insights
Avoiding the
New York Estate Tax Cliff By Nicholas S. Proukou, ESQ 585-944-9861; nick@kroll-lawoffice.com
N
ew Yorkers with estates greater than $6,110,000 are subject to New York Estate Tax. This poses a problem for married couples with assets that may end up exceeding this figure. Failing to employ estate tax planning can result in falling off what practitioners sometimes refer to as the NYS Estate Tax Cliff. This article will briefly summarize this estate tax risk and use of Disclaimer planning to keep married couples from “falling off the cliff.” The risk is simple. The spouses never update their estate planning documents, all of the assets fall to the surviving spouse, and the surviving spouse now owns assets that exceed $6,110,000. Since the NYS estate tax exemption is a use it or lose it exemption, the failure to use the predeceasing spouse’s exemption leaves the surviving spouse with all of the marital assets and half the estate tax exemption that was otherwise available to the couple.
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Financial Insights • 2022
This problem is compounded by NYS law because estates that exceed the exemption amount are taxed on the entirety of their value; NOT the value of the estate that exceeds the exemption. As a rule of thumb, you can estimate the estate tax due for an estate that exceeds the NYS estate tax exemption as slightly less than ten percent of the gross value of the estate. Consider a hypothetical couple with combined assets of $6,500,000 equally divided between them. A simple estate plan, leaving everything to the surviving spouse, would result in $574,000 of NYS estate tax on the surviving spouse’s death. See illustration 1.
Carolyn Reardon, Richard Kroll, Marcus Kroll, Nick Proukou
