Effective April 1, 2014, the New York State estate tax exclusion applicable to New York resident decedents increased from $1,000,000 to $2,062,500. The increased exclusion amount will remain in effect through April 1, 2015. The exclusion amount will again increase – to $3,125,000 on April 1, 2015, $4,187,500 on April 1, 2016 and $5,250,000 for residents dying between April 1, 2017 and January 1, 2019. After January 1, 2019, the exclusion amount will be indexed for inflation. The maximum New York State estate tax rate is 16%.
Significantly, the revised estate tax law also made a drastic change regarding gifts made to reduce the size of a decedent’s taxable estate. Now, taxable gifts not otherwise included in the Federal gross estate made during the three years prior to the decedent’s death are included as part of the gross estate for purposes of calculating the New York estate tax. This “claw back” does not apply to gifts made prior to April 1, 2014 or after January 1, 2019 and/or to gifts made while the decedent was not a resident of New York State.
The revised New York estate tax law did not adopt the “portability” feature of the current federal estate tax law which permits the transfer of a decedent spouse’s unused estate tax exemption to his or her surviving spouse.
For New York residents who have estates that exceed the applicable state exclusion amount, longstanding estate tax minimization strategies remain viable planning considerations.