Director of Public Relations
Forchelli, Curto, Deegan, Schwartz, Mineo & Terrana, LLP
First Annual Increase to New York State’s Estate Tax Exclusion
By: Allison W. Tenenbaum, Esq.
April 1, 2015 — New York State Estate Tax Legislation, which became effective April 1, 2014, instituted annual increases to the applicable exclusion amount. From April 1, 2015 through May 31, 2016, the estate tax exclusion amount increases to $3,125,000 per person (previously $2,062,500 per person). Effective April 1, 2019, it is projected to be $5,900,000 per person, the equivalent of the Federal exclusion. The 2014 legislation is extremely beneficial to those residents who have taxable estates below the exclusion amount. A taxable estate that is less than or equal to the New York applicable exclusion amount will pay no New York estate tax. Those who exceed it, however, may need to re-evaluate their estate planning strategies.
The 2014 legislation introduced a new concept, commonly called the “cliff.” Before this legislation came into effect, an individual could leave an estate of $1,000,000 and not owe New York estate tax. If an individual had an estate in excess of the $1,000,000 threshold, New York estate tax would be imposed only on the assets above the $1,000,000. There was speculation that under the new legislation taxable estates exceeding 105% of the applicable exclusion amount would be subject to the New York estate tax on the entire taxable estate. This is probably not correct since there were changes to the tax rate table, and, as a result, estates valued in excess of 105% of the exclusion amount will be liable for the same tax as before the legislation became effective.
Unfortunately, the New York State law, unlike the Federal law, does not provide for “portability”. Portability allows the surviving spouse to make use of the deceased spouse’s unused exclusion. In 2015, the Federal exclusion is $5,430,000 per person. Therefore, under the Federal law, it would be possible for a surviving spouse to have an estate of $10,860,000 ($5,430,000 x 2) and upon his or her death, not owe Federal estate tax. Since New York has not adopted portability, each spouse is limited to his or her own applicable exclusion amount upon his or her death. In New York, if the entire exclusion amount is not used by the individual, it is lost.
New York State residents must file a New York State estate tax return if the federal gross estate, increased by the amount of any gifts includible in their New York gross estate, exceeds the exclusion amount applicable on their date of death.
Forchelli, Curto, Deegan, Schwartz, Mineo & Terrana LLP
Founded in 1976, Forchelli, Curto, Deegan, Schwartz, Mineo, & Terrana LLP is one of Long Island's most acclaimed and distinguished law firms. Headquartered in Uniondale, NY, the Firm is conveniently located for clients in Nassau and Suffolk. The Firm employs 60 attorneys who provide counsel to a broad range of clients, including national, regional and local businesses, major real estate developers and organizations, banks, insurance companies, municipalities, educational institutions, and individuals. Personal attention and quality representation that is both practical and cost-effective are hallmarks of the Firm's policy towards clients.
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