Estate and gift taxes have effects that may vary widely depending on the value of an estate and the place where you live. When a person engages in estate planning, the tax consequences are always considered. Like most taxes, estate and gift taxes are imposed by various states and by the Federal government. Estate lawyers in New York can assist their clients with these matters.
During recent years, most individuals have not had to worry about paying estate or gift taxes. At present the exemption for Federal estate tax is $11.7 million per individual. Even in a highly taxed state like New York, the individual exemption is presently $5,930,000.00. There are various strategies to diminish the impact of these taxes. Provisions in Last Wills can utilize trusts and other methods to defray taxes.
What is important to realize is that the step-up in basis is really an income tax concept. Basis, from an accounting standpoint, is the cost of an item. This cost or basis is used to determine the taxable gain, typically a capital gain, which is incurred when an asset is sold. As an example, if you purchased a house for $1,000.00 (the basis) (ignoring any additional costs or depreciation), and then sold the house for $2,000.00, the gain would be $1,000.00. This gain would be the amount subject to tax.