Estate Planning Surprises Turn 'I Do' Into 'I Should Have'

A lack of careful estate planning can lead to unexpected expenses at a time when people are often unprepared to cover them. Such is the case with a New Jersey couple who delayed getting married until they moved to Florida. Unfortunately, the man died before the wedding could take place, and a gift of over $1 million worth of stock he made while still alive was considered to be part of his estate and therefore subject to state inheritance tax--leaving the woman on the hook for a tax bill of over $200,000.

The application of the tax came about because of a series of events--perhaps more accurately, a series of non-events. Had the couple been married in New Jersey, the woman would have been exempt from state inheritance tax as a spouse. If they had been able to establish residency in Florida and marry there, they would have been in the clear as well, because Florida doesn't have a state inheritance or estate tax.

Unfortunately for the couple, neither of those things happened. The man's gift of stock took place six months before his death, and under state law, gifts of over $500 that are given within three years of a person's death are considered to be "in contemplation of death" unless proven otherwise. Therefore it was considered part of the deceased man's inheritance was taxable.

None of this would have transpired had the couple been able to follow through on their plans to marry in Florida. However, proper estate planning might have revealed the risks they were taking by waiting as long as they did. An estate planning attorney can often assist people in similar situations to prevent unnecessary tax burdens.

Source: Forbes, "Delayed Nuptials Coast Couple $214,000 In State Death Tax," Ashlea Ebeling, Dec. 23, 2011

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