It doesn’t matter what a person does for a living — lawyer, farmer, architect or mechanic — everyone can benefit from having an estate plan. The problem is that there are certain estate planning mistakes that people in New Jersey commonly make that could jeopardize what they are trying to accomplish. There are many things that people do in order to avoid an asset having to go through probate.
One of them is taking a remainder interest in property and the other is having property jointly titled with children and their spouses. Both of these actions can keep an asset out of probate, but cause other problems. Tax liability is one problem. In a remainder interest, the total value of the asset ends up in the estate for federal tax purposes. When titling property with children, the children may become liable for taxes and the property could become property of the marital estate — a potential disaster if there is a divorce.
Some people believe that they aren’t worth enough to have an estate plan, but if they decide to get one, they just take their neighbors advice and use their paperwork as a guide. The problem is that assets that aren’t worth much today can increase in value at any time and no one estate plan works for everyone. What works for one person may not work at all for someone else.
Estate planning is important for everyone, but needs to be individualized based on the needs of each person. There are more issues to consider other than just whether an asset will end up in probate. Finally, without seeking the advice of someone familiar with the federal and New Jersey laws regarding estates and taxes, the person wanting an estate plan could end up with issues they didn’t anticipate.
Source: The Lane Report, “How to avoid 5 common estate planning mistakes,” Polly J. Dobbs, May 7, 2013