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Dying In New Jersey: The Estate Tax Challenge

Dying in New Jersey: The Estate Tax Challenge

Benjamin Franklin is often credited for the well-known phrase “…in this world nothing can be said to be certain, except death and taxes.” If Franklin lived in New Jersey today, he’d undoubtedly stand by that quote—especially concerning estate taxes.

As you know, estate taxes are technically not a problem for the living: They’re the challenge your children and/or grandchildren may face after your death. However, if you wish to pass on a financial legacy to your family, New Jersey’s onerous estate taxes may concern you greatly while you’re still breathing.

The Garden State has THE highest state estate tax in the country, hands down. Our per-person estate tax exemption of just $675,000 was set in the early 2000s, and has never been updated. This means that if you’re single, the amount of your total estate (homes, financial accounts, cars, property, coin collections, etc.) that exceeds $675,000 is subject to New Jersey estate tax. If you’re a married couple, you can exempt twice that amount ($1.35 million). However, if you own a nice home and have a reasonable retirement account, it’s relatively easy to exceed that limit and pass on taxes to your heirs in addition to your estate.

To give you a frame of reference, the federal estate tax exemption is much more generous, at $5.43 million per person. Many people won’t owe Uncle Sam a dime in federal estate taxes, but it’s much easier to owe the state of New Jersey.

On the other hand, if you were to leave New Jersey, establish domicile in balmy Florida, or one of the 31 states without an estate or inheritance tax, and die there, your heirs would owe zero in Florida estate taxes. Nada. Nothing.

Here’s an example that makes this comparison very clear: Let’s say you and your spouse have a net worth of $10 million. If you become Florida residents, your heirs won’t pay any estate taxes after your deaths. The entire $10 million will be theirs. However, if you and your spouse die as residents of New Jersey, just $1,350,000 will be shielded from estate taxes. That leaves $8,650,000 exposed to New Jersey estate taxes, which leaves your heirs to pay a tax bill of approximately $874,500. That’s the equivalent of a modest shore home that your kids won’t inherit. Note, this assumes each spouse does the proper planning to efficiently utilize their New Jersey exemption.

What’s to be done? It doesn’t look like the New Jersey estate tax will be repealed anytime soon. If you aren’t interested in relocating to a lower-tax state, it’s wise to seek the counsel of an experienced estate attorney. This professional can help you utilize your New Jersey estate tax exemptions as effectively as possible.

If you don’t have an estate attorney, RegentAtlantic can refer you to several excellent professionals. Your Wealth Advisor can also work collaboratively with your attorney to help preserve more of your estate for your beneficiaries.

 

Important Disclosure Information

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This presentation is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Please remember that RegentAtlantic does not provide tax or legal advice. Please consult with your tax advisor and/or attorney prior to implementing any of the strategies discussed in this article.

This article is based on RegentAtlantic’s current understanding of tax law. This law can change at any time by an act of Congress or a state’s legislature.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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