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 firstname.lastname@example.org or via phone at 732-521-9455 to get started.