How Changes In Estate Tax Laws Could Impact You
Estate taxes are a concern for New York residents on a local and state level, potentially impacting the amount heirs and beneficiaries are entitled to receive from your estate. Often thought of as applying to only the wealthiest of individuals, changes in the current tax code over the next few years and new proposals could end up impacting larger numbers of business owners, high asset individuals, and families. Avoiding this burden is an important goal in estate planning.
Planned and Proposed Changes In State and Federal Estate Taxes
Estate taxes impact your right to transfer assets in the event of your death and could limit the amounts heirs and beneficiaries receive. Unfortunately, changes in the tax code in the coming years could mean that larger numbers of people owe estate taxes. There are also some proposed changes on both the state and federal levels that could result in an overall higher estate tax debt.
Currently, the federal estate tax exemption is $11.7 million for an individual and $23.4 million for a married couple. That is reduced on January 1, 2026 roughly $6 million.
Through his American Families Plan, President Biden is proposing to lower the estate tax threshold even further. The estate tax exemption could drop to as low as $3.5 million while the federal estate tax rate increases.
The New York estate tax exclusion remains at just under $6 million but the State Senate is proposing raising the estate tax rate by two percent. This may not seem like a lot, but for businesses and high asset families, it could represent significant portions of inheritances.
In calculating your total estate and considering whether you are likely to owe estate taxes, you will need to list all property and assets. When you consider homes, vacation or rental properties, vehicles, artwork or antiques, jewelry, other collectible items, savings, investments, and business interests, it is easy to see how more families, individuals, and business owners could be impacted by the lower estate tax exclusions and how they could end up paying more due to higher tax rates.
How Can I Avoid Paying Estate Taxes?
In estate planning, there are asset protection strategies you can employ to help preserve wealth and prevent taxes from taking a major chunk out of your business or your family’s inheritance. These include:
- Planned gifts: Under Internal Revenue Service (IRS) guidelines, you can give away more than $11 million to loved ones over the course of your life without having to pay gift taxes.
- Charitable giving: Giving to your favorite non-profits can have the added benefit of reducing estate tax debt;
- Establishing a trust: Transferring ownership of certain assets to a trust prevents them from being included in your estate.
Contact Us Today for Help
To discuss estate taxes and how you can limit your liability, reach out to our Bronx & Westchester estate planning attorneys at Cavallo & Cavallo. Give us a call or contact us online and request a consultation in our office today.