AnnMarie Palermo Smits, Esq., Partner and Chair of WJ&Ls Trust, Tax and Estate Department will be presenting at 2 Free CPE Seminars. On Thursday, November 29, 2012 from 6:00 to 9:00 p.m. at Commerce and Industry Conference Room – First Floor - 61 S. Paramus Road, Mack IV Building, Paramus, New Jersey, AnnMarie will be discussing “End of Year Tax Planning: Gifting, Crummy Notices, Family Planning, Reporting and Tax Compliance.” Then on Monday, December 10, 2012 from 6:00 to 9:00 p.m. at Infoaxis, Inc., 300-B Route 17 South, Mahwah, New Jersey, AnnMarie will be discussing “NJ Estate Tax: What is Taxable for Estate Tax and Inheritance Tax versus what is a Probate Asset.” Attendees can earn up to 3 NJ CPE Taxation credits and a light dinner will be served.
Archive for the ‘Estate Planning’ Category
AnnMarie Palermo Smits, Esq., Partner and Chair of WJ&Ls Trust, Tax and Estate Department will be presenting at 2 Free CPE Seminars. On Tuesday, November 13, 2012 from 6:00 to 9:00 p.m. at Lakeland Bank’s Wayne Branch located at 231 Black Oak Ridge Road, Wayne, NJ, AnnMarie will be discussing “What will the Estate Tax Exemption be after 2012: Time is Running out for Gifting at a Higher Lifetime Exclusion Amount.” Then on Thursday, November 29, 2012 from 6:00 – 9:00 p.m. AnnMarie will be discussing “End of Year Tax Planning” at the Commerce and Industry Conference Room – First Floor, 61 S. Paramus Road, Mack IV Building, Paramus, NJ. Attendees are entitled to up to 3 NJ CPE credits and a light dinner will be served.
With the federal current estate tax exemption amount and rate scheduled to expire at the end of the year, much uncertainly looms as to whether Congress will enact permanent legislation, and if so, what will result. As there are several possibilities, ranging from a $1,000,000 exemption amount to keeping the current exemption amount (and alternative amounts in between), only one thing is certain: no one can possibly speculate what the exemption amount will be in 2013 and beyond. In the meantime, as the uncertainty continues, there is great opportunity (and perhaps unprecedented opportunity) for individuals to utilize this year’s exemption amount ($5,120,000 per individual) to make sizeable gifts during these last five months of the year to ultimately lower their taxable estates. However, gifting is certainly not for everyone as individuals must be financially and emotionally comfortable with divesting themselves of these assets and any and all associated interest/income stream from these assets.
Once the individual has decided he or she is comfortable with gifting, there are several considerations that need to be addressed. First, what assets are most appropriate? Most likely the answer would be highly appreciating assets as they would remove the most possible value from an individual’s estate. Next, what is the best way to make a gift? There are a number of vehicles that can be examined, but one that continues to be an excellent option especially in light of the low interest rate environment is the Grantor Retained Annuity Trust (“GRAT”). The GRAT can be structured to result in almost no gift tax implications and it enables the donor to receive an income stream for a term of years, with the growth passing to the donees.
Gifting during life is more tax efficient than property passing through a decedent’s Will at death, as assets transferred during life shift the future appreciation in the property out of the individual’s estate to the donee. However, one caveat is that gifted property retains carry over basis for income tax purposes. At death, inherited property gets a stepped-up basis for income tax purposes. Any taxable gifts made in calendar year 2012 will need to be reported on a United States Gift (and Generation Skipping Tax) Tax Return (IRS Form 709) and would be due on April 15, 2013. However, no tax will be due to the extent the individual has not utilized his or her lifetime gifting exemption ($5,120,000 or $10,240,000 for a married couple for 2012). New Jersey does not have an independent gift tax.
In addition to the above gifting, every individual has a $13,000 per donee “annual exclusion” amount which is adjusted each year for inflation. This would enable an individual to gift $13,000 ($26,000 for a married couple) to each donee (to any number of donees) without necessitating the filing of IRS Form 709.
Please feel free to contact us for more information and to talk about these opportunities.
Nicole E. Russak, Esq. is an associate attorney practicing in the firm’s Tax, Trust and Estate and Real Estate Departments.
A Power of Attorney is a powerful document. It gives a person (Agent or Attorney-in-Fact) the authority to act on behalf of another (Principal). Its purpose is to notify third parties that the Principal has given the Agent authority to act on the Principal’s behalf in certain situations. A Power of Attorney can be limited in scope and time and can address very specific situations or can be broad enough to cover anything a Principal wants its Agent to handle for him or her.
In real estate, a Power of Attorney is often used for the purposes of signing closing documents, obtaining closing funds and otherwise acting on the Principal’s behalf in a very limited scope, i.e., to finalize the real estate closing. Once the closing is concluded, the Power of Attorney is extinguished.
In the Estate Planning arena, a Durable Power of Attorney is an essential document. The Durable Power of Attorney takes effect either: (1) immediately upon execution regardless of disability, or (2) upon disability of the Principal. Disability can be defined within the Power of Attorney document or if not, then the statutory concept applies, i.e., that the Principal is unable to manage his property and affairs effectively. The Power of Attorney must be “Durable” to survive during disability. The importance of the Durable Power of Attorney becomes apparent after the Principal becomes disabled. The most significant aspect is that the Principal has already predetermined who he or she wants to act as their Agent. It also avoids the costly process of applying to the court for a guardianship or conservatorship. In short, having a Durable Power of Attorney can save time, expense and the inconvenience of a court proceeding.
The powers a Principal can grant to an Agent under a Power of Attorney are numerous and can include the authority to: (1) conduct banking transactions, (2) pay for support and care, (3) handle tax filings, (4) collect social security benefits, (5) enter into contracts, (6) settle claims or controversies, (7) sell, gift or transfer assets, (8) borrow money, (9) deal with insurance and retirement benefits, (10) exercise stockholder rights, (11) disclaim property, (12) engage in Medicaid planning, and (13) obtain medical information and communicate with medical providers. New Jersey statutes require that the power to gift and the right for the Agent to receive compensation be specifically enumerated in the document, otherwise those powers will not be available to the Agent. All other powers listed in the statutes are available to the Agent even if they are not specifically referenced in the document.
Since the powers that can be granted to an Agent are very broad and involve assets, it is important that the Principal choose someone they trust will follow their wishes and act in their best interest. Generally, a spouse or an adult child is appointed the Agent. As the Power of Attorney is such a powerful document, some clients name their accountant or attorney as Agent. It is also important to have a second Agent named in case the primary Agent is unwilling or unable to act.
It is imperative that an individual consult with an attorney prior to entering into a Power of Attorney, so that there is an understanding of what powers are being given and when. An attorney will also ensure that the required statutory language is incorporated into the document, especially if the Principal intends to enter into a Durable Power of Attorney.
By: Jill F. Rosenfeld, Esq., who is an Associate Attorney practicing in WJL’s Real Estate, Tax, Trust and Estates and Corporate Departments