Articles Tagged with new york city estate planning attorney


Congress created the generation skipping tax almost 40 years ago in 1976 and ushered in an age of increasing complexity for the tax code, always complicated and cumbersome, to fix a problem perceived at the time (and since) of avoiding taxable events by transferring assets to “several generations while avoiding the Federal Estate Tax” via use of trusts and other transfers of property rights. At the time, Congress saw how wealthy families were creating life estates in their kids, followed by a life estate in their grandkids and followed by a life estate of their great grandkids.

Life estates are not subject to federal estate tax. This meant that wealthy families who had the inclination to create these arrangements and the money to pay an attorney to do so avoided paying large amounts of taxes and smaller families and estates were paying more in taxes than wealthier ones. As such, Congress decided to tax any transfer of property or assets from an individual to another individual that is more than one generation away from the grantor, in the case of family members, or from one person to another who is at least 37 1/2 years younger than the grantor, in the case of nonfamily members. The tax applies even if the transfer is via a trust


Death and taxes, the old saying goes, are the only two things in life that are guaranteed. Taxes unlike passing away, can at least be deferred, mitigated and reduced. If your total estate is less than $5.45 million (2016), it is logical to believe that an individual retirement account (or IRA) would pass tax free to your heirs. Indeed this is true, but the taxable event is when the account owner withdraws money in the account. As such, depending on the exact nature of your estate, it may make sense to pass your IRA to your estate, so that your heirs can inherit your IRA. The IRA would avoid being taxed under the estate tax, assuming the whole of the estate is under the estate tax threshold. That does not make the IRA, however, tax exempt or otherwise free of tax liability. In other words, the IRA is a taxable asset, just not taxable under the estate tax, but rather under tax schema that controls distributions of an IRA, namely income tax schema.


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