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PLANNING YOUR NY ESTATE IN 2014: WHAT IS THE NYS LEGISLATURE TRYING TO GIVE YOU FOR THE HOLIDAYS? THE GIFT OF ESTATE TAX EXEMPTION, $5 MILLION DOLLARS OF IT.

27
Dec

By Jason Stern

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So the economy is weaker than expected, job growth is stagnant and unemployment is stuck at 7%. Want some good news? If Governor Cuomo gets his way, and he usually does, New York State will begin phasing out the NYS estate tax in 2014. For years anyone who died in NYS with an estate of $1,000,000.00 or greater was subjected to the NYS estate tax or “Death Tax”. The NYS estate tax is a draconian remnant from a time when $1,000,000.00 was considered a lot of money.

The theory behind a State Estate Tax or “Death tax” as it is often referred, is to act as a toll collector for the State collecting taxes from the estates of wealthy decedents who pass within its borders. For many years these estate taxes were championed in Congress as an egalitarian way of leveling the playing field between the rich and poor while raising revenue at the state level.

However while times have changed certain State Estate Tax structures such as those in NY and NJ did not. For instance, currently the Federal Estate Tax does not apply to any and all individual estates of $5.34 million or less or $10.68 million for married couples. Each year this amount known as the Federal Unified Credit increases to account for inflation.

Unfortunately up until now the State Estate Tax in NY and NJ remained the same while most States either raised their deductions for their respective State Estate Tax or phased them out completely. In fact many states like New Hampshire, Florida, Texas, Virginia, Georgia, South Carolina along with 31 other States have no State Estate Taxes whatsoever. This number is up from 28 States in 2012.

Common sense dictates, when middle-income people retire with their modest nest eggs, they will claim residency in another State such as Florida where there is no State Estate Tax, thereby bypassing New York State’s Estate Taxes completely. As a result, New York State Tax is circumvented both after the transplant passes away and while they were alive in the form of lost revenue from the State Income Tax. It is a lose lose proposition for the State of New York.

Luckily some legislators in Albany have taken notice of this trend and are working hard to fix this issue. By the end of 2014 if not sooner, the New York State Assembly and Senate should approve a new bill raising the New York State Estate Tax to $5.34 million dollars, mirroring the Federal Estate Tax Exemption. While it is still unclear whether NYS will raise the Exemption to $5.34 million instantly or phase it in over a period of time. What is clear is that any increase in New York State Tax Exemption is a welcome tool to any NY estate lawyer.

If the NYS legislature’s new bill were successful this would be great news for NY estate lawyers, NY wealth management lawyers, NY wills lawyers and of course their New York clients as well. As a NY estate lawyer, I try and keep estate planning to a minimum for several reasons, primarily cost. However, for any estate in excess of $1 million dollars, the NYS Estate Tax remains a real concern and requires attention. Recently I witnessed more and more middle-income clients attempting to orchestrate sophisticated, often complex estate strategies previously reserved for only high net wealth individuals to minimize their NYS estate tax liability. You do not have to be a NY estate lawyer to see this was not the intended spirit of the NYS estate tax. The NYS estate tax has become an obsolete thorn in the side of middle income New Yorkers and is overdue for an update.

Luckily this new increase in NY Estate Tax Exemption will resolve these estate issues without the need for expensive trust formation or elaborate gifting. Once this law goes into effect, hopefully sometime in 2014, a simple will should be all most middle-income families require in the planning of their estates. With the Federal Unified Credit and NYS Estate Tax Exemption presumably mirroring one another as early as 2014 at $5.34 million, most New Yorker’s will not have to concern themselves with advanced NY estate planning.

If you or a loved one are thinking about planning your estate and would like to speak with a New York estate lawyer feel free to call The Law Offices of Jason W. Stern & Associates at (718) 261-2444 for a free consultation. Our Queens estate lawyers have nearly 45 years of combined NY estate law experience drafting and probating the wills for families like yours in the counties of Queens, New York, Kings, Bronx, Westchester, Rockland, Nassau, Orange, Dutchess as well as in the State of New Jersey.