• Supporting Our Clients and the Community During the COVID-19 Pandemic.
    • Skip to primary navigation
    • Skip to main content
    • Skip to primary sidebar
    • Skip to footer
    • Home
    • Our Firm
      • About Our Firm
      • Attorney and Staff Profiles
      • Communities We Serve
        • Bergen County
        • Clifton
        • Essex County
        • Hudson County
        • Hunterdon County
        • Middlesex County
          • Edison
          • Woodbridge
        • Morris County
        • Passaic County
        • Somerset County
          • Hillsborough
          • Warren
        • Sussex County
          • Franklin
        • Union County
          • Plainfield
    • Services
      • Asset & Business Planning
      • Estate And Gift Tax Figures
      • Estate Planning Services
      • Incapacity Planning
      • IRA & Retirement Planning
      • Legacy Planning Services
      • Medicaid and Elder Law
      • SECURE Act
      • Special Needs Planning
      • Trust Administration
    • Webinars
    • Resources
      • Elder Law
        • Elder Law & Medicaid Definitions
        • Elder Law reports
        • Elder Law Resources
          • Plainfield Elder Law
      • Estate Planning
        • Estate Planning Checkup
        • Estate Planning Definitions
        • Incapacity Planning Definitions
        • Is Your Estate Plan Outdated?
        • New Jersey Estate Planning Resources
        • Top 10 Estate and Legacy Planning Techniques
      • Free Estate Planning Worksheet
      • Free Seminars
      • Frequently Asked Questions
        • Business Succession Planning
        • Estate Planning
        • Elder Law
        • Estate Planning for Women
        • Frequently Asked Questions for Families Without an Estate Plan
        • Legacy Wealth Planning
        • LGBTQ Estate Planning
        • Medicaid
        • Trust Administration & Probate
        • Wills and Trusts
      • Newsletters
      • Pre Consultation Form
      • Probate and Trust Administration
        • Bereavement Resources
        • How to Know if You Need Extra Help With Your Grieving
        • Loss of a Loved One
        • Probate Resources
          • Hillsborough Township Probate
          • Plainfield Probate
        • The Mourner’s Bill of Rights
        • Things You Need To Do When a Loved One Passes Away With a Trust
        • Things You Need To Do When a Loved One Passes Away With a Will
        • Trust Administration & Probate Definitions
      • Published Books
    • Reviews
      • Our Reviews
      • Review Us
    • Blog
    • Contact Us

    Augulis Law Firm

    New Jersey Estate Planning Information Center

    Connect with us today(908) 222-8803

    • Attend A Seminar
      • Attend A Webinar
    • Facebook
    • Twitter
    • Linkdin
    • Youtube
    • Instagram
    Committed to helping New Jersey families preserve and protect their wealth.
    Home » Taxes » Revocable Living Trusts & Death Taxes

    Revocable Living Trusts & Death Taxes

    March 11, 2016Estate Planning

    revocable living trustsAccumulating wealth can be challenging, and you may breathe a sigh of relief when you find that you will be able to make things easier for your loved ones after you are gone. This is well and good, but you do have to be aware of the potential impact of estate taxes.

    In this blog post, we will look at the death taxes that can come into play, and we will also pass along some important information about taxation and revocable living trusts.

    Federal Estate Tax

    There is a federal estate tax in place, and it has been around since 1916. Every estate is not subject to the tax, because there is a credit or exclusion that allows you to transfer a certain amount of property before the tax would kick in.

    There was a base exclusion of $5 million installed for the 2011 calendar year, and after the American Taxpayer Relief Act of 2012 was passed, this exclusion was made permanent. However, there have been ongoing adjustments each year since 2011 to account for inflation.

    After a series of adjustments, the exact amount of the federal estate tax exclusion in 2016 is $5.45 million. You are probably going to see a somewhat higher figure each year as inflation adjustments are added.

    The maximum rate of the federal estate tax is 40 percent at the present time, so we are talking about an attention-getting figure that can significantly impact your financial legacy.

    Federal Gift Tax

    A logical response to the estate tax would be gift giving while you are alive. People used to be able to do this for a few years after the original enactment of the death tax, but a gift tax was installed to close this loophole.

    The gift tax and the estate tax are unified, and this means that the $5.45 million exclusion is a unified exclusion. It includes gifts that you give while you are living along with the value of your estate. In other words, if you gave $5.45 million in tax-free gifts while you are living using your unified exclusion, your available exclusion would be exhausted. All of your estate would be subject to the estate tax.

    The estate tax exclusion is portable between spouses. This means that a surviving spouse could use his or her own exclusion and the exclusion that was afforded to his or her deceased spouse.

    While we are on the subject of spouses, there is an unlimited marital transfer tax deduction. Unlimited assets can be transferred to your spouse while you are living or after you pass away free of federal transfer taxes. A caveat to this statement would be that your spouse must be an American citizen to take advantage of the unlimited marital transfer tax deduction.

    State-Level Estate Tax

    There are a number of states in the union that have state-level estate taxes. We practice law in the state of New Jersey, and there is a state-level estate tax in our state. At the present time, the New Jersey state estate tax exclusion is $675,000. As a result, you could be exempt from the federal estate tax, but exposed to the New Jersey state estate tax.

    We should point out the fact that there is a marital deduction on the state level as well. You can transfer unlimited assets to your spouse without incurring any New Jersey state estate tax liability.

    Revocable Living Trusts

    Now that you understand the lay of the land when it comes to death taxes, we can look at revocable living trusts. These trusts are useful for a wide range of people, but they do not provide estate tax efficiency, unless a Credit Shelter Trust is added.

    Since this type of trust is revocable, you retain incidents of ownership when you establish and fund a revocable living trust. For this reason, assets that are held by revocable living trusts are part of your estate for tax purposes.

    However, there are different types of trusts that can provide estate tax efficiency. These would be irrevocable trusts. Generation-skipping trusts, grantor retained annuity trusts, qualified personal residence trusts, and charitable lead trusts are some of the trusts that can be used for tax efficiency purposes.

    Schedule a Consultation

    Revocable living trusts are not going to provide estate tax efficiency, but if you are not exposed to death taxes, this type of trust could be a good choice for you. On the other hand, if your estate is in taxable territory, you should consider the utilization of a wealth preservation trust.

    Our doors are open if you would like to discuss your situation with a licensed estate planning attorney. To schedule a consultation, call us at (908) 222-8803 or send us a message through our contact page.

    • Author
    • Recent Posts
    Alan Augulis, Estate Planning Attorney
    Mr. Augulis founded his Warren, New Jersey law firm so that he could focus his practice in the areas of advanced estate planning and tax law. Mr. Augulis has invested considerable time and energy helping to educate others on the topic of estate planning and has become a sought-after speaker in the tax and estate planning arena because of his informative and entertaining seminars.
    Latest posts by Alan Augulis, Estate Planning Attorney (see all)
    • Important Subjects to Discuss with Your Estate Planning Attorney - January 23, 2023
    • Planning for the Possibility of Dementia - January 20, 2023
    • How to Prepare for Retirement - January 17, 2023

    About Alan Augulis, Estate Planning Attorney

    Mr. Augulis founded his Warren, New Jersey law firm so that he could focus his practice in the areas of advanced estate planning and tax law. Mr. Augulis has invested considerable time and energy helping to educate others on the topic of estate planning and has become a sought-after speaker in the tax and estate planning arena because of his informative and entertaining seminars.

    Primary Sidebar

    Augulis Law Firm

    Free Estate Planning Worksheet

    There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
    • This field is for validation purposes and should be left unchanged.

    Follow Us

    • Facebook
    • Twitter
    • Linkdin
    • Youtube
    • Instagram

    Testimonials

    Client Review
    August 4, 2020
        

    Very happy with work. Everything explained clearly and concisely and all my questions were answered completely. Process of putting together plan and review of documents was very organized and easy to understand.

    norm

    Blog Subscription

    • This field is for validation purposes and should be left unchanged.

    Where we are

    Augulis Law Firm
    5 Mountain Blvd. Suite 5
    Warren Twp, NJ 07059
    Phone: (908) 222-8803
    Fax: (908) 222-8815

    See Larger Map Get Directions

    Office Hours

    Monday9:00 AM - 5:00 PM
    Tuesday9:00 AM - 5:00 PM
    Wednesday9:00 AM - 5:00 PM
    Thursday9:00 AM - 5:00 PM
    Friday9:00 AM - 5:00 PM

    Map

    map

    Footer

    • Advantages of Working With Our Firm
    • Disclaimer
    • Privacy Policy
    • Sitemap
    • Contact Us

    Connect with Us

    • Facebook
    • Twitter
    • Linkdin
    • Youtube
    • Instagram
    footer-logo

    Augulis Law Firm
    All Right Reseved.

    Attorney Advertisement

    © 2023 American Academy of Estate Planning Attorneys, Inc.