In view of the repeal of the New Jersey estate tax as of January 1, 2018, as well as the recent significant increases in the federal estate, gift and generation-skipping transfer tax (“GST”) exemptions to $11,180,000 per person, also effective January 1, 2018, many clients should review their estate plans.
A. Formula Gifts in Wills and Trust Agreements. For example, if the estate plan bases the disposition of the estate on the available estate tax exemption and divides the estate into shares, with one share for the spouse and the other share for the family, that plan could now result in over-funding the amount passing to family members other than the spouse, thereby reducing or eliminating the spousal share. In short, if the estate plan is based on a formula gift, whether outright or in trust, or if the plan creates a marital trust and a “credit shelter trust” or “family trust” (sometimes called an “AB trust plan”), the estate plan and documents should be reviewed.
B. GST Exemption Gifts. Similarly, if an estate plan includes a gift based on the amount of the GST exemption, for example, a bequest of the GST exempt amount outright to grandchildren, or to a trust for the benefit of children for life and then for grandchildren, this too could significantly reduce the amount a client may wish to provide for his or her spouse or other beneficiaries.