Kansas and Missouri Estate Planning

How Will Changes in New Jersey Estate and Income Taxes Affect Residents?

Recent tax law revisions may prove beneficial for New Jersey residents.

Change is not always good.

But it can be.

According to a recent Newsworks article titled “New Jersey deploys tax changes for elderly and veterans in 2017,” this recent tax change in New Jersey is beneficial to many of its state residents.

What does the tax law stipulate?

Retirement income excluded from the states income tax has been raised to $40,000.

This is double the previous exclusion.

It will not stop there.

The number is planned to increase to $100,000 by 2020.

Veterans also get a tax break and low-income workers receive a greater tax credit.

What does this mean?

Many retirees will no longer pay state income taxes on IRA distributions or pensions.

What about "state" estate taxes?

They will be exempt up to $2 million.

By 2018, the "Garden State" state estate taxes will be completely exempt.

Sales tax has decreased marginally from 7 percent to 6.875 percent.

Will New Jersey retain more retirees?

Possibly.

The state still has some of the highest income and real estate taxes in the nation.

Time will tell.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Newsworks (January 2, 2017) “New Jersey deploys tax changes for elderly and veterans in 2017”

What Factors Should I Consider When Moving to Another State?

All men may be created equal, but all states are not.

You are planning a move.

Or perhaps, you are merely considering it.

Either way, you will need to do your homework.

According to the recent Kiplinger article titled “5 Financial Matters to Consider When Moving to a New State,” you have more to think about than school districts, doctors or churches.

What should you consider?

Differences in Income Tax.

Before you agree to your new job, find out if your new state has a higher income tax.

If yes, you may want to consider how this will affect your stock options or capital gains in your portfolio.

If the proposed contract does not take into account that you will be receiving less of each paycheck, you may want to renegotiate your salary.

Revisions to Your Estate Plan.

Laws vary between states.

Estate tax and probate laws are not exempt.

You will want your will and powers of attorney to reflect these differences.

Updating your estate plan may be especially important if you own property out of state and desire to minimize the tax impact.

Consideration of Cost of Living.

Recreation, housing, utilities and even groceries can be far more expensive in one geographic location over another.

Take these into consideration when purchasing a home and choosing schools for your children, too

Even if income tax is lower, property or sales tax could more than make up for it.

Investments Influence.

States treat investments differently.

Portions of your capital gains can be exempt from income taxes in certain states.

The bottom line?

Before you move, be sure it is a wise choice financially.

Once you move, hire an experienced estate planning attorney licensed in your new state.

It will make the transition far smoother.

Ask your current estate planning attorney to help you find an "experienced" estate planning attorney in your new state, if your current attorney is not admitted to practice law there.

States are very strict on protecting their citizens from non-admitted attorneys and what is called the "unauthorized practice of law."

If you do not have a current attorney, then here is how I would recommend sorting through the "noise" when selecting an attorney.

First, ask around. Friends, family and other professional advisors are trustworthy sources.

Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").

Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.

How?

Two helpful online resources are just a mouse click away to assist with your due diligence:  Avvo.com and Lawyers.com.

Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.

In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Kiplinger (October 2016) “5 Financial Matters to Consider When Moving to a New State”

Why is My New Financial Planner Wanting a Copy of My Tax Return?

I think that is an excellent indicator that your new financial planner is on the ball.

Not only does your tax return contain a treasure trove of information regarding your financial circumstances, but it can be of great benefit when it comes to your estate planning, too.

In case you missed it, your question was the subject of a recent CNBC report titled “Use your tax return for more than paying taxes.”

Here are some relevant items that may be revealed in your Form 1040 income tax return, according to that report:

Lines 1-5 (Filing status). If you need to check a different box for your filing status, you should review your estate plan. If you get married or divorced, you will need to update your will and trust, along with the beneficiaries for life insurance and retirement plans.

Line 6c (Dependents). An increase in the number of dependents is a good reason to update your estate plan. This might mean a change to your cash flow for college savings and insurance needs.

Line 7 (Wages, salaries, tips, etc.). Take a look at your W-2s. Are you making the most of workplace benefits? For instance, employees can benefit from boosting pre-tax retirement contributions, and those with children may be missing the opportunity to contribute to a pre-tax account for dependent care expenses.

Line 11 (Alimony). This is considered earned income, so consider using some of it to bolster retirement savings by contributing to an IRA.

Line 12 (Business income). If your business has become more profitable, look at whether a sole proprietorship is still the best business structure. There may be significant tax and liability considerations that suit your growing company.

Line 13 (Capital gains). Your capital gains and the details on your Schedule D can say a lot about how you are investing. If the numbers are too high or too low, it could mean you need to reexamine whether the investments and diversification are appropriate for your age and acceptable risk levels. You may have some missed opportunities to offset capital gains with capital losses.

Line 17 (Rental real estate). Are you buying rental property? Your estate planning attorney may have some suggestions regarding the best way to hold ownership to reduce your liability exposure.

Line 28 (Self-employed SEP, SIMPLE and more). Are you a Schedule C or F worker? If yes, then a "zero" on line 28 may be a missed opportunity to increase your retirement savings.

Line 40 (Itemized deductions). A look at these line items may help determine if you need to make any changes to maximize deductions.

Consider bringing your financial planner and your estate planning attorney together over coffee.

Not only should they should know one another anyway, but this will enable them to collaborate on and seamlessly coordinate your financial and estate planning. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: CNBC (September 28, 2016) “Use your tax return for more than paying taxes”