Category Archives: Tax

Before You Retire: Steps for Planning In Advance

By Joseph L. Goldman, Esq. and Naomi B. Collier, Esq.

The article below appeared in the November issue of Meadowlands USA newsletter.

As the average life expectancy in the United States seems to increase with each passing year, having a secure retirement plan is more important than ever. Retirement planning encompasses much more than simply saving enough money to live on after you stop working—it is an ongoing and dynamic process.

While it is tempting to put it off, the best time to start planning for retirement is well in advance of when you are actually ready to retire.

Consider the following suggestions as you start down the long, winding road that is your retirement:

  1. Get organized. Organizing and understanding your finances is a great starting point. Create a balance sheet that contains your financial information, including asset type and value, and how owned. Consider how the assets will be distributed upon your death. Consolidate your account log-in information and corresponding passwords—and ensure that your advisors and trusted family members/friends can access the information in the event of your incapacity or death.
  1. Build your team. Pick professional advisors that you trust to work with you towards your goals. Make sure your team works together. By gathering a well-rounded team, including an attorney specializing in estate planning, a financial planner, an accountant and an insurance adviser, you will have put in place a system with built-in checks and balances.
  1. Create a budget and savings plan. Carefully monitor your spending patterns and expenses to determine how much you will need to live during your retirement years. This will enable you to work with your advisors to create realistic current and projected budgets, and tailor your savings approach. Review spending and expenses (at least annually) to reflect any significant changes.
  1. Consider retirement goals. Think about your life after retirement. Consider where you might live, your desired retirement lifestyle, any ongoing obligations, as well as expected and unexpected health care expenses. Consider the impact of these factors on your finances in retirement.
  1. Review your estate planning documents. Review your existing estate planning documents to make sure they still make sense. Have the documents reviewed by a trust and estates attorney to ensure that they reflect current law. If you do not have documents in place (including a will, durable power of attorney, and health care proxy/living will) consult with an attorney qualified to assist you with preparing and implementing these documents.
  1. Review your beneficiary forms. Even if you have estate planning documents in place, be mindful that certain assets pass outside of a will. For example, life insurance, IRAs and retirement plans generally pass to the designated beneficiaries. If your beneficiary designation forms are not coordinated with your estate planning goals, your objectives may not be realized. Be aware that failure to designate individual beneficiaries may also have adverse income tax consequences.
  1. Consider estate tax implications on your estate. It is also important to discuss with your attorney whether your estate will be subject to estate tax. While the federal exemption has increased dramatically over the years ($5,450,000 in 2016, indexed for inflation), some states continue to have much lower exemptions ($675,000 in New Jersey). If your estate will be subject to estate and/or inheritance tax, consider how it will be paid and/or whether you can minimize those taxes.
  1. Consider long term care implications on your estate. Consider how you will fund your long term care, if necessary. Are your assets sufficient to self-fund such care? Alternatively, evaluate whether long term care insurance is a viable option or if qualifying for government benefits might be necessary. Consult an attorney versed in elder law to better understand the options available to you.
  1. Talk about it. Most people do not want to think about what will happen when they die or become incapacitated, let alone talk about it! However, having a discussion with the important people in your life when you still can, before you are in a crisis situation, beats the alternative. Ensure that everyone understands your wishes as related to health care decisions, why you made certain provisions in your estate planning documents and how you wish your affairs to be handled if you are unable to handle them yourself.

Not all roads to retirement are alike and events often occur that require adjustments to your plan.  However, if you create a retirement plan in advance, select the right advisors to help you implement and oversee your plan and make adjustments as necessary, you will go a long way to helping yourself enjoy a successful and rewarding retirement.

New Jersey Passes Law Repealing Estate Tax By 2018

By Trusts & Estates Group

On October 14, 2016 Governor Christie signed into law the much discussed gas tax hike bill, ultimately repealing the New Jersey estate tax in its entirety.  Beginning on January 1, 2017, a decedent will not be subject to New Jersey estate tax unless his or her taxable estates are greater than $2,000,000 (a significant increase from the current $675,000 New Jersey estate tax exemption).  For individuals dying on or after January 1, 2018, the New Jersey estate tax is repealed entirely.  A decedent domiciled in New Jersey and dying in 2016, however, will remain subject to New Jersey estate tax if the value of his or her taxable estate exceeds $675,000. MORE

Update on 1031 Exchanges

By Scott R. Lippert, Esq.
slippert@pashmanstein.com

If you are considering any transactions utilizing Section 1031 of the Internal Revenue Code for a tax-deferred exchange, you would be well-advised to close these transactions before December 31, 2014.  The Federal Budget issued for 2015 by the U.S. Treasury Department contains a proposal to limit the amount of deferred capital gains under Section 1031 to $1,000,000, indexed for inflation, effective January 1, 2015.  While this proposal has not yet become law, momentum appears to be gathering in the direction of this or some other constraint on the use of 1031 exchanges.

1031 exchanges have been used by investors for decades.  They can make otherwise marginal transactions much more attractive by deferring the capital gain that would otherwise have been incurred on the sale of the property.  In general, a Seller has up to 45 days from a sale of property within which to identify as many as three properties as potential exchange properties.  The closing or closings with respect to the acquisition of the exchange properties must occur within 180 days of the sale of the property.  Typically, the funds from the sale are held by a disinterested party, called a “qualified intermediary” and are then used to acquire the exchange properties.

This Blog will keep you informed as to the progress of this potential change in the law.