Answer: The New York State Estate Tax exclusion amount will be increasing again as of April 1, 2016 to $4,187,500.00. This is an increase from the $3,125,000.00 exclusion amount which has been in effect since April 1, 2015. As of January 1, 2016, the federal estate tax exclusion is $5,450,000.00. The New York State estate tax exclusion will increase again on April 1, 2017 to $5,250,000.00. This exclusion amount will remain in effect until December 31, 2018. On January 1, 2019, the basic exclusion amount will be indexed for inflation annually and will be equal to the federal exclusion amount. The New York State and federal exclusion amount is estimated to be $5,900,000.00 in 2019.
An item still of particular concern to many is the “cliff” language contained in the law. If the estate is valued between 100% and 105% of the exclusion amount, the amount over the exclusion will be taxed. As of April 1, 2016, the 105% amount is $4,396,875.00. However, once an estate exceeds the exclusion amount by more than 5%, not just the amount in excess of the exclusion amount is taxed, but, rather, the entire estate is subject to estate tax. Practically, this means that taxable estates greater than 105% of the exclusion amount receive no benefit from the exclusion amounts shown above and will pay the same tax that would have been paid under the prior estate tax law.
The New York State Estate Tax law does not contain a portability provision like in the federal estate tax law. Portability is a provision in the federal estate tax law that allows the unused estate tax exemption of a married taxpayer to carry over to his or her surviving spouse. Without portability, the manner in which a married couple holds title to their assets may continue to have a significant effect on the amount of New York State Estate Tax ultimately payable upon the survivors’ death.
This New York Estate Tax law is working towards closing, and eventually eliminating the gap between the New York and federal estate tax exclusion amounts. For the next three years, however, as the exclusion amount increases tax planning will still be complex. That being said, it is important for anyone considering whether to make changes to their estate plans to see an estate planning attorney specializing in these matters.