Many New Jersey Residents accept invitations to local restaurants because they are offered a free gourmet meal in return for listening to a presentation as to how a living trusts will benefit them by helping to avoid probate. Sometimes the presentation is made by an attorney, sometimes not. If the only, or primary, reason for creating a living trust, is to avoid probate in New Jersey, it is probably a waste of money and effort for New Jersey residents.
At this point, I should explain the difference between probate and administration. In New Jersey, probate is a judicial process that results in the appointment of an executor or administrator of an estate. New Jersey’s probate process is one of the easiest, if not the easiest in the United States. Here is how it works. The executor goes to the county Surrogate’s office with the original will, a death certificate provided by the funeral director and a check. Relevant information is sent to the Surrogate in advance. The executor hands over the will and death certificate, is given a few papers to sign and pays the fee with the check. The probate clerk says that a certificate officially appointing the executor will be sent within a week. If there is no will, and, therefore, no one designated as executor, statutory law states the order of preference as to who will be the administrator. The administrator must post a surety bond from an insurance company guaranteeing that the administrator will perform his/her duties faithfully and not misappropriate any of the estate assets. The bond can be costly, because the amount is based on the size of the estate. Once the executor or administrator is appointed, that’s it for probate, unless there are problems with administration of the estate.
Administration is the procedure during which assets and liabilities of the decedent are identified, debts are paid, appropriate estate and inheritance tax returns are filed, taxes are paid, and documents called tax waivers are received from the Division of Taxation so that estate assets can be distributed. This process can take as little as a few months or as much as a few years, depending on how complicated the estate is. In New Jersey, there is no need to involve the Surrogate in the administration process - - unless there are problems between the executor/administrator and the beneficiaries, or unless there are legal issues that require court intervention or approval.
In states like Florida and California, as well as others, however, the administration of the estate is intimately intertwined with the probate process. Except for small estates, court approval is needed virtually every step of the way. Appraisals, motions, affidavits, briefs, etc. are required. The process is time-consuming and expensive. In order for to avoid probate, residents establish revocable living trusts during their lifetimes. They transfer their assets to the trust and then continue their lives as before, except that everything passes through the trust. It is a bit cumbersome, but worth the inconvenience because assets owned by a trust are not subjected to probate. They are, however, subject to administration.
The bottom line is that a properly drawn will can easily accomplish what a trust is used for in other states, generally at a lower cost. There are, however, situations where the use of a living trust is important. Here is just one example.
Some years ago I prepared an estate plan for one of my clients, a widower I’ll call Adam. I have made a few changes to the facts, to protect his privacy. His estate included real estate in New Jersey and a Florida condo where he used to go for the winter. We established a New Jersey trust and transferred his New Jersey real estate and other assets to it. I advised him to transfer the Florida condo to the trust as well and explained the problems he might encounter if he died with the condo still in his own name. I gave him and his son, whom he had designated as his executor and trustee, contact information for a Florida attorney. A few years later, he became seriously ill. I determined, after speaking with the son that they had not gotten around to transfer the Florida condo and that they had lost the contact information for the attorney. I gave the son the information again. He called me not long afterward to say he called the attorney but did not engage him because he thought the $750 fee was too high. I said I thought it was reasonable, but he should feel free to shop around. He didn’t. Soon after that, my client died. Because the condo was not in the trust, the son, after qualifying as executor, had to go through the Florida probate process, which took almost a year. He spent almost three times the $750 fee he had rejected. Had the condo been transferred before my client’s death, everyone would have been much happier.
Although the previous example was rather minor, there are other situations where the establishment of a revocable trust is critical. One is where a couple (or an individual) are New Jersey residents and own property in Florida, with is a likelihood that eventually they will become Florida residents. In such cases, it is virtually imperative for them to set up a trust and transfer all property to the trust to avoid Florida probate later. The inconvenience of having a trust while they are still New Jersey residents is outweighed by the convenience of avoiding probate in Florida.