Finally Some Estate Tax Relief for New Yorkers

By: Anthony J. Enea, Esq.

Fearing a continued exodus of affluent New Yorkers to states that do not impose a state estate tax, the State of New York has finally enacted significant changes to N.Y. Tax Law §952.

The most significant change is the increase in the basic exclusion amount for the imposition of New York estate taxes. Thus, for individuals dying on or after:

(a) 4/1/14 and before 4/1/15 the exclusion is $2,062,500 per person;
(b) 4/1/15 and before 4/1/16 the exclusion is $3,125,000 per person;
(c) 4/1/16 and before 4/1/17 the exclusion is $4,187,500 per person; and
(d) 4/1/17 and before 1/1/19 the exclusion is $5,250,000 per person.

Clearly, the significant disparity that existed between the Federal estate and gift tax credit ($5.34 million per person for 2014) and the significantly smaller New York exclusion ($1 million per person) was a significant impetus for the enacted changes. It should be noted that after January 1, 2019 the federal gross estate made during the three (3) year period ending on the decedent's date of death, but not including any gift made: (1) when the decedent was not a resident of New York state; (2) before April 1, 2014; or (3) on or after January 1, 2019. While this "add back" regarding taxable gifts may succeed in generating additional estate tax revenue, it could also result in New Yorkers seeking non-resident status if they wish to avoid the estate tax and are interested in sheltering assets from the cost of long term care.

Clearly, the aforestated changes to the New York estate tax are welcomed. However, whether in the long run they will have the intended effect of preventing New Yorkers from moving to tax friendlier states is something only time will tell. It is definitely a step in the right direction.

Anthony J. Enea, Esq. is the managing member of the firm of Enea, Scanlan & Sirignano, LLP of White Plains, New York. His office is centrally located in White Plains and he has a home office in Somers, New York.

Mr. Enea is the Immediate Past Chair of the Elder Law Section of the New York State Bar Association.

Mr. Enea is a Past President and a Founding Member of the New York Chapter of the National Academy of Elder Law Attorneys basic exclusion amount will be indexed for inflation from 2010. This should allow the New York exclusion to be approximately equal to the federal amount.

Unfortunately, while Governor Cuomo and the State Legislature were in favor of increasing the basic exclusion amount, it appears that they believed that if a resident decedent's estate exceeded the basic exclusion amount by more than five (5%) percent, then the entire taxable estate will be subjected to a New York estate tax. With the top rate remaining at sixteen (16%) percent, this can result in significant New York estate taxes especially during the period prior to the exclusion amount reaching $5,250,000 on April 1, 2017. Additionally, while under federal law the surviving spouse can utilize the unused federal exclusion of the decedent spouse ($5.34 million) pursuant to the "portability" provisions, no such "portability" provision exists under New York law.

While there was discussion of a significant add back to the taxable estate for taxable gifts made, its application was significantly limited to a three (3) year look back in the enacted legislation. N. Y. Tax Law §954(3) provides that the New York gross estate of a resident decedent will be increased by the amount of any taxable gift pursuant to §2503 of the Internal Revenue Code not otherwise included in the decedent's federal gross estate made during the three (3) year period ending on the decedent's date of death, but not including any gift made: (1) when the decedent was not a resident of New York state; (2) before April 1, 2014; or (3) on or after January 1, 2019. While this "add back" regarding taxable gifts may succeed in generating additional estate tax revenue, it could also result in New Yorkers seeking non-resident status if they wish to avoid the estate tax and are interested in sheltering assets from the cost of long term care. Clearly, the aforestated changes to the New York estate tax are welcomed. However, whether in the long run they will have the intended effect of preventing New Yorkers from moving to tax friendlier states is something only time will tell. It is definitely a step in the right direction. Anthony J. Enea, Esq. is the managing member of the firm of Enea, Scanlan & Sirignano, LLP of White Plains, New York. His office is centrally located in White Plains and he has a home office in Somers, New York. Mr. Enea is the Immediate Past Chair of the Elder Law Section of the New York State Bar Association. Mr. Enea is a Past President and a Founding Member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). He is also a member of the Council of Advanced Practitioners of NAELA.

Mr.Enea is a Past President of the Westchester County Bar Association.

Mr. Enea is the President of the Westchester County Bar Foundation.

Mr. Enea focuses his practice on Elder Law, Wealth Preservation, Guardianships, Medicaid Planning and Applications, Wills Trusts and Estates.