Some people have sizable estates that they know are going to be taxes when they pass away. For these individuals, it might be possible to lower the value of the estate before they pass away so that the estate won't be subjected to exorbitant taxes.
There are two different levels of estate taxes that you have to think about when you are trying to reduce the estate tax that will come upon your death. One is the federal estate tax. The other is the state estate tax.
What is the federal estate tax?
The federal estate tax kicks in at $5.49 million in 2017. An estate over this amount is taxed at a whopping 40 percent. This can be avoided by reducing the value of the estate under this threshold. You can give away assets of up to $14,000 per person each year. There is no limit to how many people can receive this gift each year, so you might have to get creative with how you handle this type of reduction.
What is the New Jersey estate tax?
The estate tax in New Jersey kicks in at $2 million for 2017. Next year, this tax will be eliminated. If you find that you need to reduce your estate's size this year, you can give away assets in any amount to any individual without limit.
As you can see, laws for federal estate tax and New Jersey estate tax are very different. You should make sure that you understand these laws and how they will impact how you handle your estate before you start giving assets away or deciding to squirrel away money.
Source: NJ.com, "Lowering an estate's value before death | Biz Brain," Karin Price Mueller, June 23, 2017