Monthly Archives: January 2018

Trust & Estate and Elder Law Considerations on Capacity if New Jersey Legalizes Recreational Marijuana Use

New Jersey’s 56th Governor, Phil Murphy, has indicated his intent to sign into law sensible regulation of non-medical marijuana when it crosses his desk.  It may only be a matter of time before New Jersey will join the trend toward legalizing the recreational use of marijuana for people 21 years of age and older.  Therefore, it is important for New Jersey’s trust & estate and elder law attorneys to be conscious of the issues they may face in their practices if and when such legislation becomes law.

Issues to be considered by trust & estate and elder law attorneys include: the potential impact of marijuana use on capacity; trust administration considerations (i.e. when the trust contains a provision regarding the use of “illegal” drugs); estate administration considerations (i.e. when a decedent owned marijuana-related assets, such as business interests, at the time of death); tax implications; and the potential impact on life insurance as a planning tool.  This article will focus on the considerations relating to capacity and marijuana use.

One of the biggest challenges faced by trust & estate and elder law attorneys alike revolve around whether the client has the requisite capacity to accomplish his or her legal goals.  Generally, a person signing a legal document must understand what they are signing when they are signing it.  However, when determining whether a client has capacity, there are different thresholds that may apply depending on your state and what your client is trying to accomplish.  For instance, the capacity required to enter into a contract is a higher standard than that needed to sign a Will.  Generally, in order to execute a valid Will, an individual must understand:

  • The nature of his or her assets;
  • The natural objects of his or her bounty; and
  • That he or she is making a Will and the effect of that Will (even if they forgot they signed it the next day).

While there are many grounds for contesting a Will, lack of testamentary capacity is one of the most popular.  New Jersey courts have yet to address whether a Will can be invalidated for lack of capacity due to marijuana use.  Absent such guidance from the Court, practitioners should be guided by parallel case law that addresses the creation of a Will while an individual is under the influence of intoxicants, chemical dependents, or other mind-altering substances.

Generally, the Courts tend to focus on the circumstances surrounding the execution of the Will when determining whether capacity was present, and, absent evidence to the contrary at the time of execution, Courts do not find that habitual drunkenness and/or drug use impairs an individual’s capacity as a matter of course.  For instance, the court in Bannister et al. v. Jackson held that despite evidence of the decedent’s “habitually excessive indulgence in strong drink [it] had not produced a fixed mental disease sufficient to destroy his testamentary capacity and that at the very time of the execution of that document he was not so intoxicated that the act in which he was engaged was vitiated.”  45 N.J. Eq. 702 (1889).

Diminished capacity might not always be evident.  An individual’s capacity can be impacted by many different factors, and capacity might vary depending on the day, and, for some, the time of day.  If you determine that a client’s capacity is diminished, then you must take the steps necessary to determine whether the client has the capacity required to proceed with his or her specific goal.  Whether or not New Jersey legalizes the recreational use of marijuana for people 21 years of age and older, it is imperative for trust & estate and elder law attorneys to continue to be vigilant to ensure that their client in fact has capacity that is appropriate for his or her stated objective.

Pashman Stein Walder Hayden is carefully monitoring developments in New Jersey and federally with respect to marijuana legislation and will be available to help its clients navigate the sure-to-be complex regulatory framework of this potential business frontier.

Please contact Naomi Becker Collier at ncollier@pashmanstein.com or 201.639.2011 for further information.

Major Changes to the Estate & Gift Tax Laws Make Review of Your Estate Plan Documents Imperative in 2018

Each year, as a new year begins, we encourage you to review your estate plan and your estate plan documents (Will, Power of Attorney, Health Care Directive/Proxy, Trusts) to ensure that they reflect changes to the tax law and/or changes to your family or financial situation since your documents were executed.  This year, as 2018 begins, recent significant changes to the estate and gift tax laws make that review imperative.

With the enactment of The 2017 Tax Cuts and Jobs Act only a few weeks ago, the federal estate and gift tax exemption that was scheduled to increase to $5,600,000 has doubled (to approximately $11,200,000) and portability remains in place.  This means that a married couple (who have not previously used any of their unified credit) can now have combined assets of approximately $22,400,000 without incurring federal estate tax.

For individuals domiciled in New Jersey, the estate tax exemption has been eliminated as of January 1, 2018 (although with Governor-Elect Phil Murphy soon to take office, this could soon change).  The New York estate tax exemption is currently $5,250,000 and is scheduled to equal the federal exemption on April 1, 2019.

On account of these changes, individuals may wish to revise an existing Will, particularly if it contains a “credit shelter” provision based on a formula calling for funding up to the amount of the available exemption, even if only the state exemption.  Such a Will may now cause an individual’s entire estate to be left in trust instead of having a significant portion passing outright to the surviving spouse.  Furthermore, older individuals in various stages of relocating to Florida may now wish to reconsider whether a change in domicile is advisable.

Periodic review of an estate plan and related documents is always a good idea.  This year, on account of dramatic tax law changes, a review of your estate plan is especially important.

We would be pleased to discuss your estate plan with you.  If you would like to set up an appointment, please contact Joseph L. Goldman (jgoldman@pashmanstein.com) or Naomi Becker Collier (ncollier@pashmanstein.com).