The federal government taxes estates of more than $5.34 million at a 40 percent rate. However, for residents of New York any estate worth more than $1 million can be hit with a maximum rate of 16 percent. In other words, residents of New York may be paying a state estate tax without being required to pay a federal estate tax.
Prior to 2001 an estate tax of 16 percent could have been deducted from federal taxes that were owed. This credit was eliminated, however, and this resulted in many states eliminating estate taxation. New York is one of 14 states that still impose an estate tax.
In 2012 the federal government imposed this tax on 3,758 estates while New York taxed close to 4,000 estates. This tax is not imposed on annual income but on what individuals have accumulated over the course of a lifetime.
There likely are many individuals looking at relocation to avoid paying estate taxes altogether. Though there does appear to be discrepancies between the estate tax for one state versus another, relocation is not always the best option. While we can’t count on legislative changes, there may be strategies individuals can use to reduce or eliminate the amount of estate taxes that one’s heirs would have to pay.
Attorneys can use a variety of estate planning tools to make certain that as much of one’s estate as possible can be passed on to a person or persons of your choosing. Attorneys can help set-up trusts where money can be placed for asset protection and can also provide advice as to other steps that can be taken.
Source: Crain’s New York Business, “Big numbers on NY’s estate tax,” Greg David, Feb. 25, 2014