Estate Taxes

How Does New York Stack Up for Retiree Taxes?

Published on: August 26, 2013 | by Ettinger Law Firm

Do you have enough money to retire? It is a questions that tens of thousands of New Yorkers ask themselves every day. When talking with attorneys and financial advisers, many factors are weighed to determine whether enough resources are available for one to have the type and length of retirement that they want and need.

One of those factors, as always, is taxes. Retirement income is frequently taxed, with a portion of money going to state and local government. These are not necessarily trivial amounts, as the exact size of the tax burden may affect whether or not the nest egg is large enough to cash in one’s chips and begin the next phase of life.

Federal taxes will obviously be the same everywhere, but the rules about retirement taxes vary considerably from state to state. When making long-term plans regarding finances, it is critical to understand how state tax rules will affect your retirement

IRS Valuation & Taxes – The Michael Jackson Examples

Published on: August 23, 2013 | by Ettinger Law Firm

Death and taxes; the two constants in life. There has been significant discussion in the past few years over the one tax that is itself most closely tied to death: the estate tax. At the federal level, the President and Congress have debated the exact rate of the the tax and at one point it should kick in.

But once those details are set, it is still not entirely easy to determine what one’s total estate tax bill is. That is because most individuals have assets whose value is hard to gauge. It would be straightforward if all of one’s wealth was in a bank account with a set balance or stocks with a clear value.

That’s not how it works in the real world, however. Instead, many have assets that must be “valued” before added to a tax bill. Who does the valuing and what decisions they reach may ultimately have significant effects on how much of an estate goes to Uncle Sam. As you might imagine there is frequently considerable disagreement regarding this matters.

Federal Estate Tax — Back on the Agenda?

Published on: April 12, 2013 | by Ettinger Law Firm

Earlier this week we touched on the fact that estate tax issues need to be on all New Yorkers’ radar, because the state tax kicks in at a far lower level than the federal tax. The federal rate was seemingly fixed as part of the compromise legislation that averted the “fiscal cliff” earlier this year. While any law can be changed, the passage of this legislation was assumed by most to signal some level of finality on the matter. Debate had raged for months (even years) about the exemption level and rate. The uncertainty was a challenge for estate planners, because it is more difficult to craft complex protection plans when the tax rules are a moving target

In that vein, regardless of one’s own opinion of the estate tax, passage of the compromise bill was a welcome relief–offering stability. But that stability may be short lived, as proposals about changing the federal estate tax have are already making their way back into national political discussions.

Here We Go Again

Don’t Forget: There is a New York Estate Tax on Top of Federal Tax

Published on: April 10, 2013 | by Ettinger Law Firm

Much discussion at the end of last year dealt with the estate tax. As federal officials groped for a compromise to avoid the so-called “fiscal cliff,” details about the federal estate tax were one part of the negotiations. Democrats wanted it returned to levels during the Clinton Administration while Republicans wanted it eliminated altogether.

Just before the deadline, a law was passed which apparently settled some of the matters of contention. In so doing, it seemed to finally provide some permanence to the federal estate tax. The tax rate now tops off at 40% (a jump from the previous 35%) and begins on parts of the estate over $5.25 million. The exemption level is pegged to inflation, and so it will rise slightly each year.

With news of this new estate tax compromise (and its relatively high exemption level), many have pointed out that the federal tax is now only a concern to a small slice of the population. After all, the majority of residents will not die with assets over $5.25 million, and so estate planning to avoid that federal tax is unwarranted.

Estate Taxes & New York Legend Ed Koch

Published on: March 19, 2013 | by Ettinger Law Firm

One of the biggest names and personalities in recent New York City history passed away in early February: Ed Koch. Koch has a wide-ranging career, most notable for his three terms as New York City mayor. The mayor emeritus apparently died with healthy bank accounts, as a recent Forbes article suggests that his estate is valued at about $10 million. Apparently most of the wealth was accumulated after he left office in the late 1980s. A high-profile name, Koch made money giving speeches, writing books, appearing and the radio and television.

As usually happens after a celebrity passing, many have asked how Koch’s fortune might be distributed. Court documents recently filed in the matter shed light on how it all might shake out–offering yet another example of the need for community members to be vigilant about their affairs to protect against large tax obligations.

According to reports, Koch left most of his fortune to various relatives along with some charities. He made specific cash distinctions to certain relatives (i.e $500,000 to sister and husband, $100,000 to sister in law, etc.), and left the “residuary estate” (everything remaining after specific gifts) to three nephews.

DOMA Case Update: Amicus Briefs Mount in New York Couple’s Case

Published on: March 7, 2013 | by Ettinger Law Firm

We have frequently discussed the federal law known as the Defense of Marriage Act. Passed in 1996, the law essentially prevents the federal government from recognizing as married same-sex couples who are legally wed in individual states. Of course, New York allows gay couples the right to marry. Under state law, all couples, gay and straight alike, are treated the same. However, while in most cases the federal government defers to state law on legal marriages, that is not so for same-sex couples. To this day they are treated as legal strangers for federal purposes, creating a whole host of complex long-term planning, tax, and government support complications.

New York DOMA Challenge

Over the past few years a few legal challenges have been heard in federal courts arguing that DOMA violates federal constitutional principles. In virtually all of those cases the courts have ruled in favor of the plaintiffs, agreeing that parts of the law are unconstitutional. However, considering the magnitude of the issue, it was almost guaranteed that the decision would ultimately lie with the U.S. Supreme Court.

E-Planning: Estate Planning in our Digital World

Published on: February 6, 2013 | by Ettinger Law Firm

Like it or not, our world is infatuated with technology. Smartphones conduct intercontinental transactions. Friends across the country communicate through instantaneous text messaging, and telephones and tablets close distances and miles through face to face conversations. Because technology plays such an important role in our daily lives, today’s estate planning should include an arrangement for organizing and protecting technological and digital assets.

Dividing Up Digital Assets

We have frequently discussed how there are different kinds of digital assets to think about when drafting your estate plan. First, there are your personal digital assets, which would include any email accounts, personal social media accounts and maybe even a personal web site or personal blog. Personal digital assets might also include any photos or documents stored on different websites, like Snapfish, Shutterfly or Dropbox. Information stored in any cloud storage should also be considered personal digital assets.

Trusting Kids with Large Inheritances Remains a Challenge

Published on: January 30, 2013 | by Ettinger Law Firm

One of the most common concerns that parents have when creating an estate plan in New York is worrying about passing on too much wealth to children who cannot properly handle it. After a lifetime of hard work, ingenuity, and prudent planning, the last thing many families want is to see a child obtain an inheritance and then lose it. One need only check newspapers headlines to see celebrity examples of younger individuals with too much money whose lives take a turn for their worst as they fail to handle their wealth carefully.

A Wall Street Journal article last week discussed this issue in the context of the now seemingly permanent federal estate tax rates. Per the “fiscal cliff” agreement, the estate tax law will allow each individual to shield up to $5.25 million. For a couple, that allows $10.5 million to be given to others tax-free.

While this is good news for those who have this much wealth to pass along, it does raise some questions for families. Is your child–no matter what age–prepared to handle an inheritance of this size? Will it be lost to creditors? Taken by a spouse? WIll the money change the child’s motivation or long-term goals?

Potential Heir in Huguette Clark Case Dies During Inheritance Feud

Published on: January 4, 2013 | by Ettinger Law Firm

Timing is of critical importance with estate planning matters. Obviously, a plan must be in place early enough to be of use before one falls ill or suffers from mental issues. For example, creating a will or trust may be impossible after one suffers a stroke or succumbs to serious effects of Alzheimers. This is why we continue to encourage residents to make plans early and consistently update them.

Time also factors into matters after a death. Many beneficiaries may face hardship if they are forced to wait months (or even years) to have an estate settled. One of the key benefits of an inheritance plan is to minimize the risk of a long delay between the actual passing on of assets, often focused on avoiding probate and preventing feuding.

Celebrity Example

End of Year Estate and Gift Tax Dilemma

Published on: December 26, 2012 | by Ettinger Law Firm

Only a few days remain in the year, and most financial activity for 2012 has come to a close. However, the end of year action has already brought one of the most active seasons ever. Financial advisors, estate planning attorneys, and others have all seen community members of all different income brackets seek out help understanding how possible legal changes in the new year might affect their own financial health and long-term prospects.

A Forbes story last week explored one of the main reasons for confusion and the seeking out of help: the “give now or pay later” problem. This is an issue that mostly affects those with significant assets who may be affected by gift and estate tax changes. As has been documented exhaustively, Congress is considered what to do with the gift and estate tax. Over the past ten years the tax rate has steadily fallen and the exemption level has risen. In 2010, the estate tax was eliminated altogether. However, what will happen in the new year remains to be seen.

Many different options are on the table–from a permanent elimination of tax (unlikely) to a return to pre-2001 rates. A table from the Tax Policy Center (viewed here) offers a helpful snapshot of the options and how many people would be affected by each. One comparison offers the range of possibilities. If the current rate continues, about 3,800 estates will be affected next year. Those estates would bring in about $12 billion in taxes. Conversely, if the 2001 rates returned then 47,000 estates would be affected and over 300% more tax revenue would be generated.