Tax Planning FAQs
Q. WHAT KIND OF TAXES WILL I HAVE TO PAY WHEN I DIE?
A. New York residents are responsible for the payment of both State and Federal gift and estate taxes. Estate and gift taxes are separate and above the taxes paid on income. No Federal estate or gift tax is due unless or until the total of lifetime gifts combined with the assets remaining in the individual’s estate exceeds certain levels.
Q. WHAT ASSETS ARE INCLUDED AS PART OF MY TAXABLE ESTATE?
Q. ARE THERE ANY TRANSFERS (GIFT OR INHERITANCE) THAT ARE TAX-FREE?
A. Yes, there are certain exclusions from gift tax. Each individual currently has the right to gift $15,000 in any calendar year to any number of persons. For example, if you have two children who are married and each one of those children has a spouse and three children, you could gift $15,000 to each of the ten family members per year. In this way, you could gift $150,000 per year with no gift tax consequences and reduce your taxable estate. Often family members who have total assets that exceed the Federal applicable credit amount make these tax-free gifts for the purpose of reducing the amount of assets in their estates, thereby reducing their eventual estate tax liability.
Other gifts excluded from gift tax are unlimited payments on behalf of another person made directly to a provider of educational services for tuition or to a provider of medical services. An individual can reduce his total assets and eventual tax liability by paying a grandchild’s college tuition, or nursery school bills directly to the educational institution. Hospital or doctor bills paid by the individual directly to a hospital or doctor on behalf of another person also carry no gift tax consequences.
The most significant exception to gift and estate tax is the marital deduction. The marital deduction allows each spouse the right to give an unlimited amount of assets during life or after death to the other spouse who is a U.S. citizen without any estate or gift tax consequences. Although this is often of great benefit, it is not always the best plan to take full advantage of the marital deduction. It may leave the surviving spouse with a very large taxable estate. Significant estate tax savings can be achieved by married couples with the right estate plan.
Q. IF I’M MARRIED, WHAT TAX PLANNING CAN I DO TO SAVE ON TAXES?
Q. I AM SINGLE. ISN’T THERE ANYTHING I CAN DO TO SAVE ON TAXES?
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