New Jersey residents may wonder about common mistakes people make when establishing their estate plans. Being aware of a few common estate planning errors can help people know how to better manage their affairs.
Common mistakes made when estate planning
Beneficiaries determination based on asset type
It is important to know the disposition of assets upon the death of a financial account holder. In New Jersey, the Multiple Party Deposit Account Act applies to accounts at banks, and the payable-on-death determination takes precedent over the terms in a will. If there is a surviving party on the account title, he or she becomes the only owner of the amounts in the account.
Estate planning may reduce taxes, help with long-term care
New Jersey residents who are planning for their futures may wonder about how to reduce estate taxes or avoid using their savings to pay for their long-term health care needs. One advisor recommends that couples start their estate and nursing home planning while they are healthy.
Statute of limitations affects same-sex filing status
Although the Supreme Court decision ruled that the Defense of Marriage Act was unconstitutional and that same-sex spouses would be eligible for the same federal benefits as opposite-sex spouses, the confusion is not over. The Internal Revenue Service and the Treasury Department stated that same-sex spouses who were legally married in states that recognize gay marriage like New Jersey would be treated as married spouses for federal taxes, even if they live in states that do not legally recognize their marriage. Even though same-sex spouses can transfer property to their spouses without having to incur an estate tax, the Internal Revenue Service has set a limit for the years of refunds that can be amended.
The wealthiest families' plans for asset protection
New Jersey residents might be curious to learn what the wealthiest families are doing to protect their assets. Trusts can be used for a variety of purposes, one of which is protecting assets while the parents are still living. Asset protection trusts are trust funds that specifically allow people to protect their assets while they are alive.
Residency effect of trusts
In the last two decades, the number of trusts that have been executed has grown, perhaps owing to more people becoming aware of their benefits. New Jersey residents may utilize trusts as an asset protection tool or use them to save on federal estate taxes and to avoid the expensive and public process of probate. Although trusts have multiple benefits, using them requires a more complete knowledge of how they work.
Bypass trusts serve as annual tax savings tools
New Jersey residents might be interested to hear that they can use bypass trusts as annual tax savings tools. Everybody has to pay taxes on their income; according to the assignment of income doctrine, they cannot simply hand their income over to another person in a lower tax bracket to avoid paying a higher tax rate. However, bypass trusts offer people an exception to this rule and may be used as a tool for asset protection.
Giving your home away as an estate planning tool
It may seem counterintuitive, but there may be instances in which giving away your home may be the best course of action as part of asset protection and estate planning strategies. Older New Jersey homeowners and their families may want to consider such a gift under certain circumstances.
Questions a person with aging parents should ask
While New Jersey individuals over the age of 50 with aging parents may be under the impression that their parents have a plan in reserve for their final years, this may not be the case. More than 80 percent of people older than 65 live at home and independently, but this can rapidly change should a health crisis occur. According to the president and CEO of a nonprofit continuing care retirement community, the children of these vulnerable individuals would do well to ask a series of questions in order to form a solid plan for the future. First, one should evaluate how well his or her parents are really doing in terms of keeping up with everyday tasks and maintaining a healthy social life in addition to their overall picture of health. Second, one must ask his or her parents whether they need help, and the honest assessment should include how much and what type of help, if any, is needed.
Changes in tax laws anticipated
Good news for the wealthy or the particularly comfortable was just released by the federal government. In 2014, individuals in New Jersey and across the country will be able to add an extra $90,000 free from federalestate tax to the amount that they are allowed to transfer to a person during their life and at their death.
End of life planning: protecting your assets
Those who plan to set up inheritances for their children often do not plan to leave a significant portion of their assets to third parties; however, more often than not, that is what occurs. Many estate planning attorneys fail to discuss asset protection, or the manner in which people's money will be managed after they pass away.
