Certified New Jersey Elder Law Attorneys

McHugh & Macri
Certified Elder Law Attorneys Serving New Jersey Residents since 1978.
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Planning around New Jersey, federal estate taxes

NAELA National Academy of Elder Law Attorneys, Inc. MEMBER

When a person creates a will as part of their estate plan, they are taking a thoughtful step to provide some peace of mind. However, the demands of New Jersey's tax code may require individual to take additional steps to make sure their loved ones benefit as much as possible. Thoughtful tax planning may become a necessity when considering the possibility of inheritance and estate tax assessments in our state.

New Jersey is actually one of a handful of states that has both an inheritance and estate tax in place, so this definitely creates interesting challenges for the testator and his or her beneficiaries. In many cases, federal estate taxes aren't a major concern, since estates worth less than $5.25 million aren't taxes. Yet New Jersey has the lowest state-level estate tax bar -- sitting at $675,000.

On a very basic level, individuals looking to form an estate plan should understand the potential tax implications. By knowing this, there will be fewer surprises when the estate is administered. At the same time, however, it is important to note that individuals may be able to minimize the tax burden through planning.

One tax planning method includes setting up trusts to deliver assets to beneficiaries without the same kind of tax demands. For example, a person could establish a credit shelter trust. This allows a person to designate beneficiaries, but pass along control to their spouse, which will allow for a larger estate-tax exemption down the road.

The important thing to remember here is that tax planning isn't just for people with very large estates. Considering New Jersey's tax laws, anyone could stand to benefit from planning ahead for whatever the future might bring.

Source: The Wall Street Journal, "Focus Shifts to State Estate-Tax Planning," Arlen Dale, May 16, 2013

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