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.


For gifts to qualify for the annual gift tax exclusion in 2013, the gift must have been completed by December 31, 2013. This means that, if the gift is a check, the check must be presented for clearance to the bank before December 31st, 2013. Further, there can be no strings attached to the gift (i.e. restrictions as to the purpose or use of the funds).

If there is a need or desire to make larger gifts (in excess of the annual gift tax exclusion of $14,000 per person or $28,000 with a consenting spouse), an individual may pay directly the medical or educational expenses on behalf of the beneficiary. The amount of medical or educational gifting is limited only to the extent of the direct medical expense or the educational expense. As mentioned above, the gift amounts must be paid directly to the medical institution or to the educational institution.

Section 529 educational plans can also be used to fund educational expenses. The funds that are placed into Section 529 plans are not deductible for federal income tax purposes when made, however, there are a limited number of states that do permit residents to take a state income tax deduction for the contributed amounts. The income earned on the Section 529 plan is income tax free as long as the funds, including the interest earned, are used for qualified educational expenses. The rules for the beneficiary of the funds are fairly liberal. If a beneficiary graduates from college and funds remain in the 529 plan, a new alternate beneficiary can be named. The remaining funds can then be used for the educational expenses of the alternate beneficiary. The income earned in the 529 plan remains untaxed as long as the funds continue to be used for qualified educational expenses.