Protecting Your Assets in New Jersey: Essential Estate Planning Steps

In New Jersey, the essential estate planning documents include: 1) A Last Will and Testament that directs how your assets should be distributed; 2) A Durable Power of Attorney that appoints someone to handle your financial affairs if you become incapacitated; 3) An Advance Healthcare Directive (living will) that outlines your medical treatment preferences; and 4) A Healthcare Proxy that designates someone to make medical decisions for you if you cannot. Without these documents, New Jersey intestacy laws will determine how your assets are distributed, and the court may appoint someone to make decisions for you.

Probate in New Jersey is the court-supervised process of validating your will, paying debts, and distributing assets. It typically takes 9-18 months and can be costly. You can avoid probate through: 1) Creating a revocable living trust and transferring assets to it; 2) Setting up payable-on-death designations for bank accounts; 3) Holding property in joint tenancy with right of survivorship; 4) Establishing transfer-on-death registrations for securities and vehicles; and 5) Ensuring life insurance policies and retirement accounts have proper beneficiary designations. Assets under $50,000 may qualify for simplified probate procedures in New Jersey.

If you die without a will (intestate) in New Jersey, state law determines who inherits your assets. Under New Jersey intestacy laws: 1) If you have a spouse and children from that marriage, your spouse receives the first 25% of your estate (minimum $50,000, maximum $200,000) plus half of the remainder, and your children share the rest; 2) If you have a spouse and children from another relationship, your spouse gets 25% of your estate and your children share the remainder; 3) If you have a spouse but no children or parents, your spouse inherits everything; 4) If you have children but no spouse, your children inherit everything equally; 5) If you have neither spouse nor children, assets go to parents, siblings, or more distant relatives in a specific order.

To protect your home in New Jersey: 1) Consider transferring it to a revocable living trust, which allows you to maintain control during your lifetime while ensuring it passes to beneficiaries without probate; 2) For married couples, hold the property as tenants by the entirety, which protects against creditors of only one spouse; 3) Explore New Jersey's limited homestead protections in bankruptcy; 4) Consider long-term care insurance to protect against nursing home costs; 5) If you're concerned about Medicaid asset protection, consult with an elder law attorney about irrevocable trusts or other planning strategies (subject to a 5-year lookback period); 6) Maintain adequate homeowner's insurance with liability coverage.

New Jersey offers several asset protection strategies: 1) Maximize contributions to protected retirement accounts like 401(k)s and IRAs, which have strong creditor protection under state law; 2) Consider life insurance policies and annuities, which have exemptions from creditors under N.J.S.A. 17B:24-6; 3) For business owners, form an LLC or corporation to separate personal and business assets; 4) For married couples, hold property as tenants by the entirety; 5) Establish an irrevocable trust for long-term protection (assets must be transferred at least 4 years before any claims arise to avoid fraudulent transfer laws); 6) Consider a Domestic Asset Protection Trust in a state that permits them (New Jersey doesn't have DAPT legislation). Consult with an attorney before implementing these strategies, especially if you already have creditor issues.

Medicaid planning in New Jersey involves strategies to qualify for long-term care benefits while preserving assets: 1) New Jersey has a 5-year lookback period for asset transfers; any gifts or transfers below fair market value during this period may result in a penalty period; 2) Certain assets are exempt from Medicaid calculations, including your primary residence (with equity up to $955,000 in 2023), one vehicle, personal belongings, and burial funds; 3) For married couples, the community spouse can keep the primary residence, a vehicle, personal property, and up to $148,620 in assets (2023 figure); 4) Irrevocable Medicaid Asset Protection Trusts can shield assets if established more than 5 years before applying; 5) Medicaid-compliant annuities can convert countable assets to income streams; 6) Caregiver agreements can compensate family members for care services. These strategies are complex and should be implemented with guidance from an elder law attorney familiar with New Jersey Medicaid rules.

New Jersey eliminated its estate tax in 2018, but still maintains an inheritance tax. The inheritance tax applies based on the relationship between the deceased and the beneficiary: 1) Class A beneficiaries (spouse, civil union or domestic partner, parents, grandparents, children, stepchildren, and grandchildren) are exempt from inheritance tax; 2) Class C beneficiaries (siblings, sons-in-law, and daughters-in-law) pay 11-16% on inheritances over $25,000; 3) Class D beneficiaries (all other individuals) pay 15-16% on inheritances over $500; 4) Class E beneficiaries (charitable organizations, religious institutions, educational institutions, and medical facilities) are exempt. Life insurance paid to a named beneficiary is exempt from inheritance tax. The federal estate tax exemption is $12.92 million per individual in 2023, affecting only larger estates.

To protect digital assets in New Jersey: 1) Create a comprehensive inventory of your digital assets, including online accounts, cryptocurrencies, digital photos, and intellectual property; 2) Include specific provisions for digital assets in your will and power of attorney; 3) Consider using New Jersey's version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which allows you to use online tools provided by digital platforms or legal documents to authorize fiduciaries to access digital assets; 4) Store passwords and access information securely, using password managers or secure physical storage, and provide instructions on how your executor can access them; 5) Back up important digital content to physical storage devices or secure cloud services; 6) Consider setting up a digital asset trust for valuable digital property like cryptocurrency or income-generating online businesses.

Business owners in New Jersey should consider: 1) Establishing the right business entity (LLC, corporation, etc.) to separate personal and business assets; 2) Creating a comprehensive succession plan that addresses ownership transfer, management transition, and business valuation; 3) Implementing buy-sell agreements funded with life insurance to ensure business continuity if an owner dies or becomes disabled; 4) Considering business continuation trusts to hold business interests; 5) Exploring family limited partnerships or LLCs for transferring business interests while maintaining control; 6) Maintaining adequate business insurance (liability, key person, business interruption); 7) For professional practices, exploring professional liability insurance and retirement plans with creditor protection; 8) Considering New Jersey-specific business regulations and tax implications when structuring asset protection strategies. Consult with both business and estate planning attorneys familiar with New Jersey law.