One of the most important goals of a comprehensive estate plan is minimizing tax obligations in as many ways as possible. The probate process following an unexpected death can easily result in a significant tax claim on the estate by both the state of New York and the IRS. The best method of avoiding a detrimental probate process is putting assets in trusts or other financial instruments that take the protected assets out of ownership for the primary estate holder and put them in shelters that make them off limits to both creditors and tax collection agencies.
New York estate tax
Along with Washington, D.C., there are 12 states that apply an estate tax when a resident dies. New York is among those states. This tax is levied in addition to the federal estate tax, but the tax threshold in New York is the highest among all of these states. Having an experienced New York estate tax planning attorney can help greatly with understanding what steps may be taken to lessen or even completely avoid any tax obligation in some cases.
Federal estate tax
The federal estate tax has been through some changes over the past few years after the Trump Administration increased the exemption cap to above $11 million. It currently sits at $11.7 million, and it has been increased since the original enactment. Additionally, there is a federal estate tax deduction for state taxes. However, there is also a potential for taxable income classified as Income in Respect of Decedent, or IRD, that can easily complicate matters significantly. An experienced estate planning attorney can provide a strategy for avoiding as much tax burden as possible.