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Applied Financial Group - Woodbury, NY

The Living Balance Sheet

Federal and State Estate Tax Changes

2015 Federal Estate Tax Exclusion

$5.43 million per individual

2015 New York State Estate Tax Exclusion

The 2014‐2015 New York State budget was recently passed and changes to the New York estate and gift tax law became effective April 1, 2014. The estate tax exemption amount has been increased from $1,000,000 to $2,062,500 for persons dying on or after April 1, 2014.

The new New York estate tax exemption schedule (i.e. the basic exclusion amount) is as follows:

For deaths on or after April 1, 2014 and before April 1, 2015, the exemption is $2,062,500.
For deaths on or after April 1, 2015 and before April 1, 2016, the exemption is $3,125,000.
For deaths on or after April 1, 2016 and before April 1, 2017, the exemption is $4,187,500.
For deaths on or after April 1, 2017 and before January 1, 2019, the exemption is $5,250,000.

For decedents who die on or after January 1, 2019, the exemption amount shall be $5,000,000 dollars multiplied by one plus the cost of living adjustment.

The Good News

The new law eliminates New York’s generation skipping tax, which is the additional tax imposed on bequests or gifts to beneficiaries who are a “skip generation” younger than the donor (e.g. grandchildren, great nieces and nephews, and non-relatives who are 37½ years younger).

The Bad News

The new law introduces a couple of items that can be seen as bad news for families:

  • Estate Tax "Cliff" Concept - the New York State exclusion will be phased out for those with New York taxable estates over the exclusion threshold. Going forward, estates that exceed the exemption amount by 5% or more will be taxed back to the first dollar.
  • New York's top estate tax rate will remain at 16%, instead of lowering to a recommended 10%.
  • Now York has not adopted portability, so spouses will need to use estate planning techniques to ensure both of their New York State exemptions can be used.

What You Should Do Now

As a result of these changes in federal and state estate and gift tax laws, we recommend meeting with us to review your estate plans and determine if your plan needs updating or alterations. We can help you determine if you are taking advantage of the increased exemptions and avoiding any new pitfalls.