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New Jersey residents: estate planning mistakes to avoid

Many residents of New Jersey and nationwide may, at one time or another, have to look at estate planning for their parents and themselves. Many financial planners believe that some individuals who are otherwise in good shape financially either lack judgment or use poor judgment when it comes to their personal estate planning. They believe that misjudgment leads to omissions and poor estate-planning decisions.

Unfortunately, some people err simply by not having a plan at all. When an individual dies without a will, the state takes over to determine how assets are to be divided. New Jersey and other states have intestacy laws that determine which surviving family members share in the estate of such an individual. And while some make the mistake of avoiding estate planning altogether, others resort to online, do-it-yourself estate planning options. While these boiler plate documents may make sense in some situations, they are rarely individualized to fit the specifics of one's personal and financial life.

Further, many simply fail to periodically review beneficiary designations and the titling of accounts held. This can lead to transfers being made to the wrong individuals based on out-of-date designations, which could have unintended estate planning and tax ramifications. For instance, some fail to take into account the Estate and Gift Tax consequences of life insurance. The manner in which an insurance policy should be owned and controlled is specific to each person and can be complicated.

Estate planning is dependent on individual circumstances: family dynamics, net worth, and one's financial/liquidity position. Add in personal preferences and even one's personal philosophy on the transfer of assets to future generations, and there are a myriad of issues to consider. Those that take the time to understand the laws and regulations, including potential tax consequences, as they relate to a particular set of circumstances will likely find themselves ahead of the curve. And those that follow up by making periodic reviews of plans already in place can ensure that their assets are divided in the manner in which they intended.

Source: Forbes.com, "7 Major Errors In Estate Planning," Rob Clarfeld, April 25, 2012

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