In the past few weeks, we've talked about what concerns and actions take place during the probate process and how you can help protect your heirs and assets through trusts. While many people in New Jersey aren't worried about the federal estate tax given the high threshold for that tax, you should still be concerned about taxes in general if you are planning an estate or expect to inherit assets.
Federal estate taxes aren't the only tax-related concern associated with estates. State, property, income and other tax burdens might also come into play depending on where you live, where you establish your estate vehicles, and what property you include. One way to keep from putting unexpected burdens on heirs is to understand how taxes are going to affect assets and property transfers at the time of probate and in the future.
For example, if your estate includes a home and you want to leave that home to an adult child, the estate won't incur federal property tax unless the total value of the estate -- including the home -- passes the federal threshold. However, once you transfer ownership of the home to an heir, he or she is responsible for any applicable property tax each year. If your heir is not prepared to pay such a tax, you might be putting an undue financial hardship on them. You can avoid such an issue by using trusts to shelter assets or by funding a trust to pay such taxes in the future.
Understanding how various taxes might come into play can be difficult. Our firm offers estate tax planning services to help you create the best future for yourself and your heirs.