Articles Posted in Estate Taxes

An Estate Planning “Perfect Storm”

Published on: November 7, 2011 | by Ettinger Law Firm

Investment News published a story yesterday declaring that the current financial, political, and social climate made it a “perfect storm” for estate planning. It was explained how tax policy proposals, low interest rates, and a relatively weak economy make now a particularly worthwhile time for local families to take steps to plan for their long-term financial future. Our New York estate planning attorneys continue to help many local families do just that. As one observer explained in the article, “If individuals are trying to transition assets to the next generation, we currently have a perfect storm–in a good sense–to do it.”

Any time is a good idea to visit a professional and make future financial preparations. However, it may be particularly valuable to do so now, because planning strategies currently available might soon be gone. For one thing, large estate tax and gift tax exemptions now make it possible for individuals to transfer up to $5 million (or $10 million for couples) tax free. However, it is unlikely that the current tax scheme will remain–it is only a matter of what changes will be made and when. Observers have noted that estate rules have been changed 19 times in the last quarter century alone.

The current climate may present particularly attractive options encouraging some families to make major decisions to save on taxes and pass on assets. But many advocates explain that the tried and true planning tools that have long been available often remain the best way for many community members to accomplish their long-term estate planning goals. For example, while it may be favorable to give large gifts in the current environment, many families are uncomfortable making extremely large gifts. Instead, their goals may be best met by making smaller gifts under the $13,000 annual exemption amount. Those families can then save on estate taxes down the road by setting up trusts that distribute money more conservatively along the way.

Federal “Super Committee” May Target Gift Tax in Deficit Reduction Scheme

Published on: November 1, 2011 | by Ettinger Law Firm

The gift tax has implications in a variety of New York estate planning situations, from deciding the best way to provide aid to loved ones to conducting business succession planning. As with many other tax issues, timing is important because lawmakers at the federal and state level can change these rates. While the risk of rate changes always exists, there has been significant discussion as of late about a variety of potential changes involving the 12-member federal “Super Committee.” The Super Committee has been charged by Congress with reducing the federal deficit by $1.5 trillion over the next ten years. To do so, the group will have to enact a combination of spending reductions and tax changes. No matter what combination they ultimately decide upon, it is highly likely that their work will have effects on local residents crafting their New York estate plan.

For example, last week the Wall Street Journal’s Market Watch published a story explaining proposed changes to gift tax exclusions. The specific committee meetings are mostly private, so some of the recent thoughts on the committee’s actions are speculative. However, it is known that one of the President’s proposed recommendations to the committee includes reducing the estate, gift, and generation-skipping transfer tax thresholds. The proposal would reduce the tax-free gift threshold to its 2009 level of $1 million. Currently the tax-free threshold is supposed to stay at $5 million until the end of 2012. However, many are speculating that the committee may decide to return the exclusion back to $1 million a year early as a cost-saving measure.

The story’s author summarizes the changes by noting, “Overall tax planning and gift tax thresholds that are now available could be at risk for families…not much good can come from the committee’s recommendations from a wealth preservation perspective.” Clearly, the potential actions by this group may make it important for some local residents to take long-term financial actions now. Our New York estate planning attorneys urge all community members who may be affected by these changes to visit with a professional to either create a plan or update an existing one. Depending on the advice received, it may be prudent to accelerate planned lifetime gifts, review estate-tax funding mechanisms, or otherwise revise estate plans.

Estate Tax Issues Continue to Plague Married New York Same Sex Couples

Published on: August 30, 2011 | by Ettinger Law Firm

Thousands of same sex New York couples have wed since the state became the sixth to legally allow such unions last month. At the time our New York estate planning attorneys noted how the change means that these couples are no longer required to pay state taxes on domestic partnership benefits, will gain access to worker’s compensation benefits, can bring wrongful death lawsuits on behalf of their spouse, and can file joint state tax returns. In addition, surviving same sex spouses are no longer subject to New York estate taxes on assets they receive from their partners at death.

However, the fight for equality continues. Same sex marriages are specifically repudiated at the federal level through the Defense of Marriage Act (DOMA). This has significant repercussions on the estate planning needs of married same sex couples. These couples cannot file joint tax returns or joint bankruptcy petitions. Upon the death of one spouse the other cannot inherit veterans benefits or Social Security benefits. Also, property passing to a surviving spouse is subject to federal estate taxes.

Our New York estate planning lawyers work with families on plans that account for both state and federal tax and asset transfer issues. We understand the complexities that same sex couples continue to face when preparing for the future as a result of the divergence in the law at the state and the federal levels. These inequalities led several area publications to issue joint appeals last week calling for DOMA to be declared unconstitutional. For example, the Syracuse Post-Standard noted that “the law discriminates by denying homosexual spouses significant federal benefits that flow automatically to heterosexual spouses.”