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Estate Tax Planning

January 12, 2015

As 2014 comes to an end, it is a good time to assess your estate plan. For many, estate planning is something they realize they should do, but they keep postponing. With the dawn of a new year, it is time to consider management and protection of assets during lifetime and controlling distribution following death so you may leave a legacy for your loved ones.

Effective estate planning may reduce estate taxes, which will benefit you and your family financially. In the face of ever-changing tax laws, there is growing concern about how to best protect assets and secure them for future generations.

Anticipating your potential estate tax liability is a great place to start planning. The current estate exemption equivalent for New York State residents is $2,062,500. The first $2 Million of assets are exempt from NYS estate tax and any amounts over $2 Million will be subject to NYS estate tax. The New York State Estate Tax Exemption will be increasing to $3,125,000.00 for decedents dying after April 1, 2015.

For the year 2014, the Federal estate tax exemption will be $5,430,000.00 for decedents dying after January 1, 2015. Any assets over that threshold will be subject to Federal estate taxes.

Estate taxes are due within nine months after the date of death. Therefore, advance planning is key to addressing tax liability.

Below is a brief overview of the various estate planning techniques that may shield assets from future estate tax liability.

Last Will and Testament with Disclaimer (credit shelter trust) provisions: This technique provides a married couple the opportunity to utilize estate tax exemptions of each spouse while giving the surviving spouse the opportunity to elect how much he/she shall receive from the deceased spouse’s estate. Any assets disclaimed or renounced by the surviving spouse are held in trust for the benefit of the surviving spouse. The trust assets are distributed to the ultimate beneficiaries only upon the death of the surviving spouse. The use of a Disclaimer Will may result in significant estate tax savings.

Annual Gift Tax Exclusion: One of the simplest ways to reduce the size of your estate would be to begin making annual gift tax exclusion gifts. An annual exclusion from gift taxes applies to each person to whom you make a gift. In 2015, you will be able to gift up to $14,000 each to any number of individuals without those gifts being taxable.


  1. Allows you an opportunity to reduce the size of your taxable estate.
  2. No gift tax returns are required if the gifts are $14,000 or less each year.
  3. You can make these gifts each year, thereby dramatically reducing the size of your estate.
  4. Receipt of the gift is not taxable to the recipient (unless the item gifted was a tax-deferred asset).

Payment of Tuition and Medical Expenses: Tuition payments made directly to a medical or educational institution are not taxable gifts. The payment must be made directly to the medical or educational institution providing the services. Please note that the exclusion covers tuition payments but not books, supplies, board, and dorm fees.


  1. Allows you an opportunity to reduce the size of your taxable estate.
  2. Allows you an opportunity to make additional gifts over and above the annual gift tax exclusion.
  3. This unlimited exclusion can be used for all levels of education.
  4. This exclusion is permitted for tuition expenses of full-time or part-time students.

Irrevocable Life Insurance Trust: A life insurance trust is a vehicle by which the grantor gifts money to the trust and the trust, in turn, buys a life insurance policy on the life of the grantor. When the grantor dies, the life insurance proceeds are paid to the trust and distributed to the beneficiaries designated within the trust. This is a good wealth replacement tool to offset projected estate taxes to be paid.


  1. Provides a liquid pool of funds to pay estate taxes, which are due within nine months of date of death.
  2. The value of the life insurance policy is not included in the grantor’s
    estate because it was not owned by the grantor.

These are just of few of the available estate planning techniques. In estate planning, timing is critical for the proper protection of your assets to ensure security for future generations, and starting sooner rather than later is most important. If you have any questions about the above material or wish to speak to an attorney, please contact HoganWillig at 716-636-7600. HoganWillig is located at 2410 North Forest Road in Amherst, New York 14068, with additional offices in Buffalo, Lancaster, and Lockport.