Tag: taxation

Estate Administration in the Digital Era: Digital Assets, Cryptocurrency and More

On By Jane Fearn-Zimmer, Esq.In Estate PlanningLeave a comment

Digital Assets and Cryptocurrency

The probate proceedings for the estate of the late musical artist, Prince Rogers Nelson, have been repeatedly profiled in the national news for a variety of reasons. Here are some digital age strategies for dealing with cutting-edge estate administration issues, including identifying heirs, working with digital assets and block chain technology, and administering estate assets in specialized industries.

  1. Genetic testing can determine the rightful heirs. If parentage may become an issue, obtain an order authorizing DNA testing of the decedent’s blood sample as soon as possible after death. Obtain a court order for genetic testing of purported heirs early on in the proceedings.
  1. Identify, catalogue, disclose and value digital assets. Digital assets include a wide variety of electronic files and works. Some examples are digital accounts (i.e., social media, e-mail and online commercial accounts such as Etsy and Amazon), video and audio files and electronically stored media (such as photographs, art, music, and original works and blogs), knowledge stored in electronic databases or formats (i.e., software and architectural plans). Cryptocurrencies (Bitcoin) and block-chain technologies are also digital assets. Some forms of digital assets are more easily monetized than others. Digital assets are regarded as personal property by the taxing authorities and as such, must be clearly identified and properly valued on death tax returns. See I.R.S. Notice 2014-21. In some cases, discounts for lack of marketability may be appropriate. Initial coin offerings (ICO’s) may be subject to registration requirements under the Securities Exchange Act of 1933.
  1. Hire experts for specialized industries. Prince’s estate held a wide range of intellectual property. The personal representative faced unique business challenges, such as operating multiple entertainment businesses, overseeing a real estate portfolio and a museum, archiving a vast quantity of audio and video assets, and safeguarding personal property. The use of entertainment and other industry experts was needed to help monetize the estate’s assets.
  2. File any confidential information disclosed to the court under seal. Consider whether to file sensitive information under seal. Sensitive matters could range from business and licensing negotiations and confidential litigation settlements to details relating to parentage.

Questions? Contact Jane.

Jane Fearn ZimmerJane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Involuntary Commitment Proceedings –Who Pays for That?

On By Jane Fearn-Zimmer, Esq.In Disability LawLeave a comment

social worker.jpg

An involuntary commitment, or civil commitment, proceeding, is a summary legal action filed in order to obtain a court order to require a mentally ill individual to receive necessary psychiatric treatment against his or her wishes, pursuant to N.J. Rule of Court §4:74-7 and N.J.S.A. §30:4-27.2.  Typically, the involuntary commitment process is initiated through a mental health screening, but the process can also be filed by a prosecutor or the Attorney General. Only individuals who are shown by clear and convincing evidence to present a danger to themselves may be involuntarily committed.

An order for involuntary commitment must be issued within 72 hours, and the hearing itself must be held in no more than 20 days.  The individual who is the subject of an involuntary commitment hearing has the right to an attorney to represent her in the commitment proceedings. The existence of involuntary commitment proceedings does not mean that an individual has been adjudicated incapacitated, nor does it mean that her rights, such as the right to bear arms, the right to drive, the right to have visitors, to receive medical treatment, and to fresh air and exercise, are removed or restricted.  The only mechanism to restrict these rights is to obtain a guardianship order from the Superior Court, which is an entirely different proceeding governed by different rules.

By law, the State of New Jersey is required to bear ninety percent of the cost of an involuntary commitment, leaving the remaining ten percent to be borne by the involuntarily committed individual. The financial evaluation process is undertaken by the county adjuster’s office. If it is determined that the individual can afford to pay for the cost of their psychiatric care, the county adjuster seeks a court order requiring the individual to pay for the cost of psychiatric care, which can impose a heavy financial burden on the former patient.

It is important to know that hospitals and the county adjuster’s office are required to follow strict regulations in collection matters arising from emergency hospital admissions and psychiatric emergency screening services.  Charity care regulations apply where a financially eligible patient becomes involuntarily committed as the result of a hospital emergency room admission. Newton Medical Center v. D.B., No. A-5101-15T4 (N.J. Super. App.Div., January 17, 2018.  The case involved an uninsured patient who was admitted to a hospital emergency room during a psychotic episode, and was involuntarily committed. After the patient’s release, the medical center billed the patient the sum of $65,000 bill for the eleven days of care, reduced the bill due to the patient’s lack of insurance, and attempted to collect on the reduced bill. At the trial level, the Court entered summary judgment in favor of the hospital.  The Appellate Division reversed the trial judge’s decision, ruling that the hospital could not recover from the former patient, because it did not contact the patient as required by the charity care regulations.

Questions? Let Jane know.

Jane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Estate Planning Check Up and the New Tax Laws

On By Jane Fearn-Zimmer, Esq.In Estate Planning, Tax ReformLeave a comment

Estate planning tax reform

The Tax Cuts and Jobs Act of 2017 enacted the most sweeping changes to the federal tax code since 1986. Many people assume that due to the increase in the basic exclusion amount (BEA) to $11,180,000 per individual, only the wealthiest need now estate planning. That is just not true!

Certainly, many fewer federal estate tax returns will be required to be filed. However, it is still important to periodically review your documents and your estate plan.  Most clients should review their existing wills and trusts. Particularly where a formula bequest was incorporated, the estate plan must be reviewed to ensure consistency with the client’s legacy goals.  This is due to the increase of the BEA.  The BEA functions like a sponge to limit or prevent a decedent from any federal estate tax liability at death. The BEA soaks up the decedent’s aggregated lifetime gifts and the assets remaining in the decedent’s estate at the moment of death, allowing the donor’s wealth up to the BEA limit to be transferred free of federal estate and gift taxes. Beyond the BEA, the estate will incur federal estate transfer tax liability. When the BEA was significantly lower, it was very common for estate planners to draft formula bequests, which allocated all of the decedent’s assets up to the decedent’s basic exclusion amount, to a “credit shelter trust” for the benefit of the surviving spouse and/or the descendants of the decedent. The remaining assets would pass outright to or in trust for the surviving spouse. With the doubling of the BEA and with credit shelter trusts which do not name the surviving spouse as a trust beneficiary, those estate plans will now disinherit the surviving spouse, and the surviving spouse will then be entitled to a one-third elective share of the decedent’s augmented estate in New Jersey.  The solution is to update the estate planning now, possibly with a disclaimer formula.  The new law sunsets on December 31, 2025.

At least until the new law sunsets, under the current regime, family limited partnerships remain a viable planning strategy, with the possibility of discounts for lack of marketability and lack of control. Trusts will continue to be useful for non-tax reasons, including privacy by avoiding the probate process, creditor protection, curbing spendthrift children, centralizing asset management, fostering family harmony through controlled asset disposition, and preserving a fund for a special needs beneficiary while protecting the beneficiary’s Medicaid and SSI eligibility.

Questions? Let Jane know.