2014-06-13 / Columnists

Spotlight on Elderlaw

Important Changes to the New York Estate and Gift Tax Laws
By Deidre M. Baker, Esq.

On March 31, Governor Cuomo signed legislation related to New York State’s fiscal plan. This plan makes significant changes to the estate and gift tax laws in the state.

These changes are important because they may affect the estate plans of individuals that are already in place and will certainly impact estate planning moving forward.

One of the most positive changes to come as a result of this new legislation is a considerable increase in New York’s estate tax exclusion. The exclusion is the amount of money a person can have in their name at the time of death with no estate tax due. New York’s estate tax exclusion used to be $1 million, but has been increased to $2,062,500. Additionally, this exclusion amount is set to rise incrementally until April 2017, at which time it is expected to be $5.25 million.

While the higher exclusion amount is certainly beneficial, wealthy New Yorkers now run the risk of “falling off the cliff” if proper estate planning is not done. Once an estate reaches 105 percent of the exclusion amount or $2,165,625, the entire estate becomes subject to estate tax, not just the portion that is over the exclusion amount. Keep in mind, your taxable estate includes not only liquid assets such as checking and savings accounts, but also life insurance proceeds, the value of real property, annuities and your portion of jointly held assets.

Also included in the new law is a limited 3-year look back period for taxable gifts made within 3 years of death. If such a gift is made, the value of the gift will be included in the decedent’s estate for purposes of computing the New York estate tax. Some gifts, however, are excluded such as gifts made by a New York resident before April 1, 2014 and gifts that are otherwise includible in the decedent’s estate under another provision of the federal estate tax law (no double taxing these gifts). It is important to consult with an attorney familiar with these laws when making lifetime gifts to loved ones.

One of the goals of the new law is to bring the New York estate tax exclusion amount up to the federal level. While this will allow many to avoid estate tax, as New York’s exclusion amount continues to rise, the application of the 3-year look back for taxable gifts will make estate planning increasingly complex.

In any event, it is important for individuals to regularly review estate plans with their attorneys to ensure that they are avoiding heavy taxes where possible.

Deidre M. Baker is an associate attorney with the law firm of Brady & Marshak, LLP. The attorneys can be reached at 718-738-8500.

The forgoing information is intended for information purposes only and should not be construed as legal advice.

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