The 2014-15 New York State budget became effective on April 1, 2014. Included in the budget are several changes to the estate tax provisions.
Estate Tax Exclusion
Most notably, the estate tax exclusion amount more than doubled to $2,062,500 per decedent and will continue to increase in stages, until January 1, 2019, when the New York State exclusion amount will effectively match the federal exemption amount. After 2019, the estate tax exclusion amount will be indexed for inflation. The chart below outlines how the estate tax exclusion amount will increase over the next five years.
Click here to view table.
Estate Tax Rate
The maximum estate tax rate (for estates over $10,100,000) remains at 16%. However, in calculating the estate tax, if a decedent’s taxable estate exceeds 105% of the exclusion amount, no credit will be allowed to the estate. Meaning, if the decedent dies in 2014 with just 5% over the exclusion amount of $2,062,500 (thus having a taxable estate of $2,165,625), the estate is taxed on the full value of the estate, not just the amount over the exclusion amount.
Gifting During Life
Under the 2014-15 budget, New York residents can no longer make unlimited lifetime gifts within a three year period prior to death in order to remove assets from the estate for New York estate tax purposes. Instead, a decedent’s estate will be increased by the amount of any taxable gift under section 2503 of the Internal Revenue Code not otherwise included in the decedent’s federal gross estate and made during a three year period ending on the decedent’s date of death, but does not include (i) any gift made when the decedent was not a resident of New York State, (ii) any gift made before April 1, 2014, or (iii) any gift made on or after January 1, 2019.
Generation Skipping Transfer Tax
The 2014-15 budget repealed New York’s generation-skipping transfer tax.