Posted by: Pierson W. Backes | Posted on: April 16th, 2011 | 0 Comments
When handling a decedent’s Estate, one common and sometimes thorny problem is property owned by decedent in another state. Often, the only option is to conduct what is called ancillary administration in the second state, which generally is the equivalent of a second complete administration in that state.
In New Jersey, ancillary administration can often be avoided through the simpler process of recording the decedent’s Will. An executor or administrator of an out-of-state decedent’s Estate can avoid ancillary probate by recording the Will when:
- The only property in New Jersey that’s affected is real estate.
- The decedent left a Will, and the Will has been admitted to probate in another state.
- The Will probated out-of-state meets the requirements for a valid Will in New Jersey.
Figuring out the best approach in any particular Estate is pretty fact-sensitive; the legislative scheme is a garden of forking paths and there are alternative approaches if any of the items I’ve listed here aren’t satisfied. In broad stroke, though, these are the requirements, and they’re often easily met. Once a Will has been properly filed, the New Jersey real estate can be transferred or sold as easily as if a full administration had been undertaken.
It’s worth noting that, when I’m contacted about handling ancillary administration in New Jersey, more often than not the only Estate property in New Jersey is real estate. (Sidenote: the whole question of ancillary administration for the handling of real property can be avoided in life through estate planning, and it may be advisable to do address the problem presented out-of-state property in the estate planning process.)
The two conditions that must be met — that there’s an out-of-state probate and that the Will would be valid in New Jersey — are rarely a stumbling block. I don’t think I’ve ever encountered an Estate where the decedent managed to completely avoid probate in their home state but left Estate property in New Jersey. The question of what constitutes a valid Will in New Jersey is something I’ll be writing about soon, there’s been some interesting cases recently, but the short answer is that, if a Will is valid anywhere, it’s likely valid in New Jersey.
The mechanics of recording a Will are considerably simpler than a full ancillary administration, and can be handled entirely in the Surrogate’s office without application to the court in most instances.
Last word is a couple of a tax warnings. First, New Jersey will impose an inheritance tax of up to nearly 16% on the value of the property if the proceeds pass to (almost) anyone other than a spouse, parent, or child of the decedent, and that tax must be paid within 8 months of the decedent’s death. In addition, on the sale of the real estate, New Jersey will require the payment of an Estimated Gross Income Tax at closing; the amount is calculated by formula but in any event is no less than 2% of the gross sale price. This probably merits its own discussion another day.