husband passed away, we were talking about their estate plan. They were worried that when they were both gone, and everything went to the neighbor, she would have to pay 15%-16% to the State of New Jersey because she wasn’t related to them.

If we consider her to be our daughter, can we adopt her? they asked.

Yes, and why not! was Gretchan’s answer. If the biological parents are gone, which they were, and in the case of a married adult the spouse consents, which the spouse did, then the adoption can continue.

A Humane Reaction to a Tough Law

When we went to court, we were very upfront with the judge that the primary purpose was to avoid inheritance tax obligations. Still, we emphasized that this was especially important because the couple and the woman shared a parent-child relationship. The judge not only ruled in our favor but said she was “happy” to do it.

On an equally personal level, this long-ago adoption was the first adult adoption for Gretchan. Since then, Gretchan has overseen other adult adoptions that share a similar story.

“It was so obvious that my clients cared so much about this person and were so happy and relieved that that they could solidify this relationship,” says Gretchan.

At Phelan, Frantz, Ohlig & Wegbreit, we always listen intently to your unique situation and then work diligently to develop an estate plan that fulfills your wishes and your needs.

Call us at 908-232-2244 and we will work with you to take care of your heirs in ways that will make your heart sing.

If Capital Gains & Proposed Tax Law Change Could Boost Your Tax Bill a Charitable Trust Could Help

While it’s great to see significant growth in your stock portfolio and the appreciation of your investments is gratifying, the capital gains can cause you problems at tax time. Couple that with proposed estate tax changes coming out of the Biden administration and your heirs could be handed a hefty bill when they inherit your estate.

Proposed Tax Law Changes Amounts You Can Pass Tax Free to Heirs

At Phelan, Frantz, Ohlig & Wegbreit, LLC, we can provide you with tools to reduce your estate’s tax burden and gifting strategies that can help minimize your tax bill. The Biden administration, however, has proposed estate tax reform which includes removal of the stepped-up basis. These proposed reforms could potentially increase the tax burden to your estate. That’s why in the current political climate it’s more important than ever to put your head together with your financial advisor, your accountant, and your estate attorney to do some strategic estate planning. Creating an estate plan is your opportunity to provide for your loved ones. The thoughtful time you spend will not only benefit your heirs but also benefit you during your lifetime especially when it comes to estate taxes.

Reduce Your Taxable Estate With an Income Stream to Someone You Love

The good news is that a charitable remainder trust (CRT) may be an option to circumvent changes that may be ahead to significantly reduce the amount of money an individual can gift tax-free during their lifetime and at death.  In fact, the primary benefit of a CRT, allows you to reduce your taxable estate while providing an income stream to someone you love.

A CRT is a trust that is funded by an individual during their life. In addition to donating funds to a charitable organization, the CRT makes distribution to a noncharitable beneficiary, which can include the donor or another beneficiary, such as a spouse or child, for a prescribed number of years. A CRT can also offer an opportunity to move assets with a low basis (and corresponding high capital gain).

This is a particularly palatable option if you are charitably inclined and understand that your estate plan serves as a testament to who you are, the values you hold, and the legacy you want. Plus, it addresses the federal estate tax exclusion change currently on the table by limiting or eliminating the amount that will be subject to estate tax upon your death. As attractive, it also can eliminate capital gains on appreciated property, reducing income tax liability during the years of your life when you likely need it most.

Income Stream a Real Plus

Here’s how it works. The CRT makes a distribution to a noncharitable beneficiary for a fixed number of years or for the rest of their life. This means that you can give yourself or another individual an income stream of either a fixed dollar amount per year or a fixed percentage based on the value of the assets transferred to the trust. At the conclusion of the designated term, the assets that remain in the trust will be paid to the charity you have selected. In the year you create the trust and initiate the asset transfer and for the predetermined period thereafter, you will receive a charitable deduction on your income tax return. The deduction will be based on the value of the transfer, the number of years of the trust, the payout rate, and the number of beneficiaries.

Although there has been no proposal put forth to eliminate the tax benefits of utilizing a properly structured CRT, Biden’s proposed plan would impose a 28 percent limit on charitable deductions for taxpayers making over $400,0000 per year in income.  This compares to the current environment in which a high-income earner can make a $100,000 charitable gift and write off $37,000 (the highest marginal tax rate). But under Biden’s plan, the same charitable gift would be limited to a $28,000 income tax write-off, with 28 percent being the proposed limit for deductions for charitable giving for those in a higher income tax bracket. Despite this reduction in the write-off limit, however, there is still substantial savings on your income tax. Your accountant and attorney will work together to maximize the amount of charitable deduction you will be able to take on your income tax return.

Heart Centered and Money Wise

At the end of the day, by making this transfer, you have simultaneously maximized the philanthropic benefit of a charitable gift while avoiding the payment of capital gains tax on your highly appreciated assets. You have also subsequently reduced the value of your estate for your heirs which is an important consideration in light of the potential tax changes on the horizon. As importantly, you have not given up the benefit you received from the underlying asset, as you have converted it into an income stream for a period of time.

There is a long road between proposed revisions to the tax law and their enactment. But even in the current environment, capital gains on low basis assets may still be an issue that can cause you significant taxation. At Phelan, Frantz, Ohlig & Wegbreit, LLC, we have always been available to guide you on approaches that can enable you to make investment decisions that will minimize taxation for you during your lifetime as well as for your loved ones when they inherit your estate. In light of the current political environment, there is no better time to work with your accountant, your financial advisor, and your estate attorney to review your estate plan as well as gifting strategies.

Call us at (908) 232-2244 to understand the benefits of charitable giving. Learn how it can be incorporated into a well-designed estate plan that will benefit not only your heirs upon your death but also put your assets to work for you during your lifetime.







Proposed Estate Tax Reform Seeks to Cut the Stepped-Up Basis, Raise Tax Rate

A provision in President Joe Biden’s relief plan could cause average Americans along with the uber wealthy to pay more to the federal government when they die, which means your kids or other heirs may get less than they would under the current estate tax laws.

President Biden’s COVID-19 relief package, the American Families Plan, includes a proposal to change the way capital gains are taxed when people pass away. According to economic policy experts, the revision to a tax rule called the stepped-up basis has the potential of being a big revenue raiser for the plan. This, coupled with Biden’s proposed reduction in the federal estate tax exemption to $3.5 million likely will result in tax hikes for not only for the uber wealthy and the well-off but also for everyone who has something of value to pass along to heirs.

The proposed changes are not yet law, and there will surely be lots of Congressional haggling over the measures. But they’re out there and looming. Right now, it’s important for you to keep abreast of what’s going on in Washington and keep in touch with your accountant, financial planner, and estate attorney to make sure you get a handle on how estate tax reform will specifically impact your estate situation.

Inheritance With and Without the Stepped-Up Basis

The stepped-up basis is defined in IRS Tax Code 1014 which says the basis of an inherited asset rises to “the fair market value of the property at the date of the decedent’s death.” Inherited assets like your house or equities in your stock portfolio typically have gained in value since you purchased them. These capital gains are taxable, but the stepped-up basis wipes out the capital gains tax when heirs inherit an asset, which significantly reduces the tax liability when and if the inheritor eventually sells the asset.

For example, if the house you bought for $200,000 years ago has grown to a fair market value of $700,000, the $500,000 in capital gains would not be taxed when your son or daughter inherits it. Plus, if years later, they sell it for $950,000, their personal capital gains would be valued against the $700,000 fair market value of the house at the time they inherited it. The same would be true for stock. There would be no tax when your heirs inherit it and upon sale, the gains would be based on the difference between the market value at the time of your death and the time they sell it.

With the proposed Biden changes, the step-up basis would be eliminated, and your heirs would be taxed on the carryover basis of $200,000 either at the time of your death or at a future date when they sell the asset—and the taxation may be at a new, higher 39.6 percent rate (which is another part of President Biden’s proposal). The use of the carryover basis would be applicable on all assets transferred in the estate.

Then There’s the Gift Tax

Currently, the unified federal estate and gift tax exemption is at an historically high $11.7 million and integrates both the gift and estate taxes into one tax system. You can give as much as $15,000 to as many people as you want during the year without being subject to a gift tax. If any gift exceeds $15,000, you are required to submit a form to the IRS but not required to pay a tax until, if and when, you exceed the $11.7 million exemption. On December 31, 2025, that exemption, which was increased under the 2017 Tax Cuts and Jobs Act (TCJA), will sunset to the pre-TCJA level of $ 5.3 million per person. President Biden, however, has proposed that the estate and gift tax exemptions be decoupled and return to 2009 levels: $3.5 million for the estate tax exemption and $1 million for the gift tax exemption with an increased maximum estate tax rate of 45 percent up from the current flat 40 percent rate.

What You Should and Can Do Now

If you’re planning your estate now, reviewing your current plan, or expect to be the beneficiary of an inheritance, we recommend you consider these strategies to better arm yourself for potential changes Congress may make to the estate tax code.

  1. Gather Up all Your Records – If you’re not certain where you’ve put all these records, now is the time to find them, store them in a safe place, and send copies to your accountant and your estate attorney. One reason the current stepped up basis rule exists is that it can be difficult to keep track of an asset’s cost basis. In the case of real estate, for example, records of the kitchen renovation or the addition you built several years ago would favorably impact the carryover basis, making it higher. Similarly, if you reinvested dividends and interest in your stock portfolio, that too, would increase the carryover basis.
  2. Consider Making Charitable Donations or Establish Trusts – You can still donate an appreciated asset to a qualified charitable organization and receive a deduction on the full market value. Trusts will allow you to pass assets to heirs with as little tax as possible.
  3. Purchase an Insurance Policy – If you’re leaving an asset or assets that you anticipate will cause your heirs to face a big tax bill, consider including a life insurance policy as part of your estate. This will help your heirs pay the tax.
  4. Gift Prudently – You must seriously think about how you make large lifetime gifts. Even now, we advise clients who want to reduce their estate or get assets out of their names to gift liquid assets. Gifting liquid assets with no capital gains implications makes more sense than an asset like your house or your stock.
  5. Stay in Touch – Start talking or continue your dialogue with your tax advisors (e.g., your accountant, financial advisor, and your estate attorney). With potential estate tax reform on the horizon, staying connected with these professionals is more important than ever. Change can be daunting but being informed will enable you to be ahead of the curve and, therefore, more flexible and at the ready to make specific adjustments quickly.

At Phelan, Frantz, Ohlig & Wegbreit, LLC, we are knowledgeable of estate tax laws and issues and stay continually abreast of the ongoing changes in estate tax law—and are always available to provide you with the guidance you need for your unique situation.

Call us at (908) 232-2244 to ensure that you’ll be fully prepared for whatever estate tax reform Congress may send your way.


Lessons of Intention and Preparedness That Stick

COVID-19 has taught us many lessons, including the importance of being intentional, prepared and ready to confront uncontrollable situations. New Year’s resolutions tend to do that for us, too, because they get us started on a focused beginning as we ring in another year. Should you be wondering what to include among your resolutions, consider putting a review of your estate plan at the top of the list. If you haven’t already visited your attorney to create these documents, or review them, it’s definitely time to do so—and pend your estate plan for at least five years when it will be time to re-evaluate it.

More than divvying up your assets

We’ve all heard about the importance of having a Will, but there’s more to estate planning than how to divvy up your assets. A number of our other blogs address the importance of having a fundamental estate plan in place. Two less frequently talked about but related issues include protections for your college or travel-bound 18+-year-old child and the importance of storing your account passwords in an accessible location.

If you’re the parent of an 18-year-old who’s heading back to college, you’d be wise to have your young adult sign a durable power of attorney with healthcare proxy language before taking off. By signing these documents, your children are giving you permission to act on their behalf and be their important and immediate fallback should a health or financial emergency occur.

A helicopter parent…not

You don’t have to be a helicopter parent to orchestrate this. In fact, COVID has highlighted the need for these documents. We’ve heard of too many kids, now chronologically and essentially adults, who went off to school and got sick with COVID. Their parents had difficulty gaining information about the severity of their child’s illness or finding out where their kids had been moved to quarantine. Plus, there were too many unanswered questions about how the school would plan to keep them safe going forward.

The unknown is tortuous

There’s nothing more troubling than the unknown when it comes to your kids’ wellbeing. The Health Insurance Portability and Accountability Act (HIPPA) works as a great safeguard to your individual privacy because it prevents individuals beyond adult patients and their health care providers from sharing information. But as a parent, it could work against you when it’s time to protect your son or daughter if they’re facing a scary health emergency.

COVID, as well as other health emergencies, could require intercession for life-saving decision-making. Your child may have a high fever and be too sick to discuss a need for surgery. Also, the treating medical professionals may need to know that your youngster reacts allergically to certain medications. Even financially, your child could be quarantined someplace in the states or abroad and unavailable to perform time-controlled financial activities like signing a lease or talking to a creditor.

Sowing privacy oats versus clear communication

The reality is, however, that although you can drive your kid to your lawyer’s office, they must cooperate. At 18, your youngsters may be feeling their oats. They may not want you to know their business, even though these documents benefit them as they would any adult who grants a trusted other the power to act on their behalf when situations require. Clear communication with your child about when and how the documents would be used is critical. Helping them understand that having a healthcare proxy and a durable power of attorney in place are safeguards not encroachments. An experienced estate planning attorney can help explain the value of these documents to your new adult and likely will ask you to leave the room in order to ensure complete understanding and consent.

Where are your passwords

Where are your passwords

Another important aspect of an effective estate plan is password accessibility. If you’re like many of us, you may misplace or forget your passwords. Passwords are not one of the first things we think about when it comes to estate planning. But nine-times-out-of-10, they are the key to where important information is located.

It’s a good idea to store your passwords in a special folder or envelope that you turn over to your estate attorney. This will make it easy to put a finger on everything when the information is needed. Also be sure to include your passwords on a spreadsheet that catalogues all your important documents and their whereabouts [e.g., Will, Durable Power of Attorney, Trusts, Living Will and Advanced Healthcare Directive, house deed and mortgage documents, investment and 401(k) accounts]. Storing extra password copies in a safety deposit box that holds important documents is also an added protection, as is providing your attorney and your appointed fiduciaries an extra key to your safety deposit box.

In the end, a gift

A new year, especially this one, comes with hope for the future. A topic like your estate may seem dark, an intrusion to holiday spirit and a counterpoint to positivity. But there’s no escaping the importance of the preparedness that comes with having an estate plan. There’s no time like the present and the symbolism of the new year’s resolution to take action. If you think about estate planning as a gift you’re giving your family, you just may decide that there’s no better way to ring in the new year.

When you turn to Phelan, Frantz, Ohlig and Wegbreit, LLC, we will partner with you on every step of your estate planning process. Call us at 908.232.2244 to set up an appointment, begin a new year with intention and be prepared for wherever life takes you and your family.


The do-it-yourself mentality has become an integral part of many areas that inform our lives. Thanks to the Internet and even YouTube, consumers now have all the tools and how-to’s they need to create anything from simple arts and craft gifts, to more upscale inspirations like DIY fashion, printed merchandise or any number of home remodeling projects. This DIY mentality has even expanded to the potentially intricate, increasingly personal and definitely legal task of estate planning and the execution of your Will. Most often undertaken to save money, even the “simplest” DIY Wills may contain pitfalls that end up costing families large amounts of grief or money.

Seen it all

Mixing online programs like LegalZoom, Rocket Lawyer and Quicken WillMaker Plus to lay down the groundwork that will protect and provide for loved ones after you’re gone in the hopes of saving time and money in the here and now can be a recipe for disaster.  Most trust and estate lawyers likely will tell you that choosing these options for estate planning documents may be a real disservice to your heirs.

Estate lawyers should know. They’ve seen it all when it’s come to unraveling the intended bequests of DIY Wills that were erroneously drafted. When a person has passed there’s literally no resource available to clarify his or her intent. Some people will tell you a DIY Will is better than no Will at all. But a bad DIY Will inappropriately and incompletely done does NOT trump no Will status. If you shortchange the process on the front end, there can be significant legal costs incurred after death either due to errors in the execution of the Will or lack of clarity about dispositive wishes.

False sense of security

In fact, DIY estate planning may give benefactors a false sense of security even if you have only modest assets and plan to draft the “simplest of wills”—a term with which legal professionals take issue.  There is no such thing as a “simple will.” First, every individual’s circumstances are unique with particular family complexities that impact to whom and how assets should pass. Second, there are so many assets that pass outside an estate such as insurance policies, 401(k)’s and IRA’s to name a few that there must be careful coordination between probate (the Will) and non-probate or beneficiary assets. It’s imperative that you have a full understanding of what will happen with your assets when you die—which is why a conversation with a lawyer is critical.

With DIY sites, there’s limited, if any, professional guidance. Some sites do provide some attorney assistance, but you don’t get to choose the person with whom you’re working or have any sense of their background with trusts and estate law. For a sensitive subject like the financial protection of your loved ones, the client experience matters and so does interaction with a professional who knows you and understands your family situation.

You don’t know what you don’t know

The lack of appropriate guidance can lead to ignorance, which is a real deficit to DIY planning. Choosing a DIY option for your estate planning is like looking for cures to your ailments on WebMD—most individuals have no real idea what they need when it comes to protecting themselves and their loved ones. For example, every state has unique rules, particularly when it comes to estate/inheritance or “death” taxes. None of this is contemplated in a DIY will. Some sites may not offer the right tools for state-to-state differentiation. Others may offer graded packages and you may inadvertently or for cost reasons choose the wrong one.

Then, too, DIY sites do not lend themselves to the intricacies and/or depth of complex family and financial situations such as blended families, stepchildren and the like.

Plus, a host of other issues can unknowingly arise when upon death, your Will is passed on to the surrogate or probate court. The surrogate court oversees matters of probate, the administration of estates and the process of distributing the decedent’s assets to the proper beneficiaries. To name some of the most common problems that can arise with DIY Wills at this time:

Where’s the Will?

Another wrinkle that occurs with DIY Wills is when the individuals who take on the responsibility of executing their own Wills forget or simply don’t let anyone know where their Will is located.  If the original Will can’t be located, it’s as good as dying without a Will.

It’s also important to remember that your Will is a living, breathing document. This means it must be reviewed regularly and revised with changing life situations like marriage, childbirth, inheritance, etc. Choosing the DIY route to estate planning just may make an individual less aware or inclined to make regular reviews and subsequent revisions.

Covering All the Bases

But when you work with an estate attorney, you have an accountability partner who can help you stay on top of these very important matters—from the sometimes uneasy but serious and important planning process, to choosing the right fiduciaries, to reviewing your Will at least at five-year intervals, down to keeping the original document in safekeeping. Then, when the inevitable time comes for your loved ones to inherit and carry on your legacy, everything will be in order.

When it comes to providing for the precious people in your life, you will surely want nothing less than that.

At Phelan, Frantz & Ohlig, LLC, we take our responsibility to provide families with conscientious estate planning very seriously.  Please contact us if we can be of assistance to you in developing the appropriate estate plan for your family.



Recent reports out of Trenton suggest that the evolution of the New Jersey estate tax — thought to be complete in January 2018 with the full repeal of the tax — may face further developments. Revelations that the repeal has resulted in a higher drop in state revenue than anticipated have led to calls for reinstatement of the estate tax in some form. The uncertain future of the New Jersey estate tax adds an additional layer of complexity to the estate planning process.


For many years, the estate tax exemption in New Jersey was relatively low. An estate tax was imposed on individuals with net assets in excess of $675,000 at death. Many residents sought to avoid the hit by establishing domicile in a more tax-friendly state, such as Florida, which had the accompanying result of impacting New Jersey’s income tax collections. In 2016, then-Governor Chris Christie and Republican lawmakers introduced a law to phase-out the estate tax. In 2017, the estate tax exemption was increased to $2 million and in 2018 it was eliminated altogether.


While New Jersey still has an inheritance tax which is imposed when someone other than an immediate family member (parent, spouse, child or grandchild) or charity receives an inheritance, lawmakers knew that the fiscal hit would be significant. News issued recently by the Department of Treasury reveals that the hit has been harder and more precipitous than initially believed, however. Analysts predict that estate and inheritance tax collections for 2018 will decline more than $100 million, in large part because of the 2017 bump in the estate tax exemption and the complete elimination of the tax in 2018.


Calls for restoration of the estate tax have been coming fast and furious. Whether it will come back and, if it does, whether it will be restored at the $2 million exemption amount or less, remains to be seen. Regardless, it is critical that individuals and families in the process of updating or creating an estate plan include flexibility in their Will to account for the variety of scenarios that may come to fruition. Consultation with a knowledgeable and thoughtful estate planning attorney with experience in New Jersey’s estate tax is an essential part of this process. The attorneys at Phelan, Frantz & Peek are all mindful of this possibility when we discuss planning with our clients.

Navigating The Shifting Estate Tax Landscape

The attorneys at Phelan, Frantz & Peek want to help you navigate the rolling hills that have become the landscape of inheritance and estate taxes in New Jersey. Until January of 2018, New Jersey was one of two states in the United States (the other is Maryland) that had two death taxes. The first is an inheritance tax that is imposed based on WHO inherits from an estate. The second is an estate tax that is imposed based on the VALUE of the assets passing from one generation to another. As of January 2018, the estate tax is no longer.

NJ Estate Tax Repealed

In October 2016, then-Governor Chris Christie signed into law a bill that repealed the New Jersey estate tax as part of a transportation funding bill that included .23 cent/per gallon tax hike on gasoline. At that time, the state’s estate tax exemption was $675,000 – meaning that an individual could leave up to $675,000 without triggering the estate tax. The exemption amount was increased to $2 million in 2017 and is now eliminated entirely with the ushering in of the New Year.

NJ Inheritance Tax Remains

While the estate tax repeal may have some dancing in the aisles – especially those whose net worth exceeds $2 million, the catch for New Jersey families is that the inheritance tax remains. New Jersey’s inheritance tax is levied on assets passing to anyone other than a descendant’s blood line (children and grandchildren in one direction and parents in the other) or a charity. It is important to note that domestic partners, legally adopted children, stepchildren (but not step-grandchildren), and mutually acknowledged children are included in this class.

Those not exempt from the inheritance tax are siblings, in-laws, civil union partners, nieces, nephews, and friends, to name a few. The tax imposed on gifts left in a Will to individuals in these categories varies depending on their classification and the amount of the gift.

Federal Estate Tax Exemption Increased

And last, but certainly not least, is the federal estate tax. The federal estate tax individual exemption was increased from $5.49 million in 2017 to $11.2 million after President Trump signed the Tax Cut and Jobs Act of 2017. The increase will only last until 2026, when the exemption amount is scheduled to return to 2017 levels. Between now and then, few will have to contemplate this issue.

What does all this mean for you?

As evidenced by the up and down of the past twelve months alone, the landscape of estate taxes is subject to frequent fluctuation. Given recent changes, now is a good time to review your estate plan with a professional to determine if your wishes are still being addressed under the new laws, and insure there is some flexibility built in to deal with possible frequent changes to these laws at both the federal and state levels.