New York Plans Changes to Estate Taxes

Many affluent Americans, investors and business owners were pleased when the federal estate tax law was changed, allowing for a $5.25 million estate tax exemption for individuals and $10.5 million for joint filers. However, many people who are focusing on retirement and going through the process are still contending with state estate taxes, with some even relocating to new areas that provide a more favorable tax structure. In an effort to keep wealthy residents from fleeing, some states are considering sweeping changes to their existing estate tax rules.

New York Estate TaxesThe New York State Tax Relief Commission, for instance, proposed significant modifications to its current laws that would implement a lower top rate and a higher exemption to match the new permanent federal estate tax exemption and be indexed for inflation, Forbes reported. Under the proposed changes, individuals with a net worth of $5.34 million or less would owe no New York state estate tax - a considerable increase from its existing $1 million exemption. Additionally, the commission proposed reducing the top tax rate on amounts above that to 10 percent, down from its current 16 percent.

New York state is currently one of 17 states with either an estate tax or an inheritance tax in place, and only two states have a lower exemption, according to the New York Observer Today. Additionally, the commission notes that estate tax exemptions have been unable to keep pace with rising home values in many areas, resulting in more individuals becoming subject to estate taxes.

Over the last several years, the state has faced an exodus of wealthy residents and investors who wished to avoid the state's high tax rates and limited estate tax exemptions. However, the commission hopes that putting more favorable rates in place will help reverse the tide of individuals relocating their families and their investments to other states as they amass more wealth.

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Frank Brunetti has been practicing law for over thirty years in the areas of estate and wealth preservation, tax planning for business entities and complex tax matters. He is admitted to the New Jersey and New York Bars as well as the United States Tax Court. Mr. Brunetti provides representation in federal and state tax matters, IRS controversies, estate and business planning and guidance for the preparation of wills and trusts as well as the administration of estates. For more information, please visit Frank Brunetti's full biography at Scarinci Hollenbeck

2 Responses to “New York Plans Changes to Estate Taxes”

  1. Johanna Mayer

    Could you please tell me when the expected change to the New York State estate tax exemption (from $1 million to $5.34 million) is supposed to take place?

    How long before it becomes law? Thank you.
    Johanna

    Reply
    • Frank L. Brunetti

      Johanna,

      At long last, New York will consider a proposal to significantly increase its state estate tax exemption from the current $1 million level to match the federal estate tax exemption. This would close the ever expanding, multimillion dollar gap between the New York exemption and the federal exemption since the federal exemption is now adjusted annually for inflation, with the 2013 federal exemption sitting at $5.25 million and increasing to $5.34 million in 2014. In addition, the proposal would lower the top New York estate tax rate from 16% down to 10%.

      The proposal is part of a December report (http://wills.about.com/library/commission_report.pdf) issued by the New York State Tax Relief Commission and is expected to become part of New York Governor Andrew Cuomo's executive budget that will be released in January 2014. The increase in the exemption and reduction in the tax rate would not happen overnight but would be phased in over a period of several years.

      Reply

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