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.
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.
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.
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.
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.
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.
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.
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.
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.
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.