It is essential for families with significant wealth to be aware of estate and gift tax limits. An important part of estate planning is making sure that as much of your wealth as possible goes to your heirs rather than to pay taxes.

The good news is that both the federal and New York State estate tax exemptions have risen quite a bit. The federal estate and gift tax exemption now rises each year, indexed for inflation. In 2016, the exemption is projected to be $5.45 million, or $10.9 million for a married couple. This amount can be left to one’s heirs tax free. The gift tax and estate tax are linked, so you can make gifts to your heirs during your lifetime, but they count against the limit.

Separate from the lifetime gift exemption is the annual gift tax exclusion. For 2016, it is projected to be $14,000, the same as 2015. This amount can be given tax free to as many individuals as you wish, and these gifts don’t count against the lifetime gift exemption.

New York State is also in the process of raising its estate tax exemption, and it is set to match the federal exemption by 2019. In the meantime, there is a significant difference. The estate tax exemption amount in New York is $3,125,000 for deaths as of April 1, 2015 and before April 1, 2016; $4,187,500 for deaths as of April 1, 2016 and before April 1, 2017; and $5,250,000 for deaths as of April 1, 2017 and before January 1, 2019.

It is important to be aware that New York State, unlike most other states, taxes not only the amount over the exemption, but the full value of the estate, for estates that exceed the exemption amount. Thus, you can face a taxation cliff if you die with an estate valued at just above the state exemption amount.

Learn more about our legal services at www.littmankrooks.com or www.elderlawnewyork.com.

Was this article of interest to you? If so, please LIKE our Facebook Page by clicking here.