NY used to be a very expensive place to die. As of March 31, less so.
The federal law allowed you to pass $5.25M tax free. NY was only at $1M. NY topped that off with estate tax rates that hit 16%….making it a very expensive place to die.
The new law raises the NY amount you can pass tax free to the federal amount of $5.25M; phased in through 2019. However, the actual estate tax rate remains a healthy 16%.
As usual, nothing is simple in New York. While they raised the exclusion to $5.25M, they turned around and put in a provision that claws it back quickly if your estate is over the $5.25M amount.
In addition, they added some other provisions to increase revenue. They added a 3-year look back period for gifts made between April 1, 2014 and Jan. 1, 2019. Specifically, if a NY resident dies within three years of making a taxable gift, the value of the gift will be included in the decedent’s estate for purposes of computing the NY estate tax.
The bottom line is that law will eventually eliminate the gap between the NY and federal estate tax exclusion amounts. However, for the next five years, the exclusion amount increases and a 3-year look back for taxable gifts is in place, making planning more complex. It’s important for NY residents to review their estate plans to ensure they take these changes into account.
For a more detailed discussion, see the NYSBA summary of the law changes.
Connecticut remains an expensive place to die too, with only a $2M exclusion and rates up to 12%.