New York City, Long Island, Nassau County, Suffolk County

Rudolf J. Karvay

New York Probate Attorney

1-800-939-0235

Probate • Administration • Estate Litigation • Tax • Kinship Hearings

Flat Fee & Contingency Fee Arrangements Available

Call Now for a Free Consultation

NY probate and estate litigation lawyer

Copyright © 2014 Rudolf J. Karvay, Esq. All rights reserved.  New York Probate Attorney Advertising. Terms & Conditions    Privacy Policy


ESTATE TAX GUIDE - FEDERAL AND NEW YORK STATE

An estate may be subject to two types of tax and it is important to keep both types in mind.  The first type of tax is income tax. All estates are subject to federal and state income taxes on income earned each year after the date of death.  If the estate earns income in a given year, the executor must file fiduciary income tax returns and pay any tax that may be owed.  Fiduciary income tax returns must be filed each year the estate remains open and earns income.


The second type of tax is called the estate tax and, unlike the income tax, it is a one time tax.  Generally, the estate tax is based upon the date of death value of the estate's assets.


This means that the tax is calculated as a percentage of the value of the assets reduced by allowable deductions, exemptions and credits. Keep in mind that the estate's assets will likely include non-probate as well as probate property.


Not all estates are subject to the estate tax. The following information is provided to aid you in determining whether an estate is subject to the tax.

Do You Need to File a U.S. Estate Tax Return?


FOR DECEDENTS DYING IN 2006, 2007, 2008


A federal estate tax return (form 706) must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is more than $2,000,000.


FOR DECEDENTS DYING IN 2009


A federal estate tax return (form 706) must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is more than $3,500,000.


THE FEDERAL ESTATE TAX SAGA 2010 AND BEYOND


The federal estate tax was repealed for 2010.  The result was that the estate's of individuals dying in 2010 were not subject to the estate tax, but new rules regarding the tax basis of inherited property left some people liable for higher capital gains taxes than they would have had to pay under the old estate tax rules.  The Tax Relief Act was signed into law on December 17, 2010 and made major changes to the tax law for 2010, 2011 and 2012.  


A CHOICE FOR ESTATES OF INDIVIDUALS DYING IN 2010


The new law permits the executor of an estate of a decedent who died in 2010 to choose between two paths.  One path, which is automatic unless the executor opts out of it, subjects the estate to estate tax, a $5,000,000 exemption and a 35% estate tax rate.  However, appreciated estate assets get a stepped-up basis which reduces capital gains taxes if the asset is sold.


Alternatively, the executor may elect not to subject the estate to estate tax.  In which case, appreciated estate assets would receive only a modified carryover basis which may result in an increased capital gains tax liability.


While it is obvious that estates under $5,000,000 should choose to be subject to the estate tax, a great deal of analysis must be done before deciding which road to choose for the lowest overall tax consequences for estates over $5,000,000.


Tax basis rules determine how you calculate your taxable gain when you sell property you've inherited.  Stepped-up tax basis means that if you inherit property, the new tax basis of the property is its value on the date of death.  As a result, if you inherit property and later sell it, you will pay capital gains tax only on the gain based upon value of the property as of the date of death.  On the other hand, if you inherit property with a carryover basis the gain is based upon the value of the property when it was acquired by the decedent plus the cost of improvements.


FOR DECEDENTS DYING IN 2011


A federal estate tax return (form 706) must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is more than $5,000,000.


FOR DECEDENTS DYING IN 2012


A federal estate tax return (form 706) must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is more than $5,120,000.


FOR DECEDENTS DYING IN 2013 AND BEYOND


A federal estate tax return (form 706) must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts is more than $5,250,000 indexed for inflation in later years.


IMPORTANT - THERE MAY BE OTHER REASONS FOR FILING AN ESTATE TAX RETURN


You may want to file a federal estate tax return even when the gross estate is below the filing threshold amount. For example, you must file a timely estate tax return to preserve the portability of the estate tax exclusion between spouses.  



Do You Need to File a New York State Estate Tax Return?


If the date of death is on or after February 1, 2000, but before January 1, 2004, and the estate is required to file a federal estate tax return, the estate must also file a New York State estate tax return if the decedent was domiciled in New York State (resident) at the time of death or if the decedent was a nonresident who owned real property or tangible personal property in New York State.


If the date of death is on or after January 1, 2004, the estate must file a New York State estate tax return if any one of the following conditions are met:


The decedent was domiciled in New York State at the time of death and the total of the federal gross estate, federal taxable gifts and specific exemption exceeds $1 million.


The decedent was not domiciled in New York State at the time of death and the estate includes real or tangible personal property located in in New York State, and the total of the federal gross estate, federal taxable gifts and specific exemption exceeds $1 million.


The decedent was neither a resident nor a citizen of the United States, the estate includes real or tangible personal property within New York State, and the estate is required to file a federal estate tax return.



When is The Estate Tax Return Due?


If you are the fiduciary of an estate that is subject to federal and/or NY state estate taxes, you must file a return and pay the tax within 9 months of the date of death.



Important Note:


The laws on Estate and Gift Taxes are considered to be some of the most complicated in the Internal Revenue Code. For further guidance, the IRS strongly recommends that you visit with an estate tax practitioner (Attorney or CPA) who has considerable experience in this field.

Notice: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained on this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Tax Due Date

Big Changes to New York State’s Estate Tax Laws Effective April 1, 2014

“Portability”


NY Probate Process


Probate Blog


Intestate Administration


Estate Litigation


Kinship Hearings


Executor's Guide


Estate Debts


Executor Fees / Commissions


Court Directory


Public Administrators


Recommended

Author: Rudolf J. Karvay

Contact Information


Main Office:

100 Garden City Plaza, Suite 300

Garden City, NY 11530

(516) 780-0281

(631) 944-8034

(718) 360-9014

Connect with us

Share this

Print Share via e-mail
Due Date

Important News

CONTACT US

For a Free Consultation, please fill out and submit the form below.

Telephone

Comments

Name

Email

Subject