No April Fool’s Joke Here – NY Residents Receive a $1,062,500 Gift on April 1st

In 2014 New York passed a budget that finally addressed an estate tax that was driving people out of state.  The new legislation gradually increases the amount that escapes death taxes.  Here is the breakdown:

Before April 1, 2014                                       $1,000,000

April 1, 2014 – March 31, 2015                      $2,062,500

April 1, 2015 – March 31, 2016                      $3,125,000

April 1, 2016 – March 31, 2017                      $4,187,500

April 1, 2017 – December 31, 2018                $5,250,000

January 1, 2019 and beyond                           Matches the Federal exemption

As of April 1^st, 2015, if your estate is less than $3,125,000 it will not owe taxes to New York.  The Federal estate tax exemption is currently $5,430,000 per person. 

You may think this means there is no need for estate planning anymore, but you couldn’t be more wrong.  Good old New York will tax your entire estate if it’s 105% or more of the exemption amount.  This means if you are anywhere near the limit you had better do some planning!  The limit isn’t as difficult to get to as it seems when you factor in all the assets in your name plus the value of any life insurance you own on yourself.

I recently saw an example of how proper planning could have made a huge difference.  A client’s husband died with over $2 million in assets and left it all to his wife, which means no estate taxes were owed due to the spousal exemption. Unfortunately, now the wife has almost $4 million in her name alone, meaning if she passes away today the entire $4 million will be taxed by New York. This would result in hundreds of thousands of dollars of avoidable estate taxes!

As always, make sure you regularly review your situation as laws and limits continue to change.  A few hours spent each year could save you big money!

Learn more at www.sbvfinancial.com