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It's been a little while since I have written an article on the Pennsylvania inheritance tax.  However, before I discuss ways to minimize the PA inheritance tax, it is important to understand that the tax rate is affected by who receives money upon your death.

As a refresher, Pennsylvania has an inheritance tax on most assets that are transferred at the time of your death if they are going to anyone besides a spouse or a charity.  There is also no inheritance tax if a child under age 21 dies and leaves their estate to their parent or step-parent.
Pennsylvania Inheritance Tax

As many of you know, the new Democratic Governor of New Jersey, Phil Murphy, was engaged in a recent budget showdown with members of his own party.  A last minute government shutdown was avoided, however, as the legislature and the Governor came to terms on a variety of tax increases and spending priorities.  For more specifics, NJ.com has a good article here.

From the perspective of estate planning attorneys, what is noteworthy is that there was never any mention of bringing the New Jersey estate tax back.  One of the concerns with many lawyers was whether, with a new Governor, the estate



In a previous post, I described the Reasons to Set up a 3rd Party Supplemental Needs Trust as an Irrevocable Life Insurance Trust.  The same Third Party Supplemental Needs Trust can also be set up as an IRA Stretch Trust.
If a Special Needs person is named as beneficiary of an IRA, 401k, 403b or any other asset, that could ruin their ability to qualify as for SSI and Medicaid.  However, paying retirement money to a traditional Third Party Supplemental Needs Trust can cause income tax problems.  Accordingly, we usually recommend that the Supplemental Needs Trust be created with provisions that allow a slow withdrawal



Recently, I wrote a post explaining the differences between a First Party Special Needs Trust and a Third Party Supplemental Needs Trust.  As you are aware, the goal of a Special Needs Trust or a Supplemental Needs Trust is to provide financial resources to a Special Needs Person in a way that will not cause them to lose their government benefits, like Medicaid. Today, I wanted to explore the benefits of a Third Party Supplemental Needs Trusts in more depth.


A Third Party Supplemental Needs Trust can be created under a Will or it can be created as a stand alone trust by the parent

"Special Needs Trusts" and "Supplemental Needs Trusts" are terms to describe trusts designed to provide benefits to a person in a way that will preserve the public benefits that he or she is entitled to receive. These types of trusts are most commonly created when a person has some sort of special needs or disability.  The person who benefits from the trust is called the beneficiary.

In New Jersey, Pennsylvania and Florida, the terms "Special Needs Trusts" and "Supplemental Needs Trusts" are often used interchangeably, although they should not be as it often results in serious problems.  I personally try to



It’s probably not surprising to learn that Facebook has become the most widely-used social media outlet in the world, boasting over 2 billion active users as of late 2017(1). The social networking giant is unique in that it caters not only to the younger Gen-X & Millennial demographics, but also to those born before: 79% of online adults ages 30 to 49 in the U.S. use Facebook, and about 56% of online Seniors age 65 and up use the site as well(2).
Facebook is a regular part of the daily lives of 53% of Americans(3), but what happens when we pass

As we get closer to the repeal of the New Jersey Estate Tax on January 1, 2018, it is important to remember that New Jersey has NOT gotten rid of its inheritance tax.  Accordingly, if you wish to leave money to brothers, sisters, nieces, nephews, friends or a significant other (besides a spouse) and if you have life insurance, you should explore whether a trust is a good option.


Here's generally how the NJ Inheritance Tax works.  There is no inheritance tax on money going to charities or Class A Beneficiaries.  Class A Beneficiaries include: 

A spouse (or civil union partner

While the House and Senate are considering competing tax proposals, including a proposal to eliminate the federal estate tax, it is worth noting that the IRS has released Revenue Procedure 2017-58 which provides inflationary updates for a number of provisions in the Internal Revenue Code, including Estate Tax Exemption Limits.

Assuming that the Republicans do not pass a bill that modifies the existing estate tax and gift tax structure, for 2018:

US Citizens and Permanent Residence Aliens can pass on $5,600,000 per person upon death or during their lifetime.  The federal estate tax exemption is also known by several other terms including

As most of you know, I generally try to avoid political discussions and I really try to avoid commenting on proposed tax policy before it becomes law for the simple reason that most proposed law changes never get enacted.  However, I feel compelled to talk about what I believe is a major flaw in the proposed “Tax Cuts and Jobs Act”.

Before I do, I think it is important to have a quick discussion on the background of estate and gift taxes, social policy and the purpose of an estate tax.  As many of you know, the United States has a

NJ Special Needs Trusts:  Can the Trustee Buy Clothing?
Although the federal government clearly changed the rules in 2005 to allow a Trustee of a First Party Special Needs Trust to buy an unlimited amount of clothing for person receiving Medicaid and SSI, there is still a lot of confusion regarding this issue in New Jersey.

New Jersey Administrative Code Section 10:71-4.11, which was enacted in 2001, states that if Trustees of NJ Special Needs Trusts purchase clothing for someone who has qualified for Medicaid or SSI, it will be considered income to the beneficiary and could reduce the beneficiary's government benefits. 

Equifax Breached
In perhaps one of the largest security breaches ever, the credit reporting agency Equifax has admitted that criminal hackers have had access to over 143 Million consumers' files, including names, Social Security Numbers, birth dates, addresses and driver's licenses.  Make sure you monitor your credit very carefully with a reputable agency.  For more information, see this USA Today news article.

As a fan of the works of Author Terry Pratchett, in particular Going Postal and Making Money, I got a chuckle out of this story in the New York Times.  As some of you are aware, Terry Pratchett died in 2015.  One of his last wishes was that all of his unpublished works be destroyed by a steamroller.  A few days ago, Rob Wilkins, his estate manager posted a picture of a steamroller running over a hard drive.

Compare what Terry Pratchett did with what the Administrator of Prince's estate is doing.  Comerica Bank and Trust, as Trustee of Prince's estate, is

New Jersey Estate Tax
As most of my estate planning clients are aware, I have been very cautious regarding whether or not New Jersey will keep a $2,000,000 estate tax exemption beyond 2017 or allow for a full repeal. However, it is worth noting that the front-runner for Governor, Phil Murphy, released part of his tax and spending plan today.  See this article on NJ.com: http://www.nj.com/politics/index.ssf/2017/08/murphy_tax_plan_would_raise_13_billion_heres_whod.html

As part of the plan, he stated that he has NO intentions of re-introducing the estate tax.  Accordingly, there is probably a good chance that the repeal of the New Jersey Estate Tax does become permanent.

As I know many of you have been waiting anxiously, I wanted to make sure that you are aware that the New Jersey Division of Taxation has finally released the 2017 Estate Tax Return form.  They have also released an estate tax calculator so that we can accurately prepare the return.  The NJ 2017 Estate Tax Calculator can be downloaded from the NJ Department of Treasury website.

The New Jersey Estate Tax Calculator is important because the new estate tax law was crafted with a slight flaw in it because it has a circular calculation.  (This means the tax can't be calculated



Best place to die
Several years ago, I wrote a few articles comparing the tax consequences of dying in New Jersey, New York, Pennsylvania and Florida.  Now that New Jersey has amended its estate tax laws, I thought I should write another post for 2017 regarding the best place to die.
I will write this post with the following assumptions in mind:

Nothing is going to a surviving spouse (since no state taxes transfers to a surviving citizen spouse, this is generally not a factor).  Note, NJ still has an estate tax on transfers to a surviving NON-CITIZEN spouse if the transfer is



As many of you know, New Jersey recently revised its estate tax law.  
Effective January 1, 2017, people who die in the year 2017 will have a New Jersey estate tax exemption of $2,000,000.  Since the law was enacted towards the end of 2016, the division of tax needs some time to prepare a new estate tax return form.
Unfortunately, if you are the executor or an administrator of an estate, and the estate is in excess of $2,000,000, you will not be able to file an estate tax return until the State of New Jersey provides guidance on the type



New Jersey recently passed a new law
It requires senior citizen housing developments to notify the next of kin in the event that a resident passes away in the development.  See http://www.nj.com/politics/index.ssf/2017/02/christie_signs_next-of-kin_notification_law_to_pre.html#incart_river_home
You would think that most organizations would have procedures in place for sort of thing. But it is actually a fairly common occurrence that families are not notified immediately when a loved one dies, goes to the hospital or is injured.  Accordingly, it is best for each family to make sure that if you are moving a loved one into a facility of any kind that you determine what policies



I was talking to another estate planning recently and discussing how much of our work involves assisting clients who have blended families.  Blended families generally refers to clients who are married but at least one of the spouses has a child from a previous relationship. In comparing stories and ways that we can assist clients, we discovered that the biggest hurdle that we face is with respect to titling of assets.  To understand the problem, you must realize that the following are examples of things generally trump whatever you put in your Will or Trust:

Life insurance beneficiary designations;
IRA/401k/403b and other

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