If you have a significant estate in New York, you may have concerns about being subject to the estate tax. According to the New York State Department of Taxation and Finance, the current estate tax limit for 2019 is $5,740,000. If the value of your estate is below this amount, you do not need to worry about having an estate tax liability.
But if you are close to or over this amount, you may need to use some special estate planning strategies to avoid the estate tax. Here are some general methods people use to ensure their wealth goes to who they want instead of the government.
Give tax-free gifts
One of the simplest ways to remove some value from your estate is to give gifts to people before you pass away. If you have an idea of what you want to give to certain individuals, you do not need to simply put assets in your will or trust for your heirs to inherit after you die. You can make gifts now, which can be personally satisfying. But you do not want to give too much. According to the IRS, the 2019 gift-tax exclusion is $15,000 per gift.
Create a life insurance trust
Life insurance policies can quickly add to the value of your estate. You can eliminate the value of your life insurance from your estate by putting it in an irrevocable life insurance trust. This makes the trust the owner of the policy.
Make a qualified personal residence trust
Real estate properties are worth a lot. Whether you simply have a family home or even have a vacation property, you can transfer real estate from your estate into a QPRT. You can continue to live in your home, and then your beneficiaries will receive it once the trust term ends.
These are just some general ideas. There are many other methods for reducing or avoiding your tax liabilities. Your exact strategies will depend on the unique circumstances of your estate.