Year-End Estate Tax Planning By: Hinkle, Fingles & Prior, P.C.

As we come to the end of another year, many families are eager to set up their estate plan and special needs trust for the benefit of their child with disabilities.  Other families establish a “New Year’s resolution” to get their estate plan and special needs trust done right after the holidays.  Regardless of when you begin the process, we usually engage in a discussion regarding the effect of the State and Federal Estate Tax. 

Here are a few estate tax tips to consider taking advantage of before the end of the year:

• Don’t forget to make year-end gifts:  For 2013, you can give up to $14,000 each to as many individuals as you wish (or to a special needs trust for the benefit of your child with a disability) and pay no gift tax.  Married couples can gift up to a total of $28,000 per beneficiary. Gifts beyond that are taxable, but only to the extent they exceed the lifetime gift tax exemption of $5.25 million over a donor's life. The recipient of the gift will not owe gift or income tax. 
• Pay someone's medical or education expenses:  People with disabilities often incur significant medical bills.  You can make unlimited payments directly to medical providers on behalf of another without generating a gift tax or eating away at your $5.25 million lifetime gift-tax exemption.  This is also true for payments made directly to an educational institution. This planning tip is very useful for grandparents who may want to reduce the size of their taxable estate.  Certainly, your children will not mind if you help with expenses associated with raising their children. The payment of medical and educational expenses is not limited to individuals with disabilities.
• Give appreciated securities to charities by the end of the year:  Most agencies serving individuals with disabilities are non-profit charitable organizations.  Consider donating appreciated securities for a full fair market value deduction and no capital gains tax. On the other hand, if you're holding securities at a loss, sell them first and then donate the cash. That way, you can claim the capital loss on your tax return.  The charity appreciates a gift which you are able to give with a “warm hand” rather than upon your death.   

If you are considering taking advantage of one or more of these estate tax planning tips, you will need to do so before the end of the year.  Keep in mind, these strategies as well as many other estate tax planning strategies are not only for the “rich.”  In fact, more and more families are affected by state estate taxes.  Planning ahead can result in the ability to reduce your estate tax liability and, therefore, leave more money to your children. 

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Hinkle, Fingles, & Prior, P.C., Attorneys at Law is a multi-state law practice with offices in Lawrenceville, Cherry Hill, Florham Park, Wall, and Paramus, New Jersey, and Plymouth Meeting and Bala Cynwyd, Pennsylvania. The firm's partners and associates lecture and write frequently on topics of elder law, estate planning, special needs trusts, guardianship, special education, health care insurance & Medicaid, and accessing adult services, and are available to speak to groups in New Jersey and Pennsylvania at no charge. For more information, visit http://www.hinkle1.com/ or call (609) 896-4200, or (215) 860-2100.