Many people believe inheritance tax and estate taxes are the same things, but they are not. The amount of estate taxes due is calculated based on the value of the property which the deceased person owns. Estate taxes are paid when assets transfer to beneficiaries. The income or assets of the person who inherits does not affect the taxable amount. Inheritance taxes, on the other hand, are calculated based on people receiving property and are affected by the recipient’s income as well as the value of the property received.
The federal government does not impose an inheritance tax. Very few states do. However, the federal government does impose an estate tax, and New York State does as well. If you are concerned about protecting your heirs from losing money due to taxes, you need to worry about the estate tax.
Fortunately, there are ways to reduce or avoid estate taxes in many situations. Mark . Eghrari Wealth Training Law Firm can provide assistance in determining how you can reduce taxes charged on your estate. Give Our Suffolk County inheritance tax planning lawyers a call to learn more.
When is an Inheritance Tax Assessed?
Only seven states collect inheritance tax. Unless you live in one of those states, you do not need to worry about inheritance tax.
For people in New York, estate taxes are the primary concern. The Department of Taxation and Finance in New York State explains the rules for estate taxes. Under New York laws, estate taxes must be paid if the amount of the NY resident’s federal gross estate and the amount of includible gifts exceeds NY’s basic exclusion amount.
The basic exclusion amount varies each year:
- Deaths between April 1, 2014 and March 31, 2015 have a basic exclusion amount of $2,062,500
- Deaths between April 1, 2015 and March 31, 2016 have a basic exclusion amount of $3,125,000
- Deaths between April 1, 2016 and March 31, 2016 have a basic exclusion amount of $4,187,500
- Deaths between April 1, 2017 and December 31, 2016 have a basic exclusion amount of $5,250,000
If your estate is not above this amount, you don’t have to worry about estate tax or inheritance tax. If your estate is above this amount, you need to be aware the state of NY will tax your estate.
You also need to know federal rules for estate tax, which will apply to New Yorkers as well as people throughout the United States. If you have more than the federal excludable amount, which is $5.45 million as of 2016, federal taxes will be assessed on the estate.
How Can You Avoid Taxes On Your Estate?
Inheritance tax and estate tax can be a burden for heirs. Taxes have already been paid on income by the deceased person, so many people believe it is unfair for assets to be taxed again. However, this is the law and heirs can end up losing a significant amount of their inheritance because of it.
The good news is, there are some options for trying to reduce or avoid taxes on an estate. For example, combining exemptions is one option for married couples who are concerned about federal estate taxes.
Money left to a spouse is always tax free, so you can leave as much to your husband or wife as you want without worrying about taxes. Federal law allows for spouses to combine their own personal exemption and their husband or wife’s exemption, if it is not used. In other words, you can pass on $5.45 million and so you can your spouse. If your spouse leaves all his money to you, you now have your own $5.45 million exemption and your spouses. You can now pass on $10.9 million without worrying about estate taxes.
You can also try to use trusts and other estate planning tools so assets will transfer outside of probate and not count for estate taxes or inheritance tax.
How can a Suffolk County Inheritance Tax Lawyer Help You?
Tax planning can be complicated, but it is an essential consideration when you create your estate plan.
Eghrari Wealth Training Law Firm understands New York and federal estate tax rules as well as inheritance tax rules across the United States. We can provide assistance to you in understanding when taxes need to be paid on an estate. We can also provide invaluable advice on ways to reduce or eliminate tax obligations.
You can join us for a free seminar to learn more about estate taxes and inheritance taxes. You can also give us a call at (631) 265-0599 or contact us online to learn more about how an experienced inheritance tax lawyer can provide personalized assistance to help protect an heir’s inheritance. We will work hard to make sure your nest egg goes to your loved one and not to the state or federal treasury due to high taxes.
- What You Need to Know about the New York Medicaid Estate Recovery Program - June 15, 2022
- How to Decide Which Kind of Last Will and Testament Is Right for You - June 1, 2022
- How to Be a Caregiver from a Distance - May 25, 2022