Estate Taxes

August 5, 2014October 2, 2014

Do I Need a Trust?

As trusts have gotten more popular and evolved in type to appeal to a lot of people, so now you might be under the impression that you must have a trust. While it’s not for everyone, there are so many trusts out there that it’s very likely you could find one that will help you to meet your goals, including to protect your assets and minimize taxes.

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Major liquid assets, setting up care for a child with special needs, and a variety of real estate ownership are a few of the reasons that people might initially turn to trusts. If you’re a resident of a state with a high state estate tax, income tax or probate costs, you’re likely to be concerned about the hit of taxes, too. This refers to situations where a federal estate tax is factored into your asset value, but an additional taxable event occurs at the state level. Without proper planning, you could find that the value of the assets you have worked so hard to build is extremely vulnerable to these taxes and costs.

Contact our offices today to learn more about how these trusts can help you. Send us a message at info@lawesq.net or call us 732-521-9455.

June 2, 2014June 3, 2014

Minimize Estate Taxes Through Gifting

Your estate planning goes farther than figuring out who should be named as a beneficiary and how much they should receive. Comprehensive planning also thinks about the best way to distribute assets and how the methods you choose influences the beneficiary’s life.

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On your death, your estate is subject to Generation Skipping Tax and Estate Tax. In states like New Jersey, your estate will also be subject to a State Estate Tax plus an Inheritance Tax in some cases. Without realizing the impacts, a portion of your estate can be swallowed up before your beneficiaries ever receive it. Some states also impose their own estate tax, diminishing your estate even further. The good news is that some advance planning with a professional can reduce the impact of these taxes.

To start with, you can take advantage of the federal exemption amount of $5.34 Million, which allows you to give away up to that amount during lifetime and death (total) without initiating that estate tax. Annual exclusion gifts, too, can be helpful for minimizing the blow of a big tax. Married couples are able to combine exclusion powers to give up to $28,000 per year per person without being hit with a tax, and this is separate from the federal gift-tax exemption.

This is just the tip of the iceberg when it comes to strategies to protect wealth and minimize taxes. Many tools are available and you can learn more from contacting us today for a consultation. Send us a message at info@lawesq.net or contact us via phone at 732-521-9455 to begin.

May 6, 2014May 2, 2014

Put Your Trust in a Trust

Now is a great time to evaluate how using a trust can help you achieve your financial goals. The federal gift tax and estate tax laws give big incentives for using trusts in estate planning. In the pasts, trusts have been used mostly to transfer gifts to children while limiting estate taxes on wealth, but there are numerous other benefits.

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An appropriately funded trust can help ensure that your assets are protected and available in the event that you become incapacitated. When you pass away, that same trust can be used to pass on assets to your beneficiaries. You can also protect your legacy by keeping your assets away from any of the heir’s creditors, too.

There are probate savings and privacy reasons that a trust can benefit you, too. There are potentially large fees for going through probate and your probate records will also be public. Putting your assets into a revocable trust instead can keep them from having to go through probate at death- therefore protecting you and your family’s privacy.

Finally, trusts can be a good tool when you live in a state that has an estate tax. Some states levy estate taxes that are rather substantial, but trust planning is one way to cut down on how many estate taxes will be levied on your death. This can also be a good tool for those who have real estate located in a state that imposes estate taxes.

May 5, 2014May 2, 2014

Thanks, But No Thanks. State Estate Taxes & Disclaimer-Based Approach

Twenty-one states have their own estate taxes, including New York and New Jersey. Many of these states have exemption amounts beneath the federal exemption, so it’s worth factoring in state estate taxes in your overall estate planning process.

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One way for married couples domiciled in those states with it’s own estate taxes to plan is to use the disclaimer-based approach. A disclaimer refers to a refusal by a beneficiary of a gift transferred to that beneficiary during life or at the time of death through a will, trust, or another mechanism.
The government makes a distinction between “nonqualified” and “qualified” disclaimers.

Using a disclaimer-based approach, the residuary estate passes on to the surviving spouse in a plan that provide that if the surviving spouse disclaims the interest, those assets will pass to a disclaimer credit shelter trust. This approach can add an element of flexibility to planning by empowering the spouse to make any needed changes. The surviving spouse will need to execute a disclaimed within nine months of the date of death. In order to ensure that you are prepared to use this disclaimer, work with an estate planning attorney to learn more. For all your complex estate planning, contact us at info@lawesq.net or via phone at 732-521-9455 to get started.

May 1, 2014May 2, 2014

The N.Y. State of Mind: Changes to New York Gift Tax and Estate Laws

At the end of March, Governor Cuomo approved changes to New York’s estate and gift tax laws while also making amendments to income tax rules. One of the most important changes was in relation to the estate tax exclusion amount. The amount that an individual can pass without being hit by the New York estate tax, which was previously $1 million, has now been increased based on the follow specifications:

For those individuals who pass away between April 1, 2014 and April 1, 2015, the exclusion amount is increased to $2,062,500
For those individuals who pass away between April 1, 2015 and April 1, 2016, the exclusion amount is increased to $3,125,000.
For those individuals who pass away between April 2, 2016 and April 1, 2017, the exclusion amount is $4,187,500
For those individuals who pass away between April 1, 2017 and January 1, 2019, the exclusion amount is $5,250,000.

Starting in 2019, the exclusion amount will be indexed for inflation purposes. Presently, the New York estate tax will stay at 16 percent. It’s also worth knowing that there’s an estate tax cliff for those with taxable estates between 100 percent and 105 percent of the state exclusion amount. There’s never been a better time to meet with an estate planning specialist to ensure that you are maximizing protection of your assets. Since estate planning and tax rules are complex and constantly changing, an annual review is recommended so that your documents and plans are fully up to date. To capitalize on your assets with a comprehensive estate plan, contact us at 732-521-9455 or email us at info@lawesq.net

April 15, 2014April 16, 2014

Showdown: Wills vs Trusts

Depending on who you talk to, your estate planning specialist might recommend wills over trusts or trusts over wills. Let’s walk through some of the differences between these two planning tools to see if one might be a better fit for your needs.

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If you are planning to use a will as your primary tool, bear in mind that your assets must first go through the probate process in order to be eventually received by your beneficiaries. Some states have lengthy and cumbersome probate processes, meaning that it could take your beneficiaries a while to actually receive the assets. Probate is also very public, meaning that details about your financial situation will be shared in a less-private forum. If you’re concerned about this, a trust might be a better option.

In comparison, trusts tend to pass by the court system for the majority of the administrative process. Since these are privacy documents, there’s less public scrutiny into your finances or your plans, and some clients prefer this confidential approach. Unlike wills, which become active on your death, a trust can be rendered effective immediately. Additionally, trusts can also be used for incapacity planning, adding another layer to their usefulness.

Both wills and trusts can do tax planning for credit shelter trusts. The bottom line is that it depends on your needs. If you are not concerned about the red tape of the probate process, there are still advantages (especially regarding privacy) for the establishment of a trust. We work with clients to create a customized plan for you since we recognize that each client is unique. To talk more about the kinds of trusts we can help you establish or to begin generation of your will, contact us today at 732-521-9455 or through e-mail at info@lawesq.net

April 9, 2014April 9, 2014

Risky Do-It-Yourself: Wills

Software or online programs to help you plan your estate are popping up everywhere, but that doesn’t mean they are the best choice for your needs. Many of these programs lead you to believe that generating your will is easier than it truly is. Heirs might find out too late that your self-created will doesn’t really match up with your state laws or even your own intent.

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When it comes to estate planning, intent is everything. Too often, the wishes of an individual don’t come across clearly in self-generated wills. Many modern court cases have focused on the determination of the testator’s intent, but judges are hesitant to cross certain lines to clear up confusion. As a result, your heirs may discover that your wishes aren’t carried out as you planned at all. Simply put, doing your will on your own can have big consequences.

Consider the Estate of George Zeevering. Last fall, a Pennsylvania appellate court was evaluating an unclear DIY will. Since the testator had not worked with a lawyer to generate the document, which was incomplete, it was difficult to determine the true intentions of Mr. Zeevering. In one aspect of the case, property had already been titled in the names of a son and a decedent as joint tenants. Mr. Zeevering stated that “the failure of this will to provide any distribution” to his daughters was done on purpose.

The case got sticky when the residuary and residuary estate totaled over $200,000 after debt payments were made. There was no provision within the DIY will for what should happen to those assets. In the end, the court determined that when a will doesn’t provide for the disposal of an entire estate and fails to include a residuary clause, the residuary estate must be divided under intestacy laws.

This case is but one example of where estate planning on your own can go wrong. Although it may not have been Mr. Zeevering’s intention to distribute the remainder of his estate under intestacy laws, that’s what happened. Despite his wishes, the law overrides an incomplete or improper will. While online and computer programs argue that wills and estate planning documents are easily done on your own, that minimizes the true complexity of document generation and estate laws.

Estate planning can be very complicated for an individual but it’s easily done under the guidance of an estate planning attorney. An added benefit of using a legal professional “in the know” is that he or she is clued into state and federal laws about estate planning, which always have the potential to change. An estate planning attorney is an excellent resource for all your questions as well as giving you the peace of mind that your estate will be carried out in the manner you wish. Cutting corners with a do it yourself tool is your choice, but do so at your own risk. If you want the assurance of totality and legality, contact an estate planning professional today.

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