The federal government’s tax on the value of a person’s estate only applies to a handful of families. In 2022, the law assesses no taxes on an individual taxable estate of less than $12,000,000.
Only a small minority of families will have to pay estate taxes to the federal government after a loved one dies.
New York’s estate tax law has a significantly lower threshold. In New York, for the year 2022, a single person’s estate is subject to tax beyond what New York calls the Basic Exclusion Amount of $6,110,000.
While most people do not have this kind of money, many people in the lower Hudson Valley would have to be mindful that, after they die, their loved ones could have to pay estate taxes to New York.
Others may want to engage in some planning because their estates are close to the threshold, especially if their wealth continues to grow.
What are some common estate planning techniques?
New York’s estate tax is based off of the federal estate tax laws but subject to a few changes.
Basically, though, if a New York estate is subject to the tax, the executor will file a federal return with the State of New York and add a separate form to calculate the state’s tax.
In practice, this means a good start for planning to minimize one’s estate tax liability is to consider some common techniques people across the country might use to reduce federal estate taxes.
One common example is planned gifting. Donations to tax-exempt charities are one example of planned gifting that reduces estate taxes. A person may also wish regular to give smaller gifts, within what is called the annual exclusion amount, to different loved ones over several years.
More complicated legal techniques, such as creating trusts or setting up family corporations, may be the right fit for a person’s needs.