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2 ways to reduce your estate tax risks in New York

On Behalf of | Aug 26, 2021 | Estate Planning |

You pay taxes when you earn income and also when you acquire property. In some cases, you may have to pay taxes on those assets again posthumously. Both the state of New York and the federal government assess estate taxes. 

If your estate is worth more than $5,930,000, you may have to pay state estate taxes to New York. The minimum estate value that triggers federal estate taxes is almost twice that amount. Thankfully, two simple tactics can help you minimize your estate tax liability or even eliminate it altogether.

Start giving gifts to your loved ones

You can make gifts of valuable property or financial assets worth up to $15,000 to each of your immediate family members without them needing to pay taxes on those gifts. Giving away some of your property each year can substantially diminish your estate. It also allows you to watch as your family members use their inheritance while you are still alive.

Use your biggest assets to fund a trust

Estate taxes only apply to assets in your name or that must pass through probate court. Moving the ownership of certain assets from your name into a trust can help those holding bypass probate and prevent them from contributing to your tax risk. 

Your house, your biggest financial accounts or even a business could all be assets worth transferring into a trust. As a secondary benefit beyond tax protection, holding major assets in a trust allows for a smoother transfer to the next generation. It also gives you more control over the use of those assets.

Proactive estate planning can help you avoid the pitfalls of a large estate, such as losses to taxes.