When planning your estate, it’s important to consider the various state and federal laws that could impact the plan. One such aspect is how you will navigate estate taxes. Please continue reading to discover how gifting assets before death can reduce your estate tax liability and how an experienced Rockland County Estate Planning Attorney can help explore your legal options.
Why Should I Consider Gifting Assets?
Gifting assets before death in New York can offer several benefits. One of the primary reasons people being gifting assets to loved ones is to reduce their estate tax liability. It’s important to note that if you pass away and your estate is valued over a certain amount, which as of 2025 is $13.99 million, you will be subject to federal estate taxes upon your death. However, you can mitigate estate taxes by making qualified transfers to reduce the value of your estate.
In addition, you may be able to bypass the Probate process by gifting assets before death. Probate can be time-consuming, costly, and public, making it preferable to avoid it altogether. By gifting assets you can reduce the value of the estate that needs to be administered after death, as assets are no longer owned by the deceased.
Gifting assets before death can also help with Medicaid planning. If you anticipate requiring long-term care in the future, this need-based program is available. Typically, those with less than $2,00 in assets qualify. As such, if you “spend down” assets through gifting you can reduce the overall value of your estate. You should note that the state has a look-back period for the transfer of assets. The look-back period is generally five years, meaning any transfers made within five years of applying for Medicaid will be taken into account and counted against you. If you have depleted your assets to become eligible, this could disqualify you from receiving benefits.
Does New York Impose an Annual Gift Tax?
First, it’s crucial to understand that gift taxes are a financial obligation imposed on a person’s right to transfer property to another person without receiving fair market value in return. Giving someone a gift that exceeds a specific value may trigger taxes. However, New York state doesn’t require residents to pay an annual gift tax. This means you can bestow gifts upon loved loves during your lifetime without the worry of taxes on the state-level. However, there are federal gift taxes that you must be aware of when trying to gift assets to beneficiaries before death in New York.
While there is no New York gift tax, the state does employ a provision that indirectly imposes a “de factor: gift tax. Under this provision, the value of gifts made within three years before death is included when calculating estate taxes. Essentially, this means if a beneficiary doesn’t survive for at least three years from the date the gift was bestowed, the value of that gift could be subject to estate taxes upon their death. Nevertheless, there are certain exceptions to this rule.
If you are concerned that you may be subject to the New York “clawback,” it’s in your best interest to connect with a determined attorney from The Lauterbach Law Firm, who can help you determine the best course of action for gifting assets to bring your estate below the threshold. Connect with our firm today to learn more about what we can do for you.
