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FREE MONEY: WHY THE FEDERAL GIFT TAX EXCLUSION IS ONE OF THE BEST ESTATE STRATEGIES IN 2014

20
Sep

By Jason Stern

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As a NY estate lawyer probating the estates for families in New York I have noticed some very big shifts in the estate law. Many of these shifts are just not being utilized by clients, mainly the Federal Gift Tax Exclusion. Most of us know that a will is a great place to begin planning your estate. For a relatively small amount of money, your NY estate lawyer you can help you transfer millions of dollars of wealth to your surviving heirs in the manner of your choosing. No matter what we all need a will.

But what then? Well if you like your kids and want to spare them the costly headache of paying nightmarish estate taxes, you can simply leave it to them while you are alive. If this sounds too easy and you are waiting for the catch, well you are in luck cause it is that easy.

Although federal estate tax only applies to estates of married individuals worth $10,500,000.00or more, the NYS estate tax kicks in at $1,000,000.00. As a NY estate lawyer, I am all too familiar with the NYS estate tax structure. The NYS estate tax is a progressive tax, which is a nice way of saying it gets progressively worse as the value of your estate increases. The NYS estate tax starts out at a manageable 6% for estates over $1 million dollars, escalating to 16% for estates of $10 million dollars or more. If this sounds pretty ominous it is.

You do not have to be a NY estate lawyer to see that New York is an expensive municipality to run. Hence traffic cameras giving unsuspecting motorists expensive tickets, costly property taxes, exorbitant parking tickets that would be unheard of in any other part of the country and of course the death tax.

Believe it or not we have a friend in all this, the Federal Gift Tax Exclusion. The Federal Gift Tax Exclusion is simply the legislatively designated amount that each individual and/or married couple can gift away in their lifetime(s). Under the current tax structure in 2013 an individual can gift up to $5,250,000.00 or $10,500,000.00 as a married couple during their lifetimes. In the calendar year 2014 the Federal Gift Tax Exemption gets even more attractive rising for inflationary purposes to $5,340,000.00 for individuals and $10,680,000.00 for married couples.

Thus the Federal Government is literally handing your heirs an extra $180,000.00 in NYS estate tax exemption by utilizing the 2014 Federal Gift Tax Exemption. As such by gifting assets away while you are still alive you are decreasing the amount of estate tax liability of the aggregate amount calculated for your estate tax purposes. This can easily save your heirs and their heirs hundreds of thousands if not millions of dollars in NYS estate tax liability.

Now depending on the value of your estate this may or may not do the trick. For clients with estates in excess of the federally allotted gift tax exemption, $10,680,000.00, they may have to think about creating a more sophisticated estate strategy. As any and all estate gifts in excess of the Gift Tax Exclusion are subject to the gift tax rate of 35%. However, as a NY estate lawyer I feel very comfortable prescribing this estate strategy for many clients. There is one catch to the Federal Gift Tax Exemption. Every donor must survive 36 months (3 years), after making the gift or else the gift lapses and the amount comes back into their estate for estate tax purposes.

The Federal Gift Tax Exclusion is both effective in its simplicity and in the amount of inheritance you can shield from estate tax liability. As such, until NYS develops its own State Gift Tax, only Connecticut and Minnesota currently has State Gift Tax, this will perhaps remain the most underutilized and best estate weapon in our estate-planning arsenal.

Additionally, as a NY estate lawyer I can tell you this can often be more advantageous than creating a trust or other sophisticated estate plans. Trusts can fail for a number of reasons. As a NY estate lawyer I have personally challenged trusts that were either not set up properly by another NY estate lawyer or were the subject of undue influence or fraud. In some cases trusts can even be challenged by the I.R.S.

Contrary to popular belief, the Federal Estate Tax structure can be our friend. If your NY estate lawyer knows what they are doing he or she should have an intimate and current understanding of the existing tax structure. The estate tax structure is a living and breathing code that changes each year to meet societal and inflationary challenges. However as an experienced NY estate lawyer I can tell you these changes are not always bad for your estate plan.

If you or a loved one are thinking about planning their estate, feel free to speak to an experienced NY estate lawyer at the Law Offices of Jason W. Stern & Associates for a free consultation at (718) 261-2444. Our NY estate lawyers have been planning the estates for New Yorkers in Queens, Manhattan, Bronx, Brooklyn, Nassau, Westchester, Orange, Putnam, Rockland and Dutchess Counties for years.