As you prepare the plan for transitioning your assets to your beneficiaries in Schenectady, a nagging thought likely lingers in the back of your mind: what you anticipate having to pass on to them is not a true amount, as a portion of those assets will almost certainly have to go towards paying taxes.
Yet are estate taxes inevitable? That depends on the total amount of your estate, as exclusions apply at both the federal and state levels.
New York’s estate tax
New York remains one of the few states to impose a local estate tax on its residents. However, it does also offer an exclusion amount of $5.85 million. Thus, if the total taxable value of your estate falls below that mark, it will not be subject to taxes.
Federal estate tax portability
The federal government also has an estate tax exemption. Per the Internal Revenue Service, that amount for 2020 is $11.58 million. You can also take advantage of estate tax portability to protect even more than that for your beneficiaries. Portability allows married couples to combine their unused exemption amounts. Working in conjunction with the unlimited marital deduction, you and your spouse together could protect as much as $23.16 million.
The unlimited marital deduction allows you to pass as much money as you would like on to your spouse tax-free. Thus, leaving your entire estate to them when you die would not only help avoid taxes, but it would also preserve your entire estate tax exemption amount. Your ex-spouse would then need to file an estate tax return within nine months of your death stating that they would like to elect portability. Your exemptions amounts would then combine, effectively doubling what you can protect.