In the last two decades, the number of trusts that have been executed has grown, perhaps owing to more people becoming aware of their benefits. New Jersey residents may utilize trusts as an asset protection tool or use them to save on federal estate taxes and to avoid the expensive and public process of probate. Although trusts have multiple benefits, using them requires a more complete knowledge of how they work.
New Jersey residents might be interested to hear that they can use bypass trusts as annual tax savings tools. Everybody has to pay taxes on their income; according to the assignment of income doctrine, they cannot simply hand their income over to another person in a lower tax bracket to avoid paying a higher tax rate. However, bypass trusts offer people an exception to this rule and may be used as a tool for asset protection.
It may seem counterintuitive, but there may be instances in which giving away your home may be the best course of action as part of asset protection and estate planning strategies. Older New Jersey homeowners and their families may want to consider such a gift under certain circumstances.
Those who plan to set up inheritances for their children often do not plan to leave a significant portion of their assets to third parties; however, more often than not, that is what occurs. Many estate planning attorneys fail to discuss asset protection, or the manner in which people's money will be managed after they pass away.
New Jersey residents hoping to enjoy their golden years later in life will have to dig deep into their pockets before retiring. The cost of everything continues to increase, so Boston College's Center for Retirement Research advises working adults saving for retirement to use a required minimum distribution calculated by the Internal Revenue Service. This differs from the "4 percent rule" advocated by many financial planners to determine how much personal savings can safely be spent after retirement.
Federal estate taxes are more of a concern for very wealthy individuals as the tax doesn't kick into place unless an estate is valued at more than $5.25 million. However, New Jersey residents need to pay close attention to asset protection plans because of the impact of state estate taxes. While not all states have separate inheritance or estate taxes, those that do can place financial burdens on the survivors of a deceased party. It's important to consider these needs in determining how much of an estate to keep liquid.
Estate planning may seem daunting to some New Jersey residents because it can be complicated. An estate plan may require consideration of a person's personal preferences, cash flow, retirement needs, taxes, insurance and investment wishes, both currently and in the future. A basic understanding of how trusts work can help make the process seem less complicated.
It's important for New Jersey residents to plan how their estates will be distributed when the time comes, but many of them may not know the importance of the estate planning process. Without a solid estate plan, their children don't always know what assets they own, and these assets are often scattered in different places. Even after the assets are assembled and the family can start dividing them, there are often issues with various ownership structures, account titles and beneficiary information. Dated estate planning may not keep up with the changing laws, and it may not reflect a person's current financial position. As a result, surviving family members may face a mess of paperwork that is difficult to understand and time-consuming to sort through. The more convoluted the estate is with accounts in various joint names and housed at different banks, the more tedious it will be to finalize and divide.
A unique trend is emerging among Baby Boomers as they plan for retirement. Many are now attempting to position themselves through a process known as Medicaid planning to be more likely to qualify to receive Medicaid while still preserving their assets.
In April, a 43-year-old Matawan resident appeared in court to plead guilty to numerous charges, including several counts of attempted impersonation and theft by deception. The charges arose out of the man's impersonation of an 87-year-old woman's nephew. He then used his relationship with the woman to steal close to $1 million and her family home. The victim suffered from dementia and terminal cancer at the time of the acts. The arrest followed a five-month investigation by Adult Protective Services and the Prosecutor's Office. The County was looking into reports of suspicious estate planning, real estate and financial transactions in which the man had participated. The man admitted to preparing a will for the woman, naming himself as the sole beneficiary of her estate. He also prepared a deed transferring the woman's home to himself in exchange for $1. The home was built in 1925. The value of the property was not disclosed.