New Jersey residents may wonder exactly what estate planning is, what it entails or how it might benefit them. At its most basic level, estate planning is a way of ensuring that a decedent’s assets are distributed in accordance with the person’s wishes. There are different means of doing this.
For many people, one of the primary goals of estate planning is to reduce or avoid federal or state estate taxes. There are ways to achieve this goal, but some of them require the person to give up control over the asset during life. That may not be desirable for everyone. For example, a charitable trust will allow a person to avoid paying taxes on funds in the trust, but the person must transfer those assets and give up the ability to control them. Some people may prefer to use more simple vehicles such as life insurance or a credit-shelter trust to retain control while reducing tax liability.
Those with substantial assets may prefer a more complex approach to estate planning, in order to not only reduce or avoid taxes but to keep funds beyond the reach of any creditors. There are many ways to do this, such as gifting the funds during life, establishing private placement life insurance or creating dynasty trusts. Which option will work best is a personal decision based on the individual’s goals and financial situation.
The aim of basic estate planning is to transfer wealth pursuant to the individual’s desires and aspirations. An attorney with experience in estate planning may be able to assess a client’s goals and prepare appropriate documents that will incorporate them.
Source: Forbes, “What is estate planning?“, Russ Alan Prince, November 04, 2013