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The gross estate includes all the things a person owned when they died, like property in a revocable trust, property owned with someone else that passes to them automatically, life insurance, retirement accounts, and other assets that don't go through probate. The value of the gross estate is used to figure out if federal or state estate taxes need to be paid. In 2023, estates worth less than $12.92 million don't owe federal estate taxes, but some states have lower limits. New York's estate tax kicks in at $6.58 million. People with gross estates above these amounts should make an estate plan to lower their taxes.
The probate estate is different. It only includes things the person owned in their name alone, like bank accounts, investments, and real estate. These assets go through probate court and are given out based on the person's will or state law if there's no will. Estate planning is important if you want your assets to skip probate and go straight to the people you choose.
Estate Planning Considerations
For wealthy people whose gross estate is worth more than the federal and state estate tax limits, good planning means using ways to reduce the value of your assets on paper. This lowers your estate taxes. The most common way to do this is to use trusts that can't be changed, called irrevocable trusts. There are different kinds of these trusts, depending on what you want to do. One thing to think about is that an irrevocable trust uses the original cost basis of the assets, not the value when you die (step-up basis). This computation matters when figuring out how much you'll save in taxes.
If you want your assets to go directly to the people you choose without going through probate court, you can use revocable trusts, name beneficiaries on your accounts, and make sure your assets are titled the right way. Working with a skilled estate planning lawyer like us can help you make a full plan that does what you need and want.
Strategies to minimize estate taxes
Estate planning is about keeping as much of your money as possible for the people you care about. One way to do this is to lower the amount of estate taxes you have to pay. You can give gifts to your loved ones each year while you're alive. Or, you can move your assets to a special kind of trust. In 2024, you can give up to $18,000 to each person without having to pay gift taxes. You can also put your life insurance into a special trust. This way, the money from the insurance won't be counted as part of your estate when you die. Another good idea is to give money to charity. This can help lower your estate taxes and also help good causes.
Utilizing revocable trusts and beneficiary designations
Revocable trusts can help you avoid probate but they do not lower your gross estate for purposes of estate taxes. Still, a revocable trust lets you stay in control of your assets while you're alive and avoid guardianship proceedings in case you become incapacitated. But when you die, the assets go straight to the people you want them to without going through the court process.
Naming beneficiaries on your life insurance, retirement accounts, and other money accounts is another way to make sure these assets go right to the people you want, without probate. There are several types of beneficiary designations for bank accounts, such as in trust for and transfer on death accounts. It's important to check and update your beneficiaries regularly, especially after big life changes like getting married, divorced, having a child, or when someone dies.
Importance of proper asset titling
How you own your assets can make a big difference in estate planning. Property owned together with rights of survivorship goes straight to the other owner when one dies. But assets in just the dead person's name have to go through probate. Titling assets the right way can help avoid probate.
Estate Planning Documents
It's also very important to have a full set of estate planning documents. This usually means a will, power of attorney, healthcare proxy, and trusts if you need them. Your will names an executor and says how to give out your assets that go through probate. Powers of attorney let people you trust make money choices for you. A healthcare proxy names someone to make medical choices for you if you can't. You should look over these documents regularly to make sure they still say what you want.
By using the right strategies to lower estate taxes, using trusts and beneficiary designations, and having your assets titled right with good estate planning documents, you can handle your estate well, pay less in taxes, and make sure your assets go where you want. Talking to a good estate planning lawyer like us can help you make a plan that fits your specific needs and goals.
If you are facing the tough job of probate or need help with estate planning, the Law Offices of Albert Goodwin are here to talk about what you need. We can help make sure you make the best choice for your situation. You can call us at [212-233-1233](tel:+12122331233) or email us at [[email protected]](mailto:[email protected]). We are in Midtown Manhattan in New York, NY.
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
