Estate Planning Tips

Here are a few points to help you reach your estate planning goals in the weeks and year ahead from President's Council member, Courtney Boniface, Esq.:

♦ The NY limit for what can pass to a non-spouse free of state estate taxes increased again this year, to $4,187,500. Under current law, it is expected to increase again to $5,250,000 on April 1, 2017. On January 1, 2019, the state exemption will match the federal estate tax exemption (but this could change if the federal estate tax rules change). Keep in mind that for NY, if your estate exceeds the limits by just 5%, your entire estate is taxed, not just the excess. Careful planning is the key to minimizing taxes, especially with this “cliff tax”! The CT estate taxes remain unchanged, “kicking in” at $2,000,000.

♦ October brought major changes to the NJ estate tax. Until the end of this year, only $675,000 can pass to non-spouse beneficiaries free of estate tax, but on January 1st this will rise to $2,000,000. On January 1, 2018 there will no longer be a NJ estate tax. However, NJ still has an inheritance tax, which taxes assets left to beneficiaries other than a spouse and descendants. Careful planning is still important. 

♦ Clients who have estate tax planning in their wills or trusts may wonder if it is still needed. Certain provisions may be beneficial for non-tax reasons, so don’t be too quick to have the language removed. It makes sense to review your plan so you understand all of your options.  

♦ If a tax-sensitive credit shelter (by-pass) trust was created when a spouse died, you and your trustee should review the terms of the trust. It might make sense for the trustee to distribute some of the assets to the surviving spouse now to take advantage of a step-up in basis in the future. There are pros and cons to distributing trust assets, so please get proper legal and tax advice before taking action.

♦ If you use 529 plans to save for college for young people, be sure the accounts have a designated successor owner. Otherwise, probate will be required if you die before the account is distributed. This costs time and money. Check your accounts on line or by phone and update as needed! 

♦ Last year Congress passed the Achieving a Better Life Experience (ABLE) Act. It provides the framework for states to establish 529 ABLE plans that offer tax-advantaged accounts for children with disabilities. The rules are complicated and particular to each state. If you have a beneficiary with a disability, this is a good time to review your estate plan. 

♦ In addition to traditional assets, like a home, bank and retirement accounts, you should also pay attention to your digital assets like online bank accounts, credit cards, email, online photo accounts, and smartphones.   Your legal documents should reference these types of assets . . . and someone you trust needs all those codes!

♦ Intra-family loans are a wonderful way to help family members purchase a home, start a business, go back to school, or pursue other costly endeavors. However, you need the proper paperwork to document the loan and set interest rates. Always consult with a professional before making a loan.

♦ If you have a revocable living trust be sure you have funded it properly. Assets left behind in your own name without a beneficiary will require probate. This can be costly and defeats one of the reasons you created a trust. Review your assets to see how they are owned. Retirement accounts should not be owned by your trust and should not name your trust as the beneficiary. If you are unsure of “what goes where” please call us and we can guide you. Also, if your house is owned by your trust (and it almost always should be), make sure your homeowner’s property and casualty insurance names the trust as “an additional named insured.” Call your agent, and if you have questions, we can give you a sample letter to use to make that happen.

 ♦ Visit your state’s website for unclaimed funds to see whether you, a loved one, or a long-deceased relative has unclaimed property. Funds get added all of the time. You may be able to claim these waiting funds!

♦ Powers of Attorney let agents act on your behalf, but we find that even if you have a “durable power of attorney” designed to be valid as long as you are alive, getting banks and others to honor older documents can be hard. If it has been more than a few years since you executed a Power of Attorney, you should update it. Signing an additional Power of Attorney elsewhere (like your bank or a brokerage firm) can be useful, but let’s coordinate so you don’t invalidate those or the Power of Attorney you signed in our office.

♦ Check your beneficiary designations on assets like life insurance, IRAs, pension plans, retirement funds, annuities, and work related death benefits, that pass by beneficiary designation, rather than your will. Are they up to date? Do not name “my estate” or “my trust” as the beneficiary, as this usually means higher fees and taxes. If you have questions, call us. 

♦ Have you checked your credit report lately? What about your child’s credit report? Children make ideal targets for identity thieves because the fraud may go undetected for years – likely until the child is ready to go to college or applies for her first credit card. Check with one of the three major credit agencies (TransUnion, Experian, and Equifax) about how to check a credit report for yourself or a minor.