There is a federal estate tax that high net worth Americans must contend with, and the amount of the exclusion stands at $5.34 million in 2014. There was a base of $5 million put in place for the 2011 calendar year, and there have been annual adjustments to account for inflation ever since. Next year you might see a somewhat higher figure when another inflation adjustment is added.
Some of the states also levy state-level estate taxes. This is commonly done in the Northeast. We practice law in the state of New York, and there is indeed an estate tax on the state level in our state.
The state-level estate tax exclusion in the state of New York was previously $1 million. However, a new piece of legislation was passed and signed into law recently. It raised the amount of the New York State estate tax exclusion. The exclusion at the state level is going to go up incrementally year-by-year until it matches the amount of the federal estate tax exclusion.
It should be noted that the top rate of the tax will remain constant at 16 percent.
This graduation of the estate tax exclusion has already begun. As of April 1, 2014, the New York state estate tax exclusion is no longer $1 million. It is $2,062,500 at the present time, and this figure will stay in place for a year. On the first of May in 2015 it will go up to $3,125,000. It will continue to rise by somewhere in the vicinity of $1 million per year until the beginning of 2019, when it will match the amount of the federal estate tax exclusion.
Laws are always subject to change, and it is important to be aware of the lay of the land at all times. A change such as this one can definitely render your existing estate plan obsolete if it was created when there were different laws in place.
This underscores the need for regular estate plan reviews. It may not be fair to expect a layperson to be apprised of every estate tax law that is on the books at all times. This is what estate planning lawyers are there for, and your lawyer will keep you up-to-date if you do in fact develop an ongoing working relationship with an attorney.
Even if you are exposed to the estate tax, there are steps that can be taken to mitigate your tax responsibilities.
Tax Efficiency Consultation
If you are a resident of the greater Smithtown, New York area, we would like to extend a hand. Our firm offers free consultations to families here in our area, and we can assist you if you are concerned about transfer taxes on the federal level, the state level, or both.
You can request an appointment electronically through this website.
- Three Tips to Provide Inheritance Planning Insight - June 11, 2021
- Veterans Pension Can Defray Long-Term Care Costs - June 7, 2021
- How Can a Special Needs Trust Trustee Use the Funds? - June 3, 2021