Recently I completed the estate administration for Lillian. Lillian and her late husband Charles attended one of my Estate Planning and Elder Law seminars years ago. They set up an appointment to meet with me shortly thereafter.    When we first met, Lillian & Charles had assets in excess of $1,350,000.00 and the assets were held in more than 15 accounts. My first recommendation was to consolidate all assets into a manageable number of accounts, five being the most.   My second concern was that their existing Wills were reciprocal “I love you Wills”. In over 20 plus years of practicing Estate Planning and Elder Law I have seen too many clients come to me with “I love you Wills” prepared by other attorneys. This means that since I love you, I leave all my assets to you. These “I love you Wills” in essence say that upon the death of the first spouse, all marital assets pass to the surviving spouse.

The problem with this simplistic approach is that it would have cost the family $54,800.00 in NJ estate taxes. No tax would exist upon the death of the first spouse because of the unlimited marital deduction. This means that spouse can pass money freely to each other without triggering the tax.

Both the reciprocal “I love you Wills” fail to take advantage of both spouses “unified credit”. The “unified credit” allows each spouse to protect up to $675,000.00 free of NJ estate tax. But if the existing wills were kept in place and the surviving spouse received all of the assets, the first spouse’s credit would be forfeited. Thus an estate worth $1,350,000.00 would pay $54,800.00 in estate taxes.

Fortunately, the couple attended my seminar and implemented the estate plan I outlined. Upon the death of the first spouse, the surviving spouse may place into a trust an amount equal to $675,000.00. The funds in the trust are available to the surviving spouse, but is not included in his/her estate. When the surviving spouse later passes away all the money from this trust plus all money in his/her name up to $675,000.00 pass to the children, free of NJ estate tax. This is how I saved the family $54,800.00 from the NJ estate tax.

The legal and tax strategy described above are just a sample of ways to reduce the tax bite of NJ estate taxes. Other techniques can be implemented to preserve your estate, so that more money passes to your family members, and not the federal or state governments. To learn more, please attend one of my conveniently located seminars.

 

Benjamin D. Eckman, Esq. concentrates his practice on Elder Law & Estate Planning. Elder law is intended to broadly assist “extended living”. An elder law practitioner provides the legal information necessary for persons whose lives will extend or have already extended beyond the time when all children are usually out of the house and when regular employment ceases. After the elder law attorney and client complete their work, legal documents have been drafted, tax considerations have been analyzed, and a plan to protect the elder’s estate has been implemented.

Benjamin D. Eckman’s practice focuses on Estate Planning & Elder Law – legal issues facing senior citizens. Benjamin D. Eckman received his Bachelor’s Degree in Business/Accounting from Touro College and his law degree from Seton Hall University School of Law. He is a member of the New York State Bar Association, the New Jersey State Bar Association, the National Academy of Elder Law Attorneys, the Elder Law Section and Real Property, Probate and Trust Section of the New Jersey State Bar Association, the Union County Bar Association, Passaic County Bar Association and the Bergen County Bar Association. He can be reached at (973) 709-0909, (908) 206-1000 or (201) 263-9161.