If you are an affluent New Yorker, it is essential that you follow the specific actions required under New York estate tax laws. As of 2023, the federal estate tax exemption rate is $12,920,000. In New York, however, there are different parameters and requirements. For deaths that occur after January 1, 2023, if a decedent’s estate in New York exceeds $6,580,000, the fiduciary of the estate is required to file an estate tax return with New York State within 9 months of the decedent’s having passed.
The estate tax in New York is progressive and can range from 5%-16%. The range will depend upon the value of the estate at the time of the decedent’s passing. In terms of the federal estate tax rate, it currently rests at 40% of any amount above the exemption. Ineffective or inaccurate estate planning can lead to huge amounts of equity being lost to taxes, highlighting the importance of working with informed legal representation.
Are you concerned with how estate taxes might impact your plans and looking for legal guidance from an experienced Long Island tax planning lawyer? The experienced estate planning lawyers with Davidow, Davidow, Siegel & Stern are available now to help you with all your tax and estate planning needs.
The Estate Tax in New York
New York has no inheritance tax; however, estates in New York may still be subject to estate taxes. The estate taxes that are in place in New York are distinct and different from federal estate tax laws as well as the laws of other states. To ensure the best possible outcome in your estate tax planning measures, it is important to work with a Long Island tax planning lawyer with considerable experience in federal and New York estate planning services.
The Tax Exclusion Level in New York
When estates fall below the exclusion amount, they may not be required to file tax returns and pay any estate taxes at all to New York. What determines this is the exclusion amount of New York estates, which as of 2022 stood at $6,110,000, adjusted annually to account for inflation. Any New York estates that exceed this amount at the date of death will be required to file estate tax returns.
When determining the value of an estate in New York, the government takes into account not only the gross estate but also any non-excluded gifts within three years of death.
Spousal Exemption in New York State
New York is among the many states that offer an estate tax exemption for spouses. Any amount passed to a spouse is tax-free.
The Estate Tax Cliff and New York Implications
While there are some aspects of New York estate law that can be beneficial and support aspects of planning, the “cliff tax” is not one of them. The “cliff tax” is considered by many legal practitioners and persons engaged in their own estate planning to be one of the most unique and difficult elements of New York estate tax law. When the value of an estate in New York is greater than 105% of New York’s estate tax exemption, then the estate receives no exemption from estate taxes. Should this happen, the entire value of your estate would be subject to New York’s estate tax, drastically reducing the value of your estate.
NY Estate Planning Tools and Techniques
To preserve the highest possible value for your estate, it is wise to work with an experienced Long Island tax planning lawyer. Effective planning can help to avoid the dreaded “cliff tax”, helping to reduce the taxable estate. There is a broad range of estate planning tools that can be put to work to reduce or eliminate your estate tax.
Some of the most commonly used techniques that we can employ on your behalf to reduce or eliminate your estate tax altogether include:
Gifting Assets to Future Heirs While You’re Alive
One of the more common methods in New York to preserve your assets is to gift a certain amount, either outright to your heirs or to a trust for their benefit.
The Placement of Assets in Trusts
You can create specific trusts that can be used to reduce the value of your estate. Trusts reduce the property that you hold by placing it into the control of another person, effectively removing that portion of your estate from the estate tax. A trust is basically the designation of certain assets of yours into a trust for the intended benefit of a third party.
Connect with a Long Island Tax Planning Lawyer Now
To explore your tax planning options with an experienced Long Island tax planning lawyer, reach out to Davidow, Davidow, Siegel & Stern at (631) 234-3030, or visit our site to schedule a consultation.