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Sophisticated Planning


As people acquire more wealth, sophisticated estate plans should be crafted to take full advantage of estate tax exemptions provided by law. In addition to the Durable Power of Attorney, Health Care Proxy, Living Will and Burial Designation form referred to under Basic Estate Planning, Sophisticated Estate Planning is usually done for a number of reasons:

  • Minimizing the effect of estate taxes
  • Transferring wealth to the next generation
  • Avoiding probate
  • Removing assets from your taxable estate
  • Gifting assets at a discounted value

Federal and State Estate Tax Exemptions: Currently, for Federal estate tax purposes, a person can leave $5,430,000 to beneficiaries free of estate tax. In New York, the exemption amount is $3,125,000 which means that even if you have to pay no Federal estate tax, if your estate exceeds $3,125,000, it is likely you will have to pay New York estate tax.

There is no estate tax if a spouse leaves all of his or her assets to a surviving spouse. However, it is not always wise to leave all of those assets to the surviving spouse outright because there could be some estate taxes due at the death of the second spouse. In effect, by leaving all the assets to the surviving spouse, the deceased spouse has not used his or her Federal and State estate tax exemptions. This is easily remedied with proper sophisticated estate planning utilizing credit shelter trusts for the benefit of the surviving spouse.

Gifting: Individuals are permitted to gift up to $5,430,000 during their lifetimes without incurring gift tax, however they will be required to file a gift tax return. Also, in 2015, individuals are permitted to make annual exclusion gifts of $14,000 per person per year without filing a gift tax return. Such annual exclusion gifts are not counted toward the lifetime maximum of $5,430,000. Annual gifts in excess of $14,000 will be counted toward the lifetime maximum. Spouses can each gift $14,000 per person per year. In addition to annual gifting, individuals can pay medical and educational expenses for any person. Such payments will not be counted as a gift if they are paid directly to the provider institution.

Gift giving techniques should be explored to take advantage of options that allow you to gift on a discounted basis and/or gift assets while maintaining some control over those assets.

Some Sophisticated Estate Planning techniques include:
  • Annual Gifting and Gifting Trusts
  • Credit Shelter Wills and Trusts
  • Life Insurance Trusts