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New estate tax rules leave many people thinking about their kids

On January 1, Congress made a lot of decisions regarding the financial situation for the country. Although there is an ongoing debate as to what they did, and what they might do in the future, one of the rules they did make permanent was how much money parents can leave to their heirs without having to pay estate taxes. This amount was set at $5.25 million. Whether or not a person has that much money to leave to their heirs, this estate tax rule has prompted many people to think about whether their children are actually ready to receive any large sum of money.

For some, they trust that their children will continue to be productive adults and won't just rely on their parent's money to survive. Other might think that their children should wait to discover that their parents have set up a trust for them, with a potentially large sum of money.

The ability to give money to an heir without paying taxes can be extremely cost saving. If a person goes over the amount of the exception, they could face taxes of 40 percent. Even though this tax savings could be substantial, many parents feel that their children should not find out about any potential trust until they reach a certain age.

Certain estate planning measures can be taken to make sure children are informed of their inheritance at a certain age. This can help parents pass money along to their children using today's tax rules, while still allowing time for their children to reach an age that they feel the children can be informed of the money and manage it appropriately.

Source: The Wall Street Journal, "Can You Trust Your Kid With $5.25 Million?" Kelly Greene and Arden Dale, Jan. 18, 2013

-Our law firm handles many estate planning needs in New Jersey. Please visit our website to learn more.

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