Each year, the IRS announces how much the estate and gift tax exemptions will be for the following year. Recently, the announcement was made that the estate tax exemption will rise to $5.43 million per person, and the annual gift tax exemption remains at $14,000 for 2015. The $90,000 increase could allow a New Jersey resident to do more gifting during his or her lifetime.
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.
When it comes to estate planning, one of the most important aspects which most people pay attention to is avoiding unnecessary tax liabilities. This has been an especially important concern for many people in New Jersey, since it is one of only two states in which people are required to pay the estate tax as well as the inheritance tax. However, some state lawmakers are now looking to change this situation.
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.
When a New Jersey resident dies, his or her estate is subject to taxation. Effectively reducing these taxes is an integral part of estate planning. There are a number of ways to limit the taxes that will come with the transfer of assets following a death. Life insurance is one estate tax planning tool that can be used to ensure that loved ones have the means to pay any remaining taxes.
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.
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.
U.S. citizens may be pleased that the federal government has offered generous estate tax deductions; however, they should not get too complacent yet. New Jersey is one of the 19 states that still levy death taxes. Several states, including Washington, D.C., assess estate taxes, and seven states collect inheritance taxes, which are paid by the decedent's heirs as opposed to the estate. New Jersey and Maryland are the two states that assess both; however, New Jersey offers one of the lowest exemptions at $675,000.
While the Federal government is giving beneficiaries a generous estate tax exemption, states like New Jersey are not. In fact, New Jersey imposes an estate tax and an inheritance tax on estates with a value about $675,000. Some attorneys who do estate planning for their clients recommend that they move to a state such as Florida that does not have a death tax.