On December 22, 2017, President Trump signed into law a tax bill with sweeping legislative tax reform. The 2017 Tax Bill doubles the federal estate and gift tax exemption for estates of decedents dying and gifts made after Dec. 31, 2017, and before Jan. 1, 2026. For 2018, the federal exemption amount per individual will be $11.2 million. Conversely, the 2018 New York exemption amount per individual will be only $5,250,000.
Per the current New York legislation, which was enacted in 2014, it was understood that beginning January 1, 2019, the New York State exemption amount will equal the federal exemption amount. Unfortunately, this does not mean that the New York estate tax exemption amount will match the federal exemption amount in 2019 as determined under the 2017 Tax Bill.
Pursuant to the 2014 New York legislation that made changes to New York's tax laws, any reference to the internal revenue code under the legislation refers to the United States Internal Revenue Code of 1986, with all amendments enacted on or before Jan. 1, 2014. What this means for New Yorker residents is that the New York estate tax is designed to ONLY match the federal exemption amount that existed at the time that the state law was passed in 2014 (i.e., $5 million), not the amount set forth in President Trump’s 2017 Tax Bill (i.e., $10 million).
Per the New York State 2014 tax law, "In the case of any decedent dying in a calendar year beginning on or after Jan. 1, 2019, the basic exclusion amount shall be equal to: (i) $5 million, multiplied by (ii) one plus the cost-of-living adjustment, which shall be the percentage by which the consumer price index for the preceding calendar year exceeds the consumer price index for calendar year 2010." Hence, in 2019 and moving forward, New York's estate tax exemption will continue to rise with the consumer price index, a measure of inflation, NOT with the provisions set forth under the 2017 Tax Bill.
If you have any questions in regard to the President's recently enacted tax bill and how it might affect you, please contact Josh Beisker.