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New York State Estate Tax Update

Jun 20, 2016

The 2014 New York State Budget included several important changes to estate tax laws that may affect your planning needs. 
Individual Tax Exemption Increase:
  • As of April 1, 2015, the New York estate tax exemption rose to $3,125,000 for an individual and again to $4,187,500 as of April 1, 2016.
  • Federal estate tax laws treat a married couple as a unit with a concept known as portability, which means that the amount of federal estate tax exemption a deceased spouse did not use can effectively be inherited by the surviving spouse. New York State does not have portability and treats everyone as an individual in terms of estate tax regardless of marital status.  
  • If you or your spouse own assets over $4,187,500 or if the increase from $3,125,000 to $4,187,500 will exempt your estate from estate tax, you should contact your estate planning attorney  for advice.
Gifting To Reduce Estate Value:
  • If either you or your spouse have assets valued at over $4,187,500 in your name, consider re-titling your assets so that both you and your spouse have assets valued at less than $4,187,500.  If either you or your spouse have an estate close to the $4,187,500 exemption, you can reduce the value of your estate by gifting to your spouse, charity, tuition or medical expenses, or other recipients below $14,000 per donee. 
  • Under the 2014 Budget, a person's gross estate includes taxable gifts made after April 1, 2014 and before January 1, 2019 by a New York State resident donor within three years of death.  Taxable gifts do not include gifts to a spouse or a charity, and certain gifts for tuition and medical expenses.  The gift tax exclusion amount of $14,000 per donee is still applicable. 
Trust at First Death:
  • Prior to the 2014 Budget, when the New York State exemption was $1,000,000, there may have been a reason to have provisions in your will to set up a trust upon the first spouse's death.  Credit shelter trust provisions and disclaimer trust provisions were common ways to alleviate estate tax upon the first spouse's death.  
  • These provisions may now create unnecessary restrictions for the surviving spouse, especially if your estate is no longer above the estate tax exemption amount.  Due to the April 1, 2016 changes, it is advisable to have your attorney review your current will to remove this potentially limiting trust arrangement.
Reduce the Size of Your New York Estate:
  • There are always ways, depending upon your asset structure, to reduce the size of your New York estate.  One simple way is to purchase realty in another state.  For example, if you were to purchase realty in Florida you would reduce your New York estate by the value of the Florida realty.  In this scenario, we would suggest that you deed the Florida property into a living trust.
  • You may also reduce the value of certain business interests owned by your estate at the time of your death by transferring those business interests into a family limited partnership or a limited liability company.
Please contact Daniel S. Williford to review your arrangements and determine whether implementing any estate planning changes is right for you.