ONLINE ESTATE PLANNING AND E-WILLS

The Uniform Electronic Wills Act (the “E-Wills Act”) was introduced and, finally, approved by the National Conference of Commissioners on Uniform State Laws also known as the Uniform Law Commission (“ULC”) in July of 2019.  The E-Wills Act provides that a Last Will and Testament, a document traditionally printed and executed on paper, can now be created, signed, witnessed and notarized electronically.  The ULC has worked, for over a century, to propose laws in an effort to simplify life for people who live, work, or travel in multiple states and to facilitate interstate commerce.

For example, the 1999 Uniform Electronic Transactions Act, adopted in all but three states, permits electronic signatures in commercial and contract matters.  However, the Uniform Electronic Transactions Act contains an exception for Wills which cannot be electronically signed. The execution requirements of Wills are normally set by state statutes to ensure validity of a Will.  The long-standing tradition of executing paper Wills is now changing as people are increasing using technology in more and more aspects of their lives.

The ULC has provided through the E-Wills Act that a testator’s electronic signature or even a “mark,” using a stylus or typed signature, must be witnessed contemporaneously and/or notarized contemporaneously with all physically present.  However, states that adopt the E-Wills Act will have the option to include language that allows remote witnessing of a Will and remote notarization.  The E-Wills Act allows a testator to execute his or her “electronic will” with witnesses who are in the “electronic presence” of the testator and allows probate courts to give such a Will legal effect.  In addition, notaries can be permitted to notarize E-Wills remotely to make a Will self-proving.

Hopefully, the E-Wills Act and online estate planning will not increase fraud and coercion with respect to Will creation and execution.  While New Jersey has not yet adopted the E-Wills Act, the issue of electronic Wills executed under the law of another state is one that New Jersey residents, businesses and Courts are soon to face.

Dying with Dignity in New Jersey: New Jersey’s Aid in Dying for the Terminally Ill Act

New Jersey residents should be aware that on August 1, 2019, New Jersey’s Aid in Dying for the Terminally Ill Act went into effect.  The Aid in Dying for the Terminally Ill Act permits qualified terminally ill patients to self-administer medication to end their life in a humane and dignified manner. Both patients and physicians are protected by several safeguards built into the recently enacted New Jersey statute.

The patient must be a New Jersey resident who is at least 18 years of age and can document his or her residency with a driver’s license or identification card issued by the New Jersey Motor Vehicle Commission; a New Jersey resident gross income tax return filed for the most recent year; or other government record that demonstrates residency. The patient must be able to communicate health care decisions and be capable of making informed decisions. The patient’s attending physician and consulting physician will make the determination regarding a patient’s mental capacity.  Finally, the patient must be terminally ill, as defined in the statute. If a patient is in the terminal stage of an irreversibly fatal illness, disease, or condition with a prognosis, based upon reasonable medical certainty, of a life expectancy of six months or less, he or she will be considered “terminally ill” under the statute.

Some of the requirements for the attending physician include: (i) examining the patient and confirming that the patient is terminally ill; (ii) informing the patient of the feasible alternatives to taking the life-ending medication, including, but not limited to: concurrent or additional treatment opportunities, palliative care, comfort care, hospice care and pain control; (iii) referring the patient to a consulting physician for medical confirmation of the diagnosis and prognosis and a determination that the patient is capable of decision-making and is acting voluntarily; (iv) referring the patient to counseling with a mental health care professional; and (v) recommending the patient participate in consultation regarding the alternatives to self-administering the life-ending medication.

Prior to providing a prescription for the medication, the physician is required to recommend that the patient notify their next of kin. Whether the patient decides to withhold notice to their next of kin is left entirely up to the patient. The patient must make two oral requests and one valid written request, in the written form set forth in the statute, to their attending physician to receive a prescription for the life-ending medication.

The State of New Jersey is now the 8th state in the United States to enact a compassionate death with dignity statute. Presently, each of California, Colorado, District of Columbia, Hawaii, New Jersey, Maine (will be effective in September 2019), Oregon, Vermont, and Washington have death with dignity statutes. The State of Montana relies on case law to permit physician-assisted deaths.

Should you wish to receive additional information, or if you have any questions relating to this topic, we invite you to contact our firm’s Private Clients Services and/or Health Care Practice Groups for further discussion.

Gift Tax Update – Taxable Gifts and the I.R.S. Anti-Clawback Regulation

For 2019, for U.S. citizens, the Federal estate and gift tax basic exclusion amount is $11.4 Million per individual and the Federal gift tax annual exclusion amount is $15,000 per donee, per year.  In 2019, an individual can pass up to $11.4 Million estate and gift tax free; for married couples, the figure is doubled.

Making gifts in excess of the $15,000 annual exclusion amount will chip away at the maximum amount that an individual can give away gift tax-free during life.  If an individual (a “donor”) gifts $15,000 to each of ten donees in 2019 for a total of “taxable” gifts in the amount of $150,000, there will be no gift tax due, and there is no decrease in the donor’s $11.4 Million available estate and gift tax basic exclusion amount. In contrast, if a donor gifts $150,000 to a single donee in 2019, only $15,000 of the gift would be exempt from gift tax, and the donor must file a gift tax return showing an excess gift of $135,000.  The donor will not have any tax due; however, the $11.4 million of available exclusion amount will be reduced by the excess gift of $135,000. Thus, the larger the gifts, the quicker a donor will use up his or her $11.4 Million exclusion amount. Given the sizable exclusion amount in 2019, most people would never come close to using the entire exclusion amount.

The Tax Cuts and Jobs Act of 2017 put the whopping $11.4 Million exclusion amount into effect – but the law is only temporary. The law will sunset and for the year 2026, the exclusion amount will automatically drop to $5 Million (adjusted for inflation) if Congress fails to act by the end of 2025. Many estate planning practitioners believe the exclusion will revert to an amount of approximately $6 Million for 2026.

Planners have raised questions due to the temporary nature of the $11.4 Million exclusion amount. In the event that a gift is made in accordance with the applicable exclusion amount in effect at the time the gift was made, but the exclusion amount decreases by the time of the donor’s death, will the donor’s excess gift be subject to a “clawback” and, accordingly, be included in the donor’s taxable estate for Federal estate tax purposes? In an effort to resolve the question, on November 20, 2018, the IRS released a proposed regulation to eliminate “clawback” for estate and gift tax purposes.

The IRS proposed regulation provides that the donor’s estate can compute its estate tax credit using the higher of the “Basic Exclusion Amount” applicable to gifts made during life or the “Basic Exclusion Amount” that applies on the date of the donor’s death. REG-106706-18, (83 Fed. Reg. 59343).  Therefore, if a donor dies on or after January 1, 2026, but made taxable gifts prior to 2025 relying on a higher exclusion amount and, in the year of his or her death, the applicable lifetime gift tax exclusion amount is lower than the amount gifted prior to 2025, the donor’s estate will have the benefit of using the higher exclusion amount that applied during his or her life. The proposed regulation should inspire large gift planning and year-end gift planning in 2019.  We encourage you to contact us if you wish to discuss gifting as a part of your estate planning.