By Fredrick P. Niemann, a NJ Estate Planning Attorney
Did you know that there are three different types of taxes associated with death and the passing on of an estate in New Jersey? Both the federal government and the state of New Jersey will tax you upon your death, making it expensive and sometimes difficult for your family to receive your assets. While a properly written irrevocable trust can help minimize some of these taxes, it is important to understand the different types of taxes and the exemptions for each.
THE FEDERAL ESTATE TAX IS IMPOSED BY THE FEDERAL GOVERNMENT. This is one of the largest taxes you and your family will ever have to pay. For 2011 and 2012, the federal estate tax rate is 35%. Fortunately, the federal government currently offers an exclusion of $5 million for 2011 and 2012, meaning you will only be taxed on the amount of your estate that exceeds $5 million. However, in 2013, that exemption amount is expected to shrink to $1 million, possibly with an increased top rate of 55% taxation depending on how much the estate is worth. Another reason you should think about who you’ll vote for in 2012.
THE STATE OF NEW JERSEY WILL ALSO TAX YOU WHEN YOUR ESTATE PASSES. New Jersey has both an inheritance tax and an estate tax. Both taxes depend on the value of the estate being passed, with higher taxation rates being imposed the more valuable your estate is. The NJ Inheritance tax applies to all property that has a total value of $500 or more and passes from a decedent to a beneficiary, while the NJ Estate Tax allows for a $675,000 exemption, meaning the tax would only apply to the value of the assets over that amount. New Jersey does not anticipate any changes in the near future to its taxation laws.
Both the federal government and the state of New Jersey exempts all transfers of assets between a husband and wife, meaning there will be no tax whenever the first spouse dies. Proper estate planning, such as placing your assets in an irrevocable life insurance trust, may also allow certain individuals to avoid or minimize some of the taxation. For example, proper estate planning may allow a married couple to double the $675,000 exclusion in New Jersey, while preserving the availability of these assets throughout their lives.
Estate taxation can be a complicated and burdensome area of the law. Proper estate planning can help you and your family minimize the effects that taxation will have on your estate. Please call Fredrick P. Niemann, Esq., an experienced New Jersey Estate Planning attorney today toll-free at 888-800-7442 or email him at firstname.lastname@example.org/. He will be happy to meet and discuss estate planning and answer any questions you may have about taxation of your estate. For further information, go to http://www.youtube.com/user/NJElderLawCenter#p/search/0/iysxOtkAByo to learn more.