You may have a well-intentioned inheritance plan so that your loved ones may be financially supported when you are no longer around. However, you must consider the federal and state laws that may impact your plan, such as the potential estate taxes that may be imposed. Read on to discover how to reduce your estate taxes and how a seasoned Putnam County estate planning attorney at The Law Office of Andres D. Gil, PLLC can help you strategize.
How much might my estate be taxed in New York State?
Of note, New York State is one of the 15 states, along with the District of Columbia, that imposes a state-level estate tax on its residents. What’s more, this tax may even apply to non-residents who own property within the state borders. The only way in which you may be exempt from this tax is if the value of assets you intend to pass down to your beneficiaries, who are not your spouse or a charity, is below $6.58 million. Even with your total assets being just five percent above this threshold, at $6.909 million, you may incur a significant tax rate of nine percent. All in all, the New York estate tax rate may go as high as 16 percent.
It is worth mentioning that this state-level estate tax may be in addition to the federal-level estate tax. That is, you may also incur federal-level estate taxes if the value of your assets totals $12.92 million or more. Currently, this tax is at a flat rate of 40 percent.
In what ways can I reduce my estate taxes?
As you may likely conclude yourself, these state-level and federal-level estate taxes may significantly diminish the value of your assets. In turn, your heirs may not inherit the amount that you initially intended. But you may rest assured knowing that there are ways to reduce the value of your estate without necessarily giving up your hard-earned assets. Such strategies may allow you to reduce or altogether avoid these estate taxes. Examples are as follows:
- You may transfer your assets to an irrevocable trust that is named to your desired beneficiaries. Since you would not technically hold ownership rights over these assets, they cannot be considered part of your taxable estate.
- You may gift up to $17,000 per year to your desired beneficiaries, or use gift-splitting with your spouse to gift up to $34,000 per year. Since these amounts qualify for the annual gift tax exclusion, they cannot be considered taxable in your estate.
- You may sell your assets to your desired beneficiaries in exchange for payments throughout the rest of your lifetime. These payments may be considered part of your taxable estate, but not the sold assets.
When establishing these documents, please consider contacting a competent Putnam County estate planning attorney. Our team at The Law Office of Andres D. Gil, PLLC is ready and willing to assist you.