Estate planning is an opportunity for you to make the most of your hard earned money. This process allows you to review your assets and tax obligations. It can provide an opportunity not just to put together a plan to transfer assets, but also to discuss potential tax savings steps that you can take right now.
The law regarding estate planning is constantly evolving. This was recently highlighted with the passage of a package that will have a huge impact on estate planning in New Jersey.
New Jersey state law and estate planning: What is current law?
New Jersey currently allows for people to leave an unlimited amount of their assets to charity or a spouse without having to pay a tax. A transfer of assets valued at or above $675,000 to anyone else is generally subject to an estate tax. This will be true for the rest of 2016.
After 2016, this will no longer be the case.
How will current law change?
It appears Governor Christopher Christie has officially repealed this tax, which is called the New Jersey Estate Tax.
These changes will impact residents of New Jersey in a number of ways. Three of the more applicable influences include:
- A slow transition. The transition is scheduled to occur in two steps. The first step essentially involves reducing the current tax. This will occur in 2017, when the exclusion rate will be increased to only apply to transfers that are over the $2 million mark. In 2018, the tax is scheduled to be fully repealed.
- Snowbirds may return. For many who choose to "snowbird" to other states, part of the incentive may be tax savings. Those who are spending a significant portion of time in another state to achieve a domicile status and make the most of estate tax savings may change their plans and remain in New Jersey once its state estate tax is repealed. However, there are other potential tax impacts so this decision should be carefully reviewed.
- Keep federal limits in mind. Although the state estate tax will likely be nonexistent as of 2018, the federal estate tax may not. Keep this in mind and plan accordingly.
These changes may translate to significant tax savings for New Jersey residents. This provides an excellent time for residents to meet with an estate planning attorney to update or put together your estate plan.