Princeton Estate Tax Planning Lawyer

Princeton Estate Tax Planning Lawyer

It is only natural to want to protect the size of your estate for your loved ones. Uncle Sam, however, is also greedy and can upend even the most careful estate plan by either taxing the estate or taxing the individuals who inherit from you.

Estate tax planning requires up-to-date knowledge of federal and state tax laws, which are always changing. An attorney must also use that knowledge to minimize the tax burden on your loved ones.

Scott Counsel, P.C. can help with estate tax planning. Our legal team will listen to your goals and develop a road map for maximizing the value of your estate. Please contact us today to speak with a Princeton estate tax planning lawyer today.

Will Your Loved Ones Owe Taxes?

The general answer is no—unless your estate is large or you leave estate assets to non-relatives. Let’s look at some of the important taxes your loved ones might end up paying:

• Inheritance taxes. New Jersey inheritance tax will apply if you leave assets to someone other than a close relative like your spouse, parents, children, or grandchildren. Have a romantic partner you never married? He or she could owe substantial inheritance tax.
• Federal estate tax. The federal estate tax rate ranges from 18-40%. Fortunately, the federal government provides a generous exemption of $12.06 million per individual and $24.12 million for married couples. However, the amount will be lower by 2025 when the most recent tax cuts expire.
• Capital gains tax. This tax applies to the amount an asset has appreciated between the date you bought it and the date you sell it. When assets appreciate substantially—such as cryptocurrency or some real estate—the tax bill could be huge.

Although the federal estate tax will only hit the largest estates, many heirs could end up paying a sizable tax bill after inheriting. It all depends on what assets you leave them and how.

Why Minimizing Taxes is Important

Some people never imagine that their loved ones will run into difficulty if they owe taxes after inheriting from them. But we see some common problems crop up again and again.

For example, most of your assets could be illiquid. If you only leave illiquid assets like real estate to your loved ones, they could struggle to pay a tax bill. They would need to sell a home or other piece of property, which means they will lose control. You might love for your child to have your family home. But if she needs to pay estate taxes and there’s no cash, you are essentially forcing a sale.

The same is true if you leave a small business. The only assets to sell could end up compromising the ability of the business to run. Some heirs end up in tax arrears because they can’t find a convenient way to pay the bill.

Reducing taxes is also important to create intergenerational wealth. You might harbor dreams of providing not only for your children but your grandchildren. Reducing a tax bill on a large estate is a good way to accomplish that.

Our Princeton Estate Tax Planning Lawyer Can Help

There are many ways to reduce the size of an estate or shield your loved ones from needing to pay taxes. An attorney can help you identify the best ways to save and then draft any legal documents you need. Estate tax planning is not a Do-It-Yourself endeavor, since you could make a mistake which costs your estate dearly.

For example, we might use any of the following:

• Purchase a life insurance policy. Beneficiaries receive benefits tax free. Your loved ones can also gain access to life insurance proceeds faster than probated assets.
• Set up a college savings account. Many parents and grandparents use 529 college savings plans to make tax-free contributions which are invested, much like a retirement account, for a child or grandchild. Any growth is tax free, as are qualified distributions to pay for educational expenses.
• Leave assets in a trust. Trusts are common ways of owning property which shield assets from certain taxes.
• Make charitable gifts. Charitable giving is a convenient way to reduce the size of an estate since gifts to charities are not subject to either estate or gift tax.
• Give lifetime gifts. By making gifts while living, our clients can accomplish several goals. One is to give children or other loved ones a leg up early in life. The other is to reduce the size of the estate at death. We can advise on whether you can use the gift tax exemption when making a gift.

There are more tax savings tools available which we will gladly discuss in a confidential meeting.

Estate Tax Planning Through Life

Tax planning is not a one-time event—set it and forget it. Instead, tax planning needs shift continually through life.

For example, many people acquire wealth as they age and work. At age 30, a person might only own their home (with a mortgage) and have a small savings account or meager retirement savings. By age 50, however, their home could be mortgage-free and savings could be well over six figures. By the time you die, your estate could be subject to federal estate tax and assorted other taxes. You will want to update an estate plan and consider how the estate will be impacted by taxes.

Tax law is also changing, as are most of our client’s goals. For example, you might not have even included grandchildren in an estate plan you created in your 30s. By the time they are born, your goals might have changed to include the provision of lifetime gifts or college savings plans.

We recommend that people reconsider their estate taxing plans whenever they update an estate plan. This can include after getting married or divorced, or whenever children or grandchildren are born. Otherwise, it is sensible to meet once a decade or so to review changes in tax law.

Save By Calling our Princeton Estate Tax Planning Attorney

Scott Counsel has helped countless clients protect their assets from the tax man over the years. If you would like to learn more, or if you have specific questions you need answered, give us a call at (856) 281-3131. We provide consultations in a private and comfortable environment.