If we thought Presidents Obama and Trump are diametrically opposed to one another in nearly every way possible we would be correct. Except when it comes to Estate Tax Reform. As a NY estate lawyer practicing in Forest Hills, NY, I am always curious to see what the winds of political change bring to this arena and so should you. Love him or hate him, January 20, 2017 ushered in a new age for our country as well as the way we may be planning our NY estates. Historically our country was founded on the principles of hard work, ingenuity and fair play. Government claimed the Federal Estate Tax was imposed on estates within the spirit of these principles. Previously government marketed the Federal Estate Tax as a mechanism to create a level playing field by preventing excessive wealth from being seamlessly passed from one generation to another and to inhibit oligarchies.
What is the Estate Tax?
For those who are not NY probate lawyers, we have traditionally had two taxes on any and all estate assets, the Federal Estate Tax and currently in 16 states the State Estate Tax. Cumulatively these taxes could impose a 60% surcharge on any and all Federal and State inheritance. Fail to pay the estate tax liability in a timely manner, 9 months from the date of death, and these tax rates could easily rise above 80% with interest and penalties.
So how can an estate tax be good public policy? The truth is the Federal and NY State Estate Taxes were not good public policies. In fact, as a NY probate lawyer I can tell you from experience the wealthiest families in America never pay a dime of either Federal or NYS Estate Tax. These families have legions of NY estate lawyers and Certified Public Accountants and Investment Advisors to guarantee that no portion of their estates are ever tainted by the nuisance of estate tax liability. Contrary to popular belief it is actually the middle and upper middle class families of hardworking individuals who often fall into the Federal and NY Estate Tax trap. More frequently than not, they are not as savvy as their wealthier counterparts and fail to take requisite precautions to protect their inheritance from the pitfalls of both the Federal and NYS Estate Tax.
One graphic example of such an instance is the Estate of The Artist Formerly Known as Prince. Born Prince Rogers Nelson, the artist legally changed his name in 2006 as indicated above. On April 21, 2016, the tremendously talented artist who found incredible success in a career spanning over thirty years was found unresponsive in his Minnesota home from a suspected overdose of painkillers. As a NY probate lawyer the only portion of this tragedy as sad as Prince’s premature death was the fact that he failed to do any estate planning. Prince leaves behind an inheritance conservatively estimated to be over Two Hundred Million ($200,000,000.00) Dollars without having done so much as a simple will. Any experienced NY estate lawyer will tell you this was lunacy. Between the Federal Estate Tax of 40%, Minnesota’s State Estate Tax of 16% and administration costs, expenses and fee’s Prince’s Estate is about to cut a check for an estimated One Hundred Seventeen Million ($117,000,000.00) Dollars for the above expenditures.
There is no sugar coating it, as a NY estate lawyer I can tell you when Estate Taxes are triggered it is not pretty. There was no excuse for an individual with Prince’s resources to fail to retain the competent counsel his inheritance required. Unfortunately, it is not uncommon for the American families of the hard working and industrious to run into the same estate tax issues albeit on a slightly different scale as Prince’s Estate. Thus the Federal and State Estate Taxes have turned into nothing more than a running joke for the wealthiest Americans and a tremendous penalty on some of the hardest working ones.
For all of their differences Presidents Obama and Trump are very similar when it comes to the Estate Tax. Prior to the Obama Administration, any and all estate assets over and above One Million ($1,000,000.00) Dollars would suffer the same onerous fate as Prince’s estate. Obama quickly recognized the injustice of the Estate Tax for what it was, just another tax on an already squeezed middle class. Obama quickly passed the American Taxpayer Relief Act raising the Federal Estate Tax Exemption from the One Million ($1,000,000.00) Dollars to nearly Six Million ($6,000,000.00) Dollars per individual and nearly Twelve Million ($12,000,000.00) Dollars for married couples. Moreover, each State imposing their own Estate Tax such as the case in New York, raised their exemptions to match the Federal levels. This legislation, while putting a lot of high priced NY estate planning lawyers out of business, created a much needed buffer to safeguard the inheritance of middle and upper middle class families everywhere.
At the current Federal and NY State exemption levels the majority of estate tax liability is still being paid by the most hardworking Americans. In 2015, of the 5,000 estates in the nation who paid the combined Seventeen Billion ($17,000,000,000.00) Dollars in Federal Estate Tax liability only 25% of it was paid by the wealthiest .1% percent. The remaining portion was again paid by the hardest working Americans who did not possess the resources and expertise to circumvent the estate tax. As an experienced NY probate lawyer I can tell you that it is generally the middle and upper middle classes who bear the brunt of the Estate Tax.
Holding a majority in both the Senate and House of Representatives our 45th President, Donald J. Trump has set his sights on finishing what Obama started with the American Taxpayer Relief Act and abolishing the Estate Tax in its entirety. President Trump has made it absolutely clear in his first days as President that he intends to repeal the Federal Estate Tax and has the votes to get it done. As an experienced NY probate lawyer I am excited to see how the Obama agenda put forth by the previous administration converges with the current administration’s repeal of the Federal Estate Tax. Personally I think it is a huge win for all Americans, Democrat and Republican alike and will pump a lot of wealth back into our economy.
If you are looking for a will or to see if your estate requires some additional planning it never hurts to ask the opinion of an experienced NY probate lawyer. Feel free to call the NY wills lawyers at The Law Offices of Jason W. Stern & Associates for a free consultation at (718) 261-2444. Our Queens estate lawyers have 50 years of combined NY estate law experience drafting and probating the wills for families like yours in the counties of Queens, New York, Kings, Bronx, Richmond, Westchester, Rockland, Nassau, Orange, Dutchess as well as in the State of New Jersey.