Using Gifting Strategies for Single Individuals to Minimize

in New Jersey Probate as Part of Estate Planning

Whether widowed, divorced, or never married, a single person has fewer estate-tax planning options than someone who is married. Techniques involving the unlimited marital deduction typically serve as a cornerstone of federal and NJ transfer-tax planning for a couple. When the unlimited marital deduction is not available, an individual whose gross estate is expected to exceed the exemption amount must look to other tax-minimizing strategies.

Of the planning options available to an individual who no longer has (or never did have) the benefit of the marital deduction, a strategy of making lifetime gifts is perhaps among the most powerful.

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Basic, simplest estate planning strategy

In any gifting strategy use of the gift-tax exclusion of $13,000 per person (in 2009) per year is a must. To qualify for this exclusion, the interest transferred must be a present interest.  The concept of present interest is complex.  Contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com or call him at (888) 800-7442 for further information.

Making lifetime taxable gifts can also be a viable planning option in that such gifts irrevocably remove the assets and any subsequent appreciation from the donor's estate. The applicable exclusion amount for lifetime gifts is currently $1,000,000 under the IRS tax code.

Lifetime charitable gifts also present planning options for a single individual. Such gifts can provide significant income-tax savings in addition to gift- and estate-tax benefits.

Within these broad parameters, there are a number of gifting strategies an estate planner might recommend. As with any planning, a client=s personal situation and planning goals will dictate the most appropriate strategies.  Contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com or call him at (888) 800-7442 for additional information.

Paying for Education and Medical Care

For individuals who want to help fund higher education costs, making contributions to a tax-favored Sec. 529 plan may be an attractive option. Section 529 plans generally are exempt from federal income tax. Plan contributions are not deductible for federal income-tax purposes, but qualifying distributions are not includable in the gross income of either the contributor or the designated beneficiary. A Section 529 plan therefore offers the potential for tax-free investment growth.

The tax code also allows the equivalent of five years' worth of annual exclusion gifts to be made in one year to a Section 529 plan. The gifts will be treated as having been made on a pro rata basis over five tax years, commencing with the year of contribution. For individuals who have college-age beneficiaries (especially students in expensive private universities), substantial gifts can be made at no gift-tax cost by making tuition payments directly to the university.

Given the high cost of medical care, it is not uncommon to learn that a client is assisting a loved one with medical expenses. In this situation, making payments that qualify for the medical expenses exclusion can be a very useful tax strategy.

If you have questions concerning the availability of educational or medical expense deductions under the NJ tax code, contact Fredrick P. Niemann, Esq. at fniemann@hnlawfirm.com or call him at (888) 800-7442.