Understanding

Estate Tax Planning

Both the federal government and New York State impose a tax on property that you pass at death. However, in both cases there has been a high exemption in recent years.

· New York State's exemption for people who die in 2022 is $6,020,000, up from $5,930,000 in 2021. Note that in NY, if the estate is worth more than 105% of the exemption amount, the entire estate is subject to tax - there is no benefit for the exemption amount.

· The federal estate tax exemption for people who die (or make gifts) in 2022 is $12,060,000, up from $11,580,000 in 2021. The tax rate is 40%, and with proper planning, few people pay estate tax.

Estate Tax Planning in Briarcliff Manor, Westchester County, NY

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 $12,060,00 for 2022 in gifts during life (and at death) and not pay an estate tax. A married couple gets double that amount, and one spouse can use the unused exemption of the first spouse to die, if proper election is made on a federal estate tax return.

In New York State, there is no tax on gifts made during your life, but gifts made within three years of death are included in the calculation of assets you own when you pass away. It's essential to plan for the NYS estate tax if you're in the ballpark. Rates climb as high as 16%.

Tax Breaks Under Law

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:

    • For single people or couples who are not married, 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, P.C. at (914) 923-1600 to help you organize and plan.