Fratello Law

2024 Estate Tax Planning Update

Estate Tax Update 2024 in New York State

As we usher in the new year, there are significant updates on the horizon that could impact your financial planning and wealth transfer strategies. One key area of interest for many is estate tax, commonly referred to as death tax. The Internal Revenue Service (IRS) and New York State’s Department of Taxation and finance have adjusted the exclusion amounts, ushering in changes that could influence how individuals plan for the transfer of their wealth.

Understanding Estate Tax:

Estate tax is levied on the transfer of assets from one individual to another after death. To prevent double taxation, the IRS and the New York State Department of Taxation and Finance allow individuals to exclude a certain amount of their assets from these taxes, known as the exclusion amount.

2024 Federal Estate Tax Exclusion Amount:

For the year 2024, the federal estate tax exclusion amount has been set at $13,610,000 per individual, up from $12,920,000 in 2023. This means that an individual can transfer up to $13,610,000 of their estate to heirs and beneficiaries upon their death without incurring federal estate taxes. For spouses, the combined federal exclusion amount is effectively doubled, reaching $27,220,000. More information is available at the IRS website.

2024 Federal Annual Exclusion for Gifts:

The federal annual gift tax exclusion rises to $18,000 per person per year in 2024. A significant increase from $17,000 in 2023. The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $18,000 in 2024, the annual exclusion applies to each gift. In addition, each spouse is entitled to the annual exclusion amount on the gift, making the total amount of the annual exclusion for spouses $36,000 per donee in 2024. More information is available at the IRS website.

2024 New York State Estate Tax Exclusion Amount:

New York State has also increased its estate tax exclusion amount for 2024 to $6,940,000. Special estate tax planning considerations are important if you are a New York State resident. If your estate is 5% more than the NYS exclusion amount, you “fall off the cliff” and your entire estate will be subject to New York estate tax starting at the first dollar. New York also does not allow a combined estate tax exclusion for spouses. More information is available at the NYS Department of Taxation and Finance website.

Implications for Estate Planning:

    1. Review Existing Plans: Individuals with existing estate plans should review and, if necessary, revise their strategies in light of the updated exclusion amounts. This is particularly important for those whose estates are approaching or exceeding the new exclusion thresholds.

    1. Maximizing Gifting Opportunities: With the increased gift tax exclusion, individuals may find it advantageous to maximize annual gifts to heirs and beneficiaries. This can be an effective way to transfer wealth while reducing the overall taxable estate.

    1. Consideration of Trusts: Trusts remain a valuable tool in estate planning. Individuals may want to explore the use of various trusts, such as irrevocable life insurance trusts or credit shelter trusts, to optimize the transfer of assets while minimizing tax implications.

    1. Professional Guidance: Given the complexities of estate planning and tax laws, seeking professional advice from experienced estate planning attorneys, tax advisors, and financial planners is crucial. They can provide personalized guidance based on individual circumstances.

The adjustments to the 2024 estate and gift tax exclusion amounts present both challenges and opportunities for individuals engaged in estate planning. Whether you’re aiming to minimize tax liability, maximize wealth transfer, or ensure the smooth transition of assets to the next generation, staying informed and seeking professional guidance are key elements in navigating the ever-evolving landscape of estate and gift taxes.

The estate planning lawyers at Fratello Law have been counseling Long Island residents about transfer of wealth and strategies to protect assets for decades. As your family and wealth grow, we grow with you.