Posted by: BlogMaster | July 15, 2014

NY Estate Tax: Still Alive, So Plan Well!

On April 1, 2014, New York State Governor Andrew Cuomo passed legislation increasing the amount of wealth a state resident can pass to their survivors upon death, without incurring any inheritance tax.

For many years, the maximum inheritance an individual could pass tax-free to survivors (‘exemption‘) was $1 million – and higher, if the person also bequeathed funds to charities.  And, with proper planning in Wills or Trusts, married couples could pass $2 million tax-free.

With the new legislation that took effect on April 1, 2014, the revised basic exemption amount is $2,062,500 for an individual – and twice that amount for a married couple, with proper planning. The amount will increase annually each April until 2019, when the individual exemption matches the Federal exemption of $5 million – and $10 million for a couple, with proper planning.

Sounds too good to be true. So what’s the hitch?

The hitch is that you will face higher estate taxes if your estate value is more than 105% of the exemption amount in any calendar year before your death.

Example: An individual who dies in April 2015 can pass a $3,125,500 tax-free exemption to their heirs. But if their estate is worth $3,281,250 (105% of the exemption), their entire ability to pass wealth without taxes does not receive the full exemption from inheritance tax (because it is phased-out) and could be zero, the closer to the 105% exemption the estate value is!

What can you do if this new legislation impacts your estate?

Have a “legal check-up” to ensure your Will and Trust are up-to-date. Remember that assets which may pass outside of your estate (including joint bank accounts, retirement accounts with beneficiary designations, life insurance, etc.) are still subject to inheritance tax unless a charity inherits the account.

With careful planning and wise legal advice, you can retain more wealth at the time of your death and pass more of that wealth to your designated heirs.

But NY State estate taxes are here to stay, so make sure to review your legal documents and understand your options while you still have time to make appropriate arrangements.


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