Estate Tax planning is perhaps the hardest area for advisors to guide their clients. The amount of money that can pass free of estate tax, on a Federal Tax basis, from the deceased to their heir(s) has changed substantially since 2001. In 2011 the Federal exclusion was set at $5,000,000 (adjusted for inflation) for years 2010, 2011 and 2012. In 2013, the Estate Tax exclusion was set to $5,250,000 with the amount in excess of the exclusion being taxed at 40%.

All of the above ignores the taxes that may be incurred at the State level. New Jersey, specifically, has become problematic as it has “uncoupled” from the Federal Estate Tax exclusion amount and left its exclusion amount at $675,000. New York has taken the same approach, however, New York’s exclusion amount is set at $1,000,000. Many other States have uncoupled from the Federal exclusion amount. All of these factors, the floating target for the Federal exclusion amount, the actual repeal of the estate tax and the fixed, substantially lower exclusion amounts for New Jersey and New York, make it imperative that the proper Estate planning be done. We are knowledgeable in the use of Trusts, Charities and Private Foundations as tools for Estate planning. Very often, with the proper planning, the confiscatory nature of estate taxes can be greatly reduced or even eliminated. We work closely with many very qualified estate planning Attorneys and can guide and help you with the implementation of the proper plan for you.

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Very often, for estate planning purposes, it is beneficial to make annual gifts. If the gifts are below Federally set guide lines there is no required tax filing, the gifted amounts avoid estate taxes and there is no income to the beneficiary. Of course there is no deduction for the donor. In 2013, you can gift up to $14,000 per person. Further, a consenting married couple can gift up to $28,000 per person.
A one time gift exclusion of up to $1,000,000 can be given with no immediate taxation to the donor or the donee. The $1,000,000 will be added back to your estate, however, upon your death. This method of gifting is generally used to remove assets from a taxable estate that are believed to have a high likelihood for appreciation in value during the donors lifetime.