The Truth About Estate Taxes in New York
Dan L. Duncan, a Texas billionaire, described by Forbes as the 74th richest person in the world, died unexpectedly from a brain hemorrhage in 2010. His untimely death generated a number of reports by the media, noting that from an estate taxation perspective, his timing couldn’t have been better. In that year, Congress failed to renew the Federal estate tax, leaving Duncan’s heirs with a seeming estate tax of zero and making him the first billionaire ever to die tax-free.
An estate tax (Federal and State) is imposed on a decedent's estate that exceeds the Federal estate tax exemption. While it is true that acquiring that property means you have already paid income tax or capital gains tax, death affords the government an opportunity to take a second bite out of the apple.
Federal Estate Tax Threshold
The Federal estate tax exemption is currently $5 million, adjusted for inflation. The estate assets exceeding $5 million are taxed at a rate of 45%. If your estate is worth less than $5 million, then it can pass to your heirs without being subject to Federal estate taxes. Many Americans breathe a sigh of relief when they hear about this threshold, knowing that their smaller estates do not have to pay estate tax and they do not have worry about how to structure their will and trusts to avoid it.
New Yorkers should pay close attention to estate taxes
New York’s estate tax exemption is not $5 million, but $1 million. As a result, many who do not pay any Federal estate tax nevertheless pay New York estate taxes.
Advance legal planning and carefully structuring your estate can help protect your hard-earned assets and preserve them for the next generation. Contact us for a review of your situation to find out how best to protect your heirs from loss of estate assets to payment of estate taxes.