New York State faces a budget deficit of $15 billion over the next two fiscal years. In what is proclaimed to be an effort to avoid cutting funding for education and social services programs, New York State legislators in both chambers have proposed an “Heirs Tax,” which they claim will raise $8 billion annually. This is a companion bill to proposed legislation that would tax New York’s top earners, a move Governor Cuomo has opposed, arguing it will force New York’s wealthiest residents to relocate, thereby depriving New York of base tax revenue on which the state depends.
New York’s current estate tax law provides that inheritances up to $5.93 million are exempt from state estate taxes. There is a “cliff tax” that subjects the entirety of the Estate to state estate taxes if the taxable estate exceeds 105% of the exemption. The proposed Heirs Tax bill seeks to drastically reduce that threshold and also add a gift tax. New York currently does not have a gift tax, although it does “claw back” gifts made within three years of a decedent’s estate for the purpose of calculating the gross estate. Proposals in the Heirs Tax bill include:
- imposing a NYS tax beginning at 5% on estates over $250,000
- retirement and pensions would be exempt
- a $2 million primary residence exclusion would be allowed for estates under $5 Million
- levying a marginal tax of 50% on assets over $10 Million
- instituting a gift tax
- 5% on gifts from $50,000 to $100,000
- 50% on gifts exceeding $2 Million
It should be noted that the NYS Senate and Assembly have recently released separate bills calling for an increase to the estate tax rates but with no reference to the more substantial changes referred to above. All of these changes face uncertain prospects for passage but warrant watching.
The current New York State estate tax exemption remains in place until January 1, 2022, however, any new legislation could be retroactive. In addition, the federal estate tax exemption is at an historic high ($11.7 million per person; $23.4 million per couple with portability). This summary is provided for informational purposes only and is not intended to be relied on as legal advice, which depends on each individual situation. If one of your objectives is preserving more of your assets for future generations and avoiding it being eroded by estate taxes, and you would like to discuss strategies that will protect your assets now and in the future, contact us at 212.695.8100 ext. 289.
Goetz Fitzpatrick LLP has been offering clients insightful solutions throughout the New York Metropolitan area since 1967. The firm provides its clients with expertise in the areas of Construction and Real Estate, Trusts & Estates Administration & Litigation, Commercial Litigation, Corporate, Bankruptcy, and Labor & Employment. The firm’s office is located at One Penn Plaza, Suite 3100, New York, NY 10119, Telephone 212 695 8100, [email protected], www.goetzfitz.com. You can learn more about Goetz Fitzpatrick on: LinkedIn | X (Twitter) | Soundcloud | YouTube | Facebook | Instagram
