February 28, 2014

Estate Tax Savings Opportunity for New York Residents

Estate Tax Savings Opportunity for New York Residents Tax & Business


Governor Cuomo introduced his Executive Budget for 2014-2015 on January 21, 2014 to the New York State Legislature. The Bill provided a number of changes impacting Estates of New York Residents.


The Bill includes a proposal to:

  1. Increase the New York State estate tax exemption amount (presently $1 million) to $5.25 million over the next four years, and indexing future levels to inflation, and
  2. Lower the top New York estate rate from 16% to 10% by 2017.

Please be advised that New York does not have portability provisions, which for federal estate tax purposes would permit a surviving spouse to inherit the decedent spouse’s unused estate tax exclusion amount (DSUE).

Starting in 2011, when the federal estate and gift tax exemption began increasing from $5 million dollars to $5.34 million dollars in 2014, many New York residents began making large lifetime gifts which resulted in the reduction of their New York State estate tax. This reduction occurs because New York State does not have a gift tax and because New York State does not currently add back gifts to the New York taxable estate at death. The Bill proposes to include gifts made after March 31, 2014 in a New York resident decedent’s estate for New York estate tax purposes, if the decedent was a New York resident at the time of the gift.

Therefore, clients who have significant estates and, who are considering making gifts of their remaining federal estate tax exemption amount (the maximum federal exemption is currently $5.34 million per person) may wish to complete such gifts during the small window of opportunity which may close on April 1, 2014.

The Bill is complex and the potential estate tax savings from using lifetime gifts described above must be balanced against several issues, including the potential loss of a “step-up” in basis at death if making a gift of an appreciated asset. However, if passed, it is clear that the Bill will result in potential tax saving benefits to New York residents making lifetime gifts prior to April 1, 2014.

Should you have any questions on how these potential changes may impact your current estate plan, please contact your Marcum Tax Professional.

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