If you live in New York and you are making an estate plan or your loved one has passed away, you need to know the New York estate tax rules. Depending upon the size of the estate you are leaving (or that your loved one has left behind), estate taxes may need to be paid to the state of New York after death. Not only that, but estate taxes may also need to be paid to the federal government.
The rules for federal and state estate taxes are not the same, which can make it more difficult to make an estate plan that reduces or avoids estate taxes. Eghrari Wealth Training Law Firm can help. Give us a call to find out more about the ways in which our legal team can assist you with the estate planning process by explaining how estate tax will impact your plans.
How are Federal Rules Different?
New York estate tax rules are not the same as federal rules. New York charges estate tax on smaller estates than the federal government does. New York has also created an “estate tax cliff.” Once your estate exceeds 105% of the amount you are allowed to pass on to loved ones without being taxed, your entire estate is taxed. The federal government, on the other hand, will impose taxes only on the value of your estate that exceeds the exempt amount that you don’t have to pay taxes on.
Because the rules differ, you need to make different plans if your goal is to reduce or avoid estate taxes on the state level versus the federal level. Your attorney can discuss with you whether a death (your own or the death of the person who you will be inheriting from) is going to result in estate taxes being paid to the federal government or to New York. An experienced attorney will also help you to identify the appropriate tools that can be used with the goal of reducing what you pay or avoiding estate tax altogether.
New York Estate Tax Rules vs. Federal Estate Tax Rules
The IRS will allow you to pass on $5.49 million in 2017 without having to pay estate tax. In the state of New York, the amount you are allowed to pass on without having to pay taxes is smaller than this $5.49 million.
The date of the death matters in determining when estate taxes are assessed in New York. If a death happens before March 31, 2017, the exempt amount in New York is $4,187,500. If the death occurs after April 1, 2017 but before December 31, 2018, the exempt amount in the state is $5.25 million. This is getting closer to the exempt amount for the federal government, but New York still charges taxes on some estates that the federal government does not.
It is important to realize that the estate tax is assessed by the federal government or by the state of New York only in situations where the money or property is not left to a spouse. You are allowed to leave as much of your wealth so your surviving spouse as you want to without having to worry that your spouse is going to have to pay a substantial tax bill on inherited assets.
Estate taxes can be a substantial financial burden. People who acquire wealth already pay taxes while they are alive and earning income or acquiring assets. The fact that taxes must be paid again on an inheritance is seen by some as unfair, since taxes were already paid. Those who inherit will lose a portion of their inheritance due to the money being taken by the state or federal government.
There are also situations where business assets or valuable farmland transfer after a death, triggering estate tax. This can be a problem if the bulk of the wealth is in these assets because there may not be cash available to pay estate tax. Business assets could have to be sold, a loan could have to be taken, or land could have to be sold to pay the tax.
Getting Help from A Long Island Estate Tax Planning Lawyer
To discover more about how planning for estate tax can fit into your comprehensive estate plan, download our estate planning checklist. You can also give us a call at (631) 265-0599 or contact us online to get personalized advice from a Long Island estate tax planning lawyer. Call today so you can protect your wealth or your inheritance by exploring ways to minimize the taxes that will be taken out of an estate after a death.
- Can Medicaid Planning Still Help Me If I Need to Qualify Now? - November 30, 2022
- Should I Tell My Loved Ones the Details of My Estate Plan? - November 23, 2022
- Protecting Assets with an Intentionally Defective Grantor Trust - November 16, 2022