Buffalo Estate Tax Planning Attorney
People work hard to build their legacies and leave an inheritance for loved ones. What they don’t want is for either the federal government in Washington D.C. or the state government in Albany to get an inordinate amount of that inheritance. A Buffalo estate tax planning lawyer can work with clients on strategies to reduce the federal and state tax bite.
DePrima Law has worked for over 18 years on ways to help clients preserve their financial legacies. Contact our Buffalo estate tax planning attorney online or call us at (716) 638-2633 to arrange a consultation.
How Estate Taxes Work
The first step is to determine the overall value of the estate. New York divides assets into two categories. The first is real property, which is real estate. The second is personal property, which is everything else–the cash, investments, heirlooms, etc.
If the value of an estate exceeds $11.58 million, it is subject to federal estate taxes. If the value is higher than $6.11 million, then state taxes will apply.
Regarding state taxes, it is worth noting that only property owned within the state of New York counts towards the total value of the estate. It’s not uncommon for people who still have a New York residence to own winter homes in Florida or land elsewhere. That property will still count towards the federal total, but it will not count on a New York estate tax return. Furthermore, New York is one of only twelve states that even have a state estate tax, so it’s more likely than not that out-of-state property will only count towards the federal limit.
How To Reduce an Estate Tax Bill
If estate taxes are based on the total value of the final estate, it stands to reason that the way to reduce one’s tax bill is to find ways to reduce the value of the estate. The tax code at both the federal and state level offers ways to do this. Each person’s situation will be different but, broadly speaking, a Buffalo estate tax planning lawyer can lead the way on strategies like these…
Give Financial Gifts to Children & Grandchildren
The IRS will allow gifts of up to $16,000 to be given to children and grandchildren. That $16,000 limit is for one spouse, so both spouses could combine to give away $32,000. When this is done consistently, the reduction of an estate’s value can be significant.
Depending on how a client’s estate plan is structured, this could be money that the kids or grandkids will inherit anyway. Giving some of it away in advance not only reduces the tax burden, but it allows the parents the joy of seeing their loved ones benefit from the gift while they–the parents–are still living.
Make Charitable Donations
You can also lower the value of your estate by giving to a tax-exempt 501(3)(c) organization. Perhaps this is a charity that the client already believes in and has included in their will. The same logic of giving gifts to children applies here–the organization will already receive money upon the client’s death. So why not advance some of the assets, have the good feeling that comes with giving, and reduce one’s tax bite all at once?
Real Estate Valuation
The value of real estate is determined by its fair market value. That means if a client purchased a vacation home in the Hamptons for $1.5 million, and its value has grown to $3 million by the time of their death, it is the latter figure that will be relevant for tax purposes.
However, there is some maneuvering room within the tax code. At the federal level, property is generally valued based on its “Highest and best use.” That’s fine for a house in the Hamptons, but a family farm might be valued at a disproportionately high level. The IRS will allow property, under certain circumstances, to get its value based on “actual use.” The latter criteria is more likely to have an outcome favorable to the property owner. A Buffalo estate tax planning attorney can advise on whether this applies in each client’s specific situation.
Set Up a Trust
One of the best ways to deal with estate taxes is to arrange for all assets to go straight into a trust after death. There are a number of different trust options, and each person’s needs will be a little different. But for our purposes here, assets in a trust are not subject to estate taxes, as they now belong to the trust, not the deceased.
DePrima Law has over 18 years of experience working with clients to help them maximize the financial reach of their legacies. We all want our assets to go to our loved ones, and DePrima Law understands the best strategies to work with.
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