Salt Lake City Estate Planning

Facts On New Jersey’s Inheritance Tax

New Jersey is one of the few states that still imposes an inheritance tax. In that state, the inheritance tax isn’t based on the size of the estate. It depends on who receives the estate, says NJ.com in its recent post, “Will domestic partner owe inheritance taxes?”

In the Garden State, there are different classes of beneficiaries. Each class is given different treatment for inheritance tax purposes.

First, there’s no inheritance tax imposed on transfers to Class 'A' beneficiaries. This group includes a parent, grandparent, spouse, child or step-child.

Because of the New Jersey Domestic Partnership Act that was enacted in 2003, domestic partners are also now included as Class 'A' beneficiaries who are exempt from inheritance tax (for any partners who die on or after July 10, 2004).

The Domestic Partnership Act also allows same sex couples to register as domestic partners in New Jersey.

The Act also lets opposite sex couples who are at least 62 years of age to register as domestic partners. What is required for this registration is meeting the established legal requirements and having a local registrar issue what is called a “Certificate of Domestic Partnership.”

This inheritance tax exemption works, even if the domestic partnership was entered in another state or DC.

Documentation of the domestic partnership is important to avoid the inheritance tax because common law marriage is not recognized in the state.

Under the laws of New Jersey, it can be an unwelcome surprise to the survivor of an unmarried couple in a long-term relationship, if they didn’t qualify or register as a domestic partner. The bequest that he or she receives from their partner, will then be subject to an inheritance tax at a rate of 15%.

Reference: NJ.com (August 28, 2017) “Will domestic partner owe inheritance taxes?”

If you want  help with your inheritance taxes, give our office a call for a free consultation, 801-438-7120 

 

Estate Planning Ideas for the 56% Who Have Done Nothing So Far

A recent survey found that a majority of Americans haven't decided how their estate should be divided after their passing. Yahoo Finance’s article, “Estate Planning Is Important for People Without Children,” reminds us that complications arise for people who are single without children, unmarried cohabitating couples or even married couples without kids. While the surviving spouse usually inherits all of the married couple’s assets, in the absence of an estate plan, things can and sometimes do go sideways.

There can be unintended beneficiaries, and this is especially true for singles. Complications and unintended consequences make it critical for singles and married couples without kids to plan for the distribution of their assets, as well as how to take care of themselves, if they become incapacitated.

Everyone’s estate plan should have, at the bare minimum, a will and powers of attorney (POA) for financial and health care decisions. Powers of attorney are used in the event that an individual is unable to make decisions for him or herself. Married couples typically default to the spouse. However, if a couple is in a long-term relationship without a legal relationship, (not married), then the powers of attorney are crucial. If you fail to name a person in a POA, the default may be a parent or sibling to whom you’re not physically or emotionally close. As a result, that person will be able to make decisions that may be contrary to what your partner would carry out according to your wishes.

Think hard about who you’d want to be a power of attorney. That person should have strong character and the ability to make tough decisions. After your POAs are created, think about the beneficiaries of your assets. When you do this, speak with your family members about these decisions.

For those couples without children, they may have favorite charities and may want to leave a gift to these organizations. As far as taxes are concerned, making charitable distributions while you’re alive is more efficient. The donor gets both an income tax deduction and a gift tax deduction, based on the amount of the gift.

One popular option is to create a donor-advised fund, which lets you take a current-year tax deduction on the fair market value of any gifts to the fund. The money doesn’t need to be immediately donated, allowing you time to make a decision on which charity to select.

Who you rather leave outright gifts to charity after your death? You can earmark money in IRAs, instead of other assets. A charity does not pay taxes on the retirement funds, but a non-charity beneficiary must.

You could also set up a charitable foundation with instructions on how to distribute the donation over time. An estate planning lawyer can help you do this. This lets your philanthropic objectives continue for years to come.

Reference: Yahoo Finance (February 16, 2017) “Estate Planning Is Important for People Without Children”

IRS Tips On Charitable Contributions

As individuals and businesses rush to make charitable contributions at this busy time of year, the IRS has issued several tips as reminders of tax law provisions that have taken effect in recent years. 

If you’re considering making last-minute charitable contributions before the end of the year, consider these tips from the IRS:

Charitable Contributions for Certain IRA Owners. If you are over age 70-1/2 and own an IRA, remember you can make a direct transfer tax-free of up to $100,000 per year to an eligible charity. Created in 2006, this provision expires at the end of this year.

Clothing and Household Items. Remember to get a qualified appraisal of clothing and household items if you plan to claim a deduction of more than $500. Household items include furniture, furnishings, electronics, appliances and linens.

Monetary Donations. Be sure you have a bank record or a written communication from the nonprofit that shows the name of the charity, the date and the amount of your contribution. If you want to deduct your donation of $250 or more, you must receive acknowledgment from the charity.

Go online to AdvisorOne for more tips and reminders.

Also, we would be happy to help you plan your year-end charitable gifts, or set you up with a long-term charitable giving plan using a private foundation, donor-advised fund, or other charitable giving structure.  Call, e-mail us, or visit our website pages for charitable giving for more information.

Voluntary Philanthropy – Look to Your IRA

[Qualified Charitable Deductions] can be used to satisfy the RMD requirement for the IRA owner. This means that the IRA owner who doesn’t need his or her RMD for income can direct the distribution to the charity of his or her choice.

If you would rather be a “voluntary philanthropist” versus an “involuntary philanthropist,” then you need to take action regarding the Qualified Charitable Deduction (QCD). In short, it’s a very powerful tool for both charity and reducing the tax liabilities associated with IRAs. However, on December 31, 2011, will we see it disappear?

Jim Blankenship at Forbes has recently pointed out that the very popular QCDs are not legally extended beyond 2011. As a result, we ought to take stock regarding whether the option will be around in 2012. As you may know, a QCD allows you to forgo taking your Required Minimum Distribution (RMD) by letting you redirect those funds straight to the IRS certified charity (or charities) of your choice. You can contribute as much as $100,000 per year.

It’s a pretty powerful tool for a “voluntary philanthropist,” if you don’t need the money from your IRA in the first place. Otherwise, taking the distribution just means more “T-A-X-E-S.” Note: Making this charitable beneficiary designation gives you an efficient way of contributing to charity and saving on your income taxes.

If you’ve taken advantage of the QCD this year, then you still have to ensure proper tax filing compliance.

Unfortunately, the only thing that can reinstate the Qualified Charitable Deduction is an act of Congress.

Reference: Forbes (November 7, 2011) “Last Chance for Making Charitable Contributions From Your IRA?”