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New tax laws might impact New York estates

Those who plan on willing property to their loved ones or executing existing estates may be interested to know that in March 2016, the IRS issued proposed regulations that are designed to match the value of properties received by beneficiaries and other recipients with the value of such properties as computed for estate taxes. The laws may also change the way due dates, beneficiary discovery, joint tenant arrangements and other factors impact property transfers.

The rules could create a clearer definition for when value limitations should be applied to properties. The regulations may also institute penalties for inconsistencies in basis determinations that result in underpayments.

The proposal could impact multiple sections of the Internal Revenue Code, and many of these laws were previously modified in July 2015. Under existing law, the basis of property inherited from a decedent is calculated to be the fair market value at the date of the decedent's death. The recipient uses this value to calculate depreciation as well as the gain on a future sale. The proposed regulations are intended in part to ensure that such value is what is reported on the decedent's federal estate tax return, and the executor has to notify both the IRS and the beneficiary of this figure. Penalties could be assessed in the event a discrepancy results in an underpayment.

Income tax laws can have an impact on estate planning just as estate tax laws do. Individuals who want to leave properties to their relatives may also be leaving tax obligations for these beneficiaries, and the way they calculate the value of their inheritances can impact how much heirs have to pay. The new regulations may increase the already significant burden that many executors face, and thus such individuals may want to obtain the guidance of an attorney in this regard.

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