When to Have it Reviewed they all have a common theme, and that is - - PDF document

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icture this: A man’s wife dies at an early age and he then marries another woman who helps raise – but never for- mally adopts – his children from the prior marriage. In time, the man dies and leaves nearly everything to his second

• wife. Then the second wife dies intestate (without a will).

Stephen M. Greenberg, shareholder at Flaster/Greenberg (the law fi rm with offi ces in Cherry Hill, Egg Harbor Township, Morristown, Trenton, Vineland and two other states), says, “She didn’t have a will and as a result, the fi ve children have been

• disinherited. I suspect that was not what either [the husband or

the wife] wanted. Ultimately, the assets are going to the wife’s brothers, who were elderly themselves and frankly, somewhat

• greedy. And there is really nothing I can do about it, because of

the intestate laws.” Wills are important, and New Jersey attorneys remark that people procrastinate about creating wills because: contemplating

• ne’s mortality isn’t pleasant; businessmen and businesswomen

are often focused on creating and growing their businesses (and not thinking about their own deaths); and, among other things, wills need to be updated over the years. “People generally can’t conceive of their own death,” Green- berg explains. “Everybody knows that nobody lives forever, but it’s not something that the human brain really contemplates. We all have very, very busy lives and wills are easily pushed to the back burner.”

Compelling Reasons

Sandra Brown Sherman, a partner in Riker, Danzig, Scher- er, Hyland & Perretti LLP’s tax, trusts and estates practice (the fi rm has offi ces in Morristown, Trenton, Manhattan and Lon- don), says dying intestate is “terrible” for a couple of reasons. First, nearly every will forgives the bonding requirement, so the executor and trustees don’t have to obtain a potentially expen-

By George N. Saliba, Managing Editor N e w J e r s e y B u s i n e s s 1

Wills:

Preparing For Your Passing

sive indemnity bond to protect against the fact that they might steal assets. She also stresses that intestacy laws may not pass property as one would like (as in the above example), or pro- vide, say, trusts for minor children. Michael N. Gooen, chair of the trust and estates group at Lowenstein Sandler, P.C. (the fi rm with offi ces in Roseland and Manhattan), adds, “By creating a trust under a will, or by fund- ing such a trust during one’s life, a person can implement virtu- ally anything they want. There are limits on what one can do to disinherit a spouse – and there are certain things you can’t put in trust because public policy prohibits them. But mostly you can do whatever you want -- as long as you have a skilled attorney draft it for you.”

Protecting Loved Ones

Greenberg, at Flaster/Greenberg, notes that a will names guardians for minor children, so they don’t become wards of the state or subject to a court helping decide who is going to be the children’s guardian. In addition, if both the mother and father perish in, say, a car accident and leave orphans, trusts can ensure assets get passed to the children at appropriate ages. Greenberg says, “Even if you have left substantial life insur- ance, you may not want to put six or seven fi gures into the hands

• f a 21-year-old, because all they care about is: ‘What kind of

a car can I get?’ They don’t realize that it has to last them for a very long time.” He adds that one also might want to provide for an elderly parent via a will, or give to a favorite charity, for example.

Taxes

In the past, the federal government had an estate tax death credit, in which state governments essentially received some

• revenue. However, the federal government gradually phased

the credit out, and today, many states have enacted their own tax, separate from the federal system, to compensate for the lost

• revenue. New Jersey imposes an estate tax on residents whose

assets exceed $675,000, but do not pass to a surviving spouse or a charity. There are ways to help address the estate tax, such as estab- lishing residence in another state, as one grows older.

When to Create a Will

Attorneys interviewed for this article express various opin- ions regarding when one should create a will. For example, Allan C. Bell, partner-in-charge of the estate planning group at Sills Cummis Epstein & Gross (offi ces in Newark, Manhattan and Princeton), says a will should be created “once [a person] reaches the age of majority and has any assets.” Gary J. Hoagland, managing partner at Hoagland, Longo, Moran, Dunst & Doukas (offi ces in New Brunswick, Clinton, New York City and Buffalo, N.Y.), says, “We generally see peo- ple come in for wills at three different times in their lives. One would be when they have kids, a second one is when they are about to go in the hospital, and a third reason is when they are leaving on a trip.”

Who Should Draft a Will?

Does one need an attorney who specializes in wills and es- tates? Sills Cummis’ Bell says yes – one should not use the per- son who created a closely-held business or handled a real estate closing. “You should use somebody who does this on a regular ba- sis,” he explains. “It is complex and I have seen clients go to lawyers who don’t practice in [wills] and the [lawyers] pick up a form book and do something that is not appropriate for that particular client, or is just plain wrong . . .” Meanwhile, Karen M. Stockmal, an attorney specializing in estates and business planning at Pepper Hamilton, LLP (offi ces in Princeton and 10 other locales) says, “The most important el- ement to fi nding an attorney to work with you in this regard is to fi nd someone whom you trust: someone who you can talk to, and who is responsive to you in whatever ways are most important. For some clients, it’s fi nding an attorney with a type of working style, and for others it’s getting a [telephone] call back the same day . . . It is equally important that the attorneys be skilled – you have to look at that, as well. But sometimes, people look at the skill and not necessarily their own comfort level. And it really is a team effort.”

2 O c t o b e r ,     Rita M. Danylchuk, chair of the private client group at Gibbons, P.C., Newark

When to Have it Reviewed

Rita M. Danylchuk, chair of the private client group at Gib- bons, P.C. (offi ces in Newark, Trenton, Manhattan and Phila- delphia), says one should review a will perhaps every two or three years. However, if an event occurs during that time (i.e., marriage or birth of child), one might want to re-examine the will then. Every few years, there may also be changes in tax laws or state laws, which should be reviewed. She adds, “Certainly, if you move to another state, it is al- ways a good idea to have your will reviewed at that point, too, because each state’s laws are different, as far as what they may provide.” A problem Diane Hoagland – partner at Hoagland, Longo, Moran, Dunst & Doukas – sees is that people create wills when they are 30 or 40 years old, and when they fi nally pass away, the person they named as executor has also passed away. She says it’s important to create a new will, over time, to ensure that executors are still living – and willing to be executors.

Common Errors

Danylchuk says common errors regarding wills involve: not having them be as tax-effi cient as possible; and having owner- ship or benefi ciary designations on assets passing outside the will, inconsistent with the will. For instance, one may have a life insurance policy that names Person A as the benefi ciary, but the will names Person B. Gooen, at Lowenstein Sandler, says, “Once you get past the hurdle of not having a will at all, which is the biggest mistake, I think the next biggest mistake is thinking of the will as a com- modity: a one-size-fi ts-all type of legal document. They are

• not. Wills are as unique as the people and families they serve.

For some people – if they have simple family situations and they don’t have a lot of assets – [simple] wills will work fi

• ne. Typi-

cally, for business owners, if they are ongoing business owners and they are doing well . . . that type of one-size-fi ts-all approach will not work. “I see a lot of people come to my offi ce, having done a less thorough round of planning. Sometimes I see this technical mis- take, that technical mistake or a tax error – there is really no point for me to name the laundry list. Just suffi ce to say that they all have a common theme, and that is that somebody didn’t ask the next question. The more thinking and planning some- body is committed to doing, the more opportunities you uncover and the more missteps you avoid. That can make the difference between a successful story of inter-family transition of wealth, and a failed inter-family transition of wealth.”

Succession Planning

Since approximately 36 percent of New Jersey Business magazine’s readers are owners or partners with businesses, this article wouldn’t be complete without mentioning business suc- cession planning. Pepper Hamilton’s Stockmal explains succession planning and estate planning have discrete issues, because in the fi rst, there is a business that is going to continue forward, and the lat- ter, of course, deals with the personal assets and accounts of the business owner. She explains, “Imagine a model of two circles that intersect and overlap partially: one circle is the business succession and the other circle the estate plan. The will, in most cases, will not document the entire business succession plan, but a portion of the will will deal specifi cally with the business and its succes-

• sion. It needs to be cohesive with other documentation that sur-

rounds the business, the business plan and its governing docu- ments. “I think the biggest issue we see is that business owners often underestimate the need to work through a fairly detailed busi- ness succession plan that dovetails with their estate plan.”

Conclusion

It has been said a great human paradox is that, on the one hand, we humans are insignifi cant: the great universe moves forward and we are each merely single grains of sand on a vast

• beach. Who will think of us in 120 years? No one. On the other

hand, we are each extraordinarily signifi cant, due to the love and interactions we have with individual humans in our lives. Dwelling on the latter point, a good legal will ensures the trans- fer of our assets to those who are mutually signifi cant, allowing us to love them after our passing.

N e w J e r s e y B u s i n e s s 3

Reprinted with permission from New Jersey Business, Novemeber 2007 by Ti e Reprint Dept., 800-259-0470 (10833-1107)

For web posting only. Bulk printing prohibited.