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Estate Planning

Ask Attorney Lola Waterman …About Estates!

OTP Staff: So, what is an “estate”?
Attorney Waterman: Simply stated, an estate is the total value of a person’s assets minus all of that person’s liabilities. Assets include real property, cash, stocks and bonds, artwork, jewelry, cars, pension plan distributions, retirement accounts, personal items, and so much more. The term “estate” is mostly used to describe what a person leaves behind when he or she dies, and can be disposed of under a will to beneficiaries, or under the laws of intestacy (when a person dies without a will) to heirs.
An estate can also be disposed of by operation of law. An example of such an asset is jointly owned real property. To illustrate, let’s take a look at a vacation home owned by two sisters – Dana and Diana. They are both married and have children. The deed reflects that the property is owned by both sisters as a joint tenancy, with rights of survivorship. What this means is that they each own an undivided interest in the whole property, and the term “with rights of survivorship” means that if one of the sisters dies, that deceased sister’s interest automatically goes to the surviving sister, without the need for a proceeding in Surrogate’s Court. It is important to note that the spouse and children of the deceased sister will not have an interest in the vacation home.
Other examples of assets passing by operation of law include, but are not limited to, transfer-on-death assets such as stocks and bonds, life insurance proceeds, joint bank accounts, and any other asset held jointly or designates a beneficiary. These assets pass outside of a decedent’s will.
No discussion about estates is complete without mentioning taxes. In New York, estates are subject to federal and state estate taxes, as well as income taxes. Your taxable estate is the total value of your estate, less allowable deductions, exemptions and credits. Federal estate tax is not imposed on most estates in the U.S. The federal estate tax exclusion amount for this year is $11.58 million. This means that if a person dies in 2020, and that person’s net estate is worth less than $11.58 million, no estate tax will be due. According to the Joint Committee on Taxation, 99.8 percent of estates will owe no estate tax. The New York estate tax exclusion amount is set at $5.85 million (indexed for inflation each year), with a tax rate ranging from 5% to 16%, depending on the size of the estate.
Aside from the federal and state estate tax, there is also an estate income tax – yes, Uncle Sam always wants his cut. The fiduciary or administrator of an estate should take note that a final income tax return for the year of the decedent’s death may be necessary. In addition, any income earned by an estate is subject to both federal and state income tax on an annual basis. An estate may continue to receive distributions from an IRA, unpaid salaries to the decedent, rents from real property, all of which may be subject to estate income tax. Notably, there is no inheritance tax in New York. That means that a person who inherits money or property from a decedent does not have to pay an inheritance tax on it.
In conclusion, prudence requires choosing a knowledgeable attorney and tax professional to ensure compliance with federal and state estate taxes. These professionals can also assist you with creating an estate plan now with the objective of minimizing your taxable estate later.
Be encouraged to get your affairs in order. I can be reached at Lola Waterman, Esq.

The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. The views expressed in this article are those of the individual author writing in her individual capacity only.

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