December 15, 2020

Inheritance and estate taxes apply to estate assets that are passed on to another person upon the death of the owner of those assets, but they are different.  New York State estate tax basic exclusion amount for deaths on, or after January 1, 2021 is $5,930,000 and they do not require inheritance taxes.

Inheritance tax.

Inheritance tax is paid by a person who inherits something and is based upon a percentage of the value of the asset inherited.  The complexity may arise when the inherited asset originates in a state that charges inheritance taxes.  If a New York probate action involves a property owned by a New York resident in either New Jersey, Pennsylvania, Maryland, Nebraska, Kentucky, or Iowa, the beneficiary who received that asset may have to pay inheritance taxes.  A New York probate attorney can answer questions relevant to specific cases.

Exemptions.

Surviving spouses are exempt form inheritance taxes in all states.  Some states also exempt children and parents of a person who dies, and if the inheritance amount was worth less than a named amount according to state law.  Restrictions may be involved depending upon the state law and the way the decedent prepared their will.  Individuals should speak with an estate planning attorney when concerns arise regarding property in other states that will be left for beneficiaries.

Capital gains tax.

Beneficiaries may be required to pay capital gains tax on assets they inherit upon the sale of those assets for profit.  It is important to understand how the value of the asset may impact those capital gains taxes.  The tax applies to investments, property, and other tangible valuables, such as collections that have a significant net worth.  Capital gains taxes are collected at federal and states levels.  It is best to speak with a New York Probate attorney regarding questions surrounding the disposal, or sale of an inherited asset.

 Avoiding inheritance tax.

 An experienced estate planning attorney can assist in alternatives to leaving property that will require inheritance taxes for a beneficiary.  Leaving a whole estate to a spouse, or other exempt individuals; giving away assets before death; preparing an irrevocable trust to pass on inheritances, or moving to a state that does not require inheritance tax are methods to avoid it.  Even though New York does not require inheritance taxes, there are special situations where taxation at federal and state levels may arise due to the capital gains on a property, or estate asset from another state and a probate attorney can be instrumental in guidance through alternatives.

Seek legal counsel.

New York residents who wish to leave secondary property located in New Jersey, Pennsylvania, Maryland, Nebraska, Kentucky, or Iowa to heirs, but avoid burdening them with a potential inheritance tax have options they should discuss with a New York Estate Planning lawyer.  Contact Attorney Ron Meyers with questions regarding bequests in your estate planning packages that involve assets that may call for inheritance taxation. 

 

Ron L. Meyers & Associates, PLLC

Address:  475 Park Avenue South, Suite 2100

Manhattan, NY 10016

Phone: 212-644-8787

 

Sources:

https://www.tax.ny.gov/pdf/current_forms/et/et706.pdf

https://www.tax.ny.gov/pit/estate/etidx.htm

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