Founding Attorney
A factor in any estate plan is dealing with the potential for tax liability. Your estate and your heirs could have a significant tax liability if you are not careful when creating a plan to finalize your affairs after your death. Because of the recent changes in tax laws, it may be a good time to review your estate plan with a New York estate planning attorney to ensure that you are taking steps to reduce the tax liability for your heirs and loved ones.
Four Important Things to Know About Estate Taxes in 2020
1. Estate Tax Exemption for 2020
The tax exclusion for federal estate taxes for 2020 is $11.58 million. While this may sound like a lot, it is not when you consider that some individuals may have a home, vacation home, investment accounts, jewelry, vehicles, and other property that could total more than the federal estate tax exclusion. Some assets that do not pass through probate may still count toward the estate’s value for federal estate tax purposes. A careful review of all assets and resources is necessary to determine if your estate could owe federal taxes after your death.
2. Gift Tax Exemption
A way to reduce the taxable value of your estate is by gifting assets during your lifetime. For 2020, the gift tax exemption is $15,000. You may give $15,000 in assets or money to as many people as you desire without incurring gift taxes. Gifts to your spouse or a charity are unlimited. Likewise, if you pay a medical institution or educational institution directly, the amount of the gift is unlimited.
3. New York Has An Estate Tax
New York is one of several states that has an estate tax. The estate tax exclusion for New York is $5.85 million for individuals who die on or after January 1, 2020, but before January 1, 2021. Estates must file an estate tax return and pay New York estate taxes within nine months from the date of the decedent’s death.
4. New York Does Not Have an Inheritance Tax
New York is not one of the few states that have an inheritance tax. Inheritance tax is paid by heirs, whereas estate taxes are paid directly by the estate.
Even though New York does not have an inheritance tax, your heirs could incur some tax liability for certain assets. For instance, beneficiaries of some retirement plans could incur taxes on required distributions. Heirs could also incur short-term or long-term capital gains taxes depending on how they dispose of certain property. With careful estate planning, you may avoid these taxes with the use of various trust agreements to manage assets for heirs.
Work with New York Estate Planning Attorney to Eliminate Estate Taxes
There are several ways that you can reduce or eliminate the tax liability for your estate and your heirs. Contact us today. Working with a New York estate planning attorney is one of the best ways to protect your loved ones, especially if you have a high-net-worth. High-net-worth estates take careful planning and execution to protect assets and heirs from unnecessary costs, taxes, and liabilities.