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Estate Taxes in New Jersey: Federal and State

Much has been covered in regards to the disappearing, reappearing federal estate tax and many have assumed that 2010 is a "freebie" in regards to asset transfers. What many forget to take into account is that a large number of states, like New Jersey, also levy an estate tax.

These taxes are separate from federal estate tax and often kick in sooner. For example, in New Jersey, the state tax on estates applies once you go beyond $675,000.

Between home and property values, money in the bank, retirement savings and more, $675,000 is not usually a very high threshold at all. When the federal estate tax returns in 2010, at $1 million, this will also be figured into the mix.

With taxes set to come out of your estate left and right, it is absolutely essential that you plan your estate with a competent and qualified attorney. When you do, there are several things you should ask about if you want to protect as much of your estate as possible.

  1. Ask about the "marital deduction." This allowance should let you transfer assets to your spouse tax-free. This can be achieved by titling assets between one another and preparing a well-documented will.
  2. Consider giving a one-time gift of $1 million to a child or other family member. You may also take advantage of the "annual exclusion," which allows you to gift $13,000 a year, per spouse, tax-free. If combined between spouses, you may increase that amount to $26,000.
  3. Consider setting up a trust to protect your assets, as discussed in last week's post.

Again, it is very important to begin contemplating these questions early. Estate planning is an easy area to get lost in and finding someone with the most up-to-date map can save you time, money and a headache or two.

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