Our Moorestown Estate Tax Lawyers Are Ready to Help!

Planning, drafting and executing a comprehensive estate plan is critical to ensure that your assets are properly organized, accounted for, preserved, and distributed to your intended beneficiaries after death.

When developing an estate plan, however, individuals with substantial assets must be careful to consider the impact of taxes on their beneficiaries. If your estate could be exposed to significant taxes, an experienced New Jersey or Pennsylvania estate lawyer at Posternock Apell, PC can help guide you through the process of creating an estate plan that enables you to minimize or avoid tax liability altogether. Contact our firm today to learn more.

How do federal and state estate inheritance taxes impact your estate plan? We can explain.

In 2019, the federal estate tax exemption increased to $11.4 million. This essentially means that an individual does not have to pay any federal estate taxes — which can be significant at the highest tax rate of 40 percent — if the total value of their estate assets is worth less than the $11.4 million exemption.

At the state level, New Jersey abolished its estate tax in 2018, but continues to apply an inheritance tax, which is levied at rates between 11% – 16% on the net estate assets distributed to certain beneficiaries, such as siblings, nieces, nephews, or unrelated individuals. The inheritance tax does not apply to surviving spouses, children, grandchildren, parents or charities. Pennsylvania, on the other hand, has an inheritance tax that applies to all beneficiaries other than spouses. For example, inheritances passing to children are subject to a 4.5% inheritance tax in Pennsylvania.

High net-worth clients have an obvious need to strategize around the estate tax (as they may have assets worth more than the $11.4 million exemption), but what about those who are less wealthy? The exemption may seem sufficiently large that it is pointless for those who are less wealthy to engage in estate tax planning, but that is not necessarily true.

Regulations surrounding the state estate tax may change. New Jersey, for example, more-than-doubled its estate tax exemption in a single year, then eliminated its state estate tax entirely the following year. There is no guarantee that the State of New Jersey will not bring back a state estate tax in the future.

Effective tax planning must account for this possibility and execute a strategy that is both protective and dynamic (i.e., can be altered as the exemption amount changes over time).

The Posternock Apell, PC team can guide you through minimizing New Jersey and Pennsylvania estate taxes.

Strategies for avoiding or minimizing estate taxes primarily center around the creation of an irrevocable trust. An irrevocable trust is not controlled directly by the trustor (the creator of the trust), though the rules governing the trust’s distributions may be established by the trustor themselves at the time of its creation. Because the trustor does not directly control the assets that have been placed in an irrevocable trust and does not receive the beneficial use and enjoyment of those assets and their income, the value of the trust is not included in the calculation of the taxable estate at the time of death.

So, how does tax planning work in this respect? Suppose that you’d like to ensure that $10 million goes to your only child in the event that you die. Your taxable estate is worth $20 million, and as such, you could be exposed to significant estate taxes unless you can reduce the taxable estate below $11.4 million (or the exemption value set in the year of your death). Rather than delay the distribution until the time of death, you can retitle such assets into an irrevocable trust, relinquish control of each such asset, and name another individual or entity to manage and control the trust. By removing these assets from your direct control, you lose the ability to spend such assets before death (in the event that you need them), but you can ensure that they will go tax-free to your child.

There are a number of different types of irrevocable trusts, each of which has their own unique advantages and limitations: Qualified Personal Residence Trusts, Qualified Domestic Trusts, Charitable Remainder Trusts, Charitable Lead Trusts, Grantor-Retained Annuity Trust, and more.

Call today for a free phone consultation with an experienced New Jersey or Pennsylvania estate tax attorney.

Planning an estate is often perceived as simple or straightforward when in reality it requires truly thorough, tailored legal representation. Estate plans can be powerful tools for handling lifetime assets when used correctly — for example, a strategically-sound estate plan may involve the creation of irrevocable trusts to avoid the imposition of significant estate taxes at the time of death.

It’s important that you work with a team of attorneys who understand the need for developing an “airtight” estate plan. A poorly-written plan cannot only expose your estate assets to excessive tax consequences but can lead to unnecessary delays in the probate court. It may even give rise to an actionable dispute. These issues can cause a financial burden for those beneficiaries who are waiting to receive assets. We can help.

Here at Posternock Apell, PC, our attorneys have decades of combined experience handling a wide range of transactions and disputes for clients in New Jersey and Pennsylvania, including estate planning matters that involve significant taxable assets. We are committed to the provision of client-driven service, and as such, we invest the time and resources necessary to understand a client’s estate assets, goals, limitations, and concerns.