Recent Developments

By Martin M. Shenkman, CPA, MBA, JD

■ Proper Prenup Protects Estate:

W and H signed a prenup agreement. Both were represented by counsel, engaged in discovery, and schedules of assets, liabilities and income tax return were attached to the agreement. H and W married July 8, 2003. H died March 9, 2008. On March 31, 2008 W filed a caveat to H's will. A caveat is a challenge that the will should not be admitted. Issue - should the caveat be rejected and the will accepted, or should the prenuptial agreement be rejected and W be permitted to take a surviving spouse's elective share under N.J.S.A. 3B:8-1 to -19. An elective share is a minimum inheritance a surviving spouse is entitled to by law, regardless of a will, if this right was not properly waived. W claimed, among other things that the agreed payments were made to her under a trust instead of under the will as required. The court found no practical difference. The court noted that the law, N.J.S.A. 37:2-38, places the burden of proof to set aside a prenup on the party alleging the agreement to be unenforceable and that burden must be met by clear and convincing evidence. A challenge can succeed on equitable considerations, such as unconscionability, failure to disclose, etc. In the matter of the estate of Donald Towbin, Deceased, Sup Ct NJ, App Div, Docket No. A-0161-08T30161-08T3, March 16, 2009.


■ Real Estate Tax Audits:

The IRS Estate and Gift Tax Program recently started working with state and county authorities in several states to determine if real estate transfers reported to them are unreported gifts. Although a tax may not be due, a gift tax return may be required for real estate transfers above the annual exclusion amount.  Penalties will be considered on all delinquent taxable gift returns filed.