Wills, Trusts & Estates Insights — Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events

Changes to the Estate and Gift Tax Laws Still Pending

Published on: October 20, 2021 | by David G. Hardin

It has been our hope that estate and gift tax reform would be settled by the time this article goes to print. Unfortunately, this is not the case. Revenue issues involving the debt ceiling and stop-gap spending are circulating in Congress at the same time as legislative priorities, like infrastructure, are being hashed out, and procedural steps, like filibuster and reconciliation, are being threatened. Tax reform is but one issue in the mix, and its ultimate resolution is influenced by, and dependent upon, the resolution of a number of the others which are still unresolved. This article will provide a summary of the most recent available information.

Perhaps the most significant proposal on the table is the reduction of the lifetime estate and gift tax exemption, often referred to as the “unified credit,” from its current $11,700,000 per person to $6,020,000 per person in 2022 as estimated by the staff on the Joint Committee on Taxation. The lifetime exemption was increased from $5.5-million to $11-million (with adjustments for inflation) as part of the 2017 Tax Act. The increased exemption amount is due to sunset by its own terms on December 31. 2025, but the current proposal would accelerate that timetable. Individuals looking to make maximum use of the higher lifetime exemption currently available will want to consider making gifts before any reduction becomes effective. Under the proposed bill, the provision would apply to decedents dying and gifts made after December 31, 2021.

The current proposals would eliminate the use of discounts for transfer tax purposes when valuing passive, nonbusiness assets. Discounts are generally based on concepts of minority interest and lack of control, and can reduce the value of an asset for gift or estate tax purposes by as much as 50% or more. The proposal would not affect the valuation of assets that are used in the conduct of a trade or business, which could continue to be valued at a discount. Discounts have been useful in leveraging lifetime estate and gift tax exemptions. The new rule, if adopted, would be effective as of the date of enactment.

Unequal Inheritance

Published on: May 19, 2021 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Elizabeth Candido Petite recently spoke with the New York Times for an article The Unequal Inheritance: It Can Work, or It Can ‘Destroy Relationships’. In the article Elizabeth shares her insights on estate planning strategies that can be used when someone decides to bequeath different amounts to their heirs. The strategies she shares come from her experience helping estate planning clients navigate the intricacies of early inheritance, gifting for caregiving children and second marriage families.

The Impact of a Divorce on Estate Planning

Published on: May 19, 2021 | by Nicole A. Kobis and Elizabeth Candido Petite

Births, deaths, marriages, and divorces reshape the definition of family for individuals on a constant basis. It’s no wonder, then, that family law and estate planning often go hand in hand. Estate planners and divorce attorneys alike are often presented with “what if” questions that span both areas of law. Here, a few common questions are explored which can help guide people faced with these life transitions as they make decisions to protect their spouses, children, and assets.

Can I change my Will while I’m getting divorced? Should I?

Although the last thing that many people want to do once the divorce action has begun is engage another attorney, it is actually a good idea to revisit your estate plan at this time. Public policy prohibits disinheriting your spouse, so a spouse who is not named in the other’s Will could file a claim for the “spousal elective share” to receive a portion of the deceased spouse’s estate. The filing of a divorce complaint does not prevent a soon-to-be former spouse from inheriting an equitable share of marital assets. The New Jersey Supreme Court has analyzed what should happen in this situation and applied a remedy which does not allow the surviving spouse a windfall, but at the same time recognizes that at the time of the death, the parties were in fact still married.[1]

Proposed Estate & Gift Tax Reform

Published on: May 19, 2021 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On March 25, 2021, Senators Sanders and Whitehouse introduced a bill titled “For the 99.5% Act.” If enacted, the following are among some of the significant provisions:

Federal estate tax exemption reduced from $11.7 million to $3.5 million
Gift tax exemption reduced from $11.7 million to $1 million

Estate Planning With Family Businesses

Published on: February 25, 2021 | by Anne Marie Robbins

To the owners of family businesses, estate planning can sometimes be an after-thought. Owners are often so involved in building their business and managing its daily operations that they do not have time to devote to the planning that will become important when the owner is ready to hand over management control and ownership to successors. It is often the case with successful family businesses that there has been little or no thought given to the transition of management and ownership, with the result being there is no succession plan in place. Further, available strategies to transfer the ownership of the business to younger generations of the family in a tax-effective manner may not have been utilized.

When a family business is one of the assets, or perhaps the primary asset, a well thought out strategic and financial plan for the business and an estate plan for the family are critically important. The following is a brief and by no means exhaustive outline of some points to consider.

Strategic Planning

Unclaimed Property in New Jersey

Published on: February 25, 2021 | by Anne Marie Robbins

Every state has an unclaimed property program holding forgotten property belonging to its residents such as uncashed checks, security deposits, abandoned accounts, and more. “Unclaimed property” generally refers to tangible (items in safe deposit boxes) and intangible (bank accounts, stocks, and checks) personal property. Eventually, the state takes over the unclaimed property in a process known as “escheatment.”

In New Jersey, the Unclaimed Property Administration is a section of the Department of the Treasury. The Mission Statement of the Unclaimed Property Administration is set forth on its website and reads as follows:

“The Unclaimed Property Administration (UPA) recovers and records abandoned or lost intangible and tangible property. The UPA’s goal is to return this property to the rightful owner and/or heirs. The New Jersey Unclaimed Property Statute ensures that property owners never relinquish the right to this property and the UPA only acts as a custodian until the property is returned.”

Increased Estate & Gift Tax Exemption for 2021

Published on: February 25, 2021 | by Anne Marie Robbins

The federal estate and gift tax exemption (known as the “basic exclusion amount”) has increased to $11.7 million per taxpayer in 2021. The exemption in 2020 had been $11.58 million. The increase means that in 2021, an individual can make gifts during life or at death totaling $11.7 million without incurring gift or estate tax; a married couple can transfer $23.4 million of assets. The annual gift tax exclusion remains at $15,000 per donee (or $30,000 if spouses elect gift-splitting).

Note that it seems likely the Biden administration will attempt to pass a reduction in the exemption as well as other changes to the estate and gift tax law during the next two years when there are Democratic majorities in the House and Senate. It is unknown whether any such changes will be made retroactive to January 1, 2021.

We recommend consulting with your estate planning attorney early in 2021 to discuss whether large gifts now may be advisable.

Honorable Judge Katherine Dupuis, (Ret.) Discusses Mediation in Estate-Planning Disputes

Published on: December 10, 2020 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In the latest article for WealthManagement.com, the Honorable Judge Katherine Dupuis, (Ret.) of Lindabury’s Alternative Dispute Resolution Practice Group offers insight on how mediation can be a viable way to achieve cost savings and justice during estate-planning disputes. This write-up addresses both what can go wrong and how to move forward through the process. To read it in its entirety, click here.

Uses of Disclaimers in Post-Mortem Planning

Published on: September 29, 2020 | by Lauren M. Mulcahy

The idea of giving up an inheritance might sound foolish, but in certain circumstances it can be a beneficial estate planning tool. While we as estate planning attorneys try to prepare for every possible outcome at the time of a death, there is no way to predict the timing of a death, the laws at that time, nor the assets a decedent will actually hold at death. Especially in today’s environment where COVID-19 has shocked our economy, the tax laws could change at any time.

A disclaimer or a renunciation is a refusal to accept an interest in property. No one can be forced to receive a gift or bequest; everyone has the right to either accept or refuse what is given. In certain situations, disclaiming may be more beneficial than actually receiving the gift. If the beneficiary of a decedent’s estate disclaims an asset passing to the beneficiary (the “disclaimant”) as a result of decedent’s death, the asset passes to the next-in-line beneficiary as if the disclaimant had predeceased the decedent.

Under federal law, a “qualified disclaimer” is an irrevocable and unqualified refusal by a person to accept an interest in property so long as the following requirements are met:

The SECURE Act Eliminated Stretch IRAs – Now What?

Published on: September 28, 2020 | by Elizabeth Candido Petite

The SECURE Act (“Setting Every Community Up for Retirement Enhancement” Act), which was enacted in December 2019, eliminated the “stretch IRA” – a feature of an inherited IRA account[1] that allowed the beneficiary to stretch out required minimum distributions (RMDs) over his or her lifetime, thereby deferring a significant amount of income taxes on the RMDs. Now, beneficiaries must withdraw the entire account over the 10-year period following the owner’s death. Doing so will significantly accelerate the income tax due with respect to the account.

Perhaps you are thinking: this is a piece of legislation coming from Washington – there’s got to be a loophole, right? The answer is: maybe. Here are a few planning ideas to consider in light of the SECURE Act:

Increase the number of designated beneficiaries.