One of the most important elements of estate planning is ensuring that upon your passing, your beneficiaries in Morristown are not left having to deal with a large number of liabilities facing your estate. Thus, you may plan to settle your outstanding debts and even structure your estate so as to minimize the financial impact of the probate process.
Yet like many of our past clients here at Torzewski & McInerney, LLC, you might assume that there is nothing you can do to avoid the potential of estate taxes. Yet that may not be the case.
Understanding the tax estate threshold
As previous posts on the blog detailed, New Jersey does not impose a local estate tax. This means that the only potential tax liability your estate may face comes from the federal government. Yet the federal estate tax exemption may allow your estate to escape a tax liability altogether. The estate tax threshold adjust every year. Per the Internal Revenue Service, the threshold for 2020 is $11.58 million.
Taking advantage of portability
You may even be able to protect more assets than the estate tax exemption allows individuals through the process of estate tax portability. This permits you to share your exemption amount with your spouse. Yet doing this must be carefully planned for, as not preparing could potentially leave your spouse facing estate taxes when they otherwise might not.
If you leave your assets to your spouse upon your death, the unlimited marital deduction allows those funds to pass on tax-free. This preserves your entire exemption for your spouse to them claim. They can do so by filing an estate tax return within nine months of your death electing portability.
You can find more information on tax planning strategies such as this throughout our site.