Many New Jersey residents have retirement plans, annuities and life insurance policies. These accounts do not pass through probate but instead go directly to beneficiaries through forms filed with the company for each account. How these forms are filled out can have an impact on an individual's estate.
Back on Feb. 26, we wrote about Philip Seymour Hoffman's estate ("Where did Philip Seymour Hoffman's estate planning go wrong?"). More details recently came to light regarding why he may have set up his estate the way he did. Reportedly, he was adamant about not allowing his children to be considered "trust-fund kids," and his estate planning reflects that. Some New Jersey residents may not know that his children were not among the heirs to his estate. Virtually everything will pass to his partner of many years, to whom he was not married.
New Jersey's recognition of same-sex marriage has resulted in significant changes to the rights of same-sex couples. Married same-sex couples now have the same rights as all married couples. As a result, there are changes with retirement benefits and Individual Retirement Accounts ("IRA") and how they are taxed to beneficiaries that inherit these funds. The recognition of same sex marriage means that same-sex married couples have greater options when it comes to the inheritance of IRAs and most retirement benefits. It is important to note that in order for same-sex couples to have these different options, they must actually be married. A civil union or domestic partnership does not qualify as marriage for federal tax purposes.
For numerous New Jersey residents, estate planning does not end with wills and trusts. Most retirement accounts -- including IRAs -- life insurance policies and annuities are not governed by those documents. They require the account owner to fill out a beneficiary designation, but if an individual is not careful, beneficiaries may not receive the inheritance intended for them.
Virtually everyone in New Jersey and nationwide has heard of the Kennedy family, which was made infamous through the political aspirations and tragedies surrounding the children of the family's patriarch, Joe Kennedy. Another thing for which the Kennedys are known is their vast wealth. It was the foresight of Joe Kennedy and the trusts he founded that may keep Kennedy heirs wealthy for decades to come.
An estate plan is formulated to express the wishes of the one making the plan. However, a New Jersey resident’s heirs have to live with those wishes. If an individual is not careful, one's heirs could end up resenting each other after he or she passes away.
New Jersey residents often hear that it is important to keep beneficiary designations up to date on retirement accounts such as an IRA. However, not as much attention is given to making that designation in a way that helps heirs get the most out of the account. Below are two ways for an account holder to control how an heir will receive distributions from the account.
One of the biggest dilemmas for any parent leaving money or assets to their children is whether they will be responsible enough to handle their inheritance. There is no way to be sure that heirs will take care of their inheritance in the manner in which a New Jersey resident would like. As children grow, parents may be better able to determine how responsible an heir will be. If any doubts exist, estate planning documents can be changed or updated to keep an heir from squandering his or her inheritance.
Many New Jersey residents want to incorporate charitable donations in their estate plans. The question may be how to do so without taking away from the inheritances of other heirs. Life insurance is one estate planning tool that may provide maximum benefit to a beneficiary that is a charity while preserving other assets for other heirs and beneficiaries.
Estate planning is designed, in part, to prevent future generations from paying taxes on money they inherit. An ordinary trust protects the first generation of beneficiaries (children), but does not necessarily protect the second generation (grandchildren) from tax liability. One type of trust that can help a New Jersey grantor provide for grandchildren during their lifetime is the dynasty trust.