Estate planning is a way to maximize how much you leave for the people and charitable causes that you care about when you die. By planning ahead, you keep control over what happens to your property and can potentially minimize how much of your money and property goes to outside obligations instead of your family members.
Estate taxes can make a dramatic impact on what you have to leave for the people you love. The executor who is managing your estate may end up paying estate taxes both to the state of New York and the federal government.
Do you need to worry about estate taxes for your property?
Only multi-million-dollar estates have estate taxes
Most New Yorkers do not need to worry about estate taxes unless they have unusually large assets, like a business in their name. If your property is worth millions of dollars, then your assets could be subject to estate taxes.
For 2022, the basic exclusion amount for a New York estate is $6,110,000, which is roughly half of the value that triggers federal estate taxes. The lowest tax rate for state estate taxes is 3.06%, and the highest tax rate is 16%. When you combine that with the maximum federal estate tax rate of 40%, more than half of the assets you leave behind could go to paying taxes.
Careful estate planning can help you avoid estate taxes that can diminish the assets you hold and therefore reduce the overall value of your estate. Understanding the liabilities that can reduce your legacy can help you engage in effective estate planning.