You have to think about many different issues when you create a New York estate plan. You will need to create a list of debts and your property. You need to think about the needs of your family members and the relationships you have had with each of them.
People often spend so much time thinking about specific property that they fail to consider the total value of their estate as carefully as they should. Especially if your New York estate includes a business or real estate holdings, the executor of your estate and beneficiaries could be in for a nasty surprise in probate court.
Your estate could trigger major estate taxes that add up to more than half of its value unless you update your plan to limit those liabilities.
How do New York estate taxes work?
Your executor will have to provide information about your estate plan and your assets to the New York probate courts. In scenarios where the total value of your estate is higher than the current limit for estate tax purposes, your executor will need to pay taxes to the state of New York and possibly the federal government before they distribute property to your family members and other beneficiaries.
At least under the end of 2022, a New York estate worth less than $6,110,000 is excluded from estate tax obligations. If the total value of the estate exceeds that cutoff, then the executor will need to pay taxes to the state. The tax rate depends on how much the estate exceeds the limit, and it ranges from 3.06% to 16%.
Of course, large estates will also have to worry about federal estate taxes. The current federal exemption limit is $12,060,000, and the tax rate is progressive, just like the rate in New York. The maximum rate is much higher, however, as it maxes out at a massive 40%.
How do you plan for estate taxes?
There are several ways to limit the estate tax obligations your loved ones will have when you die. Making gifts now while you are still alive can reduce the value of your estate to a point where the taxes no longer apply. Adding a trust to your estate can reduce the property you hold in your own name and achieve the same goal.