Tax planning is an essential component of estate planning. The right strategies can save money and avoid future tax problems. With tax laws set to change soon, planning ahead and working with an experienced New York estate planning attorney will let you take advantage of current benefits before they disappear.
How Tax Changes Can Affect Your Estate Plan
Whenever there are tax reforms, you should anticipate the need for potential changes to your estate plan. Meeting with an experienced lawyer who can adjust your plan based on approaching tax changes is crucial to ensure your estate plan works to your benefit. Even if you only need to make minor adjustments, staying informed and adapting your plan allows you to maximize what you pass on to your heirs.
Our Estate Planning Lawyers Can Assist With Your Tax Planning Needs
The estate planning attorneys at Amoruso & Amoruso LLP can help you manage your tax planning needs effectively. We bring a deep understanding of state and federal tax laws to help you create an estate plan that maximizes your financial benefits and minimizes your tax liabilities. We can also suggest intelligent strategies to protect your assets, such as establishing trusts or making timely gifts to heirs so you can align your estate plan with your financial goals.
Upcoming Tax Changes
The Tax Cuts and Jobs Act (TCJA) of 2017 brought significant temporary changes to individual income tax and estate and gift taxes. These changes will expire on December 31, 2025, and revert to pre-2017 levels.
For instance, the current federal exemption for estate and gift taxes is $13.61 million per individual or $27.22 million for married couples. This is a temporary increase from the 2017 exemption level of $5.49 million per person, adjusted for inflation. Post-2025, the exemption is slated to drop to around $7 million per individual, significantly lower than the temporarily heightened threshold.
Additionally, the top individual tax rate, which decreased to 37 percent (from 39.6 percent), will revert to its previous rate post-2025. Tax brackets will also shift, affecting various income levels differently.
In New York, the current estate tax exemption for 2024 is $6.94 million. Notably, New York does not have a separate gift tax, but it includes any gifts you make within three years of your death in your estate tax calculations. This inclusion could push an estate’s value over the exemption threshold, leading to significant tax liabilities.
New York estate tax exemptions are determined by state legislation. Unless new laws are enacted to alter the exemption amount, the current exemption will likely remain in effect beyond 2024, adjusted for inflation. The experienced attorneys at Amoruso & Amoruso LLP can help you update and optimize your estate plan to account for statutory changes.
Key Strategies for Effective Tax Planning
Given the scheduled reduction in federal exemptions post-2025, New Yorkers have a considerable incentive to develop strategic plans to reduce their tax burdens before then. Here are some potential strategies that could save money for you and your loved ones:
- Maximizing deductions and credits – Understanding which expenses and investments are deductible or eligible for tax credits can significantly reduce your taxable income. This might include maximizing deductions for healthcare costs or charitable contributions.
- Income shifting and deferral – Income shifting involves transferring income from someone in a higher tax bracket to someone in a lower one. You can do so by establishing family trusts or employing family members and paying them a salary. Income deferral involves using retirement accounts or other investment vehicles to delay taxes until later, ideally when you are in a lower tax bracket, such as after retirement.
- Charitable giving – Making charitable donations can fulfill philanthropic goals and provide tax benefits. Under current tax laws, you can deduct contributions to qualified charities from your income to lower your tax liability.
- Investment strategies – Strategic investment planning involves selecting tax-efficient investment vehicles, such as municipal bonds or certain types of mutual funds that manage capital gains distributions efficiently. Additionally, adjusting the timing of buying and selling investments can help you manage capital gains taxes more effectively.
Contact Amoruso & Amoruso LLP Today
Protecting your future means having a comprehensive estate plan that includes effective tax planning. Not sure what that means for you? At Amoruso & Amoruso LLP, we’ve got answers. Contact us today to schedule an initial consultation with an experienced New York estate planning lawyer.
