Long Island Estate Tax Attorneys
Guidance on Estate & Inheritance Taxes in New York
Do you have questions about estate taxes and need legal guidance in New York? Our Long Island estate tax lawyers at the Law Offices of Steven M. Adler, PLLC can assist you today. What information should you be privy to, if you own real estate in New York? New York's estate tax laws require specific actions to be taken for high worth estates.
The federal estate tax exemption rate is currently (as of 2020) set to $11,580,000. However, in New York, if a decedent’s estate exceeds $5,850,000 (for deaths occurring after January 1, 2020), the fiduciary of the estate must file an estate tax form with the state within nine months of the decedent’s passing. The state tax is progressive and ranges from 5 percent to 16 percent, depending on the estate's worth. The federal estate tax rate is currently at 40 percent on any amount over the exemption.
Estate Tax in New York State
The state of New York does not charge an inheritance tax, but estates in New York are still subject to estate taxes. These estate taxes are unique when compared to federal estate tax law and the laws in other states.
New York Estate Tax Rate
While the federal estate tax rate is 40%, the New York state tax rate is much lower, starting at just 5% and capping at 16%. These tax rates are calculated on a table, correlated with the value of the estate.
Tax Exclusion in New York
As of 2021, the exclusion amount for estates in New York is $5,930,000, adjusted every year for inflation. Any estates that exceed this amount at the date of death are required to file estate tax returns. In determining how much an estate is worth, New York state considers the gross estate as well as any non-excluded gifts.
Spousal Exemption in New York
As in many states, New York does provide its own spousal exemption. However, this spousal exemption differs from the federal spousal exemption. Mainly, if the spouse of the deceased does not pass their exclusions to beneficiaries or into a trust, they will not be able to transfer that exclusion to use later. This could lead to significant estate taxes down the line.
New York's Estate Tax Cliff
The "tax cliff" is possibly one of the most distinct and challenging aspects of New York estate tax law,. If the value of an estate in New York is greater than 105% of the state's estate tax exemption, that estate receives no exemption from estate taxes. This means the entire value of the state will be subject to the state's tax.
Estate Tax Planning Techniques
Estate planning is particularly important in New York due to the aforementioned estate tax cliff. Reducing the taxable estate is key for any estates currently at or near 105% of the estate tax exemption.
There are a variety of estate planning tools that can reduce or eliminate the estate tax. One common method is gifting assets to future heirs while you are still alive. This must be done carefully, however, in order to avoid future penalties.
Another commonly employed technique is placing assets in trusts. Specific trusts can be used to reduce your estate's value, as they reduce the property that you hold by placing it in another person's hands.
Finally, those looking to avoid estate taxes can turn to charitable giving, whether through a trust or a will provision.
The federal government allows you to give $15,000 per person every year, and if you are married, you and your spouse can give $30,000 per person annually.
In addition to tax-free gifts, you are allowed to pay the medical and education bills of another individual. You can also make gifts during your lifetime in excess of the $15,000 annual exclusion by utilizing some or all of your $11,580,000 federal unified credit during your lifetime so that all future appreciation of gifted assets is out of your estate.
There are several types of trusts you can create to avoid high estate taxes. One of the best to consider is a Life Insurance Trust (ILIT). Life insurance payouts can dramatically increase the value of an estate, possibly tipping it over the "tax cliff." A Life Insurance Trust can instead hold these payouts to keep them out of the taxable estate.
Gifts made to a charity are never taxable to an estate. Adding a "Santa Clause" provision to a will or creating a trust for a charity are both valid methods of reducing total estate taxes. Additionally, gifting to charity over one's lifetime can help reduce the final estate after death.
Choose the Law Offices of Steven M. Adler
If you have a large estate, it may be in your best interest to provide your loved ones with their inheritance as early as possible. With more than 30 years of experience, our team at the Law Offices of Steven M. Adler, PLLC can help you avoid costly estate taxes, reduce the impact of probate, and leave as much as possible to your future heirs.
Our attorneys pride themselves on taking the time to get to know our clients by personally handling each and every one of their cases. We remain accessible to each of our clients and are committed to returning your phone calls within 24 hours.
If you are interested in working directly with a lawyer who can guide you through every aspect of your estate plan and help you reduce the impact of estate taxes, contact our firm today.