Estate planning is the process of advance planning for the disposition of your assets and an provides a plan to care for beneficiaries and other loved ones.
A good estate planning may include the creation of a last will and testament, trusts, beneficiary designations, powers of appointment, and other advanced directives. Estate planning also attempts to maximize the value of the estate by reducing taxes and other expenses.
Almost everyone should have an estate plan. Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions.
Effective January 1, 2022, the amount that can be excluded from federal estate tax is $12.06 million. Under the federal portability allowance, a married couple may be able to exclude up to $24.12 million from federal estate taxes with proper planning. Please note that many states, such as New York, have their own state estate tax.
Effective January 1, 2023, the amount that can be excluded from federal estate tax is $12.92 million. Under the federal portability allowance, a married couple may be able to exclude up to $28.84 million from federal estate taxes with proper planning. Please note that many states, such as New York, have their own state estate tax.
New York Estate Tax ranges from 3.06% to 16%. As of 2022, estates over $6.11 million are subject to New York Estate Taxes.
New York Estate Tax Exemption will apply if a person person’s estate is worth less than $6.11 million. This means that if a person’s estate is worth less than $6.11 million and they die in 2022, the estate owes nothing to the state of New York. New York has a “cliff” that impacts very wealthy estates. If the estate exceeds the $6.11 million exemption by less than 5%, it only pays taxes on the amount that goes over the threshold. If the total value is more than 105% of exemptable amount, taxes are paid on the entire estate.
Here’s an example of how that works: 105% of $6.11 million is $6,415,500 million. If your estate is worth between $6.11 million and $6,415,500 million, you only pay tax on the amount that exceeds $6.11 million. So if your estate is worth $6.26 million, your taxable estate is only $150,000. If your estate surpasses $6,415,500 million, all of your estate is taxable. If your total estate is $6.5 million, for example, you will pay estate taxes on all of that.
The estate tax rate for New York is graduated. It starts at 3.06% and goes up to 16%.
| NEW YORK ESTATE TAX RATES | |||
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $500,000 | $0 | 3.06% | $1 |
| $500,000 – $1 million | $15,300 | 5.0% | $500,000 |
| $1 million – $1.5 million | $40,300 | 5.5% | $1 million |
| $1.5 million – $2.1 million | $67,800 | 6.5% | $1.5 million |
| $2.1 million – $2.6 million | $106,800 | 8.0% | $2.1 million |
| $2.6 million – $3.1 million | $146,800 | 8.8% | $2.6 million |
| $3.1 million – $3.6 million | $190,800 | 9.6% | $3.1 million |
| $3.6 million – $4.1 million | $238,800 | 10.4% | $3.6 million |
| $4.1 million – $5.1 million | $290,800 | 11.2% | $4.1 million |
| $5.1 million – $6.1 million | $402,800 | 12.0% | $5.1 million |
| $6.1 million – $7.1 million | $522,800 | 12.8% | $6.1 million |
| $7.1 million – $8.1 million | $650,800 | 13.6% | $7.1 million |
| $8.1 million – $9.1 million | $786,800 | 14.4% | $8.1 million |
| $9.1 million – $10.1 million | $930,800 | 15.2% | $9.1 million |
| Over $10.1 million | $1.082 million | 16% | $10.1 million |
*The taxable estate is the amount above the exemption of $6.11 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.
Please contact us to schedule an appointment with an estate planning attorney to create a new Estate Plan or to have your existing Estate Plan reviewed.