A well-designed legacy plan can help you:
■ Arrange for the guardianship of your minor children
■ Preserve wealth and promote your values throughout generations
■ Protect assets from creditors, divorces and lawsuits
■ Minimize family discord
■ Provide for orderly family business succession
■ Promote a charitable cause
■ Provide for loved ones who have special needs while preserving eligibility for government assistance
■ Avoid probate and probate fees
■ Minimize or eliminate estate taxes at death
Taxes and Transfer Costs
Whether you do bare bones planning by drafting a will or fail to plan altogether, you have an estate that is subject to probate administration. Your estate must be administered through the probate court located in the county of your legal residence at the time of death. The overall cost of probate will vary according to state law and will generally hinge on the size of the estate—the more you own, the more you owe.
In addition, generally the federal government imposes an estate tax on all property you pass to your loved ones upon your passing. Every asset you own at that time will be included in determining the value of your estate and any taxes due. Any amount that is above the applicable estate tax exemption in the year you pass away will be subject to federal estate taxes. In 2015, the estate tax exemption is $5.43 million.
Some states impose their own separate estate tax. For example, in New Jersey, the estate tax exemption is $675,000. It is possible that an estate that is too small to generate federal estate taxes may nonetheless trigger state estate taxes.
Some states impose an inheritance tax in addition to the state estate tax. Inheritance tax is imposed on the right to receive property by inheritance or legal succession. The tax imposed is based on the beneficiary’s relationship to you and the amount of property received from your estate