Nashville, TN asked in Estate Planning, Real Estate Law and Tax Law for New York

Q: What are the best ways for a child to purchase assets from parents and avoid the estate tax (state+federal)?

I recently heard that the Federal Estate tax was around 40%... Also, I heard that on top of the federal estate tax, some states had their own estate tax. Therefore, I want to avoid this by purchasing the assets from my parents over time while they are alive. Would this be feasible? What are the tax consequences? What if I bought their membership interest in the LLC that owns the property?

3 Lawyer Answers
Inna Fershteyn
Inna Fershteyn
Answered
  • Estate Planning Lawyer
  • New York, NY
  • Licensed in New York

A: Again, this is not a real estate question but rather Estate planning one. You need consultation with experienced estate planning lawyer as you are not taking into consideration an appreciation in value of the real estate in your parents hands over time.

If you purchase it from them you will inherit their original Basis and hense will be hit with huge capital gains taxes at sale. If you receive it from them in a Trust after their death you may avoid such tax as you will get Step Up basis.

Again call experienced Estate Planning Attorney.

Inna Fershteyn

Law Office of Inna Fershteyn and Associates, P.C.

1517 Voorhies Ave, Suite 400

Brooklyn, NY 11235

tel: 718-333-2394

fax: 718-701-8859

www.BrooklynTrustandWill.com

5 users found this answer helpful

Michael David Siegel
Michael David Siegel
Answered
  • New York, NY
  • Licensed in New York

A: It depends on valuation. There are high floors on estate taxes, and it is possible, if the new tax bill becomes law, the estate tax will be eliminated at the Federal level. Often, if justified by values, trusts can be used.

Barry Eran Janay
Barry Eran Janay
Answered
  • Estate Planning Lawyer
  • New York, NY
  • Licensed in New York

A: If you're purchasing the assets with your own money there is NO estate or gift tax implication so long as it's reasonably tied to the fair market value for the assets. Furthermore, there is a lifetime exemption in the estate / inheritance tax at the federal level for $5.4M in gifts from individuals and $10.8 for married couples. Meaning so long as they are under that limit in taxes / gifts there is no estate tax due. As the other attorney pointed out, you should have a consultation with an estate tax lawyer to go over your specific situation.

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