21 Nov Planning for assets before you die

Q. I’m going to die in two months. Should I start gifting my investment accounts or should I let them be inherited?
— Contemplating

A. Oh, my.

We do hope you’re comfortable and with your loved ones at this time.

We also appreciate that you’re trying to tie up loose ends before your death.

Gifting helps reduce your estate to avoid the current New Jersey estate tax, said Brian Power, a certified financial planner with Gateway Advisory, LLC in Westfield.

The current New Jersey estate tax applies to the estates of New Jersey residents and currently has an exemption of only $675,000, which means anything above $675,000 passing to heirs other than a spouse will be taxed, Power said.

“Since there is no New Jersey gift tax, you can essentially gift all of your investments away to make sure you only have $675,000 or less left in your estate,” he said.

If you live until January 2017, based on recent changes affecting the New Jersey estate tax, you can die with $2 million in your name and avoid the New Jersey estate tax. By January 2018, the New Jersey estate tax will be eliminated entirely, he said.

“The benefit of passing investments to your heirs at death versus gifting them is that your heirs will get a stepped up cost basis based on the price of the investments on your date of death, Power said. This can lessen or avoid any capital gains taxes in the future if your heirs decide to sell the investments after they inherit them.

“If you have investments that have greatly appreciated, you would want to pass these to your heirs at death,” Power said. “If you gift these assets, your heirs will take on your original cost of the investment that you paid.”

Power said you might be able to have the best of both worlds by gifting assets that do not have significant gains to bring your estate down to $675,000 or less, and whichever assets you pass at death should be highly appreciated/low cost basis assets.

We wish the best to you and your family.

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This post was first published in November 2016.