Kaye said in one case, he is advising a client who suffers from a terminal illness to put stocks that have declined in value in his wife's name. Because the stocks are being transferred while he is alive, she will continue to own stocks at the price at which he purchased them - which is much higher than their current depressed prices.
ESTATE PLANNING Hoping estates can find shelter Steven J. Dundas Christopher G. Rohde, a partner in the Nutley law firm Piro, Zinna, Cifelli, Paris & Genitempo, says if Congress makes the tax exemption permanent, it should consider inflation, in order to avoid annual adjustments. Financial advisers expect Congress will make $3.5M exemption permanent this year having this argument” over how generous the federal estate tax exemption should be, he said. BY BETH FITZGERALD Zinna, Cifelli, Paris & Genitempo, is among those predicting Tax advisers are looking forward to a stable, predictable TAXPAYERS WHO DIE in 2009 can shelter $3.5 million from fed- Congress will pass legislation before year’s end, rather than allow estate tax exemption, so they can do long-term tax planning. In eral estate taxes — an all-time high for the estate tax exemption, the estate tax to expire in 2010. “I don’t know anybody who recent years, given the volatility of estate tax law, “especially with and one experts say Congress is likely to extend. thinks we will have no estate tax come January 1, 2010,” he said. younger, high-net-worth individuals, a lot of attorneys have Insiders say Congress needs to take action, because under “But I’m surprised we haven’t seen legislation yet.” taken a wait-and-see approach,” Rohde said. a bizarre quirk in the current law, if lawmakers do nothing, the Rohde said he is hoping Congress makes the $3.5 million Over the past decade, the federal estate tax has been any- federal estate tax disappears entirely in 2010. Then, in 2011, the exemption permanent, and “builds in an adjustment for infla- thing but stable and predictable. estate tax returns — but with an exemption of just $1 million. tion.” If the exemption is indexed to inflation, “we won’t have to In 2001, only the first $675,000 of the estate was exempt Christopher G. Rohde, partner in the Nutley law firm Piro, address this issue every few years, and we won’t have to keep ➤➤ See TAX on page 19 $102,800. After a withdrawal of $52,110 for the Trusts aim to find silver lining in economy’s plunge first annuity payment, there is $50,690 left, which at 2.8 percent grows to $52,110, which is the sec- BY BETH FITZGERALD stock values and low interest rates “means there worth of stock — plus the interest rate the Inter- ond annuity payment. THE STOCK MARKET plunge, coupled with the are some transactions that are really important nal Revenue Service uses to value annuities. That But with stocks now so chance that Congress may rein in techniques to do right now,” Presser said. interest rate, known as the “Section 7520 rate,” depressed, the value of the used to reduce gift and estate taxes, might moti- Here’s how GRAT works: The investor now stands at 2.8 percent, near a historic low. shares may rise significant- vate investors to act now and take advantage of decides how long the trust should remain in So, the investor would have to remove ly in the next two years — any tax breaks that still remain. effect, choosing a date the investor expects to $52,110 in stock from the trust in each of the next and anything above Attorney Lisa Presser, a partner with outlive — say, two years. Suppose the investor two years. When the 2.8 percent rate is applied to $104,220 would remain in Lisa Presser Drinker Biddle, in Princeton, who heads the owns stock that has lost half its value in the past a $100,000, two-year annuity, it yields two annu- the trust, and pass to his or her loved ones, firm’s Private Client Group, said now is an espe- year, and is worth $100,000 today. The investor al payments of $52,110, which have a combined exempt from gift and estate taxes. cially good time to consider a grantor-retained can put that stock in the two-year GRAT, and present value of $100,000. At the end of year one, Presser said the administration of Barack annuity trust, or GRAT. The combination of low each year remove half the principal — $50,000 at 2.8 percent, the $100,000 has increased to ➤➤ See TRUST on page 19 www.njbiz.com NJBIZ ◆ June 8, 2009 17 New Jersey TAX Congress ‘will have to do something’ ➤➤ Continued from page 17 from federal estate taxes. Congress exemption to $5 million, but lowering the tax increased the exemption to $1 million for rate to 35 percent. “Congress clearly will have 2002 and 2003; $1.5 million for 2004 and to do something,” she said. 2005; $2 million for 2006 to 2008; and $3.5 Steven Kaye, president of the financial million in 2009. The federal estate tax rate is planning firm American Financial Planning 45 percent, levied on the amount of the Group, in Watchung, said the steady increase estate over $3.5 million. in the federal estate tax exemption has had Christine G. Pronek, a CPA and senior one clear impact on estate planning: “It has manager in the trust and estate group at caused a significant reduction in the need to Shine your shoes. Amper, Politziner & Mattia, in Bridgewater, buy life insurance for estate tax purposes.” said she also expects Congress to take action Individuals may still decide they want life Raise your glass. on the estate tax before year-end. insurance, but the higher estate-tax exemp- She said the House is leaning toward tion has eliminated the need to buy life insur- Get inspired. making the $3.5 million exemption perma- ance to pay estate taxes “for a significant por- nent, and keeping the tax rate at 45 percent, tion of our client base,” he said. ◆ while the Senate is looking at raising the E-mail to firstname.lastname@example.org Nationally sponsored by
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