New York residents who want to try to reduce the size of their estate below the federal estate tax exemption, which in 2016 stands at $5.45 million for individuals and $10.9 million for married couples, have a number of options available to them. Couples may give away up to $28,000 annually per recipient as a gift while individuals may give away $14,000 per recipient. This can add up to $140,000 per year for a couple with five children who give them the maximum amount. People who are considering making gifts to minors may want to speak to a professional about how to best do so in a responsible way.
Another option is paying for another person’s medical or educational expenses. This amount does not count toward the gift exclusion as long as it is made directly to the provider.
An intentionally defective grantor trust will not make funds immediately available to the beneficiary, but it does exempt the assets placed in it from estate taxes. The donor pays income tax on income generated from the trust, and paying these taxes reduces the estate’s value as well.
An attorney may be able to assist with the complex estate planning that may be necessary if a person has a large estate. There are a number of vehicles available that can provide tax savings and preserve family wealth across generations. Individuals who do not have to worry about estate taxes may benefit from using trusts in estate planning as well. Trusts are not just for the wealthy. They allow a person more control over when and how assets are distributed. For example, if a person wants to leave money for a relative who struggles with addiction but is concerned about how the relative might spend the money, a trust can be set up to manage that money. Money from a trust might also be distributed based on a person attaining a certain age or other milestones.