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Changing the Value of an Estate before Death

07/17/2017

Changing the Value of an Estate before Death

In cases where a loved one is on life support for an extended period time and is legally incapacitated, there may come a time when the family is faced with a one of the most difficult decisions that any of us have to make. If a living will and healthcare directive is in place, the wishes of the person will be known and the family will know they did what their loved one wanted.

It must be said that this is a heart-breaking situation that no one wants to think about, but it does provide the opportunity to engage in "death bed" planning that could help minimize estate taxes. There may be steps that families can take while a person is incapacitated but still living, that can minimize taxes after an individual dies, says NJ.com, in “Lowering an estate's value before death.”

Estates larger than $5.49 million are subject to federal estate taxes of 40% in 2017. However, gifting can be used to lower the value of the estate. Individuals can make annual gifts of $14,000 per person, and a couple can make $28,000 to any person. If assets exceed $5.49 million, the estate can be reduced by making $14,000 (annual exclusion amount) gifts to as many family members as possible, prior to death. Gifts can be made in excess of $14,000, but that will be applied against and reduce the $5.49 million exemption amount. An exception is that gifts for the benefit of someone else to a medical or educational institution can be in excess of the annual exclusion amount and not reduce what you can give when you pass away.

Some states, like New Jersey, have taxes on estates that are worth more than $2 million. (Yes, the New Jersey estate tax is scheduled to be eliminated in 2018, but we still are in 2017). Check with a qualified estate planning attorney like DANIEL T FLEISCHER for state-specific rules. In New Jersey, there’s no limitation on annual gifts. Therefore, an individual can transfer an unlimited amount of assets immediately before death to reduce the estate tax.

Gifts can be executed by a power of attorney or guardian, if the loved one is unable to make the gifts him or herself. That power of attorney document must specifically authorize the agent to make gifts, and court approval is required to authorize a guardian to make gifts.

Certain states have what is known as an “inheritance tax,” where the person who inherits is taxed, depending on their relationship to the deceased. New Jersey heirs do not have an inheritance tax on transfers to a spouse, domestic partner, child, step-child, parent or grandchild, who are all considered Class “A” beneficiaries.

An estate planning attorney will be able to explain the laws of your state, and help your family to prepare for this challenging situation.

Do you live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help! Please visit www.411probate.com for valuable information.

  • My practice is exclusively estate planning and probate,
  • I have prepared numerous estate plans in 16 years of practice,
  • I have administered estates and trusts through Probate all over Florida,
  • I am a Certified Financial Planner Professional™, and
  • I am here for YOU today and there for your FAMILY tomorrow.

Reference: NJ.com (June 23, 2017) “Lowering an estate's value before death”

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