www.qns.com I LIC COURIER I DECEMBER 2018 43
New York State
Estate Tax Changes
BY JOHN SAVIGNANO, CPA
IBack on April 1, 2014, New York State substantially changed its rules
regarding estate taxes. e biggest changes concern the size of the estate tax
exemption and how the estate tax is calculated. For most, New York estate
taxes have been reduced. For some, New York estate taxes remain very high
and many New York residents (for income and estate tax reasons) are moving
to Florida or other low tax states. However, with proper planning, signicant
New York estate taxes can be saved or eliminated for those who would
otherwise be subject to New York estate taxes.
As the New York exemption is still tied to the prior federal law, New York
will not raise is exemption to equal the new federal exemption of $11.18
million that became eective in 2018. us, New York exemption eective
January 1, 2019 will be approximately $5.8 million.
e rising New York estate tax exemption sounds great at rst, but along
with the increase came a new and bizarre way of calculating the estate’s tax
base. If the New York taxable estate is greater than the New York estate tax
exemption amount, the tax is calculated on the entire amount of the taxable
estate rather than only the amount in excess of the exemption (even if it’s by
only $1). is rule is terrible for New York residents whose estates exceed the
New York exemption. erefore, it is critical to implement an estate plan (if
possible) to ensure the taxable estate is less than the New York exemption.
Proper Planning is Vital for Married Couples
For married couples, it is particularly critical that planning be implemented
so that the New York exemption is not wasted at the death of the rst spouse.
While federal law allows a transfer of the unused federal exemption to the
surviving spouse under the doctrine of “portability” (provided a federal estate
tax return is timely led), New York law does not have an equivalent portabil-ity
statute. erefore, the rst spouse’s New York exemption will be lost if not
used at the rst death. As a result, if a couple with a combined $10.5 million
estate has all assets passing to the surviving spouse at the rst death in 2018
(as would be the case if all assets are owned jointly), no federal or New York
estate tax would be payable at the rst death (due to unlimited marital
deduction), but a New York estate tax would be payable at the second death of
$1,146,800 (on the entire $10.5 million).
Implementation of Plan
e rst step is to ensure that each spouse separately owns assets that are at
least equivalent to New York exemption amount. is may involve separating
jointly held assets and/or transferring assets from one spouse to the other. In
addition, both spouses must have properly draed Wills providing for an
exemption trust at the rst death for the available New York estate tax exemp-tion.
e surviving spouse can retain access to the assets in the exemption
trust by being a beneciary of the trust. is strategy will allow for the New
York exemption amount to be held in the exemption trust at the death of the
rst spouse regardless which spouse passes away rst. erefore, if the rst
spouse to die has a taxable estate of $5.25 million, all estate tax can be
eliminated! A Will containing an exemption trust is generally preferable to
so-called “disclaimer” wills to ensure the New York exemption is not wasted.
It is very important that all available estate planning tools be utilized to
maximize tax savings in light of the current law.
John Savignano is a partner with Savignano Accountants & Advisors located at
47-46 Vernon Blvd., Second Floor, in Long Island City. If you have any questions or
require additional information, please call John at 718-707-0955.