Probate for Estate and Taxes

A primary responsibility of the executor of an estate is to collect all assets of the estate, pay all expenses and obligations of the estate and distribute the net proceeds of the estate to heirs and or distributees of the estate.

Estate taxes may be one of the liabilities of the estate. It is the obligation of the Executor, or Administrator of the estate to ensure that these taxes are paid. In addition, there may also be personal income tax due, if incurred by the decedent in the last year of his/her life. The executor must consult with the decedent’s accountant to determine if any outstanding obligation may exist. Taxes must be paid before any distribution is made.

Estates may be taxed or levied by both the state and federal government (IRS). There are some southern and western states that do not levy state estate taxes, notably Florida, Texas and Arizona.

Estate tax rates are high. The federal estate tax rate is now 40%. The New York state estate tax rate is 16%. However, the good news is that there are Federal and New York State exemptions and they keep rising every year.

It must be noted that the effective tax rate is based on the date of death, and not on the year the taxes are paid. For an estate where the decedent died in 2017, the individual Federal exemption is $5,490,000. This exemption rises to $5,600,000 in 2018. Thus, for all estates open in 2018 with assets of $5.6 million or less, there is NO ESTATE TAXES due. There is also no requirement to file a tax return if no tax is due.

The New York state estate tax exemptions have also risen dramatically in recent years. For a death in year 2015, the exemption is $ 3,125,000; in 2016 it is $4,187,500; and in 2017 $5,250,000; and beginning in 2019, NY state will follow the federal exemption schedule. One final note, even if no NY state estate taxes are due, banks and title companies will frequently require a tax waiver issued by NY state tax authorities when transferring real estate.

For more information, please contact Jeffrey Weinstein, tax attorney with 29 years experience at 212-693-3737.

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