Lessons in probate and executor duties

Ask NJMoneyHelp

Photo: The Brass Glass/morguefile.com

Q. If a spouse dies, you have to have the will probated with the county and you will receive short forms to take to banks. Does the state figure out the estate and sales tax from the information sent to them on short forms? There are savings bonds worth $2,578.06 that have not matured.
— Planning

A. It is good that you are researching the answers to these questions prior to a spouse passing away so you can take the time to understand the process when you are not in the process of grieving.

Here’s how it works.

When a resident of New Jersey dies, their will is probated in the surrogate county court in the area they resided when they died, said Dawn Brown, a certified financial planner with Lassus Wherley in New Providence.

She said the will and a certified copy of a death certificate has to be brought to the court to start the probate process.

“The person named as the executor in the will is responsible for completing the probate process with the court,” she said. “Sometimes one spouse names the other as the executor of their estate.”

The executor will be issued Letters Testamentary, also called short form certificates, by the surrogate court to be used to settle the estate, Brown said. This will include settling all debts of the person who has died, and distributing the property named in the will to the recipient(s) named in the will.

Now, the issue of estate taxes.

Under federal law, estates valued over $5.49 million in 2017 are subject to estate tax, and there is no sales tax involved in settling an estate, Brown said. Then under current New Jersey law, estate tax is payable only for estates valued over $2 million with a progressive rate from zero to 16 percent.

But in 2018, the New Jersey estate tax is scheduled to be eliminated, and if a surviving spouse inherits all of the assets of the deceased spouse, no federal or state estate tax is payable, Brown said.

The feds and the state won’t simply tell you the estate taxes due, if any.

“The executor is responsible for working with a lawyer and accountant to file the decedent’s income and estate tax returns,” Brown said. “The accountant/lawyer will calculate the total gross value of the estate and review all the beneficiaries of an estate to determine if an estate tax return has to filed.”

The value of savings bonds will be included in the calculation of the total estate when determining the value of the estate, she said.

As you go through this process, remember New Jersey also has an inheritance tax.

“There are no plans to eliminate the inheritance tax,” Brown said. “There is no inheritance tax due if the person who inherits falls into Class A. This class includes a spouse and child of the decedent. For other inheritors, except charities, the tax is between 11 and 16 percent.”

Prior to the distribution of the inherited property, Brown said, the executor needs to file the tax returns. If no tax is due, the executor must get a tax waiver from the New Jersey Division of Taxation.

Back to your savings bonds. These need to be distributed by contacting Treasury Direct.

“The executor will need to complete FS Form 1455 detailing how funds are to be distributed,” Brown said. “This completed form along with a copy of the death certificate and Letters Testamentary are to be submitted to Treasury Direct for the savings bonds to be transferred to the inheritor of the bonds.”

Check the Treasury Direct website for more information.

Email your questions to moc.p1511336430leHye1511336430noMJN1511336430@ksA1511336430.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.