OVERVIEW OF FEDERAL AND NEW YORK STATE GIFT & ESTATE TAXES
OVERVIEW OF FEDERAL ESTATE & GIFT TAX 2020
40% tax rate.
Unlimited estate and gift tax marital deduction for U.S. citizens.
Estate and gift tax exemption of approximately $11,580,000 (indexed periodically for inflation).
The increased exemption is scheduled to expire on December 31, 2025 (but may disappear earlier), when the exemption amount will be reduced to $5,000,000 (indexed for inflation). Wealthy donors should consider taking advantage of the increased exemption while it is still available.
Portability enables a surviving spouse whose spouse died on or after January 1, 2011 to utilize the unused portion of the deceased spouse’s federal estate and gift tax exemption if certain requirements are met.
$15,000 per year gift tax exclusion (indexed periodically for inflation).
Gift tax exclusion for direct tuition and medical payments.
Lifetime and at-death transfers to qualified charity are gift and estate tax free.
Noncitizen spouse annual gift tax exclusion amount of $157,000.
OVERVIEW OF NEW YORK ESTATE & GIFT TAX 2020
Maximum estate tax rate is 16%.
Unlimited marital deduction.
$5,850,000 estate tax exemption for individuals dying after January 1, 2020.
The New York estate tax is a cliff tax, such that if the decedent's estate exceeds the exemption by 5% or more, the exemption disappears entirely, and state estate tax applies to the entire taxable estate (from the first dollar).
At-death transfers to qualified charity are estate tax free.
No gift tax, and taxable gifts made within three years of death are once again subject to New York estate tax.
BENEFITS OF GIFTING DURING LIFE
$15,000 annual gift tax exclusion and exclusion for direct tuition and medical payments are available only for gifts, not at-death transfers.
All income earned on gifted property after date of gift is out of your estate.
All appreciation on gifted property after date of gift is out of your estate.
Consider capital gains tax consequences upon sale of gifted property. Recipient of gifted property receives the donor’s cost basis in the property.