Steven W. Tarta, Esq.
45 North Broad Street
Ridgewood, NJ 07450
Tel: 201-444-8448
Voice Mail: 201-444-6950
Fax: 201-612-0827
E-Mail: TartaLaw@att.net
Internet: http://www.TartaLaw.com
Often people do not believe they are worth enough to be subject to Federal Estate Taxation. If your estate is larger than $1,000,000, the estate tax begins at 41 percent! It is common to hear a person undervalue real estate, especially in this portion of the country (Bergen and Passaic counties in New Jersey rank as the 6th most expensive residential areas in the United States, with 20 percent appreciation per year). Also, life insurance, IRA's and the value of your business must be considered.
Not Balancing Ownership of Assets
Too often people own most of their assets jointly. At the death of the first spouse, all assets pass directly to their surviving spouse. If all assets are held jointly, one Unified Credit may be lost-that's a $345,00 loss and mistake!
Choosing The Wrong Executor or Trustee
Frequently a person wants to choose a friend or family member. The jobs of Executor and Trustee are very critical; numerous fiduciary obligations must be performed, and performed correctly. Is your chosen fiduciary competent and willing? More importantly, the person appointed to a fiduciary position should be asked??
Wrong Beneficiary and Distribution Elections of Retirement Plans
A retirement plan is subject to estate taxation (when the unified credit is met), then the remaining funds are subject to Income Taxation; this could represent a 50 percent Estate Tax exposure in addition to a 38.6 percent Income Tax. Please review the website "Article" published May 14, 2001 addressing IRA Income Distribution Rules.
Owning Life Insurance
Many times people purchase life insurance "dedicated" to pay estate taxation. While this may represent a wise method of "paying the bill", too often people fail to realize that the same life insurance will be subject to estate taxation. If the life insurance proceeds become an asset of the estate, the same life insurance intended to "pay the bill" just increased the bill. Also, having the life insurance policy owned by the other spouse, results in keeping the policy proceeds out of one estate while assuring that the proceeds ARE INCLUDED in the surviving spouse 's estate and therefore subject to Estate Taxation. The best method of assuring that the proceeds are not included in the estate of either spouse is the use of a "third party"-a Life Insurance Trust. An Irrevocable Life Insurance Trust can provide for the "other spouse", pay estate tax bills, and provide for beneficiaries without any Estate Taxation.
Lack of Estate Planning Documentation
Not addressing the subject of Death or Disability, or perhaps procrastination, results in not having the necessary documentation, this is exactly what the IRS wants, 70 percent of the people in this country die without a will!! Too often the estate planner prepares the Trust but it is never funded. The estate plan should include, but not necessarily be limited to, the following documentation: Will, Trusts, Durable Power of Attorney, Health Care Proxy. As an estate becomes more complex, or if the desire is to aggressively remove assets from Federal Estate Taxation exposure, additional documentation may be required, possibly the use of a Qualified Personal Residence Trust (see newsletters addressing this subject under the "Article" button) would be appropriate.
Lack of Liquidity
Whether federal or not, every estate will have some expenses to honor. Providing liquidity for the estate can be accomplished in many ways; a frequently used method of generating liquidity is the life insurance policy, sometimes the "second to die" policy is appropriate. Unfortunately, the estate plan that does not address this issue results in liquidation "sale" of perhaps the wrong assets within the nine month "window" to settle the estate and file the Estate Tax Return.
Loss of Tax Credits and Gifting
Too many people do not realize that an UNLIMITED amount of gifts can be made every year up to $11,000 per recipient. This gifting ability is in addition to the utilization of the "unified credit" or "exemption amount" that permits the transfer of $1,000,000 without estate tax or gift tax consequence during the calendar years 2002 and 2003. The "exemption amount" or "unified credit" can be used either during life or at death. Remember however that taxable gifts made within three years of death will be "returned" to your estate and taxed accordingly.
Need for a Master Plan, and Keeping it Current
Stale documents are dangerous! Unfortunately, stale documents cost too much in tax dollars. It is wise to have your estate plan reviewed every two years, as well as every time the estate tax laws change- REMEMBER OUR PRESENT LAW CHANGED JANUARY 1st OF THIS YEAR!! Also, it is wise to review your estate plan as changes occur in your health as well as family life; a change of intention means a possible change of documentation. When "changes" occur which are not addressed in estate planning, the wrong person "inherits" the wrong property, and this can lead to very expensive litigation.
Dated : June 3, 2002 NOTE: The opinions expressed in this article are the author's own and do not necessarily reflect the opinions of this website or Brokerforyou/Promotions Unlimited. Disclaimer: The information provided in this article is general information on the legal issues presented and should not be regarded as a substitute for individual legal advice from an attorney. The above article is presented as a community service with the permission of the author. Disclaimer The information presented in this web site is of a very general nature, provided for general informational purposes only. It should therefore not be relied upon to address individual legal concerns, as each client's situation differs. Because each situation is different and the law is constantly changing, you should consult with a Lawyer well versed in this field. The benefits and risks of taking or not taking any legal action can be assessed only after consultation with a Lawyer. By providing the information in this web site, we do not intend to any make any promises or give any assurances about the outcome of your individual situation, and none should be presumed. Prior to retaining a lawyer, one should check with The State Bar. Any information provided or contact received from this web site does not constitute a client/Lawyer relationship. Disclaimers:
The information provided on this website is not intended to be legal advice or real estate advice, but merely conveys general information related to legal/real estate issues commonly encountered. Your access to, and use of this website, is subject to additional Terms and Conditions. Editors Note - If you are seeking legal assistance, a real estate agent or broker is not the person to advise you! For qualified legal advice it is best to seek the guidance of a local California attorney. As a service to our readers seeking California legal advice, we have listed below a few legal directories that list California lawyers by the area of legal specialization. Plus, each directory provides numerous legal articles for reference. As laws are always changing and every person's individual circumstance differs, one should seek out the best qualified local legal assistance prior to making decisions that could prove to be very costly. Local city codes, state laws, and Federal laws can be quite complex. Proper, current legal advice, directly from an attorney could be considered prudent insurance for any major decisions. Many California attorneys do not charge for an initial consultation. Some California legal advice sources are: San Diego attorneys - This legal directory is one of the most visited in the State. Los Angeles lawyers Orange County attorneys - "Injured people with lawyers receive 3.7 times more than injured people without lawyers" Insurance Research Council National Survey of auto injury claims - Riverside lawyers - San Bernardino attorneys - San Francisco lawyers - Oakland attorneys - Bay Area lawyers - "The United States is a nation of laws: badly written and randomly enforced." Frank Zappa San Jose lawyers - Sacramento attorneys - Fresno lawyers - California attorneys - legal advice directory - San Diego lawyers articles
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