The basic rules:

Federal: The new laws enacted in May 2001 set forth the estate tax rate and exemption equivalents until full repeal in 2011 as follows:

Please be aware that there have been drastic changes to the stepped up basis allowed on the assets of decedents. It is imperative that you discuss with your attorney the effect of this change on your estate planning.

Please be aware, that there is a separate New York Estate tax that is in effect, over and above the Federal Estate tax. Currently, you may give away $1,000,000 in your lifetime and at death New York State Estate Tax Free. Any transfer over and above that amount is taxable.

But...there are ways to give way more during your lifetime

Of course, to every basic rule, there is an exception, here are a few:

• $13,000 exclusion. Every year, a person may give any number of people $13,000 each. Jointly, a married couple may give each person $26,000. The benefits include reduction of your taxable estate, and this $13,000 does not use up any of your lifetime credit.
• Spousal Allowance. If your spouse is a United States citizen, you may give your spouse thousands, millions or billions of dollars tax free. Again, this does not use up any of your lifetime credit. The problem arises when your spouse dies, and the money goes to others. The money will be fully taxable. ** Speak to an attorney if your spouse is not an American citizen, special rules apply.
• If your estate is greater than the credit allowed, it would be wise to divide your assets between you and your spouse, held in separate names, so you can utilize and maximize each of your lifetime credits.
• Charitable Allowance. You can give an unlimited amount of money to charities tax-free. Your attorney will advise you as to whether your charity is a tax-exempt corporation which allows deductibility.
• Start a trust for the benefit of your children or grandchildren's health, education, maintenance and support.

There are other means and variations of the above which will help you accomplish your goals. Your attorney will help you based on your special facts and circumstances.

Helpful Links

New York State Tax Forms:www.tax.state.ny.us/forms

Internal Revenue Service Tax Forms:www.irs.gov/forms_pubs

Taxable Estate: That property which is subject to taxes. Please understand that even if you did not have a probate estate, your estate can still be a taxable estate. It includes, among other things, property which was held jointly, insurance policies, houses, bank accounts, brokerage accounts and gifts that were given by the deceased person within three years of his death.
bullet

Probate Estate: Only that property which the decedent owned in his own name only, or as a tenant in common with someone else. Those assets held jointly with the right of survivorship or by the entirety (special only to married couples), by operation of law automatically run to the joint owner, and need not go through probate. Please note that although said joint property does not have to go through probate, the entire value of the joint property is placed as if the first to die owned it entirely and taxes have to be paid on the entire value of the asset.
bullet

Lifetime estate tax credit: It is the total amount of money which the government allows you to transfer in your lifetime and at death tax-free.
bullet

Stepped up basis: The fair market value of the decedent's assets as of the time of his death, versus the value of the assets at the time the decedent purchased said assets or was gifted said assets.

Go to the top of the page