Estate Planning
While most people want to avoid speaking about what happens after they die, careful estate planning can insure that the assets they leave behind are distributed in a timely manner instead of being tied up in court indefinitely. Estate Law deals with how someone’s estate is administered, both before and after their death. For tax purposes, an estate’s value pertains to any property or possessions of the decedent including any taxes or debt owed on the property.
In addition to covering wills and trusts, estate law also governs probate, living wills, and power of attorney. Due to the differences between states, people need to become familiar with the laws where they reside. New or different legislation may change how property is distributed to a spouse or their children.
Inheritance tax
One of the more controversial estate laws in New Jersey is the inheritance tax, which is often confused with the estate tax. They are, however, two separate taxes. Until recently, New Jersey distinguished itself by levying both an estate and an inheritance tax. Luckily for New Jersey residents, the state became a less expensive place to die by repealing the estate tax on Jan. 1, 2018. The inheritance tax, on the other hand, is still in effect and brings in a sizable amount of revenue for the state.
Unlike the now defunct estate tax, which applied to immediate relatives of the deceased such as a spouse or children, the inheritance tax falls to other relatives. While the tax rate varies from 11 to 16 percent depending on the overall value of the estate, the tricky part is that it divides this class of relatives into two more subcategories. For example, the decedents’ siblings or the spouses of their children are liable for estates greater than $25,000. Yet, other relatives such as nieces and nephews are liable for any amount over $500. As one can imagine, not knowing how to navigate this process could result in a heavy tax liability.
Wills & Trusts
Wills and trusts are documents that enable a person to plan how their estate will be handled after their death. Although these two documents are often mentioned together, they serve different purposes. A will enables someone to dictate how their assets will be divided upon their death. Whether is it real estate, securities, money in a bank account, or even valuable art, a will is basically an instruction manual for how assets are transferred to one’s heirs. They are helpful because they can reduce conflicts regarding possessions, and they can take the pressure off a family in the midst of the grieving process.
A trust differs from a will in that it allows someone to control their estate after their death. There are many types of trusts but they essentially dictate how and when assets will transfer to a beneficiary. For example, a trust can distribute assets to beneficiaries over a period of time, when they reach a certain age, or when they satisfy certain requirements. People often use them to manage property for beneficiaries who those may not be old enough or responsible enough to manage it for themselves.
Another distinct advantage is that when assets are put in trust, the trust now owns them instead of the person who created it. As a result, trusts typically avoid probate and lessen an estate’s tax burden because the assets in trust are no longer considered part of the estate.
Probate
Probate court is another area of estate law about which people often have questions. If someone dies without a will, then the decedent’s estate goes through a much lengthier probate process. In this case, the probate court determines the executor of the estate. One of the main objectives of wills and trusts is to keep this process as simple as possible. In New Jersey for instance, court hearings are unnecessary with an uncontested will. On the other hand, a trust generally avoids the probate process altogether. Although most states enact their own probate laws, New Jersey has made things easier by adopting the Uniform Probate Code, which both cuts costs and streamlines this process.
Due to the complexities involved in planning and administering an estate, it is important to consult an experienced estate lawyer anytime someone moves in or out of New Jersey. In addition, an estate attorney can also clarify issues that may be clouded by emotions such as creating a living will or deciding power of attorney. At times like these, proper legal guidance can help with decisions which often have far-reaching consequences.