At the client’s death, with the house still in his name, the New Jersey estate tax would be around $332,500. But his children could sell the home for $2 million and have no capital gain. If the client transfers the house before death, then the New Jersey estate tax would only be $132,500. But, if the children sell the house for $2 million, their capital gains tax could be around $570,000, Kaplan said.
New Jersey, New York, Connecticut, Los Angeles and parts of Florida have populations concerned with the federal estate tax, Kaplan said, and so personal residence trusts make sense for their estate planning. For many others, Kaplan said, the above-mentioned tax-saving options apply.