• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Who We Are
    • About Our Firm
    • Career Opportunities
    • Meet Our Team
    • News and Events
    • Seniors Rock Radio
  • Estate Planning
    • Elder Law & Medicaid Planning
    • Estate Planning Services
    • Estate and Gift Tax Figures
    • Family Farm Succession Planning
    • Family-Owned Businesses & Farms
    • IRA Planning
      • Planning With An IRA
      • IRA & Retirement Planning
    • Legacy Planning Services
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
    • Young Families
  • Elder Law
    • Coping With Alzheimer’s
    • Elder Law Resources
      • Elder Law Reports
    • Guardianship & Conservatorship
    • Hospice Care
    • Veteran’s Benefits
  • Resources
    • Definitions
    • FREE Estate Planning Worksheet
    • FREE Webinars
    • Estate Administration Legal Guide
    • Estate Planning Articles
      • Questions for Your Estate Planning Attorney Before Creating Your First Estate Plan
      • How to Create Your First Estate Plan in 2022
      • How to Choose a Guardian for Your Child
      • Address These Three Questions in Your First Estate Plan
    • Estate and Gift Tax Figures
    • Frequently Asked Questions
      • Adult Guardianship
      • Alzheimer’s Care
      • Custodial Accounts for Minors
      • Estate Planning
      • FAQs for Families Without an Estate Plan
      • Elder Law
      • IRA & Retirement Planning
      • Is Your Estate Plan Outdated?
      • Legacy Planning
      • LGBTQ Estate Planning
      • Medicare and Social Security
      • Probate
      • Probate Avoidance
      • Irrevocable Trusts
      • Trust Administration
      • Trusts
      • Veterans’ Benefits
      • Wills
    • Newsletters
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
    • Top Estate Planning Techniques
  • Reviews
    • Our Reviews
    • Review Us
  • Medicaid Planning
    • Medicaid Planning
    • Emergency Medicaid & Nursing Home Planning
    • Medicaid Frequently Asked Questions
    • Medicaid Resources
  • Blog
  • Contact Us

Law Office of Michael Robinson, P.C.

Estate Planning Services in Rochester, New York and the Finger Lakes Area

Connect With Us Today

(585) 374-5210
Law Pay Button
Attend a Free Webinar
Home » Estate Planning » Beware of New York Estate Tax Exclusion Cliff

Beware of New York Estate Tax Exclusion Cliff

June 3, 2021Estate Planning

NY estate tax exclusion cliffFor the most part, the news is surprisingly good when it comes to taxes on inheritances. Generally speaking, you do not have to claim a bequest as taxable income with the exception of distributions of the earnings that are generated by a trust.

Appreciated assets that you inherit get a step-up in basis, so you would not pay capital gains taxes on the appreciation.

This being stated, there is a federal estate tax, but most people don’t have to be concerned about it because there is a high credit or exclusion. The estate tax exclusion is the amount that can be transferred before the tax would be imposed.

At the time of this writing in 2021, the federal exclusion is $11.7 million. There are ongoing annual adjustments to account for inflation, so you will see a somewhat higher figure next year.

Here in the state of New York where we practice law, there is also a state level estate tax that you should be aware of when you are devising your estate plan. The state exclusion is significantly lower than the federal exclusion at $5.93 million during the current calendar year.

The Estate Tax Exclusion Cliff

Now that we have set the stage appropriately, we can get to the specific point of this blog post. The federal estate tax exclusion is available to you regardless of the total value of your estate, but the situation is different on the state level. This is what the “estate tax exclusion cliff” is all about.

In the state of New York, if the value of your estate is more than 5% over the exclusion amount, the exclusion will not be available when your assets are being transferred after you die. The entirety of your estate would be subject to taxation.

New York Estate Tax Clawback

There is a federal gift tax in place that is unified with the estate tax. The exclusion is a unified exclusion that applies to large gifts along with your estate. Because there is a gift tax, you cannot simply give gifts to avoid the federal estate tax.

We do not technically have a gift tax in New York, but at the present time, the estate tax parameters include a clawback provision. If you give gifts within three years of your death, the value of those gifts would be added to your estate for tax purposes.

Lack of Portability

Since 2011, the federal estate tax exclusion has been portable between people that are married to one another. In an estate planning context, the term “portability” refers to the ability of a surviving spouse to use the exclusion that was allotted to his or her deceased spouse. In essence, the survivor would have two exclusions to apply to their estate.

Most people would say that this is the fair approach because it typically takes the efforts of two individuals to accumulate the resources that are shared by a married couple.

Why should there be just one exclusion available when the assets that will be passed along were the product of the efforts of two different taxpayers?

Whether it is fair or not, here in in New York, the estate tax exclusion is not portable, so if you die without using any of your exclusion, it would not be available to your surviving spouse.

To account for this, you could work with our firm to implement the appropriate estate tax efficiency strategy. This could potentially be facilitated through the creation of a credit shelter trust.

In essence, you could arrange for an amount equal to the exclusion to be conveyed into one of these trusts at the time of your passing. The estate tax would not be applicable on the transfer, and it would not be a factor when assets from the trust are distributed to the beneficiaries.

Schedule a Consultation Right Now!

If you are ready to work with a Rochester, NY estate planning lawyer to put a plan in place, we are here to help, even if estate taxes are not a source of concern. Each case is different, and we can apply our expertise to create a plan that is ideal for you and your family.

You can set the wheels in motion if you call us at 585-374-5210, and you can use our contact form if you would prefer to send us a message.

 

 

  • Author
  • Recent Posts
Michael Robinson, Estate Planning Attorney
Michael Robinson, Estate Planning Attorney
Clients notice Michael Robinson’s unique approach to his estate planning practice the minute they walk through his office doors.
Michael Robinson, Estate Planning Attorney
Latest posts by Michael Robinson, Estate Planning Attorney (see all)
  • How Estate Planning for a Family May Trap the Unwary Practitioner - August 31, 2022
  • State Income Taxation of Social Security Benefits - August 24, 2022
  • Understanding Tax Apportionment Clauses - August 17, 2022

Other Articles You May Find Useful

How Estate Planning For A Family May Trap The Unwary Practitioner 150x150
How Estate Planning for a Family May Trap the Unwary Practitioner
State Income Taxation Of Social Security Benefits 150x150
State Income Taxation of Social Security Benefits
Understanding Tax Apportionment Clauses 150x150
Understanding Tax Apportionment Clauses
estate planning
Estate Planning in Five Easy Steps
How Do I Trust Thee…Part III 150x150
How Do I Trust Thee…Part III
How Do I Trust Thee…Part III 150x150
How Do I Trust Thee…Part I

Primary Sidebar

Law Office of Michael Robinson, P.C.

Blog Subscription

  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube

TESTIMONIALS

News & Events

Seniors Rock Radio Show Recording 5-1-21

https://drive.google.com/file/d/1U7UkQbEGy-xY7XFAXvX9Qz7pKSVDVV3D/view?usp=drive_web   Author Recent Posts Michael Robinson, Estate Planning AttorneyClients notice Michael Robinson’s unique approach to his estate planning practice the minute they walk through his office doors. Latest posts by Michael Robinson, Estate Planning Attorney (see all) How Estate Planning for a Family May Trap the Unwary Practitioner -... Read more →

Pittsford Office

1163 Pittsford-Victor Road, Suite 120 (Powder Mill Office Park)
Pittsford, NY 14534-3817
Phone: (585) 374-5210
Fax: (585) 485-0394

See Larger Map Get Directions

Map

mrobinson_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Disclaimer
  • Privacy Policy
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • Twitter
  • Linkdin
  • Youtube
robinson law logo

The Law Office of Michael Robinson, P.C.

Attorney Advertisement


© 2023 American Academy of Estate Planning Attorneys, Inc.