Estate Planning Success® for New Jersey Residents:
Detailed Contents
Part I: Estate Planning Fundamentals
Chapter 1: The Estate Planning Process
Introduction
An Estate Plan Is a Responsibility and an Opportunity
Your Estate Planning Team
What an Experienced Estate Planning Team Brings to the Table
Finding an Estate Planning Attorney
Experience
Education
Professional Associations
The First Meeting With Your Attorney
Initial Consultation Costs
The Estate Planning Questionnaire
What Are Reasonable Fees for an Estate Planning Attorney?
An Overview of the Estate Planning Process
Phase One: Gather the Required Information
Phase Two: Estimate Taxes and Expenses Due
Under Your Existing Estate Plan
Phase Three: Design a New Estate Plan
Phase Four: Implement the Plan
Phase Five: Make a Second Calculation of Taxes and Expenses
Phase Six: Monitor Your Estate Plan
Summary
Chapter 2: Estate Planning Fundamentals in New Jersey
Introduction
What Is Estate Planning?
The Estate Planning Revolution
Lack of Coordination of Beneficiaries
Determining Who Must Pay the Estate Taxes
What Happens to Your Assets Depends on “How” You Own Them
Assets in Your Sole Name (probate assets)
Assets Owned Jointly With Others (nonprobate assets)
Assets Given to Others by Beneficiary Designation or Agreements (nonprobate assets)
Why Comprehensive Estate Planning Is Important
The Deed to Your Home or Other Property
Life Insurance
IRAs
Annuities
Payable on Death Accounts
Your Will
Postmortem Estate Planning
Surviving Spouse's Right to Elect Against the Estate
Disclaimers
What Are the Benefits of Disclaiming?
How Are Disclaimers Invoked?
Disclaimer of Jointly Owned Assets
Summary
Part II: Who Will Manage Your Affairs if You Become Incapacitated?
Chapter 3: Planning for Incapacity
Introduction
Who Will Manage Your Assets if You Become Incapacitated?
Management by Your Court-Appointed Guardian
Power of Attorney and Management by Your Named Agent
Management by the Successor Trustee Named in Your Living Trust
Who Will Make Your Healthcare Decisions if You Become Incapacitated?
Advance Medical Directive
Why You Should Sign an Advance Medical Directive
Who Will Pay for Your Care if You Cannot Take Care of Yourself?
Paying for Long-Term Care at Home or in a Long-Term Care Facility
Medicaid Planning for Nursing Home Costs
Medicaid
Who Can Qualify for Medicaid?
The Transfer of Assets Rule
Medicaid Estate Recovery Program in New Jersey
The Use of Trusts in Medicaid Planning
How to Apply for Medicaid
Long-Term Care Insurance
Who Should Consider Long-Term Care Insurance?
The Purpose of Long-Term Care Insurance
What to Look for in Long-Term Care Coverage
The Basic Elements of Long-Term Care Insurance Contracts
Trusts for Family Members With Disabilities
What Are Special Needs Trusts and Supplemental Needs Trusts?
The Supplemental Needs Trust
How Supplemental Needs Trusts Are Established
Who Should Be Trustee?
How Supplemental Needs Trusts Operate
Summary
Part III: Who Will Receive Assets Upon Your Death?
Chapter 4: Using Wills and Trusts to Plan Your Estate
Introduction
The Will
What Makes It Legal?
Intent
Capacity
Signature
Military Wills
The Eight Primary Estate Planning Challenges Solved by Wills
Control Who Receives Your Assets After Death
Name Your Own Personal Representative
Name the Guardian for Your Children
Control When Your Children, Grandchildren or Other Heirs
Will Receive Their Inheritance
Protect Your Heirs' Inheritance From Others
Turn Tax Dollars Into Family Dollars
Give Gifts to Special People and Charities
Protect Government Benefits of Family Members With Disabilities
The Disadvantages of Wills
Trusts
Revocable Living Trusts
Irrevocable Living Trusts
Testamentary Trusts
Summary
Chapter 5: Living Trusts in New Jersey
Introduction
What Is a Revocable Living Trust?
The Eight Primary Estate Planning Challenges Solved by Living Trusts
A Living Trust-Centered Estate Plan Creates a Master Plan to Control the Distribution of All Your Assets in the
Event of Your Death
A Living Trust Avoids Court Control of Your Assets in Case of Incapacity
A Living Trust Saves Time and Money When Settling Your Estate
A Living Trust Provides Lifetime Management of a Grantor's Assets
A Living Trust Provides Continuity of Asset Management
A Living Trust Can Control the Distribution of Benefits
A Living Trust Reduces the Risk of Litigation
A Living Trust Provides More Privacy Than Probate
The Parties to a Revocable Living Trust
Grantor
Trustee
Successor Trustee
Beneficiary
How to Choose a Trustee
Powers of a Trustee
Who Can Be Your Trustee?
Successor Trustees
Nonresident Trustees
The Registration Process (Funding Your Living Trust)
How to Reregister Assets Into the Name of Your Living
Trust: A Step-by-Step Guide
Real Estate
Bank Accounts
Bank CDs
Stock, Bonds and Mutual Funds
Life Insurance
IRAs and Qualified Retirement Plans
The Operation of the Revocable Living Trust
While You Are Healthy
If You Become Incapacitated
In the Event of Your Death
Revoking Your Living Trust
Tax Treatment of Revocable Living Trusts
Disadvantages of Living Trusts
A Living Trust Is More Expensive Than a Will to Establish
Living Trusts Are More Complex
A Focus on Probate Avoidance Ignores Other Issues
A Loss of Statutory Deadline for Creditors' Claims
Types of Living Trusts and Related Estate Planning Documents
Joint Trusts
Credit Shelter Trusts
Documents That Should Accompany Living Trusts
The Pour-Over Will
Durable Power of Attorney
Advance Medical Directive
Summary
Chapter 6: Estate Planning for Retirement Plans and IRAs
Introduction
Review Your Qualified Retirement Plan
Qualified Retirement Plans
Traditional Individual Retirement Accounts (IRAs)
Roth IRAs
Taxes Affecting Qualified Retirement Plans and IRAs
10% Penalty Tax on Plan Distributions Taken Too Soon
50% Penalty Tax on Plan Distributions Not Taken Soon Enough
Income Tax (Income in Respect of a Decedent)
Federal Estate Tax
Estate Planning for Retirement Plan Distributions During Lifetime
Minimum Distribution Rules
Designated Beneficiaries
Spouse as Designated Beneficiary
Estate Planning for Retirement Plan Distributions After Death
If Participant Dies Before Required Beginning Date
If Participant Dies After Required Beginning Date
Estate Planning Considerations When Naming Retirement Plan Beneficiaries
Naming a Trust as Beneficiary
Q-TIP Trust as Beneficiary
Credit Shelter Trust as Beneficiary
Revocable Living Trust as Beneficiary
Charitable Remainder Trusts
Charity as Beneficiary
Summary
Part IV: How Much Will Your Family Need to Pay in Taxes in the Event of Your Death?
Chapter 7: Understanding New Jersey's Inheritance Tax
Introduction
Overview of the Tax
Who Must Pay the Tax
What Are the Tax Rates?
Transfers That Are Taxable for the Inheritance Tax
General Rule
The Three-Year Look Back Rule
Valuation
How to Calculate the Tax
Returns & Payment of Tax
New Jersey Transfer Inheritance Tax Planning Strategies
Trusts for the Sole Use of Surviving Spouses
Lifetime Gifts Reduce the New Jersey Transfer Inheritance Tax
Summary
Chapter 8: Understanding New Jersey's Estate Tax
Introduction
Overview of the Tax
New Jersey Estate Tax Rates
What Property Is Taxable?
How Are the Taxes Calculated?
Returns and Payments of New Jersey Estate Tax
Valuation
Limitations on Entry Into Decedent's Safe Deposit Box
Summary
Chapter 9: The Federal Estate and Gift Taxes Explained
Introduction
Overview of the Federal Estate Tax
Who Must Pay the Tax?
What Are the Tax Rates?
Assets Included in Your Gross Estate at Death
Valuing the Gross Estate
Special Use Valuation of Real Estate Used in a Farm or Business
Estate Tax Deductions and Credits
Liquidity Planning
Sell Estate Assets
Borrow the Money From the Bank or Beneficiaries
Borrow the Money From the IRS - Section 6166 Deferral
Purchase Life Insurance
Overview of the Gift Tax
Who Must Pay the Tax?
How the Gift Tax Interacts With the Estate Tax
Payment of the Gift Tax
Income Tax Problems Related to the Gift Tax
Appreciation in Value
Changes in the Step-Up Rules
The Generation-Skipping Transfer Tax
Summary
Chapter 10: How To Reduce the Federal Estate Tax
Introduction
Strategy Number One: Maximize the Unlimited Marital Deduction
How to Qualify for the Unlimited Marital Deduction
Forms of Transfer That Qualify for the Marital Deduction
Should the Transfer to Your Surviving Spouse Be Outright or in Trust?
Strategy Number Two: A Credit Shelter Trust Saves the Lifetime Exclusion Amount of the First Spouse to Die
Benefits of the Credit Shelter Trust
How Credit Shelter Trusts Are Established
Choosing the Trustee of the Credit Shelter Trust
How the Credit Shelter Trust Operates
Registering Assets to Fund the Credit Shelter Trust
Calculating the Value of Assets Needed to Fund the Credit Shelter Trust
Strategy Number Three: Make Lifetime Gifts to Family Members
How to Reduce Estate Assets Using Systematic Lifetime Giving
Gifting and the Capital Gains Tax
Gifts to Minors
Trusts for Minors
Strategy Number Four: Discounting the Remaining Asset Value in Your Estate
What is a Family Limited Partnership?
The Benefits of a Family Limited Partnership
How Family Limited Partnerships Are Established
Who Should Consider Using a Family Limited Partnership?
Strategy Number Five: Prepay the Estate Tax With Discounted Life Insurance Dollars
The Role of Life Insurance in Estate Planning
What Is an Irrevocable Life Insurance Trust?
Benefits of an Irrevocable Life Insurance Trust
How Life Insurance Trusts Are Established
Operation of the Irrevocable Life Insurance Trust
What Happens When the Grantor Dies?
“Can't I Just Have My Children Own the Policy?”
Trust Protector Powers
Disadvantages of Irrevocable Life Insurance Trusts
Who Should Consider Using an Irrevocable Life Insurance Trust?
Summary
Part V: What Will You Leave Behind of Lasting Significance?
Chapter 11: Charitable Estate Planning
Introduction
What Is Charitable Estate Planning?
What Is a Charitable Gift?
What Is a Qualified Charity?
Tax Benefits and Limitations of Charitable Gifts
The Rules of Valuation
Popular Giving Tools
Direct Gifts to Charities
Charitable Bequests
Bargain Sale
The Gift of an Undivided Portion of a Donor's Interest in Assets
Gifts That Give Back
Charitable Gift Annuities
Charitable Remainder Trust
Benefits of Charitable Remainder Trusts
How Charitable Remainder Trusts Are Established
Choosing the Trustee
Choosing Trust Assets
Fixed Payout (Charitable Remainder Annuity Trust)
Variable Payout (Charitable Remainder Unitrust, 3 types)
Tax Treatment of Charitable Trusts
Who Should Consider Using Charitable Remainder Trusts?
Replacing Charitable Trust Assets With a Wealth Replacement Trust
Charitable Lead Trusts
Pooled Income Funds
Remainder Interest in Home or Farm
Conservation Easements
Foundations
Private Foundations
Community Foundations
Charitable Estate Planning With IRAs and Qualified Retirement Plans
Summary
ABOUT THE AUTHORS
APPENDICES
APPENDIX I: THE CONFIDENTIAL ESTATE PLANNING QUESTIONNAIRE
APPENDIX II: SAMPLE NEW JERSEY ADVANCE MEDICAL DIRECTIVE
APPENDIX III: SAMPLE NEW JERSEY GENERAL POWER OF ATTORNEY
APPENDIX IV: CREDIT SHELTER TRUST ILLUSTRATIONS
APPENDIX V: SAMPLE CRUMMEY LETTER
APPENDEX VI: THE PROFESSIONAL DESIGNATIONS OF ESTATE PLANNING ADVISORS
GLOSSARY
INDEX
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