Estate probate laws in New Jersey require that an application for the probate of a Last Will and Testament and the appointment of the Executor must wait ten (10) calendar days following the death of an individual. The Surrogate will accept the paperwork for probate before the expiration of the 10-day period but will not admit the will to probate until after the expiration of this 10-day period. This delay period is designed to permit any person with an interest in the estate to file a “caveat” to the admission of a contested Last Will to probate. The term “caveat” means an objection. This objection to the Last Will generally means that the authenticity or legality of the Will is being challenged in a “Will Contest” or “Probate Litigation Dispute” by someone who is dissatisfied with some or all the provisions set forth in the Last Will.
After ten (10) days following the death of a person and filing the Last Will and Testament with the County Surrogate will the County Surrogate inspect and find the Will to be either authentic and legally executed as required by law with no objections having been filed by heirs and interested persons through a caveat or be rejected. If the Surrogate finds the Will to be legal, he or she will issue the “Certificate(s) of Executorship” or letters of administration which will appoint the executor or estate administrator to act with the same power as the person exercised prior to death over his/her over estate property (i.e., cash, checks, withdrawal of money from bank accounts, transfer of property and real estate, etc.).
HOW TO OBJECT TO THE PROBATE OF A WILL OR APPOINTMENT OF THE EXECUTOR
Do you feel that a caveat should be filed against the probate of a Last Will? Is there a problem with the Will or the physical or cognitive condition of the person at the time he or she signed the Will that should prevent it from being probated? Do you object to the qualifications of the proposed executor of the Will or an application to be appointed administrator of the estate when the decedent died without a Will?
Challenging a Will, Trust or Power of Attorney in NJ – Part I
Challenging a Will, Trust or Power of Attorney in NJ – Part II
Challenging a Will, Trust or Power of Attorney in NJ – Part III
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What Are Some Grounds For (1) Opposing the Appointment of an Executor/Administrator or (2) Removing an Already Appointed Executor/Administrator From an Estate?
The mere existence of a perceived conflict of interest or appearance of a conflict of interest, because a proposed executor is also a named beneficiary under the Last Will, is not a cause for the automatic disqualification and removal of an executor/administrator (commonly called a fiduciary). Many fiduciaries are also named as co-beneficiaries with other beneficiaries under many Last Wills. Some beneficiaries believe there is a conflict in the Will because the decedent named the proposed executor as both beneficiary and estate representative. However, if a potential conflict either causes or is likely to cause a materially adverse impact upon the estate or the interests of beneficiaries caused by the fiduciary’s conduct, or substantially threatens to make his or her conduct inconsistent with his or her legal obligations to the estate or trust, then the removal of the fiduciary is warranted and may be granted by a court.
You Need Solid Reasons to Remove an Executor
The disqualification and/or removal of a fiduciary during the probate process will be exercised cautiously by a Chancery judge. To be successful generally requires that the dissatisfied beneficiary prove by clear and convincing evidence the existence of a real and substantial conflict and/or other disqualifying reasons. So long as the named executor or trustee acts or promises to act in good faith and within the scope of his or her powers he or she will generally be successfully appointed if challenged. But there are exceptions.
If a beneficiary claims hostility, tension, personal dislike, civil litigation lawsuits, criminal complaints, or malice against him or her as the basis for objecting to or as grounds for the removal of an executor or a trustee, the court must determine not only the truthfulness of such claims but whether such a relationship has a meaningful chance of actual acts of misconduct or has created a conflict of interest which appears likely to endanger the estate, trust or the welfare of other beneficiary(ies) going forward. A court need not wait until such misconduct or damaging conflict of interest has actually taken place before the court will remove an executor/administrator where it finds that such action is warranted “to protect the estate against possible future jeopardy”.
What is the Personal Liability of an Executor, Trustee, or Administrator Arising from Ownership or Control of an Estate?
A fiduciary can be held individually liable for obligations arising from the ownership or control of the estate or for torts committed in the course of his or her administration of the estate under New Jersey law only if he or she is personally at fault. In other words, you’re not automatically liable for damages and legal claims just because you serve as the agent of the estate or trust. But you must act with caution, however, as there are many exceptions to this general rule which can create unpleasant and unintended consequences for you.
A Dispute Over an Executor’s Commission: What is a Permissible Commission Rate?
I recently read a new case and want to share it with you. The issue involved an executor’s commission and whether the commission under NJ law is to be calculated as a percentage of the fair market value of the estate, or the net value of the estate, after subtracting the outstanding mortgages and debts of the estate payable at the time the fiduciary sold estate assets.
In this case, a bank had become the Administrator of the estate and sold real estate for $172,500. After paying off the principal mortgage and interest of $132,017.94, the net value of the property was $40,482.06.
The bank filed the Estate’s transfer inheritance tax return, which included an administration expense deduction of $8,625. The bank calculated the deduction by taking 5% of the Estate’s gross value, of $172,500. After examining the return, the Director of Taxation issued a Notice of Assessment denying the full value of the Estate’s administration expense deduction. The director allowed an administration expense deduction of only $2,004, which was calculated by taking 5% of the net value of the property (i.e., $40,482.06).
The Estate Filed a Protest With the Transfer Inheritance Tax Branch Challenging the Director’s Notice of Assessment.
The Estate argued that NJ Law authorizes the deduction of “ordinary expenses of administration, including the fees allowed executors and administrators,” in determining the fair market value of the property for Inheritance Tax purposes. The amount of the deduction, the Estate argued, is calculated by taking 5% of the first $200,000 of the gross value of the estate. Accordingly, the Estate contended that the allowable deduction from an executor’s commission from the taxable estate should be 5% of $172,500 or $8,625.
The Director of Taxation argued that the term “ordinary expenses of administration” and “ordinary fees allowed executors and administrators,” did not allow a gross value calculation under the law. The director cited his authority to promulgate regulations to help determine what the legislature meant by allowing the deduction for the “ordinary expenses of administration, including the ordinary fees allowed executors and administrators,” in determining the clear market value of the property. Pursuant to that authority, the Director argued that these regulations only allow the estate to deduct “ordinary expenses of administration” based on the net value of the Estate’s assets after all encumbrances are deducted.
Moreover, the Director contended that it had interpenetrated the term “ordinary expenses of administration” deduction consistently for nearly thirty years. The Director argued that since this long-standing administrative construction of NJ laws has remained undisturbed by the Legislature, it must be accorded substantial weight as evidence of conformity with the legislative intent of the statute.
In this case, the Court found the Director’s arguments to be unpersuasive. The Judge ruled that the New Jersey Transfer Inheritance Tax Act imposes a tax on the transfer of real and personal property by a decedent as a result of his or her death. Those taxes are based on the “clear fair market value of the property transferred”. In determining the market value of the property, the Act clearly specifies what may be deducted. The Act provides:
In determining the clear market value of the property the following deductions and no others shall be allowed:
- The property for which the debt is owing or for which it is secured is subject to the death tax;
- A foreign debt exceeds the value of New Jersey property securing it for which it was contracted:
- Funeral and last illness expenses – A reasonable sum for funeral expenses and last illness.
- Administration expenses; fees of executors and attorneys – The ordinary expenses of administration, including the ordinary fees allowed executors and administrators and the ordinary fees of their attorneys
- Payment of state, county, and local taxes upon the property for the current fiscal year
- Transfer taxes of other states or the United States – Transfer taxes paid or payable to other states or territories or the District of Columbia or foreign countries on any property the transfer of which is taxable.
The New Jersey Transfer Inheritance Tax is imposed upon the transfer of property based upon the fair market value of such property. Fair market value is ascertained by deducting from the market value of any property, the debts, expenses, and taxes that constitute an encumbrance upon the property of a decedent. No deductions are allowed, however, against any property which is exempt or not subject to the New Jersey Inheritance Tax.
The Court held that the balance of a mortgage owing on the date of death is allowed as a deduction from the value of any real property securing such mortgage, except that in the case of realty held by a decedent and a surviving spouse as tenants by the entirety, the amount of any mortgage owing on such realty at the decedent’s death is not allowable as a deduction since such property is exempt from the New Jersey Inheritance Tax.
Thus, the state’s position was reversed and the commission based on the fair market value of all estate property without offset for liens/debts was affirmed. This is a big deal. It means the executor/administrator can calculate his/her commission based on the fair market value of all property that is part of the probate estate without subtracting liens and debts.
Calculating a Fiduciary’s Commission
The executor(s) or administrator(s) commission(s) is to be calculated based upon the fair market value of the property, as of the date of death as follows:
- 5% on the first $200,000 of all corpus received by the fiduciary;
- 3.5% on the excess over $200,000 up to $1,000,000;
- 2% on the excess over $1,000,000; and
- 1% of all corpus for each additional fiduciary provided that no one fiduciary shall be entitled to any greater commission than that which would be allowed if there were but one fiduciary involved.
Find yourself with questions regarding executors and estate administrators? To speak with a knowledgeable and experienced probate and estate administration attorney who is easily approachable and comfortable to talk to, call Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or e-mail him at firstname.lastname@example.org and set up an office consultation at your convenience.
Written by New Jersey Estate Probate and Administration Lawyer Fredrick P. Niemann, Esq.