New York Probate Lawyer Blog
Once Congress passes the tax bill being debated in Washington, those with estate plans in place, and those seeking to begin the new year by consulting a New York estate planner, should seek the advice of a qualified attorney to discuss how the changes will impact their estate.
In addition to a two-year window for large, tax-free gifts made under the gift-tax exemption, significant changes to the estate tax rates could impact the options for best distributing your estate after your passing. The estate tax disappeared this year as the result of a phase-out signed by George W. Bush in 2001. It is slated to return Jan. 1 with a top rate of 55 percent on estates valued at more than $1 million.
Many are unaware that a New York estate tax exists. State and federal estate taxes are only two considerations. Property taxes (and the loss of exemptions in some states), capital gains taxes and other taxes and fees can quickly drain an estate. This can be particularly devastating for family businesses, which are often liquidated to settle the tax debt. In some cases, a family may buy life insurance, which can present its own tax complications without proper planning.
Because of the federal deficit, Democrats would like to see the federal estate tax return next year with a top rate of 45 percent — after a $3.5 million per-person exemption. However, the current plan would raise the exemption to $5 million and lower the top rate to 35 percent.
Also of note is the “step up in basis” clause, which may benefit those who die in 2010, 2011 or 2012. What that means, is that the sale of an inherited asset will be taxed based on its value at time of inheritance — not its value when originally purchased by the decedent.
CNN Money reports that the beneficiaries of those who die this year (2010) will essentially have their choice of which rules to follow. Under current rules there is no estate tax, but limited step up rules.
Too often, someone who has worked a lifetime does not put the proper planning into optimizing the distribution of his or her estate and minimizing the tax obligations. The second-most-common problem is failure to keep up with changes in the law — or changes in life, such as divorce, marriage or significant asset purchase or liquidation –after an estate plan is established.
With all of the changes passing through Congress, a resolution to visit a trusted New York City probate attorney would be an excellent start to 2011.
New York City Probate Attorney Jules Martin Haas handles all types of probate cases, including Wills, estate planning, estate settlement, advanced directives and guardianship matters. Call (212) 355-2575 for a free consultation to discuss your rights.