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Estate planning tips just for New Jersey women, part two

A general theme in our blogs is the fact that everyone can benefit from estate planning tools. However, in a recent post, we focused on a few reasons that it is especially important for women to create an estate plan.

We discussed naming someone as durable power of attorney, understanding the differences between wills and trusts, and creating a trust regardless of the size of your estate. Today we will discuss three more reasons why it is especially important for women in Hudson County to create estate plans.

When one spouse dies, the widowed spouse often receives a tax break. Because women have longer life expectancies than men and because they often marry men older than they are, women are more commonly widowed than men. When the tax laws changed in 2011, the tax breaks for spouses also changed. If a deceased individual does not reach the limit on the amount of estate tax exclusion, the remaining amount can be passed on to the other spouse, which is called portability. This means a widow can pass as much as $10 million untaxed on to loved ones.

One of the primary objectives with estate planning is minimizing the amount of tax penalties you will be subject to. When couples are married, they typically have one primary goal - to help ensure their spouse is financially supported when the first spouse dies. When a spouse is widowed, he or she is often left with more complicated objectives. Tax benefits and penalties change, and the widow must think about which individuals he or she would like to support financially.

The tax penalties for life insurance should also be considered. In many situations, if your life insurance policy is still in your name when you die, it can be taxed heavily. Naming a beneficiary as the owner of the policy or creating an irrevocable life insurance trust can both minimize tax penalties.

Source: Forbes, "Nine Things Women Should Know About Estate Planning," 19 May 2011

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