Those thinking about their future and their property in New York often decide they want to create an estate plan or update their existing end-of-life documents. Estate planning gives someone control over what happens to their assets when they die and can allow them to plan for their protection in the event of incapacity later in life.
One of the many issues influencing how people structure their estate plans is the possibility of estate taxes. Those with resources worth $6.58 million or more in New York may have to pay state estate taxes. The federal threshold is roughly twice the state threshold, so anyone who might be responsible for federal estate taxes will typically have to pay state estate taxes as well. That obligation could lead to the loss of a significant percentage of someone’s property after their death. How do individuals plan ahead to minimize or eliminate estate taxes?
Starting and funding a trust
The use of a trust to hold certain assets is one of the more common ways to avoid estate tax obligations. When someone has particularly valuable property, such as a business or real estate holdings, transferring the ownership of those assets to a trust can significantly diminish the total value of their estate. A trust can also provide more control over the use and distribution of assets in order to better prevent loved ones from squandering their inheritance.
Arranging for the direct transfer of certain assets
There are numerous ways to keep specific assets out of probate court when someone passes away. Someone could change the vesting for their property so that they hold a title as joint tenants with rights of survivorship. When one owner dies, their interest in the property would then transfer to the other owner in ways that avoid probate. It is also possible to file paperwork to arrange to have financial accounts transferred to beneficiaries after someone’s death.
Making annual gifts
When the value of an estate is substantially higher than the current New York estate tax threshold, testators may want to diminish their holdings more aggressively during their golden years. Multiple years of gifts to children and grandchildren could not only reduce the value of an estate but can also give the testator an opportunity to witness their loved ones enjoying their inheritance.
The larger someone’s estate is, the more they will have to pay in taxes, and the more important creating a thorough plan for estate tax minimization becomes. Carefully planning ahead of time can help an individual with significant resources pass as much of their property as possible to their intended beneficiaries.