New York recently passed changes to its Estate Tax laws. These changes will affect the Estates of individuals who are domiciled in New York State dying on or after April 1, 2014.
The biggest change is an increase in the Basic Exclusion Amount (BAE)—i.e., how large your Estate can be before you will owe Estate taxes.
For those dying on or after: The Basic Exclusion amount is:
April 1, 2014 and before April 1, 2015 $2,062,500
April 1, 2015 and before April 1, 2016 $3,125,000
April 1, 2016 and before April 1, 2017 $4,187,000
April 1, 2017 and before January 1, 2019 $5,250,000
On or after 1/1/2019, the BAE will be indexed to the Federal Basic Exclusion Amount annually, meaning it will continue to increase every year based on inflation.
It is important to note that, unlike with Federal Estate Taxes, there is no portability of the unused deceased spousal exclusion amount.
You may have heard about the tax “cliff” resulting from these changes. This refers to the fact that there is a very small credit available if your taxable Estate is between 100% and 105% of the BAE. If your taxable Estate is any larger than this, you will receive no credit at all, not even on the portion of your Estate under the BAE.
However, with the BAE increasing so quickly, very few Estates will have to worry about this “cliff.” Even for Estates in excess of the BAE, there are numerous Estate Planning options to available to protect assets from New York Estate Tax.