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Flemington NJ Estate Planning Law Blog

Using trusts for adult children

One of the estate planning mistakes that many New Jersey residents make is not using a trust to hold assets for their adult children. Trusts can be particularly helpful if an adult child has unhealthy spending habits.

Assets that are left outright to adult children can be squandered if left in the hands of adults who do not have the financial maturity needed to handle money properly. The adult children may see the wisdom of having a financial advisor help them manage the wealth they receive. However, there's no guarantee that the beneficiaries will make wise choices when choosing someone. To ensure that the wealth will continue to grow and last for years to come, it may be prudent to have the financial assets properly managed through a trust.

Deciding whether or not to avoid probate

Some New Jersey residents who are creating an estate plan might wonder if they should take steps to avoid probate. There are advantages and disadvantages to the probate process, and a person should consider them carefully before deciding how to set up the estate plan.

Probate can be costly and may take up a lot of time. Beneficiaries who are waiting for assets to pass through probate may be left uncertain as to how much they will actually receive and when. Furthermore, the probate process is not private. The worth of a decedent's estate, what that person owed and other details are all open to the public.

Doing estate planning right in 2018

New Jersey residents and others who are thinking about their legacy may want to start creating an estate plan today. At a minimum, an estate plan will contain a will or a trust in addition to a health care and financial power of attorney. The will or trust will give a person greater control over how assets are handled. In the absence of a will, assets may go to surviving family members such as parents or children.

However, if there are no survivors, assets may be claimed by the state. While some may not experience negative consequences of not having a will or trust, most people will have a need for it. The financial power of attorney allows a designated person to take steps to ensure that a person's bills are paid while he or she is mentally incapacitated. Absent this document, the state may determine who oversees a person's finances while incapacitated.

Why it is important to update an estate plan

People in New Jersey who have created an estate plan may want to review that plan. In December, Congress passed a law that changed the amount of the estate plan exemption from $11 million for couples to $22 million. This means that people who have created trusts and used other tools to avoid estate tax may want to review their plans and see if those tools are still necessary. However, there are reasons that everyone should review an estate plan regularly even if the estate is a much smaller one.

Estate planning includes preparing documents that deal with what happens if a person becomes incapacitated. These include health and financial powers of attorney, which appoint people to manage a person's health care and finances. Individuals should review these to make sure they are still satisfied with whom they have chosen for these roles.

The importance of timely estate planning

New Jersey residents can't predict when they may find themselves incapacitated. If they do, how their affairs are carried out depends on how their estate plan was created. If the plan has a power of attorney, whoever was granted that power has the authority to manage the principal's affairs. It is important to point out that it must be signed by the principal while he or she is of sound mind.

Once a person is not of sound mind, family members or other concerned parties may have to pursue legal guardianship. Without legal guardianship or a power of attorney, beneficiaries generally cannot take control of assets that may be left to them. A power of attorney can be created and signed at any time by anyone who is 18 or older. This is true even if a person doesn't anticipate the need for one in the near future.

How proactive estate planning may benefit anyone at any age

A common misconception people have is that estate planning is for wealthy individuals with many assets. Some people in New Jersey also believe that estate planning is meant to be done later in life. While it's true that a tax filing isn't required unless assets and previous taxable gifts exceed $5.6 million, there are many potential benefits associated with being proactive about estate planning at any age.

Without an estate plan in place, court costs and legal fees involved with family disputes could quickly deteriorate assets and present unexpected challenges for surviving family members. The truth is that everyone can benefit from some type of estate planning, which may include deciding upon a will and a health proxy, life insurance, guardianship of children, and division of cash and possessions.

Lessons to be learned about estate planning

Many New Jersey residents are aware of the new tax bill that was passed by Congress and signed by President Trump. Kristi Noem, who is a Republican congresswoman from South Dakota, has campaigned for a repeal of the estate tax based on her family's story.

According to Noem, her father was killed when he was still relatively young in a farming accident. He had amassed 10,000 acres of land but had relatively little cash when he died. Noem was 22 at the time of her father's death and has repeatedly told the story of how she had to move home and work to save the family's farm because of the high estate tax bill that was assessed by the Internal Revenue Service.

Estate planning and caregiving

A New Jersey resident who is creating an estate plan might think primarily of putting together a strategy that will pass assets on to loved ones. However, making a plan that covers potential incapacitation is another important aspect of estate planning. Many seniors end up needing a caregiver at some point, and around one-third of people eventually need long-term care.

There are several legal documents an estate holder may need. For example, a financial power of attorney appoints someone to take care of financial matters if the estate holder is incapacitated. A living will and possibly other documents cover health care matters. A person may also need a will and a trust.

Build for the future with a legacy plan

Legacy planning involves much more than assigning beneficiaries for money and other assets after death. Although legacy planning is often used interchangeably with estate planning, the two are different. Estate planning is something New Jersey residents do when they want to ease tax burdens and allocate assets. Legacy planning is done to continue a life's work after the estate holder has died.

Estate planning starts with assets that a person already owns. An attorney might help a client transfer the assets or put them into trusts to avoid probate and excessive taxes after death. Legacy planning is quite different. It starts with determining what a person wants to be known for and working on a plan to continue that work after they're gone. Although physical assets might be involved, they aren't a necessary element of a legacy plan.

The importance of reviewing estate plans when getting divorced

After people in New Jersey have completed their estate plans, it is important that they review them regularly. It is especially important for people to review and change their estate plans when they decide to get divorced so that they don't accidentally leave their estates to their ex-spouses when they die.

If a person has a large amount of money before he or she gets married, the person may keep it as separate property by placing it in a trust that is only in the person's name. If the person adds his or her spouse as a beneficiary and later decides to divorce, the spouse will receive a portion of the trust if the person dies before the divorce is final.

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Lanza & Lanza LLP
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Flemington, NJ 08822

Phone: 908-905-0183
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