New Jersey Estate Planning Attorney Examines Concerns Regarding Latest Estate and Inheritance Tax Law
Moorestown, NJ (Law Firm Newswire) October 22, 2012 - Many clients are coming into The Begley Law Group to discuss their options for estate planning and estate administration.
"Our clients first concern is the two types of possible tax assessments against an estate," says New Jersey estate planning attorney Ethan Ordog. "Estate tax can include an assessment from the state in which the individual passed away or owned property, as well as the imposition of federal tax, based upon those assets in which an individual would otherwise direct for distribution to heirs from their estate."
The estate tax is calculated in consideration of the net value of the property owned by the decedent at the time of death. An estate, depending on the relationship of the heirs receiving a distribution from the decedent, may be subject to inheritance tax - a type of state tax calculated based on who receives property, and how much they receive.
On January 1, 2010, the federal estate tax was officially repealed. In December, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, which reinstated the estate tax retroactively to January 1, 2012 and also set new rules for estates of those passing in 2011 and 2012.
At the end of 2012, unless a new law is enacted, the estate tax reverts back to the laws in effect in 2001/2002. Presently, the federal estate tax exemption is $5,120,000, with those estates exceeding such amount taxed at a rate of 35%. If no action is taken, the federal estate tax exemption shall drop to $1,000,000, with estates with assets over such amount, taxed at a rate of 55%.
As of 2012, a New Jersey estate tax return must be filed if the decedent’s gross estate, plus adjusted taxable gifts, exceeds $675,000. The New Jersey estate tax is calculated by either taking the maximum credit for state inheritance, estate, succession or legacy taxes allowable under the IRS code in effect on December 31, 2001, called the 706 method, or an amount determined pursuant to the simplified tax system, prescribed by the Director of the Division of Taxation, state of New Jersey.
The form 706 method must be used if the taxpayer is required to file a federal estate tax return, IRS form 706. If the taxpayer is not required to file the IRS form 706, then, in addition to the form 706 method, the simplified form method may be used, so long as it produces tax liability similar to the form 706 method.
The New Jersey estate tax rate is progressive and maxes out at 16% for estates above $10,040,000. The estate return, as well as the corresponding estate tax due, must be filed and paid within nine (9) months of the decedent’s death, or nine months plus thirty (30) days, if the form 706 method is used. An extension of time may be requested, although, even if granted, the payment is not extended for the corresponding tax due.
For those individuals directing assets to beneficiaries in New Jersey, it is important to understand the applicable tax considerations. New Jersey now defines three distinct classes of individuals for inheritance tax purposed. Class A beneficiaries, which include spouses, civil union partners, domestic partners, parents, grandparents and descendants, are all exempt from New Jersey inheritance tax.
Class C beneficiaries, which include siblings, the spouse or widow(er) of a child of the decedent, and the civil union partner or surviving civil union partner of a child of the decedent, receive an exemption equal to the first $25,000 of an inheritance, with transfers exceeding $25,000, taxed at a rate between 11%-16%.
Class D beneficiaries, which include all other beneficiaries, receive an exemption equal to only the first $500, with transfers exceeding such amount taxed at a rate between 15% and 16%. Additionally, all charitable organizations are exempt from the payment of New Jersey inheritance tax. A New Jersey inheritance tax return must be filed and the tax paid within eight months after the decedent’s date of death.
It is of note that life insurance paid to a named beneficiary, regardless of the class, as defined by the state of New Jersey, is exempt from New Jersey inheritance tax. Moreover, although a Class A beneficiary is not required to file a New Jersey Inheritance tax return, they must file a form L-8 to secure the release of a New Jersey bank account, stock, bond or brokerage account held in the decedent’s name. Further, if there is any New Jersey real estate titled in the name of the decedent, then form L-9 or form L-9NR, for a nonresident decedent, must be filed in order to obtain a release from the state’s lien on the real estate.
Accordingly, in order to best understand what steps can be taken to take advantage of estate planning available to clients, as well as further updates regarding changes to the law, or if assistance is needed regarding the administration of an estate, or as a beneficiary thereof, it is important to consult an attorney regarding those specific needs. The Begley Law Group, P.C. is more than willing to discuss these and other matters affecting their clients.
To learn more about Begley Law Group call 1.800.533.7227 or visit www.begleylawgroup.com.
Begley Law Group, P.C.
509 S. Lenola Road, Building 7
Moorestown, NJ 08057
- WHAT IS A SELF-SETTLED SPECIAL NEEDS TRUST?
by Thomas D. Begley, Jr., CELA Trusts for disabled individuals who have not reached age 65 and are funded with assets of the disabled person are authorized under OBRA-93. The trust is for the benefit of disabled persons. The person must be under 65 at the inception of the trust. While the trust must be established and funded prior to the beneficiary attaining the age of 65, it may continue after 65. If the trust is funded with a structured settlement prior to the beneficiary attaining the age of 65, the trust remains viable even though payments from the annuity [...]
- WHAT IS A THIRD PARTY SPECIAL NEEDS TRUST?
by Thomas D. Begley, Jr., CELA A Third Party Special Needs Trust is usually used in a Medicaid context not for the benefit of the grantor of the trust, but for the beneficiary. The grantor of the trust is typically a parent, but could be grandparent, sibling, other relative or friend. The grantor uses the grantor’s assets to fund the trust. The assets of the beneficiary cannot be used to fund a Third Party Special Needs Trust. In order for the trust to be a Special Needs Trust, the beneficiary must be disabled. Disability is usually determined by the fact [...]
- USING SELF-SETTLED SPECIAL NEEDS TRUSTS TO PROTECT PUBLIC BENEFITS
Many public benefits available to persons with disabilities, such as Supplemental Security Income (SSI) and Medicaid, place limits on income and certain types of assets. Exceeding such limits can lead individuals to lose some or all of their benefits. Individuals receiving SSI are limited to $2,000 of assets. For many individuals, their Medicaid is linked to their SSI. Today there are many Medicaid Waiver Programs. In many states the asset limit for these waiver programs is also $2,000, but this varies from program-to-program and from state-to-state. Assets held in ABLE accounts do not affect SSI until the ABLE account reaches [...]
See other news sources publishing this article. BETA | Tags: new jersey elder law, new jersey elder law attorney, new jersey estate planning, new jersey estate planning attorney, new jersey estate planning lawyer, New Jersey personal injury settlement consultant, New Jersey Special Needs attorney, New Jersey Special Needs Lawyer, New Jersey Special Needs planning, new jersey veterans law, nj elder, nj estate planning, nj estate planning attorney