Probate is a court-supervised legal process that may be required after someone dies. Probate gives someone, usually the surviving spouse or other close family member, authority to gather the deceased person’s assets, pay debts and taxes, and eventually transfer assets to the people who inherit them.
Probate and Nonprobate Assets
Probate court proceedings aren’t always necessary. Usually, they are required only if the deceased person owned assets in his or her name alone. Other assets, called “nonprobate” property, can probably be transferred to their new owners without probate.
Common nonprobate assets include:
- assets the deceased person owned with someone else in joint tenancy or tenancy by the entirety, which pass automatically to the surviving owner
- assets for which the deceased person designated a beneficiary outside of the will—for example, IRAs or 401(k) plans for which the deceased person named a beneficiary, or payable-on-death bank accounts
- life insurance proceeds or pension benefits that are payable to a named beneficiary
- assets held in a revocable living trust
Simplified Probate When There’s No Will
If the deceased person didn’t leave a will or a lot of valuable property, surviving family members can take advantage of New Jersey’s simplified probate procedures. The streamlined probate, which is quicker and less expensive than regular probate, is available if:
- the value of all of the assets left by the deceased person doesn't exceed $20,000, and the surviving spouse or domestic partner is entitled to all of it without probate, or
- there is no surviving spouse or domestic partner and the value of all of the assets doesn't exceed $10,000. One heir, with the written consent of the others, can file an affidavit (sworn statement) with the court and receive all the assets.
Probate in New Jersey is handled by the surrogate’s court in the county in which the deceased person lived. If all goes smoothly, the process should take less than a year.
Appointment of an Executor or Administrator
If the deceased person named you to serve as executor in his or her will, and probate is necessary, you will go to the surrogate’s court and request to be formally appointed as executor of the estate. This can happen as soon as 10 days after the death. You’ll need to supply the will and a certified copy of the death certificate. If the will isn’t “self-proving,” one of the two witnesses who watched the deceased person sign it and signed the will themselves must appear I court (or submit a sworn statement) as well.
If there is no will, or the person named in the will isn’t available or willing to serve, the probate court will appoint an “administrator.” This person does the same job as an executor. New Jersey law gives the surviving spouse or domestic partner, if any, first priority to be appointed as administrator.
An executor or administrator who is not a resident of New Jersey must post a bond, unless the will states that it’s not necessary. A bond is a kind of insurance policy that protects the estate if the executor or administrator mismanages or steals estate funds.
Unless there is reason to think the will is not valid, or someone is contesting the will in court (this is called a “will caveat”), the surrogate’s court will issue a document called “Letters Testamentary” (if the executor was named in the will) or “Letters of Administration” (if the court appoints an administrator). This document gives the executor or administrator the duty and authority to:
- collect and inventory the deceased person's assets, and keep them safe
- have the assets professionally appraised, if necessary
- pay valid debts and taxes, and
- distribute the remaining property as the will (or if there's no will, state law) directs.
Within 60 days after a will is admitted to probate, the executor or administrator must mail notice of the proceeding to all heirs (people who inherit under state law in the absence of a will) and beneficiaries named in the will.
An executor or administrator is entitled to compensation, called a commission, for the work of settling the estate. The commission is 6% of income received by the estate plus 5% of the value of the gross estate for estates up to $200,000.00, 3.5% on the excess above $200,000 to $1 million, and 2% on amounts over $1 million. (New Jersey Statutes §§ 3B:18-13 and -14.)
Handling Estate Assets
Usually, the executor or administrator opens a bank account for the estate and consolidates existing cash accounts in the estate account. The executor deposits amounts that come into the estate (for example, compensation earned by the deceased person, refunds, and other miscellaneous payments) into the account, and uses the funds to pay estate expenses.
The executor or administrator has authority over any assets that go through probate. Probate assets can include vehicles, real estate, bank and brokerage accounts, and personal belongings (for example, jewelry, home furnishings, artwork, and collections). Life insurance proceeds that are payable to the estate (not a named beneficiary) are also probate assets.
The executor or administrator must keep careful records of how estate assets are handled and distribute and may need to submit receipts, bills and bank statements to the court. Before the probate can be closed, the executor will have to submit an accounting, showing all assets, disbursements of estate money, and proposed distribution to inheritors. If all the beneficiaries approve the accounting, a formal approval from the court isn’t necessary.
Dealing With Debts and Taxes
It’s the executor’s job to pay valid debts and expenses of the estate. The executor can ask the court for an Oder Limiting Creditors; this gives creditors six months to come forward with claims.
If there’s not enough money in the estate to pay all debts, the executor or administrator must turn to state law, which prioritizes claims. The family is paid first; the surviving spouse and children under 18 are entitled to a year’s support. After that come funeral expenses, costs of probate (court filing fees, lawyers’ fees, and more), expenses of the last illness, and taxes, in that order. The list goes on; you’ll need to consult it only if the estate can’t pay all the bills. If that’s your situation, you’ll want to get legal advice before you start writing checks.
The executor or administrator must file final New Jersey and federal income tax returns for the deceased person. These returns are generally due by April 15 of the year following the year of death. Income tax returns may also be required for the estate itself, if it receives income.
A federal estate tax return will be required only if the taxable estate is very large—for deaths in 2016, more than $5.45 million. More than 99% of all estates do not owe federal estate tax. New Jersey estate tax, however, may affect much smaller estates—those worth more than $675,000.
New Jersey also imposes an inheritance tax. Unlike estate tax, inheritance tax rates are not based on the amount of the entire estate, but on who inherits. More distant relatives and unrelated persons pay a higher rate than close family members.
Distributing Property and Closing the Estate
The executor or administrator can distribute estate assets to inheritors only after debts and taxes are paid. The executor must also check, before distributing assets, to be sure that an inheritor has not been found liable for back child support. This is called a Child Support Judgment search.
The executor or administrator follows the instructions in the will, or if there is no will, turns to state law to determine who inherits. New Jersey law provides that the deceased person’s closest relatives inherit his or her assets. When the executor or administrator has paid all debts, filed the required tax returns, and distributed all the estate assets, the court will relieve the executor of his or her duties.