Although the Supreme Court decision ruled that the Defense of Marriage Act was unconstitutional and that same-sex spouses would be eligible for the same federal benefits as opposite-sex spouses, the confusion is not over. The Internal Revenue Service and the Treasury Department stated that same-sex spouses who were legally married in states that recognize gay marriage like New Jersey would be treated as married spouses for federal taxes, even if they live in states that do not legally recognize their marriage. Even though same-sex spouses can transfer property to their spouses without having to incur an estate tax, the Internal Revenue Service has set a limit for the years of refunds that can be amended.
Good news for the wealthy or the particularly comfortable was just released by the federal government. In 2014, individuals in New Jersey and across the country will be able to add an extra $90,000 free from federalestate tax to the amount that they are allowed to transfer to a person during their life and at their death.
New Jersey same-sex couples may be interested in new policies from the Internal Revenue Service that may open up new avenues for smart estate planning. The Treasury Department announced on Aug. 29 that the IRS will now recognize legal same-sex marriages for the purposes of calculating federal taxes. The ruling will mean significant changes to tax planning and asset protection planning for same-sex couples. New guidance on same-sex couples had been expected after a portion of the Defense of Marriage Act was defeated on June 26.
Many New Jersey residents may be wondering about how the recent changes to law relating to estate taxes, also known as the "death tax," may affect them. The good news is that the majority of people will not be impacted by changes to the estate tax, and a large number of those who are affected will only be to a limited degree. The new law states that the first $5.25 million of an estate is tax exempt, and anything beyond that number will be taxed at a 40 percent rate.
New Jersey residents might be interested to hear that when there are unpaid taxes on an estate, this can end negatively for beneficiaries. According to a recent decision rendered by the U.S. District Court for the Southern District of Florida in one case, an inter vivos trust contained almost $5 million in stocks, and an IRA was found to contain almost $4 million. The estate tax was supposed to be paid out of the inter vivos trust in this case, but the IRS is reportedly trying to get one beneficiary's IRA distribution to cover part of the tax.
New Jersey residents may be interested to learn of two techniques available for shielding certain assets from estate tax. In an online article, a tax expert offered advice about how to use the 2013 American Taxpayer Relief Act to chart a plan for intelligent estate planning. The law has provisions regarding a significantly increased limit for estate tax exclusion and the concept of portability, which may result in significant advantages to families.
The federal estate tax law has a portability provision; that is, it allows the transfer of the federal estate tax exemption from the decedent to the surviving spouse. If the correct estate tax planning steps are taken, residents of New Jersey might be able to double their estate tax exemptions.
A few weeks ago, the death of New Jersey native and Sopranos actor James Gandolfini stunned his family, friends and fans. Even more shocking was the recent news that Gandolfini's heirs have to pay $30 million total in estate tax.
In our previous post, we began looking at the new fiscal cliff deal Congress came up with in the 11th hour, and the way it will affect estate planning in the coming year. As we noted, The same exemption amount will apply permanently, with adjustments for inflation, meaning that wealthy estates have less to pay in estate taxes.
We've been talking about the estate and gift tax exemption debacle on this blog for a number of months now, informing our readers about the changes that could come in the New Year, and trying to stay on top of any developments. Now that Congress has come up with a fiscal cliff deal, we are able to relate to our readers how the changes will affect estate planning in the coming year.