Estate planning under New York's estate tax exemption rules

Previously, estates worth $1 million or less were

Previously, estates worth $1 million or less were exempt from New York tax. Currently, the exemption is $2,062,500. It increases to $3.125 million in 2015, $4,187,500 in 2016 and $5.250 million in 2017. (Credit: iStock)

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New York's estate tax exemption is rising annually, but your entire estate is taxable if it's worth more than 105 percent of the current exemption. There's no tax on what you leave to your spouse, however. Will my estate avoid New York tax if I leave "an amount equal to the New York exemption" to my kids and the excess to my spouse?

 

Yes -- but then your date of death will determine the amount your spouse inherits. Is that really what you want?


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Previously, estates worth $1 million or less were exempt from New York tax. Currently, the exemption is $2,062,500. It increases to $3.125 million in 2015, $4,187,500 in 2016 and $5.250 million in 2017. In 2019, it will match the federal estate tax exemption, which is indexed to inflation and currently $5.34 million. If you die leaving more than 105 percent of the prevailing New York exemption, your entire estate is subject to New York tax -- but, in general, you'd be no worse off than before the law changed, because the old $1 million exemption is built into the new tax rates, says Michael W. Alderman, an East Meadow tax accountant.

Let's say you're worth $4.5 million and leave an amount "equal to the exemption" to your kids and the rest to your wife. If you die this year, your kids inherit $2,062,500 and your wife gets $2,437,500. But if you die between April 2016 and April 2017, she gets only $312,500. And if you die on or after April 1, 2017, the kids get everything, says Gregg Weiss, a New York City estate lawyer. Your wife would have to exercise her legal right of election (which guarantees surviving spouses an inheritance) to claim a share of your estate.

The bottom line Estate planning isn't just about beating taxes.

Websites with more information nwsdy.li/nyestatetax and nwsdy.li/estatetaxes

TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday Newsroom, 235 Pinelawn Rd., Melville, NY 11747-4226, or email act2@newsday.com. Include your name, address and phone number. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own advisers for your specific needs.

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