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.
Unexpected taxes can put a family in financial ruin. New York Estate Planning Lawyers can help uncover any possible taxes your family might incur. New York Estate Planning Attorneys understand estate tax laws and will help your family make the right decisions. The law offices of Stephen Bilkis & Associates has caring New York Probate Lawyers that can help you plan your estate. Our New York Probate Lawyers can help you probate an estate, write a will or set up a trust. We have convenient offices in New York City, Brooklyn, Queens, Bronx, Suffolk and Nassau County. We want to help you through what may be a difficult time with as little problems as possible and offer a free consultation at 1-800-NYNY-LAW (1-800-696-9529). Call us today to take advantage of this free consultation and speak to a New York Probate Lawyer from our firm.