Unfortunately, Estate Planning Must take Political Considerations in Account in 2019

In recent decades, phased in changes to estate tax exemptions, and unexpected surprises which dramatically changed rates and exemptions have made estate tax planning more difficult and complicated.  Despite the changes, the underlying strategies remained similar over the last fifty years, using tried and true techniques built on rulings and loopholes inhabited by tax lawyers and advisors who were intent on keeping their client’s wealth intact for future generations.  Those strategies are now threatened, and the time to use them may be running out. The “sunset” of the current generous estate tax Exemption of $11.4 million (after indexing annually for inflation) in 2026 presents a huge challenge.  The Exemption declines back to the 2011 level of $5 million (before annual inflation adjustments are included).  State […]

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Obama’s Final Budget Proposal Continues to Address Estate Planning Issues

The Administration included in its 2017 budget proposals two new proposals regarding the reporting of cost basis for persons receiving inherited property, and to require donees to report their basis consistently with that of the donor with respect to lifetime gifts reported on gift tax returns. It also repeats several former estate planning-related proposals, including: (a) simplifying the income tax limitations on charitable deductions for gifts to private foundations; (b) requiring that GRATs have a minimum length of 10 years and a minimum remainder of 25 percent of the value of the transferred assets (or $500,000, if greater); (c) requiring a person who buys an interest in an existing life insurance contract with a death benefit of $500,000 or more to report the purchase and report […]

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Tax Thresholds for 2016 vs. 2015

The Tax Thresholds, 2016 table provides some important federal tax information for 2016, as compared with 2015. Many of the dollar amounts are unchanged or have changed only slightly due to low inflation. Other amounts are changing due to legislation.  Please click on the highlighted text to access the document, and Happy 2016 from the Will Doctor.

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Cuomo Proposes Drastic Reduction in the New York Estate Tax!

Last week,  Andrew Cuomo proposed bringing New York into conformity with the liberalized Federal Estate Tax Regime, by 2019.  It’s not next year, but far better than a poke in the eye with a sharp stick. The proposal would reduce the NY maximum marginal rate to 10% from 16%, and tie the NY Exemption to the Federal-now $5.34 million, and indexed for inflation (it went up $90k last year).  This is great news, since a person with a $5 million estate under current law owes the IRS nothing (assuming no lifetime gifts), and owes NY $391,600. Of course, New Yorkers can take advantage of the fact that we don’t have a gift tax, and NY does not tax lifetime gifts.  So you can reduce the […]

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Remember: Federal Estate Taxes are Only for the TOP .2%

Due primarily to increases in the applicable exclusion amount, the number of estate tax returns filed decreased from more than 108,000 in 2001 to just over 15,000 in 2010. After accounting for marital and charitable bequests, as well expenses and debts of the estate, less than half of the estates filing in 2010 owed estate tax.  This was before the applicable exclusion amount jumped to $5 million and became indexed for inflation. It is estimated that in 2012 perhaps fewer than 4,000 estate tax returns were filed for taxable estates. With the increased applicable exclusion amount, less than 0.2% of Americans are expected to be subject to the federal estate tax. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% […]

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Direct Charitable IRA Distributions No Longer Allowed

For tax years 2006 through 2010, amounts up to $100,000 per year distributed directly to charitable organizations from an individual retirement plan, other than a Simplified Employee Pension (“SEP” IRA) or a Simple Retirement Account (“SIMPLE” IRA), on or after the date the participant attains the age of 70 1/2 are excluded from income.   The exclusion does not apply to distributions made to Section 509(a)(3) supporting organizations or donor-advised funds.  A donor is not allowed to claim an income tax charitable deduction for such distribution to charity, and doesn’t report the distribution as income, either. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Tax Relief Act”) effectively extended this rule through 2011, and the American Taxpayer Relief Act […]

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No More Taxes: Don’t Forget to Jump Through the Hoop

We recognize that far fewer individuals who pass away in 2013 will be required to file federal estate tax returns, with the AEA (Applicable Exclusion Amount) at $5.25 million, (before the increase of $90,000 next year to $5.34 million, per person).  Don’t  forget, however, that the AEA remaining to protect the inheritance will be reduced by taxable gifts made during life. Of course, married people can protect twice as much-either through careful planning with trusts (recommended, for many reasons), or through “portability”, the excellent (and long delayed) new tax break which allows the AEA of the spouse who dies first (the “predeceased spouse”, or PD) to “port” or pass over to the surviving spouse, to supplement their own AEA.  This tax benefit is called the […]

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Estate Tax Filers: An Exclusive Club

The Congressional Research Service has issued a report concluding that the new estate tax regime is permanent.  They noted that: The estate tax will affect less than 0.2% of decedents over the next decade The estate tax is concentrated among high income taxpayers: 96% is paid by the top quintile, 93% by the top 5%, 72% by the top 1%, and 42% by the top 0.1% About 0.2% of estates with half or more of their assets in businesses will be subject to the estate tax About 65 farm estates (or approximately one per state) are projected to be subject to the estate tax About 94 estates (about two per state) with half their assets in small business with owners who expect their heirs to […]

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