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
Governor Malloy of Connecticut has proposed a budget for the 2018-2019 fiscal year that would change the state estate tax exemption so that it matches the Federal exclusion. This would increase the exemption from the current $2,000,000 to approximately $5,500,000 over three years.
The IRS has announced that the federal estate tax exemption for decedents who die in 2017 is $5,490,000. The gift tax annual exclusion remains at $14,000 per donee.
As part of his 2014-2015 budget, Governor Cuomo has proposed significant changes to the New York estate and gift tax law. First, over four years, from April 2014 through December 2019, the New York estate tax exemption will increase from $1,000,000 to $5,250,000. After December 2019, the estate tax exemption will be indexed for inflation. Planning will still be important, because a surviving spouse will not be able to use a decedent’s unused New York exemption. This is the opposite of the federal rule, which does allow a surviving spouse to use a decedent’s unused federal estate tax exemption. Also, the New York exemption will always be less than the federal exemption. The top rate of estate tax will be reduced from 16% to 10%.
Now that the dust has settled and I have just returned from a week long national conference on the latest tax planning techniques, I thought it would be appropriate to circulate a brief summary of the “fiscal cliff saving” tax law recently signed by the President.
The American Taxpayer Relief Act of 2012 allows tax rates to rise on the nation's highest earners while also extending dozens of tax cuts for individuals and businesses. It also permanently extended the $5,000,000 (adjusted for inflation) federal estate tax exclusion that applied to deaths in 2011 and 2012.
Specifically, the bill:
Mr. Hendel has been practicing wealth preservation planning for over forty years.