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Proposed 2014 Changes to NY Estate Tax

Tax planning in New York may evolve in the New Year. Although the New York estate tax (“death tax”) is not slated for repeal, the expected proposal would create a greater exemption at a lower rate.

The current New York estate tax provides a $1 million exemption with a 16% tax rate. The federal exemption this year is $5.25 million. Part of the 2014 proposal includes terms to adjust the exemption to federal limits and reduce the tax rate to 10%. The federal exemption is rising to $5.34 million in 2014 and will continue to rise in the future for inflation.

For those living in New York and considering retirement, the state estate tax is one of the many reasons that aging New Yorkers choose to relocate. A significant tax savings can easily be found in another state, preserving wealth and assets that have taken a lifetime to earn. The proposed changes may affect retirement choices and retain residents.

For those working in Manhattan but living in and commuting from New Jersey or Connecticut, if the New York estate tax changes proceed as proposed, relocating to the Empire State would be a wise move. New York would offer the most attractive estate tax terms compared to neighboring states that impose greater tax requirements—including a separate inheritance tax in New Jersey. (New York would likely drop down the national rankings of Top Places Not to Die.)

If New York does increase its estate tax exemption, individuals and couples should revisit their estate planning. And now, in light of the recent Windsor case, all married same-sex couples should make updating their plans high on their list of New Year’s resolutions.

Inadequate estate planning may leave assets subject to taxes, unnecessary trust administration, and or probate, and as a result, cause greater expenses and minimize assets left to beneficiaries.

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