Law Office of Kit Applegate

01/17/2022

Death and taxes. It’s not as bad — the taxes that is — as many people assume it’s going to be.

First off, inheritance is not “income,” and so federal and New Jersey state income taxes are not triggered by either giving or receiving an inheritance.

As for “death” taxes, historically, there were three. Now there are two.

The first is the federal estate tax. We still have a federal estate tax, but the exemption is so darn high that most people have nothing to worry about. If you’re single, your estate must exceed $11.7 million, or for a married couple $23.4 million, before the federal estate tax applies.

The second was the New Jersey estate tax. For the longest time, the threshold for New Jersey’s estate tax was $675,000. Over time, the tax was catching too many middle-class families, so the threshold was raised to $2 million in 2017, and in 2018, New Jersey repealed the estate tax in its entirety.

The third is the New Jersey inheritance tax. Unlike an estate tax, which is triggered by how large your estate is, the New Jersey inheritance tax is triggered not by how much you have or how much you give, but to whom you give it. A person who inherits from your estate is called a beneficiary. And this is a bit of an oversimplification, but the New Jersey inheritance tax puts those beneficiaries into one of three classes, Class A, Class C, and Class D. Inheritances to Class A beneficiaries are exempt from the tax. Inheritances to Class C beneficiaries, meanwhile, are assessed an 11% tax, and inheritances to Class D beneficiaries are assessed a 15% or 16% tax depending on the size of the inheritance.

The good news is that most people pay no “death” tax. This is because their estates are (1) under the federal estate tax threshold and (2) their beneficiaries are usually Class A beneficiaries, like spouses, children, or grandchildren.

12/23/2021

Merry Christmas to all and a sincere thank you for your support and business in 2021. We'll see you again in 2022. Until then, be safe, have fun, and enjoy the time with your friends and family. 🎅

11/16/2021

File this under "What they didn't teach in law school."

Being a lawyer in a small town sometimes means going to WaWa to pick up TicTacs for an elderly client. But only the white ones, not the green. 😀

10/31/2021

We're ready for you. Happy Halloween!

09/28/2021

I get a lot of calls asking whether I do Wills. I do. But when it comes to estate planning documents, I think a Will is in many instances the least important. The more important, in my opinion, is the Power of Attorney.

I joke that a Will doesn’t go into effect until you’re dead. And by that time, what do you care what happens to your stuff? A Power of Attorney, by contrast, is meant to take care of you while you’re alive.

If you die without a Will, it’s usually not the end of the world. We have intestacy laws that kick in and govern the disposition of your assets. But if you have an accident or an illness and become incapacitated and don’t have a Power of Attorney, then a guardian must be appointed. That involves the court, lawyers, time, and money.

With a Power of Attorney, you can avoid that mess by designating someone you trust to automatically step in and act on your behalf if and when the time arises. So, I’m not saying don’t get a Will, but I would prioritize getting a Power of Attorney first.

08/04/2021

There has been a residential eviction moratorium in place in New Jersey since the start of the pandemic. New legislation signed today by Governor Murphy takes that moratorium a step further. No residential tenant with a household income below 120% of the area median income may be evicted because of the nonpayment of rent during the period beginning March 1, 2020 and ending August 31, 2021.

All pending evictions for nonpayment of rent during this period are subject to dismissal. Any payments made by a tenant after August 31st may only be applied to rent that accrued after that time. Nor may a landlord report the non-payment of rent to another landlord, credit reporting agency, or debt collection agency. A landlord's recourse is to sue the tenant and secure a money judgment for the rent owed.

Call me jaded, but this seems like passing the buck. Thousands of eviction actions will be dismissed/not be brought. But with landlords now limited to suing for money damages, I suspect we'll see a rise in federal bankruptcy filings.

03/30/2021

NJ's COVID-19 Emergency Rental Assistance Program is accepting applications. There is significant money available. Household income must be at or below 80% of the area median to be eligible. Landlords can apply on behalf of their tenants. Link below for the program's website.

https://njdca.onlinepha.com/

03/12/2021

Eliminating the "step-up in basis" would be huge (in a negative sense).

For the uninitiated, if you buy a property for $30k and sell it for $100k, you would ordinarily pay capital gains on the $70k difference.

But if you were to inherit the property first and then sell the property, the capital gains would be $0. This is because the tax basis in the property "steps up" and becomes the property's fair market value at time of death.

So, many times, if you own property that has appreciated significantly in value, the advice given is to NOT sell the property while you are alive and instead let your estate sell the property so it may receive the step up in basis and avoid the capital gains tax.

Most people have been able to pass on assets like a family home without federal tax, but that could be changing.

02/23/2021

Governor Murphy signed the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act into law yesterday. Among other things, it creates a framework for the sale of cannabis by businesses licensed in one of six “marketplace” classes:

Class 1 Cannabis Cultivator license for facilities involved in growing and cultivating cannabis;

Class 2 Cannabis Manufacturer license for facilities involved in the manufacturing, preparation, and packaging of cannabis items;

Class 3 Cannabis Wholesaler license for facilities involved in obtaining and selling cannabis items for later resale by other licensees;

Class 4 Cannabis Distributor license for businesses involved in transporting cannabis plants in bulk from one licensed cannabis business to another;

Class 5 Cannabis Retailer license for locations at which cannabis items and related supplies are sold to consumers; and

Class 6 Cannabis Delivery license for businesses providing courier services for consumer purchases, including the ability of a consumer to make a purchase directly through the cannabis delivery service.

Licenses will be issued by the Cannabis Regulatory Commission, and, with the exception of an initial cap on the number of cultivator licenses, the Commission will determine the maximum number of licenses for each class based upon market demands. Additionally, at least 10% of the total licenses for each class, and 25% percent of the total number of licenses, must be issued to “microbusinesses” (a business owned by a New Jersey resident, no more than 10 employees, and operating an establishment no larger than 2,500 square feet, among other requirements).

01/04/2021

With the new year under way, small businesses that are “corporations” should remember to hold their annual shareholder and board of director meetings. This is a simple but often overlooked requirement.

Some courts take the view that if you want the benefits of conducting business as a corporation (i.e. no personal liability for corporate debts), then you must follow the formalities of doing business as a corporation. And that means, among other things, holding annual shareholder and board of director meetings. Failure to do so could open the door to someone trying to “pierce the corporate veil” and hold you personally liable for the corporation’s debts.

At the annual shareholder meeting, board members are elected. And at the annual board meeting, officers are elected. But many times, an actual meeting is not needed. The shareholders can simply sign a unanimous written consent to elect the agreed upon directors. And the directors can sign a unanimous written consent to elect the agreed upon officers.

So remember to schedule and hold your annual shareholder and board of director meetings.