Taxation is a threat to the wealth that you have been able to accumulate throughout your life. There are some significant taxes that are levied on asset transfers and you must be aware of them and take the appropriate action to mitigate your exposure.
First of all there is the federal estate tax that is applicable in all 50 states. The maximum rate of this tax in 2012 is 35% and the exclusion is $5.12 million.
When you read the above you may come away thinking that you have no concerns because your accumulated resources do not exceed $5.12 million. The fact is that you should always keep abreast of the current and future estate tax parameters because they are always subject to change.
Next year this $5.12 million exclusion is going down to just $1 million, and the top rate of the tax goes up to 55%.
And then there are death taxes on the state level that you must contend with if you live in the state of New Jersey. The entirety of your estate is subject to the New Jersey estate tax if its value exceeds $675,000. This tax maxes out at 16%.
But in addition to the estate tax there is also an inheritance tax in the state of New Jersey. We are one of just two states that have both an estate tax and an inheritance tax. (Maryland is the other one.)
This tax is paid by each individual who receives an inheritance. It should however be noted that close relatives are exempt from the tax.
If you get together with a good central New Jersey estate planning lawyer you can receive an in-depth explanation of these taxes and how you may be able to reduce or even eliminate your exposure.