A general practice law firm
Upon the death of a resident of New Jersey, there are three taxes that may apply to the gross estate of the decedent:
Federal Estate Tax-applicable to estates with gross value in excess of $5.0 million, adjusted for inflation, and sets the maximum tax rate at 40% . The gift tax exemption is unified with the estate tax. An election for modified basis rules may be made by executors. The executor of a deceased spouse’s estate may transfer any unused estate and gift tax exemption to the surviving spouse (a new concept known as “portability”).
The annual exclusion gift has remained at $14,000 since 2013 through to 2017.
New Jersey Estate Tax– New Jersey is phasing out its Estate Tax. For decedents that died in 2016 or before the exemption is $675,000. For decedents dying in 2017, the exemption is $2,000,000, and for decedents dying in 2018 the estate tax will no longer be imposed. This does not affect the applicability of Inheritance Tax.
New Jersey Inheritance Tax-affects almost every estate, but tax is due only if giving property to beneficiary other than charity, spouse, children or grandchildren.
The above are general guidelines for determining when a tax is due. Determining what assets are within the estate is often an overlooked task. For example, the full face value and cash value of life insurance is included in your estate for estate tax purposes – in addition to the value of real estate property and bank accounts. No tax is due for property passing to a spouse, but use of this marital deduction may create more tax due after the death of the surviving spouse. I would be happy to discuss these with you by phone or in a conference.
Is Your Estate Subject To Tax? Yes, if
Your estate’s value is over $675,000 – New Jersey is phasing out its Estate Tax. For decedents that died in 2016 or before the exemption is $675,000. For decedents dying in 2017, the exemption is $2,000,000, and for decedents dying in 2018 the estate tax will no longer be imposed. This does not affect the applicability of Inheritance Tax. This includes entire value of joint accounts, life insurance, living trusts, and any property in which the decedent had an interest (there may be exceptions but each asset must be evaluated). If your estate’s value were is over the federal exemption, it would be subject to the Federal Estate Tax as well.
You have left anything to a friend or more distant relative valued over $499.
You have left anything to a sibling valued over $25,000.
Methods to Eliminate or Temper Taxes:
Credit Shelter Trust in your will. Best for married individuals. Can double the amount of the estate tax exemption.
Life Insurance Trust. Places value of life insurance outside your taxable estate. For married couples with children this is a valuable tool; the life insurance proceeds may be put in trust for your minor children and thereby avoid the imposition of estate tax.
Gift Giving to Trust or Individuals. This is a very powerful asset protection tool. There are many ways to provide gifts besides an annual gift of cash. However, major gift giving to minors can be extremely complex depending upon the method chosen to accomplish the giving, a trust (complex but flexible) as opposed to payment of tuition or medical expenses (simple but rigid).
