The Florida Estate Planning and Probate Law Blog is focused on recent federal and state case law and planning ideas.


Federal Estate & Gift Tax: The Federal estate tax exemption amount will be $5,490,000 in 2017. The annual gift exclusion amount will remain at $14,000 Qualified Plans for 2017: The limit on the maximum amount of elective contributions that a person may make to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan remains unchanged at $18,000. The limit on “catch-up contributions” to a §401(k) plan, a §403(b) tax-sheltered annuity, or a §457(b) eligible deferred compensation plan for persons age 50 and older remains unchanged at $6,000. The dollar limit on the maximum permissible allocation under a defined contribution plan is increased from $53,000 to $54,000. The maximum annual benefit under a defined benefit plan is increased from $210,000 to $215,000. The maximum amount of annual compensation that may be taken into account on behalf of any participant under a qualified plan will go from $265,000 to $270,000. The dollar amount used to identify “highly compensated employees” remains unchanged at $120,000. Social Security Tax: The Department of Health and Human Services has set the maximum taxable wages for the OASDI portion of the social security tax at $127,200 for 2017, which is an increase from the 2016 limit of $118,500.


Since 2001, the Massachusetts Department of Revenue ("DOR") has taken the position that Massachusetts resident who die owning real estate or tangible personal property in states which do not impose a state estate tax (New Hampshire, Florida, etc...)the Massachusetts estate tax is applied to the total net value (including the assets in other states). In effect, if another jurisdiction charges an estate tax on real estate or tangible items located within its borders, Massachusetts allows a credit for the tax paid to the other jurisdiction. If no tax is charged, Massachusetts collected the tax attributable to that value as part of the total tax computed. However, a recent Massachusetts probate court held for the first time that a taxpayer who died with property in such a jurisdiction was able to exclude such property from their taxable estate, thus decreasing the tax significantly. While this decision was made by a state trial court, and not on the appellate level, the reasoning was based on solid U.S. Supreme Court precedent. The DOR does not seem likely to challenge the court’s reasoning. The U.S. Supreme Court previously ruled on this issue and found that such taxing schemes were in violation of the Due Process clause of the U.S. Constitution, because the person owning the land or tangibles in the other state derived no benefit from the laws of the state imposing the tax. Such benefits are held to be the basis of the state’s power to tax.


On October 14, 2016, Governor Chris Christie signed into law legislation which raises the New Jersey estate tax exemption to $2,000,000 in 2017 (up from $675,000) and eliminates it entirely in 2018. Until January 1, 2018, the New Jersey estate tax will continue to be applied based on a graduated rate table which begins at 4% for estates of $675,000 or more and increases to 16% for estates in excess of $10,100,000. While the New Jersey estate tax exemption is going away, the New Jersey inheritance tax will remain. The New Jersey inheritance tax only applies to transfers to other relatives and friends, and does not apply to transfers at death to parents, spouse, children and other descendants and charity. So ends New Jersey's reign as the state with the highest estate tax among those states which continue to impose an estate tax.


The Social Security Administration has announced its changes for 2017. Social Security benefit payments will increase by .3% (3/10s of 1%) in 2017. The Social Security Wage Base, the amount of income subject to Social Security taxes, will increase to $127,200 (up from $118,500). In addition, the age for full retirement (which has been 66 for the past 12 years), will increase in 2017. You receive the full amount of your calculated benefits at full retirement age, but a reduced amount if you start receiving benefits earlier. For those born in 1955, full retirement age will be 66 years and 2 months. In essence, Social Security benefits are being decreased since you are required to wait longer to collect "full benefits." The change in the full retirement age dates back to a "deal" enacted in 1983.


♠ Posted by Marc J. Soss in ,,
Recent reports indicate that the State of New Jersey will officially eliminate it's estate tax. The tax elimination will be offset by an increase in the both the gas and sales tax. The tax reform will also include a larger tax credit for the working poor, a tax cut on retirement income, and a tax exemption for veterans who have been honorably discharged. It is anticipated that the estate tax exemption will increase from $675,000 (its current exemption amount) to $2,000,000 effective January 1, 2017 and be phased out completely over the next few years.


This is a reoccurring issue that Personal Representatives/Executors of a probate estate need to be educated on. The First Circuit recently ruled that the executor of an estate was personally liable for unpaid federal income tax when she knew, prior to distributing property from an insolvent estate, that there were outstanding tax deficiencies. The decedent owed $340,000 in unpaid federal income tax, which would have left his estate insolvent. The transfer took place right after the decedent's death and prior to their appointment as executor. The transfer was made despite IRC Section 3713(a)(1)(B) which provides that a claim of the U.S. government shall be paid first when an estate is insolvent (it has priority over any other claims). If the executors fail to honor that priority, they become personally liable for the deficiency under Section 3713(b) if three requirements are met: (1) they transfer assets before paying the government’s claim; (2) the estate is insolvent; and (3) they had knowledge of the liability. The executor's argument, against personal liability, was that the transfer occurred prior to her appointment as executor and a strict reading of the statute found it applied to “a representative of the person or an estate…” The court said that whether she had actually been appointed executor at the time was irrelevant because the assets were under her control at the time they were transferred.