Most of us realize we have to pay taxes when we’re alive. This includes income, capital gains, and property taxes. However, your estate might also have to pay taxes on a state and/or federal level.
New York is one of the few states that imposes an estate tax, or otherwise known as a death tax. The federal government (IRS) also imposes an estate tax if your estate exceeds the estate tax threshold.. Fortunately, there are some strategies for minimizing your estate tax burden so that your heirs or beneficiaries can keep more of what you leave to them.
What the estate tax threshold is
Any New York resident with an estate valued at $6.58 million or more in 2023, known as the basic exclusion amount, must pay estate taxes. Furthermore, the federal basic exclusion amount for an individual is $12.92 million in 2023.If your estate exceeds the basic exclusion amount on either the state or federal level, we highly recommend having an estate plan to minimize paying estate taxes.
Ways a New York resident can reduce their estate tax burden
One approach for minimizing estate taxes in New York is including a disclaimer trust in your will as well as your spouse’s will. This type of trust can only be used by married couples. The disclaimer trust allows the surviving spouse to disclaim ownership of a portion of the estate and then transfer it into an irrevocable trust.
A second approach for minimizing estate taxes in New York is making monetary and asset gifts to others while you are alive. The Internal Revenue Service (IRS) has set the annual exclusion amount for 2023 at $17,000. Gifting is a win-win for both you and your heirs and beneficiaries in that it reduces the overall value of your estate, meaning your estate pays less taxes on it. Also, so long as the gift you give your immediate family member is under the amount threshold set by the IRS, you don’t have to file a gift tax return.