A not so funny thing happened
in my office the other day…
…NEW JERSEY ESTATE TAXATION!
During a consultation, my clients asked what the “exemption amount” for Federal Estate tax planning was. I responded by telling them that under the most recent Federal Tax revision of December 2017, the exemption amount is now $11,200,000.00 per person that can be utilized as a credit during your lifetime gifting programs or as a credit at death. I also advised them of the now $15,000.00 annual gift tax exclusion.
Since my clients’ assets did not exceed $11,200,000.00 per person or $22,400,000.00 per couple, it was clear that NO FEDERAL estate tax exposure existed.
As the saying goes LONG STORY MADE SHORT (BTW, that’s impossible in law!) Now I had to explain the New Jersey Estate tax twist, and I realized this would take a while: The State of New Jersey enacted a law to create an Estate Tax for any estate with assets in excess of $2,000,000; simply put, the state was running in the “red” and as predicted in my website in 2002, it was only a matter of time before the state (a) realized it was operating in the red and should “do something…” and (b) realized that the Federal Estate Tax legislation of 2001 included a provision that phased out the Federal credit available to pay New Jersey Estate Taxation.
What this all means is: (a) The Federal Estate Tax exemption is $5,459,000 and (b) the New Jersey Estate Tax Exemption is $2,000,000. So that we are clear on this, any estate in excess of $2,000,000 must file two tax returns with the State of New Jersey i.e. the New Jersey Inheritance Tax Return as well as the New Jersey Estate Tax return. Additionally, all estates in excess of $ 5,459,000 must file the Federal Estate Tax Return Form 706 with the Federal Government. Also, so that it is crystal clear in the majority of New Jersey estates, life insurance is a taxable asset when payable to a named beneficiary.
The following chart illustrates the Federal Estate increases.
|Year||Exemption||Top Estate Tax Rate|
|2010||Estate Taxes Repealed for 2010|
So, do you revise or create your Estate Planning to cap off your Credit Shelter Trust a/k/a By-Pass Trust with a formula? Also, do we create that Irrevocable Life Insurance Trust to transfer life insurance out of your name and therefore, removed from your taxable estate.
I suggest to my friends and clients that it is definitely time for an Estate Tax Planning review. Contact us today.
Steven W. Tarta