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New Jersey estate planning may require new tactics

People in New Jersey and across the nation have likely heard much on the news recently about the new federal tax laws passed by Congress in January. The American Taxpayer Relief Act (ATRA) is considered to be good news for those who are in the process of estate planning. According to the Tax Policy Center, an estimated 3,800 estates nationwide are large enough to owe any federal estate tax this year, which means that most of the U.S. population will not be affected by estate taxes.

Even though the majority of estates will not be required to pay a federal estate tax, there are still some tactics to think about when planning. Those who already established trusts with cash may opt to invest that cash in assets that grow in value over time, such as growth stocks. Another option is to trade the cash for assets that currently exist outside of the trust. Once an asset is no longer a part of the estate, it can appreciate without being subject to estate tax.

Gifting is still an option for those who want to take funds from their estates. Individuals can give tax-free gifts of up to $14,000 per person in 2014. These gifts are not applicable toward the $5.25 million threshold set by the new tax laws. If these gifts are given annually, they can add up to a substantial amount over time, tax-free. 

New Jersey residents whose estates are below the federal estate tax requirements may still be subject to state estate taxes. Therefore, it may be beneficial to get some guidance on estate planning in order to minimize or avoid these taxes. While sidestepping estate taxes may be a goal for many, it is also important for individuals to ensure that their estate plans express their wishes and take care of the people who matter most.

Source: Reuters, "New estate tax rules call for new planning tactics," Amy Feldman, Feb. 26, 2013

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