Heirs of those who died are often stuck with hefty estate taxes. Those in New Jersey and other states may benefit from considering how to use estate planning to better manage their retirement wealth. Properly envisioning an estate may ensure that heirs will pay little or no federal taxes on their inheritance. Whether it's a large estate or an average one, estate planning can go a long ways toward limiting unnecessary taxes and expenses.
New Jersey is one of only eight states that have an inheritance tax. This means that special care may be required in setting up an estate in our state. A simple rule suggests that if the value of one's assets has increased, it is best for heirs to receive the assets as their inheritance. Gifting these assets provides them to the heirs by using the original purchase price, which may be considerably less than their current value.
Keep in mind that you are able to gift a person up to $13,000 per year without any tax. It may make sense to provide heirs with some money yearly to eliminate the potential estate tax debt later on. This amount is per person, so both a husband and wife can gift a combined $26,000 per person per year.
Setting up a life estate for one's home provides for the opportunity to lock in the value while still retaining the right to continue living there. These are just a few of the options to consider. Estate planning in New Jersey need not be complicated, but those that confront the issues early on may allow themselves the opportunity to create an opportunity for heirs to limit tax and other obligations associated with an estate while maximizing the financial return.
Source: CNBC.com, "Financial Challenges 2012," Michelle Lodge, May 29, 2012