If you live in Maryland, odds are, you have one frustration in common with New Jersey residents: these two states are the only ones that straddle residents with both an estate tax as well as an inheritance tax. Fortunately, a new Maryland law puts into place incremental increases in your estate tax exclusion. This is one reason why now is a great time to review your estate plan.
Increasing Exclusion Amounts
You may recall that the state’s exclusion amount was at $1 million. Now, though, you can pass $1.5 million without the estate tax liability and by 2019, the rate will match the federal estate tax and gift tax exclusion, which will most likely be $5.9 million.
Naturally, this will mean more estates will be able to pass more of their wealth to beneficiaries with fewer tax worries.
Estate Tax Changes
We have long since encouraged our Maryland clients to consider trusts as a way to avoid the estate taxes. There were times when a bypass trust worked well and in some instances, a life insurance policy in place for the sole purpose of shouldering the taxes. Further, a life insurance trust allows you to take the value of the life insurance proceeds out of your estate.
Many with considerable wealth will opt for an AB trust, which allows spouses to leave their property for their children in a trust. The children inherit the property after the death of their second parent, who has the right to use the property for the rest of their lives. It keeps the taxable portion of the estate lower, thereby reducing the tax bill (if there is one). Charitable trusts allow you to make a tax exempt gift to the charity of your trust, again, because your estate is smaller, there are fewer tax concerns.
You Always Have Options
Remember that you can also make tax free gifts – up to $14,000 for 2015 – without having to pay a gift tax. This too can help reduce the size of your estate, especially if the one you gift the money to is in your will.
With all of these changes, it’s important to review your estate plan so that what worked in the past will work both today and in the future.
Ultimately, you want to be sure your estate plan is serving your purposes and meeting your needs. Because laws change often, it’s always a good idea to perform a review and make changes at least once a year. It’s one of those things that we put off and then realize we’ve not made changes in several years. This is one time you don’t want to delay a bit of time spent with your estate planning lawyer.
To learn more or to schedule a time convenient for you to review your estate plan, contact DeBruyckere Law Office, PC today.