If you wish to leave your assets to loved ones after passing on, you probably do not want their inheritance eaten up by heavy taxation. In New York, there are both state and federal estate taxes.
However, proper estate planning may result in the reduction of these fees. By taking a few actions now, you may be able to lighten the future burden on your heirs.
1. Take advantage of the federal gift tax exemption
The Empire State has no separate gift tax. There is also an annual federal gift tax exclusion. This the maximum amount you may give during the year without affecting your lifetime exemption. The limit refers to what you gift to each individual, not the combined total of everything you confer to others. The lifetime exemption sets the total value you may leave to relatives and friends without federal estate taxes applying. The law entitles spouses to a separate lifetime exemption of the same amount. There are also certain kinds of presents that have no gift or estate levies.
2. Include donations in your will
Bequests to charity are deductible with regards to estate taxes. You may also make them conditional by including a clause where if a contribution to a non-profit lowers taxable estate to the base exclusion amount, the director makes it.
3. Create a life insurance trust
Life insurance is subject to estate tax. Setting up an irrevocable life insurance trust removes such policies from the gross taxable estate, eliminating this worry.
Planning out your estate now may help minimize your heir’s tax burden. Note that transferring all of your assets to someone on your deathbed will not do this. Gifts granted within three years of your death are subject to estate taxes.