Articles Posted in Death Taxes

For 2024, the exemptions for estate taxes rise to 6.94 million for New York estate taxes, and to 13.61 million for Federal estate taxes. The annual gift tax exclusion rises to $18,000. If your estate is, or may become, greater than the New York threshold, early intervention can avoid the hefty New York estate taxes, which start at over $500,000. Some of the techniques are (1) setting up two trusts, one for husband and one for wife, and using them to double the New York exemption, (2) gifting out so much of the estate so as to reduce it below the New York exemption, at least three years before the death of the donor, and (3) using the “Santa Clause” providing that the amount over the threshold be donated to a charity or charities of your choosing so as to reduce the estate to no more than the exemption.

For Medicaid, the house is an exempt asset so long as a spouse is residing there, up to $1,071,000 of equity for 2024. Seeing as over 80% of nursing home residents do not have a spouse, it is better to plan ahead with a Medicaid Asset Protection Trust (MAPT) to get the five year look-back for nursing facility care. In that case, the house would be protected by the trust rather than the unreliable spousal exemption. Unless your other assets have been protected by the MAPT, an individual may keep only $30,182 and a spouse can keep up to $154,140.

The major change to Medicaid is the often-delayed imposition of the new two and a half year look-back for home care, commencing April 1, 2024. Previously, there was no look-back for home care. This resulted in people not having to worry about getting home care until they actually needed it. With the law change, the MAPT now becomes far more important as a tool to qualify you for home care than to simply protect your assets from a nursing home. Assets will have to be moved into the MAPT years ahead of time if you want to be able to afford to stay in your own home and get home health aides for assistance with the activities of daily living, should the need arise.

Your “basis” for calculating capital gains taxes is what you paid for the stock or the real estate. For real estate, the basis gets raised by the amount of any capital improvements you make to the property.  When you sell your primary residence you may exclude the first $500,000 of gain if you’re a couple or $250,000 if you’re single.  The $500,000 exclusion for a couple get extended for a sale occurring up to two years after a spouse dies.

For gifts you receive of appreciated stock or real estate during the donor’s lifetime, no capital gains tax is payable, however the donee receives the donor’s basis.  It is generally considered better to wait, if possible, and pass the gift to the donee at death, due to the “stepped-up basis”.  The basis of any inherited property is “stepped-up” to date of death value.  If the property is sold within six months of the date of death, then the sale price is deemed to be the date of death value.

If the property is going to be held for some time it is helpful to get date of death values to establish the new basis.  For real estate, this means getting an appraisal from a licensed real estate appraiser (not a real estate broker!).  For stocks, you simply ask the company holding the stocks to provide this information.

Since 2021, many conversations have been had about the Build Back Better Act,  which saw several substantial tax increases. While some people have described the Act as dead, the future of the act remains uncertain. 

Despite what happens to the act, its contents are subjects to which Congress is likely to respond in regards to what is referred to as “death taxes”. 

A “death tax” is a type of “transfer tax” and is referred to as an estate tax. Most people are acquainted with income tax. If an individual receives a salary, the salary is taxed. If a person sells a property that has appreciated, the gain also receives what is referred to as a capital gains tax. Ordinary income tax, as well as capital gains tax, are two types of income tax.

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