New York aggressively enforces its residency audit program. New York residents must pay income tax on all income, and estate tax on all assets. A non-New York resident pays income tax only on New York source income and pays New York estate tax only on New York situs assets. A typical audit case might involve a person who is domiciled in Florida but maintains an apartment in New York and travels to New York for work and/or pleasure.
The test for residency is different for income and estate tax purposes. For income tax purposes, a person is a New York resident if he meets one of two tests.
According to the IRS in 2016, 5,219 families paid federal estate tax. The average size of an estate that paid tax was over $20,000,000. The average tax paid was approximately $3,500,000.
Now that the federal estate tax exclusion has been increased to $11,400,000 per person for deaths occurring in 2019, we can expect far fewer families to pay estate tax. The Tax Policy Center estimated that in 2018, only 1,700 families would owe estate tax.
Of course, many more families pay New York and Connecticut estate taxes. The New York estate tax exemption for deaths in 2018 is $5,250,000; the Connecticut estate tax exemption is $2,600,000.
"Only 1,700 Estates Would Owe Estate Tax in 2018 Under the TCJA" by Howard Gleckman
"SOI Tax Stats - Estate Tax Statistics" by the IRS
On November 15, the IRS issued annual inflation adjustments that cover over 60 items. The standard deduction for married taxpayers filing jointly will be $24,400.
The top income tax rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are: 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly); 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly); 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly); 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly); 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly). The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
The annual exclusion for gifts will be $15,000.
The combined estate and gift lifetime exemption will be $11,400,000 per person.
Rev. Proc. 2018-57
NY Court rules marital trusts created by DESCENDANTS who died in 2010 are not subject to ny estate tax
There was no federal estate tax on the estates of decedents who died in 2010 ("2010 estates"); however, New York imposed an estate tax. Many 2010 estates elected to place property held for the surviving spouse into a so-called QTIP marital trust in order to avoid New York estate tax. Assets placed into a QTIP trust are subject to federal estate tax upon the death of the surviving spouse. New York tax authorities took the position that QTIP assets from a 2010 estate were subject to New York estate tax upon the death of the surviving spouse. In a recent ruling, a New York Surrogates Court ruled that the New York tax authorities were wrong. QTIP assets from a 2010 estate are not subject to New York estate tax upon the death of the surviving spouse.
Mr. Hendel has been practicing wealth preservation planning for over thirty years.