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.
The initial step in planning an estate is to name beneficiaries for insurance and retirement accounts. Individuals may minimize tax liabilities by giving a certain amount of assets to charity while still alive. Assets can also be set aside in college savings plans for grandchildren. Another possibility is to create trusts to protect certain assets from probate and tax costs. There are many options with trusts. An irrevocable trust that cannot be amended, modified or changed often provides additional protections from creditors and litigation, and a home may be kept out of an estate with a qualified personal residence trust.
It’s a good idea for individuals dealing with estate matters to work with an attorney familiar with the process when drafting estate planning documents and exploring options with trusts. An estate lawyer may also be able to suggest ideas and strategies that could minimize tax burdens for surviving family members. An attorney may help maintain and update existing plans, especially if beneficiaries change over time.