The federal estate tax is going to be a huge concern for affluent people during the estate planning process. There is an estate tax on the federal level that carries a 40% rate and a $5.25 million exclusion.
Here in New York we have a state-level estate tax. This exclusion is $1 million, and the top rate is 16%.
There are steps that you can take to position your assets with tax efficiency in mind. One thing to take into consideration is the fact that there is an unlimited marital deduction.
As long as your spouse is an American citizen you can leave any amount of money to your spouse free of the estate tax. You would have your $5.25 million exclusion to facilitate tax-free transfers to others.
Because same-sex marriages are legally recognized in the state of New York, on the state level the unlimited marital deduction has been afforded to same-sex spouses since their marriages have become legal.
However, even if you were legally married in New York the federal government was not recognizing these marriages because of provisions contained within the Defense of Marriage Act.
A New York woman, Edith Windsor, challenged the constitutionality of the portion of the Act that defines marriage as a union that can only exist between a man and a woman. An inheritance that she received from her spouse Thea Spyer in 2009 was taxed by the federal government because the union was not recognized.
This case made it all the way up to the Supreme Court. A ruling was recently handed down, and the DOMA was indeed found to be unconstitutional by a majority of the justices.
Many individuals who are involved in same-sex marriages will benefit from the ruling. If you would like to discuss the implications with a licensed estate planning attorney contact our firm to schedule a free consultation.