How New Yorkers Can Take Advantage of the New 2018 Estate and Gift Tax Exemption Increases

by David Goldfarb

While many Federal lawmakers wished to eliminate estate and gift taxes entirely, the 2017 Tax Cuts and Jobs Act did not do so. Instead, legislators compromised on a temporary increase in the exemption amounts for these taxes. This increase could benefit certain age groups that are in the process of estate planning. There has also been an increase in the amount a person may gift annually without using either tax exemption.

This does not affect the New York State Estate Tax, though, so New York residents who may, at least for now, be exempt from Federal Estate Tax may still be subject to New York State Estate Taxation.

The Increased Exemption Amounts

The tax exemption for Federal Estate and Gift Tax has been raised to $11.2 million for individuals and, effectively, $22.4 million for couples in 2018, and will be increased for inflation annually (lower exemptions apply for nonresident aliens). These exemptions will apply to gifts made between January 1, 2018 and December 31, 2025, and to estates of persons who die in this same time period.

Unless Federal law is changed before the year 2026, these exemptions will revert to what they would have been under prior law – somewhere in the $6 million range after taking inflation adjustments into account.

It is important to realize that the gift tax exemption works in concert with the estate tax exemption. Thus, if an individual uses $3 million of the gift exemption during her lifetime, her available estate tax exemption will be reduced by $3 million after her death. It is therefore important to plan appropriately in order to use these exemptions at the time that will best serve your overall financial plan.

New York residents, though, still face lower exemptions for New York State Estate Tax.  Through the year 2018, for New York State Estate Tax purposes, the exemption is $5.25 million for an individual and $10.5 million for a married couple, with inflation indexing thereafter. If an estate exceeds 105% of the exemption, the entire exemption is lost. A New York estate planning attorney can assist you in navigating these differing tax laws to save money for yourself and your loved ones.

The Annual Gift Exemption

Aside from the estate and gift taxes, a person may make annual gifts without incurring tax liability. In 2017, this amount was $14,000 per recipient. The limit increased to $15,000 in 2018. Because these gifts do not count toward the gift tax or estate exemptions, they can be used to limit the amount of an estate and therefore protect its assets from crossing the taxable threshold.

Maximize Your Estate and Gift Tax Deductions with the Counsel of a New York Estate Attorney

A New York estate attorney can help you improve your deductions and reduce overall tax liability (Federal and New York State) for yourself and your loved ones. The attorneys at Goldfarb Abrandt Salzman & Kutzin have decades of experience in helping New Yorkers develop estate planning strategies which best meet their financial goals. Call (212) 387-8400 today to schedule your consultation.