Taxes! You deal with them while alive quite often. You have federal income tax, state income tax, excise tax, use tax, & sales tax. For the wealthier individuals in this country, they are also exposed to estate tax. Bear in mind, estate tax typically does not affect 99% of the residents in the United States. A portion of estate planning deals with decreasing the taxable liability that is imposed on an individual’s estate after their passing. An entire industry is devoted to helping individuals plan accordingly on their approach when dealing with estate tax. When it comes to one’s estate, you are exposed to various forms of taxes including capital gains, gift taxes, and income taxes. It is crucial for an individual to be educated properly in knowing what assets are subject to tax. Contacting an estate lawyer in New York is always a viable option to understand this area of law better.
What is Subject To Estate Tax?
What is included in an individual’s taxable measure as far as estate taxes are concerned? By taxable measure, I refer to the dollar amount subject to tax. Generally speaking, an individuals bank account (savings and checking), cash, real estate property, and owned securities are all subject to estate tax. Be aware, a person’s life insurance policy may also be subject to estate tax unless correctly planned via estate planning tools. Also, joint property which is currently owned by an individual who is not a spouse is included in your taxable measure when calculating the estate tax due.
When you and your spouse have joint property such as real property and bank accounts, the entire amount is included within the estate and exposed to estate tax. What the living spouse would have to do is provide supporting documentation substantiating the amount that was made by their own contribution. Also, whatever interest the decedent may have in a corporation, limited liability company, or any other business entity is subject to estate tax.
The Deductions From Your Gross Estate
To know what exactly what your taxable exposure is, we first need to apply all the allowable deductions which the Internal Revenue Service (IRS) provides. Yes, they do give us a little bit of a break, it’s not as grim as you think.
Marital Deduction: Your spouse is in luck. Whatever that is directly passed to him or her, it will not be taxed.
Charitable Deduction: Generosity has its many benefits. One of those benefits is savings on your tax bill. Whatever property left to a qualified charity is deductible from one’s gross estate.
Debt: Mortgages and general debt isn’t always problematic. At least not in this case. Debt is deducted from the gross estate.
Financial Losses During Estate Administration: Any losses incurred during the entire probate & administration process is applied as a deduction against the gross estate.
Related Fees Associated With Administration: There are several filing fees, attorney fees, and accounting fees involved during the probate & administration process. These too are deductible.
Now Onto Taxes
For all of my potential New York clients, I have some bad news. Not only are you hit with federal estate tax, but your also subject to state estate tax. Notice the number of senior citizens living in Florida. It’s not only because of the warm weather. There’s no estate tax along with state income tax in the Sunny State. Here is some free estate planning advise: move to Florida. At one point, there used to be an Estate Tax Credit which allowed you to take a deduction for the estate tax which was paid to your state jurisdiction but that has phased out in 2005.
The Federal Estate Tax applies towards property and assets valued over $5.43 million as of 2015.
The State of New York has it’s own threshold:
- Decedents death prior to April 1, 2014 – Estates over $1,000,000 are taxable
- Decedents death between April 1, 2014- March 31, 2015 – Estates over $2,062,500 are taxable
- Decedents death between April 1, 2015- March 31, 2016 – Estates over $3,125,000 are taxable
- Decedents death between April 1, 2016 – March 31, 2017 – Estate over $4,187,500 are taxable.
- Decedents death between April 1, 2017 – December 31, 2018 – Estates over $5,250,000 are taxable.
- For Decedents who pass after January 1, 2019, the taxable measure will match that of the federal exemption amount but it will be indexed for inflation.
What Are Your Options?
As with any estate planning matter including creating a will, trust, estate administration, probate, guardianships, and estate tax, it is highly advisable that you seek out a professional who specializes in this field. An Estate Lawyer in New York is aware of all the nuances involved when it comes to estate administration and estate tax. Equip yourself with a trusted individual who can guide you through the various details involved when it comes to estate taxes on a federal and state level.
Our firm, Mishiyeva Law PLLC., is located on 85 Broad Street, New York, NY 10004 and our number is (646) 535-1667. We assist individuals in all five boroughs, Long Island, and the surrounding counties of New York City when it comes to all matters dealing with estates and probate. Contact us for a free consultation so we may resolve any estate issues you may be dealing with.