Jersey… Wrong? Exodus of the Millennials

NJ Inheritance Tax

In the past, much has been written about retirees leaving New Jersey in record numbers for multiple reasons — estate tax, inheritance tax, cost of living, population density, weather, and even marijuana legalization. However, now in 2016, it is millennials — that is, individuals between the ages of 18 and 34 — who are leaving the Garden State en masse.

Recently, the New Jersey Business & Industry Association released a report that showed the out-migration of around 2 million N.J. residents between 2004 and 2013 which has cost the state $18 billion in net adjusted gross income. The report goes on to explain that during those eight years in question, the state lost the following potential revenue:

  • $8.4 billion in household spending
  • $11.4 billion in economic output
  • 75,000 jobs
  • $4 billion in total lost labor income.

So, where are young New Jerseyans moving to start families, settle down and retire? Not very far it turns out. In fact, the majority of N.J. residents exiting the state are looking for homes in Pennsylvania and New York. This allows millennials to live comfortably out-of-state while still being able to work and visit friends and family in N.J.

From an estate planning perspective, it makes a lot of sense. Even though Governor Christie called for a repeal of N.J.’s estate tax in a January address, the fact remains that N.J. currently has an estate tax AND an inheritance tax. N.J. also has the lowest estate tax exemption — $675,000. Although P.A. has an inheritance tax, the rate is low (4.5 percent for those who die after 2000) in comparison to N.J.’s 11-16 percent.

In addition, N.Y. is in the process of raising its estate tax exemption limit to match the federal exemption of $5.9 million by 2019.  Unless New Jersey changes its estate and inheritance tax, it seems likely that the exodus will continue, especially when affordable living is just across the border and within an hour of friends and family.

If you are thinking about your estate plan, it’s a good idea to speak to a lawyer. For N.J. and N.Y. residents seeking counsel on wills, trusts and other aspects of estate planning, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com, or call 908-236-6457.

N.J. Estate Tax versus Federal Estate Tax

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If you live in New Jersey and are planning your estate, you may be wondering how the N.J. and federal estate taxes will affect your heirs. Unfortunately, N.J. has both an inheritance tax and an estate tax. Furthermore, the state’s estate tax exemption limit is quite low when compared to the rest of the states in the union.

State exemption limit

The exemption limit in New Jersey as of 2016 is $675,000. If you are the executor of a Will, and the value of the gross estate is more than $675,000, you will have to file a New Jersey estate tax return. However, keep in mind that there are various deductions such as funeral expenses, attorney’s fees, and income tax bills that may reduce the estate value below the exemption limit.

Federal exemption limit

The federal exemption limit as of 2015 is $5.43 million per person, which is up from $5.34 million in 2014. This means that a married couple in 2016 can give away $10.86 million tax free. It also means, that unless the decedent’s gross estate is valued at more than $5.43 million, it won’t have to pay the federal estate tax rate of 40%.

What is meant by “the value of the gross estate”?

Many people make the mistake of assuming the word “estate” refers only to a house. In fact, it encompasses much more. In order to calculate the total value of a decedent’s estate, numerous assets are gathered and assessed, including:

  • New Jersey real estate;
  • Vehicles and other items of personal property;
  • Securities and investment accounts;
  • Funds from retirement account;
  • Business interests such as a sole proprietorship, limited liability company, or small corporation; and
  • Bank accounts and certificates of deposit.

Also keep in mind that any property you leave to your spouse or civil partner is exempt from the NJ estate tax.

Comprehending legal information after losing a loved one can be difficult and frustrating. An experienced attorney can explain estate planning to you in an easily accessible manner so that you and your family can move on with your lives. For more information on estate planning in Union and Hunterdon Counties, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457 today.

What is Happening to New Jersey’s Estate Tax?

There has been a lot of talk lately about recent developments with New Jersey’s estate tax, and I wanted to pass on a quick update for this month’s newsletter.

As you’ve read here before, New Jersey has the worst estate tax in the country. Better said, New Jersey’s estate tax exemption amount, i.e., $675,000.00, is the lowest in the country. That means if your estate (including life insurance) exceeds $675,000.00 then your family members could be on the hook to pay New Jersey estate tax. Not to mention New Jersey has inheritance tax as well.

But change could be on the way. In February, a state Senate committee passed a bill that would gradually eliminate the estate tax.

From an estate tax perspective, the bill calls for:

  1. Raising the $675,000 exemption to $1,000,000 in 2017;
  2. $2.5 million in 2018;
  3. $3.5 million in 2019;
  4. $5 million in 2020; and
  5. Full repeal in 2021.

Sounds fantastic, right? The problem is that legislators believe the only way to recover the roughly $800 million shortfall from an estate tax change is to raise the gas tax. The reason these legislators give is because of the connection between the estate tax which funds the Transportation Trust Fund, which is currently on course to run out of money by our next (June 2016) newsletter.

This leads to the main question New Jersey legislators should be asking: Is the New Jersey Estate Tax causing residents to leave the state and, thus, lose income tax? According to the state’s 2015 debt report, the answer is a resounding “yes!”

Over 2 million people left the Garden State between 2005 and 2014, costing approximately $18 billion in income according to the New Jersey Business and Industry Association. In April, David Tepper (pictured above), one of New Jersey’s most wealthy residents, announced he was moving to Florida, in big part because of its abusive tax laws.

But there are two sides to every issue. Many legislators say that raising the estate tax at the cost of New Jersey gas prices would cause less wealthy residents to finance the inheritance of the middle and upper classes.

As of right now, nothing is official. There have been hints out of Trenton that they are already expecting a smaller budget as a result of some form of estate tax increase, but we do not know anything for sure. Be sure to stay tuned – once something becomes official, we will let you know!

One last note – from time to time from now on I’ll be mentioning presentations that I’ll be giving with experts related to Estate Planning. On June 9, 2016, I’m going to be presenting at the Metuchen YMCA with an insurance expert. To learn more about this event CLICK HERE.

If you have any estate planning questions, please feel free to call us at (908) 236-6457, or email me at alec@bmcestateplanning.com.

Will New Jersey Take a Gas Tax in Exchange for Repeal of the Inheritance Tax?

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New Jersey is one of the last states to still have the loathed inheritance tax. To make matters worse for New Jerseyans, the state has the lowest estate tax exemption limit — $675,000. For years members of various political groups have called for a repeal of the state inheritance and estate tax laws. Will they finally achieve their goal?

A recent plan has been in the works to offer some form of tax cut on the current inheritance and estate tax which is tied to an increase in gas prices. Basically, let’s pay for a tax cut by charging more for gas throughout the state.

Who will the new law affect if it passes?

In the unlikely event that this proposed gas tax-estate tax tie-in plan comes to fruition, it will affect everyone in the state. The current estate tax exemption is $675,000, ridiculously low and still a substantial amount of money for the average American. A tax cut would raise this limit considerably, helping the wealthiest members of the state while hitting the middle and lower-middle class the hardest.

As for the inheritance tax, no tax is imposed on class A beneficiaries (father, mother, grandparent, descendant, spouse, civil union partner, or domestic partner). For beneficiaries who are subjected to the inheritance tax, the current rate is between 11-16%. So basically, if your uncle leaves you an estate, it is subject to an 11-16% tax from the start. If the total value of the estate exceeds $675,000, you also have to pay an estate tax. If the new law passes, the inheritance and estate tax laws will take a cut but the price per gallon for gas will go up as a result.

Considering that fewer than five percent of estates are affected by the estate tax, the plan may not be worth it. Many economists say the numbers don’t add up, especially since the inheritance tax and estate tax combined equal New Jersey’s third largest source of tax revenue.

If you have questions about the N.J. estate tax, or need help probating a will, consult with an experienced attorney as soon as possible. For legal assistance with estate planning matters in Hunterdon and Union Counties, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457.

Your Duties as the Executor of a Will in New Jersey

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Over the course of your life, you may be asked to serve as the executor of someone’s Will. The job has many important responsibilities and should not be taken lightly. Your primary duties as executor are to gather and manage all property and assets of the estate and ensure they are distributed according to the Will.  If you are named executor of a Will in New Jersey, seek guidance from an experienced estate planning attorney.

In the meantime, review the following list containing the primary obligations of a New Jersey will executor:

  1. Probate — First, you must probate the will, that is, have it “validated” by the court. Once this has been accomplished, you are granted the authority to perform your duties under the provisions of the will.
  2. Manage the decedent’s estate — You must gather and assess the value of all estate property and assets. Additionally, you should hire a professional appraisal company to ensure the estate is assessed at market value. In order to properly manage estate assets, you may be required to operate or even liquidate an estate-owned business.
  3. Handle taxes — Remember, as executor, you are legally responsible for filing required income and estate-tax returns, and for paying any necessary inheritance taxes.
  4. Settle debts — Any outstanding debts owed by the estate should be paid as soon as possible. In many cases, litigation may be required to determine if a claim is valid.
  5. Distribute assets— Once you have paid off all debts and expenses, you can distribute the remaining estate in accordance with the last wishes of the testator.

Will Guardian

In addition to eventually performing the obligations above, you may become the guardian of a Will if the creator of the Will provides you with a copy for safe-keeping. He or she may even provide you with the location of the original document should a will contest dispute arise.

Being the executor of a will is both an honorable and overwhelming experience. Fortunately, with the assistance of an experienced attorney, you can properly execute your loved one’s Will. If you need assistance probating a Will or have general estate planning requests in Hunterdon or Union Counties of New Jersey, contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457.

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