You likely will, unless you plan ahead.
While most of the emphasis on estate planning has often been focused on federal estate taxes, many New Yorkers may not realize that state estate taxes are just as, if not more, significant for many families to take into account.
The Digital Journal reports that a federal tax exemption of $5 million is allowed under the new estate legislation that was passed at the end of last year, and any amount over $5 million becomes subject to a 35 percent tax. But in New York, state estate taxes are applied to those that exceed $1 million, meaning residents will still have to pay for NY state taxes even when they may be completely exempted from federal estate levies.
Let’s say, for instance, that Mary has an individual estate valued at $3 million. According to Forbes, New York law currently has a 16 percent top tax rate on estates, which means Mary must pay about $480,000 in state estate taxes even though she has no federal tax liability. Even if she was married and had an estate with her spouse valued at $3 million, Mary would still be required to pay the $480,000 in NY estate taxes upon her spouse’s death.
To avoid these state estate taxes, New Yorkers can consider setting up an individual trust and placing no more than $1 million of their assets in that trust, which can exempt them from the state estate taxes. A key strategy is to plan and organize your estate in advance to help ensure that most of your assets will be distributed as you desire.
To learn more about your legal options when it comes to facing federal or state estate taxes and other estate planning issues, seek legal counsel from an experienced lawyer who can explain New York estate laws and make sure your interests are met.
- Contact A New York Estate Planning Lawyer (FindLaw)
- State Laws: Estate Taxes (FindLaw)
- AB Trusts: The Tax-Saver (FindLaw)
- Do You Need To Worry About State Estate And Inheritance Taxes? (FindLaw’s New York Estate Planning Law News Blog)