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Could New Jersey's estate tax be on the chopping block?

Many of New Jersey's residents inherit from a loved one at some point in their lives. The process of transferring wealth from one generation to the next is one that can be rife with legal complexities. Failing to adequately plan an estate could result in unwanted consequences including excessive estate tax, property being tied up in probate, and individuals who were not intended to inherit property obtaining ownership of it. For this reason, obtaining the help of an experienced estate planning attorney may be extremely beneficial.

One aspect that an attorney can help an individual understand is estate tax. There has been a lot of talk lately about New Jersey raising its estate tax deduction from its current level of $675,000 to the federal amount of $5.34 million. Past attempts at similar legislation have failed to pass into law. Other states, though, have either eliminated their estate and inheritance taxes or increased their deduction amounts to meet the federal limit. Such momentum could spur New Jersey to take action, but it could be years from now.

It is important to note that although New Jersey has both a state and a federal estate tax, the rates are different. The federal tax, imposed on estates valued over $5.34 million, is currently at 40 percent. The state tax, on the other hand, imposed on assets in excess of $675,000, is currently at 16 percent. Though the New Jersey tax rate is quiet lower, the state may also impose an inheritance tax on a person who inherits an estate, depending on his or her relationship to the deceased.

Dealing with taxes with regard to estate planning can cause an individual headaches and sleepless nights. But, by speaking with and obtaining the advice of an attorney, a person may feel more at ease that their estate plan is in line with their wishes. Properly drafting wills, creating trusts, and gifting property before death may help reduce estate and inheritance taxes so that a planner's heirs get as much of the estate as possible.

Source: The Star-Ledger, "Your Money: Could NJ's estate tax be on the way out? Keep dreamin', the experts say" Karin Price Mueller, June 9, 2014

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