New York Probate and Estate Administration Blog

Many people tend to overlook the likelihood of being hit with an estate tax because they aren’t considered “rich.” But according to NY Estate Lawyers many upper middle-class citizens could be hit with a tax rate as high as 35%.
Currently the law indicates an exemption for estate tax of up to $5 million for those who die in 2011 and 2012. What many people are unaware of is that this amount can easily be exceeded when you take life insurance coverage, a valuable home, healthy retirement balances and other assets into account.
“Don’t forget to count any private business ownership interests such as shares in a family corporation or partnership,” explained a New York Probate Lawyer.
He continued explaining an example about a divorced single parent. “She earns a healthy salary, she has a $4 million term life policy to provide for her three teenagers, has $800,000 of equity in her home, $1 million in retirement plan accounts, and $500,000 worth of assorted personal assets (cars, clothes, furniture, jewelry, and so forth). She has no debt other than her mortgage and because she has never considered herself to be anything close to ‘rich’ she has never done any estate-tax-avoidance planning.”
The lawyer explained that if she died tomorrow, her estate would be worth $6.3 million for federal estate tax purposes ($4 million + $800,000 + $1 million + $500,000), and her estate would accumulate a state bill of $455,000.
This scenario is all too common and they also add that for unmarried people, high life insurance coverage is the biggest reason for unexpected federal estate taxes. Married couples, he sited have an advantage because of the unlimited marital deduction privilege. This deduction is only good for U.S. citizens he added.
Lawyers are now recommending to their clients setting up an Irrevocable Life Insurance Trust. This basically helps avoid traditional estate taxes on the life insurance policy because it is not officially owned by anybody. The only catch is if you die within three years of setting up the trust you are subject to estate tax on it. People in The Bronx and Brooklyn should seek advice as to what road to follow.
In the end experts recommend talking to a professional to find out what your situation is. Although many people think they are exempt, often times they are not and only a professional can make the right recommendation. “It’s money well-spent,” one lawyer concluded.

Continue reading "Seeking an estate planning lawyer’s advice is essential" »

During one of the state of Illinois’ largest ever tax increases; the new public act appears to contain a nice loophole for the wealthy deceased, said a New York Estate Planning lawyer.

Earlier this year the Governor of Illinois signed into law the Public Act 096-1496, the Taxpayer Accountability and Budget Stabilization Act.

Aside from increasing state income taxes on individuals and corporations, [it] reinstated the Illinois estate tax effective January 1, 2011, with a $2,000,000 exemption.

The estate tax in Illinois, which is not independent, is directly tied to the federal estate tax and is known as a “pick-up” estate tax.

Before EGTRRA, which was enacted in 2001, states that had a “pick-up” estate tax enjoyed a federal credit for state death taxes. Until 2010, Illinois incurred no federal state death tax credits, which caused a problem for taxpayers who assumed EGTRRA had continued to hold these estate taxes.

A New York Estate Planning Lawyer explained that the Illinois Attorney general had issued a warning last year about a possible reinstituted estate tax even though there currently is not one. He added that the Governor’s new law protects this possibility.

The new law clearly states that 2010 Illinois descendants will have no estate tax. Those who die after 2010, however, may be subject to a tax but have an exemption of up to $2 million. In the Bronx and Staten Island these changes are being studied to see how they might effect estates in NY.

Continue reading "Estate Tax Laws in Illinois worth looking into, writes a New York Probate Lawyer." »

Extensive trust-planning and maneuvering tax law in order to protect a surviving spouse has long been a central part of the job of any qualified New York City Estate Planning Lawyer. Almost as soon as the United States Government christened the estate tax, wealthy families began finding ways around paying. Of central concern for many married couples is how to avoid the estate tax long enough that if one partner in the marriage dies, the other partner’s assets are protected, and any shared wealth is not taxed.

One of the most time-trusted methods of escaping the estate tax is a bypass trust- known more familiarly as a “family trust”. This trust is typically used to set up a trust-fund. The money which is set aside in a trust fund or other tax sheltered annuity (another common example is a charitable trust), is not taxable by the government. The surviving spouse can continue to live on whatever interest the fund might bear. In some cases, he or she can actually use a small percentage of the principal as well. Lawyers in Brooklyn and The Bronx are constantly trying to improve their handling of these problems.

According to the New York Estate Planning Lawyer we spoke with, the new tax law enacted at the end of 2010 could spell good news for married couples trying to plan their estate. By significantly raising the exemption and making those exemptions portable (in other words, transferable from one spouse to another in the event of death), the federal government has given couples the option of leaving funds directly to one another, without going through a trust or other tax shelter.

Continue reading "New Estate Tax Law Alters Estate Decisions" »

The Estate Planning community is in a buzz over a new tax law approved by president Obama in late December of 2010. The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010, or TRA 2010 for short, is a “game-changer,” one New York Estate Planning Lawyer is saying. In the past, the entire estate planning business revolved around estate taxes, and how those taxes were applied. In light of the new law, these taxes represent a much smaller hurdle to the industry at large. Lawyers in The Bronx and Staten Island are very aware that laws can change at any time.

If you are a New York Estate Planning Lawyer, and are considering giving your congressional representative a thank-you call, you are certainly not alone; but I would caution you to first read the fine print of the law. While no law is ever completely permanent, this law comes with an expiration date. After two years, the law is slated for review. If it is not reviewed and reinstated at that point, then estate tax law will effectively be reset to the levels present before the law was enacted.

On the other side of the equation, one New York Estate Planning Lawyer claims that this new law sounds the death knell for the Estate Tax in general. He contends that under the New TRA law, the value of collectible Estate Taxes is now so small as to be almost negligible, and would be a waste of IRS manpower to even bother to collect. Only time will tell whether the new law will act as a temporary tax relief mechanism, or as a stepping stone to Estate Tax repeal.

Don’t wait until it’s too late to make decisions about your financial legacy. A New York Estate Planning Attorney is one call away, and can help bring peace of mind to you and your loved ones that they will be taken care of, and that your wishes will be carried out as you intend.

Continue reading "New Tax Law Changes the Game " »