Estate Tax Planning Strategies in NJ

Discover effective estate tax planning strategies in NJ with the Law Offices of Scott J. Goldstein, LLC. Give us a call today for more information.

Mastering Estate Tax Planning in New Jersey

Estate taxes can be a complex and intricate aspect of estate planning. Whether you are planning your own estate or involved in someone else’s, it is crucial to have experienced legal counsel by your side.

When planning an estate, it is essential to consider tax implications. Your attorney can help you create a plan to minimize tax liability and ensure your loved ones receive the maximum benefit from the estate. They can also provide valuable advice on estate planning strategies to help you achieve your goals.

For personalized assistance with your estate planning needs, reach out to the Law Offices of Wenarsky & Goldstein. Our team can help you create an estate plan that suits your needs and addresses any potential tax issues. If you already have an estate plan, we can assess it and make any necessary adjustments. Contact us today for a consultation.

Understanding Estate Taxes in New Jersey

The New Jersey estate tax was phased out in 2018, resulting in significant changes to the state’s estate and inheritance tax landscape. Previously, New Jersey was one of a few states that imposed an estate tax on both residents and nonresidents. With the phase-out, New Jersey no longer has a state estate tax, making it more attractive for individuals and families to establish residency or relocate there.

However, it is essential to note that there are still federal estate tax implications to consider. Federal estate taxes are currently capped at 40%, with a federal estate tax exemption of $13.61 million per individual and $27.22 million for married couples. This means that couples with a combined estate of more than $27.22 million must pay federal estate taxes on any amount over that.

Portability of Federal Estate Taxes and How This Affects Spouses

Federal estate tax law provides for portability, which allows a surviving spouse to utilize the unused estate and gift tax exemptions of the deceased spouse. This provision, referred to as the Deceased Spouse Unused Exclusion (DSUE), shields the estate from hefty estate tax bills if it exceeds the exemption thresholds. In order to retain the unused exemption, it is generally necessary to file an estate tax return promptly after the death of the first spouse.

How to Elect Portability

Electing portability requires you to fill out Form 706, the same form you would use to file your estate tax return. The election must be made within nine months after the decedent’s death. A six-month extension can also be granted, so you have up to 15 months.

If, however, you were unaware of the portability election and there was no filing requirement for the decedent’s estate, you are still eligible to make an election under Rev. Proc 2017-34, which allows relief to elect portability until the second anniversary of the decedent’s death.

Contact us to schedule a consultation to learn more about how portability may affect your estate. We are happy to answer any questions you may have.

Inheritance Tax Laws in New Jersey

Even though New Jersey does not have estate taxes, it does have inheritance tax. As the name suggests, inheritance taxes are imposed on the assets or money inherited by a beneficiary after the death of the individual from whom it was inherited. It is paid by the heir who inherits the property.

Like every other state, New Jersey has its own inheritance laws that outline how an estate should be handled and allocated. These laws detail the procedures, tax implications, and legal requirements of inheriting property.

While estate taxes are imposed on the overall value of an estate before it is distributed to heirs, inheritance taxes are generally imposed on individual beneficiaries. Inheritance taxes are usually levied as a percentage of the beneficiary’s inheritance. In New Jersey, the amount varies depending on the recipient’s relationship to the original owner.

New Jersey Inheritance Tax Calculations

In New Jersey, inheritance tax is calculated based on the relationship between the deceased person and the heir. There are four distinct “classes” of beneficiaries under the New Jersey Inheritance Tax: Class A, Class C, Class D, and Class E. The beneficiary’s class determines whether the New Jersey inheritance tax must be paid. (Class B was abolished in 1963.)

New Jersey’s Beneficiary Classes

Class A

Inheritance taxes do not apply to distributions or bequests to Class A beneficiaries such as a decedent’s spouse, civil union partner, children, grandchildren, great-grandchildren, stepchildren, mother, father, or grandparents.

Class C

Those in Class C include the decedent’s siblings, half-siblings, sons-in-law, daughters-in-law, widows of deceased sons, and widowers of deceased daughters. Class C beneficiaries are taxed as follows:

  • 11% tax on any amount over $25,000 up to $1,100,000 (no tax below $25,000)
  • 13% on any amount over $1,100,000 up to $1,400,000
  • 14% on any amount over $1,400,000 up to $1,700,000
  • 16% on any amount over $1,700,000

Class D

Class D beneficiaries include people who are not members of Classes A, C, or E. For example, nephews, nieces, cousins, fiancées, friends, or unmarried partners are included in the class.

  • 15% on any amount up to $700,000 (unless the bequest is less than $500)
  • 16% on any amount over $700,000

Class E

Those in Class E are tax-exempt entities, such as charities and not-for-profit organizations. A distribution or bequest to a beneficiary in this category is exempt from the New Jersey Inheritance Tax.

New Jersey inheritance tax does not apply to life insurance paid to a named beneficiary, regardless of the class.

Key Estate Tax Planning Strategies

Embarking on effective estate tax planning demands a thoughtful approach to safeguard your assets from undue tax burdens. Mastery of critical strategies can prove pivotal in preserving your wealth. Some essential estate tax planning strategies include:

Gifting Assets During One’s Lifetime:

One effective strategy is gifting assets during one’s lifetime. The overall value of individuals’ estates can be gradually diminished by strategically giving gifts. Utilizing the annual gift tax exclusion, currently set at $18,000 per recipient, allows for the tax-free transfer of assets to heirs.

Utilizing Trusts Effectively:

Another crucial aspect of estate tax planning is the effective use of trusts. Trusts, such as revocable living trusts, provide a means for asset control and management. Additionally, irrevocable life insurance trusts offer a way to mitigate the impact of taxable estates. A well-structured trust can be tailored to meet an individual’s asset distribution wishes.

Charitable Donations and Tax Implications:

Charitable donations also play a significant role in estate tax planning. Not only do they allow individuals to support causes close to their hearts, but they also reduce the taxable estate. Contributions to qualified charitable organizations yield deductions, providing a tax-efficient avenue for charitable giving while aligning with overall estate planning goals.

Navigating estate taxes can be complex, but these key strategies serve as a valuable starting point. For personalized guidance tailored to individual circumstances, consulting with experienced professionals, such as the team at the Law Offices of Wenarsky and Goldstein, LLC, is essential. With our skill set, you can effectively navigate estate taxes and ensure that your assets are preserved according to their wishes.

Estate tax planning is a complicated journey, and these key strategies serve as a starting point. For personalized guidance tailored to your situation, consult the experienced team at the Law Offices of Wenarsky and Goldstein, LLC. We are committed to assisting you in navigating estate taxes effectively and ensuring your assets are preserved according to your wishes.

How Law Offices of Wenarsky and Goldstein, LLC Can Assist You

At the Law Offices Wenarsky and Goldstein, we understand estate tax planning is a nuanced and personal endeavor. We consider all aspects of your financial landscape based on your unique circumstances and goals. We navigate the intricate details of federal estate tax planning with a keen focus on your goals, leveraging our experience to craft a plan that safeguards your assets and minimizes tax liabilities.

With years of experience navigating New Jersey’s estate laws, we bring a wealth of knowledge. The federal estate tax laws and the state inheritance tax landscape can be complex, and having a seasoned ally like the Law Offices of Wenarsky and Goldstein can make all the difference.

We stay abreast of the latest developments, ensuring that your estate plan is current and optimized for tax efficiency. Our proficiency in both federal and state estate laws and regulations positions us to provide comprehensive guidance, offering peace of mind as you navigate the intricacies of estate tax planning. For personalized and professional estate tax planning assistance, contact the Law Offices of Wenarsky and Goldstein here.

Contact Us Today!

Take the first step towards securing your financial future by scheduling a consultation with the Law Offices of Wenarsky and Goldstein, LLC. Contact us today for personalized estate planning and guidance on navigating New Jersey’s tax laws. Your tailored estate planning solutions await.

Call the Law Office of Wenarsky & Goldstein

At the Law Offices of Wenarsky & Goldstein, LLC, our New York and New Jersey attorneys are experienced and knowledgeable in bankruptcy, estate planning and probate, guardianship, special needs planning, and real estate law. To learn more about how we can assist you with your legal needs, call us today at 973-453-2838.