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What is estate planning fatigue and who is affected?

The process of planning for the distribution of one's assets at the time of death is difficult for many in New Jersey. Aside from the matter of facing the reality of one's own mortality, there are plenty of practical reasons why many prefer to postpone the estate planning process. Recent research suggests that for individuals and families who hold more than $1 million but less than $5 million in wealth, a condition known as estate planning fatigue may be to blame.

Estate planning fatigue occurs when an individual makes multiple changes to his or her estate plan, only to find that additional attention is required within a very short period of time. This type of mental fatigue is common among those who made efforts to adjust to the ever-changing estate tax issues that were prevalent in the decade leading up to 2013. During that time, it was difficult to predict how one's estate might be taxed, and many people made a number of changes to their estate plan in order to try and reduce taxation.

In 2013, a permanent cap (adjustable for inflation) was placed on the assets that an individual could pass on free from estate taxation. That amount currently sits at $5.43 million, which is doubled for married couples. This means that those who have less than that amount in accumulated wealth can rest assured that their assets will not be subject to the federal estate tax.

For many in New Jersey, this leads to the false assumption that no other estate planning measures need to be taken. In reality, there are a number of benefits to proper estate planning aside from avoiding the estate tax, especially since New Jersey is one of 15 states that impose private label estate taxes. In fact, failing to address estate planning needs can leave a family at risk of losses when the time comes to distribute an estate. It is important to sit down and construct an estate planning package that serves the needs of one's family, regardless of the level of wealth that has been achieved.

Source: wealthmanagement.com, ""Rich" Suffering from "EP" Fatigue?", July 13, 2015

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