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Florham Park Estate Planning Partner Mary Lou Parker in the New Jersey Star-Ledger: "Estate Planning to Benefit Heirs"

Publisher: New Jersey Star-Ledger
March 7, 2010

In the New Jersey Star-Ledger's March 7 Biz Brain Column, a reader asks if his family would benefit upon his death if he declared Pennsylvania his primary residence rather than New Jersey. For the answer, the Star-Ledger turns to Day Pitney's Mary Lou Parker.

From the Star-Ledger:

"Both New Jersey and Pennsylvania impose an inheritance tax based on the relationship between the beneficiary and the decedent. Transfers to a spouse are exempt in both states, but in Pennsylvania, transfers to children are subject to Pennsylvania a 4.5 percent inheritance tax. Pennsylvania does not impose an estate tax, said Mary Lou Parker, an estate planning attorney with Day Pitney in Morristown.

"Parker says this is what your case looks like, assuming you and your wife are U.S. citizens, your New Jersey home is worth $300,000 and your Pennsylvania home is worth $200,000: Regardless of in which state you're domiciled, the first of you to die leaves everything to the surviving spouse, causing no tax. If the surviving spouse was domiciled in New Jersey and still owns both homes, there would be no New Jersey inheritance tax, but there would be a New Jersey estate tax of $26,560 and Pennsylvania inheritance tax of $9,000 ($200,000 x 4.5 percent), for a total of $35,560. If the surviving spouse was domiciled in Pennsylvania, the Pennsylvania inheritance tax would be $31,500 ($700,000 x 4.5 percent) and there would be no New Jersey tax.

"Parker said whichever state you choose, you could avoid the tax by splitting your assets and creating a bypass trust on the first death for the other's benefit. This would shelter assets from New Jersey's estate tax in both estates by taking advantage of the $675,000 New Jersey estate tax exemption, thereby maximizing your children's inheritance."

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