Many New Jersey residents have worked hard to build a strong base of wealth. Retaining as much of that wealth as possible becomes a priority for many families. Understanding the proper steps required to do so can be a challenge, as there are a wide range of rules in place that must be carefully adhered to in order to achieve a favorable result. By working with an attorney, individuals and families can create an estate tax planning strategy that meets their needs.
Many New Jersey readers are aware of the tax benefits of establishing and funding a Section 529 college savings account. The money deposited within is allowed to accumulate interest tax-free, and there is no penalty for withdrawing funds to cover the cost of tuition and other college needs for the account's beneficiary. However, there are also estate tax-planning benefits associated with a 529 account, which is a fact often overlooked by many.
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.
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.
The federal estate tax exemption for 2014 is an impressive $5.34 million. Many New Jersey residents believe their estate plans can now be simplified since the majority of people's estates will never reach that level. People believe their estate tax exposure is small, if anything.
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.
Many New Jersey residents may be wondering about how the recent changes to law relating to estate taxes, also known as the "death tax," may affect them. The good news is that the majority of people will not be impacted by changes to the estate tax, and a large number of those who are affected will only be to a limited degree. The new law states that the first $5.25 million of an estate is tax exempt, and anything beyond that number will be taxed at a 40 percent rate.
The federal estate tax law has a portability provision; that is, it allows the transfer of the federal estate tax exemption from the decedent to the surviving spouse. If the correct estate tax planning steps are taken, residents of New Jersey might be able to double their estate tax exemptions.