I was advised that New York State has raised its estate tax exemption to equal the current $11 million federal exemption. Is this true?
Let’s begin with some background. Your estate is the dollar value of everything you own when you die — e.g., your house, retirement accounts, life insurance policies, jewelry, etc. That value is theoretically subject to federal and state estate taxes. But in fact, only estates that exceed an exempt amount are taxed.
The amount exempt from federal estate tax has long been greater than that exempt from the New York tax. But under current New York law, the state exemption has been increasing annually. Starting next year, it was intended to equal the federal exemption. But the federal Tax Cuts and Jobs Act — passed after the current New York law was enacted — increased the federal estate tax exemption from $5.6 million to $11.18 million per person. As a result, a married couple can now leave up to $22.36 million free of federal estate tax.
But New York’s law is tied to the previous federal exemption, says Alan E. Weiner, a Melville tax accountant. This year, the state’s exempt amount is $5.250 million. In 2019, it will be $5.6 million plus the still-undetermined 2018 increase in the Consumer Price Index. Moreover, New York taxes an entire estate if its value exceeds 105 percent of the exempt amount, notes Eric Kramer, a Uniondale estate lawyer. For example, if a New York state resident dies this year, leaving an estate worth more than $5,515,500 (105 percent of the current $5.250 million exemption) his entire estate is subject to the New York tax.
THE BOTTOM LINE
A New Yorker’s estate can be free of federal estate tax, but still be subject to the state’s estate tax.