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Estate liquidity is an important consideration

Federal estate taxes are more of a concern for very wealthy individuals as the tax doesn't kick into place unless an estate is valued at more than $5.25 million. However, New Jersey residents need to pay close attention to asset protection plans because of the impact of state estate taxes. While not all states have separate inheritance or estate taxes, those that do can place financial burdens on the survivors of a deceased party. It's important to consider these needs in determining how much of an estate to keep liquid.

In addition to inheritance or state estate taxes, there are other costs faced by survivors that may require liquid assets. Probate costs can be hundreds or thousands of dollars. Funeral expenses tend to run thousands of dollars as well. Remaining medical bills can be excessive as Medicare rarely covers everything. Additionally, it's important to consider the most appropriate forms for charitable gifts. Liquid assets can be much more useful to charitable organizations.

The amount of final expenses and estate taxes can be difficult to predict. New Jersey has an estate tax that kicks in for estates that exceed $675,000. The tax doesn't apply to non-residents.

It can be helpful for New Jersey residents needing to establish a plan for asset protection to consult with an estate planning professional. An attorney can help with drawing up the necessary documents to address distribution of an estate, making prompt changes as the need arises. The estate expert may also provide appropriate guidance related to how final expenses and gifts will be disbursed. A periodic evaluation of an asset protection plan can ensure that enough liquidity is maintained while providing the opportunity to make any necessary adjustments. Legal assistance ahead of time may be able to alleviate a lot of trouble later.

Source: Life Health Pro, "Why you should keep an eye on estate liquidity", Tom Nawrocki, July 11, 2013

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