Agreement To Change a Will

Most people know what a last will and testament is.  A Will is a document that states who is to receive your assets after you die.  For instance, “I give my entire estate to my four children equally” is an example of a testamentary devise contained in a Will.

What many people do not understand is that beneficiaries of an estate are free to change the terms of the Will if they so choose.  For instance, perhaps Mr. Jones dies and disinherits one of his children.  Maybe Mr. Jones did not have a good relationship with that particular child and he wanted to disinherit him.

Mr. Jones is free to disinherit anyone he wants to disinherit.  The only person you cannot effectively disinherit is a spouse because a spouse can always assert a claim against the estate of her deceased husband.  A disinherited spouse could be entitled to one-third of her deceased spouse’s estate, if the deceased spouse disinherited her.

Other than a spouse, though, a person is free to disinherit anyone he wishes.  He doesn’t have to leave the person he is disinheriting a token amount to make it effective.  He can simply leave the person—be him a child, a brother, a cousin—nothing.

So, assume that Mr. Jones disinherits his wayward son with whom he had little to no relationship.  After Mr. Jones dies, his other children are free to get together and effectively say “We know that dad and you didn’t get along, but we want to enter an agreement whereby we give you an equal share of dad’s estate.”

Such an agreement would be perfectly legal and binding.  Our state has a specific statute that permits the beneficiaries of an estate to agree to a different distribution of the estate than the one specified in the decedent’s Will.

With that said and notwithstanding the legally binding effect of an agreement entered into between beneficiaries of an estate, the agreement that the beneficiaries enter cannot change the tax liability of the estate.  Our state has two death taxes, an estate tax and an inheritance tax.

The inheritance tax is primarily assessed based upon the relationship of the beneficiary to the decedent.  A beneficiary who is the spouse, children, or grandchild of the decedent does not pay inheritance tax.  A beneficiary of more distant relation, such as a sibling or cousin, or a beneficiary of no relationship to the decedent at all, such as a friend, will have his devise subject to the New Jersey inheritance tax.

So, assume that Mr. Smith leaves his estate to his four children but also leaves $30,000 to his favorite son-in-law, Joe, who is married to one of Mr. Smith’s daughters.  After Mr. Smith dies, his family and Joe learn that Joe’s share of the estate is subject to New Jersey inheritance tax.

If the children and Joe entered an agreement to change the terms of Mr. Smith’s Will in order to leave the $30,000 that Mr. Smith devised to Joe to Joe’s wife, the daughter of Mr. Smith, in order to eliminate the inheritance tax (the daughter’s devise is not subject to inheritance tax), their agreement will not change the tax that would have been owed.

The beneficiaries are free to agree to a change the terms of Mr. Smith’s Will, but they cannot alter the inheritance tax that would be owed based upon the terms of Mr. Smith’s Will.  In this example, Joe could disclaim his inheritance, a disclaimer is a document that Joe signs saying he does not want the inheritance Mr. Smith left to him.

Once Joe disclaims the inheritance, the $30,000 he would have received, would go back into Mr. Smith’s estate and would be divided even amongst his children.  His children would then be free to give Joe the $30,000 as a gift, though they would not be legally obligated to make that gift.

The bottom line is, a person’s last will and testament is not a binding document in the sense that the beneficiaries are always free to alter the terms of the Will.  The beneficiaries cannot, however, alter the obligations of the estate, such as its obligation to pay death taxes.

Estate Administration

Over the course of my career, I have drafted thousands of last wills and testaments for clients.  As time passes, some of those clients have passed on and their family members have come to me for advice in administering their deceased family member’s estate.

The process of administering an estate is called “estate administration.”  Some people refer to it as “probate,” but this is really a misnomer.  The process of submitting a decedent’s last will and testament to probate is one small part (perhaps the smallest and most easy part) of estate administration.

The administration of an estate might take anywhere from one to two years.  At a minimum, an estate should probably take nine months to administer.  Estate administration is really about winding down the financial affairs of the decedent—closing out his accounts and paying any debts he, or his estate, may owe.

Frequently a family member will come to my office for guidance on how to administer an estate.  Of all the advice I give (estate planning advice, Medicaid planning advice, guardianship advice), I find giving advice on estate administration during the initial consultation to be the most difficult to explain.  This may be because most of the tasks an executor needs to accomplish aren’t legal in nature and simply require leg work.

For instance, if I were to explain to a person how to open an estate account, the task might sound difficult, but we have all opened bank accounts in our lives and opening an estate account is little different from opening a personal bank account.  I think people are intimidated by the concept of estate administration and that intimidation causes them to lose track of the fact that most estate administration tasks are tasks we have all already done several times for ourselves (open bank/brokerage accounts, close accounts, sell a home, etc.).

If I were to explain how to open a personal bank account to you and you thought you needed to pay attention to what I was saying because it was something you never did before, you would probably be confused by what I was saying.  It isn’t the task, it’s the fear of the unknown that is confusing.

When I tell people to bring the original Will, original death certificate, and a checkbook (it costs about $150) to the Surrogate’s office to submit the Will to probate, you would think I was describing how to diffuse an active bomb.  But probating a Will is so simple it would actually be difficult to do it incorrectly, because quite frankly, you aren’t doing anything other than taking the original Will, the original death certificate, and a checkbook to the Surrogate’s office.  The people at the Surrogate’s office do the rest for you.

In fact, it is so simple that I never go with client’s to submit a Will to probate, because I know that after the client has done it, they would be mad at me for billing them for my time to accompany them to the Surrogate’s office.

Now, this is not to say that you do not need the advice and counsel of an attorney in handling an estate.  Sometimes you do.

I tell clients that if a death tax return (such as a New Jersey estate tax return or a New Jersey inheritance tax return) needs to be filed, then you need the help of an attorney.  If you need to account to the beneficiaries, then you need the help of an attorney.  Now, some families get along splendidly, and even though the executor should account, the family doesn’t want an accounting from him.

If you think you can handle the estate but you would simply feel more comfortable with an attorney providing advice to you along the way, then you can (it is your right as executor) and should hire an attorney.

An attorney can be a valuable resource to an executor over the year or two it takes the executor to handle properly the affairs of the decedent.  I firmly believe that a great many estates are mishandled and the executor and beneficiaries may or may not ever know the estate was mishandled.

Having an attorney provide advice along the way can be very helpful, but estate administration is a process.  It does not lend itself to quick advice that can be rendered during the course of a brief consultation with an attorney.