Regency Wealth Management

Proper financial planning for the passing of a spouse can save a huge tax liability

Ramsey, NJ (Apr 7, 2016) – The death of a spouse puts significant strain on a family. Careful financial planning can help to reduce that burden. One New Jersey couple, following advice from Regency Wealth Management, will save an estimated $1 million in taxes.

When the husband’s health began to decline, the couple needed help gathering and organizing their financial holdings. They wanted to optimize their assets to provide for the wife should she outlive her partner, and they wanted to provide for their children and minimize taxation.

Regency’s Mark Reitsma worked closely with the family’s attorney to take stock of the couple’s combined total assets and explore their options. Their portfolio included a mix of liquid and illiquid investments, some of which had appreciated significantly. Regency and the family attorney suggested an asset reorganization plan.

The illiquid assets were transferred to the ailing spouse in expectation that the basis would be stepped up at the date of death, voiding any capital gain.  Additionally, the husband established a trust to benefit his wife and children, enabling him to avoid estate and gift taxes on those assets.

The couple was a long time client with Regency, and Reitsma worked with them on these changes for a year before the husband’s death. Now the wife owns the illiquid assets with virtually no capital gain tax liability, and the trust is providing her income without being included in her estate.

“No one wants to contemplate the death of their significant other, but this is an important situation to prepare for, and even more so if one’s health is failing. It is standard procedure at Regency to look at these issues and create strategies for unforeseen events,” Reitsma says.

“For example, the New Jersey estate tax allows for $675,000 to pass tax-free from a deceased person to their non-spouse beneficiaries. If a couple holds more than that amount in the name of one spouse, a trust could maximize the exemption and still provide for the survivor.  That’s a contingency that should be taken into account for everyone, regardless of health.”

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