Tune-Up Your Estate Plan in Light of Changing Conditions

(JD Supra) -- If you haven’t looked at your Will or estate plan lately, now is a good time to do so.

Much has changed over the last decade, and more change may be on the horizon. See if your estate plan is still appropriate in light of the following:

Federal Changes

  • The federal estate tax gift and estate tax exemption amount is now $11.4 million, indexed for inflation, which is its historic high. A married couple may transfer twice that amount to children or others, or $22.8 million, free of federal gift and estate tax.
  • The federal exemption amount is now “portable” between spouses, so that the first spouse to die may transfer any unused exemption to the surviving spouse without a “credit shelter trust”.
  • However, the enhanced federal exemption amount is scheduled to “sunset” in 2026 back down to $5.6 million (indexed for inflation). No new legislation is needed for the sunset; in fact, Congress and the President would have to agree to change it.
  • Many are calling for increased taxes on wealth and the wealthy. Some candidates for President have proposed reducing the federal exemption amount, increasing gift and estate tax rates up to 77%, and closing “loopholes”, i.e., eliminating long-standing estate planning strategies. These changes could happen before 2026.

State Law Changes

  • The New York estate tax exemption amount is $5.74 million but is not portable, and the exemption is phased out if your taxable estate exceeds that amount by 5%. For a NY taxable estate of about $6 million there is effectively no exemption, and the NY estate tax is about $500,000. The NY estate tax on a $10 million taxable estate is more than $1 million! Because NY has no gift tax, lifetime gifts do not decrease the estate tax exemption for NY purposes, although gifts made within three years of death would be clawed back under a pending proposal.
  • New Jersey repealed its estate tax but retained its inheritance tax.
  • Connecticut raised its estate and gift tax exemption amount.
  • The Illinois estate tax exemption amount is only $4 million and is not portable, putting a premium on flexibility in your estate plan. For IL residents, the estate tax savings are less dramatic as the exemption is smaller than in NY, but the potential savings through proper planning are nonetheless significant.

Other Considerations

  • Surrogate’s Courts and Probate Courts, always slow, have become even slower.
  • Stock markets and real estate markets have surged since 2008.


Some of the above may affect your current estate plan. Many older Wills have credit shelter bequests and trusts that should be revised in light of the changes. You may want to take advantage of the enhanced federal exemption amount now before it sunsets away. We can show you how to shelter up to almost $23 million from your state’s estate tax if you are married and live in a state with an estate tax such as NY, CT or IL, potentially saving millions of dollars of the state estate tax.

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