As the saying goes, "nothing is certain except death and taxes." In the context of estate planning, this reality encourages the planner to minimize death taxes. In fact, the world of estate planning is consumed with the minimization of taxes in all its forms. Lawyers and counselors ask clients to take legal and financial steps in order to avoid or delay the payment of taxes, whether it is an estate, capital gains or not. , donation, income, etc. It is imperative that clients know if their assets will be taxed upon death that they can seek advice from their estate planning professional. This article provides a general overview of estate taxes.
What is taxable?
In a very general way, all property owned by a person at death is taxable, including bank accounts, cash, securities, real estate, cars, etc. Contrary to popular belief, the death benefit of life insurance policies held by a person is taxable unless properly structured. The commons, including joint bank accounts, are included at 100% in the estate of the first co-owner to die, except to the extent that the other co-owner can prove that he contributed to the property. Commercial, corporate and LLC interests are also included in the gross weight, as are the general appointment authorities.
Deductions from gross succession:
To determine the taxable amount, we must reduce the gross weight of the applicable deductions. The IRS allows the following deductions of gross mass that reduce gross mass:
1. Marital Deduction: One of the main deductions for married deceased persons is the marital deduction. Both jurisdictions allow for unlimited matrimonial deduction, meaning that assets that pass directly to a citizen spouse will not be taxed when the first spouse dies. There are often very good financial, legal and tax reasons not to leave everything to the surviving spouse, as will be discussed in the next article on bridge credit trusts.
2. Charitable Deduction: If the deceased leaves property to an eligible charity, it is deductible from the gross estate.
3. Mortgages and debts associated with properties.
4. Administration costs of the estate, including the fees of the executor, accountant and attorney.
5. Losses during the administration of the estate.
Not one, but two:
Both the state of New York and the federal government impose separate estate taxes on deceased persons who die with a certain amount of assets. The government believes that death should be a taxable event because almost everything you have done in life has been. The state of New York and the federal government impose estates at different levels and at different rates. However, Uncle Sam grants taxpayers a deduction for the amount they paid in state taxes.
Federal Tax Taxation :
The federal government currently levies taxes on property valued at more than $ 5.12 million at the rate of 35% in 2012. If Congress does not act, the federal estate tax should be in place. Establish 55% on gross assets of more than $ 1 million in 2013 and beyond.
New York State Estates Tax:
The state of New York taxes the estates of New York residents if they exceed $ 1,000,000. Non-residents pay the tax only if their estate includes real estate or tangible personal property located in New York valued at more than $ 1 million. Estates tax rates in New York range from 5.6% to 16% for estates over $ 10 million and are expected to remain unchanged in the near future. In New York, estates with a gross estate of more than $ 1,000,000 must complete form ET-706 with a declaration of federal estate tax, even if the latter is not obliged by the IRS (because the estate is below the federal deposit threshold).
The tax thresholds mentioned above assume that the deceased did not make a taxable gift during his lifetime. A taxable gift is a gift made to a person in excess of the annual donation tax exclusion amount of $ 13,000. If taxable donations are made, they reduce the amount of the inheritance tax exemption to the extent that they are not paid.
Inheritance tax can be avoided by (1) making full use of the estate tax exemption for each spouse (2) by deferring taxes until the death of the second spouse (3) and by completely avoiding taxes by making suitable donations during life and / or after death. To speak to a estate planning lawyer to assess your financial situation and determine options that can reduce or eliminate your potential inheritance tax, contact us at (347) ROMAN-85.