Estate Tax Planning

Both the federal government and NYS impose a tax on property that you pass at death. However, in both cases there is a high exemption (NYS over $5.4 million and federal $11.4 million for 2019). This means most people do not pay an estate tax. However, especially if you’re in the ballpark for owing NYS estate tax, special planning is needed because if you exceed the exemption by more than 5%, the tax is due on the full estate, not just the amount above the exemption.

Estate Tax Planning

Both the federal government and New York State impose an estate tax on assets you pass at death. Under the federal estate tax system, you can make up to $11.58 million (in 2020) in gifts during life (and at death) and not pay an estate tax. In New York State, the amount exempt from tax is $5,490,000 (for 2019). Both amounts are adjusted annually.

Tax Breaks Under Law

Under federal and state rules, there are some breaks:

  • Married folks can give an unlimited amount of money/assets/stuff to each other and not pay an estate tax. There is an “unlimited marital deduction.”
  • Exemptions are available for gifts to charity.
  • The New York rules are different than the federal rates in some respects. For example:
    • Under federal law, if you are married and don’t use up your full exemption, your surviving spouse can use it to shield assets from estate tax in his/her estate. That’s not true in New York.
    • In New York, if you exceed the exemption amount by even a small bit, the whole estate becomes subject to New York estate tax.

Tax Rates

When taxes do kick in, they are hefty. The federal estate tax rate is 40%, and New York State has graduated rates to 16%. In my experience, tax planning is especially important for single people who cannot take advantage of the “unlimited marital deduction” and for anyone who has wealth levels that would subject them to tax.

It’s important to get your documents in order with any business or estate planning. Contact the law firm of Susan G. Parker Law Associates, PC at (914) 923-1600 to help you organize and plan.

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