Estate planning may become all the more important this year for New Jersey residents since beneficial tax breaks currently in effect may not exist in 2013. Estate and gift tax exemptions will go down next year unless Congress votes to extend the tax measures passed in 2001 under the Bush Administration.

Before the Bush-era tax cuts, only estates and gifts less than $1 million escaped taxation. And tax rates, the highest set at 55 percent, could take a significant piece of any attempted wealth transfer. The tax reforms passed in 2001 raised that $1 million ceiling to $5.12 million. In addition, gifts less than $13,000 did not even trigger the need to file a gift tax return.

Solutions to the uncertainty over next year's tax laws could include transferring some wealth now to take advantage of the still favorable gift tax exclusion. Some may find it helpful to create a trust. Different states have varying rules about trusts, but in general they can serve as a vehicle to protect some assets from taxation.

It remains to be seen whether the government will extend the current law, modify it, or let it expire. Since it is possible that the tax law surrounding gifts and estates could be completely different next year, an estate planning attorney can help you see what options you have to minimize tax consequences and preserve the greatest amount of wealth for yourself and your loved ones. In addition, estate and gift tax laws are closely related, so any wealth transfer will require an examination of the effect that both sets of laws will have on the transfer.

Source: The New York Times, "A Year to Stay Flexible on Tax Plans," Jan M. Rosen, Feb. 8, 2012.