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New Jersey Estate Planning Blog

New Jersey baby boomers need to consider estate planning

  • 22
  • August
    2014

The segment of the population known as “baby boomers” is beginning to retire from the workforce. If they have not already created an estate plan, it is imperative that they do so. Estate planning can include medical directives, powers of attorney, a trust or a will. New Jersey families may feel intimidated if they are of the boomer generation and haven’t yet started determining their end-of-life directives, but it is never too late to make such an important change.

People are living much longer lives, so even if a boomer retires around the national retirement age of 67, he or she could live another 20 or 30 years. A significant portion of the population over the age of 65 requires long-term care at some point in their lives, and those costs are not covered by Medicare. Insurance for long-term care does exist, but there can be gaps in coverage and expensive premiums. An estate plan can determine what money should be designated for the person’s care post-retirement.

Estate tax and inheritance tax can diminish an estate

  • 19
  • August
    2014

Nearly everyone is aware of the federal estate tax exemption, which is a generous $5.34 million per person for 2014, according to the Internal Revenue Service. Most people feel that they do not have to worry about estate taxes since the majority of estates do not reach this level. However, for those of us in New Jersey, the state assesses both estate tax and inheritance tax, and without proper planning, these taxes can quickly diminish an estate.

New Jersey also has an estate tax exemption, but it is nowhere near the amount of the federal exemption. The current exemption in our state is only $675,000, and any amount over that limit could be taxed up to 37 percent. This can create a significant tax burden on heirs, especially if those heirs are not your spouse. In addition, inheritances left to certain people may be assessed an additional tax, which can be as high as 16 percent if that person inherits outright.

Are there gaps in your estate planning package?

  • 15
  • August
    2014

One of the biggest misconceptions surrounding estate planning is the idea that this is a singular, one-time need. Many in New Jersey feel that they can address the matter once and then move on, comforted by the fact that they have taken care of this important planning need. In reality, however, estate planning is more of a process, one that requires periodic review in order to ensure that one’s documents still reflect their wishes and their unique set of circumstances.

One of the most powerful ways to address this need is also among the simplest. Most individuals and couples can place all of their estate planning documents within a three-ring binder. Tabs or subject dividers can be used to separate documents such as wills, power of attorney forms, healthcare directives and life insurance paperwork. The binder should also have a section of blank paper, in which the users can write down questions or concerns as they arise.

Do celebrities have better asset protection tactics?

  • 12
  • August
    2014

As Americans, we tend to idolize celebrities, placing them upon pedestals that are sometimes deserved, and are often not. When it comes to estate planning and asset protection, it is easy to assume that the fame and wealth that many of these individuals enjoy will translate into a higher level of preparation than the rest of us enjoy. Not to mention the fact that many celebrities have far more wealth to manage than most New Jersey residents. In reality, however, the rich and famous often leave behind estates that are rife with poor planning and errors in judgment, just like many “regular” Americans.

Take, for example, the estate of actor James Gandolfini. Made famous by his award-winning performance as Tony Soprano in the HBO hit “The Sopranos,” Gandolfini had amassed an estate valued at between $70 million and $80 million. At the time of his death at only 51 years of age, his estate planning consisted primarily of a will. There was no trust in place to guide the distribution of his assets to the intended heirs.

Estate planning and the modern American family

  • 09
  • August
    2014

Gone are the days when a “typical” American family consisted of a husband, wife and their offspring. In today’s world, families can take on an amazing array of shapes and configurations. This is especially true for those in New Jersey who marry more than once, and share a family connection with a mix of children, stepchildren and past and present spouses. In regard to estate planning, the modern American family offers a unique set of challenges.

For those with young children, the importance of structuring a thorough estate plan is vitally important. Children will require financial support as they continue to grow, and leaving behind a poorly conceived or non-existent estate plan can leave kids without that much-needed assistance. In addition, when there is little or no guidance available, current and former spouses often have to fight for a share of the estate.

How does life insurance factor into estate tax planning?

  • 06
  • August
    2014

When a New Jersey resident dies, his or her estate is subject to taxation. Effectively reducing these taxes is an integral part of estate planning. There are a number of ways to limit the taxes that will come with the transfer of assets following a death. Life insurance is one estate tax planning tool that can be used to ensure that loved ones have the means to pay any remaining taxes.

The proceeds from a life insurance policy can be excluded from one’s estate if the following conditions are met. The deceased must not have been the owner of the policy, and he or she must not have had control over the policy for a period of three years preceding death. The best way to fulfill these requirements is to establish an Irrevocable Life Insurance Trust, or ILIT.

How New Jersey families can prevent estate planning errors

  • 31
  • July
    2014

Families in New Jersey and elsewhere have likely heard just how important it can be to have an estate plan. Estate planning can help beneficiaries as well as the owner of the estate -- the plan can give instructions on how that person wishes certain medical and legal decisions to be made. There are some common errors that many families make when creating their estate plan, but there are ways to avoid the confusion.

The simplest mistake to understand is that some families will not create an estate plan in the first place. Failure to have one or putting off creating one could have negative repercussions that might not be immediately evident, but can affect the estate owner as well as those they care about. If a plan does exist, the will needs to be updated regularly. An important consideration is who the executor of the estate will be -- someone who is personally connected to the owner might not be able to think objectively about his or her best interests. Also, planning for one's death is not the only reason to have an estate plan -- some folks need them if they become disabled or otherwise unable to care for themselves.

Estate planning topics: Planning one's own funeral

  • 28
  • July
    2014

One of the most appealing aspects of creating an estate plan is having the ability to clearly outline one’s wishes. A great deal of confusion, misunderstanding and tension can arise after the death of a loved one, and spelling out one’s wishes in a clearly constructed estate planning package can help ease those sources of stress. In this regard, planning one’s own funeral is one of the most important gifts that a New Jersey resident can give to his or her loved ones.

Handling one’s own funeral planning ensures that the service will be conducted in line with an individual’s wishes. For some, this means adherence to religious traditions. For others, it means that loved ones will attend a service that celebrates the life of the individual who has passed on, and is upbeat in nature. Regardless of the tone one wishes to strike with the gathering, handling the details ahead of time allows family members to avoid the rush of planning and decision-making that often accompanies the death of a loved one.

Prenup as part of estate planning for second and third marriages

  • 25
  • July
    2014

New Jersey couples that want to ensure that their marriage will revolve around a loving union rather than material assets may find that a prenuptial agreement could ensure the peace of mind required to focus on their relationship. Although a prenuptial agreement may sound very unromantic, couples that get married for a second or third time may use such an agreement as part of their estate planning. This is especially true when an older person with considerable assets plans to marry someone who is much younger.

It is not uncommon for the children of, for example, an older man who plans to marry a much younger woman, to believe that the new bride-to-be is after their father’s money. A prenuptial agreement may set their minds at ease, and the father can ensure that the assets intended for his children will be protected. Similarly, consider an older woman, who is reasonably affluent, marrying a much younger man without assets. In the event of the wife’s death -- with an agreement in place -- the property will go to her children. If the husband has occupancy rights, the wife’s children will receive the property upon his death.

Misconceptions about the estate planning process

  • 23
  • July
    2014

Most New Jersey residents are aware that there is a need to address estate planning at an early age. However, quite a few hold common misconceptions about the process or individual aspects of estate planning. The following are just a few issues that are commonly misunderstood, and which can lead to serious consequences if not properly addressed.

One common belief is that an individual does not need to create a trust until their level of wealth exceeds $5 million or some other stated value. In reality, trusts are an important estate planning tool that can be put to use for people who hold far less wealth. The decision to create a trust actually has very little to do with one’s overall level of wealth, and more to do with how they would like to be able to control those assets.