Governor Cuomo has proposed significant changes to New York's gift and estate tax rules, that may be both good and bad for New York residents. If these changes are approved, the effective date may be as soon as April 1, 2014.
Currently, New York's estate tax exclusion amount remains at 1 million dollars while the federal amount is 5.34 million dollars. That means for New Yorkers who die with a taxable estate in excess of 1 million dollars, they may be assessed an estate tax for the excess up to a top rate of 16 percent. The good news is that under the proposed changes, New York's estate tax exclusion amount will gradually increase over the next 5 years from 1 million dollars to the federal amount of 5.34 million dollars. Further, the top tax rate will decrease from 16 percent to 10 percent.
A common method currently used to decrease the size of your taxable estate, is to give monetary gits to family, friends and loved ones. As long as the monetary gift does not exceed $14,000 per person each year, one may avoid filing a gift tax return. Therefore if you have two married children with two kids each, you may gift to them and reduce your taxable estate by up to $112,000 per year. If you are married, your spouse may do the same, increasing the total amount to $224,000 per year.
Under the proposed changes all amounts gifted in your lifetime from April 1, 2014 going forward, will be counted as part of your taxable estate. Accordingly, if you live in New York and your taxable estate exceeds one million dollars, you should very seriously consider gifting money to your loved ones before April 1, 2014. Failure to do so, may result in giving the government "money for nothing."
Long Island Lawyer
Paul A. Lauto, Esq.