My tax/estate planner says not to put my nephew in the will since he will have to 15% on anything that comes to him through the will. (We both live in New Jersey). He suggested gifting in an advance. Is there any other legal way around this? For example, if I leave a note to my executor to deduct X% due my children and give that to my nephew, would that bypass the tax. Or is there still a tax involved even though it is not part of the will?
NJ imposes both an estate tax and an inheritance tax. The inheritance tax only affects certain classes of beneficiaries, a nephew being one of them. It is taken directly from any bequest or transfer before it reaches the nephew. Leaving a note to your executor will be useless. Your executor cannot do anything that is not explicitly permitted or directed by your will. If he were to give X% to your nephew, your other beneficiaries could sue the executor personally for their full share of your estate. Ira Smilovitz
If the executor is Child 1 (also a beneficiary) and the second beneficiary is Child 2, can I request (outside of the will) that both children consider gifting a portion (X%/2) of their inheritance to the nephew? Whether they do it or not would be entirely up to them.
I suppose the OP could create a bank or brokerage account in another state, and put his nephew on as a POD beneficiary. Would that work? Stu
Great idea if you want your legacy to be ripping the family apart. Evidently you've never seen people go absolutely whacko over an estate. You're lucky. Look, the whole idea of having a will is to make sure what you want to happen after your death happens. Getting cute in an effort to stiff the state of New Jersey could easily defeat your prime purpose. Then again, you'll be dead, so what do you care?
-- Phil Marti Clarksburg, MD
Not if the decedent is a resident of NJ at the time of death. The transfer would still be subject to NJ Inheritance tax. Ira Smilovitz
While that would work, I wouldn't want to rely on the nonbinding assurances of others (even those of my children), just to save 15%. Why not just gross up the amount of the bequest so that the nephew receives the desired amount after taxes? Ira Smilovitz
The First Amendment says you can make any request you want.
Since there's no (legal) obligation on their part, it would truly be a gift if they chose to make it. Seth
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