By now we should be aware of the recent change in the law which raised the gasoline tax 23 cents. Well, along with that gas tax increase a “deal” was made in Trenton that resulted in:
(A) A reduction in the state Sales Tax from 7% down to 6.875 on January 1, 2017 and t hereafter a further reduction to 6.625% on
January 1, 2018
(B) A change/reduction in the New Jersey Estate Tax exemption amount which means that every estate in New Jersey under 2 million dollars,
on January 1, 2017 will incur no estate taxation. Thereafter, on January 1, 2018
there will be no estate taxation in New Jersey no matter what the size of the estate.
(C) A change in the “Earned Income Tax Credit form 30% to 35% and Veterans will receive an increase of $3000.00 in their personal exemption
(D) An increase in the income tax exclusion regarding pensions and retirement is to be phased in over four years to $100,000.00.
This all sounds great, but remember the saying: If something sounds too good to be true, it probably isn’t true….”…so here is a closer look at the impact of the new law.
The gas tax increase will generate $1.2 BILLION per year to the Transportation Trust Fund. The remaining tax reductions, (B, C, D as noted above) will reduce revenue to the state of New Jersey up to 1 BILLION per year.
How does the State balance the budget with a revenue loss approaching 1 BILLION per year?? Something has to change to replace the lost revenue.
In reality, estate planning is not “going away.” During this transition period, the State still has the Inheritance Tax.
Remember that Probate Expense is not removed or even discussed in the new law. Other issues also remain to be addressed with your Estate Planner. Young or disabled beneficiaries, Guardians and/or Trustees for minors, subsequent marriages, death tax liens, creditors, vacation homes, personal effects, to name a few, all represent concerns that continue to require a comprehensive estate plan that permits your assets to pass to your intended beneficiaries and not the State of New Jersey if an estate plan is not in effect.
Estate planning is not only a discussion of taxation avoidance, but is crucial to accomplish the necessary steps to protect your loved ones and pass whatever you have earned unto those that will survive us.
My recommendation to clients since the new law was implemented has been: We have a great deal to do in this estate planning arena even without discussing taxation.