Make Estate Planning a New Year's Resolution

Happy New Year! “Another year over, a new year just begun.” You’ve made your resolutions. But don’t forget your estate plan! Estate planning is a dynamic process and must be reviewed periodically so that your planning remains current. As the new year begins, the time is right to review your estate planning goals and existing estate plan documents.

Odds are good that the substantial changes to the estate and gift tax laws over the past few years will have a dramatic effect on the way your estate passes to your intended beneficiaries. Changes in your financial information and/or family situation over the years may also require amendments to your existing estate plan and related documents. At a minimum, it is good to review your estate plan documents annually to make sure that they still make sense, both as relates to your wishes for disposition of your assets and to your appointment of fiduciaries to administer your estate and any trusts you created. An annual review can help ensure that your estate plan and related documents comply with changes in both the law and your circumstances.

The federal estate tax exemption is $11,580,000 for decedents dying in 2020. In addition, “portability” remains in effect, allowing a total of $23,160,000 to be passed to the next generation free of federal estate tax. Note, however, that the exemption is scheduled to automatically decrease to $5,000,000 after December 31, 2025 (indexed for inflation) and, depending on what happens in Washington in 2020, the federal estate tax may change at an earlier date. For those of you who still have “credit shelter” Wills, a review and an update may be long overdue.

New Jersey has repealed its estate tax. This change should be reflected in your current estate plan. The New Jersey inheritance tax remains in effect, but dispositions to a Class A beneficiary (i.e., a spouse, child, grandchild, or parent) are exempt from New Jersey inheritance tax. New Jersey currently has no gift tax in place, although gifts you make within three (3) years of your death are brought back into your estate for New Jersey inheritance tax purposes.

For New York residents, the State estate tax remains in effect. The New York estate tax exemption is now $5,850,000 in 2020, but there is no “portability.” Note that New York estate tax is subject to a “cliff”, so that if the taxable estate of a New York resident exceeds $6,142,500 (the exemption plus 5%), the exemption disappears. New York has also maintained a 3 year lookback for purposes of gift tax. Accordingly, any gift made within 3 years of death will be brought back into the estate for New York estate tax purposes.

Regardless of the size of your estate, the changes discussed above may require you to rethink your estate plan Even if you think that you will never be affected by the estate tax, planning is still an important step for everyone to consider, for reasons that may include asset protection and planning for your beneficiaries. There is no time like the beginning of a new year to get your planning in order, and we are happy to discuss that process with you.