You have to do some careful inventorying when you are making preparations for the future because of the realities of the estate tax. On the federal level the estate tax exclusion is $5.12 million right now, but it is going down to just $1 million next year.
On the New Jersey state level the estate tax exemption is only $675,000, so you have to be ready to take action if your assets are in taxable territory.
One question that people sometimes have is whether or not their life insurance policies are part of their estate for tax purposes. The answer to this question is yes, but the good news is that there are ways to carry life insurance in a tax efficient manner.
It is possible to have a family member own the insurance policy, perhaps your spouse. But, this individual would then own the assets and they would become part of his or her estate and the tax burden would ultimately be delayed rather than eliminated.
Perhaps the best solution is to have a life insurance trust purchase the life insurance. In this manner you do not own the insurance so it is not a part of your estate, and the beneficiary does not technically own the assets either.
Life insurance is an important part of many estate plans but there are tax implications to consider. To explore all of the details and have your questions answered, simply make an appointment to speak with a licensed and experienced Central New Jersey estate planning lawyer.