Estate planning has become one of the more complex financial processes for some people. Traditionally, estate planning mostly consisted of getting your financial affairs ready to take care of your family after your death. However, now it has expanded to serve other purposes as well, such as leaving behind a legacy and making a difference in the world. Exemptions and federal tax rates have made the process of estate planning more difficult than it used to be, though. Therefore, it would benefit you to begin planning as soon as possible.
Making estate planning easier
Understanding probate is key to saving money
New Jersey residents might benefit from understanding probate procedures before spending money in an attempt to avoid it. The probate process in New Jersey is simpler than it is in other states, and it usually requires filing an easy application in order to designate an executor with the surrogate of the county where the person who died resided. The procedure is neither as expensive nor time-consuming as it is in some other states.
How the new estate tax works
Many New Jersey residents may be wondering about how the recent changes to law relating to estate taxes, also known as the "death tax," may affect them. The good news is that the majority of people will not be impacted by changes to the estate tax, and a large number of those who are affected will only be to a limited degree. The new law states that the first $5.25 million of an estate is tax exempt, and anything beyond that number will be taxed at a 40 percent rate.
Executors have a big job
According to an expert from New Jersey Today, naming an executor for one's estate is one of the most important decisions that a person can make. After all, someone must remain behind when they die in order to settle their affairs. Many people consider being the executor an honor; some people deem it a chore. In either case, there is a ton of work involved.
IRS goes after beneficiaries when estates don't pay taxes
New Jersey residents might be interested to hear that when there are unpaid taxes on an estate, this can end negatively for beneficiaries. According to a recent decision rendered by the U.S. District Court for the Southern District of Florida in one case, an inter vivos trust contained almost $5 million in stocks, and an IRA was found to contain almost $4 million. The estate tax was supposed to be paid out of the inter vivos trust in this case, but the IRS is reportedly trying to get one beneficiary's IRA distribution to cover part of the tax.
Establish a complete estate plan
Some New Jersey residents may believe that estate planning is primarily about taxes. This belief arose when many estates were depleted by IRS regulations. However, with changes to the law, it is now estimated that only approximately 5,600 estates pay taxes in a given year. Still, even without taxation issues, estate planning is important to ensure that a person's wealth is distributed as desired.
New Jersey middle-income boomers and retirement planning
A recent study on middle income boomers by Bankers Life and Casualty Company showed that while members of this age group generally have a financial plan in place for their final life expenses, they are largely unprepared for any future that may require nursing home planning or Medicaid planning. Many, aside from plans for their final expenses, simply have plans to retire based on their financial situations.
New techniques available for shielding assets from estate tax
New Jersey residents may be interested to learn of two techniques available for shielding certain assets from estate tax. In an online article, a tax expert offered advice about how to use the 2013 American Taxpayer Relief Act to chart a plan for intelligent estate planning. The law has provisions regarding a significantly increased limit for estate tax exclusion and the concept of portability, which may result in significant advantages to families.
Don't forget unexpected expenses when planning for retirement
New Jersey residents hoping to enjoy their golden years later in life will have to dig deep into their pockets before retiring. The cost of everything continues to increase, so Boston College's Center for Retirement Research advises working adults saving for retirement to use a required minimum distribution calculated by the Internal Revenue Service. This differs from the "4 percent rule" advocated by many financial planners to determine how much personal savings can safely be spent after retirement.
