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Death Taxes
for New York State Residents
Mark S. Eghrari Estate Planning Attorney

People who live in the United States must be aware of the existence of the federal estate tax. The event that triggers the tax is your death, and this is why the estate tax is often referred to as the "death tax."
As a result of provisions that were contained within the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 the federal estate tax exclusion was set at $5 million in 2011. This figure rose to $5.12 million in 2012 when an inflation adjustment was applied. In 2013 yet another adjustment has set the federal estate tax exclusion at $5.25 million. The maximum rate of the tax was 35% in 2011 and 2012. After the most recent tax relief act (the American Taxpayer Relief Act of 2012) was passed the top rate went up to 40% for 2013.

In addition to being subject to the federal estate tax we also have an estate tax on the state level here in the Empire State. It is a progressive tax, and this means that the rate of the levy is dependent upon the amount of money that is being transferred to the heirs of the deceased. At the current time the maximum rate of the New York state estate tax is 16% and the exemption is $1 million.

Federal Gift/Estate Tax Unification

On the federal level the estate tax is unified with the gift tax, and they both carry this 40% maximum rate. Because of this unification, the $5.25 million exclusion applies to gifts that you have given throughout your life that are considered to be taxable plus the value of your estate. Anything above $5.25 million is taxable in 2013.

Spousal Exemption & Portability

This $5.25 million threshold does not apply to transfers between spouses. A taxpayer may transfer any amount of money to his or her spouse without incurring any federal estate tax liability. Under currently existing laws the estate tax exclusion is portable between spouses. After the death of one spouse the surviving spouse may use his or her own exclusion and the exclusion that was due to his or her deceased spouse. It should be noted that same-sex marriages are not recognized on

the federal level, so the unlimited spousal exemption is not applicable to those involved in same-sex unions.

Generation Skipping Transfer Tax

Gifts and transfers into trusts for the benefit of people who are at least 37.5 years younger than the donor are subject to the generation-skipping transfer tax. In 2013 the maximum rate of this federal levy is consistent with the gift tax and the estate tax at 40%.

New York State Death Taxes

In the state of New York there is an estate tax on the state level, so residents of the Empire State have another layer of taxation to address. The amount of the exclusion on the state level is considerably lower than the 2013 federal estate tax exclusion of $5.25 million. In New York only the first $1 million may pass to the heirs of a deceased individual free of the state-level estate tax. Therefore, if your assets exceed $1 million in value without going over $5.25 million you still have to concern yourself with death taxes if you live in the state of New York or if you own property that is located in the state. Non-US citizens who own property in the state must also file a New York State Estate Tax return if the value of the property exceeds the filing limit.

Marital Exemption
There is an unlimited marital New York estate tax exemption for transfers between spouses. Unlike the federal estate tax, because of the passage of the Marriage Equality Act this does include married same-sex couples in the state of New York.

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New York Estate Tax Rate

The rate of the New York estate tax is calculated on an individual basis utilizing a graduated rate schedule. The maximum rate of the estate tax in New York is 16%.

Filing New York Estate Tax Return

If your assets exceed the $1 million exclusion you must file a New York state estate tax return, Form ET-706. You are also required to complete and submit the United States estate tax return IRS Form 706. This is required even if you have no estate tax liability on the federal level because your taxable estate does not exceed $5.25 million. These tax returns must be submitted no later than nine months after the passing of the decedent in question. It is however possible to apply for an extension by filing Form ET-133.

Conclusion
Though death taxes can erode your wealth considerably, there are many different legal steps that can be taken to mitigate your exposure.

In this report, we'll show you WHY you need an estate plan and more importantly, all the things a good plan can do for you and your loved ones.

Each case is different, and the optimal way to proceed will vary depending on the exact circumstances. Implementing the appropriate tax efficiency strategies with the assistance of an estate planning attorney who has a thorough understanding of the tax code is the key to wealth preservation. In addition, the laws are always subject to change, so an individual could be exempt from the tax one year and exposed the next. It is important to recognize this and develop an ongoing relationship with your attorney so that you can make adjustments to your existing plan if and when they become necessary.

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ABOUT THE AUTHOR

References
Forbes http://www.forbes.com/sites/deborahljacobs/2013/01/02/afterthe-fiscal-cliff-deal-estate-and-gift-tax-explained/ Wall Street Journal http://online.wsj.com/article/SB10001424127887324235104574 3461964155832.html New York State Department of Taxation and Finance http://www.tax.ny.gov/pit/estate/etidx.htm New York State Estate Tax Return ET-706 http://www.tax.ny.gov/pdf/current_forms/

Mark S. Eghrari is an attorney in private practice in Smithtown, New York. He has been in practice since 1988. Mark S. Eghrari provides extensive estate and tax planning services to individuals and businesses. Mr. Eghraris primary focus is helping clients avoid probate, minimize or eliminate Federal and State Estate taxes and protect their assets from the high cost of nursing care, if they become ill. Mr. Eghraris expertise is in providing unique and innovative estate planning solutions that create a secure future for his clients and their loved ones. Mr. Eghrari is a member of the American Bar Association and New York State Bar Association as well as the National Academy of Elder Law Attorneys and the American Academy of Estate Planning Attorneys. 50 Karl Avenue, Suite 202 Smithtown, NY 11787 Phone: (631) 265-0599