Elder Planning Isn't Just For The Elderly

Planning for the potential of estate taxes

Most prospective clients who come to us here at Enea, Scanlan & Sirignano, LLP expecting that there are some expenses relative to their estate plans that they cannot avoid. Estate taxes typically rank among these. Yet will one’s estate inevitably face an estate tax liability?

New York residents do indeed face the potential of estate taxes at both the federal and state levels. However, this does not necessarily mean that an estate will automatically be subject to tax.

Federal estate tax portability

Federal lawmakers set an estate tax exemption threshold annually. Provided that the total taxable value of one’s estate comes in under that level, it will not be subject to tax. According to the Internal Revenue Service, the threshold amount for 2022 is $12.06 million.

Married couples might take advantage of portability to effectively combine their exemption amounts. If one spouse leaves their entire estate to the other upon their death, that amount passes on tax-free thanks to the unlimited marital deduction (thus preserving their entire estate tax exemption). If the surviving spouse then files an estate tax return electing portability, they then claim their deceased spouse’s unused exemption, allowing them to protect as much as $24.12 million from taxes.

New York’s estate tax exemption

Per the website SmartAsset.com, New York’s estate tax exemption threshold for 2022 is $6.11 million (the state does not offer the benefit of portability). The state does, however, provide an estate tax cliff up to 105% of the exemptable amount. What this means is that for an estate exceeding the threshold by less than 5%, only that exceeding amount is subject to tax. For estates above 105%, the entire estate is subject to tax.

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