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Certain types of trusts in an estate plan can help protect wealth

It is important for New Jersey residents to ensure they protect their assets in the future by understanding the key aspects of estate planning. This applies to everyone, but it is especially important for those who have generated wealth and have a business they would like to pass on to their heirs. For those who have a business and are concerned about the inheritance tax and how their heirs will move forward after the testator has passed on, there are certain strategies that can be beneficial.

When putting together an estate plan, it is essential to account for a business being given to heirs and mitigating the costs with gift taxes and estate taxes. A specialized trust can be useful towards this end. A successful business that is set to be sold by the testator will be subject to various taxes. If, however, the business owner uses a trust in a wise manner, this can be significantly lessened.

Making a gift of a certain amount via company stock and then selling more stock at a discount to the trust can leave a substantial amount in the trust. It can then be classified as a minority interest with a marketability discount. The value of that which is transferred to the trust is higher than it would otherwise be. The discounted stock that was sold to the trust and its possible appreciation will not be part of the owner's estate and will not be subject to taxes. As the trust increases in value, it goes to the heirs and is not going to be taxed as it might have been without this tactic.

When business and estate planning intersect, it is imperative to have a legal professional who is well-versed in both. Transferring assets to one's heirs is one of the biggest concerns that business owners and other who have accrued wealth will consider. Understanding wealth protection and trust administration can be achieved with assistance from an estate planning attorney.

Source: Forbes, "How To 'Freeze' The Value Of A Business To Eliminate Estate And Gift Taxes," Russ Alan Prince, Sept. 28, 2017

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