"elder law"

The New Jersey Estate Tax is being phased out beginning with residents dying on or after January 1, 2017. Governor Christie signed a new law calculator-385506__340 [1], the new tax laws reduce the estate tax for resident decedent’s dying in 2017 by increasing the exemption amount to $2,000,000.00, and then eliminating the New Jersey Estate Tax altogether for resident decedents dying on or after January 1, 2018. New Jersey is no longer one of the worst states in which to die, and New Jersey resident seniors may no longer feel the need to establish domicile elsewhere. Those New Jersey decedents dying in 2016 with estates exceeding $675,000 will remain subject to New Jersey estate tax. Further, the federal estate tax will continue to apply to estates greater than the federal exemption amount, currently $5,450,000, which increases annually based on inflation. And, after the recent elections, we need to keep an eye out for new laws enacting changes to the tax code.

However, while the New Jersey Estate Tax is being phased out, the Inheritance Tax will remain. New Jersey is one of only six states which impose an inheritance tax on transfers from a decedent to a beneficiary. Whether an estate is subject to inheritance tax is determined by the relationship between the decedent and the beneficiary. Bequests to “Class A” beneficiaries (i.e. spouses/domestic partners, parents, children) are not subject to inheritance tax. The tax rate on transfers to non Class A beneficiaries depends on the “Class” of the beneficiary and the value of the asset transferred to that beneficiary. Likewise, non-resident decedents who own New Jersey real estate or tangible personal property will continue to be subjected to the New Jersey Inheritance Tax. Additionally, New Jersey Inheritance Tax Waivers will still be required in order to transfer title to real estate, brokerage accounts, securities and bank accounts.

Please call or e-mail the attorneys at McLaughlin & Nardi, LLC to create an estate plan or review and update an existing plan.

It is a fairly common practice for people to open joint bank accounts. Often joint accounts are held by spouses, and the funds do actually belong to both individuals. However, sometimes these accounts are opened for the convenience of allowing a child or to access funds and write checks to pay bills, or as a way to have ownership of the funds pass to the surviving joint account holder upon death. While this is an effective and simple way to give someone else control of your assets of have the funds pass to another upon death, there are problems associated with joint accounts which should be considered before opening a joint account.

1) The joint account holder has unfettered access to the funds in the account. There is no oversight over the way the funds are used. Both joint account holders can utilize the funds for any reason; there is no need for permission – either account holder can withdraw of any portion or all of the money in the account for any purpose.

2) A joint bank account is at risk from legal actions by the creditors of either account holder. If the joint account holder has a judgment entered against her, all the funds in the joint bank account can be attached and used to pay the judgment. For example, a one account holder gets divorced and his spouse claims a right to some of the funds in the account, then the account holder who deposited the funds in the joint account would need to go to court to prove that the money does not belong to the divorcing account holder. Another example is if the other joint account holder is sued, loses and does not pay the resulting judgment.

3) Upon the death of either account holder, the money would indeed pass to the surviving joint account holder. However, the money remains subject to estate and inheritance taxes. If the individual who passes is not the individual who contributed the funds to the account, the account would nonetheless be taxed as part of the deceased account holder’s estate. In other words, the survivor would have to pay inheritance tax even if she deposited the funds in the first place. Depending on the amount of assets in the account, the relationship between the two joint account holders, and the value of the decedent’s total estate, this can result in a significant death tax burden which could have been avoided.
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Articles Tagged with “elder law”

Changes to New Jersey Estate Tax

Joint Bank Accounts in New Jersey