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Important IRS Update: Significant Interest Penalty Increase for Tax Underpayments

The Internal Revenue Service (IRS) has recently announced a critical change that could significantly impact taxpayers who underpay their taxes. This update is particularly relevant as we approach the next tax filing season. Previously, the IRS charged a 3% interest penalty on estimated tax underpayments. However, this rate has now been increased to a substantial

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Will Inflation Hurt Stock Returns? Not Necessarily

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1993, one-year returns on

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Maximize Your Charitable Impact with These Four Strategies

As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies: Need Guidance? Reach Out to Us! These strategies are just a starting point. There

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Do I Need a Trust?

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Category: Estate Planning Estate Taxes Income Tax Planning Probate Trusts

As trusts have gotten more popular and evolved in type to appeal to a lot of people, so now you might be under the impression that you must have a trust. While it’s not for everyone, there are so many trusts out there that it’s very likely you could find one that will help you to meet your goals, including to protect your assets and minimize taxes.

Do I Need a Trust?

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Major liquid assets, setting up care for a child with special needs, and a variety of real estate ownership are a few of the reasons that people might initially turn to trusts. If you’re a resident of a state with a high state estate tax, income tax or probate costs, you’re likely to be concerned about the hit of taxes, too. This refers to situations where a federal estate tax is factored into your asset value, but an additional taxable event occurs at the state level. Without proper planning, you could find that the value of the assets you have worked so hard to build is extremely vulnerable to these taxes and costs.

Contact our offices today to learn more about how these trusts can help you. Send us a message at info@lawesq.net or call us 732-521-9455.

Minimize Estate Taxes Through Gifting

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Category: Estate Taxes

Your estate planning goes farther than figuring out who should be named as a beneficiary and how much they should receive. Comprehensive planning also thinks about the best way to distribute assets and how the methods you choose influences the beneficiary’s life.

Minimize Estate Taxes Through Gifting
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On your death, your estate is subject to Generation Skipping Tax and Estate Tax. In states like New Jersey, your estate will also be subject to a State Estate Tax plus an Inheritance Tax in some cases. Without realizing the impacts, a portion of your estate can be swallowed up before your beneficiaries ever receive it. Some states also impose their own estate tax, diminishing your estate even further. The good news is that some advance planning with a professional can reduce the impact of these taxes.

To start with, you can take advantage of the federal exemption amount of $5.34 Million, which allows you to give away up to that amount during lifetime and death (total) without initiating that estate tax. Annual exclusion gifts, too, can be helpful for minimizing the blow of a big tax. Married couples are able to combine exclusion powers to give up to $28,000 per year per person without being hit with a tax, and this is separate from the federal gift-tax exemption.

This is just the tip of the iceberg when it comes to strategies to protect wealth and minimize taxes. Many tools are available and you can learn more from contacting us today for a consultation. Send us a message at info@lawesq.net or contact us via phone at 732-521-9455 to begin.

Put Your Trust in a Trust

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Category: Estate Taxes Last Will & Testament Trusts

Now is a great time to evaluate how using a trust can help you achieve your financial goals. The federal gift tax and estate tax laws give big incentives for using trusts in estate planning. In the pasts, trusts have been used mostly to transfer gifts to children while limiting estate taxes on wealth, but there are numerous other benefits.

Put Your Trust in a Trust
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An appropriately funded trust can help ensure that your assets are protected and available in the event that you become incapacitated. When you pass away, that same trust can be used to pass on assets to your beneficiaries. You can also protect your legacy by keeping your assets away from any of the heir’s creditors, too.

There are probate savings and privacy reasons that a trust can benefit you, too. There are potentially large fees for going through probate and your probate records will also be public. Putting your assets into a revocable trust instead can keep them from having to go through probate at death- therefore protecting you and your family’s privacy.

Finally, trusts can be a good tool when you live in a state that has an estate tax. Some states levy estate taxes that are rather substantial, but trust planning is one way to cut down on how many estate taxes will be levied on your death. This can also be a good tool for those who have real estate located in a state that imposes estate taxes.

Thanks, But No Thanks. State Estate Taxes & Disclaimer-Based Approach

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Category: Estate Taxes Probate

Twenty-one states have their own estate taxes, including New York and New Jersey. Many of these states have exemption amounts beneath the federal exemption, so it’s worth factoring in state estate taxes in your overall estate planning process.

Thanks But No Thanks State Estate Taxes & Disclaimer-Based Approach
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One way for married couples domiciled in those states with it’s own estate taxes to plan is to use the disclaimer-based approach. A disclaimer refers to a refusal by a beneficiary of a gift transferred to that beneficiary during life or at the time of death through a will, trust, or another mechanism.
The government makes a distinction between “nonqualified” and “qualified” disclaimers.

Using a disclaimer-based approach, the residuary estate passes on to the surviving spouse in a plan that provide that if the surviving spouse disclaims the interest, those assets will pass to a disclaimer credit shelter trust. This approach can add an element of flexibility to planning by empowering the spouse to make any needed changes. The surviving spouse will need to execute a disclaimed within nine months of the date of death. In order to ensure that you are prepared to use this disclaimer, work with an estate planning attorney to learn more. For all your complex estate planning, contact us at info@lawesq.net or via phone at 732-521-9455 to get started.

The N.Y. State of Mind: Changes to New York Gift Tax and Estate Laws

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Category: Estate Planning for Attorney Estate Taxes

The NY State of Mind Changes to New York Gift Tax and Estate LawsAt the end of March, Governor Cuomo approved changes to New York’s estate and gift tax laws while also making amendments to income tax rules. One of the most important changes was in relation to the estate tax exclusion amount. The amount that an individual can pass without being hit by the New York estate tax, which was previously $1 million, has now been increased based on the follow specifications:

  • For those individuals who pass away between April 1, 2014 and April 1, 2015, the exclusion amount is increased to $2,062,500
  • For those individuals who pass away between April 1, 2015 and April 1, 2016, the exclusion amount is increased to $3,125,000.
  • For those individuals who pass away between April 2, 2016 and April 1, 2017, the exclusion amount is $4,187,500
  • For those individuals who pass away between April 1, 2017 and January 1, 2019, the exclusion amount is $5,250,000.

Starting in 2019, the exclusion amount will be indexed for inflation purposes. Presently, the New York estate tax will stay at 16 percent. It’s also worth knowing that there’s an estate tax cliff for those with taxable estates between 100 percent and 105 percent of the state exclusion amount. There’s never been a better time to meet with an estate planning specialist to ensure that you are maximizing protection of your assets. Since estate planning and tax rules are complex and constantly changing, an annual review is recommended so that your documents and plans are fully up to date. To capitalize on your assets with a comprehensive estate plan, contact us at 732-521-9455 or email us at info@lawesq.net