Estate Tax for Beginner: An Easy to Read Guide to Estate Taxes
Many politicians use the words “death tax” to refer to a tax on your estate. This tax is the tax you pay to transfer your estate to your heirs upon your death. It’s a highly contested political issue many Americans don’t completely understand.
So, will you have to pay estate taxes? If so, how much? What does it mean for your heirs?
Navigating the complexities of estate taxes can be daunting, but with the guidance of an experienced Brooklyn estate tax planning lawyer from New York Legacy Lawyers, you can gain clarity and peace of mind. Our attorneys can assist in simplifying the intricate world of estate taxes, ensuring you understand the process every step of the way. Contact us today at (718) 713-8080 to start your journey toward informed estate planning and secure a thriving future for your loved ones.
Here’s a simple guide to this little-understood, and yet controversial tax.
New York Estate Tax
New York imposes a state estate tax, which means that when a person passes away as a resident of New York or has property physically located within the state, their estate may be subject to taxation both at the federal and state levels. It’s important to know that the federal estate tax and New York’s estate tax operate independently of each other.
In New York, residents and some non-resident property owners are subject to a state-level estate or inheritance tax upon death, in addition to the federal estate tax. New York’s estate tax rate is graduated, starting at 3.06% and reaching a maximum rate of 16%.
For New York estate tax purposes, when the total value of assets passing to beneficiaries, excluding a spouse or charity, is below a specific threshold ($6.58 million in 2023), those assets are completely exempt from taxation, and New York estate taxes do not apply. However, as the estate’s value surpasses this threshold, the exemption gradually diminishes. If an estate exceeds the threshold by more than 5% ($6,909,000 in 2023), it loses the exemption entirely, and the entire value of the estate’s assets becomes subject to New York estate tax. This change in estate tax treatment for estates exceeding the New York threshold is often referred to as a “cliff tax.” Estates falling within the range between the threshold amount and the 5% excess are subject to partial New York estate tax.
At New York Legacy Lawyers, our Brooklyn estate tax planning lawyers can help you in exploring options to minimize your estate tax liability and ensure a seamless transition of assets to your loved ones. We can guide you through the intricacies of estate planning, safeguard your legacy, and secure your family’s financial future. Contact us today to schedule a consultation and take the first step toward achieving peace of mind in your estate affairs.
| Estate Value | New York Estate Tax Rate | Exemption Amount | Additional Notes |
|---|---|---|---|
| Up to $6.58 million | 0% | $6.58 million | No estate tax owed. |
| Over $6.58 million to $6,909,000 | Graduated rates | $6.58 million | Exemption gradually diminishes. |
| Over $6,909,000 | 16% | No exemption | Entire estate value subject to tax. |
You May Have No Estate Tax at All…
The estate tax brackets range from 18% for estates valued under $10,000 to 40% for estates valued over $1 million. There is a catch.
There is a lifetime exemption amount of up to $11.18 million. That means you can leave up to that amount to your heirs before the estate pays a tax.
If your estate is valued more than the exemption amount, it will only pay taxes for the amount over the exemption amount.
Keep in mind that this amount is per person. Married couples can leave up to $22.36 million to their heirs with no tax.
The only people paying a tax on their estate are those who would fall into the 40% tax bracket. Even then, there are generous allowances for gifts.
Unrealized Capital Gains May Be Taxed
Unrealized capital gains account for as much as 55% of the total tax revenue from estates because the IRS doesn’t tax investment profits until you sell and “realize” the gains.
Depending on how you plan your estate, these investment gains and losses may be subject to taxation.
For example, you might transfer a valuable asset into an irrevocable living trust to reduce your taxable estate upon your death.
The Individual States With Their Own Estate Tax
Depending on where you live, your estate could be subject to state taxes. Keep in mind that state taxes may come with different exclusion amounts.
When you get around to estate planning, be sure to discuss these matters with your estate lawyer. Your lawyer can help you plan the best course of action for your estate.
In the state of New York, all estates valued more than $5.25 million will pay a 3.06% tax. And, those valued over $10.1 million will pay a 16% tax. The escalation you’re seeing is a graduated tax.
Estate Planning is Essential
Estate planning is important for estates of all values. However, it becomes even more important as the estate becomes more valuable and complex. Each estate will need its own considerations.
You should consult an estate planning lawyer to help you get your affairs in order before you die. This one step alone will save your heirs tons of trouble, and quite literally a lot of expenses/missed inheritance, following your passing.
Contact us today to request an estate plan consultation.
via New York Legacy Lawyers by Yana Feldman and Associates yanafeldmanlaw.com/estate-t...
