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New York Estate Tax and Portability

Posted on: August 2nd, 2014
The New York estate tax changes that went into effect on April 1, 2014 do not provide for spousal portability. The legislation provides that the state estate tax exemption will adjust annually - you can review the estate tax forecast here.

The concept of estate tax portability provides a surviving spouse with the power to claim the balance of their deceased spouse’s estate tax exemption. On the federal level, portability applies to taxable estates as long as widowed spouses (or executors) apply for the estate tax exclusion prior to deadlines. However, the New York State legislature did not adopt portability as part of the recent tax reform. If a married person in New York does not use their exemption ($2,062,000 as of this writing through March 31, 2015) before they pass away, their spouse will not be able to benefit from the unused exemption. 

Another matter to review with a New York tax attorney when revising tax and gift planning strategies: Gifts in excess of the $14,000 annual exclusion made within three years prior to an individual’s death will now be included in the decedent’s estate for New York estate tax purposes. 

Wealthy New Yorkers may only benefit from exemptions if they plan effectively. Taxable estates valued at 100% to 105% of the exemption may benefit, whereas estates valued over 105% of the exemption do not enjoy a tax benefit. Learn more about this “tax cliff” in New York.

These dramatic changes will affect the gifting strategies, tax plans, and estate plans of many wealthy New Yorkers. If an individual was expecting tax benefits as the result of using certain trusts, learn about a separate New York tax law affecting trusts.
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