What is subject to estate tax?

Many people think that because they do not have one million dollars in a bank account that they should not be concerned with New York State's estate tax.  However, it is important to know what is included in an estate for estate tax purposes.  

First, and perhaps most fundamental, it is not limited to probate assets.  New York mirrors the federal estate tax in determining what is included in the gross estate.  The following is a list of common items included in the gross estate for the purposes of determining any estate tax liability:

  • Real Estate - Primary residence, vacation home(s), rental property(ies), investment property(ies), even if the decedent only retained life use of the property;
  • Investment Accounts - including stocks and bonds, whether held in certificate form or in brokerage accounts;
  • Retirement Accounts - Traditional IRA accounts, Roth IRA accounts, 401(k) accounts, 403 (b) accounts, SIMPLE and SEP IRA accounts;
  • Bank Accounts - checking accounts, savings accounts, certificates of deposit, money market accounts;
  • Mortgages - the value of all loans owed to the decedent are included in the gross estate;
  • Life Insurance - If the policy is owned by the decedent and insures the decedent's life, then 100% of the proceeds are included in the gross estate;
  • Jointly Owned Property - the value of the decedent's interest in property owned jointly with another, or others, is included in the value of the gross estate;
  • Personal Property - all personal effects owned by the decedent are included in the gross estate, ie. home furnishings, jewelry, collectibles, clothing, cars, boats, motor homes, etc.;
  • Transfers Made within Three Years of Death - certain transfers made by the decedent within the three year period before their death are considered part of the gross estate for estate tax purposes;
  • Powers of Appointment - property over which the decedent held a power of appointment are included;
  • Annuities

This list is taken from the IRS Form 706 and is not exhaustive, nor does it include potentially applicable exceptions, before making any determination regarding estate tax liability one should seek advice from a qualified professional.

Probate & Administration, Estate PlanningEric StoweComment