When it comes to taking the time to sort through one's financial circumstances and plan for the future, it always seems like the ideal time to sit down and begin is just on the horizon. However, notwithstanding the fact that sooner is always better than later in such matters, there are certain times that buckling down and addressing one's estate planning can really pay off. Now is one of those times for New Jersey residents, as the end of the year approaches and substantial tax benefits stand to expire.
Unless a revised federal estate tax law is put into motion in the coming weeks, the current estate tax perks will expire on Jan. 1, 2013. That means that the current $5 million exemption for gift and estate taxes will drop to just $1 million. In addition, there is no guarantee that this level of tax perk will ever return.
A thorough and well-informed estate plan can allow individuals or families to allocate their assets in such a way as to avoid high tax consequences. One manner in which this can be accomplished is by lifetime gifts of appreciating property. Such a move can avoid taxation on the appreciation of a gift far into the future. Trusts offer another vehicle for avoiding high estate taxes, as do LLCs in some cases.
The bottom line is simple: now is the time to sit down and get serious about estate planning. Until the end of 2012, it is possible to gift as much as $5,120,000 without having to pay gift or estate tax. That gives many in New Jersey and elsewhere the flexibility to begin allocating their assets even before death.
Source: Forbes, "Estate Planning Isn't Ghoulish And Can Save Millions This Year," Robert W. Wood, Oct. 30, 2012