Estate Planning in the Trump Era: What New Jersey Residents Need to Know
Estate planning is about preparing for the future and being mindful of the legal landscape which is constantly changing. The decisions you made yesterday, could be invalid today due to change in tax or estate laws. That’s why I recommend that you review your will and estate plan every 3 years to make sure it still reflects your needs and is updated based on the changing landscape.
Estate planning has always been a moving target, but in the era of Donald Trump, tax policies have reshaped the landscape—creating both opportunities and challenges. Whether you're a high-net-worth individual preserving generational wealth or a middle-class family protecting your family home, now is the time to understand how these changes affect you.
The Trump Tax Cuts: What Changed and Why It Matters
The Tax Cuts and Jobs Act (TCJA) of 2017 made a game-changing move by doubling the federal estate and gift tax exemption. For 2024, that means individuals can shield up to $13.61 million from estate taxes, while married couples enjoy a $27.22 million exemption. But here’s the catch—these benefits expire in 2025, dropping the exemption back to around $7 million per person. It is anticipated that the Trump administration will attempt to extend or make these provisions permanent, which would maintain the higher exemption levels. Nonetheless, this creates a golden window of opportunity for wealth transfers. If you're considering gifting assets or establishing trusts, now is the time to act to avoid the risk of these tax-friendly provisions disappearing.
For those with high-value estates, the urgency is clear. But what about middle-class families who may not realize their estate is at risk? Let’s break it down.
What’s Included in Your Taxable Estate?
Many people underestimate what counts toward their estate’s total value for tax purposes. In New Jersey, where home prices are high and life insurance is common, an estate can exceed $7 million more easily than one might think.
Your taxable estate includes:
The IRS considers the fair market value of all assets you own at death, including:
✔ Real estate – Homes, vacation properties, rental units, and land.
✔ Life insurance proceeds – If you own the policy, the full payout amount is included.
✔ Retirement and investment accounts – 401(k)s, IRAs, stocks, and bonds.
✔ Business interests – Ownership in LLCs, partnerships, and family businesses.
✔ Personal property – Vehicles, jewelry, artwork, and collectibles.
New Jersey Real Estate & Estate Taxes: A Perfect Storm
New Jersey’s high cost of living and soaring real estate prices mean that even families who don’t consider themselves “wealthy” could unknowingly cross the estate tax threshold. Many homeowners have seen their property values climb over the years, and when combined with savings, retirement accounts, and other assets, their estate could be worth far more than they realize.
One of the biggest surprises in estate planning is how life insurance affects your taxable estate. If you own a life insurance policy, the full payout is included in your estate’s value when you pass away. This is what we call "the life insurance trap." For example, if you have a $2 million life insurance policy, that entire amount is added to your estate. Now, add in the value of your home, retirement accounts, and other assets, and suddenly, you’re well over the $7 million mark.
How to Reduce Estate Tax Exposure
✔ Use an Irrevocable Life Insurance Trust (ILIT) – This removes life insurance proceeds from your estate, potentially saving millions in taxes.
✔ Gift assets before 2025 – You can use today’s higher exemption to transfer wealth tax-free.
✔ Create trusts – Different types of trusts can protect real estate and business assets from estate tax exposure.
✔ Consider charitable giving – Donations to charity can reduce the taxable value of an estate.
Estate Planning for Middle-Class Families: It’s Just as Important
I know what you’re thinking—even if the tax cuts expire, I’m still nowhere near the $7 million threshold, so why should I worry? It’s a fair question, but estate planning isn’t just about dodging taxes on massive fortunes. It’s about protecting what you do have, ensuring a smooth transfer of assets, and avoiding unnecessary costs and headaches for your loved ones.
The Trump-era tax cuts primarily benefited the ultra-wealthy by significantly increasing the estate tax exemption. But for middle-class families, estate planning remains just as critical—especially in a high-cost state like New Jersey. While New Jersey no longer has a state estate tax, it does impose an inheritance tax, which depends on the heir’s relationship to the deceased. Certain heirs, like spouses and children, are exempt, but more distant relatives—such as siblings, nieces, and nephews—could face tax rates as high as 16%. That’s a significant bite out of the wealth you worked hard to build.
Key steps for middle-class families include:
Updating Wills and Beneficiary Designations to ensure assets pass seamlessly.
Revocable Living Trusts to avoid probate and maintain control over distributions.
Incapacity Planning with powers of attorney and advance healthcare directives to protect against unforeseen events.
Protecting the Family Home using trusts to keep it in the bloodline and shield it from creditors.
Another New Jersey-specific issue is Medicaid planning. If long-term care is in your future, you must structure your assets carefully to qualify for Medicaid while preserving your legacy. Setting up an irrevocable Medicaid trust can be a powerful strategy.
Final Thought
With the Trump tax cuts set to expire in 2025, the time to plan is now. Many families who never considered themselves at risk of estate taxes could suddenly find a large portion of their assets going to the IRS instead of their heirs.
At The Law Office of Jeffrey Blair, we specialize in helping families protect their legacies, minimize taxes, and ensure their wishes are carried out. Whether you’re planning for future generations or just starting the estate planning process, we’re here to help.
📞 Contact us today to schedule a consultation and secure your family’s financial future.
