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Middlesex County Estate Planning and Bankruptcy Blog

Choosing the right trust can help you avoid taxation

There are many kinds of trusts that you could opt for to create for your beneficiaries. Each type has its own benefits to consider. For example, a credit-shelter trust helps you give your estate to your spouse tax-free while also stating who you want to receive the trust. When your spouse passes away, you can even determine who will receive the remaining principal tax-free.

Another type of trust to consider is an irrevocable life insurance trust, or ILIT. This helps remove the life insurance policy from your estate, so it's not taxed. You can then use that money to pay costs associated with the estate or give that money to beneficiaries.

Can you reduce the taxes on your estate? Learn how

Face it — nobody likes to pay taxes. Neither will your heirs after you die. But while you likely won't be able to eliminate all taxes on your estate, there are perfectly legal ways to reduce them.

Below are some that may work to your benefit (and that of your heirs).

Keep taxes in mind whether you give now or later

Did you know you could give away a substantial amount of money without paying the federal gift tax? If you plan on leaving wealth behind for your family or other heirs and you're worried about edging above the federal estate tax threshold and paying the whopping 40 percent tax, you might be looking at gifting money now to save your estate later. It's important to realize the ramifications of total gifting, though, because a miscalculation could leave your heirs on the hook for a great deal.

The federal gift tax laws have both annual and lifetime thresholds. You can only gift a certain amount per year to each person before taxes take hold. That amount also changes over time, which means you need to keep up with tax law if you plan on leveraging gift-giving as wealth-management and family support tool over numerous years.

Differences between estate executors and administrators

In New Jersey and elsewhere, people sometimes use the terms "executor" and "administrator" as though they're interchangeable regarding the estate planning process. However, they are not the same. Generally speaking, the two titles just mentioned refer to males designated to the positions while "executrix" and "administratrix" pertain to females, but for the purpose of this post, "executor" and "administrator" refers to both. When someone asks you to be one or the other, it's crucial you understand the roles and duties assigned to each before agreeing to accept the responsibility.  

Who is responsible for paying the federal estate tax?

The federal estate tax is a cut of estate value that goes to the Internal Revenue Service. When the federal estate tax comes into play, it can take a hefty bite out of the value of an estate. Luckily for most people, thresholds on this tax and numerous other factors mean that only a small percentage of people end up dealing with it, and very few estates that include small family business or farms end up on the hook for estate taxes.

The federal estate tax only kicks in for estates with a total value of over $5.49 million as of 2017. According to the Tax Policy Center, after all deductions are allowed and the threshold is considered, only about 5,190 estates in 2017 will end up owing the tax. The bulk of those paying the tax are in the top 10 percent of earners in the nation, and a fourth of all estate taxes are paid by the wealthiest 0.1 percent.

How does discharge work in Chapter 7 bankruptcy?

Numerous New Jersey residents struggle to meet their debt obligations. Are you one of them? If so, you more than likely explored various debt relief options available to you. You might find Chapter 7 bankruptcy intriguing since it could provide you with a fresh financial start free from most of your debts, but what does that actually mean?.

Prince heirs quibble on which attorney's fees to pay

The Prince heirs have been in the news consistently for almost a year now as courts, heirs and lawyers work to move the complex estate through probate. Part of the problem is that the pop star died without a will -- or any other estate provisions -- leaving everything to be sorted according to the law. That left courts with months of work in identifying the right heirs, and now that six heirs have been identified, they can't seem to agree on much.

Among the many current battles among the heirs is whether estate funds should be used to pay attorneys' fees. Multiple attorneys have incurred expenses in completing work on behalf of the estate or the heirs; some of the heirs themselves were involved in legal disputes just to prove that they were, in fact, heirs.

Understanding blind trusts

A blind trust is a certain type of legal vehicle that is used when the person who owns the assets shouldn't be able to know how the assets or being managed or have a hand in the management of the assets. Blind trusts are not something you'd use in common financial and estate management situations, but they can be a valuable tool when ethical or legal restrictions make it difficult to maintain ties with your own wealth or businesses.

Perhaps the most well-known use of blind trusts have to do politicians. While many will associated blind trusts with American presidents, anyone who holds political office might benefit from such an arrangement. A political officer is seen has having some sway over regulations, rules or laws that can impact business. He or she might be able to persuade others to agree with them -- whether or not they meant too -- because of their position. It's an unfair financial and business advantage.

Plan now so your loved ones don't have to fight later

In our previous blog post, we discussed how the streaming rights to Prince's music are at the heart of an estate battle. This is only one example of what all might be included in legal cases regarding a person's estate. One of the best ways that you can prevent your loved ones from having to head to court is to plan your estate in a way that doesn't leave room for doubt or misinterpretation.

We know that you might have some concerns about what will happen with your estate when you die. Today is the best time to take action to make your wishes known. From creating a will to putting things in trusts and from designating powers of attorney to naming personal representatives, your estate plan is what your loved ones will use to guide them after you die.

Streaming rights at heart of latest Prince estate legal battles

The Bremer Trust, which is the temporary administrator of Prince's estate, has been dealing with a number of legal battles lately. It's facing allegations from potential Prince heirs that experts botched the job of handling a tribute concert last year, and it's also dealing with an ongoing battle regarding streaming rights to Prince's music.

According to Bremer Trust, streaming firm Tidal doesn't have access to stream all of Prince's catalog. Based on contracts, says Bremer, Tidal only has rights to the penultimate album from the artist. Tidal doesn't agree, though. The company, along with Roc Nation, says that there were other written and oral agreements between the streaming services and Prince.

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