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Probate and Taxes in New York

The probate process is very intricate, meaning that unless you have a thorough knowledge and understanding of both New York and federal estate taxing, it is wise to retain a New York probate lawyer to handle the collection of information and filing of estate taxes.

Someone who must pay estate taxes on a person’s estate should hire a probate attorney to make sure that the calculation allows for the smallest amount of tax to be paid. A probate lawyer can apply the law to the assets, calculate the tax, and prepare the tax return.

Federal Taxes and Probate

Federal taxes are not directly related to probate. Anything in the probate estate is subject to federal estate tax, as are joint accounts, life insurance, and other things. When the executor files the federal tax return, they must include a copy of the will that has been admitted to probate to show how the property is to be distributed. That can affect the tax, if money is to be distributed to the surviving spouse that is not subject to estate tax, whereas, everything else may be.

Types of Federal Taxes Due When a Person Dies

In New York, federal and New York estate taxes are due when a person dies. After expenses, the net estate, to the extent it exceeds $5,450,000 (2016) is taxed. That includes the probate assets, joint accounts, and other things. Money left to a surviving spouse is not taxable. Federal taxes are due on the amount other than what is subject to exemptions such as giving money to the surviving spouse, giving money to charity, and payment of bills. Everything above that, to the extent that exceeds $5,450,000 (2016) is subject to federal estate tax.

A person should contact a probate lawyer regarding the estate taxes owed to the government when someone dies to get advice and try to minimize the amount of tax. You have to be familiar with the tax code, take the proper deductions, and to do whatever can be done under the tax code to minimize the tax.

State Taxes and Probate

New York has its own estate tax and the executor is responsible for paying that as well. The threshold of the New York state tax is currently lower than the federal threshold. If someone goes over the state threshold, they pay estate tax beginning with dollar one. With the federal tax people have an exemption and they pay only when they reach the threshold on the money, above the exemption or threshold. In New York, if an individual goes above $4,187,000 (after April 1, 2016) they must pay New York estate tax on all of the assets from the first dollar.

Benefits of Contacting a Lawyer

A probate lawyer can assist with calculating the taxes, determining if there is money available to pay the taxes, and make arrangements for payment and for the filing of the tax returns. Payment of federal taxes is due nine months after death. Usually, individuals can get an extension for another six months to file a tax return, but they must pay the tax within nine months; otherwise the estate may be subjected to interest and penalties.

A New York probate lawyer collects the pertinent information and calculates the tax owed, which is an invaluable skill. Someone who must pay federal taxes on another person’s estate should hire a probate attorney so that the taxes are paid correctly and on time and so that the estate is not penalized by the Internal Revenue Service for failure to correctly and timely file tax returns and to make the payment of taxes.

The beneficiary does not pay the taxes, the estate pays them. If the beneficiary has an understanding of, or has retained a probate lawyer who has an understanding of the tax laws, they can set up their estate to take advantage of them such as leaving money to the spouse or leaving money in trust for the spouse to keep the taxes lower upon the spouse’s death.