James F. McDonough
Of Counsel
732-568-8360 jmcdonough@sh-law.comFirm Insights
Is Income Tax Planning Now More Important Than Estate Tax Planning?
Author: James F. McDonough
Date: June 6, 2013
Key Contacts
Back
Two changes to federal estate tax law suggest that income tax planning may become more important than estate planning for most taxpayers.
First, the $5,250,000 federal estate tax exclusion (the “Exclusion”) is permanent. Thus, most estates will not be subject to federal estate tax now that the Exclusion is law. A married couple may pass $10,500,000 to their heirs free of federal estate tax using the sum of their two Exclusions.
Second, “portability” now permits a surviving spouse to add the unused Exclusion of the deceased spouse to the Exclusion of the surviving spouse. Before portability, the exclusion was lost if it not was not applied to shelter a taxable transfer at the first death. Today, portability lessens the importance funding a trust in the estate of the first-to-die.
Some practitioners believe that all assets should be held by the surviving spouse in order to obtain another step-up in basis at the second death. The assumption is that a step-up in basis at the second death will eliminate income taxation. Where the value of the second estate is below the level of one or both Exclusions, the result is no tax.
There are counter arguments. An estate tax return must be filed to elect portability and we know that many taxpayers will fail to file and lose portability. I anticipate that there will be a number of cases where a surviving spouse remarries. What the public may not realize is that portability only extends to the last spouse. Thus, if the surviving spouse remarries, the anticipated result may not be achieved. could It is also possible that, given the liquidity infused into the banking system by the Federal Reserve, inflation will result. This could cause asset values to increase beyond the Exclusions for intermediate size estates. Finally, the exemption for generation skipping tax is not portable and this fact suggests that funding a trust at the first death may still be beneficial.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
What Business Owners Get Wrong Before Meeting a Litigation Attorney
What should you expect when meeting a litigation attorney about a business dispute? You should expect to describe the dispute in your own words, hand over the most important documents, flag any deadlines or immediate threats, and leave with a clearer picture of the problem, what information is still needed, and the likely next steps. […]
Author: Michael Mietlicki
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Author: Graham Staton
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
Author: Michael Mietlicki
Crisis-Proofing Your New Jersey Business: Building a Crisis Response Plan Before You Need One
For New Jersey businesses, crisis preparedness should be viewed as a legal and operational function, not simply an emergency-management exercise. A well-designed crisis response plan can help preserve evidence, protect confidential communications, meet reporting obligations, limit unnecessary exposure, and prevent an already difficult situation from becoming a larger legal problem. Key Takeaways A serious crisis […]
Author: Sean M. Pena
Monmouth County's Next Development Wave: What Developers and Investors Need to Know
Monmouth County is entering a significant new phase of development. For those looking to acquire property or undertake a new project, understanding the market opportunity is only the beginning. The more important question is whether a particular property can actually be developed as contemplated and what approvals, agreements, and other conditions will be required to […]
Author: Donald M. Pepe
Are Your Conversations with AI Shielded from Discovery? Courts Are Split
Whether a client’s prompts to a generative AI tool and the documents it produces are protected from disclosure depends on the case type, who claims protection, and whether counsel was involved. In United States v. Heppner, a New York federal judge ruled that a criminal defendant’s communications with an AI platform were protected by neither […]
Author: Chris Seelinger
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.