Recently, I wrote about the changes to the estate tax laws, both federal and New Jersey estate tax.  The upshot of my article was, unless you are worth more than $11,200,000, you don’t have to worry about the estate tax.  I also mentioned that the implication for the gift tax—and there is only a federal gift tax, there is no New Jersey gift tax—was the same.  Unless you are worth more than $11,200,000, you don’t have to worry about gift tax.

Having said that, I know that no matter how many times I say it, people will continue to worry about the estate tax and the gift tax.  For some reason, people worry about these taxes, even though, for years, these taxes haven’t affected the majority of Americans.  And when I say the majority of Americans, I mean all but the richest 1% or fewer.  Now, with the recent changes that have occurred in the laws governing estate and gift tax, it is even more unlikely that any of you will ever be affected by these taxes.  Unless, of course, you are worth more than $11,200,000.

“I thought I could only gift $15,000 a year?”  You will ask.  To which I always tell people that is only half the legal concept.  The full statement is–A person can gift $15,000 each and every year to an unlimited number of people without reducing his $11,200,000 lifetime credit exemption equivalent against gift tax.  If you gift more than $15,000 in a given year, then your lifetime exemption equivalent is reduced.  For example, if you gifted $16,000 to your son, then your lifetime exemption equivalent would be reduced from $11,200,000 to $11,199,000.  Technically, if you gift more than $15,000, you have to file a gift tax return, but no tax is owed and the return would take hardly any time to prepare and file.

Given the extremely high exemption equivalent against estate and gift tax—so high that it is safer to say there is no estate and gift tax than to say there is such a tax—what are the implications for you?  For one, stop worrying about estate and gift tax.  As stated, it’s safer to assume that there is no estate and gift tax.

Before the credit against the estate tax went to its presently lofty height of $11,200,000 and before the New Jersey estate tax was repealed (the credit against New Jersey estate tax was $675,000 for many years), a number of people implemented planning techniques to address the federal or New Jersey estate taxes.  Many of my clients drafted trusts into their Wills commonly known as credit shelter trusts to address the estate tax, particularly the New Jersey estate tax.

If you implemented planning techniques into your estate plan—such as credit shelter trust in your Wills—then I’d recommend you have your estate plan reviewed.  You may be able to eliminate these planning techniques and have a much more simple Will.

For instance, three years ago, if your estate were worth more than $675,000, your attorney might have suggested planning techniques to address the New Jersey estate tax.  These techniques, while not harmful, are more complicated than need be given your current situation, unless you are worth more than $11,200,000.

Now, there may be other reasons for you to have a trust as part of your estate plan.  In fact, recent changes in New Jersey’s trust laws have me recommending trusts to clients for various reasons; however, these reasons have nothing to do with estate or gift tax. For instance, a person might want to have a trust in his Will to ensure that his assets pass to his blood relatives, not to an in-law.  In my opinion the elimination of the estate tax offers up planning opportunities for clients, because a person’s estate plan doesn’t need to be weighted down and burdened with planning for the estate tax.

An estate plan is designed to reflect your wishes, but those wishes often evolve as families, finances, and laws change. Reviewing documents periodically helps ensure that decisions made years ago still make sense today and continue to accomplish the goals they were intended to achieve.