Estate Tax for Beginners: An Easy to Read Guide to Estate Taxes

Posted On June 6, 2024

Many politicians use the words “death tax” to refer to a tax on your estate. This tax is used to transfer your estate to your heirs upon your death. It’s a highly contested political issue many Americans don’t completely understand. 

So, will you have to pay estate taxes? If so, how much? What does it mean for your heirs?

Understanding the challenges of estate taxes can be daunting, but with the guidance of an experienced Brooklyn estate tax planning lawyer from New York Legacy Lawyers, you can gain clarity and peace of mind. Our attorneys can assist in simplifying the intricate world of estate taxes, ensuring you understand the process every step of the way. Contact us today at (718) 713-8080 to start your journey toward informed estate planning and secure a thriving future for your loved ones.

Here’s a simple guide to this little-understood, and yet controversial tax.

New York Estate Tax

New York imposes a state estate tax, which means that when a person passes away as a resident of New York or has property physically located within the state, their estate may be subject to taxation at the state level. It’s important to know that the federal estate tax and New York’s estate tax operate independently of each other.

In New York, residents and some non-resident property owners are subject to a state-level estate upon death, in addition to the federal estate tax. New York’s estate tax rate is graduated, starting at 3.06% and reaching a maximum rate of 16%.

For New York estate tax purposes, when the total value of assets passing to beneficiaries, excluding a spouse or charity, is below a specific threshold ($6,940,000 in 2024), those assets are completely exempt from taxation, and New York estate taxes do not apply. However, if an estate exceeds the threshold by more than 5% ($7,287,000 in 2024), it loses the exemption entirely, and the entire value of the estate’s assets becomes subject to New York estate tax. This is often referred to as the New York Estate Tax “cliff.”

If you are a New York resident and the value of your estate is under the New York exclusion amount, you may not pay any estate tax.  As stated above, estate tax can be due at the state level and the federal level.  The federal exemption is currently higher than the New York exemption: $13.61 million in 2024.

At New York Legacy Lawyers, our Brooklyn estate tax planning lawyers can help you in exploring options to minimize your estate tax liability and ensure a seamless transition of assets to your loved ones. We can guide you through the intricacies of estate planning, safeguard your legacy, and secure your family’s financial future. Contact us today to schedule a consultation and take the first step toward achieving peace of mind in your estate affairs.

Estate Value New York Estate Tax Rate Exemption Amount Additional Notes
Up to $6.58 million 0% $6.58 million No estate tax owed.
Over $6.58 million to $6,909,000 Graduated rates $6.58 million Exemption gradually diminishes.
Over $6,909,000 16% No exemption Entire estate value subject to tax.

Other States with Their Own Estate Tax

If you live outside New York, depending on where you live, your estate could be subject to state estate or inheritance taxes. Keep in mind that state taxes may come with different exclusion amounts. Be sure to discuss these matters with your estate lawyer. Your lawyer can help you plan the best course of action for your estate.

What Assets Are Not Subject to Estate Tax?

When planning for the future, understanding which of your assets are exempt from estate tax can simplify your estate planning. The Internal Revenue Service (IRS) typically exempts most simple estates from estate taxes. This includes estates composed of assets such as cash, publicly traded securities, and small quantities of other assets that are easily valued. Additionally, estates that do not contain items requiring special tax deductions or elections typically fall outside the scope of estate tax requirements.

Assets held jointly are often exempt from estate taxes, particularly when jointly owned property includes a right of survivorship. When one owner dies, the property directly transfers to the surviving owner without being taxed as part of the deceased’s estate. This can include joint bank accounts, homes owned jointly by spouses, and other similar jointly held assets.

It’s crucial to note that the specifics may vary based on state laws and the estate’s structure. For most straightforward estates without complex issues, these types of assets are generally not subject to estate tax. Planning with these exemptions in mind can facilitate a smoother, tax-free transfer of assets to beneficiaries. Contact New York Legacy Lawyers today to learn more about how our Brooklyn estate tax planning lawyers can help.

Estate Planning Is Essential

Estate planning is important for estates of all values. However, it becomes even more important as the estate becomes more valuable and complex. Each estate will need its own considerations.

Consulting with an experienced Brooklyn estate planning lawyer from New York Legacy Lawyers is recommended to help you organize your affairs before your passing. This action can significantly reduce complications and financial burdens for your heirs afterward.
Contact us today at (718) 713-8080 to request an estate plan consultation.