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Inheritance Estate Tax Planning

If you are fortunate enough to retire with significant wealth, you may be interested in learning about our estate tax planning services. We can help you take advantage of the techniques that enable you to reduce estate tax burdens on your heirs.

Would you like to learn about minimizing the inheritance tax on your estate? Please contact a lawyer from Whitlock Canter LLC to arrange your consultation.

Federal and gift estate tax exemption

The federal estate tax exemption is the amount you can pass free of estate tax to your heirs. In addition, there is an unlimited “marital deduction” so that an unlimited amount can be left to a U.S. citizen spouse without any estate tax. The following is a schedule of the federal estate tax exemption based upon the year of death:

 

2009 $3.5 million
2010 Federal estate tax repealed unlimited exemption with limited step-up in basis (extended election due 12/31/14) or $5 million with unlimited step-up in basis
2011 $5 million with portability of spouse’s unused exemption
2012 $5.12 million with portability of spouse’s unused exemption
2013 $5.25 million with portability of spouse’s unused exemption
2014 $5.34 million with portability of spouse’s unused exemption
2015 $5.43 million with portability of spouse’s unused exemption
2016 $5.45 million with portability of spouse’s unused exemption
2017 $5.49 million with portability of spouse’s unused exemption
2018 $11.18 million with portability of spouse’s unused exemption
2019 $11.4 million with portability of spouse’s unused exemption
2020 $11.58 million with portability of spouse’s unused exemption
2021 $11.7 million with portability of spouse’s unused exemption
2022 $12.06 million with portability of spouse’s unused exemption
2023 $12.92 million with portability of spouse’s unused exemption
2024 $13.61 million with portability of spouse’s unused exemption

The federal estate tax laws are coordinated with the federal gift tax laws. An unlimited amount can be given to a U.S. citizen spouse during life or at death. As of 2024, the first $18,000 given to each person in each calendar year (referred to as an “annual exclusion”) does not reduce a person’s lifetime gift tax exemption. In addition, for married couples gifts can be “split” and treated as being made one-half (1/2) by each spouse, thus increasing the “annual exclusion” to $36,000 per year per recipient.

If the annual exclusion amounts are exceeded, a person begins to erode his or her lifetime gift tax exemption. If the lifetime gift tax exemption is exceeded, a federal gift tax of 40 percent is applicable on the excess. Any portion of the gift tax exemption used during a person’s lifetime reduces the estate tax exemption remaining at death. For example, if a single person made a gift of $418,000 to his son in 2024 and then died later in 2024, the first $18,000 would be treated as an annual gift tax exclusion in 2024, and the remaining $400,000 would reduce the remaining gift tax exemption from $13.61 million to $13.21 million. When the person later died in 2024, $13.21 million of estate tax exemption would remain.

For 2011 and beyond, there is portability of federal estate tax exemption between spouses. This means that upon death a spouse can pass his or her unused exemption to his surviving spouse. This is accomplished by filing a timely federal estate tax return reporting the amount of unused exemption remaining.

State estate tax exemption

Prior to 2001, all 50 states had the same estate tax exemption. In 2001, the federal law phased out the credit for state estate tax exemptions and instead allowed a deduction for state estate taxes paid. Several of the states reacted to this change in the law and now the amount of estate tax applicable depends upon the state a person resides in at the time of their death.

In New Jersey, the estate exemption was $675,000 for 2016, $2 million for 2017 and effective January 1, 2018 the New Jersey estate tax was repealed.

The New York estate tax exemption was $4,187,500 for deaths between 4/01/16 – 3/31/17, $5,250,000 for deaths between 4/01/17 – 12/31/18, $5,740,000 for 2019, $5,850,000 for 2020,  $5,920,000 for 2021, $6,110,000 for 2022 and $6,580,000 for 2023 and $6,940,000 for 2024.  The highest tax rate is 16%.   There is an infamous “Cliff” so that once the taxable estate exceeds the exemption, the estate is tax as though there was no exemption.  Like the federal estate tax law, the New York estate tax law allows an unlimited marital deduction for assets left to a spouse.   However, there is no portability of unused exemption which can be passed from spouse to spouse on the first spouse’s death.  The use of Credit Shelter Trusts or Disclaimer Trusts in New York State remains popular for this reason.

Florida, North Carolina, South Carolina and Delaware are among the 33 states that no longer have any state estate tax, help making them popular destinations for retirement.

New Jersey inheritance tax laws

New Jersey is one of only 10 states that impose an inheritance tax based upon the relationship of the person who dies (the decedent) to the persons who inherit (the heirs or beneficiaries).

The following information summarizes the New Jersey Inheritance Tax Rates based upon the relationship of the heir to the decedent:

  • Spouses, children, step-children, parents, grandchildren, other lineal descendants and charities are exempt.
  • Brothers, sisters, wife or widow of a son, or husband or widower of a daughter — First $25,000 is exempt; 11 percent $25,000 to $1.1 million; 13 percent $1.1 million to $1.4 million; 14 percent $1.4 million to $7 million.
  • All others — First $499 is exempt; 15 percent up to $700,000; 16 percent over $700,000.

For answers to your estate tax planning questions, contact our law firm to arrange your consultation today.

Inheritance tax and estate tax planning frequently asked questions