Will You Be Impacted by the New Jersey Death Transfer Tax?

When it comes to high-dollar decisions about estate planning, many people wrongfully believe they are not included because the federal tax exemption of $5.34 million is so high. While this is true, in New Jersey, you should be aware of the transfer tax because far more people are included under that umbrella.

In New Jersey, an estate larger than $675,000 at the time of your death can trigger the New Jersey Transfer Estate Tax. If you think you’re close, but not sure: cars, cash, bonds, life insurance, retirement accounts, real estate, bonds, stocks, and personal items are all included. A fair number of New Jersey residents hit that threshold with just their retirement plan and real estate. Depending on who will be the Beneficiary, there may be a separate inheritance tax of up to 18%. (See out prior blog post: https://lawesq.net/blog/2014/05/the-n-y-state-of-mind-changes-to-new- york-gift-tax-and-estate-laws/) 

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There are a few things worth bringing up if you’re concerned about this tax. First of all, it is possible to plan around it. Using DING or NING trusts, which involve establishing trusts out of state, can be a great tool for addressing state tax concerns. Gifting and special plans for your retirement accounts can also address concerns for the future.

Setting things up in advance through a trust can also make it easier on your loved ones if you have passed away. There are many cases in which a simple will just won’t suffice. To talk specifics for your assets and plans, call us today 732-521-9455.


What is a Self-Settled Trust? Asset Protection & Tax Savings.

Right now, gift and generation skipping transfer tax exemptions, set at $5.34 million each, have caused a resurgence in interest regarding self-settled trust. As of now, only fifteen states allow for these types of trusts: Alaska, Delaware, Hawaii, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia and Wyoming. Several of these states, including Delaware and Nevada, tend to be popular locations for DING/NING trust establishment when the trust creator lives in a high state income-tax and capital gains tax environment.

What is a Self-Settled Trust?  Asset Protection & Tax Savings.

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Under a self-settled trust, grantors may even be a beneficiary of an irrevocable trust that is established for their own family. As long as no assets are transferred fraudulently, no exception creditors, and no pre-existing arrangement between the trustee and grantor, a trust grantor can establish himself or herself as a beneficiary.

These trusts are most often used for domestic asset protection in four separate ways: a self-settled trust, spendthrift protection, modern discretionary trust protection, and the establishment of a limited liability company to shield and own trust property. In their most common form, self-settled trusts are used as an alternative to off-shore trusts. To learn more about trust creation and management that maximizes protection, email us at info@lawesq.net or contact us via phone at 732-521-9455.

Tax Avoidance Scheme for Wealthy: Move Assets Across State Borders

Not all states are created equal when it comes to income taxes. As part of their estate planning and asset protection schemes, wealthy Americans are taking advantage of this inequality by moving billions of dollars’ worth of assets to newly created trusts in states that do not impose income taxes. A recent article discusses this tax avoidance scheme.

Income Tax
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The scheme is similar to that employed by large corporations that move operations or assets overseas to avoid or reduce taxes. Popular states for tax avoidance include Delaware and Nevada. The legislatures for both states have passed laws in order to make their state more appealing for wealthy Americans considering moving their trusts. While Nevada has no state income tax, Delaware allows out-of-state beneficiaries to avoid income tax liability.

Estate planners shifted their focus to income tax avoidance after Congress significantly narrowed the field of individuals who will be responsible for paying federal estate tax. Currently, federal estate taxes only apply to those who have an estate with a total value of $5.34 million.

However, this practice is not without scrutiny. Officials in the state of New York are particularly concerned, as this practice drains an estimated $150 million per year from the state. Recently, a New York tax commission recommended laws that would limit the use of out-of-state trusts.

To evaluate your options in setting up a trust, please contact us at 732-521-9455.


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