A lifetime of hard work, self-denial and careful investing will lead to financial security for you later in life. It will also put you in a position to leave a meaningful legacy for your children and grandchildren. You might also want to leave money to a non-profit organization or charitable cause that matters to you personally.
Naturally, you would like as much of your remaining property as possible to transfer to your intended beneficiaries when you die. However, debts and also taxes can noticeably reduce how much of your estate actually passes to other people. The person handling your estate will have to pay your obligations before distributing assets to those that you name in your testamentary documents.
Will estate taxes affect your New York estate?
There could be state and federal taxes due
Those intending to pass large estates consisting of millions of dollars to others have to plan carefully or risk losing a substantial portion of their estate to the government in taxes. Although many states do not collect estate taxes, New York does.
Estates worth more than $6.58 million may have to pay New York estate taxes. The rate varies depending on the overall value of the estate. The base tax rate could be just over 3%, and the maximum state estate tax rate is 16%.
If state estate taxes won’t apply, then you likely won’t have to worry about federal estate taxes either. Those federal taxes only apply to estates worth more than $12,920,000. Like the New York estate tax, the federal estate tax is progressive. The higher the taxable amount of your estate, the higher the tax rate. For the federal estate tax, the maximum tax rate possible is 40%.
Successful professionals can plan to minimize taxes
Careful estate planning often requires looking at someone’s likely tax obligations. Some people will create trusts for the transfer of their property. Transfer-on-death designations for certain accounts or real estate could also help. Some adults will also make annual gifts to their family members in a planned manner to avoid both state taxes and annual gift taxes.
Addressing the possible expense of federal and New York estate taxes in your estate plan will reduce how much of your property goes to the government instead of your intended beneficiaries.