What Is the Federal Lifetime Exclusion?

In the United States, you are eligible to tap into something called a federal lifetime exclusion which is a specific dollar amount specified by the IRS that can help to minimize your estate tax liability when a person passes away. The vast majority of people will use their federal lifetime exclusion at death; however, you are also eligible to make large gifts during your lifetime to exercise this federal exemption. This amount was doubled in 2017 by President Trump to $11.7 million per person. This, however, is not permanent so this could be reduced by as much as 50% by the end of 2025.

Although this is not yet confirmed, many people anticipate significant changes related to estate taxes and limits such as this. Many taxpayers could benefit from giving away their assets during their lifetime and one such tool to accomplish this is known as spousal lifetime access trust. Most estate planners are carefully watching what might happen with estate tax shifts so that they can inform their clients promptly.

Since federal and state changes can happen at anytime, but particularly around a major shift in the White House or Congress, it’s smart to have a relationship with an estate planning law firm so that you have resources to turn to. Ensuring that your plan aligns with your current needs is key.

You can gift assets into a trust, use most of the federal lifetime exemption during the course of your life and leverage other powerful estate planning benefits. You’ll want to work directly with an experienced attorney to accomplish this because there are many complex aspects to establishing a spousal lifetime access trust.



IRS Announces New Gift Tax for 2019 Estate Tax Limits

The IRS recently announced their 2019 details about gift tax and estate tax limits. The official limits for 2019 increased the individual estate and gift tax exemption to $11.4 million per person up from $11.18 million in 2018.

This means that you are eligible to pass on up to $11.4 million to beneficiaries and heirs without paying any federal, estate or gift tax. This also means that a married couple can pass on as much as $22.8 million with appropriate shielding strategies recommended by an estate planning attorney. The annual gift exclusion will stay the same at $15,000. 

These numbers represent numerous planning opportunities for the wealthy and even if you don’t currently have a taxable estate, you’ll still need an estate plan. Scheduling a consultation with an experienced estate attorney is important because the affluent must still continue to plan around the estate tax.

Advanced strategies might be required for someone who is unfamiliar with the estate tax laws or who has recently come into a large amount of money. In all of these situations, a consultation with an experienced estate planning attorney can make a big difference.

Your Estate Planning Review Year-End

Has your life changed at all in the last year? Did you have estate plans contingent on prior versions of tax law that are no longer relevant? Don’t let the end of the year pass you by without taking the opportunity to set up a quick meeting with your accountant and your lawyer. These two professionals help you figure out what’s no longer needed and what additional plans need to be incorporated into your big picture to get things done. meet-estate-planning-lawyer-NJ

As the calendar begins to get closer to a new year, it’s a good idea to schedule a consultation with your estate planning attorney. Furthermore, you should sit down and review all of your important documents to make sure that everything is up to date and reflects your individual needs and concerns.

Many people might want to make changes to their health care and advanced financial directives in the future. Common questions that people ask regarding updating or creating your estate plan have to do with planning for a possible nursing home stay and how to leverage tax advantages. Whenever changes have occurred in your family, this can be a source of great celebration or even mourning.

Many people can easily overlook the process of going through your estate planning documents because it can be difficult to confront your own mortality or it can be all too easy to forget the various complexities associated with estate planning and how your plans must be updated and altered as a result of changes in your life, such as the birth of a child or grandchild, separating from a former spouse, deciding to go through a divorce, getting remarried to a new spouse who has a family of their own or incorporating long term wealth and asset protection planning techniques.

The support of a knowledgeable estate planning attorney is instrumental in approaching this process and ensuring that all aspects of the plan have been carefully considered.


Majority of Adults Expect to Update Their Financial Plans with New Laws

The previous tax laws were in place for so long that you might have neglected updating your estate plan because you felt there was no need. Now that there are new considerations on the table, however, it may be time to take a second look. 

As a result of a new tax law, a study has shown that six out of ten wealthy adults anticipate updating their financial plans. Now that the gifting an estate exemption is up to approximately $11 million per person, this represents double the old law and entrepreneurs may even be considering grabbing a 20% deduction against qualified business income.

The American Institute of Certified Public Accountants recently completed a study that showed that 63% of wealthy individuals were likely to update their strategies. Those individuals were people who had at least $250,000 in investible assets or more than $200,000 in household income. This could lead to a decade’s long planning process and should always be reviewed by an experienced estate planning attorney. Entrepreneurs who use pass through entities may be able to qualify for a 20% deduction against qualified business income, but this is only applicable to people who have a maximum of $315,000 in taxable income for those married and filing jointly or $157,500 if you are single. In any case, setting aside time to talk with an experienced estate planning lawyer is strongly recommended to give you a better overview of what’s involved and how your individual case can be considered carefully.

Estate Planning Strategies You Can Still Consider While Waiting for Tax Reform

It is not yet clear how Congress will take action with regard to estate tax reform. It is extremely probable that estate tax reform will happen in the next two years, but it is currently no more than speculation to determine how this might influence your individual life. 

However, there are ten strategies that you can consider with your overall estate planning while waiting for Congress to take action. These include:

  •      Annual exclusion gifts.
  •      Estate freeze installment sales.
  •      Short-term GRATs.
  •      Lifetime exemption gifts.
  •      Family limited partnerships.
  •      Flexibility in your core planning documents.
  •      Community property trusts.
  •      Philanthropic planning.

Although the future may remain unclear, it is important to take control of your own individual future and determine the goals and intentions that you have for your estate. It is imperative to think not just about what will happen to assets when you pass away, but also the plans you have in place to protect you and your loved ones if you were to suddenly become incapacitated. Many people ignore this process altogether and realize the serious consequences of failing to act all too late. Suddenly suffering an incapacitating event that renders you unable to make decisions for yourself can lead to legal challenges and emotional issues for your loved ones.

Will You Still Need Estate Planning if the Estate Tax is Abolished?

President Trump’s campaign platform expected an abolishment of the estate tax. This could lead some individuals to think that they won’t need estate planning in the event that he is able to follow through on his promises. The current estate tax sits at 40% and Trump intends to repeal it. The estate tax laws that were in place for 2017 were actually established four years ago. These allow exemptions of up to $5.49 million for an individual and $10.98 million for a couple in 2017. Nj estate tax planning lawyer

When a spouse passes away and leaves everything to their spouse, there is also no tax collected. This means that repealing the estate tax would only have significant implications for those individuals with a net worth higher than $11 million. This is why whether or not there is a federal estate tax in place, you will always need the essentials when it comes to estate planning. remember that estate planning is about more than what happens when it becomes time to pass on your property to individuals you love after you pass away.

It is also about establishing important documents like powers of attorney and healthcare proxies so that individuals are equipped to make decisions on your behalf if you become incapacitated. With or without an estate tax in place, you will need to approach the estate planning process to consider your individual issues such as your personal property, management of your pets, assisting with special needs, planning for a child, handling your digital afterlife and many other issues associated with the estate planning process.


Year-End Planning and Trump’s Tax Plan: What You Need to Know

There’s always some concern during transition years that tax planning could be going through some major changes in the near future, prompting many to evaluate their current plans. That’s certainly true this year as experts begin to speculate the real tax plan proposals of a President Trump.

Although we’ll have to wait until January and beyond to see what changes are actually pushed through, there are four key components to his current plan worthy of considering as you approach your year-end planning:

  • Business tax cuts: Although he’s proposed some hefty business tax cuts, he also plans to eliminate a lot of business deductions, too.
  • Individual cuts: In addition to getting rid of the Obamacare net investment income tax, Trump has proposed making three tax brackets in the US: 12%, 25%, and 33%.
  • Estate taxes: The president-elect has previously gone on the record saying that he wants to eliminate the estate tax completely.
  • Foreign profit taxes: Trump argues that far too many dollars are escaping the US tax system entirely and therefore supports a 10 percent repatriation tax on accumulated profits for U.S. company foreign subsidiaries.

No matter what changes do happen, it will be intelligent to have a relationship with an experienced tax and estate planning firm already established. These changes are certainly not unexpected, but it could rock the current planning opportunities and present the chance to overhaul your individual and business plans. Keeping your eye on the news and putting in a call to your estate planning lawyer for an annual review could be well worth it so that you remain poised to adapt to changes as necessary.

At Shah & Associates, we’re ready to review your current estate and tax planning and talk about next steps should the tax code change. If you haven’t yet started the process, now is the time. As always, planning ahead will be important for minimizing your tax obligations and allowing you to pass on as much as possible to beneficiaries. Contact us today to learn more about how we can help: info@lawesq.net



New Jersey State Estate Tax May Soon Disappear

According to a recent compromise with Chris Christie and New Jersey Governments, the New Jersey estate tax will likely soon be repealed by 2017. Many professionals across the state helping individuals with estate and financial planning believe that this is a long overdue change and that New Jersey is actually behind the times by keeping the state estate tax.

Remember that putting together your estate planning is about more than just considering tax implications. You should also consider legacy planning, long term care issues, and critical documents that help protect you while you’re alive as well as provide instructions for passing things on to your beneficiaries after you pass away. To accomplish all of these goals it is necessary to have a strong relationship with an existing New Jersey estate planning attorney. An estate planning attorney will keep you abreast of any changes in the law so that you can adjust your estate planning documents as needed.

As life changes, you will also need to revise these documents and consider how various life events will impact the current plans you have structured. Do not hesitate to reach out to an experienced New Jersey estate planning attorney today.


Clinton and Trump Estate Tax Proposals

Hillary Clinton and Donald Trump unsurprisingly have completely different plans for the country’s estate tax. While Trump wants to kill the estate tax, Clinton hopes to increase it. However, experts believe that any changes made to the policy will have a minimal impact on tax receipts under the Clinton proposal. This is because the estate taxes had a minimal contribution to revenue over the last several years.

Research from the IRS indicates that the estate tax generated a total of $16.4 billion in 2014, but that is a significant decrease from 2006 when the revenue was $24.6 billion. When compared with years gone by, the revenue from the estate tax has decreased even further. For example, up to 8% of all debts resulted in triggering the estate tax in 1976. However, in 2011, that number dropped to 0.13%. Estate taxes in total make up less than 1% of the country’s revenue as shared by The Tax Foundation.

The number of exemptions is the leading reason behind the decline for revenue. In 1976 the states were responsible for paying taxes on anything valued more than $60,000, however, the threshold today is at $5.5 million for individual estates. The highest estate tax rate has also decreased. The 1981 numbers were 71% but that dropped to 55% in 2000 and is now sitting at 40% today.


Even Individuals in New Jersey Who Don’t Feel Wealthy Can Be Impacted by the Estate Tax

Many families believe they don’t have to worry about estate taxes because they don’t believe they owe that much. Unfortunately, individuals may not realize that if their estate totals more than $675,000 the executor will be writing a check to the state of New Jersey. estate plan (1)

Many clients feel as though they don’t have any money, but think carefully. Even a modest home in North Jersey could cost as much as $450,000. Add in life insurance, investments, retirement plans and savings accounts and it’s not that hard to hit the estate tax threshold. The estate tax in new Jersey has been in the spotlight recently as a bargaining chip in the political argument about using a gasoline tax to pay for bridge and road repairs.

In fact, Republicans in Trenton voted to accept a higher gas-tax in exchange for reducing or eliminating the estate tax. Opponents of that idea however, allege that only 4000 New Jersey individuals pay estate taxes at the state level each year and the state budget is already crippled and unable to function without the money that those taxes bring in. One of the most important things you can do to protect yourself is to set up a meeting with a New Jersey estate planning attorney as soon as possible to protect your interests going forward. Negotiating the estate tax and taking various planning options can help you minimize your obligations.

Estate Taxes on Life Insurance & Life Insurance Trusts (“ILITs”)

Many Americans may be unaware of what an irrevocable life insurance trust (“ILIT”) is, let alone the benefits it may provide to them.

Typically, life insurance policy proceeds are not subject to income taxation. However, they are included in the calculation of a person’s gross taxable estate. This is where the ILIT comes in. If a person puts their life insurance policy into an ILIT, the proceeds of the policy are kept out of his or her taxable estate. The proceeds will therefore be available to his or her heirs free of income and estate tax.

Additionally, ILITs are a great way to provide cash to help pay for the taxes that will be levied on your estate. Beneficiaries of your ILIT can use some of the proceeds to pay the taxes owed on your estate. By doing this, your actual estate is kept in tact. This strategy is especially beneficial to those whose estate consists largely of illiquid assets such as a business or real estate. Through setting up an ILIT, you can ensure that your family will not have to sell the illiquid assets in your estate in order to satisfy the estate taxes.

Call us at 732-521-9455 or email at info@LawEsq.net to discuss the right way to own your life insurance.

Could the Court Ruling on Art Save You Money?

Art collectors are celebrating a recent decision handed down from a US Appeals Court which could help to minimize taxes. The court agree that shared ownership in a highly-valued blue chip art collection, which can also be noted as a “fractional interest” enabled one family a critical tax break in the settling of an estate.

The Texas family involved had collected Picassos, Jackson Pollock pieces, and art by Paul Cezanne. The family used a grantor-retained income trust where partial ownership of the art was handed down to each one of their three children. The idea is that shared ownership interest limits the opportunity to sell or transfer the works since this would also require agreement from each child.

The court ruling determined that the deficiency lay with the IRS commissioner’s failure to properly use the discount for restricted ownership in this case, although an earlier tax court had argued that the family was only entitled to a 10 percent discount.

If you have a substantial art collection and are concerned about how it will be passed down to beneficiaries, talking to an estate planning expert could be in your best interest. Contact our offices today to learn about trusts or other vehicles that might work best for you. Request an appointment via email at info@lawesq.net or over the phone 732-521-945twert










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Lessons from the Joan Rivers Estate

Joan Rivers was heralded as a stellar performer, but she also left behind a legacy as an incredible businesswoman. Her estate included income, collectibles, and real estate that was estimated in value between $150 million and $250 million. She left behind detailed instructions for her assets after her death, which is rare in a society when many celebrity deaths highlight the weaknesses of their estate plans. Photo Credit: breitbart.com

Looking at her careful planning, there are a few key lessons: be prepared for the unexpected, outline plans for pets, and correctly title the assets. Joan Rivers was also masterful in giving her family a brief overview of the estate plans to help improve clarity and reduce the possibility of arguments. Rivers made use of family trusts to reduce the tax burden for her beneficiaries and titled her assets

appropriately to allow for the smooth transition of business assets. This act alone helped to diminish her capital gains taxes.

Regardless of the size of your estate, proper planning allows you to pass on assets to your heirs in the most efficient manner while minimizing the tax liability. Contact our offices today for a consultation for your business and personal needs through email at info@lawesq.net or contact us via phone at 732-521-9455.

When to Use a Family LLC

Most people have heard about LLCS, but you might not be aware of the best situations to use them when it comes to your family. Essentially, a family LLC is an estate planning tool for holding assets or transferring them to succeeding generations.

The people most likely to use a family LLC are those individuals who want to keep family assets together and intact, managed only by a limited number of people. As an LLC manager, you’re in control while you’re alive, but you can also exercise control in selecting who will manage the LLC after you pass away.

If your family has rental real estate, it’s a good option to use a family LLC. You can manage it during your lifetime, and then at your death a portion of the LLC managing that real estate goes to your children. This limits the opportunity for children to argue after you have passed away about who is entitled to what.

Another benefit of a family LLC is that you can gift it during your lifetime. Without having to worry about other members signing off on your decisions, you can sell, lease, or buy assets while you are still alive. This gives you control while you are still present with opportunities for your heirs to manage the LLC after you are gone.

Interested in learning more about Family LLCs or other family entities? Send us an email at info@lawesq.net or contact us via phone at 732-521-9455.

Will You Be Impacted by the New Jersey Death Transfer Tax?

When it comes to high-dollar decisions about estate planning, many people wrongfully believe they are not included because the federal tax exemption of $5.34 million is so high. While this is true, in New Jersey, you should be aware of the transfer tax because far more people are included under that umbrella.

In New Jersey, an estate larger than $675,000 at the time of your death can trigger the New Jersey Transfer Estate Tax. If you think you’re close, but not sure: cars, cash, bonds, life insurance, retirement accounts, real estate, bonds, stocks, and personal items are all included. A fair number of New Jersey residents hit that threshold with just their retirement plan and real estate. Depending on who will be the Beneficiary, there may be a separate inheritance tax of up to 18%. (See out prior blog post: https://lawesq.net/blog/2014/05/the-n-y-state-of-mind-changes-to-new- york-gift-tax-and-estate-laws/) 

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There are a few things worth bringing up if you’re concerned about this tax. First of all, it is possible to plan around it. Using DING or NING trusts, which involve establishing trusts out of state, can be a great tool for addressing state tax concerns. Gifting and special plans for your retirement accounts can also address concerns for the future.

Setting things up in advance through a trust can also make it easier on your loved ones if you have passed away. There are many cases in which a simple will just won’t suffice. To talk specifics for your assets and plans, call us today 732-521-9455.


Especially For Those In N.J. & C.A.: Personal Tax Inversions to Avoid State Income Taxes

Take a look at the articles out there on either side of the issue and you’re likely to find compelling arguments for and against the use of corporate tax inversions. Some believe that tax inversions are not patriotic, but others see the issue as maximizing gains while “playing the rules” of the tax code game. Did you know that there’s a personal tax inversion you might be able to use to save hundreds of thousands (or more) on your state income taxes? It’s not right for everyone, but in the right situation can be a valuable tool.

In this situation, you can reap the benefits of having your assets located in a different jurisdiction, preferably one with no state income tax at all. A personal tax inversion, however, might be even simpler, because it doesn’t require you to transfer assets outside the country- just to another state. This can be done through a non-grantor trust. You are in some sense not really seen as the owner of the trust for tax purposes. Ensure that you work with an attorney who understands what, if any, gift tax implications there are of making such a move. The attorney drafting your paperwork should explain this to you and make you aware of whether you will be subject to gift taxes in exchange for giving up the burden of being hit with state income taxes. To learn more about non-grantor trusts, give us a call today at 732-521-9455 to get started.

Especially For Those In N.J. & C.A.: Personal Tax Inversions to Avoid State Income Taxes








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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.

Do I Need a Trust?

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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.

If It’s Good Enough for the Clintons, It’s Good Enough For You

The Clintons recently made the news simply for taking advantage of Estate Planning and financial planning strategies that maximize wealth and limit the encroachment of taxes. With an estate tax that has an upper limit of 40 percent of assets on death, it only makes sense for those with bigger estates to conduct some planning well in advance.

If Its Good Enough for the Clintons Its Good Enough For You
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One of the most important steps taken by the Clintons was the transfer of their New York house into a residence trust, a move they made back in 2011. These trusts have major advantages, including house value appreciation as an occurrence outside the taxable estate. The overall goal for many estate planning attorneys and other financial experts is to help build up the nontaxable estate as much as possible.

This transfer of ownership of the house specifically is a tool that could have implications for numerous Americans concerned about the tax hit on their estate. A sample strategy involving this plan is to divide house ownership in half and storing that ownership in two separate trusts. While continuing to live in the house, ensure that the trust is structured to pass on to heirs in 10 years. Remember, the growth value during that period falls outside your estate. At the end of the 10 year period, pay rent to the heirs if you plan to continue living in the house. Those rent payments are also shielded by passing outside of the estate, protecting them from tax.

For more tax-saving strategies and long-term financial planning, contact our office today. Call us at 732-521-9455 or send an email to info@lawesq.net

Is the New Jersey State Estate Tax Too Prohibitive?

Most people recognize that it can be costly to live in New Jersey, but they don’t realize that it may also be expensive to die here. Unless you have had a direct personal experience with some kind of estate planning, it’s unlikely that you understand the full implications of the state estate tax. It’s worth considering in advance to prevent a major hit on your assets and investments.

Is the New Jersey State Estate Tax Too Prohibitive
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New Jersey is one of only two states (Maryland is the other) that collects both an estate tax and an inheritance tax. In the state of New Jersey, the estate tax is factored into any estate worth $675,000 or more and the estate tax includes stocks, bods, and real estate in addition to more common sources like savings or checking accounts.

A recent study from Fairleigh Dickinson University shows that New Jersey residents aren’t thrilled about the major tax hit on their assets, with 57 percent of New Jersey residents indicating their plans to leave the state on retiring since affordability is such a major issue. Are you one of the 57 percent? Estate tax planning using a DING trust, for example, may help to alleviate some of the impact on your estate by allowing you to transfer assets into a trust that avoids some of the negative implications of New Jersey taxes. To learn more about your options, contact our office today to discuss long term financial planning for your estate. Send us an email to info@lawesq.net or contact us via phone at 732-521-9455

Inheritance Taxes and State Estate Taxes

On top of federal estate taxes to which your estate can be subject, you may also need to plan in advance for state estate and inheritance taxes. As far as inheritance taxes go, six states use these to obtain funding from assets passed on to heirs. In the past, state estate taxes largely weren’t an issue for most of the population because the federal government gave an estate tax credit based on how much was already paid into state taxes. Now it’s largely up to the states, and if you’re a resident in one where your assets could be subjected to a pretty substantial hit, it’s simply prudent to plan in advance.

Inheritance Taxes and State Estate Taxes
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The state thresholds aren’t so high that many people can be exempted, either: New Jersey’s exemption stops at $675,000. Factoring in the value of many people’s homes, retirement accounts, and other assets, it’s not hard to surpass that. And New Jersey is a double whammy- state taxes and inheritance taxes apply there, so it’s very common for individuals and business owners especially to consider their planning options well in advance.

The good news is that there are strategies and opportunities to identify and mitigate risk, but they do depend on your state. You want to find a professional that is up to date on all relevant state laws and regulations to ensure that your estate is protected properly. Contact us today to begin or to review your existing plans by email at info@lawesq.net or at 732-521-9455.