Nearly everyone is aware of the federal estate tax exemption, which is a generous $5.34 million per person for 2014, according to the Internal Revenue Service. Most people feel that they do not have to worry about estate taxes since the majority of estates do not reach this level. However, for those of us in New Jersey, the state assesses both estate tax and inheritance tax, and without proper planning, these taxes can quickly diminish an estate.
New Jersey also has an estate tax exemption, but it is nowhere near the amount of the federal exemption. The current exemption in our state is only $675,000, and any amount over that limit could be taxed up to 37 percent. This can create a significant tax burden on heirs, especially if those heirs are not your spouse. In addition, inheritances left to certain people may be assessed an additional tax, which can be as high as 16 percent if that person inherits outright.
The good news is that, with proper estate planning, those taxes can be significantly decreased. An estate-planning attorney can explore with you all of the options available, such as creating a trust or gifting assets to heirs during your lifetime. Whatever option works best for you, more of your estate could go to your heirs instead of the state of New Jersey. For those who already have an estate plan, it can be updated and modified to account for these taxes. In fact, a periodic review of everyone’s estate plans is a good idea to ensure that it still meets your goals and accounts for current tax laws.
As you can tell, it can be expensive to pass away in our state. That is why one of the main goals of any estate plan is to reduce inheritance tax and estate tax. Feel free to explore our web site for more information.