When Estate Planning, Understand the Approaches and Implications of Naming Your Adult Children as Beneficiaries
The only sure things in this life are death and taxes. As the adult beneficiary of your parent’s estate, you will become familiar with New Jersey’s inheritance regulations and complex tax laws. They can make for a seemingly impossible puzzle to solve, especially while you are grieving the loss of your parents. Parents often name a beneficiary as the executor of their estate because they are more familiar with the decedent’s life and finances. Typically, the oldest child is chosen as the executor among beneficiaries who are siblings. Parents need to select someone whose relationships with their siblings are amicable and someone who is responsible, mature, and organized. Parents should meet with an estate planning lawyer and financial planner when drawing up their will to avoid undue tax burdens or confusion after their passing. Adult children who are beneficiaries should familiarize themselves with the procedures, tax laws, and other pertinent information when the will is finished. Waiting until the will is to be applied prohibits any changes from being made.
Involving Your Adult Children in Estate Planning Decisions for a Smooth Transition
The most important part of estate planning is involving your children if they are your beneficiaries. Talk with them about your plan and how they will be affected. The idea here is to be as transparent as possible and leave no surprises. The conversation may be uncomfortable for many reasons. Still, the most prevalent ones are the emotional aspect of contemplating your passing and how they feel about how your estate will be handled.
Think about the impact the inheritance will have on your children’s lives. Talk with them about seeking financial advice and being responsible. Apprise them of tax considerations, possible investment strategies, and how they envision using their inheritance. Do everything you can to encourage them to be responsible. If you feel they don’t have the greatest financial track record, you can establish a family trust that will pay them under specific circumstances at specific times. If you are leaving a business or a company, talk to them about whether their life plan aligns with running your business and make decisions accordingly. As hard as it may be to consider leaving your business to someone other than your children, it may not be what is best for either of them.
Talk to your children honestly about the approximate value of your estate and what they will inherit. You don’t want them to give up their career, sell the house, and make crazy purchases, planning for a lifetime of living high off the hog when the value of their inheritance will not support that lifestyle. Conversely, you want them to make responsible financial plans before and after receiving their inheritance, so being familiar with the numbers will help them to do just that.
When you have spoken with your children, and they have opined what they expect to receive, you may want to adjust your estate plan to accommodate their suggestions, concerns, or both. Be clear as to why you are making changes. Remember, you aren’t necessarily seeking their approval, but by keeping the process as transparent as possible, you could avoid squabbles between them when you are no longer there.
Beneficiary Cooperation and Compliance in Estate Planning Administration
The beneficiaries should cooperate with the estate executor if there are questions or concerns. Once the beneficiaries have received their complete share, they must sign a statement indicating that they have received everything to which they are entitled. This is done to avoid lawsuits alleging that the estate distribution was mishandled. They must also follow any tax laws regarding their inheritance.
Estate Planning and Tax Implications in New Jersey
Since 2018, New Jersey has had no state estate tax; estates are valued at over $13.6 million for an individual and $27.22 million for a couple and require payment of federal taxes. New Jersey does have an inheritance tax, but children, spouses, grandchildren, great-grandchildren, and parents are exempt.
Nurturing Relationships through Executor-Beneficiary Communication
Communication between the estate executor and its beneficiaries can go a long way in avoiding in-fighting, accusations, and lawsuits. Beneficiaries have the right to a statement lining out the assets to be distributed, debts, and taxes to be paid by the estate, properties, and others. Keeping in touch with the beneficiaries about what happens during the probate process can assuage claims that the executor is dragging their feet or not doing their job properly.
Further Tips to Adult Children Designated as Beneficiaries in NJ
Beneficiaries should talk openly with their parents and each other about what will be done with the personal property in the estate. China place settings, a handbag collection, golf clubs, photo albums, etc., can cause as much, if not more, trouble when it comes down to who gets what. Grief manifests itself in many ways, and perhaps something that previously was of no interest becomes very important to an individual. In an ideal scenario, the children would specifically request that certain items be placed in the will and given to them. If that is not the case, calm discussion between siblings should be enough to resolve any issues.
Hiring a financial planner and tax attorney is beneficial. They can assist you in creating your estate plan. You don’t have to be a millionaire to plan what you want to do with your estate. Think before you spend. It can be tempting to make large purchases or go on a fancy vacation, but consider putting a large part of your inheritance in an investment account until you decide how to use it. You needn’t be in a rush. Splurging on a few more minor things is fine, but you want to be able to use this money to build a stable financial future.
Filing Obligations and Distribution Satisfaction
Even when adult children who are beneficiaries are exempt from inheritance taxes, a tax form must still be completed and submitted for Federal and state taxes. Also, the beneficiary must recognize in writing that they have received the entirety of their inheritance and are satisfied with its distribution.
Talk to Our Team of Estate Planning Lawyers to Manage Adult Children as Beneficiaries in Monmouth County, NJ
Many decisions must be made regarding your final wishes for the distribution of your estate. Although there isn’t a right or a wrong way to do it, there are ways that are more advantageous for all involved. You want to leave your estate as a benefit to your children, and that can cause you to feel overwhelmed. An estate lawyer at Chamlin, Uliano & Walsh is an excellent solution. Our attorneys have worked with hundreds of families to construct an estate plan or assist an executor in the estate distribution in Freehold, Middletown, Howell, Holmdel, Long Branch, and throughout Southern New Jersey. Our experienced attorneys know the laws and probate procedures that will apply to your situation.
If you would like to know more, call us at (732) 440-3950 or fill out a contact form so that we may schedule a consultation.