New York Estate Planning can Reduce Couple’s Tax Exposure

Market Watch recently published some estate tax tips for married couples. New York City estate planning attorneys have been dealing with the changes to the estate tax and gift tax limits since they were implemented late last year.

As we reported in December on our New York Probate Lawyer Blog, Congress set the estate tax exclusion at $5 million and the lifetime gift-tax limit at $5 million. The tax exemption ends at the end of 2012. But for now, couples enjoy tax-free giving power and the vast majority of the nation’s estates may pass to heirs tax free.
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Unlimited Marital Deduction: For spouses who are U.S. citizens, there is no limit to the tax-free inheritance they can receive. However, it does not negate the need for estate planning in New York: Leaving your spouse a large estate could mean that he or she exceeds the limits, which would subject the estate to excessive taxation upon his or her death.

Portable Estate Tax Exemption: This year and next (2011 and 2012), you may direct the executor of your estate to leave any unused federal estate tax exemption to your surviving spouse. This includes your $5 million exemption and means a spouse could have a $10 million exemption for estates distributed this year or next. Unless Congress acts, these portable exemptions are set to expire at the end of next year.

Donate to IRS-Approved Charities:
Giving to IRS-approved charities as part of a comprehensive estate plan is a great way to get your estate down to the $5 million estate-tax cap — or $10 million for couples with both available exemptions.

Give Gifts to Relatives: The annual gift-tax exclusion is $13,000, which can be given without reducing your lifetime $5 million federal gift-tax exemption. If you had two children and four grandchildren, you and your spouse could each give $13,000 to each one, or $156,000 tax free for 2011. You could do the same thing next year and reduce your taxable estate by $312,0000.

Pay School Expenses or Medical Bills for Relatives: Aside from room and board, you can give unlimited amounts for these purposes,without reducing your gift-tax or estate-tax exemption. Payments must be made directly to the school or medical provider.

Give Away Appreciating Assets: Use your $5 million gift-tax limit to give away appreciating assets now — while they are worth less than they will be at the time of your passing.

Use an Irrevocable Life Insurance Trust: While life insurance proceeds are usually income-tax free, they are included in your estate for estate-tax purposes. Policies held in irrevocable trust are free from estate-tax exposure. This is particularly critical for single people — married people can pass the proceeds to a spouse tax free using the marital deduction privilege (though they may then face taxation upon the death of a spouse). Such trusts are a terrific way to cover estate taxes upon your death.


New York City Probate Attorney Jules Martin Haas handles all types of probate cases, including Wills, estate planning, estate settlement, advanced directives and guardianship matters. Please call me at (212) 355-2575 for a free consultation to discuss your rights.

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