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McCurrie McCurrie
& McCurrie, L.L.C.

680 Kearny Avenue
Kearny, NJ 07032-3010
Phone: (201) 467-4180
Fax: (201) 997-9567
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Can trusts and other vehicles reduce estate taxes?

Individual estates must report $5.43 million or more in assets -- or $10.86 million if a couple is filing -- before federal estate taxes come into play. For most individuals in New Jersey, estates are unlikely to reach federal nonexemption values, but the state's exemption stops at just $675,000. Wives and life insurance plans get a pass, but for all other assets and heirs, taxes could take as much as 10 to 20 percent without careful planning.

One way to reduce the taxes heirs pay is to transfer wealth to them via trusts, which provide some measure of protection against both taxes and creditors. Trusts also let you control how assets are disbursed to heirs by setting disbursement rules and appointing a trustee to see to your wishes. This provides added protection should you pass away with minor heirs or others who would be unable to manage the wealth you leave them.

Structuring a trust outside of the scope of your estate and placing a life insurance policy within that trust is a way to break up the value of your assets to avoid hitting the nonexemption total. The value of the life insurance can be accessed by heirs in accordance with the trust, and life insurance proceeds of this type are usually not taxed.

Toward end of life, individuals who see that their needs are amply cared for sometimes begin gifting wealth to heirs early. You can gift someone $14,000 annually without paying taxes -- double if you are gifting to a couple who will file jointly. Even higher gift amounts could be tax free when the gift is meant for medical expenses or education. By understanding these little loopholes and participating in solid estate planning, you can reduce tax burdens on your heirs.

Source: Main Street, "How to Keep Your Estate Planning a Tax-Free Proposition" Jason Notte, accessed Mar. 20, 2015

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