Tax time is over for the year, and many New Jersey residents are more than happy to put it behind them for the rest of the year. However, this could be the perfect time to conduct some tax strategizing. Everyone could benefit from estate tax planning as well.
When people die, their estates are vulnerable to the payment of estate tax. Since the federal estate tax exemption is higher than a large portion of the population will ever reach, many people do not believe estate tax to be a problem. However, the state of New Jersey is one of 19 states that also collects estate tax, and the state’s exemption is much lower than the federal one.
New Jersey’s estate tax exemption is only $675,000. This may seem like a lot of money, but anyone who owns a home, has life insurance or even a substantial retirement account could be at risk of owing estate tax upon death. This could have a significant impact on how much of an individual’s estate heirs and beneficiaries would actually receive. Therefore, it may be a good idea to consider estate planning in order to minimize the estate’s exposure to tax liability.
Most people know they need a will, but many do not consider themselves “wealthy” enough to have a trust. However, trusts can be useful tools in estate tax planning. Placing high value assets into a trust during a person’s lifetime will not only save family members the need to probate those assets, but could also limit tax liability. Without adequate tax protections, the assets an individual worked hard to acquire in order to care for family members after death could end up greatly diminished once the state — and possibly the federal government — takes its share.
Source: MarketWatch, “5 tax mistakes you should never make again“, Bill Bischoff, April 18, 2014