Taxes are a part of life and if you live in New York and own a taxable estate youll need to know the New York estate tax rules. Taxes are also a part of death. And frustratingly if were not careful in life we can pass them on to our loved ones in death through inheritance taxes. Inheritance taxes must be paid for all gifts received as part of an inheritance or trust. The amount of tax will be determined by the value of what is collected whether it is cash real estate or any other item of value. Some gifts you receive may be eligible for tax exemptions that will significantly reduce or even eliminate the tax you may have otherwise had to pay. Estate tax planning is one of the most important plans you can make and our Brooklyn estate tax planning lawyers at New York Legacy Lawyers can help you in order to protect yourself and your loved ones from paying more than what they should. Contact us today at (718) 713-8080 to schedule a consultation. Estate Tax vs. Inheritance Tax Estate tax and inheritance tax are two different things. While they are both paid to the IRS the most significant difference is who pays them. The estate pays estate taxes and covers any taxes that are levied against the assets included in the deceaseds estate. Inheritance tax is paid for by the people who are inheriting an asset. You may be able to set aside an exclusive account that can be used to help defray the cost of the inheritance tax so that your loved ones wont be responsible for the entire amount. You can also avoid inheritance tax by using certain types of trusts. Estate planning attorney in New York New York Inheritance Tax In New York there is no inheritance tax that is levied on the property and money received by an heir from an estate. The heir bears the responsibility of paying these taxes. However its important to note that if a New York resident owns property in another state their heirs may be subject to that states inheritance tax unless proactive measures are taken to avoid it. While New York does not levy an inheritance tax itself adjacent states have enacted inheritance taxes that apply to New York residents inheriting property or assets situated within their borders. With the convenience of modern travel it is common for individuals to own property in multiple states. While the majority of a New York residents property is typically situated within the state it is not uncommon for them to possess vacation homes or investment properties in states where inheritance taxes are enforced. New York Legacy Lawyers can be your reliable partner for out of state inheritance tax concerns. Our skilled New York estate planning lawyers can guide you in creating thorough estate plans that effectively reduce the impact of inheritance taxes. Trust our dedicated professionals to handle your inheritance tax concerns with the highest level of professionalism. Contact us today to find tailored solutions that cater to your specific needs. Understanding how inheritance tax works can be tricky unless you are familiar with your states tax laws. Its essential when dealing with any estate laws to have a trusted attorney you can rely on to answer all of your questions. Our attorneys have the experience and knowledge necessary to answer your questions and make sure you are fully informed about how your will works and what type of inheritance tax your heirs may be responsible for if any. At New York Legacy Lawyers our Brooklyn estate tax planning lawyers can help draft your will and create trusts that will prevent your beneficiaries from having to pay exorbitant taxes on the gifts they receive. Contact us at (718) 713-8080 at your earliest convenience to learn more about inheritance taxes and how they may affect you! Trust Options Available in New York When undertaking estate planning one may encounter multiple legal documents to transfer their estate to beneficiaries. Alongside creating a last will and testament establishing a trust can offer asset protection and secure asset distribution according to the individuals preferences. As each type of trust carries its own set of benefits and drawbacks consulting an estate planning attorney is recommended to assess the available options thoroughly. The following are trusts that can be established in New York: Irrevocable Life Insurance Trust. An option to prevent your life insurance policy from being included in your estate. An irrevocable trust means that you will have to give up any ownership rights and you will not be able to borrow money against the trust or modify the beneficiaries. When you pass away the benefits from the policy are paid to your beneficiaries as tax-free income. This can be useful for your loved ones who may need extra money or can help pay for any remaining estate-related expenses. Charitable Remainder Trust (CRT). A life income gift trust is the most frequently used charitable trust. You move your assets to the trust while youre alive and you or a beneficiary can receive tax-free income from it for the remainder of your life. The remaining funds in the CRT are given to a charity and you receive a charitable and income tax deduction for a part of the transfer. Charitable Lead Trust (CLT). A charitable lead trust is a type of trust that enables you to select the charities that will receive the interest from the assets held in the trust for a predetermined length of time. After the specific period the remaining amount in the trust transfers to your beneficiaries or family members. Special Needs Trust. A special needs trust is a trust designed to supply financial assistance to a loved one with a disability for the duration of their lifetime. The assets from the trust can be used to supplement any benefits the individual may receive from government programs like Social Security Medicare or others. Dynasty Trusts. This trust allows the tax-free transfer of a large sum of money to your beneficiaries who are at least two generations younger than you. Qualified Personal Residence Trusts. Using these trusts can exclude the value of your personal home from your estate. This kind of trust is frequently utilized in locations with thriving real estate markets or areas where properties are expected to increase in value over time. Qualified Terminable Interest Property Trust. Assigns assets to specific family members if your family includes stepchildren remarriage(s) or children from a prior marriage. The trust will give your surviving spouse an income after you pass away. Once your spouse passes away only the beneficiaries you designate (such as your children from a previous marriage) will receive the remaining trust assets. Types of Trusts Available in New York Key Features Irrevocable Life Insurance Trust Prevents inclusion of life insurance policy in the estate. Provides tax-free income to beneficiaries upon policyholders death. Charitable Remainder Trust (CRT) Transfers assets to trust while grantor is alive. Offers tax-free income for life to grantor or beneficiary. Donates remaining funds to charity resulting in tax deductions. Charitable Lead Trust (CLT) Allows selection of charities to receive trusts interest for a specified period. Transfers remaining amount to beneficiaries or family members. Special Needs Trust Provides financial assistance to individuals with disabilities. Supplements government benefits like Social Security or Medicare. Dynasty Trusts Enables tax-free transfer of a significant sum to beneficiaries two generations younger than the grantor. Qualified Personal Residence Trusts Excludes personal home value from the estate. Often used in thriving real estate markets or areas with expected property value appreciation. Qualified Terminable Interest Property Trust Allocates assets to specific family members in complex family situations. Provides income to surviving spouse and remaining assets to designated beneficiaries (e.g. children from a previous marriage). How Is Inheritance Tax Calculated? Inheritance Taxes will be different for each beneficiary and must be calculated separately after all of the assets have been dispersed. The amount of inheritance tax varies from state to state and can range from 1 up to 20. Some states will only tax a portion of your inheritance. For example if you are given a bequest of $10 million and the state taxes anything above the first $2 million you would only have to pay tax on the $8 million over the exempt amount. Its important to talk to the administrator of the will or a lawyer who handles estate law so that you fully understand what the tax rate is for your state and how to fill out the inheritance tax form once you receive your inheritance. Inheritance Tax Exemptions Not all inheritances are taxable. States that have an inheritance tax allow for a certain amount of money to be received without having to pay an additional tax. Several states offer tax-exempt status to the deceased persons spouse. Children may also qualify for this exemption. There are instances however in which the amount received is large enough to put the inheritance into a taxable category. The main rule of thumb is that family members usually bear some degree of tax-exempt status. The beneficiaries who have no family connection to the deceased can expect to pay a much higher inheritance tax. As a person who is planning their estate if you want to preventyour beneficiaries from paying any inheritance tax you may want to look into placing your assets into trusts. This action allows you to leave whatever item or amount of money you want to any person family or not and possibly reduce the amount of inheritance tax they are required to pay once they receive their gifts. Ask Yana Feldman amp; Associates! Understanding how inheritance tax works can be tricky unless you are familiar with your states tax laws. Its essential when dealing with any estate laws to have a trusted attorney you can rely on to answer all of your questions. Yana Feldman amp; Associates have the experience and knowledge necessary to answer your questions and make sure you are fully informed about how your will works and what type of inheritance tax your heirs may be responsible for. Our New York legacy lawyers team can write your will and create trusts that will prevent your beneficiaries from having to pay exorbitant taxes on the gifts they receive. Contact us at your earliest convenience to learn about inheritance taxes and how they may affect you! via New York Legacy Lawyers by Yana Feldman and Associates https://yanafeldmanlaw.com/how-does-inheritance-work/