Planning for the Inevitable

Planning for the Inevitable

(including 2014 New York State changes) By Marisa J. Punzone, CPA


Estate planning, like retirement planning, remains an essential facet in the lives of those that like to maintain some sort of control over their future. The estate tax is a tax on your right to transfer property at your death. It is an accounting of all of your assets, with certain allowable deductions applied against them. The constant changes made to estate tax laws requires you to be on the lookout for the most beneficial and cost effective way to transfer your assets to your loved ones. The good news is that the federal estate exclusion amount continues to climb. The exclusion amount has risen to $5,340,000 (up from $5,250,000 in 2013) for estates of decedents dying in 2014. However, the estate tax rate linked to estates of this size has also increased from 35% in 2012 to 40% in 2013 and future years.

Although the federal government allows for generous estate tax exclusions, attention must be given to the state domicile of the decedent. Effective April 1, 2014, New York State enacted significant changes to its estate tax laws. For example, for those that died between January 1, 2014 and March 31, 2014 in New York State only secure a state exemption of $1,000,000. As of April 1, 2014, the New York State basic exemption amount has been increased to $2,062,500 and is scheduled to rise every year until it matches the federal exemption amount. The increase in the New York estate tax exclusion only benefits those estates equal to or below the new exclusion amount. On the other hand, if the New York taxable estate exceeds the new basic exclusion amount by more than 5%, the entire taxable estate will be subject to New York State estate tax as opposed to the amount in excess of the basic exclusion amount.  In addition, New York taxable estates that are over the exclusion amount, yet under 105% of the exclusion, will quickly lose the benefit of the exclusion due to a phase-out computation. Consider the following hypothetical examples:

Example:                                                      Case 1                                                  Case 2

  1. Date of Death:                             April 15, 2014                                     April 15, 2014
  2. NYS Basic Exclusion Amount:   $2,062,500                                          $2,062,500
  3. NYS Taxable Estate:                    $2,062,500                                          $2,165,625 (105%)
  4. NYS Estate Tax:                            $0                                                          $112,050
  5. Marginal Tax Rate:                        0%                                                         108.65%

As illustrated, the new law provides significant tax savings to estates that are in excess of the old threshold of $1 million but below the new exclusion amount. However, it provides no tax relief for those estates that exceed the basic exclusion amount by more than 5%.

In regard to gift tax, two elements must be considered: the lifetime exemption amount and the annual exclusion amount. The lifetime exemption amount equals the federal estate tax exemption ($5,340,000 in 2014). This represents the maximum amount a person can give away during their lifetime without paying gift tax. The annual gift exclusion is the maximum amount a person may gift to another person in any given year without encountering federal gift tax ($14,000 in 2014). Married couples may combine their annual exclusions and gift up to $28,000 to an unlimited amount of people per year, free of gift tax. Another important fact surrounding gift tax is that there are certain gifts which are entirely exempt and free from gift tax: gifts from one spouse to the other (unless the receiving spouse is not a U.S. citizen), gifts that qualify for either the medical or educational exclusion and gifts to charities. New York State repealed its gift tax in 2000 and has not reinstated it under the new legislation. However, there was one temporary change made. Gifts made by New York residents between April 1, 2014 and December 31, 2018, which were made within three years of death, will be included in their New York gross estate. This translates to New York State estate tax being imposed on gifted property located both inside and outside of New York State that otherwise would not have been subject to New York State estate tax. In addition, it appears that gifts that are added back may not be eligible for the state death tax deduction allowed against the federal estate tax.

Planning for the inevitable is not a pleasant task, however, we all want to offer protection to our loved ones when we are no longer able to do so. Therefore, consider the following:

  • Be sure to introduce your spouse, or loved ones, to your financial advisor. They are often the ones involved with brokerage account investments, life insurance and individual retirement accounts.
  • Inform your heir(s) of the location of all of your accounts and how to access them. This includes a password list for online accounts, a list of your estate planning documents and their locations, a list of your lawyer(s), financial planners, accountants and any other professionals that you may have utilized in constructing an estate plan.
  • Update your will and beneficiary information.
  • Never assume that having a will is enough. Certain assets are not covered by your will. Ensure that your beneficiary designations are correct on retirement accounts, such as 401(k) and IRAs, life insurance, annuities and any TOD (Transfer on Death) accounts that you may hold.
  • Although the federal government allows for portability, New York does not. Therefore, New Yorkers should consider taking advantage of a Credit Shelter Trust, due to the lack of portability within the state.
  • Review your estate plan with your attorney and accountant to minimize estate taxes and probate fees.

We hope this information answers some of your questions surrounding estate taxes. There are many aspects to consider when forming a solid estate plan. Please contact our office if you would like to further discuss the above material.

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Fraud and Theft in the Non Profit Arena

When we think of fraud, it hardly comes to mind that someone would steal from those organizations that are struggling to do good in the world.

Here’s an example of how someone was able to compromise not only the nonprofit but stole the identity of a woman in order to carry out her acts.



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Alert of New Email Phishing Scam: “Update your IRS e-file”
The IRS is reiterating it’s pervasive telephone scam warnings!  Visit here to review the warning:
They are also warning about a Email Phishing scam!
Alert of New Email Phishing Scam: “Update your IRS e-file” 

The IRS has been alerted to a new email phishing scam. The emails appear to be from the IRS and include a link to a bogus web site intended to mirror the official IRS web site. These emails contain the direction “you are to update your IRS e-file immediately.”  The emails mention and IRSgov, though notably, not (IRS-dot-gov). Don’t get scammed. These emails are not coming from the IRS.

Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at For more information, visit the IRS’s Report Phishing web page.

The IRS does not initiate contact with taxpayers by email, texting or any social media.

As a refresher, you should review our steps to help protect your identity article:

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