The ultimate goal of your estate planning efforts may be to preserve as many of your assets as possible by limiting your liabilities. Ensuring the settlement of your debts and taking steps to avoid probate help guarantee that most of what you have to leave to your beneficiaries passes on to them. However, like many of those from White Plains who come to see us here at Marcus, Gould & Sussman, LLP, you may believe that there is no avoiding estate taxes.
That may or may not be true. Both local and federal estate tax codes offer potential relief from paying estate taxes.
Understanding estate tax exclusions
New York is one of the few states that still imposes a state estate tax. However, the state also provides a way through which your estate can avoid being subject to tax. According to the New York State Department of Taxation and Finance, the state has an estate tax exclusion set at $5.85 million. If the total taxable value of your estate comes in below that amount, it can avoid having to pay taxes. The federal government also offers an estate tax exemption. That amount for 2020 is $11.58 million.
Estate tax portability
At the federal level, there is also a way for you to extend your estate tax exemption even further. The law allows your spouse to claim the unused portion of your estate tax exemption and combine it with their own through estate tax portability. In fact, if you take advantage of the unlimited marital deduction (which allows you to make an unlimited tax-free transfer to your spouse) and leave your entire estate to your significant other, you then preserve your entire estate tax exemption for them to subsequently use.
You can find more information on estate planning strategies throughout our site.