When it comes to estate planning in New Jersey, many tasks, concerns and considerations make up the foundation of a great plan. One issue that may be overlooked, however, is estate tax planning, which is a very real concern for individuals planning their estate and their loved ones. When there are multiple beneficiaries collecting inheritances from different sources, planning the big picture, including taxes, becomes a very important part of any estate plan.
Most, if not all, states require residents to file an estate tax return when the amount of the estate reaches a particular sum. In New Jersey, the sum of the gross estate or lifetime gift award is $675,000. On the federal level, the gross estate plus lifetime gift award must meet $5.34 million. What that means is that an estate worth $300,000 will not be subject to estate tax.
It is important to note that different types of accounts may have different tax liabilities. IRA accounts, for example, may be subject to tax liability based on guidelines established by the IRS that figure life expectancy of the beneficiary and the value of the IRA. If beneficiaries are named and they choose to allow the account to grow by stretching the distribution, then the account may remain tax-free, even though each beneficiary will be liable for income taxes on any distribution they receive from the account.
When parents begin the estate planning process, they want to ensure that they are considering everything needed to protect their assets and ensure that their wishes are made known. A big part of this process is ensuring that beneficiaries are named, and are made aware of any estate tax planning issues that may be pertinent later. For New Jersey residents, the estate planning process can be daunting; but fortunately, there are many avenues of assistance available to them to help smooth out the process.
Source: nj.com, Biz Brain: Lowering tax liability on inheritance of IRA, other assets, upon owner's death, Karin Price Mueller, Dec. 30, 2013