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Minimizing capital gains taxes on estates

For years, New Yorkers used estate plans to minimize the possibility of federal estate taxes being assessed. The federal exemption amount in 2015 is $5.43 million, and it will increase for 2016, meaning that many people will not be subject to it anyway. This may mean that the focus should instead be turned towards minimizing capital gains taxes.

Capital gains tax rates are currently between 25 and 33 percent when they are all added together. There are several ways to protect estates from them, however. Putting assets back into a person's estate instead of leaving them in a trust is one way in which beneficiaries can avoid capital gains taxes on the increase in their value. Another possible method is to gift assets up one generation to parents. By doing so, the value assessed will be the asset's fair market value at the time of their parent's passing, which in turn reduces the amount of capital gains taxes that will accrue when the asset is later sold.

Couples may want to set up a Joint Step-Up Trust if they have assets that have significantly appreciated in value. These trusts let a surviving spouse sell assets held by the trust without having to pay capital gains upon their spouse's death.

It is important for people to review their estate plans on a regular basis. This can help them to make needed modifications to take advantage of changes in tax laws. People may want to meet with an attorney for help with tax planning. An attorney can conduct a review of a client's existing estate planning documents in order to determine how they might need to be modified. This could result in a recommendation that changes need to be made in order to minimize the assessment of capital gains and estate taxes, which could serve to preserve and protect the assets for future generations.

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