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Planning for estate taxes

| Apr 16, 2021 | Estate Planning |

Past posts on this blog touched upon the fact that a potential tax liability is an expense that you should include in your estate plans. Indeed, you could potentially face a tax liability from both the New York state government and the federal government.

Like you, many others in the estate planning process resign themselves to the inevitability of having to pay taxes. Thus, the news we here at Futterman, Lanza & Pasculli, LLP have to share that indicates that may not be case comes as welcome news. Understanding whether your estate will be subject to federal or state taxes requires a comprehension of estate tax exemptions.

Reviewing estate tax exemption thresholds

Both the New York state and federal governments allow for estate tax exemptions. Per the New York State Department of Taxation and Finance, the local estate tax exemption is $5.93 million. According to the Internal Revenue Service, that amount at the federal level (for 2021) is $11.7 million. Thus, if the total taxable value of your estate comes in under both of those amounts, it will not be subject to tax.

Understanding estate tax portability

You and your spouse may collectively work together to extend your exemption amounts even further. Tax portability allows eligible parties to share tax benefits. In the case of estate taxes, you or your spouse can claim the others’ unused estate tax exemption amount. Say that you chose to leave your entire estate to your spouse. That allows those assets to pass tax-free due to the unlimited marital deduction. Your ex-spouse can then claim your unused federal estate tax exemption (all $11.7 million) and combine it with their own, protecting $23.4 million from tax. New York does not allow for estate tax portability.

You can find more information on estate planning strategies throughout our site.

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