Legal Question in Wills and Trusts in New York

Re: inheritance

There are measures you can take to reduce the estate tax due upon the death of your mother's aunt. Due to the complexity of the issues, I strongly suggest that you contact an estate planning attorney to schedule a consultation.

You may contact my office at [email protected] to schedule a consultation.

Good luck,

Anthony S. Park

Re: inheritance

Estates over $1.5 million ($2 million on Jan. 1) are subject to Federal estate tax. NY Estates over $1 million are also subject to NYS estate tax.

The estate that you describe, therefore, will likely be required to pay hundreds of thousands of dollars in estate taxes.

However, through proper planning there are many ways to reduce, and in some cases eliminate, estate taxes.

I would highly recommend that your family seek the assistance of an experienced attorney to develop a viable estate plan.

Please feel free to contact me if you would like my assistance.

Re: inheritance

In order to shield her hiers from paying unnecessary taxes, your aunt can set up a trust to protect them if she chooses, but it is your great aunt's decision. In order for a trust to be effective, any trust established would have to be set up, and administered, properly. Your mother and brother cannot set up a trust on their own on the basis that they may be entitled to certain properties after their aunt's death.

Should you like to discuss this or any other legal matter, you can e-mail me for more information about low cost face-to-face, on-line, or a telephone consultation with a lawyer in our office.

Re: inheritance

Everyone has touched on the subject, but gave no concrete suggestions. There are both estate/inheritance tax and income tax considerations. Depending upon her age and competency, the aunt might consider either a partially revocable and partially irrevocable living trust or an LLC and starting a gifting program. Assuming she still has her lifetime gifting available ($1M) as well as annual gifts, she could transfer the real estate to the entity she selects and commence gifts. The trust might be better as she can gift interests in the real estate to her niece/nephew, their spouses, if any, their children and grandchildren and their spouses, but only have the niece/nephew ultimately inherit, or skip a generation to their children. A properly drawn trust, as I specialize in, would allow annual gifts of $11,000 each, plus her lifetime of $1M, with no gift tax consequences. The more people, the more gifts allowed, so she can greatly reduce her potential estate/inheritance taxes over time. These gifts, since they would represent minority interests in the real estate, could be discounted, maybe up to 1/3. So about $14,300 of value would net $11,000. Multiply that by the number of donees, and that is what she can give each year, plus her lifetime gift once. Gifting results in transferred basis (cost) to the recipient, so there would probably be income taxes if and when the property is sold. However, the profit would be taxed as a long-term capital gain (15%), while the saved federal/state estate/inheritance taxes could aggregate a tax rate of over 50%. Plus, if properly drawn, additional basis could arise when the niece/nephew pass away and transfer the property to their children. Also, great income tax flexibility exists in a properly-drawn trust, which can more than compensate for any death taxes. I have been a participant for many years in a real estate trust I created for my parents and can personally attest to the vast benefits and tax benefits enjoyed over the years. The aunt should consider this ASAP, as if not done now, gifting for 2005 will be lost, and anticipate the tax loss at about 35%+ of the gifting that could be done.