New York is one of the few states with an estate tax system that is stricter than the Federal system and, last year, new laws were passed to try and change this. There are some parts of the law that work better for the majority of those who have high-value estates, but for those with estates valued at a high, but moderate amount, there could be issues, meaning your best option is to have a Long Island estate attorney assist in your estate planning.
One of the main things that was passed in the new law back in March, 2014 was that the amount of value in the estate has to be higher before it is subject to New York State estate taxes. Instead of $1,000,000 as it was previously, the amount the estate has to be between April 1, 2014 and April 1, 2015 is $2,062,500. Between April 1, 2015 and April 1, 2016, this amount will be $3,125,000. Each year, the amount will go up until it matches the federal amount.
However, there was one thing written into the law that can cause many issues for those who are subject to the estate law and is being called the estate tax “cliff”. Under the old law, if you went over the exclusion limit, you were only taxed on the amount that you went over by. This would mean that if you had $1,005,000 in assets when you died, you would only have to pay taxes on the $5,000 over the exclusion amount. With the new law, you would now have to pay estate taxes on the entire estate, something that could be a huge tax increase for those who were right on the cusp of having to pay estate taxes.
Another major change was that a three-year lookback was added when it comes to determining the size of estates. This means that when the assets are determined when valuing an estate, all gifts given within the three years prior to the decedent’s death would be taken into account. This part of the provision only would include gifts that were given after April 1, 2014, meaning at the time this article is written, New York State would not be looking back a full three years, but the three year lookback will become more and more relevant, and by 2017 should achieve its full strength – a look back of a full three years. This does add a new level of technical issues when planning out an estate since it now means that simply giving assets away to heirs or others would not be an option to avoid estate taxes.
With the tax rules how they are now written, you need a knowledgeable Long Island estate attorney on your side to help you plan out your estate in a way where you can maximize the amount your heirs get. Planning out your estate, especially when it is large enough where it could be subject to estate taxes, is an area of the law where you need a professional and should not be attempted alone. Call the Law Offices of Albert Gurevich at (516) 777-0647.