In Brooklyn, NY, estate taxes are imposed by the federal government and state governments on transferring a person’s assets or property upon death. These taxes apply to all inherited properties even if the decedent has an estate plan or will. In most cases, the executor determines the taxes to be paid, and it is essential to clear all the taxes before distributing the estate.
Currently, the federal tax exemption is $11.7 million. This means that your estate will be exempted from federal estate tax if its value falls below $11.7 million at the time of your death. The exemption amount for N.Y.’s estate for death is currently $ 5,930,000. Early estate planning is vital to avoid your estate being imposed by heavy federal and state estate taxes.
Lifetime gifting is one of the ways to reduce estate taxes in Brooklyn, NY. The state of New York does not have gift tax laws for lifetime transfers. You can decide to make annual gifts for your children or grandchildren. Over several years, the amount of property transferred to your beneficiaries will be substantial and will reduce the size of the estate. Some other gifts that may not be subjected to N.Y. estate tax, include:
- Gifts were made when the decedent was not living in Brooklyn, NY.
- Gifts of tangible personal property that is outside New York.
- Contributions made to charity.
Lifetime charitable transfers upon death minimize the size of the estate, which also reduces the estate taxes. This is an excellent method to plan for unexpected growth in property size before death. You can set the lifetime gift in a way that lets you retain the right to control the gifted income until death.
Create an irrevocable life insurance trust
Transferring a small amount of the property to an irrevocable trust reduces the size of your taxable estate. The insurance proceeds from the irrevocable life insurance are also not taxable. With an irrevocable trust, you will still have the right to control how the trustee uses or distributes your assets.
Consider relocating to a state with no estate tax
New York is one of the states in the U.S. that levies an estate tax. However, several states in the U.S. do not impose an estate tax. Relocating to a state with no estate tax will help you reduce the N.Y. estate tax and the N.Y. income tax. Changing domicile to another state needs proper planning, and you must demonstrate that the new location will be your real home and not just a residence for legal purposes.