Tax law, trust administration, and estate planning intersect in ways that affect clients across income levels and family structures. For CPAs, CFPs, and other financial professionals, staying current on developments in these areas is both a professional obligation and a service to the families and businesses you advise.
Mandelbaum Barrett’s tax, trusts, and estate planning attorneys regularly present at continuing education programs for financial professionals and work alongside CPAs and advisors to help their clients implement well-coordinated plans. This post covers key areas where tax, estate, and trust planning intersect and where coordinated professional guidance makes the biggest difference.
Estate Tax Considerations and Planning Strategies
Federal estate tax applies to estates above the applicable exemption threshold, which has changed significantly over the past decade and is scheduled to adjust again under current law. New Jersey does not currently have a state-level estate tax, though its inheritance tax — which applies to transfers to certain beneficiary classes — remains in effect and affects many families in the state.
Effective planning involves more than staying below the threshold. Gift programs, irrevocable trusts, charitable giving strategies, and business succession planning can all reduce taxable estate values and pass wealth more efficiently across generations. Coordination between the estate planning attorney and the CPA is essential, since the choice of trust structure, the timing of gifts, and the tax basis of transferred assets all have income tax consequences that outlast the original plan.
Trust Administration: What Financial Advisors Need to Know
Advisors who manage assets held in trust operate within a legal framework governing what the trustee can and cannot do. Uniform Fiduciary Income and Principal Act provisions, state-specific trust statutes, and the terms of the trust document itself all affect how assets should be treated, reported, and distributed.
Common trust administration issues that benefit from coordinated legal and financial advice include:
- Discretionary distribution decisions that could expose a trustee to beneficiary claims
- Trust modification or decanting when original terms no longer serve the beneficiaries’ interests
- Handling trust assets subject to unique valuation issues, such as closely held business interests or real estate
- Complying with investment standards and documentation requirements under the prudent investor rule
Estate Planning Updates for High-Net-Worth Clients
Clients with significant wealth face planning decisions that require careful coordination between tax and legal counsel. Recent and ongoing legislative developments have created planning opportunities and new complexities in several areas:
- The future of the stepped-up basis rule for inherited assets
- Grantor retained annuity trusts and other estate freeze techniques in a changing interest rate environment
- Qualified opportunity zone investments and their estate planning implications
- Charitable remainder trusts and donor-advised funds as vehicles for blended charitable and family wealth planning
For advisors working with clients in these areas, having an estate planning attorney in the conversation early — before a transaction closes or an irrevocable election is made — avoids costly mistakes and captures available opportunities.
Contact Mandelbaum Barrett’s Tax and Estate Planning Team
Mandelbaum Barrett’s tax, trusts, and estate planning attorneys work regularly with CPAs, CFPs, and financial advisors to help their clients implement well-coordinated plans. We are available to participate in client meetings, provide guidance on complex structures, and address planning questions that arise throughout the advisory relationship.
Contact our team to discuss your clients’ estate planning needs or to ask about continuing education opportunities with our attorneys.
What is the difference between a revocable and irrevocable trust?
A revocable trust can be modified or terminated by the grantor at any time during their lifetime and does not provide asset protection from creditors or remove assets from the taxable estate. An irrevocable trust generally cannot be modified after creation, but in exchange it can provide asset protection, remove assets from the taxable estate, and qualify for certain Medicaid planning benefits. The right choice depends on your planning goals and timeline.
Does New Jersey have an estate tax?
New Jersey eliminated its state estate tax in 2018, but it still has an inheritance tax that applies to transfers to certain classes of beneficiaries. Transfers to children, grandchildren, and spouses are generally exempt. Transfers to siblings, nephews, nieces, and unrelated beneficiaries may be subject to New Jersey inheritance tax at varying rates. This distinction makes careful beneficiary planning important for New Jersey residents.
When should a CPA or financial advisor refer a client to an estate planning attorney?
A referral is appropriate any time a client faces a significant life transition — marriage, divorce, birth of a child, death of a spouse, sale of a business, or a major change in net worth. It is also advisable when a client has assets in multiple states, owns interests in closely held businesses, has charitable giving goals, or when existing documents have not been reviewed in more than three to five years. Early coordination between advisors produces better outcomes than piecemeal planning.
How does the stepped-up basis rule affect estate planning?
When a beneficiary inherits an asset, they typically receive a new cost basis equal to the fair market value of the asset at the date of the decedent’s death — known as a step-up in basis. This eliminates any capital gains that accrued during the decedent’s lifetime. The stepped-up basis rule significantly affects decisions about which assets to gift during life versus hold until death, since gifted assets carry the donor’s original basis rather than receiving a step-up.