![]() Your estate planning professional can help you run the numbers. If you suspect that your taxable estate at the time of your death may be within the NYS estate tax “cliff” range, you may want to consider using a “Santa clause” in your estate planning documents to “hedge your bets” and give more to your heirs, while also benefitting the charities of your choice. The $50,000 over the NYS exemption amount would be subject to an NYS estate tax of $126,480, a tax rate of approximately 253%! Fortunately, Jane’s estate planning documents provided for a “Santa clause,” so Jane’s favorite charity will receive $50,000 upon her death, which brings her taxable estate down to $6,110,000, the NYS exemption amount, resulting in no NYS estate tax owed. A formula clause determines the amount of the bequest to charity the amount is not fixed and depends on the extent to which your taxable estate fallsįor example, Jane dies on July 1, 2022, with a taxable estate of $6,160,000, which is only $50,000 over the NYS exemption amount of $6,110,000. ![]() That is, the charitable bequest only takes effect when the amount over the NYS exemption amount is taxed at more than 100% (i.e., your taxable estate is in the “cliff zone”). This bequest is written into your estate planning documents and is sometimes called the “Santa clause.” The Santa clause takes effect, however, only if the amount that is to go to charity is less than the NYS estate tax that would be due if there were no charitable bequest. (Compare these rates to the current federal rate of 40, but remember that the federal rate applies only to the portion of the estate that exceeds the federal exemption. Within this range, the rate increases with the size of the estate. You can reduce the impact of the “cliff” by bequeathing to charity assets in excess of the NYS exemption amount. What is the New York state inheritance tax rate In New York, the tax rate currently ranges from 3.06 to 16. (Note that if your estate is over $6.711 million, the tax rate on the amounts over the exemption declines dramatically.) If your taxable estate, however, is in the so-called “estate tax cliff range” (between $6.11 million and $6.711 million for 2022), you fall off the NYS estate tax “cliff,” and the amount over the NYS exemption is taxed at a rate of more than 100% – as much as 250% or more! There is a solution to this crazy situation. The current per-person NYS estate tax exemption is $6.11 million, which is the amount you can leave to your heirs at your death without paying NYS estate tax. Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required if the gross estate of the decedent, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of the decedent’s death, as shown in the table below.New York has an “estate tax cliff,” which can result in heirs paying New York estate tax at a rate exceeding 100%. The tax is then reduced by the available unified credit. ![]() ![]() The value of some operating business interests or farms may be reduced for estates that qualify.Īfter the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. It consists of an accounting of everything you own or have certain interests in at the date of death ( Refer to Form 706 PDF). The Estate Tax is a tax on your right to transfer property at your death. ![]()
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