Tax Planning

For 2019, the Federal estate approximate limit before estate taxes are imposed is $11 million per person or $22 million per married couple. These numbers can be deceiving because proper action must be taken to ensure the entire $22 million is safe. The annual federal gift tax exclusion amount also increased to $15,000 in 2018.

In New York, however, for a death occurring on or after June 1, 2019, the limit is $5.7 million per person and must be allocated properly before death in order to get the full credit for a married couple. The proper way to do that is to use a “credit shelter trust” at the death of the first spouse. This trust allows both husband and wife to shelter their exemptions and maximize tax savings. If a credit shelter trust is not used, the result may be thousands in taxes due. It is critical that New York residents with more than $5.7 million use tax planning. If a person dies in New York with more than 105% of the exemption taxes are due on the whole estate.

The Irrevocable Life Insurance Trust (ILIT)

This trust is generally of those people who have a taxable estate. Life insurance owned by a person who dies is includable in their estate. We use this trust to remove life insurance from your estate, thereby reducing the taxes significantly. For a person who has $5,000,000 in assets, plus $2,000,000 in a life insurance policy in an ILIT, the family will receive all the funds tax free.


Like the ILIT, the Gift Trust utilizes the annual gift tax exclusion to make transfers in trust. The intent is to limit the tax exposure at death. Under the new tax rules, using the annual gift tax exclusion for large estates is essential to good planning.


In addition to the elemental options, there are many options related to advanced tax planning. Those include trust options such as the Irrevocable Life Insurance Trust (ILIT), the Grantor Retained Annuity Trust (GRAT), the Charitable Remainder Trusts (CRAT, CRUT), the Qualified Personal Residence Trust (QPRT), etc. There are also certain requirements in tax planning if there are non-citizen spouses. All of these options are specialized and require more time and effort in planning and often require coordination with a CPA. These options are critical if someone has a taxable estate. A taxable estate is currently defined (as of January 1, 2020) as one greater than $5.75 million for New York State purposes. A married couple can protect $11.5 million with proper planning. For federal estate purposes, the 2020 exemption is now $11 million or $22 million for a married couple. We can provide even greater tax protection if given enough time to do so.