Understanding Estate Tax Litigation

A not so funny thing happened
in my office the other day…


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enacted a law to create an Estate Tax for any estate with assets in excess of $2,000,000; HOWEVER, this law has been repealed effective January 1, 2018. Moving forward we are concerned this estate tax may be reinstated which is exactly what the Federal government did in 2011 when it reinstated the Federal Estate Tax and made it retroactive to January 1 of that year. We are concerned the State of New Jersey may do the same thing by reinstating the Estate Tax and making it retroactive to January 1, 2018, so we are carefully monitoring movement in Trenton regarding the possible reinstatement of New Jersey estate taxation. The concept of reinstatement is already in committee and under discussion in Trenton.

What this all means is (a) :The Federal Estate Tax exemption amount is $11,200,000 per person in 2018 before taxation commences and (b) although the New Jersey Estate Tax is presently repealed in 2018, the New Jersey Inheritance Tax remains in effect and in most cases tax returns must be filed with Trenton in order to receive the Inheritance Tax Waiver necessary to (a) close various accounts and (b) be recorded with the County Clerk to remove the New Jersey lien placed upon real estate upon death.

The following chart illustrates the Federal Estate increases.

Year Exemption Top Estate Tax Rate
2001 $675,000 55%
2002 $1,000,000 50%
2003 $1,000,000 49%
2004 $1,500,000 48%
2005 $1,500,000 47%
2006 $2,000,000 46%
2007 $2,000,000 45%
2008 $2,000,000 45%
2009 $3,500,000 45%
2010 Estate Taxes Repealed for 2010
2011 $5,000,000 35%
2012 $5,120,000 35%
2013 $5,250,000 40%
2014 $5,340,000 40%
2015 $5,430,000 40%
2016 $5,450,000 40%
2017 $5,490,000 40%
2018 $11,180,000 40%
2019 $11,400,000 40%
2020 $11,580,000 40%
2021 $11,700,000 40%
2022 $12,060,000 40%
2023 $12,920,000 40%
2024 $13,610,000 40%

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.

Lawyer Signature
Steven W. Tarta
February, 2018