January 2020 Newsletter

Welcome to 2020

Happy and Healthy New Year to everyone. With the coming of a new year, also comes the ability to refresh and reorganize; to consider your goals and objectives. To that, we implore you to read this Newsletter and consider some of the changes that have occurred and whether they may affect you. Consider your Estate Plans and the last time you reviewed them.

With regard to the Federal Estate and Gift Tax and New York State Estate Tax rules, as of January 1, 2020:

  • The Annual Gift Tax Exclusion remains at $15,000 per donee.
  • The Federal Estate, Gift and Generation Skipping Tax exemptions increase to $11,580,000 ($23,160,000 between U.S. citizen spouses if portability is elected).
  • The New York State Estate Tax Exemption increases to $5,850,000 (don’t forget about the 5% Cliff rule!).

Notably, in April of 2019, New York legislated to reinstate the 3 year “claw back” of gifts made within three (3) years of death for the State Estate Tax calculation. The original legislation effective as of April 1, 2014 retired the “claw back” as of January 1, 2019. What is very impacting is that New York has continued to apply the 5% “cliff” for calculating the State Estate Tax. The 5% Cliff rule removes the effective State Estate Tax Exemption (currently $5,850,000) entirely if the value of the taxable Estate is more than 5% in excess of the threshold (anything $6,142,500 or more). New York had its chance to reform this rule but did not.

Given the complicated Estate Tax rules and the possibility of a reversion of the Federal Estate and Gift Tax thresholds as of January 1, 2026, you should review your Estate Tax Planning sooner than later.

Monumental Changes to Retirement Benefits after 2019

On December 24, 2019, President Trump signed a new law into effect, the “Setting Every Community Up for Retirement Enhancement Act of 2019” (“The Secure Act”). The effective date for most of the new rules under the Secure Act of 2019 is January 1, 2020.

The major changes have to do with Required Minimum Distributions (“RMDs”):

  1. With the exception of ‘eligible designated beneficiaries,’ an inherited IRA will no longer enjoy the ‘stretch’. In the past, an inherited IRA beneficiary could stretch out the RMDs over their life expectancy. As of January 1, 2020, any inherited IRA by someone other than an ‘eligible designated beneficiary’ must receive the entire balance of the IRA within ten (10) years of the principal’s death. The ‘eligible designated beneficiaries’ who can still enjoy the ‘stretch’ include:
    • The contributing employee; you! Your RMDs are based on the value of the account and your own life expectancy;
    • The surviving spouse of the owner;
    • A disabled or chronically ill individual;
    • An individual who is less than 10 years younger than the owner; and
    • A minor child (however, the ten year rule will be triggered upon said minor attaining the age of majority, which is age 18).
  2. The Secure Act has removed the restriction mandating that employees can no longer contribute to their traditional IRAs past 70½. Those who continue to work past 70½ may continue to make contributions to their plans, contributing as much as $7,000 as a deductible contribution ($14,000 between spouses per year).
  3. Under the Secure Act, RMDs must begin by age 72 instead of 70½. However, if you are 70½ by the end of 2019, you are still bound by the old rule.

There are significant consequences to the changes under the Secure Act. You should schedule a review appointment with your Estate Planning Attorney to discuss these changes and how it will financially affect those inheriting your IRA/401k, etc. at the time of your death. If you have an IRA Trust, the Trust should be reviewed to make sure it is compliant and the planning is still viable. You may wish to consider some advanced planning because of the potential tax hit a ten year mandated payout could impose on those inheriting from you who are ineligible for the stretch.

New Jersey Enacts the Aid in Dying for the Terminally Ill Act

On April 12, 2019, Governor Phil Murphy signed the Aid in Dying for the Terminally Ill Act into effect for the State of New Jersey, allowing terminally ill patients to choose to end their own lives in a humane and dignified manner. New Jersey is the eighth jurisdiction in the Country allowing this. There are a number of prerequisites before a request will be honored including oral requests, mental capacity, witnessed written requests, and qualifying medical condition.

Careful Estate Tax planning is critical to avoid unnecessary and excessive estate taxation. Schedule a consultation with any of our Attorneys to discern what is appropriate for you.

Attention Residential Landlords!

The Housing Stability and Tenant Protection Act of 2019 was enacted and effective into the law on June 14, 2019. There are several new rules, and landlords may fall subject to significant penalties if they are not in compliance. Notably, landlords may no longer collect more than one month’s rent as a security deposit.

Many of our clients have residential income producing properties. Please make your complimentary appointment to review imperative considerations; asset protection, for example.

Organ Donation

In Newsday, Rabbi Marc Gellman (from the God Squad) wrote a very interesting article entitled, “Dispelling the Myths about Organ Donation.” Many clients are under the impression that their religion forbids organ and tissue donation when the opposite is actually true. Many religions (including Catholicism, Islam, and Judaism) consider organ and tissue donation a blessing, an act of charity and love, or an act of kindness saving a human life. Others are concerned that if you are on the donation list, the doctors will be less likely to save your life in favor of donating your organs. This is entirely untrue. Doctors only accept organ donations from people who are brain dead. Others believe they are too unhealthy or too old. Organs are viable if they are healthy. Even skin is an organ; our largest organ. If you are considering being an organ and tissue donor but don’t fully understand the process or ethical/religious rules as they may pertain to you, you should speak with your physician and/or clergyman.

Welcome Ronald Perry, Esq.

We wish to extend our warmest welcome to our new Associate Attorney, Ronald Perry, Esq. He joins us with his own experience as a practicing Attorney with talent and notable ambition to be a strong member of our team.

General Disclaimer: While we hope this newsletter provides useful information, please know that this newsletter does not predict or guarantee the outcome or result in any particular situation and no attorney-client relationship exists or is established as a result of this newsletter or its receipt.