On March 29, 2014, Gov. Andrew M. Cuomo and legislative leaders announced an agreement on New York State’s 2014-2015 budget which included several tax law changes.
As of April 1, 2014, the legislation made significant changes to the estate and gift tax law. First, there is an increase of the New York State estate tax exemption over a four year period to $5.9 Million, by the year 2019, so the NYS estate tax exemption will conform with the Federal estate tax exemption.
Before April 1, 2014, the amount an individual could leave at death without owing NYS estate tax was $1 Million and the decedent’s estate would only pay NYS estate tax (with up to 16% top rate) on assets above the $1 Million threshold.
As of April 1, 2014, the NYS estate tax exemption amount is $2,062,500, which will shield many more individuals from NYS estate taxes. However, if an individual dies with just 5% more than $2,062,500, there is a cliff taxing the decedent on the full value of the estate, not just the amount over the exemption amount. This is a significant change in the estate tax law.
Updated NYS estate tax exemption schedule:
For deaths as of April 1, 2014 and before April 1, 2015, the exemption is $2,062,500.
For deaths as of April 1, 2015 and before April 1, 2016, the exemption is $3,125,000.
For deaths as of April 1, 2016 and before April 1, 2017, the exemption is $4,187,500.
For deaths as of April 1, 2017 and before January 1, 2019, the exemption is $5,250,000.
Commencing January 1, 2019 and later, the NYS exemption amount will be linked to the Federal amount, which the IRS sets each year based on inflation adjustments (projected to be $5.9 Million in 2019). The top NYS estate tax rate remains at 16%.
In addition to the cliff, there are other problematic issues with the new law. There is no portability provision, such as under the Federal law, allowing a surviving spouse to use their predeceased spouse’s unused estate tax exemption to shelter twice as much.
Significantly, the new law includes a three-year look-back for taxable gifts for gifts made on or after April 1, 2014 and before Jan. 1, 2019 (those gifts are pulled back into your estate). The value of any taxable gifts made in the three years prior to death will increase the state estate tax due.
If you have any questions about the above material, or wish to speak to an Estate Planning attorney, please contact HoganWillig, Attorneys at Law at (716) 636-7600 or visit www.hoganwillig.com HoganWillig’s main office is located at 2410 North Forest Road in Amherst, New York with additional offices in Lockport, Lancaster and Buffalo.