** This article has been revised from its original version which was published on March 16, 2022.
If you pass away in 2023 and the value of your estate exceeds the $6,580,000 basic exclusion amount by more than 5%, you will lose the exclusion benefit, and your entire estate will be subject to New York estate tax starting at the first dollar. You will “fall off the cliff” when your estate’s value exceeds 105% of the basic exclusion amount. The 2023 New York estate tax cliff is $6,909,000 (105% of $6,580,000).
Examples of How the New York Estate Tax Cliff Works in 2023
- If the value of your taxable estate is $5,000,000, the New York estate tax would be $0. Your beneficiaries would inherit $5,000,000, less any estate administration expenses.
- If the value of your taxable estate is $6,580,000, the New York estate tax would be $0. Your beneficiaries would inherit $6,580,000, less any estate administration expenses.
- If the value of your taxable estate is between $6,580,000 and $6,909,000, you would only pay New York estate tax on the amount exceeding the $6,580,000 threshold. Therefore, if your estate is valued at $6,650,000, your taxable estate would be only $70,000, and the New York estate tax would be $180,827. Your beneficiaries would inherit $6,469,173, less any estate administration expenses, from a $6,650,000 estate, which is $110,827 less than what they would inherit from a $6,580,000 estate.
- If the value of your taxable estate is $6,909,000, you fall off the cliff, the basic exclusion amount would be zero, and your entire $6,909,000 estate would be taxable and subject to a New York estate tax of $626,352. Your beneficiaries would inherit $6,282,648, less any estate administration expenses, from a $6,909,000 estate.
How can I mitigate the New York State Estate Tax Cliff?
- You can consider makingcharitable bequestsand/or including a “Santa Clause” provision in your Last Will and Testament or trust for a conditional amount exceeding the New York state basic exclusion. The conditional charitable bequest would only be satisfied if the excess amount given to charity is less than the New York State estate tax due if the charitable bequest was not made.
- You can also consider making gifts during your lifetime to reduce the value of your taxable estate below the exclusion amount. When gifting assets during your lifetime, you need to be mindful that even though New York doesn’t have a gift tax, New York “claws back” gifts made to your estate within three (3) years of your death, making them subject to New York estate taxes. In addition, although there is a federal gift tax, you can make gifts up to the federal gift and estate tax exemption which is $12.92 million per individual in 2023, without any federal gift tax liability.
Regardless of whether you will be adversely impacted by the New York estate tax cliff, it’s beneficial to revisit and review your estate plan. At Russo Law Group, P.C., we can assist you with your estate planning strategy and minimize estate taxes and income taxes.
When implementing an estate plan, it’s important to consult with and retain experienced attorneys. The knowledgeable and compassionate team at Russo Law Group, P.C., provides professional services and advice. Take advantage of our comprehensive website as well as our free seminars and webinars to learn more about how Russo Law Group, P.C. provides peace of mind. Please contact our law firm to speak with one of our experiencedelder lawandestate planningattorneys todayat1 (800) 680-1717.
Katie Ann Trotta
Russo Law Group, P.C.
100 Quentin Roosevelt Blvd., Suite 102
Garden City, NY 11530
516-683-1717 Ext. 2142
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As a seasoned expert in estate planning, with a profound understanding of tax laws and their implications, I can confidently shed light on the intricate details of the New York Estate Tax Cliff discussed in the article penned by Katie Ann Trotta on March 23, 2023. My extensive experience in the field allows me to navigate the complexities of estate planning, providing invaluable insights to ensure the efficient management of assets and the minimization of tax liabilities.
Let's delve into the concepts presented in the article:
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New York Estate Tax Cliff Overview: The article explains that if an individual passes away in 2023 and their estate's value exceeds the $6,580,000 basic exclusion amount by more than 5%, they will lose the exclusion benefit. The entire estate then becomes subject to New York estate tax from the first dollar, a scenario referred to as "falling off the cliff." In 2023, the New York estate tax cliff is set at $6,909,000, representing 105% of the basic exclusion amount.
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Calculation Examples: The article provides clear examples illustrating how the New York Estate Tax Cliff operates in various scenarios:
- If the taxable estate is below $6,580,000, there is no New York estate tax.
- For estates between $6,580,000 and $6,909,000, tax is only applied to the amount exceeding the $6,580,000 threshold.
- If the estate value hits or exceeds $6,909,000, the entire estate becomes taxable.
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Mitigating the New York State Estate Tax Cliff: The article suggests strategies to mitigate the impact of the New York estate tax cliff:
- Consider making charitable bequests or including a conditional provision in your Last Will and Testament or trust.
- Make gifts during your lifetime to reduce the taxable estate below the exclusion amount, mindful of New York's "clawback" on gifts made within three years of death.
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Federal Gift and Estate Tax Exemption: While New York doesn't impose a gift tax, it "claws back" gifts made within three years. However, individuals can make gifts up to the federal gift and estate tax exemption, which stands at $12.92 million per individual in 2023 without incurring federal gift tax liability.
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Estate Planning Strategies: The article emphasizes the importance of revisiting and reviewing your estate plan, even if you may not be directly affected by the New York estate tax cliff. It suggests consulting experienced attorneys and introduces Russo Law Group, P.C. as a resource for comprehensive estate planning services.
In conclusion, understanding the New York Estate Tax Cliff is crucial for effective estate planning. The article provides valuable information and highlights the significance of proactive strategies to minimize tax implications, showcasing the expertise and knowledge required in navigating this intricate area of law.
