Gifts and Estate Planning In New York

When a person is creating their estate plan, gifts to friends and loved ones are often contemplated and made during the donor’s lifetime. This is known as giving an inter vivos gift – ‘inter vivos’ meaning ‘between living people.’ One might think that simply giving gifts would be easy – but legally, it can actually become quite complex, potentially opening up the recipient to heightened taxes and other financial penalties if they are not property planned out. The right New York estate planning attorney can help.

Gift & Estate Taxes

There are tangible advantages for most people if they choose to give gifts while they are still alive – primarily, because doing so means a lower tax burden for the person planning their estate. However, there is a limit under federal law to how much one can give to people and institutions tax-free per year – as of this writing, the max is $18,000 per person, or $36,000 per married couple. There are exceptions to this – for example, gifts to one’s spouse or to most charities are exempt. It is also worth noting that New York does not have a gift tax, but many other states do.

That said, whether state or federal, it is important to keep in mind that the federal gift tax affects the amount of estate tax that will be collected upon your passing. New York does have an estate tax, and while most estates are too small to be taxed, any estate with a total value over $6.94 million will fit the bill. If someone gives away too high a total in terms of assets, the state Department of Taxation & Finance (or the federal Internal Revenue Service) may require more from the estate – not the heirs, but the estate itself – in the way of taxes.

Beware ‘False’ Or Fraudulent Gifts

If you believe that gifting assets to friends and family is still a good idea for you, it can lower your overall tax burden as an individual, but it is important to keep in mind that the law surrounding these transfers is often difficult to interpret without experienced legal help. It is not uncommon for a gift or transfer to be deemed invalid or fraudulent, through no fault of the giver – for example, a gift of real property is considered invalid in New York if the property is not properly identified in the conveyance.

Alternatively, gifts given for the sole purpose of qualifying the giver for government benefits will often be considered not only invalid, but fraudulent. While it is possible to preserve some assets while still qualifying for Medicaid, far too many people try to handle the transactions themselves, and as a result, may wind up facing a penalty period where Medicaid refuses to pay for medical care they may badly need. Medicaid has what is known as a look-back period, in which any gift or other asset transfer is scrutinized to ensure that it has been conveyed legally.

Contact A Westchester County Estate Planning Attorney

It is only natural to want to give gifts to friends and loved ones – but the law does not allow this to happen without a plan in place. A Westchester County or Putnam County estate planning attorney from Meyer & Spencer, PC can help you to navigate through both New York and federal law, to ensure that you are able to give where possible without running afoul of your legal obligations. Contact our office at (914) 741-2288 to schedule a consultation.

Source:

tax.ny.gov/pit/estate/etidx.htm#bea