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New Jersey Estate Planning Blog

Estate planning and beneficiaries: Potential outcomes

  • 28
  • May
    2015

For many in New Jersey, the act of creating a comprehensive estate plan brings about a sense of relief in knowing that these matters have been addressed. With the right degree of effort, estate planning strategies can work wonders in ensuring that one's wishes are followed when the time comes. It is important for individuals to understand, however, that simply creating a will is not a catch-all solution. Many assets can still pass to others upon one's death if the proper precautions are not taken.

The most common way for assets to be distributed in direct opposition to a will is in the case of accounts that have named beneficiaries. These accounts can include retirement accounts, investments, life insurance and more. At the time the account was set up, the holder was asked to name a beneficiary. That designation will stand and will "trump" provisions laid out within one's will.

Basic steps to estate planning success

  • 23
  • May
    2015

Most tasks that people find onerous can be made easier by taking a step-by-step approach. This is true for purchasing a house, adding to one's family or planning a vacation. It is also true for estate planning, and many in New Jersey find it helpful to break down the process into simple steps. The following outline offers guidance on the matter, but it is important to note that each individual or family will have a unique set of needs, and the basic steps chosen should reflect those goals.

A great place to begin is with a review of one's existing level of life insurance. For families in which financial stability relies upon the income of one party, it is a good idea to purchase a life insurance policy that would provide sufficient financial support in the event that the breadwinner passes away. This is often a priority for families who have young children, so that their needs can be met in the event that one or both parents die before the children reach adulthood.

Asset protection planning and intrafamily loans

  • 21
  • May
    2015

For those in New Jersey who have amassed a significant volume of wealth, a higher level of estate planning is often required. Once wealth has surpassed the estate tax exemption amount, currently $5.43 million per individual, more complex asset protection strategies are necessary. A solution that can work for many families lies in an intrafamily loan.

An intrafamily loan is a tool by which wealthy individuals can provide their children, grandchildren or other family members with access to wealth at a very low cost. The Internal Revenue Service outlines a key interest rate that can be used within estate planning. This rate is published on a monthly basis, and in May 2015 was set at just 1.8 percent, which is significantly lower than the rates available from traditional lending sources. The IRS also publishes rate guidelines that must be met in order to avoid gift taxes. The rate limit set for mid-term loans (terms from three to five years) was 1.53 percent as of May.

Looking at the long term for wealth preservation

  • 15
  • May
    2015

When an individual is able to attain a high level of financial success but does not come from generational wealth, a lack of knowledge concerning complex estate planning is sometimes an issue. Many New Jersey families who have amassed first generation wealth are concerned about how to pass that wealth on to their children, but few take an approach that goes beyond that simple transfer. When it comes to wealth preservation, a long-term strategy is the best possible approach.

Long-term estate planning can be accomplished through the creation of a dynasty trust. These vehicles allow an individual or family to place assets into an irrevocable trust that will help shield the wealth from taxation or loss. It can be difficult to convince many newly wealthy individuals to place assets into a trust that is irrevocable in nature, but there are a number of benefits to doing so.

Even a simple estate plan should address digital assets

  • 13
  • May
    2015

When many New Jersey residents consider their estate planning needs, they focus on traditional types of assets. We think about retirement savings, investments, cash and property. Few people take the time to consider how less tangible assets, such as those that exist in the digital realm, should be factored into the process. However, in today's technological world, even a simple estate plan should address digital wealth.

Digital assets include property that is housed online. Examples include digital photographs, online bank accounts and writing displayed on Twitter, Facebook and other social media sites. While some of these assets may hold very little monetary value, they often have considerable sentimental value for those left behind. However, without proper planning, loved ones can find it difficult to impossible to access the accounts that hold one's digital assets.

Has your estate planning approach passed its expiration date?

  • 10
  • May
    2015

For those in New Jersey who completed their estate plans many years ago, a sense of security is often present. These individuals and families know that they have taken the steps needed to ensure that their accumulated wealth will pass on to their chosen heirs as intended. It is important to note, however, that many legal changes have taken place over the years, making it important for individuals to conduct periodic estate planning "check-ups" to ensure that their needs are still being adequately met.

For example, estate plans created prior to 2003 may lack the proper provisions required to give a loved one the authorization to make medical decisions on one's behalf. Changes to the Health Insurance Portability and Accountability Act enacted in 2003 impose strict limitations on how certain health information can be disclosed without an individual's permission. The best way to address this issue is to draft either a health care power of attorney or a durable power of attorney that gives one's chosen representative the authorization to make medical decisions on one's behalf.

Older asset protection strategies may be obsolete

  • 08
  • May
    2015

Many New Jersey residents have taken proactive stances toward their estate planning needs and have had their documents in order for many years. This is admirable, especially considering the number of people who fail to address asset protection needs -- many of whom die without having any plan in place. However, simply completing the estate planning process is not enough to ensure that the highest level of protection is in effect. In some cases, estate planning tools become obsolete over time.

An example is found in a type of estate planning structure known as an A/B plan. In such an approach, an individual states that a portion of all assets will go into a trust for one individual, usually a spouse. The rest of accumulated assets will go into a second trust from which all taxes on the estate will be paid. Anything that remains from the second trust will pass to other heirs, such as children. This approach was popular in previous decades and was chosen to preserve the estate tax exemption of the first spouse, which otherwise would be lost if not called into effect at the time of death.

Could the estate tax soon be a thing of the past?

  • 02
  • May
    2015

The estate tax, also commonly referred to as the "death tax," is a popular subject among many in New Jersey, even though very few Americans are at risk of being subjected to the tax. People tend to hold strong opinions on the matter, and it is a prime example of a topic that tends to reveal one's political leanings. The estate tax has once again become a topic of conversation due to a recent House vote supporting the repeal of the tax.

The current estate tax can lead to the loss of as much as 40 percent of wealth that surpasses the level of exemption. The current exemption sits at $5.43 million per individual, and married couples enjoy a combined exemption of $10.86 million. Only wealth that exceeds those totals is subject to the estate tax, which is why only a tiny percentage of the American public will be faced with losing a significant portion of accumulated wealth. It is also important to note that families that have amassed high levels of wealth often take advantage of complex estate planning tools that can significantly reduce the impact of the estate tax.

Estate planning for singles: A different approach

  • 30
  • April
    2015

For many in New Jersey, the main focus of planning one's estate is to ensure that loved ones receive the inheritance that is planned for them, without incurring heavy taxation and outside of the probate process. For those residents who are unmarried and do not have children, estate planning may be structured around a different focus. Many forget that an important function of estate planning can have an impact while an individual is still alive.

Singles should give serious consideration to how their interests would be looked after in the event of an incapacitating illness or injury. For married people, a spouse often fills this role, or an adult child. When a single person becomes unable to make decisions on his or her own behalf, the situation becomes a lot more complex.

Estate planning options for private collections

  • 23
  • April
    2015

Completing one's estate plan provides a wonderful sense of relief for many in New Jersey. Once the distribution of assets has been structured and all incapacitation documents are in place, many people rest assured that they have adequately prepared for the inevitable. Often, however, there are holes within a given estate planning package. For many, one of the most frequently overlooked matters involves how a personal belongings will be passed on to loved ones.

Many people spend a significant portion of time amassing collections. Whether a treasured collection of salt-and-pepper shakers or a body of valuable artwork, collections hold a great deal of personal value for their owners. Determining how to pass on a collection can be a challenge, especially for those who feel strongly that the collection should be kept together.