Beware the New York Estate Tax Cliff

On April 1, New York state more than doubled its estate tax exemption amount from $1 million to $2,062,500.  And by 2019, the New York exemption will match the generous federal exemption, projected to be $5.9 million.  This will make planning easier for a lot of people, but there is still one big trap New Yorkers should look out for.

New Yorkers who die with just 5% more than the new exemption will face a “cliff.”  They will be taxed on the full value of their estate, not just the amount over the exemption.  This means the new law could translate into a marginal New York estate tax rate of nearly 164%, as shown in this comment letter from the New York State Society of CPAs.

See Ashlea Ebeling, The New New York Estate Tax Beware a 164% Marginal Rate, Forbes, April 1, 2014.