The New York State budget passed on April 1, 2014 includes dramatic changes to the state estate and gift tax laws. Since 2001, the federal estate tax exemption amount (the amount of assets that can be passed to heirs without incurring any estate tax), has risen from $1,000,000 to $5,340,000 while New York State’s exemption remained at $1,000,000 per person. Governor Cuomo’s 2014-15 budget bill has raised the New York State estate tax exemption amount to $2,062,500 per person immediately with increases over the next 5 years so that the state estate tax exemption amount will mirror the federal exemption, complete with cost of living adjustments, as follows:
Individual dying on or after: Tax exemption:
April 1, 2014 & before April 1, 2015 $2,062,500
April 1, 2015 & before April 1, 2016 $3,125,000
April 1, 2016 & before April 1, 2017 $4,187,500
April 1, 2017 & before January 1, 2019 $5,250,000
January 1, 2019 & thereafter $5,000,000+*
* indexed for inflation from 2010
The estate tax rate for estates that exceed the exemption amount has only been fixed for the first year of the law. During that time, if a decedent’s estate exceeds the exemption amount by less than 5%, (taxable estate greater than $2,062,500 but less than $2,165,625), the tax will be between 6.5% and 8% on the excess over $2,062,500. However, once the taxable estate exceeds $2,165,625, the entire estate becomes taxable, not just the amount over the $2,062,500. At that point, the tax is computed on a sliding scale ranging from 3.06% to as high as 16% if the estate exceeds $10,000,000.
In addition, while there is still no state gift tax, any taxable gifts made within 3 years of date of death will be included in the decedent’s taxable estate, unless the gift was made at a time when the decedent was not a resident of New York State.