While the Federal estate tax has been in the news lately, many do not realize that New York State has an estate tax as well, as do several other states in the country. If you are a New York resident and your estate is valued at $1,000,000 or more, then your estate plan may need to address this tax burden. In addition, residents of other states who own real estate and/or tangible personal property located in New York, may also be subject to New York estate taxes.
There are a number of estate planning tools that New Yorkers may use to reduce estate taxes. These tools include:
- Lifetime gifting up to $13,000 (in 2011) annually per person;
- Creating trusts such as ILIT’s – Irrevocable life insurance trusts or QPRT’s – Qualified personal residence trusts; and
- Using the unlimited marital deduction, which allows transfers to surviving spouses with no taxes, although this can ultimately increase the tax burden of the surviving spouse’s estate.
Generally, the estate tax is based on the value of the estate’s assets on the date of death. This means the tax is calculated as a percentage of the value of the assets, which are then reduced by allowable deductions, exemptions, and credits. New York’s estate taxes are based on a graduated rate schedule of up to 16%.
An estate planning attorney can help you put together a comprehensive estate plan that not only can address estate taxes, but one that will meet your family’s specific needs.