By Linda M. Toga, Esq.
The Facts: I heard that the New York’s estate tax laws changed and that the value of an estate that can pass estate tax-free was increased.
The Question: Is that true? If so, what is the current NYS estate tax exemption?
The Answer: Fortunately for New Yorkers, the tax laws have changed and the tax exemption or so called “exclusion amount” was increased significantly for the first time in many years. As of April 1, 2014, individuals whose estates would have been subject to state estate tax if the value of assets passing to a non-spouse exceeded $1,000,000, can now pass on assets valued at up to $2,062,500 estate tax-free to any beneficiary. The new laws did not change the unlimited marital deduction so individuals can still pass all of their assets to a surviving spouse estate tax-free, regardless of their value. Since New York recognizes same-sex marriages, same-sex couples can take advantage of the unlimited marital deduction on both their New York and their Federal estate tax returns.
Not only has the NYS exclusion amount increased significantly as a result of the new law, but it will continue to increase at a rate of $1,062,500 per year until 2017 when it will be $5,250,000. Another increase will take effect on January 1, 2019 at which time the NYS exemption amount will equal the Federal exemption amount.
Many New Yorkers are under the impression that the new tax laws will have no effect on their estates. However, since estate tax liability is calculated based upon the value of assets owned by or controlled by a person at the time of death, even the estates of people of relatively modest means often incurred a tax liability under the old laws. That is because the estate tax calculation starts with the value of a person’s gross taxable estate and is not limited to the value of the assets that pass under a person’s Will. Rather, the value of assets such as jointly held property and bank accounts, life insurance proceeds and funds held in an IRA or 401(k), for example, are also part of a person’s gross taxable estate and may be taken into consideration when calculating an estate’s tax liability. If the gross value of an estate exceeds the exclusion amount, an estate tax return must be filed even if allowable estate tax deductions reduce the net value of the estate below the exemption amount and no tax is due.
While New Yorkers should welcome the new tax laws, they are complex and it is advisable to seek professional assistance when dealing with estate tax questions.
Linda M. Toga, Esq. provides legal services in the areas of litigation, estate planning and real estate from her East Setauket office.