From our “Ask a Question” mailbag: <strong>My estate is worth about $4,000,000, which includes a $1,000,000 life insurance policy. At my death, my estate passes to my two children. Now that the Federal Estate Tax Exemption is at $5,000,000.00, what good is an Irrevocable Life Insurance Trust for me?
In rough terms, as long as your estate stays under $5,000,000.00 (adjusted for inflation) at your death your estate will not owe any Federal Estate Tax, but you are a resident of Camden County, New Jersey, so you are forgetting about the New Jersey Inheritance Tax and the New Jersey Estate Tax. If your assets pass to your children, the New Jersey Inheritance Tax will be zero, but the New Jersey Estate Tax taxes all assets over $675,000.00. This will include the $1,000,000 life insurance policy. Your family will likely recognize a substantial savings if you form an Irrevocable Life Insurance Trust to avoid the New Jersey Estate Tax.
To give you an more exact savings estimate I would need to know what type of assets you own, how your assets are held, their value and your overall estate planning goals. If you would like to know more, please feel free to set up a free consultation.