As more Americans reach retirement age and live further into the years beyond it, the issue of asset protection is becoming more important to a larger cross-section of the population. Once you are no longer working regularly, your savings, investments and other retirement funds may become your only source of income. With the right planning and savings during your career, that can be a substantial pool of resources, but it does need to be protected.
Many New Jersey families have worked very hard to purchase their primary residence, and some are also fortunate enough to have vacation property. When creating an estate plan, it is important to understand how real estate is handled. Making the best possible choices can aid in wealth preservation and can ensure that property is passed down in the manner that is intended.
When structuring an estate plan, the primary focus of many New Jersey residents is a smooth transition of wealth to the loved ones left behind. In many cases, this is a surviving spouse, who will be entrusted to pass on any remaining assets to children and grandchildren. This approach fails to take into consideration the chance that a surviving spouse could eventually require some form of residential medical care, which can have a devastating impact on a family's finances if proper asset protection planning is not in place.
When considering estate planning options, New Jersey families are confronted with a large volume of choices, the details of which can be confusing. For most people, estate planning comes down to a few simple goals: asset protection, the smooth transfer of wealth from one generation to the next and the lowest possible tax burden placed upon those assets. One tool that can help meet those goals involves the creation of a revocable living trust, or RLT.
Prior to the passage of the American Taxpayer Relief Act of 2012, the primary focus of most estate planning was the avoidance of the estate tax, which could reach as high as 47 percent of the value of inherited assets. Now, however, only those New Jersey residents who have an estate valued at more than $5.43 million will be affected by the estate tax. For everyone else, the focus on asset protection often turns toward reducing the income tax burden placed upon heirs. The way that the IRS calculates that tax depends on the basis that is held by the individual who inherits and then sells a property.
For those in New Jersey who have amassed a significant volume of wealth, a higher level of estate planning is often required. Once wealth has surpassed the estate tax exemption amount, currently $5.43 million per individual, more complex asset protection strategies are necessary. A solution that can work for many families lies in an intrafamily loan.
When an individual is able to attain a high level of financial success but does not come from generational wealth, a lack of knowledge concerning complex estate planning is sometimes an issue. Many New Jersey families who have amassed first generation wealth are concerned about how to pass that wealth on to their children, but few take an approach that goes beyond that simple transfer. When it comes to wealth preservation, a long-term strategy is the best possible approach.
Many New Jersey residents have taken proactive stances toward their estate planning needs and have had their documents in order for many years. This is admirable, especially considering the number of people who fail to address asset protection needs -- many of whom die without having any plan in place. However, simply completing the estate planning process is not enough to ensure that the highest level of protection is in effect. In some cases, estate planning tools become obsolete over time.
Many New Jersey residents will spend a portion of their lives living abroad. Known as expats, Americans who live outside of the country for extended periods of time have a number of unusual legal needs. Creating a solid asset protection plan is an example, and individuals and families must take care to ensure that their wishes are properly documented prior to setting out on an extended trip abroad.
Taking a proactive approach to estate planning is a great way to get started. Those in New Jersey who are able to address these matters far in advance of their eventual implementation are at an advantage, as last-minute planning often yields poor results. However, in order to harness the full potential of asset protection tools such as trusts, those vehicles must be properly funded.