What Happens When You Die
Without a Will in New Jersey
When a person dies, that person’s individually owned assets without a beneficiary designation (“probate assets”) become a part of his or her estate. A legal representative, sometimes referred to as a fiduciary, must be appointed by the Surrogate’s Court of the county in which the decedent resided so that the probate assets can be marshaled into the estate and eventually distributed to the intended beneficiaries or heirs. An Executor is appointed if the decedent dies with a Will (a testate estate). An Administrator is appointed if the decedent dies without a Will (an intestate estate). The role of an Executor is to follow the decedent’s wishes as is directed under the decedent’s Will. The role of an Administrator is to follow the State of New Jersey statutes as it relates to administration of an estate of a decedent who died without a Will. This Newsletter will focus on what happens in an estate administration when there is no Will in the State of New Jersey.
Who’s in Charge?
Typically, a family member or an individual close to the decedent will go to the Surrogate’s Court in the county where the decedent resided at the time of death to apply for administration of the intestate Estate. Pursuant to N.J.S.A. 3B:10-2, priority among who is entitled to receive Letters of Administration starts with the decedent’s surviving spouse or domestic partner, then remaining heirs, and lastly anyone else who would accept the administration. If within forty (40) days of the decedent’s death no one applies for administration, a creditor or “any fit person” can apply to be appointed the Administrator. In making this application, that person is applying to become the Administrator of the estate and receive letters of administration, which will be used to prove the appointment to any institution or individual.
What Happens Next?
Once Letters of Administration are issued, the next step is to request a tax identification number for the estate (EIN) from the IRS. This can be done online and will be used for any tax returns that may be required. The Administrator will also use the EIN to open an estate checking account to transfer any assets there and pay any debts from that account. The Administrator will then marshal all estate assets and determine the date of death valuations of each account.
Prior to distribution of the estate assets to heirs, the Administrator will determine all of the decedent’s and the estate debts, including any funeral expenses and taxes that are due, and pay those as a priority administration expense. Other priority expenses include fees for any attorneys or accountants the Administrator may hire to help with the administration, then secured debts, followed by unsecured debts. N.J.S.A. 3B:22-2 provides the full list of priority of claims.
How Are Intestate Assets Distributed?
Distribution of the estate assets will depend on the structure of decedent’s family as discussed under N.J.S.A. 3B:5-3.
A surviving spouse or domestic partner is entitled to the entire intestate estate if no parent or decedent of the decedent survives, or if any surviving descendants are also descendants of the surviving spouse or domestic partner.
If there are no descendants but a parent of the decedent survives, then the surviving spouse or domestic partner is entitled to the first 25% of the intestate estate, but not less than $50,000.00 nor more than $200,000.00, plus three-fourths (3/4) of the balance of the intestate estate.
If the decedent has descendants that are not also descendants of the surviving spouse or domestic partner, or if the surviving spouse or domestic partner has descendants that not also descendants of decedent, then the surviving spouse or domestic partner is entitled to the first 25% of the intestate estate, but not less than $50,000.00 nor more than $200,000.00, plus one-half (1/2) of the balance of the intestate estate.
Any distributions to beneficiaries will require, at a minimum, a signed Refunding Bond and Release which describes the assets distributed to the beneficiary and his or her acknowledgment of receipt of the assets. This document also releases the Administrator for the work done on behalf of the Estate. Each Refunding Bond and Release is then filed with the Surrogate’s Court. Sometimes, an informal accounting may also need to be prepared and provided to the beneficiaries before the estate administration can be completed, depending on the circumstances.
Wow, Does This Job Pay?
The Administrator is entitled to commissions based on the income generated by the estate (N.J.S.A. 3B:18-3) and the corpus (principal) received by the estate (N.J.S.A. 3B:18-13). Commissions in the amount of 6% of income may be taken. As to corpus commissions, an Administrator may take 5% on the first $200,000.00 of all corpus received, 3.5% on the excess over $200,000.00 up to $1,000,000.00, 2% on the excess over $1,000,000.00. If more than one Administrator is acting, an additional 1% of corpus for each additional fiduciary can be paid to them. Any commissions received by an Administrator will be considered income for income tax purposes.
In addition to the basics outlined above, there may be more steps involved in the administration depending on the value and the complexity of the intestate estate. If you would like to learn more about the duties of a fiduciary of a testate estate, please keep an eye out for one of our subsequent newsletters discussing that topic. We at Pashman Stein Walder Hayden, P.C. have assisted many families in such matters. If you need assistance with administering an estate, please contact us.
This Newsletter is not intended to constitute legal advice, but rather to give you an overview of the topic discussed.
