In the words of John Lennon: “Another year over. And a new one just begun.” So this year, among your New Year’s resolutions, why not review your existing estate plan and estate plan documents (Will, Power of Attorney, Health Care Directive)?
For 2015, the top federal estate tax rate remains at 40%. The federal estate tax exemption amount is up to $5,430,000 per individual. That amount is $10,860,000 for a married couple, if each owns at least $5,430,000 in his or her own name, or if they take advantage of “portability”. But remember, there is no “portability” for state estate tax purposes.
The New Jersey estate tax exemption amount remains at only $675,000. For couples with total assets of over $1,350,000 that means there can be New Jersey estate tax due on the death of the surviving spouse, even if their assets are well below the federal estate tax threshold.
A big change in the New York estate tax exemption amount took place last year. An increase to the New York exemption is being phased in so that it will conform to the federal exemption amount in 2019. For decedents who die prior to April 1, 2015, the New York estate tax exemption amount is $2,062,500. For decedents dying after April 1, 2015, the exemption is $3,125,000. For couples with total assets of over $6,250,000 there can be New York estate tax due on the death of the surviving spouse after April 1, 2015.
Non-tax considerations, including changes in your family situation, such as marriage or divorce, births or deaths, or a change of residence to another state, may also call for updating your estate plan documents and your estate plan.
Consider also the use of gifting strategies, life insurance planning, and use of lifetime trusts for both tax and non-tax purposes. Even if you fully used up your federal state and gift tax exemption in 2015 ($5,340,000 for an individual, $10,680,000 for a married couple), the increased 2015 exemption amount ($5,430,000) allows you to make additional gifts of $90,000 ($180,000 for a married couple) in 2015 beyond the $14,000 annual gift tax exclusion gifts per donee. But be careful what you give away. A gift of appreciated property can result in a loss of the stepped-up basis the donee would take if he or she inherited the property. The capital gain on the subsequent sale of that property could exceed any estate tax savings.
Finally, don’t forget to check your beneficiary designations on retirement plans and life insurance to make sure they are up to date.
Here’s hoping you stick to your New Year’s resolutions in 2015!