Preneed

1. Preneed Preplanning Advance Funeral Planning

2. Terms Prearranged vs. Prefunded Guaranteed vs. Nonguaranteed Revocable vs. Irrevocable

3. Funding Methods • Trust Accounts: • P.O.D. account • Pooled Trust • 100 % Trusting • Less than 100% Trusting • Commingling: NJ 13:36-11.12 PA 13.266

4. Funding Methods (cont’d) • Insurance Products: • Whole Life • Newly Issued Funeral Insurance Qualifications of Provider SSI vs. Medicaid

5. Co-ownership of Real Property Tenancy by the Entirety Joint Tenancy Tenancy in Common

6. Tenancy by the Entirety • Held only by a husband and wife. • Husband and wife are regarded as one. • Surviving spouse owns the entire estate. • Does not require probate. • Divorce: tenancy by the entirety no longer exists.

7. Joint Tenancy • 2 or more persons own real property • Single estate with multiple ownership. • Each tenant owns the entire estate. • All joint tenants’ interests in the property are equal. • Upon death, ownership does not pass to the heirs or devisees of deceased tenant. • Does not require probate.

8. Tenancy in Common • 2 or more persons own real property • Each person owns an undivided share. • Upon cotenant’s death, share passes to the heirs of the cotenant. • No right of survivorship. • Probate required.

9. Insurance Policies • Named beneficiaries: primary and contingent • Upon death, beneficiary receives the benefit without a need for probate. • Insurance company will require: • 1) death certificate • 2) completed claim form • 3) insurance policy • If beneficiary(ies) is/are dead, policy must go through the estate.

10. Gifts • May avoid probate: Gifts in Causa Mortis ( Gift in Contemplation of Death) • May avoid NJ Transfer Inheritance Taxes • May avoid Federal Estate Taxes

11. Trust • May be created by an agreement or a Will. • Subject matter is given to a third person (trustee) for the benefit of the beneficiary. • Beneficiary is not the sole and absolute owner. • The ownership is divided into 2 parts: • 1) trustee is the legal owner • 2) beneficiary is the beneficial owner

12. Reasons to Establish a Trust • 1) mental/physical incapacitation • 2) beneficiary is a minor • 3) subject matter • 4) save estate and/or income taxes • Creator of the trust determines how the trust will be managed. (income & principal) • Probate may not be necessary.

13. Intestate Succession • Statutes provide for the distribution of property. • Separately owned property: • 1) surviving spouse and children (of that union) and their descendants • 2) surviving spouse and children (not all of the union) and their descendants • 3) surviving spouse and no other descendents • 4) surviving spouse and mother and father • 5) no surviving spouse, but lineal descendents

14. NJ Inheritance Taxes • Gifts greater than $500. • Subtracted from the gift before it is received. • State Tax that ranges from 11-16%

15. Classes of Beneficiaries • Class A: totally exempt from tax • father, mother, grandparents, spouse, child or children of the decedent, adopted child or children of the decedent, issue of any child or legally adopted child of the decedent and step-child of the decedent Class B was eliminated 07/1/63

16. Class C Beneficiaries • Brother or sister of decedent, including half brother and half sister, wife or widow of a son of the decedent, or husband or widower of a daughter of the decedent

17. Class D Beneficiaries • All others who are not included in A,C, or E • Stepbrother, or stepsister of the decedent, wife or widow of a stepchild of the decedent, husband or widower of a step-child of the decedent, wife or widow of a mutually acknowledged child of the decedent, and husband or widower of a mutually acknowledged child of the decedent

18. Class E Beneficiaries • The State of New Jersey or any political subdivision thereof, any educational institution, church, hospital, orphan asylum, public library etc…..basically “nonprofit” institutions

19. Estate (Transfer ) Tax • June 7, 2001, President Bush signed the repeal of the federal estate tax • a phased-in repeal of the estate tax

20. Timeline for Repeal of Estate Tax • 2002: exemption increased to $1 million and estate tax rate lowered to 50% • 2003: estate tax rate lowered to 49% • 2004: exemption increased to $1.5 million and estate tax rate lowered to 48% • 2005: estate tax rate lowered to 47% • 2006: exemption increased to $2 million and estate tax rate lowered to 46% • 2007-2008: estate tax rate lowered to 45% • 2009: exemption increased to $3.5 million • 2010: estate tax is repealed

21. Personal Representatives • Executor/ix or Administrator/ix • Commissions paid from the corpus of the estate • If 2 reps. 2% can be added to corpus commissions. • Personal representative must send beneficiaries a copy of the will within 60 days from the date of probate. • Claims must be made within 6 months.

22. Duties of the Personal Representatives • Safeguard assets. • Inventory assets. • Payment of taxes, claims and debts.

23. Reasonable Funeral Expenses • Cost of funeral in relation to the value of the total estate. • Allowable items: • Disallowed items:

24. Liability for Payment of Funeral Expenses • In common law, an estate is primarily liable for funeral expenses. • In common law a husband/father is responsible to provide necessities for a spouse and children. • Anyone can volunteer to pay the funeral expenses. • Prepaid arrangements are not impacted. • Divorce decrees:

25. Safety Deposit Boxes • Automatically sealed upon a person’s death. • PR may obtain will, life insurance policies etc. in presence of bank officer. • Contents may only be released after they are inventoried in the presence of the PR, bank officer and rep. from NJIT Bureau.

26. Probate • “the process where the estate of a decedent is administered” • Not always necessary. • It is a crime to conceal a valid Will. • Adopted children have equal rights to biological children. • Step-children must be written into the Will. • Illegitimate children will inherit from their mother.