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.
