A NY estate tax planning attorney can protect your family from excessive government taxes. Your estate plan should be updated periodically to reflect new life events and the latest tax laws. This is particularly important because federal and state estate, inheritance, and gift tax laws are complex and often change without notice. Working with an estate tax planning attorney ensures that your estate plans take into account the various tax consequences of passing on wealth in different ways.
The Most Common Ways to Reduce Tax Liability
In addition to creating a will, most people should also consider the use of trusts in their estate plans. Consulting with an estate tax planning attorney will help you choose the right trust, such as a tax-efficient irrevocable living trust, which can be used to avoid costly probate and transfer assets out of your taxable estate.
Another trust is a life insurance trust, which can be used to hold and control existing or new life insurance policies to minimize the impact of estate taxes on your family. An estate tax planning attorney can guide you in structuring the trust to pass on a much larger inheritance to your heirs without paying excessive estate taxes.
Even if your estate is below the state’s exemption limit, it may be wise to meet with an estate tax planning attorney for advanced planning techniques. This is because the New York estate tax “cliff” is triggered at only 5% above the basic exclusion amount. There are advanced strategies that, when implemented ahead of death, can successfully mitigate this effect and leave your heirs with a much larger post-tax inheritance.
Lastly, it is essential to keep in mind that the probate process can be very time-consuming and expensive. This is especially true for large estates. It can even be a problem for smaller estates, depending on the complexity of the assets and the legal issues that arise. An estate tax planning attorney can assist you in reducing the burden of the estate administration process to save your heirs and beneficiaries money.
An effective estate plan is an essential tool for protecting your loved ones’ inheritances from excessive taxation and ensuring that your wishes are carried out after your death. Consulting with an estate tax planning attorney can provide valuable insights and tailored strategies. They can help you identify your goals, clarify your wishes, and develop an estate plan that addresses all of your concerns, regardless of your location or specific needs.
With the coronavirus pandemic subsiding, attention is shifting to the impact on New York City businesses. Legislation to suspend the commercial rent tax for three years has been introduced. If passed, the Bill will provide some relief to the many city businesses that were shut down during the pandemic and beyond. An estate tax planning attorney could provide guidance on the implications of these changes.
Planning for NY Tax Changes
Earlier this year, New York State passed legislation providing for a number of important changes to entity-level and individual taxes. The bill includes amendments to the state’s pass-through entity tax workaround, S corporation election provisions, and the state’s personal income tax rates. An estate tax planning attorney can help businesses understand these new laws and navigate the complexities of compliance.
The new legislation increases the maximum state income tax rate from 8.82% to 9.65% for the 2021-2027 calendar years and creates two new tax brackets that target the highest earners. The new rates will apply to taxable incomes exceeding certain thresholds. The legislation also increases the top estate tax rate from 16.0 percent to 20.0 percent for estates of more than $10.1 million. Consulting with an estate tax planning attorney will be vital for those affected by these changes, to ensure proper planning and minimize potential liabilities.
Additionally, the legislation allows taxpayers to add back on their state income tax return expenses deducted at the federal level as a result of forgiving Paycheck Protection Program loan amounts. The added-back expense amount will be equal to the taxpayer’s combined state and local income tax (CTI) deduction cap of $10,000 per taxpayer. An estate tax planning attorney can assist in maximizing these deductions and aligning them with individual or business financial goals.
The legislation also amends the NYC pass-through entity tax (PTET) workaround, adding a new class of S corporations that qualify as an electing resident S corporation for purposes of PTET. Unlike the current definition of an electing resident S corporation, the new class will not require the S corporation to certify that it possesses all resident shareholders at the time of the PTET election. The new legislation also updates the effective date of the NYC PTET to January 1, 2022. An estate tax planning attorney may help with the restructuring and compliance related to these changes, ensuring alignment with tax optimization strategies.
The new law also extends the due date for individuals who live or have a business in counties affected by recent winter storms. Qualifying individuals who have a filing deadline between specific dates may be eligible to have late penalties waived or abated for the following NYC-related taxes. Working with an estate tax planning attorney ensures that you take advantage of all available reliefs and adhere to the updated regulations, making the transition smoother for businesses and individuals alike.
Many New York families are exposed to substantial state estate taxes, particularly given that the state’s exemption amount is significantly less than the federal exemption and that it does not allow portability between spouses. Fortunately, effective estate planning strategies can help to mitigate these tax consequences. Working with an estate tax planning attorney ensures proper alignment with your family's financial goals and legal requirements.
Estate taxes are assessed on the total value of an individual’s gross estate at death, which includes all assets that he or she owned at the time of death such as bank accounts, brokerage accounts and New York real estate. These taxes are determined based on a progressive rate schedule that starts at 3.06% and goes up to 16%. An estate tax planning attorney can provide the expertise needed to navigate this complex tax schedule, reducing your estate's tax liability.
The best way to minimize estate taxes is through proactive wealth planning, and this can be done in a number of ways. Some of the most common are making monetary gifts during your lifetime (currently limited by an annual exclusion amount), creating trusts such as an irrevocable life insurance trust (ILIT) or a grantor retained annuity trust (GRAT), and donating to charitable organizations. Meeting with an estate tax planning attorney will allow you to explore these and other options tailored to your specific needs.
In addition, it is important to remember that both the federal and New York estate taxes require proper filing with the appropriate entities. Incorrect filing can result in substantial penalties and may cause delays in the distribution of your estate. An estate tax planning attorney can assist with timely and accurate filing, preventing unnecessary delays and penalties.
New York state does not have a portability rule like the federal estate tax and only allows for a single exemption of $4,187,500 per person. This is often referred to by practitioners as the “cliff.” Fortunately, there are advanced techniques that can be employed to keep an estate below this threshold, and an estate tax planning attorney can guide you in implementing these strategies.
For example, married couples should consider establishing trusts equal to their combined New York state exemption amounts and transferring their assets to these trusts before their deaths. This will ensure that any growth in the assets within these trusts remains outside their taxable estates and will not be subject to New York state death or gift taxes upon their second spouse’s death.
Additionally, a “Santa Clause” provision is a popular technique amongst estate planners that involves making a conditional bequest in your Will or Revocable Trust to donate to your favorite charity the portion of your taxable estate in excess of the New York state exemption amount. This is a powerful technique that is often used in conjunction with other estate tax minimization methods. An estate tax planning attorney can help incorporate this into your plan to maximize benefits.
As New York continues to see significant changes in its exemption amount and estate tax rates going into 2022, it is critical that you seek advice from a qualified New York attorney and incorporate these strategies into your plan. By taking early action, you can effectively mitigate the impact of New York state estate taxes on your family’s legacy and leave them with larger post-tax legacies.
New York Legacy Lawyers by Yana Feldman & Associates PLLC
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