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Limiting estate tax liability

On Behalf of | Jan 24, 2020 | Estate Planning |

Estate planning experts in New York will confirm that one of the main goals of the estate planning process is to ensure that people are able to leave as much to their beneficiaries as is possible. That includes taking advantage of those opportunities to limit liabilities being assessed against one’s estate. One of the most prominent facing estates is estate taxes, yet with careful planning, that impact can be limited.

One can take advantage of the federal estate tax exemption in order to preserve funds for their beneficiaries. As long as the total taxable value of their estate comes in under the federal estate tax threshold (which, according to the Internal Revenue Service, is $11.58 million for 2020), it will not be subject to tax.

Per Forbes Magazine, taking advantage of the unlimited marital deduction can increase that threshold amount even further. Leaving their entire estate to their spouse allows one to use the unlimited marital deduction to avoid taxes without cutting into their estate tax exemption. Their spouse can then combine the unused portion of that exemption with their own, which could allow the couple to preserve as much as $23.16 million from federal taxes. This is done by the surviving spouse filing an estate tax return electing portability within nine months of the decedent’s death.

New York does impose its own estate tax, yet the state has established an exclusion amount (for 2019, that amount was $5.74 million; the 2020 exclusion amount has yet to be announced). Those estates whose taxable value is 5% more than the exclusion amount will be taxed.